<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 19, 1998
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
UNIVERSAL COMPRESSION, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
TEXAS 74-1282680
------------------------ ------------------------ ------------------------
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
4430 BRITTMOORE ROAD
HOUSTON, TEXAS 77041
(713) 466-4103
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ERNIE DANNER
CHIEF FINANCIAL OFFICER AND EXECUTIVE VICE PRESIDENT
4430 BRITTMOORE ROAD
HOUSTON, TEXAS 77041
(713) 466-4103
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Please send copies of all communications to:
ANDRE WEISS, ESQ.
SCHULTE ROTH & ZABEL LLP
900 THIRD AVENUE
NEW YORK, NEW YORK 10022
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
------------------------
If the only securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box: / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER NOTE OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
9 7/8% Senior Discount Notes
due 2008.............................. $242,500,000 100% $242,500,000 $71,538
</TABLE>
(1) Estimated solely for purposes of calculating the amount of registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS (AS SUCH TERM
IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995) AND
INFORMATION RELATING TO THE COMPANY, ITS INDUSTRY AND THE U.S. AND INTERNATIONAL
OIL AND GAS BUSINESS THAT IS BASED ON THE BELIEFS OF THE MANAGEMENT OF THE
COMPANY, AS WELL AS ASSUMPTIONS MADE BY AND INFORMATION CURRENTLY AVAILABLE TO
THE MANAGEMENT OF THE COMPANY. WHEN USED IN THIS PROSPECTUS, THE WORDS
'ESTIMATE,' 'PROJECT,' 'BELIEVE,' 'ANTICIPATE,' 'INTEND,' 'EXPECT' AND SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS
REFLECT THE CURRENT VIEWS OF THE COMPANY WITH RESPECT TO FUTURE EVENTS AND ARE
SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE CONTEMPLATED IN SUCH FORWARD-LOOKING STATEMENTS, INCLUDING
THOSE DISCUSSED UNDER 'RISK FACTORS.' READERS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE
HEREOF. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO PUBLICLY RELEASE ANY
REVISIONS TO THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES
AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
ii
<PAGE>
UNIVERSAL COMPRESSION, INC.
CROSS REFERENCE SHEET TO FORM S-4
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-4 NUMBER AND CAPTION LOCATION IN PROSPECTUS
------------------------------------------------------ ------------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Forepart of the Registration Statement; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front and Outside Back Cover Pages of
Prospectus; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information................................... Prospectus Summary; Risk Factors; Summary Historical
and Pro Forma Financial and Other Data
4. Terms of the Transaction.............................. Prospectus Summary; Risk Factors; The Exchange Offer;
Description of the Exchange Notes; Certain Federal
Income Tax Considerations
5. Pro Forma Financial Information....................... Prospectus Summary; Capitalization; Summary Historical
and Pro Forma Financial and Other Data; Unaudited
Pro Forma Financial Statements and Other Data;
6. Material Contracts with the Company Being Acquired.... Prospectus Summary; The Exchange Offer; Management;
Description of Exchange Notes; Description of Other
Indebtedness
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters....... *
8. Interests of Named Experts and Counsel................ *
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Management
10. Information with Respect to S-3 Registrants........... *
11. Incorporation of Certain Information by Reference..... *
12. Information with Respect to S-2 or S-3 Registrants.... *
13. Incorporation of Certain Information by Reference..... *
14. Information with Respect to Registrants other than S-3
or S-2 Registrants.................................. Cover Page of Registration Statement; Available
Information; Prospectus Summary; Risk Factors; Use
of Proceeds; Capitalization; Selected Historical
Financial Data; Management's Discussion and Analysis
of Financial Condition and Results of Operations;
Business; Management; Description of the Exchange
Notes; Financial Statements
15. Information with Respect to S-3 Companies............. *
16. Information with Respect to S-2 or S-3 Companies...... *
17. Information with Respect to Companies other than S-2
or S-3 Companies.................................... *
18. Information if Proxies, Consents or Authorizations are
to be Solicited..................................... *
19. Information if Proxies, Consents or Authorizations are
not to be Solicited or in an Exchange Offer......... Management; Certain Transactions; Description of Other
Indebtedness; Principal Stockholders; Financial
Statements
</TABLE>
- ------------------
* Item is omitted because answer is negative or the item is inapplicable.
<PAGE>
SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED [ ], 1998
[LOGO] UNIVERSAL COMPRESSION, INC.
OFFER TO EXCHANGE UP TO $242,500,000 OF NEW
9 7/8% SENIOR DISCOUNT NOTES DUE 2008
FOR UP TO $242,500,000 OF ANY AND ALL OUTSTANDING
9 7/8% SENIOR DISCOUNT NOTES DUE 2008
------------------------------
Universal Compression, Inc., a Texas corporation ('Universal Compression' or
the 'Company'), hereby offers to exchange (the 'Exchange Offer'), upon the terms
and conditions set forth in this Prospectus (the 'Prospectus') and the
accompanying Letter of Transmittal (the 'Letter of Transmittal'), up to
$242,500,000 in aggregate principal amount of its 9 7/8% Senior Discount Notes
due 2008 (the 'Exchange Notes') for a like principal amount of its 9 7/8% Senior
Discount Notes due 2008 (the 'Original Notes' and, together with the Exchange
Notes, the 'Notes').
The terms of the Exchange Notes are identical in all material respects
(including principal amount, interest rate and maturity) to the terms of the
Original Notes for which they may be exchanged pursuant to the Exchange Offer,
except that the Exchange Notes will generally be freely transferable by holders
thereof, and are not subject to any covenant of the Company regarding
registration. The Exchange Notes will be issued under the indenture governing
the Original Notes. For a complete description of the terms of the Exchange
Notes, see 'Description of the Exchange Notes.'
Interest on the Exchange Notes will begin to accrue commencing February 15,
2003 until maturity and will be payable semi-annually on August 15 and February
15 of each year, commencing August 15, 2003. The Notes will be redeemable, in
whole or in part, at the option of the Company on or after February 15, 2003, at
the redemption prices set forth herein, plus accrued and unpaid interest to the
date of redemption. In addition, at any time on or prior to February 15, 2001,
the Company may, at its option, redeem up to 35% of the aggregate principal
amount of the Notes originally issued with the net cash proceeds of one or more
Public Equity Offerings (as defined), at a redemption price equal to 109.875% of
the Accreted Value (as defined) of the Notes to be redeemed plus accrued and
unpaid interest to the date of redemption; provided, however, that, after giving
effect to any such redemption, at least 65% of the aggregate principal amount of
the Notes originally issued remain outstanding. The Exchange Notes will not be
subject to any mandatory sinking fund. Upon a Change of Control (as defined),
each holder will have the right, subject to certain conditions, to require the
Company to repurchase such holder's Notes at a price equal to 101% of the
Accreted Value thereof plus accrued and unpaid interest to the date of
repurchase. See 'Description of the Exchange Notes' and 'Capitalization.'
(Continued on next page)
------------------------------
SEE 'RISK FACTORS' BEGINNING ON PAGE 11, FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE EXCHANGE NOTES.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------
THE DATE OF THIS PROSPECTUS IS [ , 1998]
<PAGE>
(Cover page continued)
The Original Notes were issued and sold on February 20, 1998, in a
transaction (the 'Offering') not registered under the Securities Act of 1933, as
amended (the 'Securities Act'), in reliance upon the exemptions provided in
Section 4(2) of the Securities Act and Rule 144A under the Securities Act.
Accordingly, the Original Notes may not be reoffered, resold or otherwise
pledged, hypothecated or transferred unless so registered or unless an
applicable exemption from the registration requirements of the Securities Act is
available. The Exchange Notes are being offered hereunder in order to satisfy
certain of the obligations of the Company under the Registration Rights
Agreement, dated February 20, 1998, among the Company and BT Alex. Brown
Incorporated and Salomon Brothers Inc (the 'Initial Purchasers'). See 'The
Exchange Offer--Purpose of the Exchange Offer.' The Company is making the
Exchange Offer in reliance upon an interpretation by the staff of the Securities
and Exchange Commission (the 'Commission') set forth in a series of no-action
letters issued to third parties, although the Company has not sought, and does
not intend to seek, its own no-action letter and there can be no assurance that
the staff of the Commission would make a similar determination with respect to
the Exchange Offer. Based upon the Commission's interpretations, the Company
believes that the Exchange Notes issued pursuant to the Exchange Offer in
exchange for Original Notes may be offered for resale, resold and otherwise
transferred by holders thereof (other than any holder that is (i) an 'affiliate'
of the Company within the meaning of Rule 405 under the Securities Act (an
'Affiliate'), (ii) a broker-dealer who acquired Original Notes directly from the
Company or (iii) a broker-dealer who acquired Original Notes as a result of
market making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business and such holders are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any person to participate in, a
distribution of such Exchange Notes. Any such holder that cannot rely upon such
interpretations must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction.
Each broker-dealer who receives Exchange Notes pursuant to the Exchange
Offer in exchange for Original Notes acquired for its own account as a result of
market-making activities or other trading activities may be a statutory
underwriter and must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes. The Letter of Transmittal that is filed as an exhibit to the
Registration Statement of which this Prospectus is part states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an 'underwriter' within the meaning of the Securities Act.
Broker-dealers who acquired Original Notes as a result of market making or other
trading activities may use this Prospectus, as supplemented or amended, in
connection with resales of the Exchange Notes.
The Original Notes are designated for trading in the Private Offerings,
Resales and Trading through Automated Linkages ('PORTAL') market. The Exchange
Notes constitute a new issue of securites for which there is no established
trading market. Any Original Notes not tendered and accepted in the Exchange
Offer will remain outstanding. To the extent Original Notes are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered, and
tendered but unaccepted, Original Notes could be adversely affected. Following
consummation of the Exchange Offer, the holders of Original Notes will continue
to be subject to the existing restrictions on transfer thereof and the Company
may have no further obligations to such holders to provide for the registration
under the Securities Act of the Original Notes. No assurance can be given as to
the liquidity of the trading market for either the Original Notes or the
Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered for exchange but is otherwise subject to
customary conditions. The Exchange Offer will expire at 5:00 p.m., New York City
time, on [ ], unless extended by the Company to such other date as
the Company, in its sole discretion, may determine (the 'Expiration Date'). The
date of acceptance for exchange of the Original Notes (the 'Exchange Date') will
be the first business day following the Expiration Date. Original Notes tendered
pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date; otherwise such tenders are irrevocable. There will be no cash
proceeds to the Company from the Exchange Offer.
This Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of Exchange Notes received
for Original Notes where such Original Notes were acquired for its own account
as a result of market-making activities or other trading activities. The Company
will make copies of this Prospectus available to any broker-dealer for use in
connection with any such resale.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the 'Registration Statement') under the Securities Act with respect to the
Exchange Notes being offered by this Prospectus. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto, certain portions of which have been omitted
pursuant to the rules and regulations of the Commission. Statements made in this
Prospectus as to any contract, agreement or other document are summaries of the
material terms of such contracts, agreements or other documents and are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement is qualified in its entirety by such reference.
The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the 'Exchange Act'). The
Company has agreed that, whether or not it is required to do so by the rules and
regulations of the Commission, for so long as any of the Notes remain
outstanding, it will furnish to the holders of the Notes and, following
consummation of the Exchange Offer and to the extent permitted by applicable law
or regulations, file with the Commission (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including for each a 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and, with respect to the annual
consolidated financial statements only, a report thereon by the Company's
independent auditors and (ii) all reports that would be filed with the
Commission on Form 8-K if the Company were required to file such reports. In
addition, for so long as any of the Notes remain outstanding, the Company has
agreed to make available to any prospective purchaser of the Notes or beneficial
owner of the Notes, in connection with any sale thereof, the information
required by Rule 144A(d)(4) under the Securities Act.
Reports and other information filed by the Company with the Commission, and
the Registration Statement and the exhibits and schedules thereto, may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and will also be available for inspection and copying at the regional
offices of the Commission at 7 World Trade Center, 13th Floor, New York, New
York 10048 and at 1801 California Street, Suite 4800, Denver, Colorado
80202-2648. Copies of such materials may also be obtained from the public
reference section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. Also, the Company will file such reports and other
information with the Commission pursuant to the Commission's EDGAR system. The
Commission maintains a Web site that contains reports and other information
regarding registrants that file electronically with the Commission pursuant to
the EDGAR system. The address of the Commission's Web site is
http://www.sec.gov.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES.
SPECIFICALLY, THE INITIAL PURCHASERS MAY OVERALLOT IN CONNECTION WITH THE
OFFERING, MAY BID FOR AND PURCHASE NOTES IN THE OPEN MARKET AND MAY IMPOSE
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE 'PLAN OF DISTRIBUTION.'
THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS (AS SUCH TERM IS
DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995) AND INFORMATION
RELATING TO THE COMPANY, ITS INDUSTRY AND THE U.S. AND INTERNATIONAL OIL AND GAS
BUSINESS THAT IS BASED ON THE BELIEFS OF THE MANAGEMENT OF THE COMPANY, AS WELL
AS ASSUMPTIONS MADE BY AND INFORMATION CURRENTLY AVAILABLE TO THE MANAGEMENT OF
THE COMPANY. WHEN USED IN THIS PROSPECTUS, THE WORDS 'ESTIMATE,' 'PROJECT,'
'BELIEVE,' 'ANTICIPATE,' 'INTEND,' 'EXPECT' AND SIMILAR EXPRESSIONS ARE INTENDED
TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS REFLECT THE CURRENT
VIEWS OF THE COMPANY WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CONTEMPLATED IN SUCH FORWARD-LOOKING STATEMENTS, INCLUDING THOSE DISCUSSED UNDER
'RISK FACTORS.' READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY
DOES NOT UNDERTAKE ANY OBLIGATION TO PUBLICLY RELEASE ANY REVISIONS TO THESE
FORWARD- LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE
HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including risk factors, the Company's financial statements and
other financial data, appearing elsewhere in this Prospectus. References
hereinafter in this Prospectus except where the context otherwise requires to
(i) the 'Company' or 'Universal Compression' means Universal Compression, Inc.
and its predecessor, Tidewater Compression Service, Inc., and (ii) 'fiscal year'
means the fiscal year of the Company commencing April 1 through March 31, for
example, fiscal 1996 is the fiscal year ended March 31, 1996.
THE EXCHANGE OFFER
On February 20, 1998, the Company completed the Offering (the 'Offering')
of $242,500,000 aggregate principal amount of 9 7/8 Senior Discount Notes due
2008 for an aggregate purchase price of $149,962,000.
The Company entered into a Registration Rights Agreement with the Initial
Purchasers in connection with the Offering in which it agreed, among other
things, to deliver to holders of Notes this Prospectus and to complete the
Exchange Offer on or prior to October 18, 1998. Holders are entitled to exchange
in the Exchange Offer their Original Notes for Exchange Notes with substantially
identical terms. If the Company fails to file the Registration Statement within
90 days after the Issue Date (as defined), cause the Registration Statement to
be declared effective within 210 days after the Issue Date or consummate the
Exchange Offer on or prior to October 18, 1998, in each instance, interest will
accrue at a rate of .5% per annum for the first 90 days following such date,
such rate increasing by .5% per annum at the beginning of each subsequent 90-day
period, such interest to be payable in cash semiannually in arrears. See the
discussion under the heading 'the Offering' and 'Description of the Exchange
Notes' for further information regarding the Exchange Notes.
The Company believes that the Exchange Notes may be resold by holders
without compliance with the registration and prospectus delivery provisions of
the Securities Act, subject to certain conditions. Holders should read the
discussions under the headings 'Summary of the Exchange Offer' and 'the Exchange
Offer' for further information regarding the Exchange Offer and resales of the
Exchange Notes.
THE COMPANY
Universal Compression is a leading provider of natural gas compressor
rental, maintenance and operations services to the domestic oil and gas
industry, owning the second largest domestic gas compressor fleet, and has a
growing presence in key international markets, including Argentina, Venezuela,
the Pacific Rim, Europe and Canada. The Company has a broad base of over 500
customers and its 490,000 horsepower ('HP') gas compression rental fleet is
comprised of over 2,700 units. Founded in 1954, Universal Compression is the
only compression rental company with an operating presence in all active
domestic gas compression markets. As a complement to its rental operations,
Universal Compression designs and fabricates compression units for its own fleet
as well as for its global customer base. Universal Compression's involvement in
natural gas and oil production activities, rather than drilling, its geographic
diversity and its fleet standardization have contributed to the Company's high
operating margins and stable revenue and EBITDA. For the fiscal years ended
March 31, 1996 and 1997 and for the twelve months ended December 31, 1997, the
Company generated revenue of $110.5 million, $113.9 million and $110.2 million
and EBITDA of $40.4 million, $38.7 million and $44.1 million, respectively.
Compression equipment is primarily utilized in the production, processing,
transportation and storage of natural gas and in certain applications
facilitating the production of oil. Rental units are primarily employed in the
field compression segment encompassing production and gas gathering. Renting
compression equipment affords customers: (i) the ability to efficiently meet
changing compression requirements while limiting capital investments in such
equipment, (ii) access to the compression rental companies' technical skills
which often leads to improved production rates and (iii) overall reduction in
compression costs through the elimination of expenditures associated with owning
and maintaining compressor units.
The total domestic natural gas field compression market is approximately
16.0 million HP in size, including both operator owned and rental company units.
The domestic field compression segment grew by a compound
1
<PAGE>
annual growth rate ('CAGR') of approximately 8% from 1991 through 1996, driven
by the growth in natural gas consumption and, more significantly, by the
increase in compression required to service the nation's aging gas fields and
new gas discoveries. Throughout the same period, the domestic field compression
rental market grew at a CAGR of 13% to approximately 4.0 million HP. The higher
growth in the rental market as compared to the overall market is primarily
attributable to the trend by energy producers towards outsourcing their
compression requirements. From 1991 to 1996, rental companies' share of the
domestic field compression market grew from 20% to 25%. In addition, industry
sources expect significant growth in the international field compression market,
driven by anticipated high growth rates in natural gas consumption and by an
increased emphasis on cost effective operations resulting from the ongoing
privatization of national energy organizations and by environmental restrictions
on the 'flaring' of natural gas.
COMPANY STRENGTHS
The Company believes it has certain strengths that provide it with
significant competitive advantages and a solid base from which to enhance its
leadership position and achieve growth, including the following:
LEADING DOMESTIC RENTAL FLEET WITH NATIONWIDE COVERAGE. The Company owns
the second largest domestic rental fleet of natural gas compressors and is the
only compression rental company that has an operating presence in all active gas
compressor markets in the U.S. The Company employs a highly trained staff of
over 250 field and shop service technicians operating from 23 field service and
three overhaul facilities. The Company's geographic diversity and nationwide
operations enable the Company to (i) provide responsive and cost effective
service to its rental customers, as well as for units owned by others, (ii)
increase revenue with relatively little incremental overhead expense and (iii)
offer its customers the ability to deal with one nationwide provider for their
compression equipment and service needs.
STRONG STABLE CASH FLOW. Over the past ten years, the Company's financial
performance has been generally unaffected by the short-term market cycles of the
oil and gas industry. The Company's historical results reflect stable operating
performance and attractive operating margins that are attributable to (i)
compression being an essential component of gas production, (ii) its operations
being tied to gas production, as opposed to drilling, which is more cyclical in
nature, (iii) compression equipment rental often being a lower cost alternative
for natural gas production companies, (iv) its broad customer base, (v) its
presence in diverse geographic regions, (vi) its compressors remaining on-site
for an average of two years and (vii) the durability of the Company's compressor
fleet.
STANDARDIZED, DURABLE AND WELL-MAINTAINED RENTAL FLEET. Universal
Compression has standardized its rental fleet around two equipment platforms,
including the world's largest rental fleet of the highly durable Ajax
compressors. This high level of fleet standardization and durability (i) enables
the Company to minimize its fleet maintenance capital requirements, (ii) enables
the Company to minimize inventory costs, (iii) facilitates low-cost compressor
resizing and (iv) allows the Company to develop strong technical proficiency in
its maintenance and overhauling operations. The Company believes its deployed
rental fleet is in excellent condition as the Company provides full maintenance
on substantially all of its deployed units.
STRATEGIC INTERNATIONAL POSITION. The Company has a growing presence in
the developing international gas compression markets of Argentina, Venezuela,
the Pacific Rim, Europe and Canada. As of December 31, 1997, the Company had 35
units aggregating approximately 18,000 HP operating on contract in these
markets. The Company's international compression operations typically involve
larger projects with higher operating margins and longer-term contracts
providing the Company with a strong incentive to increase its focus in these
markets. The Company's growing international operating presence positions it to
address the compression needs of a broad international market which looks to
proven and globally experienced compression companies.
PROVEN MANAGEMENT. The Company has a senior management team that (other
than its Chief Financial Officer who was hired upon consummation of the
Acquisition (as defined)) averages over 18 years compression industry
experience. This team has been working together since January 1994 during which
period the Company approximately doubled revenue and profits. Management has
achieved these results primarily by successfully integrating and consolidating
several acquisitions, including the 1994 acquisitions of Halliburton Compression
Service and Brazos Gas Compressing Company, which in total added approximately
287,000 HP to the
2
<PAGE>
Company's fleet, as well as by (i) improving its nationwide field service and
marketing capabilities, (ii) centralizing decision-making at its headquarters,
(iii) instituting uniform quality controls, (iv) standardizing maintenance and
central overhaul procedures and (v) implementing consistent Company-wide
pricing. For details on the qualifications of the Company's Chief Financial
Officer, Mr. Ernie Danner, see the discussion under the heading 'Management.'
BUSINESS STRATEGY
Management and CHP (as defined) have developed a focused business strategy
designed to increase revenue and EBITDA which comprises the following key
elements:
INCREASE SIZE AND AVERAGE HP OF RENTAL FLEET. The Company recently
accelerated its fabrication of upper mid-range (over 500 HP) units for its
rental fleet in an effort to increase the overall size and average HP of its
fleet. Larger HP units are typically used in centralized field gathering and gas
processing, a rapidly growing segment of the compression industry. Larger HP
units are (i) leased under long-term contracts and (ii) experience lower per HP
operating and maintenance costs. The Company believes that its increased
penetration of this market segment will broaden its product line resulting in
enhanced cross-selling opportunities and increased utilization of its existing
fleet. As of January 15, 1998, the Company had on order 50 units averaging over
1,000 HP. Management believes that the Acquisition and related financings
positions Universal Compression to achieve its goal of increasing the overall
size and average HP of its fleet.
EXPAND IN SELECT INTERNATIONAL MARKETS. Increased international demand for
field gas compression is driven by rising natural gas demand and production due
to environmental concerns, growing local economies and the desire to develop a
stable local energy source permitting greater oil exports. International demand
for rental units is expected to grow as national oil entities increasingly
privatize and seek to eliminate capital expenditures, lower overall costs and
take advantage of greater technical skills afforded by gas compression rental
companies. With approximately 18,000 HP operating internationally, Universal
Compression has a strategic presence in the rapidly growing rental compression
markets of South America and the Pacific Rim. The Company plans to leverage its
existing presence and strong global reputation for the engineering and
fabrication of high specification gas and air compressors to expand its
offerings in these markets. Further, with increased capital directed toward
larger HP units, Universal Compression will aggressively pursue higher dollar
value, more lucrative international contracts.
EXPAND RENTAL FLEET AND CUSTOMER BASE THROUGH THE ACQUISITION AND LEASEBACK
OF COMPRESSORS. The Company estimates that domestic energy producers,
transporters and processors own and operate approximately 12.0 million HP of
field compression equipment, representing approximately 75% of the total
domestic field compression base. Producers and other industry participants are
increasingly outsourcing essential but non-core activities, including gas
compression services, to focus on core activities and reduce capital investment.
These outsourcing opportunities typically involve sizable fleets of operating
units that are purchased in place and leased back on a long-term basis. The
Company believes that with improved capital availability resulting from the
Acquisition and related financings, it is well positioned to capitalize on such
opportunities for significant fleet growth.
PURSUE INDUSTRY CONSOLIDATION OPPORTUNITIES. The rental compression
services industry has experienced significant consolidation over the past
several years but remains fragmented. In addition to opportunities to achieve
significant integration cost savings, consolidation is being driven by the
expanding needs of customers for the full range of compression services,
equipment and attendant technical skills. The Company initiated the current
phase of industry consolidation in 1994 with the acquisition of Halliburton
Compression Service and Brazos Gas Compressing Company. The Company believes
that continuing industry consolidation will present it with opportunities to
acquire both smaller regional operators and larger compression service companies
and that, as a result of the Acquisition and related financings, the Company is
well positioned to pursue such opportunities.
COMPLEMENT CORE RENTAL BUSINESS WITH ANCILLARY SERVICES. The Company
offers a broad array of services to complement its core rental business. These
services include maintenance, turnkey installation, contract operations and unit
fabrication. These ancillary services enable Universal Compression to (i)
increase its customer base, (ii) increase rental revenue from its existing
fleet, (iii) improve customer loyalty and (iv) diversify
3
<PAGE>
its revenue base. In addition, contract operations enable the Company to grow
its business with limited capital expenditures.
PROMOTE GROWTH THROUGH EMPLOYEE INCENTIVE PROGRAMS. The Company has begun
implementation of an employee incentive program that correlates annual and
long-term compensation with individual and Company performance. That program is
designed to result in the Company's management and employees being given the
opportunity to beneficially own approximately 12% of the common stock of the
Company's parent on a fully-diluted basis through cash investment, stock grants
and stock option awards. The Company believes such incentives will promote
internal growth and facilitate the successful implementation of the Company's
goals.
THE TRANSACTIONS
Pursuant to a Stock Purchase Agreement, dated as of December 18, 1997 (the
'Stock Purchase Agreement'), between Tidewater Inc., a Delaware corporation
('Tidewater'), and TW Acquisition Corporation, a Delaware corporation ('TW'), on
February 20, 1998, TW acquired (the 'Acquisition') 100% of the voting securities
of Tidewater Compression Service, Inc. for a purchase price of approximately
$348.1 million (the 'Purchase Price'), subject to adjustment upon final
determination of the Closing Date Working Capital (as defined in the Stock
Purchase Agreement). Immediately following the Acquisition, TW was merged with
and into Tidewater Compression Service, Inc., which changed its name to
Universal Compression, Inc. See 'Description of the Company Acquisition.'
Universial Compression is a wholly-owned subsidiary of Universal Compression
Holdings, Inc. ('Holdings'), both of which were organized and are controlled by
Castle Harlan Partners III, L.P., a Delaware limited partnership ('CHP'). CHP, a
private investment fund, is managed by Castle Harlan, Inc. ('CHI'), a merchant
banking firm.
The following table sets forth the sources and uses of funds for the
Acquisition:
<TABLE>
<CAPTION>
AMOUNT
(DOLLARS
SOURCES OF FUNDS: IN THOUSANDS)
----------------
<S> <C>
Revolving Credit Facility(1)................................................... $ 35,000
Term Loan Credit Facility...................................................... 75,000
Gross Proceeds of the Notes.................................................... 149,962
Equity Contribution(2)......................................................... 104,079
----------------
$ 364,041
----------------
----------------
<CAPTION>
USE OF FUNDS:
<S> <C>
Purchase Price(3).............................................................. $ 348,143
Working Capital................................................................ 2,872
Fees and Expenses(4)........................................................... 13,026
----------------
$ 364,041
----------------
----------------
</TABLE>
- ------------------
(1) Total availability of $85 million.
(2) The $104.07 million equity contribution was comprised of an $79.9 million
cash contribution from CHP and other parties (the 'Castle Harlan
Investment') and $24.17 million net proceeds from the issuance of the
Holdings senior discount notes due 2009 ('Holdings Notes'). See 'Principal
Stockholders.'
(3) The Purchase Price may be adjusted to the extent that the Closing Date
Working Capital is greater or less than approximately $14.1 million.
(4) Additional fees of approximately $3 million will be paid subsequent to
closing.
The Company's principal executive offices are located at 4430 Brittmoore
Road, Houston, Texas 77041. Its main telephone number is (713) 466-4103.
4
<PAGE>
SUMMARY OF THE EXCHANGE OFFER
<TABLE>
<S> <C>
REGISTRATION RIGHTS AGREEMENT............. Holders are entitled, pursuant to the Registration Rights Agreement
(as defined), to exchange the Original Notes for Exchange Notes
having substantially identical terms. The Exchange Offer is intended
to satisfy these rights. After the Exchange Offer is complete,
Holders may no longer be entitled to any exchange or registration
rights with respect to the Original Notes. Holders of the Original
Notes who do not tender their Original Notes in the Exchange Offer or
whose Original Notes are not accepted for exchange will continue to
hold such Original Notes and will be entitled to all the rights and
preferences and will be subject to the limitations applicable thereto
set forth in the Indenture except for any such rights or limitations
which by their terms, terminate or cease to be effective as a result
of the making, and the acceptance for exchange of all validly
tendered Original Notes pursuant to the Exchange Offer.
THE EXCHANGE OFFER........................ Up to $242,500,000 aggregate principal amount of Exchange Notes are
being offered in exchange for a like aggregate principal amount of
Original Notes. The Company will issue registered Exchange Notes on
or promptly after the expiration of the Exchange Offer. For a
description of the procedures for tendering Original Notes, see 'The
Exchange Offer--Procedures for Tendering Original Notes.' The Company
may also be required to issue to the Initial Purchasers Private
Exchange Notes (as defined) in the event the Initial Purchasers are
holding Original Notes having, or reasonably likely to be determined
to have, the status of an unsold allotment in the initial
distribution. The Private Exchange Notes will be identical in all
material respects to Exchange Notes.
RESALES................................... Based on an interpretation by the staff of the Commission set forth
in no-action letters issued to third parties, the Company believes
that Exchange Notes issued pursuant to the Exchange Offer in exchange
for Original Notes may be offered for resale, resold and otherwise
transferred by holders thereof (other than (i) any such Holder which
is an 'affiliate' of the Company within the meaning of Rule 405 under
the Securities Act, (ii) a broker-dealer who acquired Original Notes
directly from the Company or (iii) broker-dealers who acquired
Original Notes as a result of market-making or other trading
activities) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such Holders'
business, such Holders have no arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and
neither such Holders nor any such other person is engaging in or
intends to engage in a distribution of such Exchange Notes. Each
broker-dealer that receives Exchange Notes for its own account in
exchange for Original Notes, where such Original Notes were acquired
by such broker-dealer as a result of market-making or other
activities must acknowledge that it will deliver a prospectus in
connection with any sale of such Exchange Notes. Any broker-dealer
that participates in a distribution of the Exchange Notes may not
participate in the Exchange Offer and will be deemed to be an
underwriter for purposes of the Securities Act.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Any Holder who is an affiliate of the Company or who uses the
Exchange Offer to participate in a distribution of the Exchange Notes
to be acquired in the Exchange Offer may not rely on such
interpretation by the staff of the Commission and must comply with
the registration and prospectus delivery requirements of the
Securities Act in connection with any resales of such Exchange Notes.
See 'Plan of Distribution.'
EXPIRATION DATE........................... The Exchange Offer will expire at 5:00 p.m., New York City time,
(such time on such date being hereinafter called the
'Expiration Date'), unless the Company decides to extend the
expiration date.
CONDITIONS TO THE EXCHANGE OFFER.......... The Exchange Offer is not subject to any condition other than that
the Exchange Offer not violate applicable law or any applicable
interpretation of the Staff of the Commission.
PROCEDURES FOR TENDERING OUTSTANDING NOTES
HELD IN THE FORM OF BOOK-ENTRY
INTERESTS............................... The Original Notes were issued as global securities without interest
coupons. The Original Notes were deposited with The United States
Trust Company of New York, as book-entry depositary, when they were
issued. The United States Trust Company of New York issued a
certificateless depositary interest in each Original Note, which
represents a 100% interest in the Original Note, to The Depositary
Trust Company ('DTC'). Beneficial interests in the Original Notes,
which are held by direct or indirect participants in DTC through the
certificateless depositary interests (the 'Book-Entry Interests'),
are shown on, and transfers of such Original Notes can be made only
through, records maintained in book-entry form by DTC (with respect
to its participants) and its participants.
Holders of Original Notes held in the form of a Book-Entry Interest
who wish to tender their Book-Entry Interest for exchange pursuant to
the Exchange Offer must transmit to The United States Trust Company
of New York, as exchange agent (the 'Exchange Agent'), on or prior to
the Expiration Date:
(i) either:
(a) a properly completed and duly executed Letter of Transmittal,
which accompanies this Prospectus, or a facsimile of the Letter
of Transmittal, including all other documents required by the
Letter of Transmittal, to the Exchange Agent at the address set
forth on the cover page of the Letter of Transmittal; or
(b) a computer-generated message transmitted by means of DTC's
Automated Tender Offer Program system and received by the
Exchange Agent and forming a part of a confirmation of book entry
transfer in which such Holder acknowledges and agrees to be bound
by the Letter of Transmittal;
and (ii) either:
(a) a timely confirmation of book-entry transfer of such holder's
Original Notes into the Exchange Agent's account at DTC, pursuant
to the procedure for book-entry transfers described in this
Prospectus under the heading 'The Exchange Offer-- Book-Entry
Transfer' must be received by the Exchange Agent on or prior to
the Expiration Date; or
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
(b) the documents necessary for compliance with the guaranteed
delivery procedures described below.
PROCEDURES FOR TENDERING DEFINITIVE
REGISTERED NOTES........................ Subject to certain conditions, a holder of Book-Entry Interests in
the Original Notes is entitled to receive, in exchange for its
Book-Entry Interests, registered Original Notes which are in equal
principal amounts to its Book-Entry Interests. However, as of this
date, no registered Original Notes are issued and outstanding. If a
holder acquires registered Original Notes prior to the Expiration
Date, such holder must tender its registered Original Notes in
accordance with the procedures described in this Prospectus under the
heading 'The Exchange Offer--Procedures for Tendering Definitive
Registered Notes.'
SPECIAL PROCEDURES FOR BENEFICIAL
OWNERS.................................. A beneficial owner of Book-Entry Interests whose name does not appear
on a security position listing of DTC as the holder of such
Book-Entry Interests or a beneficial owner of registered Original
Notes that are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee that wishes to tender such
Book-Entry Interests or registered Original Notes in the Exchange
Offer should contact such person in whose name its Book-Entry
Interest or registered Original Notes are registered promptly and
instruct such person to tender on its behalf.
GUARANTEED DELIVERY PROCEDURES............ If holders wish to tender their Original Notes and time will not
permit the required documents to reach the Exchange Agent by the
Expiration Date, or the procedure for book-entry transfer cannot be
completed on time or certificates for registered Original Notes
cannot be delivered on time, such holders may tender their Original
Notes pursuant to the procedures described in this Prospectus
under the heading 'The Exchange Offer--Guaranteed Delivery
Procedures.'
WITHDRAWAL RIGHTS......................... Holders may withdraw the tender of their Notes at any time prior to
5:00 p.m. New York City time on the Expiration Date.
CERTAIN U.S. FEDERAL INCOME TAX
CONSEQUENCES............................ The exchange of Notes will not be a taxable exchange for United
States federal income tax purposes. Holders will not recognize any
taxable gain or loss or any interest income as a result of such
exchange.
USE OF PROCEEDS........................... The Company will not receive any proceeds from the issuance of the
Exchange Notes pursuant to the Exchange Offer. The Company will pay
all expenses incident to the Exchange Offer.
EXCHANGE AGENT............................ The United States Trust Company of New York is serving as Exchange
Agent in connection with the Exchange Offer.
</TABLE>
7
<PAGE>
THE ORIGINAL NOTES
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes, except that the Exchange Notes will be registered under
the Securities Act and, therefore, will not have legends restricting their
transfer and generally will not be entitled to registration under the Securities
Act. The Exchange Notes will evidence the same debt as the Original Notes and
both the Original Notes and the Exchange Notes are governed by the same
indenture.
<TABLE>
<S> <C>
SECURITIES OFFERED........................ $242,500,000 aggregate principal amount at maturity of 9 7/8% Senior
Discount Notes due 2008.
ISSUER.................................... Universal Compression, Inc. (formerly Tidewater Compression Service,
Inc.)
MATURITY DATE............................. February 15, 2008.
INTEREST PAYMENT DATES.................... The Original Notes were offered by the Company at a substantial
discount from their principal amount. Commencing February 15, 2003
interest will accrue until maturity on the Notes at the rate of
9 7/8% per annum and will be payable semi-annually on August 15 and
February 15, commencing August 15, 2003.
RANKING................................... The Original Notes are general unsecured senior obligations of the
Company and rank pari passu in right of payment to existing and
future senior indebtedness of the Company, including indebtedness
under the Credit Agreement (as defined). The Original Notes are also
effectively subordinated to all secured indebtedness of the Company
and its subsidiaries to the extent of the assets secured by such
indebtedness. As of December 31, 1997, on a pro forma basis, the
Company would have had approximately $263 million of senior
indebtedness outstanding, of which $113 million would have been
secured.
OPTIONAL REDEMPTION....................... The Original Notes are redeemable, in whole or in part, at the option
of the Company on or after February 15, 2003, at the redemption
prices set forth herein, plus accrued and unpaid interest to the date
of redemption. In addition, at any time on or prior to February 15,
2001, the Company may, at its option, redeem up to 35% of the
aggregate principal amount of the Original Notes originally issued
with the net cash proceeds of one or more Public Equity Offerings, at
a redemption price equal to 109.875% of the Accreted Value of the
Notes to be redeemed plus accrued and unpaid interest to the date of
redemption; provided, however, that, after giving effect to any such
redemption, at least 65% of the aggregate principal amount of the
Original Notes originally issued remain outstanding.
CHANGE OF CONTROL......................... Upon a Change of Control, each holder has the right, subject to
certain conditions, to require the Company to repurchase such
holder's Original Notes at a price equal to 101% of the Accreted
Value thereof plus accrued and unpaid interest to the date of
repurchase.
CERTAIN COVENANTS......................... The Indenture governing the Original Notes (the 'Indenture') contains
certain covenants that limit the ability of the Company and its
subsidiaries to, among other things, incur additional indebtedness,
pay dividends or make investments and certain other restricted
payments, consummate certain asset sales, enter into certain
transactions with affiliates, incur liens, impose restrictions on the
ability of a subsidiary to pay dividends or make certain payments
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
to the Company and its subsidiaries, merge or consolidate with any
other person or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets of the Company. In
addition, under certain circumstances, the Company will be required
to offer to purchase the Original Notes, in whole or in part, at a
purchase price equal to 100% of the Accreted Value thereof plus
accrued and unpaid interest, if any, to the date of repurchase, with
the proceeds of certain Asset Sales. All of such covenants are
subject to significant qualifications and exceptions.
ORIGINAL ISSUE DISCOUNT................... The Exchange Notes should be treated as a continuation of the
Original Notes for Federal income tax purposes. The Original Notes
were issued with original issue discount for Federal income tax
purposes. See 'Certain United States Federal Income Tax
Considerations.'
</TABLE>
For additional information regarding the Notes, see 'Description of the
Notes.'
USE OF PROCEEDS
There will be no cash proceeds to the Company from the Exchange Offer.
RISK FACTORS
See 'Risk Factors' for a discussion of certain factors that should be
considered in evaluating an investment in the Notes.
9
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA
The following table sets forth summary historical financial data for
Universal Compression, as of December 31, 1997 and for each of the years in the
three-year period ended March 31, 1997, the twelve-month period ended December
31, 1997 and summary pro forma data for Universal Compression as of and for the
twelve months ended December 31, 1997. The summary historical financial data for
the three years ended March 31, 1997 are derived from the Company's financial
statements for the three years ended March 31, 1997. The Company's financial
statements as of March 31, 1997 and 1996 and for each of the years in the
three-year period ended March 31, 1997 have been audited by KPMG Peat Marwick
LLP, independent auditors, as indicated in their report included elsewhere
herein. The summary historical financial data as of and for the twelve months
ended December 31, 1997 were derived from the unaudited financial statements of
Universal Compression which, in the opinion of management, include all
adjustments (consisting of usual recurring adjustments) necessary for a fair
presentation of such data. The pro forma financial information reflects the
Acquisition and related financings in the manner described under 'Unaudited Pro
Forma Financial Statements and Other Data.' The pro forma financial information
is not necessarily indicative of either future results of operations or the
results that might have occurred if the Acquisition and related financings had
been consummated on the indicated dates. The results for the twelve months ended
December 31, 1997 are not necessarily indicative of results to be expected for
the full fiscal year 1998. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations.'
The following table should be read in conjunction with 'Unaudited Pro Forma
Financial Statements and Other Data,' 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' and the Financial Statements of
Tidewater Compression Service, Inc., including the related notes thereto,
included elsewhere in this Offering Memorandum.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
-----------------------------------
1995 1996 1997
--------- --------- ---------
TWELVE MONTHS
ENDED
DECEMBER 31,
1997
-------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................................................ $ 84,682 $ 110,464 $ 113,886 $ 110,163
Gross margin(1)........................................ 38,796 50,928 49,733 54,150
Depreciation and amortization.......................... 15,472 26,997 26,163 25,917
General and administrative expenses.................... 8,888 10,508 11,004 10,018
Operating income(2).................................... 14,436 13,423 12,566 18,215
Interest expense, net.................................. 3,469 3,706 -- --
Income tax expense..................................... 4,648 3,745 4,724 6,814
Net income............................................. 6,319 5,972 7,842 11,401
OTHER DATA:
EBITDA(3).............................................. 29,908 40,420 38,729 44,132
Acquisitions(4)........................................ 240,000 -- -- --
Cash flows from (used in):
Operating activities................................. 35,880 50,810 41,923 42,481
Investing activities................................. (256,752) (1,270) (8,836) (11,993)
Financing activities................................. 220,872 (49,506) (33,121) (30,488)
Ratio of earnings to fixed charges(5).................. 4.1x 3.5x 88.9x 128.4x
Pro forma ratio of EBITDA to adjusted interest
expense(6)........................................... -- -- -- --
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 31, 1997
PRO FORMA
-------------------
(UNAUDITED)
<S> <C>
INCOME STATEMENT DATA:
Revenue................................................ $ 110,163
Gross margin(1)........................................ 58,150
Depreciation and amortization.......................... 17,620
General and administrative expenses.................... 13,518
Operating income(2).................................... 27,012
Interest expense, net.................................. 25,415
Income tax expense..................................... 591
Net income............................................. 1,006
OTHER DATA:
EBITDA(3).............................................. 44,632
Acquisitions(4)........................................ --
Cash flows from (used in):
Operating activities................................. --
Investing activities................................. --
Financing activities................................. --
Ratio of earnings to fixed charges(5).................. 1.1x
Pro forma ratio of EBITDA to adjusted interest
expense(6)........................................... 1.8x
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(7).............................................. $ 14,359
Total assets.................................................... 248,841
Total debt (including intercompany)............................. 176,160
Stockholder's equity............................................ 67,209
<CAPTION>
DECEMBER 31, 1997
PRO FORMA
--------------------
(UNAUDITED)
<S> <C>
BALANCE SHEET DATA:
Working capital(7).............................................. $ 14,359
Total assets.................................................... 372,472
Total debt (including intercompany)............................. 260,000
Stockholder's equity............................................ 104,000
</TABLE>
- ------------------
(1) Gross margin is defined as total revenue less rental expense and cost of
sales.
(2) Operating income is defined as income before income taxes plus interest
expense.
(3) EBITDA is defined as net income plus income taxes, interest expense,
depreciation and amortization. EBITDA represents a measure upon which
management assesses financial performance and certain covenants in the
Company's borrowing arrangements will be tied to similar measures. EBITDA is
not a measure of financial performance under generally accepted accounting
principles and should not be considered an alternative to operating income
or net income as an indicator of the Company's operating performance or to
net cash provided by operating activities as a measure of its liquidity.
(4) The Company acquired the assets of Brazos Gas Compressing Company ('Brazos')
for $35 million in October 1994, and the natural gas compression assets of
Halliburton Company ('Halliburton') for $205 million in December 1994. The
results of Brazos' and Halliburton's operations have been included in the
Company's results of operations from the respective dates of acquisition.
(5) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as earnings before income taxes, plus fixed charges. Fixed
charges include interest expense on all indebtedness, amortization of
deferred financing fees, and one-third of rental expense on operating leases
representing that portion of rental expense deemed to be attributable to
interest.
(6) Adjusted interest expense is defined as total pro forma estimated interest
expense excluding amortization of deferred financing costs of $1.0 million.
(7) Working capital is defined as current assets minus current liabilities.
10
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, including
'Selected Historical Financial Data,' 'Management's Discussion and Analysis of
Financial Condition and Results of Operations,' and the Company's financial
statements and notes thereto included elsewhere herein, the following risk
factors should be considered carefully by holders of Original Notes prior to
making an investment in the Exchange Notes. The term 'Note' or 'Notes' includes
the Original Notes and the Exchange Notes.
SIGNIFICANT LEVERAGE AND DEBT SERVICE
As a result of the Acquisition, the Company has indebtedness that is
substantial in relation to its stockholder's equity, as well as interest and
debt service requirements which are significant compared to its cash flow from
operations. As of December 31, 1997, on a pro forma basis after giving effect to
the Aquisition and related financings (the 'Transactions'), the Company would
have had approximately $260 million of indebtedness outstanding, including the
Notes, which would have represented 71% of total capitalization. See
'Capitalization.' In addition, the Company is permitted to incur up to $50
million of additional indebtedness under the Senior Secured Credit Facilities
(as defined).
The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including, but not limited to the
following: (i) a substantial portion of the Company's cash flow from operations
must be dedicated to debt service and will not be available for operations and
other purposes, except that for the first five years immediately following the
Offering, debt service will be satisfied on a non-cash payment basis; (ii) the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions or general corporate purposes may be
impaired; (iii) certain of the Company's borrowings are and will continue to be
at variable rates of interest, which exposes the Company to the risk of
increased interest rates and (iv) the Company's level of indebtedness could make
it more vulnerable to economic downturns and limit its ability to withstand
competitive pressures.
The Company's ability to pay interest on the Notes and to satisfy its other
obligations will depend upon the Company's future operating performance, which
will be affected by prevailing economic conditions and financial, business and
other factors, many of which are beyond the Company's control. There can be no
assurance that the Company's operating results will be sufficient for the
Company to meet its obligations. The Company may be required to refinance the
Notes at maturity. No assurance can be given that, if required, the Company will
be able to refinance the Notes on terms acceptable to it, if at all. If the
Company is unable to service its indebtedness, it will be forced to adopt an
alternative strategy that may include actions such as reducing or delaying
capital expenditures or the expansion of the Company, selling assets,
restructuring or refinancing its indebtedness or seeking additional equity
capital. There can be no assurance that any of these strategies could be
effected on terms acceptable to the Company, if at all. See 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources.'
LIMITATIONS IMPOSED BY CERTAIN INDEBTEDNESS
The Indenture governing the Notes contains certain restrictive covenants
which will affect, and in many respects significantly limit or prohibit, among
other things, the ability of the Company to incur indebtedness, make prepayments
of certain indebtedness, make investments, engage in transactions with
affiliates, create liens, sell assets and engage in mergers and consolidations.
The borrowings under the Senior Secured Credit Facilities are secured by
substantially all the assets of the Company. If the Company were unable to repay
borrowings under the Senior Secured Credit Facilities, the lenders thereunder
could proceed against the collateral securing the Senior Secured Credit
Facilities. If the indebtedness under the Senior Secured Credit Facilities were
to be accelerated, there can be no assurance that the assets of the Company
would be sufficient to repay such indebtedness and the Notes. See 'Description
of Other Indebtedness.'
11
<PAGE>
RISK OF FRAUDULENT TRANSFER LIABILITY
Management of the Company believes that the indebtedness represented by the
Notes were incurred for proper purposes and in good faith, and that, based on
present forecasts, asset valuations and other financial information, the Company
is solvent, has sufficient capital for carrying on its business and is able to
pay its debts as they mature. Notwithstanding management's belief, if a court of
competent jurisdiction in a suit by an unpaid creditor or a representative of
creditors (such as a trustee in bankruptcy or a debtor-in-possession) were to
find that the Company did not receive fair consideration or reasonably
equivalent value for incurring the Notes and, at the time of the incurrence of
the Notes or such indebtedness, the Company was insolvent, was rendered
insolvent by reason of such incurrence, was engaged in a business or transaction
for which its remaining assets constituted unreasonably small capital, intended
to incur, or believed that it would incur, debts beyond its ability to pay as
such debts matured, or intended to hinder, delay or defraud its creditors, such
court could avoid such indebtedness. A likely consequence of such avoidance
would be the subordination of the indebtedness represented by the Notes to
existing and possibly future indebtedness and other liabilities of the Company.
The measure of insolvency for purposes of the foregoing will vary depending upon
the law of the relevant jurisdiction. Generally, however, a company would be
considered insolvent for purposes of the foregoing if the sum of that company's
liabilities is greater than all the company's properties at a fair valuation, or
if the present fair salable value of the company's assets is less than the
amount that will be required to pay its probable liability on its existing debts
as they become absolute and matured. There can be no assurance as to what
standards a court would apply to determine whether the Company was solvent at
the relevant time, or whether, whatever standard was applied, the Notes would
not be avoided on another of the grounds set forth above.
INDUSTRY CONDITIONS
Gas compression operations may be materially dependent upon the levels of
activity in natural gas development, production, processing and transportation.
Such activity levels may be affected both by short-term and long-term trends in
natural gas prices. In recent years, natural gas prices and, therefore, the
level of drilling and exploration activity, have been extremely volatile. Any
prolonged substantial reduction in natural gas prices would, in all likelihood,
depress the level of exploration and development activity and result in a
decline in the demand for the Company's compression equipment and services. A
prolonged and significant decline in natural gas prices could have a material
adverse effect on the Company's business, results of operations and financial
condition.
SHORT-TERM LEASES; POSSIBLE INABILITY TO RE-LEASE COMPRESSORS
The initial term of the Company's leases generally varies based on
operating conditions and customer needs. In most events, the Company's initial
lease terms, unless extended by the lessee, are not generally sufficient for the
Company to recoup the average cost of acquiring or fabricating compressors under
currently prevailing lease rates. Accordingly, the Company assumes substantial
risk of not recovering its entire investment in the equipment it acquires or
fabricates through the term of the given lease. Although the Company has
historically been successful in re-leasing units in its inventory, there can be
no assurance that the Company will continue to be able to do so or that a
substantial number of its lessees will not terminate their leases at
approximately the same time, thereby causing an adverse accumulation of unleased
compressors in the Company's inventory. The inability of the Company to lease a
substantial portion of its compressors would have a material adverse effect upon
the Company's business, results of operations and financial condition. See
'Business--Operations.'
DEPENDENCE ON SUPPLIERS
As a consequence of its highly standardized fleet, certain of the
components used in the Company's products are obtained from a single source or a
limited group of suppliers. The Company's reliance on such suppliers involves
several risks, including a potential inability to obtain an adequate supply of
required components in a timely manner, price increases and component quality.
Although the Company seeks to reduce dependence on those sole and limited source
suppliers, the partial or complete loss of certain of those sources could have
at least a temporary material adverse effect on the Company's results of
operations and damage customer relationships.
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Further, a significant increase in the price of one or more of these components
could materially adversely affect the Company's results of operations.
SUBSTANTIAL CAPITAL INVESTMENTS
The Company currently anticipates it will continue to make substantial
capital investments in the expansion of the compressor rental fleet.
Historically, the Company has financed these investments through internally
generated funds and contributions from Tidewater. If the Company does not incur
these expenditures while its competitors make substantial fleet investments, the
Company's market share may decline and its business may be adversely affected.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company intends to continue to expand its business in South America and
the Pacific Rim and, ultimately, other international markets, directly and
through joint ventures. The Company's international operations are affected by
global economic and political conditions. In addition, changes in economic or
political conditions in any of the countries in which the Company operates could
result in exchange rate movement, new currency or exchange controls, other
restrictions being imposed on the operations of the Company or expropriation.
The Company's operations may also be adversely affected by significant
fluctuations in the value of the U.S. dollar to meet its obligations. See
'--Foreign Exchange Rate Risks; Repatriation Risks,' 'Management's Discussion
and Analysis of Financial Condition and Results of Operations' and 'Business.'
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant degree upon the continued
contributions of key management, engineering, sales and marketing, customer
support, finance and manufacturing personnel, certain of whom would be difficult
to replace. The Company does not maintain and does not intend to obtain key man
life insurance for any of its employees. The loss of the services of certain of
these individuals could have a material adverse effect on the Company. There can
be no assurance that the services of such personnel will continue to be
available to the Company. In connection with the Acquisition, the Company
entered into employment agreements with certain members of its senior management
team. In addition, the Company believes that its success depends on its ability
to attract and retain additional qualified employees and that the failure to
recruit such other skilled personnel could have a material adverse effect on the
Company. See 'Management--Executive Compensation; Employment Agreements.'
MANAGEMENT INFORMATION SYSTEMS
The Company believes that improvements in management and operational
controls, and operational, financial and management information systems are
needed to manage further growth. The Company also currently plans to augment its
information systems. In addition, Tidewater is conducting a program to review
and correct data processing issues relating to whether its systems will
recognize the year 2000 or will treat any date after December 31, 1999 as a date
during the twentieth century. The Company will be entitled to the benefits of
such program. There can be no assurance that the management information system
will produce the desired efficiencies or that other improvements will not be
needed. The failure to implement such improvements successfully could have a
material adverse effect on the Company's business, financial condition and
results of operations.
AVAILABILITY AND INTEGRATION OF ACQUISITIONS
Since the Acqusition, the Company has adopted a new growth strategy and
plans to pursue the acquisition of other companies, assets and product lines
that either complement or expand its existing business. Any such acquisition may
be effected by Holdings, the Company or a subsidiary of either. Each such
acquisition will involve a number of potential risks, such as the diversion of
management's attention to the assimilation of the operations and personnel of
the acquired businesses and possible short-term adverse effects on the Company's
operating results during the integration process.
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The Company is unable to predict whether or when any prospective candidate
will become available or the likelihood of a material acquisition being
completed. The Company may seek to finance any such acquisition through the
issuance of new debt and/or equity securities. If the Company proceeds with an
acquisition, and if such acquisition is relatively large and consideration is in
the form of cash, a substantial portion of the Company's financial resources
could be used in order to consummate any such acquisition. In addition, due to
the relatively large size of several potential acquisition opportunities, the
general risks inherent in acquisitions described above could be particularly
acute.
POTENTIAL LIABILITY AND INSURANCE
Natural gas service operations are subject to inherent risks, such as
equipment defects, malfunction and failures and natural disasters with resultant
uncontrollable flows of gas or well fluids, fires and explosions. These risks
could expose the Company to substantial liability for personal injury, wrongful
death, property damage, pollution and other environmental damages.
Although the Company has obtained insurance against certain of these risks,
no assurance can be given that such insurance will be adequate to cover the
Company's liabilities or will be generally available in the future or, if
available, that premiums will be commercially justifiable. If the Company were
to incur substantial liability and such damages were not covered by insurance or
were in excess of policy limits, or if the Company were to incur such liability
at a time when it is not able to obtain liability insurance, its business,
results of operations and financial condition could be materially adversely
affected.
ENVIRONMENTAL REGULATION
The Company is subject to various federal, state and local laws and
regulatory standards in the areas of safety, health and the environment,
including regulations regarding emission controls. The Company believes that it
is in substantial compliance with such laws and regulations and that the phasing
in of emission controls and other known standards at the rate currently
contemplated by existing laws and regulations will not have a material adverse
effect on the Company's business, results of operations or financial condition.
However, various state and federal agencies from time to time may adopt new laws
and regulations or amend existing laws and regulations regarding environmental
protection that may impose stricter and more costly requirements. Such changes
to existing laws or regulations could require the Company to undertake
significant capital expenditures and could otherwise have a material adverse
effect on the Company's business, results of operations and financial condition.
The Company routinely deals with natural gas, oil and other petroleum
products. As a result of its fabrication and overhaul operations, the Company
will generate, manage and dispose of hazardous wastes, such as solvents,
thinner, waste paint, waste oil, washdown wastes, and sandblast material.
Although the Company attempts to identify and address contamination before
acquiring properties, and although the Company attempts to utilize generally
accepted operating and disposal practices, hydrocarbons or other wastes may have
been disposed or released on or under properties owned, leased, or operated by
the Company or on or under other locations where such wastes have been taken for
disposal. These properties and the wastes disposed thereon may be subject to
federal or state environmental laws that could require the Company to remove the
wastes or remediate sites, which could have a material adverse effect on the
Company. See also 'Business--Environmental Regulation.'
COMPETITION
The natural gas compression service and fabrication business is highly
competitive. Overall, the Company experiences considerable competition from
companies with significantly greater financial resources and, on a regional
basis, from several smaller companies which compete directly with the Company.
The Company believes it is currently one of the largest natural gas compression
companies in the United States on the basis of aggregate rental HP.
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FOREIGN EXCHANGE RATE RISKS; REPATRIATION RISKS
Although the Company and its subsidiaries attempt to match costs and
revenues in terms of local currencies, the Company anticipates that as it
continues its expansion on a global basis, there will be many instances in which
costs and revenues will not be matched with respect to currency denomination. As
a result, the Company anticipates that increasing portions of its revenues,
costs, assets and liabilities will be subject to fluctuations in foreign
currency valuations, and that such changes in exchange rates may have a material
adverse effect on the Company's business, financial condition and results of
operations. While the Company may utilize foreign currency forward contracts or
other currency hedging mechanisms to minimize exposure to currency fluctuation,
there can be no assurance that such hedges will be implemented, or if
implemented, will achieve the desired effect. The Company may experience
economic loss and a negative impact on earnings solely as a result of foreign
currency exchange rate fluctuations. The markets in which the Company's
subsidiaries may conduct business could restrict the removal or conversion of
the local or foreign currency.
CONTROL OF COMPANY BY PRINCIPAL STOCKHOLDERS
Certain principal stockholders own and control in excess of 95% of
Holdings' outstanding voting stock. Accordingly, they have the ability to elect
the entire Board of Directors of the Company and, in general, to determine the
outcome of any other matter submitted to stockholders for their approval,
including the power to determine the outcome of all corporate transactions, such
as mergers, consolidations, and the sale of all or substantially all of the
assets of Holdings. See 'Principal Stockholders.'
ORIGINAL ISSUE DISCOUNT CONSEQUENCES
The Original Notes were issued at a substantial discount from their
principal amount. The Exchange Notes will be treated as continuations of the
Original Notes for Federal income tax purposes. Consequently, the holders of the
Exchange Notes generally will be required to include amounts in gross income for
federal income tax purposes in advance of receipt of any cash payment on the
Exchange Notes to which the income is attributable. See 'Certain United States
Federal Income Tax Considerations' for a more detailed discussion of the federal
income tax consequences to the holders of the Exchange Notes of the purchase,
ownership and disposition of the Exchange Notes.
If a bankruptcy case is commenced by or against the Company under the
United States Bankruptcy Code, the claim of a holder of Exchange Notes with
respect to the principal amount thereof will likely be limited to an amount
equal to the sum of the Accreted Value as of the commencement of such case.
CONSEQUENCES OF FAILURE TO EXCHANGE
The issuance of the Exchange Notes in exchange for the Original Notes
pursuant to the Exchange Offer will be made only after a timely receipt by the
Company of such Original Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, holders of Original
Notes desiring to tender such Original Notes in exchange for Exchange Notes
should allow sufficient time to ensure timely delivery. The Company is under no
duty to give notification of defects or irregularities with respect to the
tenders of Original Notes for exchange.
Original Notes that are not tendered will, following the consummation of
the Exchange Offer, continue to be subject to the existing restrictions upon
transfer thereof and the Company will generally have no further obligation to
provide for the registration under the Securities Act of such Original Notes. In
addition, any holder of Original Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes may be deemed
to have received restricted securities and, if so, will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. To the extent that Original Notes are
tendered in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Original Notes could be adversely affected. Each broker or dealer
that receives Exchange Notes for its own account in exchange for Original Notes
where such Exchange Notes were acquired by such broker or dealer as a result of
market-making activities or other trading activities must
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acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See 'Plan of Distribution.'
LACK OF PUBLIC MARKET; RESTRICTIONS ON TRANSFERABILITY
The Exchange Notes are new securities for which there currently is no
market. Although the Initial Purchasers have informed the Company that they
currently intend to make a market in the Notes, they are not obligated to do so
and any such market making may be discontinued at any time without notice. In
addition, such market making activity may be limited during the pendency of the
Exchange Offer or the effectiveness of a shelf registration statement in lieu
thereof. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Notes. The Notes have been designated for
trading by qualified buyers in the PORTAL Market. The Company does not intend to
apply for listing of the Notes on any securities exchange or for quotation
through the Nasdaq National Market.
The liquidity of, and trading market for, the Exchange Notes may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, the Company.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus, including, without
limitation, statements containing the words 'believes,' 'anticipates,'
'intends,' 'expects' and words of similar import, constitute 'forward-looking
statements.' Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company or the oil and gas industry to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the following: general economic and business conditions; prospects for the oil
and gas industry; competition; changes in business strategy or development
plans; the loss of key personnel; the availability of capital; regulatory
developments and other factors referenced in this Prospectus, including, without
limitation, regulatory developments and other factors referenced under the
captions 'Prospectus Summary,' 'Description of The Company Acquisition,' 'Risk
Factors,' 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' and 'Business.' Given these uncertainties, prospective
investors are cautioned not to place undue reliance on such forward-looking
statements. The Company disclaims any obligation to update any such factors or
to publicly announce the results of any revisions to any of the forward-looking
statements contained herein to reflect future events or developments.
USE OF PROCEEDS
There will be no proceeds to the Company from an exchange pursuant to the
Exchange Offer. The net proceeds to the Company (after discounts, commissions
and estimated fees and expenses in the aggregate amount of approximately $4.49
million related to the Offering) from the sale of the Original Notes in the
Offering were approximately $145.3 million. Such proceeds, together with the
proceeds of the Senior Secured Credit Facilities (see 'Description of Other
Indebtedness'), the proceeds of the Holdings Notes and the proceeds from the
Castle Harlan Investment were used to pay (i) the Purchase Price, (ii) the fees
and expenses incurred in connection with the Acquisition and related financings,
and (iii) the ongoing working capital and capital expenditure requirements of
the Company. See 'Description of the Company Acquisition.'
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Original Notes were initially issued and sold by Universal Compression
on February 20, 1998, to the Initial Purchasers pursuant to a Purchase Agreement
(the 'Purchase Agreement') entered into on February 13, 1998. The Initial
Purchasers subsequently sold the Original Notes to qualified institutional
buyers in reliance on
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Rule 144A under the Securities Act. Pursuant to the Purchase Agreement, the
Company and the Initial Purchasers entered into a Registration Rights Agreement
on February 20, 1998 (the 'Registration Rights Agreement'). Pursuant to the
Registration Rights Agreement, the Company agreed to use its best efforts to
consummate the Exchange Offer on or prior to October 18, 1998. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part and the description of the terms of
the Registration Rights Agreement is qualified in its entirety by reference
thereto. The Registration Statement of which this Prospectus is a part is
intended to satisfy the Company's obligations with respect to the registration
of Notes in accordance with the terms of the Registration Rights Agreement and
the Indenture.
Following the consummation of the Exchange Offer, holders of Original Notes
not tendered in the Exchange Offer or whose tenders are not accepted in the
Exchange Offer will not have any further registration rights. Such holders will
continue to hold such Original Notes and will be entitled to all the rights and
preferences and will be subject to the limitations applicable thereto set forth
in the Indenture except for any such rights or limitations which, by their
terms, terminate or cease to be effective as a result of the making, and the
acceptance for exchange of all validly tendered Original Notes pursuant to the
Exchange Offer.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept any and
all Original Notes validly tendered and not withdrawn prior to 5:00 p.m., New
York City time on [ ], or such later time and date to which the Exchange
Offer is extended by the Company in its sole discretion (the 'Expiration Date').
The Company will issue up to $242,500,000 aggregate principal amount of Exchange
Notes in exchange for a like principal amount of Original Notes. Holders may
tender some or all of their Original Notes pursuant to the Exchange Offer. The
Company will issue registered Exchange Notes on or promptly after the expiration
of the Exchange Offer.
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes except that (i) the Exchange Notes will have been
registered under the Securities Act and thus will not bear restrictive legends
restricting their transfer pursuant to the Securities Act and (ii) the Exchange
Notes will not be subject to any covenant regarding registration under the
Securities Act, including any such rights under the Registration Rights
Agreement or the Indenture, which rights, in any event, may terminate with
respect to the Original Notes upon consummation of the Exchange Offer. The
Exchange Notes will evidence the same debt as the Original Notes (which they
replace) and will be issued under, and be entitled to the benefits of, the
Indenture, which also authorized the issuance of the Original Notes, such that
both the Exchange Notes and the Original Notes will be treated as a single class
of debt securities under the Indenture.
In addition to the Exchange Notes, the Company, pursuant to the
Registration Rights Agreement, may be required, upon the written request of the
Initial Purchasers, to issue to the Initial Purchasers notes identical in all
material respects to the Exchange Notes (except for the placement of a
restrictive legend) (the 'Private Exchange Notes') in the event that, prior to
the consummation of the Exchange Offer, the Initial Purchasers hold Notes
having, or that are reasonably likely to be determined to have, the status of an
unsold allotment in the initial distribution. In this event, the Company may be
required to file a shelf registration statement with respect to such Private
Exchange Notes.
The Company shall be deemed to have accepted validly tendered Original
Notes when, as and if the Company has given oral or written notice thereof (oral
notice being promptly confirmed in writing) to The United States Trust Company
of New York, as Exchange Agent (the 'Exchange Agent'). The Exchange Agent will
act as agent for the tendering holders of the Original Notes for the purposes of
receiving the Exchange Notes from the Company.
Holders of Notes who tender Original Notes in the Exchange Offer will not
be required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of
Original Notes pursuant to the Exchange Offer.
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EXTENSION; AMENDMENTS
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice (oral notice being promptly
confirmed in writing) and will make public announcement thereof, each prior to
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Original Notes, (ii) to extend the Expiration Date, (iii) if any
of the conditions set forth below under, '--Conditions of the Exchange Offer'
shall not have been satisfied, to terminate the Exchange Offer or (iv) to amend
the terms of the Exchange Offer in any manner which, in its good faith judgment,
is advantageous to the holders of the Original Notes, whether before or after
any tender of the Original Notes. Any such delay, extension, termination or
amendment shall be effected by giving oral or written notice (oral notice being
promptly confirmed in writing) to the Exchange Agent, followed as promptly as
practicable by a public announcement thereof.
Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, termination or amendment of the
Exchange Offer, the Company shall not have an obligation to publish, advertise,
or otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
PROCEDURES FOR TENDERING BOOK-ENTRY INTERESTS
The Original Notes (which for purposes of the Exchange Offer include
Book-Entry Interests therein and Original Notes in registered form ('Definitive
Registered Notes'), if any) were issued as global securities without interest
coupons (each, a 'Global Note'). Concurrently with the issuance thereof, the
Global Notes were deposited with The United States Trust Company of New York, as
Book-Entry Depositary (the 'Book-Entry Depositary'), which issued a
certificateless depositary interest (each, a 'Depositary Interest') in each
Global Note representing a 100% interest therein to DTC. Beneficial interests in
the Global Notes held by direct or indirect participants in DTC through the
Depositary Interests (the 'Book-Entry Interests') are shown on, and transfers
thereof are effected only through, records maintained in book-entry form by DTC
(with respect to its participants) and its participants.
Each holder (which for purposes of the Exchange Offer, includes any
participant in DTC whose name appears on a security position listing as a holder
of Book-Entry Interests) of Original Notes held in the form of Book-Entry
Interests who wishes to tender such Book-Entry Interests for exchange pursuant
to the Exchange Offer must transmit to the Exchange Agent on or prior to the
Expiration Date either (i) a properly completed and duly executed Letter of
Transmittal or a facsimile thereof, including all other documents required by
such Letter of Transmittal, to the Exchange Agent at the address set forth on
the cover page of the Letter of Transmittal or (ii) a computer-generated message
(an 'Agent's Message'), transmitted by means of DTC's Automated Tender Offer
Program ('ATOP') system and received by the Exchange Agent and forming a part of
a book-entry transfer (a 'Book-Entry Confirmation'), in which such holder
acknowledges and agrees to be bound by the terms of the Letter of Transmittal.
In addition, in order to deliver Original Notes held in the form of Book Entry
Interests (i) a timely Book-Entry Confirmation of book-entry transfer of such
Original Notes into the Exchange Agent's account at DTC pursuant to the
procedure for book-entry transfers described below under '--Book-Entry Transfer'
must be received by the Exchange Agent prior to the Expiration Date or (ii) the
holder must comply with the guaranteed delivery procedures described below.
The tender of an Original Note by a holder that is not withdrawn prior to
the Expiration Date will constitute an agreement between such holder and the
Company in accordance with the terms and subject to the conditions set forth
hereunder and in the Letter of Transmittal.
DELIVERY OF BOOK-ENTRY INTERESTS MUST BE EFFECTED BY BOOK-ENTRY TRANSFER AS
DESCRIBED UNDER '--BOOK-ENTRY TRANSFER.' THE METHOD OF DELIVERY OF THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED
THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO
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THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL SHOULD
BE SENT TO THE ISSUER.
PROCEDURES FOR TENDERING DEFINITIVE REGISTERED NOTES
Only registered holders of Definitive Registered Notes may tender such
Original Notes in the Exchange Offer. Each holder of Definitive Registered Notes
who wishes to tender such Definitive Registered Notes for exchange pursuant to
the Exchange Offer must transmit to the Exchange Agent on or prior to the
Expiration Date a properly completed and duly executed Letter of Transmittal or
a facsimile thereof, including all other documents required by such Letter of
Transmittal, to the Exchange Agent at the address set forth below under
'--Exchange Agent.' In addition, in order to deliver Definitive Registered Notes
(i) the certificates representing such Definitive Registered Notes must be
received by the Exchange Agent prior to the Expiration Date or (ii) the holder
must comply with the guaranteed delivery procedures described below.
The tender by a holder (not withdrawn prior to Expiration Date) will
constitute an agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF THE DEFINITIVE REGISTERED NOTES AND THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED
THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR CERTIFICATES FOR DEFINITIVE
REGISTERED NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR
RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO
EFFECT THE ABOVE TRANSACTION FOR SUCH HOLDERS.
PROCEDURES APPLICABLE TO ALL HOLDERS
Any beneficial owner of Book-Entry Interests whose name does not appear on
a security position listing of DTC as a holder of such Book-Entry Interests and
any beneficial owner of Definitive Registered Notes that are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender such Book-Entry Interests or Definitive Registered Notes in
the Exchange Offer should contact such person in whose name such Book-Entry
Interests or Definitive Registered Notes are registered promptly and instruct
such holder to tender on such beneficial owner's behalf.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Original Notes surrendered for
exchange pursuant to the Letter of Transmittal or to which the notice of
withdrawal pertains are tendered (i) by a holder of the Original Notes who has
not completed the box entitled 'Special Issuance Instructions' on the Letter of
Transmittal or (ii) for the account of an Eligible Institution (as defined
below). In the event that signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantees
must be by a firm which is a member of a registered national securities exchange
or a member of the National Association of Securities Dealers, Inc. or by a
commercial bank or trust company having an office or correspondent in the United
States (collectively, 'Eligible Institutions').
If the Letter of Transmittal or notice of withdrawal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing and, unless waived by the Company,
proper evidence satisfactory to the Company of its authority to so act must be
submitted.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Original Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Original Notes not properly tendered or any Original Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Original Notes. The
Company's interpretation of the terms and conditions of the Exchange
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Offer (including the instructions in the Letter of Transmittal) will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of the Original Notes must be cured within such time as
the Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of the Original Notes, none of
the Company, the Exchange Agent or any other person shall incur any liability
for failure to give such notification. Tenders of the Original Notes will not be
deemed to have been made until any and all such defects or irregularities have
been cured or waived.
By transmitting an Agent's Message or executing a Letter of Transmittal,
each holder will represent to the Company and agree that, among other things,
(i) the Exchange Notes or interests therein to be acquired by such holder and
any beneficial owners thereof (the 'Beneficial Owner(s)') in the Exchange Offer
are being acquired by such holder and any Beneficial Owner(s) in the ordinary
course of business of the holder and any such Beneficial Owner(s), (ii) the
holder and each Beneficial Owner are not participating, do not intend to
participate and have no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes, (iii) the holder and each
Beneficial Owner acknowledge and agree that any person who is a broker-dealer
registered under the Exchange Act or is participating in the Exchange Offer for
the purpose of distributing the Exchange Notes must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the Exchange Notes and any interest therein
acquired by such person and cannot rely on the position of the staff of the SEC
set forth in certain no-action letters (see '--Resales of the Exchange Notes'),
(iv) the holder and each Beneficial Owner understands that a secondary resale
transaction described in clause (iii) above and any resales of the Exchange
Notes and any interest therein obtained by such holder in exchange for the
Original Notes originally acquired by such holder directly from the Company
should be covered by an effective registration statement containing the selling
security holder information required by Items 507 and 508, as applicable, of
Regulation S-K of the Commission and (v) neither the holder nor any Beneficial
Owner(s) is an 'affiliate,' as defined in Rule 405 promulgated under the
Securities Act, of the Company. Each broker-dealer that receives Exchange Notes
for its own account in exchange for Original Notes must represent that the
Original Notes tendered in the Exchange Offer were acquired by such
broker-dealer as a result of market-making activities or other trading
activities and must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes. By so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with the resales of Exchange Notes received in exchange for Original Notes where
Original Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has indicated its intention
to make this Prospectus (as it may be amended or supplemented) available to any
broker-dealer for use in connection with any such resale for a period of 180
days after the Expiration Date. See 'Plan of Distribution.'
ACCEPTANCE OF ORIGINAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Original Notes
properly tendered and will issue the Exchange Notes promptly after acceptance of
the Original Notes. See '--Conditions of the Exchange Offer.' For purposes of
the Exchange Offer, the Company shall be deemed to have accepted properly
tendered Original Notes for exchange when, as and if the Company has given oral
or written notice thereof (oral notice being promptly confirmed in writing) to
the Exchange Agent.
RETURN OF ORIGINAL NOTES
If any tendered Original Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Original Notes are
withdrawn or are submitted for a greater principal amount than the holders
thereof desire to exchange, then such unaccepted, withdrawn or non-exchanged
Original Notes will be returned without expense to the tendering holder thereof.
Under such circumstances, Book-Entry Interests in Original Notes will be
credited to an account maintained with DTC as promptly as practicable.
20
<PAGE>
BOOK-ENTRY TRANSFER
The Exchange Agent will establish an account with respect to the Book-Entry
Interests at DTC for purposes of the Exchange Offer promptly after the date of
this Prospectus. All deliveries of Book-Entry Interests must be made by
book-entry transfer to the account maintained by the Exchange Agent at DTC. Any
financial institution that is a participant in DTC's systems may make book-entry
delivery of Book-Entry Interests by causing DTC to transfer such Book-Entry
Interests into the Exchange Agent's account in accordance with DTC's ATOP
procedures for transfer. Holders of Book-Entry Interests who are unable to
deliver a Book-Entry Confirmation of the tender of their Book-Entry Interests
into the Exchange Agent's account at DTC or all other documents required by the
Letter of Transmittal to the Exchange Agent on or prior to the Expiration Date,
must tender their Book-Entry Interests according to the guaranteed delivery
procedures described below.
GUARANTEED DELIVERY PROCEDURES
If a holder of Original Notes desires to tender such Original Notes and
time will not permit such holder's required documents to reach the Exchange
Agent, or the procedure for book-entry transfer cannot be completed or the
certificates relating to Definitive Registered Notes cannot be delivered, in
each case, on or prior to the Expiration Date, a tender may be effected if (i)
the tender is made through an Eligible Institution, (ii) on or prior to the
Expiration Date, the Exchange Agent receives from such Eligible Institution (a)
either a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof) or a properly transmitted Agent's Message and (b) a Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery), setting forth the name and
address of such holder of Original Notes and the amount of Original Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within five New York Stock Exchange ('NYSE') trading days after the date of
execution of the Notice of Guaranteed Delivery, a Book-Entry Confirmation or the
certificates relating to the Definitive Registered Notes and all other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent, and (iii) a Book-Entry Confirmation or the
certificates relating to the Definitive Registered Notes and all other documents
required by the Letter of Transmittal are received by the Exchange Agent within
five NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
WITHDRAWAL OF TENDERS
A tender of Original Notes may be withdrawn any time prior to the
Expiration Date.
For a withdrawal to be effective, (i) a written notice must be received by
the Exchange Agent at the address set forth below under '--Exchange Agent' or
(ii) the appropriate procedures of DTC's ATOP system must be complied with. Any
such notice of withdrawal with respect to Book-Entry Interests must (i) specify
the name of the person having tendered the Original Notes to be withdrawn and
identify the Original Notes to be withdrawn (including the principal amount of
such Original Notes) and (ii) specify the name and number of the account at DTC
to be credited with the withdrawn Original Notes and otherwise comply with the
procedures of DTC. Any such notice of withdrawal with respect to Definitive
Registered Notes must (x) specify the name of the person having tendered the
Definitive Registered Notes to be withdrawn and (y) identify the Definitive
Registered Notes to be withdrawn (including the certificate number and principal
amount of Original Notes). Any such written withdrawal must be signed by the
holder in the same manner as the original signature on the Letter of Transmittal
by which such Original Notes were tendered (including required signature
guarantees). All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company, in its sole
discretion and whose determination shall be final and binding on all parties.
Any Original Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Properly withdrawn Original
Notes may be retendered by following one of the procedures described above at
any time on or prior to the Expiration Date.
21
<PAGE>
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any Original
Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of such Original Notes:
(a) if, in the sole judgment of the Company, the Exchange Offer would
violate any law, statute, rule or regulation or an interpretation thereof of the
Commission staff; or
(b) with respect to all Book-Entry Interests tendered, if on the
Expiration Date, the Book-Entry Depositary does not present the Global Notes to
The United States Trust Company of New York, as trustee ('Trustee').
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Original Notes and
return all tendered Original Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Original Notes tendered prior to the Expiration
Date, subject, however, to the rights of holders to withdraw such Original Notes
(see '--Withdrawal of Tenders') or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all validly tendered Original Notes
which have not been withdrawn. If such waiver constitutes a material change to
the Exchange Offer, the Company will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the registered holders and the
Company will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the waiver and the manner of disclosure
to the registered holders, if the Exchange Offer would otherwise expire during
such five to ten business day period.
EXCHANGE AGENT
The United States Trust Company of New York has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests of or Notices of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
BY REGISTERED OR CERTIFIED MAIL, BY OVERNIGHT COURIER OR BY HAND:
The United States Trust
Company of New York
114 West 47th Street
New York, New York 10036
Attention: Gerard F. Ganey
or
BY FACSIMILE:
The United States Trust
Company of New York
Attention: Gerard F. Ganey
Facsimile Number: (212) 852-1627
In addition, Letters of Transmittal and any other required documentation
should be sent to the Exchange Agent at the address set forth above, except
where facsimile transmission is specifically authorized (e.g., withdrawals and
Notices of Guaranteed Delivery). DELIVERY OF THE LETTER OF TRANSMITTAL TO AN
ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN
AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telecopy, telephone or in person by officers and regular
employees of the Company and its affiliates.
22
<PAGE>
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptance of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
its reasonable out-of-pocket expenses in connection therewith.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Original Notes pursuant to the Exchange Offer. If, however, a transfer
tax is imposed for any reason other than the exchange of the Original Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to the tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Original Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities within the meaning of Rule 144
of the Securities Act. Accordingly, such Original Notes may be resold only (i)
to the Company or any subsidiary thereof, (ii) so long as the Original Notes are
eligible for resale pursuant to Rule 144A, to a person whom the seller
reasonably believes is a qualified institutional buyer within the meaning of
Rule 144A under the Securities Act, purchasing for its own account or for the
account of a qualified institutional buyer to whom notice is given that the
resale, pledge or other transfer is being made in reliance on Rule 144A, (iii)
outside the United States to non-U.S. persons in an offshore transaction in
compliance with Rule 904 under the Securities Act, (iv) pursuant to an exemption
from registration in accordance with Rule 144 (if available), (v) to an
institutional 'accredited investor' that, prior to such transfer, furnishes to
the Trustee a signed letter containing certain representations and agreements
relating to the registration of transfer of the Original Notes and, if such
transfer is in respect of a principal amount of Original Notes at the time of
transfer of less than $250,000, an opinion of counsel acceptable to the Company
that such transfer is in compliance with the Securities Act and (vi) pursuant to
an effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the United States
and subject to certain requirements of the Trustee being met. The liquidity of
the Original Notes could be adversely affected by the Exchange Offer. See 'Risk
Factors--Consequences of Failure to Exchange.' Following the consummation of the
Exchange Offer, holders of the Original Notes will have no further registration
rights under the Registration Rights Agreement.
RESALES OF THE EXCHANGE NOTES
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in exchange for Original Notes may
be offered for resale, resold and otherwise transferred by holders thereof
(other than (i) any such holder which is an 'affiliate' of the Company within
the meaning of Rule 405 under the Securities Act, (ii) a broker-dealer who
acquired Original Notes directly from the Company or (iii) broker-dealers who
acquired Original Notes as a result of market-making or other trading
activities) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holders' business, such holders have no
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes and neither such holders nor any such other person is
engaging in or intends to engage in a distribution of such Exchange Notes. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Original Notes, where such Original Notes were acquired by such broker-dealer as
a result of market-making or other activities, must acknowledge that it will
deliver a prospectus in connection with any sale of such Exchange Notes. Any
broker-dealer that participates in a distribution of the Exchange Notes may not
participate in the Exchange Offer and will be deemed to be an underwriter for
purposes of the Securities Act. Any holder who is an affiliate of the Company or
who uses the Exchange Offer to participate in a distribution of the Exchange
Notes to be acquired in the Exchange Offer may not rely on such interpretation
by the staff of the Commission and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resales of such Exchange Notes. See 'Plan of Distribution.'
23
<PAGE>
DESCRIPTION OF THE COMPANY ACQUISITION
On February 20, 1998, TW acquired 100% of the voting securities of
Tidewater Compression Service, Inc. for a cash payment of $348.1 million,
subject to adjustment as described below (the 'Acquisition'). TW was formed by
CHP for the purpose of facilitating the Acquisition. TW obtained the funds
required to finance the cash payment, as well as the fees and expenses incurred
in connection with the Acquisition, in the following manner: (i) an aggregate
cash contribution of $104.07 million by Holdings derived from the Castle Harlan
Investment and net proceeds of the issuance of Holdings Notes of $24.17 million;
(ii) a Term Loan Credit Facility of $75 million and a Revolving Credit Facility
of $85 million ($35 million of which was drawn down at the closing of the
Acquisition), each with Bankers Trust Company, as agent, and other lending
institutions (collectively, the 'Senior Secured Credit Facilities'); and (iii)
net proceeds from the issuance of the Original Notes, in the amount of $145.3
million (together with clause (i) and clause (ii), the 'Financing', and together
with the Acquisition, the 'Transactions'). Immediately following the
consummation of the Acquisition, TW was merged into Tidewater Compression
Service, Inc., which changed its name to Universal Compression, Inc. See
'Description of Other Indebtedness.'
Pursuant to the Stock Purchase Agreement, TW and Tidewater agreed to
allocate responsibility for various actual and potential liabilities in the
areas of employee benefits, insurance, environmental and tax. In particular,
with respect to employee benefits, Tidewater is required to make all matching
contributions that relate to contributions made by employees of the Company to
Tidewater's 401(k) savings plan prior to closing and to insure that payments due
under the plan with respect to former employees be made in accordance with the
terms of such plan. With respect to Tidewater's non-pension benefit
arrangements, Tidewater is responsible for all costs of coverage and all amounts
payable by reason of claims incurred by the Company's employees prior to the
closing date. TW, for its part, is obligated to honor all terms of a severance
policy covering the Company employees. In the area of insured liabilities,
Tidewater assumed certain of the Company's liabilities.
In addition, the Stock Purchase Agreement gave TW the right to cause its
environmental engineer to make an environmental assessment of the operations and
physical premises of the Company between December 18, 1997 and February 17, 1998
(the 'Environmental Assessment'). On February 17, 1998, Tidewater's
environmental engineer submitted its report to Tidewater indicating that the
anticipated cost to bring the Company's operations into compliance with
environmental regulations and to remedy recognized environmental conditions at
both currently owned or operated and known previously owned or operated sites
range between $17.8 million and $18.8 million. While not denying its obligation
to indemnify the Company in the manner set forth in the next sentence, Tidewater
has indicated that it believes that many of the factual bases used in such
reports are incorrect, that in many instances the Company's customers have
agreed to undertake responsibility with respect to complying with environmental
regulations, and that the cost of compliance will be significantly below those
referred to in such report. In the event that remediation is undertaken by
the Company, then, pursuant to the Stock Purchase Agreement, the cost, to the
extent identified as part of the Environmental Assessment (the 'Actual
Remediation Costs') shall be paid as follows: (i) Tidewater shall pay 75% and
the Company shall pay 25% of the first $4 million of Actual Remediation Costs;
(ii) Tidewater shall pay 83.33% and the Company shall pay 16.67% of the next $6
million of Actual Remediation Costs; and (iii) Tidewater shall pay 100% of the
amount by which the Actual Remediation Costs exceed $10 million, but only to the
extent the Actual Remediation Costs do not exceed the Estimated Remediation
Cost. The Company and Tidewater are cooperating to determine the extent to which
matters included in the foregoing environmental engineer's report are based on
incorrect statements of fact or exaggerate the cost of remediation. Based upon
the report, Tidewater's obligation under the Stock Purchase Agreement and
potential obligations by third parties, the Company does not believe that the
actual remediation costs will be material to the Company.
The Stock Purchase Agreement also requires Tidewater to indemnify the
Company from any taxes which are (i) imposed on Tidewater or (ii) imposed on the
Company in respect of its income, business, property or operations or for which
the Company may otherwise be liable for any taxable period ending on or before
the closing date. This indemnity survives the closing date and shall terminate
thirty (30) days after the expiration of the applicable statute of limitations.
Tidewater is also required to join the Company in an election to have the
provisions of Internal Revenue Code Section 338(h)(10) and similar provisions of
state law apply to the Acquisition. The effect of the election will be to enable
the Company to treat the Acquisition as an asset sale for tax purposes.
24
<PAGE>
The Purchase Price may be increased or decreased depending on whether the
Closing Date Working Capital (as defined in the Stock Purchase Agreement) of the
Company exceeds or is less than approximately $14.1 million. Determination of
the Closing Date Working Capital is the responsibility of Tidewater and must be
completed within sixty (60) days of the closing date. For purposes of the Stock
Purchase Agreement, Working Capital is generally defined as current assets (net
of all liabilities) of the Company plus capital expenditures for new compression
equipment by the Company on or after January 1, 1998 through the closing date
and minus any equipment sales proceeds on or after January 1, 1998 through the
closing date.
The Company or Holdings may be required, pursuant to the Purchase Price
Adjustment Agreement (the 'PPA Agreement') entered into with Tidewater, to make
additional payments upon the occurrence of one of the following 'Liquidity
Events': (i) any public or private sale of common stock of the Company or
Holdings; (ii) the sale of all or substantially all of the assets of the Company
or Holdings; (iii) the merger or consolidation of the Company or Holdings into
or with any other entity or entities; (iv) any recapitalization of the Company
that has the direct or indirect effect of changing the par value of its capital
stock, its stated capital or capital surplus; or (v) any similar transaction
involving Holdings or the Company. The payment, which will be in the same form
as the consideration is paid to CHP upon the completion of such transaction,
will not be required to be paid unless the initial investors in Holdings named
under 'Principal Stockholders' below, other than directors, officers and
employees of Holdings or its subsidiaries have recognized a return upon their
entire initial investment in Holdings or the Company. The amount required to be
paid would be equal to 10% of their return over their investment in Holdings or
the Company adjusted upwards by 6.25% per quarter measured through the date of
any of the foregoing Liquidity Events.
Tidewater is also obligated, pursuant to the Transition Services Agreement,
to provide to the Company, for a term of 180 days from the closing date, certain
services, including, but not limited to, computer data processing services and
administrative services. The maximum payment that would be made if all of the
services are provided for the full 180-day term of the agreement is $105,000
plus out-of-pocket expenses.
CAPITALIZATION
The following table sets forth the cash and cash equivalents and
capitalization of the Company, (i) as of December 31, 1997, and (ii) as of
December 31, 1997 as adjusted to give effect to the Transactions. See 'Use of
Proceeds,' 'Selected Historical Financial Data,' 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' and the Company's
financial statements and notes thereto included elsewhere in this Offering
Memorandum.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................................................... $ -- $ --
-------- -----------
-------- -----------
Total debt (including current portion):
Revolving Credit Facility............................................................. $ -- $ 38,000
Term Loan Credit Facility............................................................. -- 75,000
Senior Discount Notes due 2008........................................................ -- 150,000
Due to Tidewater Inc.................................................................. 176,160 --
-------- -----------
Total debt.................................................................... 176,160 263,000
Stockholder's equity
Common Stock, $10 par value; 5,000 shares authorized; 4,900 shares issued and
outstanding........................................................................ 49 --
Additional paid-in-capital............................................................ 25,627 105,000
Retained earnings..................................................................... 41,533 --
-------- -----------
Total stockholder's equity......................................................... 67,209 105,000
-------- -----------
Total capitalization.......................................................... $243,369 $ 368,000
-------- -----------
-------- -----------
</TABLE>
25
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS AND OTHER DATA
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended. Discussions containing
such forward-looking statements may be found in the material set forth below and
under 'Prospectus Summary,' 'Risk Factors,' 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' and 'Business' and as
well as in the Prospectus generally. Actual events or results may differ
materially from those discussed in the forward-looking statements as a result of
various factors, including, without limitation, the factors set forth below and
the other matters set forth in the Prospectus generally.
The unaudited pro forma balance sheet was prepared as if the Transactions
had occurred on December 31, 1997 and the unaudited pro forma statements of
income and other data was prepared as if the Transactions occurred at the
beginning of each period presented.
The unaudited pro forma financial statements and other data have been
prepared under the purchase method of accounting. Under this method of
accounting, based on a preliminary allocation of the purchase price of the
Company, its identifiable assets and liabilities have been adjusted to their
estimated fair values. The preliminary purchase price allocations are based upon
estimates and assumptions which are subject to subsequent determination and more
detailed analyses, receiving final detailed appraisals and evaluations of
specific assets and liabilities (including liabilities relating to Actual
Remediation Costs) and the calculation of the Closing Date Working Capital yet
to be finalized. The final allocation of the purchase price of the Acquisition
may differ from the amounts contained in these unaudited pro forma financial
statements.
The unaudited pro forma financial statements and other data have been
prepared based on the foregoing and on certain assumptions described in the
notes thereto. Such statements should be read in conjunction with the historical
financial statements of the Company including the notes thereto, and
'Management's Discussion and Analysis of Financial Condition and Results of
Operations,' that are included elsewhere herein. The following unaudited pro
forma financial statements and other data do not purport to be indicative of the
financial position or results of operations that would have been reported had
the Transactions been effected on the dates indicated, or that may be reported
in the future.
26
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FISCAL YEAR ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACQUISITION
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Revenue
Rentals................................................................ $ 72,695 $ -- $ 72,695
Sales.................................................................. 36,592 -- 36,592
Other.................................................................. 3,477 -- 3,477
Gain on asset sales.................................................... 1,122 -- 1,122
---------- ----------- ---------
113,886 -- 113,886
Costs and Expenses
Rentals................................................................ 33,814 (4,000)(a) 29,814
Cost of sales.......................................................... 30,339 -- 30,339
Depreciation and amortization.......................................... 26,163 (8,543)(b) 17,620
General and administrative............................................. 11,004 3,500 (c) 14,504
Interest expense....................................................... -- 25,415 (d) 25,415
---------- ----------- ---------
101,320 16,372 117,692
Income (loss) before income taxes........................................ 12,566 (16,372) (3,806)
Income tax expense (benefit)............................................. 4,724 (6,132)(e) (1,408)
---------- ----------- ---------
Net income (loss)...................................................... $ 7,842 $ (10,240) $ (2,398)
---------- ----------- ---------
---------- ----------- ---------
OTHER DATA:
Cash interest expense(k)............................................... -- $ 9,238 $ 9,238
Ratio of earnings to fixed charges(l).................................. 88.9 -- .9
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements
27
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
NINE MONTHS ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACQUISITION
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Revenue
Rentals.................................................................. $ 59,782 $ -- $59,782
Sales.................................................................... 18,238 -- 18,238
Other.................................................................... 2,568 -- 2,568
Gain on asset sales...................................................... 968 -- 968
---------- ----------- ---------
81,556 -- 81,556
Costs and Expenses
Rentals.................................................................. 26,054 (3,000)(f) 23,054
Cost of sales............................................................ 13,358 -- 13,358
Depreciation and amortization............................................ 19,527 (6,312)(f) 13,215
General and administrative............................................... 7,281 2,625 (f) 9,906
Interest expense......................................................... -- 19,061 (f) 19,061
---------- ----------- ---------
66,220 12,374 78,594
Income before income taxes................................................. 15,336 (12,374) 2,962
Income tax expense......................................................... 5,674 (4,578)(e) 1,096
---------- ----------- ---------
Net income............................................................... $ 9,662 $ (7,796) $ 1,866
---------- ----------- ---------
---------- ----------- ---------
Other Data:
Cash interest expense (k)................................................ -- $ 6,928 $ 6,928
Ratio of earnings to fixed charges (l)................................... 143.4 -- 1.2
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements
28
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACQUISITION
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Revenue
Rentals............................................................. $ 78,500 $ -- $ 78,500
Sales............................................................... 27,676 -- 27,676
Other............................................................... 3,324 -- 3,324
Gain on asset sales................................................. 663 -- 663
---------- ----------- ---------
110,163 -- 110,163
Costs and Expenses
Rentals............................................................. 35,047 (4,000)(a) 31,047
Cost of sales....................................................... 20,966 -- 20,966
Depreciation and amortization....................................... 25,917 (8,297)(b) 17,620
General and administrative.......................................... 10,018 3,500 (c) 13,518
Interest expense.................................................... -- 25,415 (d) 25,415
---------- ----------- ---------
91,948 16,618 108,566
Income before income taxes............................................ 18,215 (16,618) 1,597
Income tax expense.................................................... 6,814 (6,223)(e) 591
---------- ----------- ---------
Net income.......................................................... $ 11,401 $ (10,395) $ 1,006
---------- ----------- ---------
---------- ----------- ---------
</TABLE>
<TABLE>
<S> <C> <C> <C>
OTHER DATA:
Cash Interest Expense (k)............................................. -- $ 9,238 $ 9,238
Ratio of earnings to fixed charges (l)................................ 128.4 -- 1.1
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements
29
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash.............................................................. $ -- $ -- $ --
Accounts and notes receivable, net of allowances for bad debt..... 12,355 -- 12,355
Inventories....................................................... 7,371 -- 7,371
Other............................................................. 105 -- 105
---------- ----------- ---------
19,831 -- 19,831
Property and equipment
Rental equipment.................................................. 330,183 (92,183)(g) 238,000
Other............................................................. 14,183 (2,183)(g) 12,000
Accumulated depreciation.......................................... (135,102) 135,102 (g) --
---------- ----------- ---------
209,264 40,736 250,000
Goodwill............................................................ 19,711 74,145 (g) 93,856
Other............................................................... 35 8,750 (g) 8,785
---------- ----------- ---------
Total assets........................................................ $ 248,841 $ 123,631 $372,472
---------- ----------- ---------
---------- ----------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable.................................................... $ 4,826 $ -- $ 4,826
Accrued expenses.................................................... 646 3,000 (g) 3,646
---------- ----------- ---------
Total current liabilities...................................... 5,472 3,000 8,472
Revolving Credit Facility........................................... -- 35,000 (h) 35,000
Term Loan Credit Facility........................................... -- 75,000 (h) 75,000
Senior discount notes............................................... -- 150,000 (h) 150,000
Due to Tidewater.................................................... 176,160 (176,160)(i) --
---------- ----------- ---------
Total liabilities.............................................. 181,632 86,840 268,472
Stockholder's equity
Common stock...................................................... 49 (49)(j) --
Additional paid in capital........................................ 25,627 78,373 (j) 104,000
Retained earnings................................................. 41,533 (41,533)(j) --
---------- ----------- ---------
Total equity................................................... 67,209 36,791 104,000
---------- ----------- ---------
Total liabilities and equity........................................ $ 248,841 $ 123,631 $372,472
---------- ----------- ---------
---------- ----------- ---------
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements
30
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(a) Reflects the effect of a change in accounting policy for capitalization
of major overhauls.
(b) Reflects an adjustment to depreciation expense resulting from the
allocation of purchase price and the change in accounting policy referred to in
(a). Depreciation and amortization expense for rental equipment is calculated
using 20% salvage value and an estimated useful life of 15 years. All remaining
depreciation for property and equipment is calculated on the straight-line basis
with estimated useful lives ranging from 2 to 25 years. Depreciation for
capitalized overhauls is calculated using a five year estimated useful life.
Goodwill amortization is calculated over an estimated 40 year life.
(c) Reflects the management fee paid by the Company to Castle Harlan Inc.
of $3 million and estimated incremental costs associated with being a
stand-alone public company. Such stand-alone costs include legal, accounting and
personnel costs.
(d) Interest expense adjustments are as follows based on the following
assumptions:
<TABLE>
<S> <C>
Revolving Credit Facility, $35 million at 8.00%...................... $ 2,800
Senior Discount Notes, $150 million at 9.875%........................ 15,178
Term Loan Credit Facility, $75 million at 8.25%...................... 6,188
Commitment Fee, $47 million at 0.5%.................................. 250
---------
24,416
Amortization of deferred financing costs............................. 999
---------
Total Interest Expense............................................... $ 25,415
---------
---------
</TABLE>
Interest on the Revolving Credit Facility and the Term Loan Credit Facility
is based on LIBOR plus 2.25% and LIBOR plus 2.50%, respectively. The pro forma
interest expense on these loans has been calculated based on the expected LIBOR
for the Company's 1998 fiscal year. A 1/8% change in LIBOR would result in
interest expense changing by approximately $140,000.
(e) Reflects an adjustment to income tax expense to effect a statutory tax
rate of 37%.
(f) Reflects the pro forma adjustments described in (a), (b), (c) and (d)
above re-calculated based on 9 months rather than 12 months.
(g) The excess of total purchase price over the allocated fair value of the
net assets will be recorded as goodwill and is calculated based on the following
assumptions:
<TABLE>
<S> <C> <C>
Total Purchase Price...................................................... $364,000
Fair Value Allocated to:
Rental Equipment..................................................... 238,000
Other Equipment...................................................... 12,000
Total Current Assets................................................. 19,831
Other Assets......................................................... 8,785(1)
Total Current Liabilities............................................ (8,472)
----------
Total Fair Value................................................ 270,144
--------
Goodwill.................................................................. $ 93,856
--------
--------
</TABLE>
- ------------------
(1) Includes $8.75 million of deferred financing costs associated with the
issuance of debt used to fund the Acquisition as described in (d) above.
(h) Reflects expected borrowings under a Revolving Credit Facility, Term
Loan Credit Facility and the Senior Discount Notes which will be used to fund a
portion of the total purchase price.
(i) Reflects the elimination of intercompany debt due to Tidewater Inc.
which is not being assumed as part of the Acquisition.
(j) Reflects capitalization of the Company and the elimination of
historical retained earnings.
(k) Cash interest expense is defined as total interest expense less
interest on the Senior Discount Notes and amortization of deferred financing
costs.
(l) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings before income taxes, plus fixed charges. Fixed
charges include interest expense on all indebtedness, amortization of deferred
financing fees, and one-third of rental expense on operating leases representing
that portion of rental expense deemed to be attributable to interest.
31
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth certain financial information for the
Company (i) as of and for each of the years in the five years ended March 31,
1997, (ii) as of and for the twelve months ended December 31, 1997, and (iii)
for the nine months ended December 31, 1996 and 1997. The financial information
as of March 31, 1996 and 1997 and for each of the years in the three-year period
ended March 31, 1997 has been derived from the Company's audited financial
statements included elsewhere in the Offering Memo. The financial information as
of March 31, 1993, 1994, and 1995 and December 31, 1997 and for the years ended
March 31, 1993 and 1994, the twelve months ended December 31, 1997, and for the
nine months ended December 31, 1996 and 1997 has been derived from unaudited
financial statements. In the opinion of management, the unaudited financial
statements have been prepared on the same basis as the audited financial
statements and include all adjustments, which consist only of normal recurring
adjustments, necessary for a fair presentation of the financial position and the
results of operations for these periods. The following financial information
should be read in conjunction with 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' and the Company's financial
statements and notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
TWELVE MONTHS NINE MONTHS ENDED
YEAR ENDED MARCH 31 ENDED DECEMBER 31
----------------------------------------------------- DECEMBER 31, -------------------
1993 1994 1995 1996 1997 1997 1996 1997
-------- -------- --------- -------- -------- ------------- -------- --------
(DOLLARS IN THOUSANDS) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue........................... $ 63,906 $ 56,978 $ 84,682 $110,464 $113,886 $ 110,163 $ 85,278 $ 81,556
Gross margin(1)................... 27,623 26,640 38,796 50,928 49,733 54,150 37,726 42,144
Depreciation and amortization..... 8,352 9,144 15,472 26,997 26,163 25,917 19,772 19,527
General and administrative
expenses........................ 9,095 10,602 8,888 10,508 11,004 10,018 8,267 7,281
Operating income(2)............... 10,177 6,894 14,436 13,423 12,566 18,215 9,687 15,336
Interest expense, net............. -- -- 3,469 3,706 -- -- -- --
Income tax expense................ 3,765 2,551 4,648 3,745 4,724 6,814 3,584 5,674
Net income........................ $ 6,412 $ 4,343 $ 6,319 $ 5,972 $ 7,842 $ 11,401 $ 6,103 $ 9,662
OTHER DATA:
EBITDA(3)......................... 18,529 16,038 29,908 40,420 38,729 44,132 29,459 34,863
Acquisition(4).................... -- -- 240,000 -- -- -- -- --
Cash flows from (used in):
Operating activities............ 14,872 11,279 35,880 50,810 41,923 42,481 30,457 31,015
Investing activities............ (2,387) (18,192) (256,752) (1,270) (8,836) (11,993) (6,447) (9,604)
Financing activities............ (12,485) 6,913 220,872 (49,506) (33,121) (30,488) (24,044) (21,411)
Ratio of earnings to fixed
charges(5)...................... 123.4x 71.4x 4.1x 3.5x 88.9x 128.4x 91.0x 143.4x
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
-------------------------------------------------------- DECEMBER 31,
1993 1994 1995 1996 1997 1997
-------- -------- -------- -------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(6)......... $ 7,815 $ 8,949 $ 18,686 $ 16,192 $ 13,953 $ 14,359
Total assets............... $ 57,393 $ 68,285 $308,339 $274,312 $257,090 $248,841
Total debt (including
intercompany)............ $ 20,537 $ 27,428 $249,430 $229,657 $194,371 $176,160
Stockholder's equity....... $ 33,071 $ 37,414 $ 43,733 $ 49,705 $ 57,547 $ 67,209
</TABLE>
- ------------------
(1) Gross margin is defined as total revenue less rental expense and cost of
sales.
(2) Operating income is defined as income before income taxes plus interest
expense.
(3) EBITDA is defined as net income plus income taxes, interest expense,
depreciation and amortization. EBITDA represents a measure upon which
management assesses financial performance and certain covenants in the
Company's borrowing arrangements will be tied to similar measures. EBITDA is
not a measure of financial performance under generally accepted accounting
principles and should not be considered an alternative to operating income
or net income as an indicator of the Company's operating performance or to
net cash provided by operating activities as a measure of its liquidity.
(4) The Company acquired the assets of Brazos for $35 million in October 1994,
and the natural gas compression assets of Halliburton for $205 million in
December 1994. The results of Brazos' and Halliburton's operations have been
included in the Company's results of operations from the respective dates of
acquisition.
(5) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as earnings before income taxes, plus fixed charges. Fixed
charges include interest expense on all indebtedness, amortization of
deferred financing fees, and one-third of rental expense on operating leases
representing that portion of rental expense deemed to be attributable to
interest.
(6) Working capital is defined as current assets minus current liabilities.
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and performance of the
Company should be read in conjunction with the financial statements and related
notes and other detailed information regarding the Company included elsewhere in
this Prospectus. Certain information contained below and elsewhere in this
Prospectus, including information with respect to the Company's plans and
strategy for its business, are forward-looking statements. See 'Risk Factors'
for a discussion of important factors which could cause actual results to differ
materially from the forward-looking statements contained herein.
OVERVIEW
The Company is a leading provider of natural gas compressor rental,
maintenance and operations to the domestic oil and gas industry with a growing
presence in several key international markets. Management believes that the key
drivers in the natural gas compression rental industry are: (i) the demand for
natural gas compression, which is principally tied to the production of natural
gas as opposed to drilling activity which tends to be cyclical, (ii) the aging
of producing gas fields in the United States which require more compression to
continue producing at the ideal economic rate, (iii) the trend by natural gas
producers to outsource gas compression requirements to reduce their overall cost
of compression and (iv) the rapidly increasing production of natural gas in
international markets which is being driven by demand for energy and
environmental concerns curtailing the historical practice of flaring natural
gas. Since natural gas compression is tied to production of gas, the demand for
compression services has not historically been affected by short-term movements
in the pricing of natural gas.
The rental compression services industry has experienced significant
consolidation over the past several years but remains fragmented. In October
1994 the Company initiated the current phase of industry consolidation through
its acquisition of Brazos and Halliburton increasing its aggregate HP from
193,000 to 480,000. For the year prior to these acquisitions, the acquired
companies' fleet utilizations were approximately 60% and 70%, respectively, as
compared to the Company's fleet utilization of 86%.
Following these acquisitions, the Company's parent, Tidewater, increasingly
concentrated on its core marine support business limiting growth capital
available to the Company. Since 1995, the Company has focused its efforts on
optimizing the efficiency of its existing operations. In particular the Company
focused on integrating these acquisitions as well as (i) improving its
nationwide field service and marketing capabilities, (ii) centralizing
management at its Houston headquarters, (iii) instituting uniform quality
controls, (iv) standardizing maintenance and central overhaul procedures and (v)
implementing consistent Company-wide policies. Because of limited growth
capital, the Company has not fully participated in the growth in the higher HP
market. The Company intends to expend a majority of its capital budget on this
market.
Although, prior to the Acquisition, the Company was a wholly-owned
subsidiary of Tidewater, the Company historically operated as an autonomous
business with limited administrative and financial services provided by
Tidewater, including treasury, legal, information systems and employee benefits.
In fiscal 1997, the Company was charged approximately $200,000 for these
services. Management estimates that the costs of providing these services on a
stand-alone basis will be approximately $700,000 per year. To all the Company's
transition following the Acquisition, Tidewater has agreed to provide these
services to the Company for a period of six months for an aggregate fee not to
exceed $105,000 plus out-of-pocket expenses.
33
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the major components of the Company's
revenue with the contribution of such components to the Company's revenue
expressed as a percentage of revenue:
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31,
FISCAL YEAR ENDED MARCH 31,
-------------------------------------------------- -------------------------------
1995 1996 1997 1996 1997
-------------- --------------- --------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Rental.............................. $49,235 58% $ 72,765 66% $ 72,695 64% $53,978 63% $59,782 73%
Fabrication and Sales............... 27,920 33% 32,319 29% 36,592 32% 27,153 32% 18,238 22%
Other(1)............................ 7,527 9% 5,380 5% 4,599 4% 4,147 5% 3,536 5%
------- ---- -------- ---- -------- ---- ------- ---- ------- ----
Total Revenue....................... $84,682 100% $110,464 100% $113,886 100% $85,278 100% $81,556 100%
------- ---- -------- ---- -------- ---- ------- ---- ------- ----
------- ---- -------- ---- -------- ---- ------- ---- ------- ----
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States....................... 76,031 90% 91,824 83% 92,615 81% 72,217 85% 67,368 83%
International....................... 8,651 10% 18,640 17% 21,271 19% 13,061 15% 14,188 17%
------- ---- -------- ---- -------- ---- ------- ---- ------- ----
Total Revenue....................... $84,682 100% $110,464 100% $113,886 100% $85,278 100% $81,556 100%
------- ---- -------- ---- -------- ---- ------- ---- ------- ----
------- ---- -------- ---- -------- ---- ------- ---- ------- ----
</TABLE>
- ------------------
(1) Other income includes primarily service fees, gains on asset sales, rental
revenue on air compressors and interest. The Company disposed of its air
compression rental business during the second quarter of fiscal 1997.
NINE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO DECEMBER 31, 1996
Revenue. Revenue for the nine months ended December 31, 1997 declined to
$81.6 million compared to $85.3 million for the same period of the prior year
due to lower revenue from fabrication and sales. Revenue from rental activities
for the nine months ended December 31, 1997 increased by $5.8 million to $59.8
million from $54.0 million in the nine months ended December 31, 1996. The
increase in revenue was primarily related to the increase in utilization of the
rental fleet to 81% for the current period compared to 76% for the same period
of the prior year. The average rental rate increased 1% for the nine months
ended December 31, 1997 compared to the same period of the prior year.
Additionally, the Company increased the amount of HP rented in international
markets by 67%, principally through additional service in Argentina. Revenue
from fabrication and sales for the nine months ended December 31, 1997 declined
to $18.2 million from $27.2 million, a decline of 33%, principally due to a
shift of the focus of the Company's sales force away from low margin sales of
third-party fabricated Ajax gas compressor units. Revenue from international
operations increased $1.1 million to $14.2 million from $13.1 million with a
$1.6 million increase in rental revenue offsetting a $0.5 million decline in
fabrication and sales revenue.
Gross Margin. Gross margin before depreciation and amortization for the
nine months ended December 31, 1997 increased $4.4 million, or 12%, to $42.1
million from $37.7 million for the nine months ended December 31, 1996. The
increase was due to higher utilization and resulting operating efficiencies
related to the rental fleet. The rental gross margin for the nine months ended
December 31, 1997 increased $4.5 million to $33.7 million compared to $29.2
million in the prior period.
General and Administrative Expenses. General and administrative expenses
for the nine months ended December 31, 1997 declined $1.0 million to $7.3
million from $8.3 million for the nine months ended December 31, 1996. The
decline was principally due to continued consolidation and centralization of
operating expenses. As a percent of revenue, general and administrative expenses
declined to 9% for the nine months ended December 31, 1997 compared to 10% for
the same period of the prior year.
Net Income. Primarily as a result of the factors discussed above, net
income for the nine months ended December 31, 1997 increased $3.6 million, or
58%, to $9.7 million from $6.1 million for the nine months ended December 31,
1996.
FISCAL 1997 COMPARED TO FISCAL 1996
Revenue. Revenue for fiscal 1997 increased $3.4 million, or 3%, to $113.9
million from $110.5 million in fiscal 1996 as increased revenue from fabrication
and sales and gains on sale of rental equipment offset a decline in service and
other revenue. Rental revenue was unchanged from the prior year at $72.7
million. A decline in average rental rates per HP due to competitive pricing
pressure was offset by higher utilization rates. The Company's rental fleet
utilization rose to 77% from 74% in the prior year as the Company was successful
in increasing the utilization of units acquired in the Brazos and Halliburton
acquisitions. During fiscal 1997, the Company increased its presence in the
international rental market by deploying an additional 5,000 HP in Argentina.
Fabrication and sales revenue increased 13% from the prior year due to increased
sales of third-party
34
<PAGE>
fabricated Ajax compressors. Revenue from international operations increased
$2.7 million to $21.3 million from $18.6 million with a $1.8 million increase in
rental revenue and a $0.9 million increase in fabrication and sales revenue.
Gross Margin. Gross margin before depreciation and amortization for fiscal
1997 declined $1.2 million, or 2%, to $49.7 million from $50.9 million due to
higher cost of sales related to low margin sales of third party fabricated Ajax
compressor units. The rental gross margin for fiscal 1997 declined $0.7 million,
or 2%, to $38.9 million as the efficiencies from increased utilization of the
rental fleet were offset by a 4% decline in average rental rate per HP.
General and Administrative Expenses. General and administrative expenses
for fiscal 1997 increased $0.5 million to $11.0 million from $10.5 million for
fiscal 1996. The increase is principally due to increased selling expenses
related to the sale of the Ajax units. When expressed as a percentage of
revenue, general and administrative expenses were unchanged at approximately 9%
of revenue.
Net Income. Primarily as a result of the factors discussed above and the
elimination of $3.7 million of interest expense on allocated debt from the
parent company present in the prior year, net income for fiscal 1997 increased
$1.8 million, or 31%, to $7.8 million from $6.0 million for fiscal 1996.
FISCAL 1996 COMPARED TO FISCAL 1995
Revenue. Revenue for fiscal 1996 increased $25.8 million, or 30%, to
$110.5 million from $84.7 million in fiscal 1995 as the first full year of the
Brazos and Halliburton acquisitions were reflected in operations. Fleet
utilization declined to 74% in fiscal 1996 from 82% in 1995 reflecting the lower
utilization of the acquired rental fleets. The average rental rate per HP was
increased by only 1% over fiscal 1995 levels as a consequence of the acquired
fleets having comparable rental rates as the historical Company's fleet. Total
revenue from rental activities increased 48% due to the larger fleet operations
as the total average rented HP increased from 235,000 to 345,000 for 1996.
Revenue from fabrication and sales in fiscal 1996 increased $4.4 million to
$32.3 million from $27.9 million in fiscal 1995. The increase was principally
related to increased revenue from engineered products. Revenue from
international operations increased $10.0 million to $18.6 million from $8.6
million with a $1.2 million increase in rental revenue and an $8.8 million
increase in fabrication and sales revenue.
Gross Margin. Gross margin before depreciation and amortization for fiscal
1996 increased $12.1 million, or 31%, to $50.9 million from $38.8 million in
fiscal 1995. The change is principally due to the effects of the Brazos and
Halliburton acquisitions. The rental gross margin for fiscal 1996 increased
$12.4 million to $39.6 million from $27.2 million in fiscal 1995 due the
efficiencies of a larger fleet size.
General and Administrative Expenses. General and administrative expenses
for fiscal 1996 increased $1.6 million to $10.5 million from $8.9 million for
fiscal 1995. The increase is principally due to increased administrative
expenses related to the acquired businesses. When expressed as a percentage of
revenue, general and administrative expenses declined to 9% of revenue as
compared to 10% of revenue for fiscal 1995.
Net Income. Primarily as a result of the factors discussed above and an
increase in depreciation and amortization expense of $11.5 million as a result
of the Brazos and Halliburton acquisitions, net income for fiscal 1996 declined
$0.3 million to $6.0 million from $6.3 million in 1995.
EFFECTS OF INFLATION
In recent years, inflation has been modest and has not had a material
impact upon the results of the Company's operations.
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 1997 the Company generated cash flow from operations of $41.9
million. Additionally, the Company generated $7.7 million from the sale of
underutilized equipment. The Company used $16.5 million of this cash flow
primarily to purchase new rental equipment and $33.1 million to repay
intercompany debt. In the nine months ended December 31, 1997, the Company
generated cash flow from operations of $31.0 million and an additional $3.5
million from the sale of assets. The Company utilized $13.1 million of this cash
flow primarily to add rental equipment to its fleet and $21.4 million to repay
intercompany debt. The Company expects capital expenditures for fiscal 1998 to
be approximately $20.6 million.
The Company expects to expend $39 million on capital projects in fiscal
1999. Approximately $20 million is budgeted for expansion of the domestic fleet,
$6 million is for additional expansion into international markets, $10 million
is for maintaining and updating the existing fleet, with the balance of $3
million being for expansion of the fabrication shop in Houston and for new
vehicles for the service technicians and other capital projects. As
35
<PAGE>
of January 15, 1998, the Company had on order 50 units averaging over 1,000 HP
at an estimated aggregate cost of $25 million. The Company's principal sources
of cash to fund capital requirements will be net cash provided by operating
activities and borrowings under the Revolving Credit Facility.
The Company has elected to treat the Acquisition as a purchase of assets
for federal income tax purposes, substantially increasing the tax basis of its
property and equipment, which will be depreciated over their useful lives. This
will result in approximately $94 million of goodwill, which will be amortized
for federal income tax purposes over a fifteen year period. As a result of the
Transactions, management anticipates that, for federal income tax purposes, the
Company will generate net operating losses; however, the Company may be
obligated to pay federal income taxes as a result of the alternative minimum tax
and to pay foreign income taxes.
The Company's principal uses of liquidity will be to provide working
capital, to fund capital expenditures for both maintenance purposes as well as
to grow the Company's business, to meet required principal and interest payments
on debt obligations and to finance future acquisitions and investments. As a
result of the Transactions, the Company has incurred a substantial amount of
indebtedness. At February 20, 1998 the Company had $260 million of debt, and had
$50 million of available credit under the Revolving Credit Facility. Based on
this capital structure, anticipated interest rates and capital spending, the
Company's total interest expense for an entire year would be expected to be 25.4
million of which only $9.2 million will be payable in cash.
The Senior Secured Credit Facilities are comprised of the Term Loan Credit
Facility and the Revolving Credit Facility. At February 20, 1998 the Company had
approximately $35 million outstanding on the Revolving Credit Facility. See
'Description of Other Indebtedness.' The required quarterly principal repayments
under the Term Loan Credit Facility are approximately $0.75 million per year for
the first five years, $26.25 million for year six and $45.0 million for year
seven. The Company will not be required to make any principal payments on the
Notes prior to maturity other than as described under 'Description of the
Notes.' Additionally, no cash interest payments are required on the Notes until
the sixth year.
The Company anticipates that internally generated cash flow coupled with
availability under the Revolving Credit Facility, will be sufficient to fund
domestic and international operations, capital investments and its obligations
to its creditors. The Company's ability to borrow additional funds is limited by
the Senior Secured Credit Facilities, the Indenture and the indenture governing
the Holdings Notes. See 'Description of Other Indebtedness' and the 'Description
of the Notes.'
RECENTLY ANNOUNCED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ('FASB') issued
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income ('SFAS 130'), which establishes standards for reporting and display of
comprehensive income and its components. The components of comprehensive income
refer to revenues, expenses, gains and losses that are excluded from net income
under current accounting standards, including foreign currency translation
items, minimum pension liability adjustments and unrealized gains and losses on
certain investments in debt and equity securities. SFAS 130 requires that all
items that are recognized under accounting standards as components of
comprehensive income be reported in a financial statement displayed in equal
prominence with other financial statements; the total of other comprehensive
income for a period is required to be transferred to a component of equity that
is separately displayed in a statement of financial position at the end of an
accounting period. SFAS 130 is effective for both interim and annual periods
begining after December 15, 1997.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures About Segments of an Enterprise and Related Information
('SFAS 131'). SFAS 131 establishes standards for the way public enterprises are
to report information about operating segments in annual financial statements
and requires the reporting of selected information about operating segments in
interim financial reports issued to stockholders. SFAS 131 also establishes
standards for related disclosures about products and services, geographic areas,
and major customers. SFAS 131 is effective for periods beginning after December
15, 1997.
SEASONAL FLUCTUATIONS
The Company's results of operations have not historically reflected any
material seasonal tendencies.
36
<PAGE>
BUSINESS
GENERAL
Universal Compression is a leading provider of natural gas compressor
rental, maintenance and operations services to the domestic oil and gas
industry, owning the second largest domestic gas compressor fleet, and has a
growing presence in key international markets, including Argentina, Venezuela,
the Pacific Rim, Europe and Canada. The Company has a broad base of over 500
customers and its 490,000 HP gas compression rental fleet is comprised of over
2,700 units. Founded in 1954, Universal Compression is the only compression
rental company with an operating presence in all active domestic gas compression
markets. As a complement to its rental operations, Universal Compression designs
and fabricates compression units for its own fleet as well as for its global
customer base. Universal Compression's involvement in natural gas and oil
production activities, rather than drilling, its geographic diversity and its
fleet standardization have contributed to the Company's high operating margins
and stable revenue and EBITDA. For the fiscal years ended March 31, 1996 and
1997 and for the twelve months ended December 31, 1997, the Company generated
revenue of $110.5 million, $113.9 million and $110.2 million and EBITDA of $40.4
million, $38.7 million and $44.1 million, respectively.
Compression equipment is primarily utilized in the production, processing,
transportation and storage of natural gas and in certain applications
facilitating the production of oil. Rental units are primarily employed in the
field compression segment encompassing production and gas gathering. Renting
compression equipment affords customers: (i) the ability to efficiently meet
changing compression requirements while limiting capital investments in such
equipment, (ii) access to the compression rental companies' technical skills
which often leads to improved production rates and (iii) overall reduction in
compression costs through the elimination of expenditures associated with owning
and maintaining compressor units.
The total domestic natural gas field compression market is approximately
16.0 million HP in size, including both operator owned and rental company units.
The domestic field compression segment grew by a compound annual growth rate
('CAGR') of approximately 8% from 1991 through 1996, driven by the growth in
natural gas consumption and, more significantly, by the increase in compression
required to service the nation's aging gas fields and new gas discoveries.
Throughout the same period, the domestic field compression rental market grew at
a CAGR of 13% to approximately 4.0 million HP. The higher growth in the rental
market as compared to the overall market is primarily attributable to the trend
by energy producers towards outsourcing their compression requirements. From
1991 to 1996, rental companies' share of the domestic field compression market
grew from 20% to 25%. In addition, industry sources expect significant growth in
the international field compression market, driven by anticipated high growth
rates in natural gas consumption and by an increased emphasis on cost effective
operations resulting from the ongoing privatization of national energy
organizations and by environmental restrictions on the 'flaring' of natural gas.
37
<PAGE>
BUSINESS STRATEGY
Management and CHP have developed a focused business strategy designed to
increase revenues and EBITDA which comprises the following key elements:
INCREASE SIZE AND AVERAGE HP OF RENTAL FLEET. The Company recently
accelerated its fabrication of upper mid-range (over 500 HP) units for its
rental fleet in an effort to increase the overall size and average HP of its
fleet. Larger HP units are typically used in centralized field gathering and gas
processing, a rapidly growing segment of the compression industry. Larger HP
units are (i) leased under long-term contracts and (ii) experience lower per HP
operating and maintenance costs. The Company believes that its increased
penetration of this market segment will broaden its product line resulting in
enhanced cross-selling opportunities and increased utilization of its existing
fleet. As of January 15, 1998, the Company had on order 50 units averaging over
1,000 HP. Management believes that the Acquisition and related financings
positions Universal Compression to achieve its goal of increasing the overall
size and average HP of its fleet.
EXPAND IN SELECT INTERNATIONAL MARKETS. Increased international demand for
field gas compression is driven by increasing natural gas demand and production
due to environmental concerns, growing local economies and the desire to develop
a stable local energy source permitting greater oil exports. International
demand for rental units is expected to grow as national oil entities
increasingly privatize and seek to eliminate capital expenditures, lower overall
costs and take advantage of greater technical skills afforded by gas compression
rental companies. With approximately 18,000 HP operating internationally,
Universal Compression has a strategic presence in the rapidly growing rental
compression markets of South America and the Pacific Rim. The Company plans to
leverage its existing presence and strong global reputation for the engineering
and fabrication of high specification gas and air compressors to expand its
offerings in these markets. Further, with increased capital directed toward
larger HP units, Universal Compression will aggressively pursue higher dollar
value, more lucrative international contracts.
EXPAND RENTAL FLEET AND CUSTOMER BASE THROUGH THE ACQUISITION AND LEASEBACK
OF COMPRESSORS. The Company estimates that domestic energy producers,
transporters and processors own and operate approximately 12.0 million HP of
field compression equipment, representing approximately 75% of the total
domestic field compression base. Producers and other industry participants are
increasingly outsourcing essential but non-core activities, including gas
compression services, to focus on core activities and reduce capital investment.
These outsourcing opportunities typically involve sizable fleets of operating
units that are purchased in place and leased back on a long-term basis. The
Company believes that with improved capital availability resulting from the
Acquisition and related financings, it is well positioned to capitalize on such
opportunities for significant fleet growth.
PURSUE INDUSTRY CONSOLIDATION OPPORTUNITIES. The rental compression
services industry has experienced significant consolidation over the past
several years but remains fragmented. In addition to opportunities to achieve
significant integration cost savings, consolidation is being driven by the
expanding needs of customers for the full range of compression services,
equipment and attendant technical skills. The Company initiated the current
phase of industry consolidation in 1994 with the acquisition of Halliburton
Compression Service and Brazos Gas Compressing Company. The Company believes
that continuing industry consolidation will present it with opportunities to
acquire both smaller regional operators and larger compression service companies
and that, as a result of the Acquisition and related financings, the Company is
well positioned to pursue such opportunities.
COMPLEMENT CORE RENTAL BUSINESS WITH ANCILLARY SERVICES. The Company
offers a broad array of services to complement its core rental business. These
services include maintenance, turnkey installation, contract operations and unit
fabrication. These ancillary services enable Universal Compression to (i)
increase its customer base, (ii) increase rental revenue from its existing
fleet, (iii) improve customer loyalty and (iv) diversify its revenue base. In
addition, contract operations enable the Company to grow its business with
limited capital expenditures.
PROMOTE GROWTH THROUGH EMPLOYEE INCENTIVE PROGRAMS. The Company has begun
implementation of an employee incentive program that correlates annual and
long-term compensation with individual and Company performance. That program is
designed to result in the Company's management and employees having the
opportunity to beneficially own approximately 12% of the common stock of the
Company's parent on a fully-
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diluted basis through cash investment, stock grants and stock option awards. The
Company believes such incentives will promote internal growth and facilitate the
successful implementation of the Company's goals.
NATURAL GAS COMPRESSION
OVERVIEW
Compression equipment is utilized in the production, transportation,
processing and storage of natural gas and in certain applications facilitating
the production of oil. Gas compression that is utilized prior to the 'main line
transmission system,' which transports gas from production to storage or the end
user is considered 'field' compression. The Company has been active in both
segments of the field compression market: (i) production and (ii) gas-gathering.
During the production phase, compression is used to boost the pressure of
natural gas from the wellhead so that it can be moved from the well to a
pipeline for transmission to an end-user. Typically, these applications require
portable low to mid-range HP compression equipment located at or near the
wellhead. As wells age and domestic gas reservoir pressure recedes, larger HP
compression equipment is frequently introduced. The continually dropping
pressure levels in gas fields require constant modification and variation of
on-site compression equipment. In addition, gas compression is utilized to
enhance the production of mature oil wells through gas-lift and gas-injection
operations.
During the gas-gathering phase, compression is used to combine gas flowing
from several wells into a gathering line leading to a transmission line. Because
gathering lines are frequently undersized and are used to transmit the combined
production of several wells, higher HP compression applications become
necessary. As noted above, the Company's strategy is to increase the number of
larger HP compression units in its fleet thereby expanding its presence in this
segment of the compression market.
Gas producers, transporters and processors have historically owned most of
the compression equipment used in their operations. At present, owned field
compression equipment is estimated to comprise 75% of total domestic field
compression HP. Owned equipment is usually maintained and operated by these
entities. Gas production and transportation companies that rent compression
equipment (25% of the total domestic field compression HP) have the option of
maintaining and/or operating such equipment themselves or contracting with the
rental company to maintain and/or operate such equipment. Maintenance services
usually call for the rental company to be responsible for the repair and general
up-keep of the equipment while the customer usually remains responsible for
installing and handling the day-to-day operation of the equipment. Operations
services, on the other hand, require the rental company to maintain and operate
and, in many cases, to install the equipment. Often, a rental company providing
operations services will inspect the equipment daily, provide consumables such
as oil and antifreeze and, if necessary, be present at the site for several
hours each day.
By renting compression equipment and/or contracting for the maintenance of
such equipment, the producers, transporters and processors are able to avoid the
costs of (i) purchasing a full line of compression equipment necessary to
service their changing needs, (ii) maintaining a spare parts inventory and (iii)
retaining dedicated compression personnel, including engineers and field service
employees. Management believes that rental companies achieve run times of over
97%, significantly higher than those achieved by owners operating their own
equipment.
NATURAL GAS INDUSTRY
The Company believes that a significant factor in the growth of the gas
compression equipment market is the increasing consumption of natural gas both
domestically and internationally.
In the United States, natural gas is the second leading fuel in terms of
total consumption and is the fuel of choice for power generation and industrial
use. In recent years, natural gas has increased its market share of total
domestic energy consumption. The closure of nuclear power plants and the current
economic expansion have further contributed to the increased consumption of
natural gas. Domestic consumption of natural gas grew from 20.24 trillion cubic
feet ('TCF') in 1991 to 23.32 TCF in 1996, representing a CAGR of 2.9%. Industry
sources forecast a CAGR of 2.3% in domestic natural gas consumption from 1997 to
2015.
Natural gas consumption is growing in the international markets as well,
and it is anticipated that natural gas will overtake coal as the second leading
fuel in terms of total consumption over the next 20 years. Increasing
international natural gas consumption is partially attributable to a growing
environmental awareness and to a
39
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desire by a number of oil exporting nations to develop a local energy source
that permits greater oil exports. Countries that historically treated natural
gas as a by-product of the more valuable oil products and flared gas at the
wellhead are now enacting no-flare requirements and building in-country
infrastructures to utilize natural gas as a clean and viable fuel for local
consumption. Furthermore, electrical power generation requirements are
escalating rapidly in developing countries, and the fuel of choice appears to be
natural gas.
Between 1991 and 1996, natural gas consumption in non-U.S. energy markets
grew from 53.50 TCF to 57.45 TCF, representing a CAGR of 1.4%. Industry sources
forecast natural gas consumption worldwide to grow at a CAGR of 3.8% from 1997
to 2015. It is estimated that natural gas consumption in South America, the
Middle East and the Pacific Rim is expected to grow at a CAGR of 5.9% from 1997
to 2015 with consumption in countries such as Argentina (where natural gas
constitutes 40% of total energy consumption) and Venezuela growing at a CAGR of
3.1% and 6.5%, respectively from 1997 to 2015.
FIELD COMPRESSION INDUSTRY
Increased utilization of natural gas compression equipment is directly
related to changing gas reservoir pressures. As gas is released from gas
formations, the natural reservoir pressure of those formations continually
declines. As the declining pressure approaches the line pressure of the
gas-gathering or pipeline system used to transport the gas, compression
equipment must be applied to boost the pressure in order to allow the gas to be
brought to market. Due in part to declining reservoir pressures, field
compression HP has grown more quickly than gas consumption in the U.S. from 1991
to 1996, with CAGR's (measured in HP) of approximately 8% and 2.9%,
respectively.
The international field gas compression market is substantially smaller
than the domestic market. However, international gas compression is expected to
grow at a faster pace than domestic compression due to accelerating gas
production internationally.
FIELD COMPRESSION RENTAL INDUSTRY
The Company primarily competes in the market for field natural gas
compression equipment. In the United States, this market constitutes compressors
aggregating approximately 16.0 million HP of which approximately 4.0 million HP
is rented. Total domestic rental and other contract field compression service
annual revenue for 1997 has been estimated at $530 million. From 1991 to 1996,
total domestic field compression HP has grown at CAGR of approximately 8% while
total domestic rental compression HP has grown at a 13% CAGR over the same
period. The rented share of total domestic field compression market grew from
20% to approximately 25% between 1991 and 1996.
The domestic rental market growth is driven by increasing natural gas
production, greater compression needs due to declining reservoir pressures and a
continuing trend towards outsourcing by energy producers and processors. Rental
of compression equipment improves the efficiency and financial performance of
their operations through greater availability of a wide variety of gas
compressors, higher rates of mechanical reliability and higher run-time rates.
As contrasted to the domestic market, the international rental compression
market is substantially comprised of large HP compressors which are maintained
and operated by compressor rental providers. A significant portion of the market
is comprised of turnkey installation projects, which includes the design,
delivery, installation, operation and maintenance of the compression and
ancillary gas treating equipment by the rental company. The only matter left to
the responsibility of the customer is to provide fuel gas. Turnkey installation
projects are generally anticipated to remain on-site for five years on average
and result in higher monthly payments due to higher installation costs.
International rental and contract compression revenue are minor in
comparison to total compression revenues. Historically, many international
energy producers have been state-owned entities that are less sensitive or
indifferent to traditional capital markets-influenced concerns about
profitability and cash flow. As state-owned entities privatize, the desire to
enhance cash flow and profitability is expected to motivate these entities to
rent rather than to purchase compression requirements. Energy producers are
replacing the outdated compressors currently being utilized in many
international areas. As a result of these factors, the market for rental
compression is expected by industry experts to grow as more companies realize
the benefits of rental compression.
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COMPANY OPERATIONS
HISTORY
The Company was originally incorporated in 1954 under the name South Coast
Gas Company. Tidewater acquired South Coast Gas Company in 1968 and renamed it
Tidewater Compression Service, Inc. At the time of its acquisition by Tidewater,
the Company had five employees and a fleet of natural gas compressors consisting
of 35 units that generated approximately $500,000 of annual rental revenue.
Between 1968 and 1992, the Company increased its fleet of natural gas
compressors to 800 units, through both internal growth and the acquisition of
three gas compression rental companies. From 1993 to 1995, the Company grew
dramatically through the acquisition of four rental compression companies:
Allison Production Services and BJC Operating Company in 1993 and Halliburton
Compression Service and Brazos Gas Compressing Company in 1994.
Since 1995, the Company has focused on integrating these acquisitions as
well as (i) improving its nationwide field service and marketing capabilities,
(ii) centralizing management at its headquarters, (iii) instituting uniform
quality controls, (iv) standardizing maintenance and central overhaul procedures
and (v) implementing consistent Company-wide pricing. During this period,
management also focused its attention on creating a strong base of international
operations. At the same time, the former parent of the Company, Tidewater,
focused on its core marine support business thereby limiting growth capital
available to the Company.
OVERVIEW
The Company provides a full range of compressor rental, maintenance and
operations services to a broad base of over 500 customers. These operations are
complemented by its compressor design and fabrication operations, through which
the Company produces compressors for sale to third parties, as well as for its
own rental fleet.
RENTAL COMPRESSOR FLEET
At December 31, 1997, the Company owned over 2,700 natural gas compressors
ranging in size from 15 HP to 1,300 HP, with an average of 177 HP as reflected
in the following table.
FLEET BREAKDOWN
DECEMBER 31, 1997
<TABLE>
<CAPTION>
HP RANGE TOTAL HP % OF TOTAL
- ------------------------------------------------ --------- ------------
<S> <C> <C>
0 - 100....................................... 68,312 13.9%
101- 200....................................... 119,291 24.3%
201- 500....................................... 175,830 35.8%
501-1,300....................................... 127,230 26.0%
--------- ------------
Total......................................... 490,663 100.0%
--------- ------------
--------- ------------
</TABLE>
The Company has standardized its rental fleet around two equipment
platforms: Ajax for smaller HP applications and Ariel for larger HP
applications. Over 90% of the HP of the Company is of these two types. This high
level of fleet standardization and durability (i) enables the Company to
minimize its fleet maintenance capital requirements, (ii) enables the Company to
minimize inventory costs, (iii) facilitates low-cost compressor resizing, and
(iv) allows the Company to develop strong technical proficiency in its
maintenance and overhauling operations. The Company believes that this
standardization has allowed it to realize high run-time rates while maintaining
low operating costs, which benefits both the Company and its customers.
The Company's Ajax fleet is a significant factor in the Company's stable
customer base. Many customers have exhibited loyalty to Ajax compressors because
of their high reliability. Also, due to its design, the Ajax compressor burns
the broadest variety of fuel gas, including 'sour' gas, which is produced in a
number of domestic and international regions.
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There has been substantial growth in customer demand in recent years in the
over 500 HP category, and management intends to focus future growth on this
segment of the market. In developing the Company's higher HP fleet of
compressors, the Company intends to fabricate units for its fleet primarily
utilizing Ariel compressors driven by Caterpillar engines. These compressors
operate at higher speeds and, although larger than the low HP compressors, are
transportable. The Company believes that the combination of these larger HP
units and the lower HP Ajax units position the Company to offer services to all
segments of field gas production and gathering.
RENTAL CUSTOMERS
The Company's customer base consists of over 500 U.S. and international
companies engaged in all aspects of the oil and gas industry, including major
integrated oil and gas companies, large and small independent producers, natural
gas processors, gatherers and pipelines. No single rental customer accounts for
as much as 10% of the Company's total revenues. The Company's top 20 customers
accounted in 1997 for approximately 50% of rental revenues. The Company
maintains no exclusive contractual relationships with any of its customers,
although three of its top 20 customers deal on a substantially exclusive basis
with the Company. All but one of the Company's top 20 customers have been
customers of the Company for more than three years, reflecting stability in the
Company's customer base.
DOMESTIC OPERATIONS
The Company's domestic operations account for over 95% of its deployed
rental fleet, which has been installed in a diverse geographic area. The Company
has compressor services operations in 23 of the 48 contiguous states. The
Company's marketing and client service functions are performed on a coordinated
basis by the Company's salesmen, field service personnel and engineers. Salesmen
regularly visit their customers to determine customer satisfaction and needs
with respect to current services being provided to that customer and to
ascertain potential future compressor requirements. Salesmen also communicate
regularly with field service employees who, in many cases, have day-to-day
relationships with key customer personnel and may have advance notice of
customer planning. When a salesman is advised of a new rental opportunity, that
salesman obtains relevant information concerning the project including gas flow,
pressure and composition. The salesman will then search a computerized data base
to determine the availability of an appropriate compressor unit in the Company's
fleet for that project. The salesman will also determine if the available unit
requires maintenance, reconfiguration or major overhaul. If providing the
appropriate unit would entail significant overhaul cost, the salesman will
communicate with the engineer and field service personnel for the customer as
well as contact a supervisor to determine the timing of the required maintenance
or overhaul, whether a competitive price can be offered and the ultimate pricing
of such bid. This ongoing communication between the sales, field service and
overhaul personnel allows the Company to quickly identify and respond to
customer requests.
For larger HP installation, including turnkey opportunities, the Company's
engineers are highly involved in the early stages of the bidding process. For
these projects, the proposal is reviewed at the Company's headquarters.
INTERNATIONAL OPERATIONS
In recent years, the Company has been expanding its presence in the
developing international compression rental markets including Argentina,
Venezuela, the Pacific Rim, Europe and Canada. As of December 31, 1997, the
Company had 35 units aggregating approximately 18,000 HP operating under
contract in these markets. The Company has three international sales offices
with three salespeople dedicated to the international business. The Company's
presence in the international compression markets, which dates back five years,
has generated higher margins for the Company and has produced longer-term
contracts than its domestic business. For the twelve months ended December 31,
1997, approximately 7% of the Company's rental revenue was generated
internationally.
The Company's international operations are oriented to larger HP compressor
markets and frequently involve turnkey projects, as discussed above. These
projects require the Company to provide complete engineering and design in the
bidding process. Commercial negotiations proceed only after the acceptance of
the proposed engineering designs and concepts. The Company believes that, due to
this necessity for a high level of
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technical capabilities, its experience and reputation provides it with a
competitive advantage in gaining future business internationally.
RENTAL CONTRACTS
The Company's rental contracts utilize variable formats of a standard
rental contract associated with a Master Service Agreement ('MSA'). The standard
rental contract documents the technical specifications, equipment selection and
performance, site location and pricing of the individual project and
incorporates the MSA by reference. When issued by sales personnel in the field,
the standard rental contract is called a 'Quick Quote,' which can be computer
generated when quoting equipment to a customer in his office. By referencing the
MSA, the Quick Quote becomes the contract as soon as it is signed by the
customer. Rental rates are generally determined by compressor category based on
the Company's standardized rental rates with variations as necessary to secure
the rental contract and assure profitability of that contract.
Over 98% of the Company's rental agreements provide for full maintenance.
Optional items such as oil, antifreeze, freight, insurance and other items may
be either itemized or included in the basic monthly rental rate. Initial rental
terms are usually six months with some projects committed for as long as five
years. After the initial term, rentals continue at the option of the lessee on a
month to month basis. The average length of time that a compressor is on a
single location with a single configuration is 24 months. After that time, the
compressor is either reconfigured for the current conditions or installed in a
different location. This constant need for varying the configuration of
compressor packages in the same location is a significant advantage for leased
compressors as compared to owned compression equipment.
The Company's international contracts are substantively similar to domestic
contracts subject to language and local law modifications. In the
Spanish-speaking countries of South America, the contracts differ significantly
from domestic contracts because individual contracts are negotiated for each
project.
MAINTENANCE AND OVERHAUL SERVICES
The Company maintains two major overhaul facilities, one in Houston, Texas
and the other in Mineral Wells, Texas. The Company maintains a third overhaul
facility located in Grand Junction, Colorado as well as 23 field service
facilities. The Company provides maintenance services on substantially all of
its rental fleet and operations services for most of its larger HP units.
Maintenance services include the repair and general up-keep of compressor
equipment. As an adjunct to its maintenance business, the Company offers (at
additional cost) supplies and services such as antifreeze, lubricants, property
damage insurance on the equipment, and prepaid freight to the job site. The
Company also may provide for installation, which for its typical lower,
mid-range and smaller HP units involves significantly less engineering and cost
than the turnkey concept prevalent in the international markets as discussed
above.
The Company's field gas compressors are maintained in accordance with
daily, weekly, monthly and annual maintenance schedules that have been developed
and refined over the Company's long history of maintaining and operating its
compressors. These procedures are constantly updated as technology changes and
operations develop new techniques and procedures. In addition, by providing
maintenance on substantially all of the Company's installed compression
equipment, its field technicians are able to know the status of that equipment
and identify potential problems.
At the termination of a unit's rental, the field service representative who
has been maintaining the equipment completes a comprehensive report detailing
the mechanical condition of the unit. Based on this report and depending upon
whether the unit is scheduled for immediate redeployment, the unit is then
either overhauled in the field, shipped to a field service location for a
maintenance overhaul or directed to one of the two major overhaul facilities.
When units are scheduled for immediate redeployment, the Company will typically
perform necessary overhauls in the field if the requirements are minor. On
average, each of the Company's units undergoes a major overhaul once every five
years. A major overhaul involves the rebuilding of the unit in order to
materially extend its useful life. Approximately one half of the units which are
being prepared for a new site are overhauled in the field or at a field service
facility, while the other half are sent in for major overhauls or
reconfigurations.
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The Company has over 200 well trained and equipped field service
representatives located throughout the United States. These employees are
responsible for preventive maintenance, repair, preparation and installation of
rental units. In addition, over 50 trained mechanics perform major overhaul and
unit rework in the major shops. Each overhaul facility is capable of overhauling
approximately 200 compressor packages per year and is equipped with in-house
engine rebuild and test equipment, full machine shops, environmentally-approved
painting facilities and high capacity cranes. The Mineral Wells location also
operates a state-of-the-art unit test loop and functions as a full time training
center.
The Company also has a technical service group which is involved in the
Company's turnkey proposals and monitors the Company's larger HP units. This
group is assisted by equipment that permits field diagnostic analyses of engines
and compressors, as well as emission analyses ascertaining compliance with
regulatory requirements.
OPERATIONS SERVICES
The Company provides complete operations services on most of its larger HP
units, including its international units, and on customer-owned units. Operating
a compressor involves working closely with a customer's field service personnel
so that the compressor can be adjusted to efficiently match changing
characteristics of the gas produced. The Company generally operates large HP
compressors, the fee for which is included as part of the rental rate. Large HP
units are more complex and by operating the equipment the Company reduces its
maintenance and overhaul expenses. While the Company does not require its
customers to retain the Company to operate smaller HP units, the Company trains
its customers' personnel in fundamental compressor operations.
FABRICATION AND SALES
As a complement to its compressor services operations, the Company designs,
engineers, assembles and sells gas and air compressors for engineering and
construction firms, as well as for exploration and production companies both
domestically and internationally. 25% of the Company's total revenues for the
twelve months ended December 31, 1997 were generated from its fabrication and
sales operations. In addition, the Company produces compressors for its own
fleet. When servicing third-party customers, the Company provides its customers
with compressors that are built in accordance with specific criteria of the
purchaser ('engineered products') as well as compressors that are prepackaged
('standard products'). The Company utilizes both Caterpillar and Waukesha gas
engines for larger HP compressor units. Also, the Company acts as a distributor
for Ariel gas compressors. The Company's standard products operations acts as a
distributor in the Houston area for Atlas Copco, the largest manufacturer of air
compressors in the world. Certain of the compressors manufactured by these
entities are also used by the Company in its design and fabrication operations.
In addition to these services, the Company has developed a significant position
as a provider of complex fuel gas booster systems for the co-generation industry
both domestically and abroad.
EMPLOYEES
As of December 31, 1997, the Company had 437 full-time and four part-time
employees. None of the Company's employees are covered by a collective
bargaining agreement. Management believes that the Company's relationship with
its employees is satisfactory.
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PROPERTIES
The following table describes the Company's owned facilities:
OWNED FACILITIES
<TABLE>
<CAPTION>
LOCATION SQUARE FEET ACREAGE USES
- --------------------------------------------- ----------- ------- -------------
<S> <C> <C> <C>
Houston, TX.................................. 94,000 30.0 Overhaul
Mineral Wells, TX............................ 83,000 37.0 Overhaul
Bridgeport, TX............................... 18,000 2.5 Field service
Grand Junction, CO........................... 11,000 2.8 Overhaul
Stinett, TX.................................. 4,000 4.0 Field service
</TABLE>
In addition to the Company's owned facilties, the Company leases 21 field
service offices and three international sales offices.
COMPETITION
The natural gas compression service and fabrication business is highly
competitive. The Company is the second largest natural gas compression company
in the United States on the basis of aggregate rental HP. As of December 31,
1997, the Company's main competitors were Hanover Compressor Company, Production
Operators, Weatherford Enterra, Global Compression, Compressor Systems, J-W
Operating, Dresser Rand and Equity Compression. The Company believes that it
competes effectively on the basis of customer service (including the
availability of personnel in remote locations), price flexibility in meeting
customer needs and quality and reliability of its compressors and related
services.
Compressor industry participants can achieve significant advantages through
increased size and geographic breadth. As the number of rental units increases
in a rental fleet, the number of sales, engineering, administrative and
maintenance personnel required does not increase proportionately. As a result,
companies with larger rental fleets have relatively lower operating costs and
higher margins due to economies of scale than smaller companies.
One of the significant cost items in the compressor rental business is the
amount of inventory required to service rental units. Each rental company must
maintain a minimum amount of inventory to stay competitive. As the size of the
rental fleet increases, the required amount of inventory does not increase in
the same proportion. The larger rental fleet companies can generate cost of
capital savings through reduced percentage of inventory. These cost savings are
particularly significant for a company which has a reduced inventory on account
of its standardized fleet.
The Company's compressor fabrication business competes with other
fabricators of compressor units. The compressor fabrication business is
dominated by a few major competitors, several of which also compete with the
Company in the compressor rental business.
GOVERNMENTAL REGULATION
The Company is subject to various federal and state laws and regulations
relating to environmental protection, including, but not limited to, regulations
regarding emission controls. These laws and regulations may affect the costs of
the Company's operations. As with any owner of property, the Company is also
subject to clean-up costs and liability for hazardous materials, asbestos, or
any other toxic or hazardous substance that may exist on or under any of its
properties.
The Company believes that it is in substantial compliance with
environmental laws and regulations and that the phasing in of emission controls
and other known regulatory requirements at the rate currently contemplated by
such laws and regulations will not have a material adverse effect on the
Company's financial condition or results of operations. Notwithstanding the
foregoing, the Company may not be in full compliance with certain
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<PAGE>
environmental requirements, in part because of the Company's growth through
several acquisitions. For example, some of the Company's facilities may not
possess proper waste generation identification numbers, may not be in compliance
with underground storage tank ('UST') registration requirements, and may require
the installation of secondary containment around various material storage areas.
In addition, the Company is in the process of determining whether it needs
certain permits (such as stormwater and waste water discharge permits and air
emission permits) or certain plans (such as SPCC Plans) at several of its
facilities. If the Company determines it is not in full compliance with all
applicable environmental laws, it intends to take the necessary action to bring
itself into compliance.
The Comprehensive Environmental Response, Compensation and Liability Act
('CERCLA'), also known as the 'Superfund' law, imposes liability, without regard
to fault or the legality of the original conduct, on certain classes of persons
considered responsible for the release of 'hazardous substances' into the
environment. These persons include the generator of hazardous substances, the
past or present owner or operator of the disposal site where the release
occurred and companies that transported the hazardous substances to the site.
Under CERCLA, such responsible persons may be subject to joint and several
liability for the costs of cleaning up the hazardous substances that have been
released into the environment, for damages to natural resources, for the costs
of certain health studies and other costs. Furthermore, it is not uncommon for
neighboring landowners and other third parties to file claims for personal
injury and property damage allegedly caused by hazardous substances or other
pollutants released into the environment. The Company could incur future
liability under Federal, state and common law, including CERCLA and its state
law counterparts, for any such damages that occur as a result of its past
operations.
The Resource Conservation and Recovery Act ('RCRA') and regulations
promulgated thereunder govern the generation, storage, transfer and disposal of
hazardous wastes. The Company must comply with RCRA regulations for any of its
operations that involve the generation, management, or disposal of hazardous
wastes (such as painting activities or the use of solvents).
Studies performed prior to the Acquisition indicated that conditions at
certain properties previously or currently owned or operated by the Company may
require remediation under environmental laws. Additional studies of Company
properties are ongoing, which may further define remedial obligations, the costs
of which may be material. The Company believes that former owners and operators
of many of these properties, including but not limited to Tidewater (see
'Description of the Company Acquisition'), are responsible under environmental
laws and contractual agreements to pay for or perform such remediations, or to
indemnify the Company for its remedial costs. There can be no assurance that
such other entities will fulfill their legal or contractual obligations, and
their failure to do so could result in material costs to the Company.
Stricter standards in environmental legislation or regulations that may
affect the Company may be imposed in the future, such as proposals to make
hazardous wastes subject to more stringent and costly handling, disposal and
clean-up requirements. Accordingly, new laws or regulations or amendments to
existing laws or regulations could require the Company to undertake significant
capital expenditures and could otherwise have a material adverse effect on the
Company's business, results of operations and financial condition. See 'Risk
Factors--Environmental Regulation.'
Since 1992, there have been various proposals to impose taxes with respect
to the energy industry, none of which have been enacted and all of which have
received significant scrutiny from various industry lobbyists. At the present
time, given the uncertainties regarding the proposed taxes, including the
uncertainties regarding the terms which the proposed taxes might ultimately
contain and the industries and persons who may ultimately be the subject of such
taxes, it is not possible to determine whether any such tax will have a material
adverse affect on the Company.
LEGAL PROCEEDINGS
The Company is not currently involved in any material litigation or
proceeding and is not aware of any such litigation or proceeding threatened
against it.
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<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN OTHER SENIOR OFFICERS
The following table sets forth certain information with respect to each
person who is an executive officer or director of the Company and Holdings and
certain information with respect to each other person who is a senior officer of
the Company:
EXECUTIVE OFFICERS AND DIRECTORS:
<TABLE>
<CAPTION>
NAME POSITION
- --------------------------------------------------- ---------------------------------------------------
<S> <C>
John K. Castle..................................... Director
Ernie Danner....................................... Chief Financial Officer, Executive Vice President
and Director
Thomas E. Hartford................................. Executive Vice President
William J. Lovejoy................................. Director
C. Kent May........................................ Director
Jeffrey M. Siegal.................................. Director
Stephen A. Snider.................................. President, Chief Executive Officer and Director
Samuel Urcis....................................... Director; Chairman of the Executive Committee of
the Board of Directors
</TABLE>
SENIOR OFFICERS:
<TABLE>
<CAPTION>
NAME POSITION
- --------------------------------------------------- ---------------------------------------------------
<S> <C>
Robert D. Ryan..................................... Senior Vice President
Newton Schnoor..................................... Senior Vice President
Duncan G. Allison.................................. Vice President--Technical Services
Orville Elmon Deeds................................ Vice President--Engineering Production
Jack B. Hilburn, Jr................................ Vice President--Director of Operations
Case H. Nienhuis................................... Vice President--Domestic Sales
</TABLE>
The Company is party to employment agreements with respect to Messrs.
Danner, Snider, Schnoor, Ryan and Hartford. For a description of the employment
arrangements with respect to Messrs. Danner, Snider, Schnoor, Ryan and Hartford
('Named Officers'), see '--Executive Compensation; Employment Agreements.' No
family relationship exists between any of the executive officers or between any
of them and any director of the Company.
The following individuals serve as Directors of the Company and Holdings:
John K. Castle (57) has been Chairman of CHI since 1987. Mr. Castle is
Chairman of Castle Harlan Partners III G.P., Inc., which is the general partner
of the general partner of CHP, Holdings' controlling stockholder. Immediately
prior to forming CHI, Mr. Castle was President and Chief Executive Officer and a
Director of Donaldson, Lufkin and Jenrette, Inc., one of the nation's leading
investment banking firms. Mr. Castle is a Director of Sealed Air Corporation,
Morton's Restaurant Group, Inc., Dearborn Risk Management, Inc., Commemorative
Brands, Inc., a Managing Director of Statia Terminals Group, N.V., and is a
member of the corporation of the Massachusetts Institute of Technology. Mr.
Castle is also a Trustee of the New York and Presbyterian Hospitals, Inc., the
Whitehead Institute of Biomedical Research and New York Medical College (for 11
years serving as Chairman of the Board). Formerly, Mr. Castle was a Director of
the Equitable Life Assurance Society of the United States.
Ernie Danner (43) Mr. Danner joined the Company and Holdings as Chief
Financial Officer and Executive Vice President upon consummation of the
Acquisition. Most recently, Mr. Danner has served as Chief Financial Officer and
Senior Vice President of MidCon Corp., an interstate pipeline company, which is
a wholly-owned subsidiary of Occidental Petroleum Corporation. From 1988 until
May of 1997, Mr. Danner served as Vice President, Chief Financial Officer and
Treasurer of INDSPEC and continues to serve as a director of INDSPEC.
47
<PAGE>
Prior to that time, he was the Executive Vice President-Finance, Administration
and Planning of Adams and Porter, an international agency specializing in marine
and energy insurance, from 1984 to December 1988.
William J. Lovejoy (30) is a Vice President of CHI, with which he has been
associated since 1994. During 1992, and from 1993 to 1994, Mr. Lovejoy was a
management consultant at The Boston Consulting Group, Inc. From 1991 to 1993 he
attended Harvard Business School, and prior to that worked as an analyst at
Wasserstein Perella & Co., Inc. Mr. Lovejoy serves as a Director of
Commemorative Brands, Inc. and Homestead Insurance Company.
C. Kent May (58) is a Senior Vice President, General Counsel, Secretary and
a Director of Anchor Glass Container Corporation. He is General Counsel and a
Director of Consumers Packaging Inc., Canada's largest glass container
manufacturer, and a Director of Fabrica de Envases de Vidrio, S.A. de C.V., a
Mexican glass container manufacturer. He serves as General Counsel to Glenshaw
Glass Company and G&G Investments, Inc., a privately-held investment company. He
is also a manager and secretary of Main Street Capital Holdings, L.L.C., a
merchant banking firm and a Director of The Stiffel Company. He has been an
associate, partner or Member of the law firm of Eckert Seamans Cherin & Mellott,
L.L.C. since 1964 and was Managing Partner of the firm from 1991 to 1996. Mr.
May is a Trustee of the Pittsburgh Public Theater, a Director of the Mendelssohn
Choir and a Director of the Mario Lemieux Foundation and the John Ghaznavi
Foundation. He is a graduate of the University of Pittsburgh School of Law,
where he was elected to the Order of the Coif and served as managing editor of
the University of Pittsburgh Law Review.
Jeffrey M. Siegal (38) is a Managing Director of CHI, with which he has
been associated since 1989. He is a Director of Dearborn Risk Management, Inc.
From 1987 to 1989, Mr. Siegal attended the Harvard Business School. From 1984 to
1987 he served in the Air Force Systems Command of the United States Air Force,
ultimately as a Captain and program manager. Before joining the Air Force, Mr.
Siegal worked at Woodward & Dickerson, an international trading company.
Stephen A. Snider (50) has been President of the Company since 1991. Mr.
Snider joined Tidewater in 1975 as General Manager of the Company's fabrication
operations. In 1979, Mr. Snider established the Company's operation in the
Northeastern United States. In 1981, he assumed responsibility for the Western
United States operations of the Company. Mr. Snider left the Company in 1983 to
own and operate businesses unrelated to the energy industry. He returned to the
Company in 1991 in his current position. Mr. Snider has 22 years of experience
in senior management of operating companies.
Samuel Urcis (63) is a General Partner of Alpha Partners, a venture capital
firm which he co-founded in 1982. From 1979 to 1982, and since 1997, Mr. Urcis
has been an investor and advisor in the energy field, primarily in the oilfield
services and equipment sector. From 1972 to 1979, Mr. Urcis was with Geosource
Inc., a diversified services and equipment company, which he conceptualized and
co-founded. Mr. Urcis served in the capacity of Chief Operating Officer and Vice
President of Corporate Development. From 1955 to 1972, Mr. Urcis served in
various technical and management capacities at Rockwell International, Hughes
Aircraft, Aerolab Development Company and Sandberg-Serrell Corporation. He
currently serves on the Board of two privately held companies, U.S. Synthetic
and Accuwave Corporation. Mr. Urcis is currently a Director of the Glaucoma
Research Foundation, and has served as Trustee of the Monterey Institute of
International Studies.
The following individuals serve as Executive Officers of the Company and
Holdings:
Thomas E. Hartford (48) has been Executive Vice President and General
Manager of the Company since 1994. Mr. Hartford joined the Company in 1982 as a
District Manager, and transferred to Houston in 1986 where he became Regional
Sales Manager. In 1987, Mr. Hartford assumed responsibility for Western United
States operations of the Company's rental operations. From 1973 to 1982, Mr.
Hartford held sales and management positions in the agricultural industry. He
has 16 years of experience in senior management of operating companies.
Robert D. Ryan (42) has been a Senior Vice President and General Manager of
the Company since 1994. Prior to this position, Mr. Ryan was the Branch Manager
of the Company's Houston office for one year, as well as for the Dallas office
for seven years. Mr. Ryan's first appointment to management was to Branch
Manager of the Odessa office where he served for two years. In 1980, he was
hired at the Dallas office in a sales position for the Company's fabrication
operations. Prior to his tenure at the Company, Mr. Ryan worked for Air
Compressor
48
<PAGE>
Sales and Service in Dallas, Texas and for Worthington Compressors in Midland,
Texas. Mr. Ryan has 22 years of experience in the compression industry.
Newton Schnoor (50) has been Vice President and Controller of the Company
since 1985. Mr. Schnoor joined Tidewater in 1979 as Controller of the Western
Division of the Company's rental operations. In 1985, Mr. Schnoor supervised the
national consolidation and reorganization of the accounting group in Houston.
These actions merged accounting groups from three different groups of the
Company. Mr. Schnoor was made an officer of the Company in 1987.
Duncan G. Allison (52) has been a Vice President of the Company since 1994.
Mr. Allison joined the Company in 1981 as a Project Manager. In 1984, he became
Engineering Manger of Tidewater Process Engineering. In 1990, Mr. Allison was
promoted to Engineering Manager of the Company's rental operations. Prior to
joining the Company, Mr. Allison worked on rotating projects in the Middle East
and later managed reciprocating compressor projects in the United States. Mr.
Allison has over 30 years of engineering and management experience in the
compression industry.
Orville Elmon Deeds (59) has been Vice President of Engineering Production
since 1994. Mr. Deeds joined the Company in 1983 as manager of engineering. His
initial responsibility was to establish a professional engineering department to
engineer high specification projects for both air and gas compressor packages.
Prior to joining the Company, Mr. Deeds spent 26 years at Ingersoll Rand. He has
41 years of experience in the compressor packaging industry 22 years of which
was in supervisory or management positions. Mr. Deeds has also engineered more
than 500 compressor packages including double deck offshore modules, concrete
barges, gas and steam compressor packages, integral engine/compressor packages
and complete compressor stations.
Jack B. Hilburn, Jr. (52) has been Vice President, Director of Operations
since he joined the Company in 1994. Mr. Hilburn is responsible for all domestic
field operations, shops and warehouses. He started in the petroleum industry
with Conoco in 1968. He joined Marathon in 1974, transferring to Marathon's
North Sea Operations. Mr. Hilburn returned to the United Sates in 1989 and
continued with Marathon as Region Manager of southeast onshore and lower 48
offshore production operations, and later as Manager of Operations and
Construction Services. Mr. Hilburn has over 20 years of management experience
and brings a valuable customer perspective to the Company at a critical
position.
Case H. Nienhuis (47) has been Director of Sales since he joined the
Company in 1996. Mr. Nienhuis has maintained an enviable track record of
consistently increasing sales every month since joining the Company. Prior to
joining the Company, he served with Camco International for 17 years where he
also held sales and management positions. Mr. Nienhuis has a total of 24 years
of experience in the petroleum industry.
COMPENSATION OF DIRECTORS
Directors who are not (i) officers of the Company, (ii) affiliated with CHI
and (iii) otherwise being paid directly or indirectly from the Company shall
receive an annual fee of $20,000, $750 per Board of Directors or committee
meeting attended and reasonable out-of-pocket expenses. At present, only C. Kent
May would be entitled to such compensation. Except as set forth above, Directors
are not provided with any compensation for their services other than the
reimbursement of expenses associated with attending meetings of the Board of
Directors or any committee thereof.
LIMITATIONS ON OFFICER'S AND DIRECTOR'S LIABILITY
The Company and Holdings have entered into indemnification agreements
with its directors that, among other things, require the Company to indemnify
the directors to the fullest extent permitted by law, and to advance to the
directors all related expenses, subject to reimbursement if it is subsequently
determined that indemnification is not permitted. The Company and Holdings are
also required to indemnify and advance all expenses incurred by directors
seeking to enforce their rights under the indemnification agreements, and cover
directors under and Holdings' directors' and officers' liability insurance.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors pursuant to the foregoing provision, the Company
has been informed that in the opinion of the Securities and
49
<PAGE>
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management Agreement
Prior to the consummation of the Acquisition, the Company and Holdings
entered into a Management Agreement (the 'Management Agreement') with CHI, as
Manager, pursuant to which the Manager agreed to provide business and
organizational strategy, financial and investment management and merchant and
investment banking services to the Company and Holdings upon the terms and
conditions set forth therein. As compensation for such services, the Company
will pay to the Manager $3.0 million per year, which amount was paid in advance
for the first year and will be payable quarterly in advance thereafter. The
agreement is for a term of five years, renewable automatically from year to year
thereafter unless CHP or its affiliates then beneficially owns less than 20% of
the then outstanding capital stock of Holdings. The Company and Holdings agreed
to indemnify the Manager against liabilities, costs, charges and expenses
relating to the Manager's performance of its duties, other than such of the
foregoing resulting from the Manager's gross negligence or willful misconduct.
In addition, the Company agreed to reimburse CHI for any reasonable
out-of-pocket expenses incurred by CHI in connection with the Transactions.
Registration Rights Agreement
Prior to the consummation of the Acquisition, Holdings entered into a
registration rights agreement (the 'Holdings Registration Rights Agreement')
with CHP and certain other stockholders of Holdings (the 'Stockholders'). Under
the Holdings Registration Rights Agreement, the Stockholders have the right,
subject to certain conditions, to require Holdings to register any or all of its
shares of common stock of Holdings under the Securities Act at Holdings'
expense. In addition, the Stockholders are entitled to inclusion (subject to
limitations) of any shares of common stock of Holdings subject to the Holdings
Registration Rights Agreement in any registration statement at Holdings' expense
whenever Holdings proposes to register any of its common stock under the
Securities Act. In connection with all such registrations, Holdings has agreed
to indemnify all of the Stockholders against certain liabilities, including
liabilities under the Securities Act.
Stock Repurchase Agreement
Prior to the consummation of the Acquisition, Holdings entered into a Stock
Repurchase Agreement with certain of the Company's employees. This agreement,
among other things, gives Holdings the right and in certain limited
circumstances, the obligation, to repurchase the common stock of Holdings upon
certain triggering events at an appraised value or at cost.
Samuel Urcis Arrangements
In consideration for finder services rendered by Samuel Urcis ('Urcis') to
TW, Holdings and Urcis have entered into an agreement with the following terms:
1. Urcis will be elected to serve as a director of Holdings and as
Chairman of the Executive Committee.
2. Urcis will be paid a finders fee of $1,750,000, $1,100,000 of which
was used to purchase shares of capital stock of Holdings at the same price
per share as was paid by CHP.
3. Urcis will be granted an option to purchase the number of shares of
Holdings common stock equivalent to 1.8% of the Holdings common stock
outstanding at the closing of the Acquisition.
4. Urcis will perform consulting services for the Company and be
entitled to a consulting fee of $150,000 per year.
The obligations set forth under items 1-3 were satisfied at the closing of
the Acquisition.
50
<PAGE>
Urcis' rights and obligations under paragraphs 1 and 4 above extend for
five years from consummation of the Acquisition and thereafter automatically for
one year periods unless either of the parties elect to terminate these
provisions. In addition, the Company reimbursed CHP for advances made by CHP to
Urcis for out-of-pocket expenses incurred by him in connection with the
Acquisition, which reimbursement did not exceed $50,000 in the aggregate.
Stockholder Agreement
Holdings, CHP and certain stockholders of Holdings entered into a
Stockholders Agreement providing for the following: (i) the right of such
holders to join in certain sales of capital stock of Holdings by CHP; (ii) the
right of CHP and each such holder to purchase capital stock of Holdings to
maintain its percentage ownership in the event of certain sales by Holdings of
such stock; (iii) the right of CHP to require such holders to sell their shares
of such stock upon a sale by CHP of substantially all of its interest in
Holdings; (iv) the obligation of each such holder to offer Holdings or CHP the
opportunity to purchase the capital stock of Holdings owned by such holder in
the event of a proposed sale by such holder of such stock; (v) the restrictions
on sales or transfers of such stock; and (vi) certain obligations of Holdings,
including reporting and Board of Directors observer rights in favor of such
holders.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Stephen A. Snider, President of the Company, is a member of the
compensation committee of the Board of Directors. No other employee of the
Company or Holdings will be a member of such committee. There are no
compensation committee interlocks (i.e., no executive officer of the Company
serves as a member of the board of directors or the compensation committee or
another entity which has an executive officer serving on the Board of Directors
or the compensation committee of the Company).
EXECUTIVE COMPENSATION; EMPLOYMENT AGREEMENTS
The following table sets forth the annual and long-term compensation for
the Chief Executive Officer of the Company and the four highest paid officers
(other than the Chief Executive Officer), as well as the total compensation paid
to, or earned by, each such individual for fiscal year 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM COMPENSATION
COMPENSATION ------------------------------------------
------------------ NUMBER OF SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS UNDERLYING OPTIONS GRANTED COMPENSATION
- ------------------------------------------------- ------- ------- -------------------------- ------------
<S> <C> <C> <C> <C>
</TABLE>
The following table sets forth grants of options to purchase shares of
common stock of Tidewater during fiscal year 1997 to such persons.
51
<PAGE>
OPTIONS GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
----------------------------------------------------------------- ------------------
% OF TOTAL
OPTIONS
NUMBER OF GRANTED TO EXERCISE
SECURITIES EMPLOYEES IN PRICE EXPIRATION
NAME UNDERLYING OPTIONS FISCAL YEAR 1997 PER SHARE DATE 5%($) 10%($)
- ------------------------------- ------------------ ---------------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
The following table sets forth options exercised during fiscal year 1997
and the fiscal year-end value of unexercised options for each such person.
OPTION EXERCISES IN 1997 AND 1997 FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FEBRUARY 28, AT FEBRUARY 28,
SHARES 1997 1997
ACQUIRED ---------------------------- ----------------------------
NAME AS EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
The Company has entered into employment agreements with (i) Stephen A.
Snider pursuant to which Mr. Snider serves as President for an annual base
salary of $170,000, plus a target bonus of up to 70% of such base salary; (ii)
Thomas E. Hartford pursuant to which Mr. Hartford serves as Executive Vice
President for an annual base salary of $135,000, plus a target bonus of up to
60% of such base salary; (iii) Robert D. Ryan pursuant to which Mr. Ryan serves
as Senior Vice President for an annual base salary of $100,000, plus a target
bonus of up to 50% of such base salary; (iv) Newton Schnoor pursuant to which
Mr. Schnoor serves as Senior Vice President for an annual base salary of
$90,000, plus a target bonus of up to 50% of such base salary; and (v) Ernie
Danner pursuant to which Mr. Danner serves as Chief Financial Officer and
Executive Vice President for an annual base salary of $135,000 plus a target
bonus up to 60% of such base salary. (collectively, the 'Employment
Agreements'). Upon consummation of the Transactions, Mr. Danner also received
$250,000 in Holdings capital stock (valued at the CHP purchase price) and
$100,000 in cash. Each of the Employment Agreements has a stated duration of
three years. If during such stated duration (or during any extension of such
duration), a 'change of control' (as such term is defined in the Employment
Agreements) occurs, each agreement shall automatically extend to a date that is
the second anniversary of the occurrence of such event.
Messrs. Snider, Hartford, Danner, Ryan and Schnoor each received certain
stock options--see 'Management Options' and 'Principal Stockholders'--and have
registration rights with respect to such stock. The Employment Agreements also
provide that if the Company terminates any of the foregoing individual's
employment without cause, such individual will be entitled to receive severance
payments for up to the remaining term of the relevant employment agreement. The
foregoing agreements also place certain restrictions on the
52
<PAGE>
ability of these individuals to disclose certain confidential information, to
compete against the Company and to hire or solicit certain employees of the
Company should such individual's employment with the Company be terminated.
BENEFIT PLANS
Pursuant to the Stock Purchase Agreement, the Company is obligated to cause
its employees to be eligible to participate in an employee welfare benefit plan
and an employee pension benefit plan (within the meaning of Section 3(1) and
3(3) of ERISA, respectively), which plans shall credit, for purposes of any
length of service requirements, waiting periods, vesting periods or differential
benefits based on length of service in such plans, service by such employees
with the Company prior to the Acquisition. Furthermore, pursuant to the Stock
Purchase Agreement, the Company is obligated to waive any waiting period for
participation or coverage in any welfare benefit plans or policies of the
Company and, to the extent an employee was a participant in Tidewater's medical
benefits plan and such condition was covered under such plan, to waive any
pre-existing medical condition provision of such plan or policy.
Additionally, pursuant to the Stock Purchase Agreement, the Company is
obligated to honor the terms of a severance policy covering the Company's
employees.
MANAGEMENT OPTIONS
In order to motivate and retain key executive employees of the Company, the
Company has established a stock option plan and an incentive bonus plan or
policy. Under the stock option plan, the Company has the ability to award to
such key employees as it may notify in writing either incentive stock options of
Holdings common stock, meeting the requirements of Section 422 of the Code, or
non-qualified stock options of Holdings common stock, which will not be subject
to Section 422 of the Code. The decision whether to grant options, the key
executive employees to whom to grant such options, the type of options to be
granted (whether incentive stock options or non-qualified stock options), the
number of shares of common stock of Holdings to be the subject of each option,
as well as other matters concerning the administration of the plan and the
interpretation of its provisions shall be solely within the power of the Board
of Directors of the Company or of a committee of such Board of Directors acting
as administrator of the plan. Under an incentive bonus plan or policy, the
Company has the ability to award to such key employees as it may notify in
writing a bonus, in an amount of up to 20% of such employee's compensation, in
cash or, with respect to amounts exceeding 10% of such employee's compensation,
Holdings stock or either incentive stock options of Holdings stock or
non-qualified stock options under the terms of the Company's stock option plan,
as the Company may determine in its discretion.
Options to purchase an aggregate number of shares of Common Stock equal to
approximately 10% of the outstanding Common Stock were granted to the employees
and directors of the Company upon the closing of the Transactions. Such options
have a ten year term, may be subject to vesting and will have an exercise price
per share equal to the purchase price per share of Common Stock paid by CHP to
acquire its Common Stock of Holdings upon such closing.
PRINCIPAL STOCKHOLDERS
All of the issued and outstanding capital stock of the Company prior to
consummation of the Acquisition, was owned by Holdings. Upon the closing of the
Transactions, Holdings had outstanding approximately 325,000 shares of Common
Stock ('Common Stock'), $.01 par value per share, and approximately 1,300,000
shares of Series A Preferred Stock ('Series A Preferred Stock'), $.01 par value
per share. Each share of Common Stock and Series A Preferred Stock carries one
vote and holders of both classes generally vote on all matters as a single
class. See 'Description of Capital Stock of Holdings.' The following table sets
forth certain information regarding beneficial ownership of the Common Stock and
Series A Preferred Stock with respect to (i) each person known by the Company to
beneficially own five percent or more of any class of Holdings' capital stock,
(ii) each director of the Company, (iii) each executive officer of the Company
and (iv) all directors and executive
53
<PAGE>
officers of the Company as a group. All information with respect to beneficial
ownership has been furnished to the Company by the respective shareholders of
Holdings.
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
NUMBER OF OF NUMBER OF SHARES TOTAL SERIES A
SHARES OF TOTAL COMMON OF SERIES A PREFERRED
NAME AND ADDRESS OF BENEFICIAL OWNER(1) COMMON STOCK STOCK PREFERRED STOCK STOCK
- ------------------------------------------------ ------------ ------------ ---------------- --------------
<S> <C> <C> <C> <C>
CHP and affiliated holders(2)................... 186,440 57.4% 745,760 57.4%
John K. Castle(3)............................... 325,000 100% 1,300,000 100%
BT Capital Partners, Inc........................ 32,000 9.8% 128,000 9.8%
First Union Capital Partners, Inc............... 32,000 9.8% 128,000 9.8%
Mellon Bank N.A., as Trustee for the
Bell Atlantic Master Trust.................... 32,000 9.8% 128,000 9.8%
Wilmington Trust, as Trustee of Du Pont Pension
Trust......................................... 32,000 9.8% 128,000 9.8%
Brown University Third Century Fund............. 2,000 * 8,000 *
Samuel Urcis(4)................................. 12,757 3.9% 27,200 2.1%
Stephen Snider(5)............................... 8,619 2.6% 8,000 *
Ernie Danner(6)................................. 7,780 2.4% 12,000 *
Thomas Hartford(7).............................. 5,940 1.8% 4,640 *
Newton Schnoor(8)............................... 2,206 * -- --
Robert Ryan(9).................................. 2,206 * -- --
All directors and executive officers as group
(10 persons).................................. 325,000 100% 1,300,000 100%
</TABLE>
* Indicates less than 1% of the outstanding stock.
- ------------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Except as indicated in the footnotes to
this table, each stockholder named in the table has sole voting and
investment power with respect to the shares set forth opposite such
stockholder's name. The address for each such stockholder or director
identified above is c/o Universal Compression Holdings, Inc., 150 East 58th
Street, New York, New York 10155.
(2) CHP acquired 178,097 and 712,388 shares of Common Stock and Series A
Preferred Stock, respectively, for its own account and the remaining shares
for the account of related entities and persons.
(3) Includes 186,440 shares of Common Stock and 745,760 shares of Series A
Preferred Stock held by CHP and its affiliates. John K. Castle is a director
of the Company and Holdings and, along with Leonard M. Harlan, is the
controlling stockholder of Castle Harlan Partners III G.P., Inc., the
general partner of the general partner of CHP, and as such may be deemed to
be a beneficial owner of the shares owned by CHP. Also includes 128,000
shares of Common Stock and 512,000 shares of Series A Preferred Stock the
voting of which Mr. Castle may direct pursuant to the Voting Agreement
entered into among Holdings, CHP and the five entities listed immediately
below Mr. Castle's name. Each of the other persons who acquired Common Stock
and Series A Preferred Stock upon the consummation of the Acquisition
entered into a Voting Trust Agreement with Mr. Castle pursuant to which Mr.
Castle acts as voting trustee. Mr. Castle and Mr. Harlan disclaim beneficial
ownership of such shares in excess of their respective pro rata partnership
interests.
(4) Includes 4,400 shares of Common Stock and 17,600 Series A Preferred Stock
purchased by Mr. Urcis with $1,100,000 of his finders fee as well as such
shares subject to the option granted to him upon consummation of the
Transactions. Also includes 2,400 shares of Common Stock and 9,600 shares of
Series A Preferred Stock owned by CHP, which shares CHP has agreed to sell
to Mr. Urcis at a purchase price of $50 per share.
(5) Includes 2,000 shares of Common Stock and 8,000 shares of Series A Preferred
Stock that Mr. Snider has agreed to purchase from CHP within 60 days of the
closing of the Transactions and 6,619 shares of Common Stock subject to an
option granted by Holdings to Mr. Snider upon the closing of the
Acquisition. Such option will vest over three years and will be exercisable
for $50 per share.
(Footnotes continued on next page)
54
<PAGE>
(Footnotes continued from previous page)
(6) Includes 2,000 shares of Common Stock and 8,000 shares of Series A Preferred
Stock owned by CHP, which shares CHP has agreed to sell to Mr. Danner at an
exercise price of $50 per share. Also includes 4,780 shares of Common Stock
subject to an option granted by Holdings to Mr. Danner upon the closing of
the Acquisition. Such option will be exercisable for $50 per share.
(7) Includes 1,160 shares of Common Stock and 4,640 shares of Series A Preferred
Stock that Mr. Hartford has agreed to purchase from CHP within 60 days of
the closing of the Transactions and 4,780 shares of Common Stock subject to
an option granted by Holdings to Mr. Hartford upon the closing of the
Acquisition.
(8) Consists of 2,206 shares of Common Stock subject to an option granted by
Holdings to Mr. Schnoor upon the closing of the Acquisition. Such option
will vest over three years and will be exercisable for $50 per share.
(9) Consists of 2,206 shares of Common Stock subject to an option granted by
Holdings to Mr. Ryan upon the closing of the Acquisition. Such option will
vest over three years and will be exercisable for $50 per share.
DESCRIPTION OF CAPITAL STOCK OF HOLDINGS
Holdings' Certificate of Incorporation, as amended, provides that Holdings
is authorized to issue 5,000,000 shares of preferred stock, par value $.01 per
share and 1,000,000 shares of Common Stock.
SERIES A PREFERRED STOCK
Dividends. No dividends shall accrue on the Series A Preferred Stock.
Redemption and Liquidation. The Series A Preferred Stock is redeemable at
any time as a whole or in part at the option of Holdings for cash in the amount
of $50 per share. In the event of any liquidation, dissolution or winding up of
Holdings or a merger or consolidation of Holdings or a sale of substantially all
of the assets of Holdings, in each case as would constitute a 'Change of
Control' under the Holdings Indenture, the holders of the Series A Preferred
Stock will receive payment of the liquidation value of $50 per share plus
accrued and unpaid dividends thereon, if any, in full, prior to the payment of
any distributions to the holders of the Common Stock of Holdings.
Restriction on Payment of Other Dividends. So long as any share of Series
A Preferred Stock shall be issued and outstanding, Holdings shall not declare,
pay or set aside for payment, any dividends on, or make any other distributions
with respect to, any shares of Common Stock or other shares of capital stock of
Holdings ranking junior to the Series A Preferred Stock as to dividend rights or
rights upon liquidation, dissolution or winding up.
Voting. In addition to any voting rights required by law, each share of
the Series A Preferred Stock shall entitle each holder to one vote on all
matters presented to the holders of the Common Stock generally, with the votes
of the holders of the Common Stock and the Series A Preferred Stock to be
treated together as a single class. Notwithstanding the foregoing, unless the
consent or approval of a greater number of shares shall then be required by law,
the affirmative vote of the holders of at least a majority of the outstanding
shares of Series A Preferred Stock, separately as a single class, shall be
necessary to (i) amend, alter or repeal any provision of the Certificate of
Incorporation or Bylaws of Holdings, and (ii) effect the consolidation or merger
of Holdings or sale of all or substantially all of its assets, in each case so
as to affect adversely any of the preferences, rights, powers or privileges of
the Series A Preferred Stock or the holders thereof.
COMMON STOCK
The holders of the Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders, including the
election of directors, and shall vote together as a class with the holders of
the Series A Preferred.
Dividends may be paid on the Common Stock, when and as declared by the
Board of Directors out of funds legally available therefor. The Company does not
expect to pay dividends on the Common Stock in the foreseeable future.
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<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
In connection with the Acquisition, the Company entered into a Credit
Agreement (the 'Credit Agreement') with Bankers Trust Company, as agent (the
'Agent') and other lending institutions party thereto (the 'Banks'), which
agreement provides for senior secured credit facilities (the 'Senior Secured
Credit Facilities') in the aggregate amount of up to $160,000,000. The following
is a summary of the material terms and conditions of the Senior Secured Credit
Facilities and is subject to the detailed provisions of the Credit Agreement and
various related documents entered into in connection with the Senior Secured
Credit Facilities. Terms not otherwise defined herein shall have the meanings
set forth in the Credit Agreement.
General. The Senior Secured Credit Facilities consist of (i) a $75,000,000
senior term loan facility (the 'Term Loan Credit Facility') and (ii) a revolving
credit facility (the 'Revolving Credit Facility') in the amount of $85,000,000
which includes a sublimit for letters of credit.
Loans under the Term Loan Credit Facility ('Term Loans') and $35,000,000 of
loans under the Revolving Credit Facility ('Revolving Credit Loans', and
together with the Term Loans, the 'Loans') were borrowed to finance in part the
Acquisition. Additional Revolving Loans will be made available for the Company's
and its subsidiaries' working capital and general corporate purposes, including
to make certain permitted acquisitions.
Interest Rates and Fees. Loans under the Senior Secured Credit Facilities
may be maintained from time to time, at the Company's option, as (i) Base Rate
Loans which bear interest at the Base Rate plus the Applicable Margin or (ii)
Eurodollar Loans which bear interest at the Eurodollar Rate (adjusted for
maximum reserves) as determined by the Agent for the applicable interest period
plus the Applicable Margin.
Eurodollar Loans may have one, two, three or six month interest periods.
Interest in Eurodollar Loans will be payable in arrears at the end of the
applicable interest period and every three months where the applicable period
exceeds three months. Interest on Base Rate Loans will be payable in arrears on
the last business day of each quarter. Overdue amounts shall bear interest at a
rate per annum equal to the rate which is 2% in excess of the rate otherwise
applicable to Base Rate Loans.
The Company will pay a commitment fee calculated at a rate of 0.5% per
annum of the unutilized commitments of each lender under the Revolving Credit
Facility. This fee will accrue from the date of the closing of the Acquisition
to and including the date of termination of the Revolving Credit Facility, and
will be payable in arrears.
The Company will pay a letter of credit fee equal to the Applicable Margin
for Revolving Loans maintained as Eurodollar Loans, and a facing fee of 1/4% of
1% per annum, in each case calculated on the aggregate stated amount of each
letter of credit for its stated duration. Such fees will be payable in arrears
at the end of each quarter. In addition, the Company will pay customary
administration charges in connection with the issuance and amendment of, and
draws under, Letters of Credit.
Amortizations; Prepayments. The Revolving Credit Facility is scheduled to
mature on the fifth anniversary of the date of closing of the Acquisition. The
Term Loans are scheduled to mature seven years after the date of the closing of
the Acquisition and will be subject to quarterly amortizations as follows:
<TABLE>
<CAPTION>
QUARTER ANNUAL
YEAR AMOUNT AMOUNT
- --------------------------------------------------------- ----------- -----------
<S> <C> <C>
1........................................................ $ 187,500 $ 750,000
2........................................................ $ 187,500 $ 750,000
3........................................................ $ 187,500 $ 750,000
4........................................................ $ 187,500 $ 750,000
5........................................................ $ 187,500 $ 750,000
6........................................................ $ 6,562,500 $26,250,000
7........................................................ $11,250,000 $45,000,000
</TABLE>
Voluntary prepayments may be made in whole or in part without premium or
penalty (other than the payment of breakage costs for Eurodollar Loans prepaid
on a day other than the last day of an interest period). The Company will be
required to make a mandatory repayment of Loans from (i) 100% of the net
proceeds from asset dispositions, (ii) 100% of the net proceeds of issuances of
indebtedness, (iii) 100% of the net proceeds from insurance recovery and
condemnation events, (iv) 50% of the net proceeds from equity issuances and
capital contributions and (v) 50% of annual excess cash flow (to be calculated
net of capital expenditures), in each case
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<PAGE>
with customary exceptions to be agreed upon. Upon a change of control of
Holdings or the Company, the Company would be required to repay in full all
outstanding Loans and all commitments under the Revolving Credit Facility would
terminate. In addition, outstanding Revolving Loans under the Revolving Credit
Facility shall be required to be prepaid if at any time the aggregate principal
amount thereof exceeds the total Revolving Credit Facility commitments, with
such prepayment to be in an amount equal to such excess.
Guaranties. Holdings ('Guarantor') has unconditionally guaranteed all
amounts owing under the Senior Secured Credit Facilities (the 'Guaranties').
Security. The Senior Secured Credit Facilities (and all obligations under
the Guaranties) are secured by (i) a first priority perfected pledge of (x) all
notes owned by the Company and the Guarantor and (y) all capital stock owned by
the Company and the Guarantor and two-thirds of the outstanding capital stock of
the foreign subsidiaries of the Company and (ii) a first priority perfected
security interest in all other assets (including receivables, contracts,
contract rights, securities, inventory, equipment, real estate, copyrights,
patents and trademarks but excluding assets located outside the United States)
owned by the Company and the Guarantor with such exceptions as Agent has
approved (it being understood that, after the final maturity of the Revolving
Credit Facility, the Company and the Guarantor shall be allowed to grant a first
priority perfected lien on all inventory and receivables owned by them to any
lender providing a replacement working capital facility).
Events of Default. The Senior Secured Credit Facilities contain customary
events of default, including the non-payment of principal or interest when due
under the notes issued in connection with the Senior Secured Credit Facilities
or, subject to applicable grace periods in certain circumstances, upon the
non-fulfillment of the covenants described above, certain changes in control of
the ownership of Holdings or the Company, cross-defaults to certain other
indebtedness, certain events of bankruptcy or insolvency, ERISA, judgment
defaults and failure of any security agreement or guarantee supporting the
Senior Secured Credit Facilities to be in full force and effect. If any such
event of default occurs, the Agent will be entitled, on behalf of the Banks, to
take all actions permitted to be taken by a secured creditor under the Uniform
Commercial Code and to accelerate the amounts due under the Senior Secured
Credit Facilities and may require all such amounts outstanding thereunder to be
immediately paid in full.
Definitions.
'Applicable Margin' means a percentage per annum equal to (i) in the case
of Term Loans that are maintained (x) as Base Rate Loans, 1.50%, and (y) as
Eurodollar Loans, 2.50% and (ii) in the case of Revolving Loans that are
maintained (x) as Base Rate Loans, 1.25%, and (y) as Eurodollar Loans, 2.25%. So
long as no default or event of default exists under the Senior Secured Credit
Facilities, the Applicable Margin for Term Loans and Revolving Loans shall be
subject to quarterly reductions based on one or more financial tests to be
determined; provided however, that the Applicable Margin for Term Loans and
Revolving Loans shall not be subject to any such adjustment during the six
months immediately after the date of the Closing of the Senior Secured Credit
Facilities.
'Base Rate' means the higher of (i) the rate that Bankers Trust Company
announces from time to time as its prime lending rate, as in effect from time to
time, and (ii) one-half ( 1/2) of 1% in excess of the overnight federal funds
rate.
DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes will be issued pursuant to the indenture (the
'Indenture'), dated as of February 20, 1998 by and between the Company and
United States Trust Company of New York, as Trustee. The following summary of
certain provisions of the Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act of 1939, as amended (the 'TIA'), and to all of the provisions of
the Indenture, including the definitions of certain terms therein and those
terms made a part of the Indenture by reference to the TIA as in effect on the
date of the Indenture. A copy of the Indenture may be obtained from the Company
or the Initial Purchasers. The definitions of certain capitalized terms used in
the following summary are set forth below under '-- Certain Definitions.' For
purposes of this section, references to the 'Company' include only the Company
and not its subsidiaries.
The Notes are unsecured obligations of the Company, ranking pari passu in
right of payment to all existing and future senior indebtedness of the Company.
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The Notes have been issued in fully registered form only, without coupons,
in denominations of $1,000 and integral multiples thereof. Initially, the
Trustee is acting as Paying Agent and Registrar for the Notes. The Notes may be
presented for registration of transfer and exchange at the offices of the
Registrar, which initially is the Trustee's corporate trust office. No service
charge will be made for any registration of transfer or exchange or redemption
of Notes, but the Company may require payment in certain circumstances of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith. The Company may change any Paying Agent and Registrar
without notice to holders of the Notes (the 'Holders'). The Company will pay
principal of (and premium, if any on) the Notes at the Trustee's corporate
office in New York, New York. At the Company's option, interest may be paid at
the Trustee's corporate trust office or by check mailed to the registered
addresses of Holders. Any Original Notes that remain outstanding after the
completion of the Exchange Offer, together with the Exchange Notes issued in
connection with the Exchange Offer, will be treated as a single class of
securities under the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount at maturity to
$242,500,000 million and will mature on February 15, 2008. The Notes have been
issued at a substantial discount from the aggregate stated principal amount
thereof at maturity. For federal income tax purposes, significant amounts of
original issue discount, taxable as ordinary income, will be recognized by
Holders annually as long as they hold the Notes, including in advance of receipt
of cash interest payments thereon. See 'Certain Federal Income Tax
Considerations'. Cash interest on the Notes will not accrue or be payable prior
to February 15, 2003. Thereafter, interest on the Notes will accrue at the rate
of 9 7/8% per annum and will be payable semiannually in cash on each August 15
and February 15 commencing on August 15, 2003, to the persons who are registered
Holders at the close of business on the day immediately preceding the applicable
interest payment date. Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from and
including the date of issuance.
The Notes are not entitled to the benefit of any mandatory sinking fund.
REDEMPTION
Optional Redemption. The Notes are redeemable, at the Company's option, in
whole at any time or in part from time to time, on and after February 15, 2003,
upon not less than 30 nor more than 60 days' notice, at the following redemption
prices (expressed as percentages of the principal amount at maturity thereof) if
redeemed during the twelve-month period commencing on February 15 of the year
set forth below, plus, in each case, accrued and unpaid interest thereon, if
any, to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------------------------- ----------
<S> <C>
2003........................................................................................ 104.938%
2004........................................................................................ 103.292%
2005........................................................................................ 101.646%
2006 and thereafter......................................................................... 100.000%
</TABLE>
Optional Redemption Upon Public Equity Offerings. At any time, or from
time to time, on or prior to February 15, 2001, the Company may, at its option,
use the net cash proceeds of one or more Public Equity Offerings (as defined
below) to redeem the Notes at a redemption price equal to 109.875% of the
Accreted Value of the Notes to be redeemed on the date of redemption plus
accrued and unpaid interest, if any; provided that at least 65% of the aggregate
principal amount at maturity of Notes originally issued remains outstanding
immediately after any such redemption. In order to effect the foregoing
redemption with the proceeds of any Public Equity Offering, the Company shall
make such redemption not more than 120 days after the consummation of any such
Public Equity Offering.
As used in the preceding paragraph, 'Public Equity Offering' means an
underwritten public offering of Qualified Capital Stock of Holdings or the
Company pursuant to a registration statement filed with the Commission in
accordance with the Securities Act; provided that, in the event of a Public
Equity Offering by Holdings, Holdings contributes to the capital of the Company
the portion of the net cash proceeds of such Public Equity Offering necessary to
pay the aggregate redemption price of the Notes to be redeemed pursuant to the
preceding paragraph.
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<PAGE>
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that no Notes of
a principal amount at maturity of $1,000 or less shall be redeemed in part;
provided, further, that if a partial redemption is made with the proceeds of a
Public Equity Offering, selection of the Notes or portions thereof for
redemption shall be made by the Trustee only on a pro rata basis or on as nearly
a pro rata basis as is practicable (subject to DTC procedures), unless such
method is otherwise prohibited. Notice of redemption shall be mailed by
first-class mail at least 30 but not more than 60 days before the redemption
date to each Holder of Notes to be redeemed at its registered address. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount at maturity thereof to
be redeemed. A new Note in a principal amount at maturity equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the redemption date, Accreted
Value will cease to accrete or interest will cease to accrue on Notes or
portions thereof called for redemption as long as the Company has deposited with
the Paying Agent funds in satisfaction of the applicable redemption price
pursuant to the Indenture.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control,
each Holder will have the right to require that the Company purchase all or a
portion of such Holder's Notes pursuant to the offer described below (a 'Change
of Control Offer'), at a purchase price equal to 101% of the Accreted Value
thereof plus accrued and unpaid interest to the date of purchase.
Within 30 days following the date upon which a Change of Control occurs,
the Company must send, by first class mail, a notice to each Holder, with a copy
to the Trustee, which notice shall govern the terms of the Change of Control
Offer. Such notice shall state, among other things, the purchase date, which
must be no earlier than 30 days nor later than 45 days from the date such notice
is mailed, other than as may be required by law (the 'Change of Control Payment
Date'). Holders electing to have a Note purchased pursuant to a Change of
Control Offer will be required to surrender the Note, with the form entitled
'Option of Holder to Elect Purchase' on the reverse of the Note completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third business day prior to the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. The Credit Agreement prohibits the purchase
of Notes by the Company, under certain circumstances, prior to full repayment of
indebtedness under the Credit Agreement and, upon a Change of Control, all
amounts outstanding under the Credit Agreement become due and payable. There can
be no assurance that in the event of a Change of Control the Company will have
sufficient funds to repay such indebtedness as well as to consummate the Change
of Control Offer. The failure of the Company to make or consummate the Change of
Control Offer or pay the applicable Change of Control purchase price when due
would result in an Event of Default and would give the Trustee and the Holders
of the Notes the rights described under 'Events of Default'. In addition to the
obligations of the Company under the Indenture with respect to the Notes in the
event of a Change of Control, the Senior Secured Credit Facilities contain a
provision designating a change of control as described therein as an event of
default, which would obligate the Company to repay amounts outstanding under the
Credit Agreement upon an acceleration of the indebtedness outstanding
thereunder.
The existence of a Holder's right to require the Company to purchase such
Holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction that constitutes a Change of Control.
The definition of 'Change of Control' in the Indenture is limited in scope.
The provisions of the Indenture may afford Holders the right to require the
Company to repurchase such Notes in the event of a highly leveraged transaction
or certain transactions with the Company's management or its affiliates,
including a reorganization, restructuring, merger or similar transaction
involving the Company (including, in certain circumstances, an acquisition of
the Company by management or its affiliates) that may adversely affect Holders,
if such
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<PAGE>
transaction is not a transaction defined as a Change of Control. See 'Certain
Definitions' below for the definition of 'Change of Control'. A transaction
involving a recapitalization of the Company's management or its affiliates, or a
transaction involving a recapitalization of the Company, would result in a
Change of Control if it is the type of transaction specified in such definition.
One of the events that constitutes a Change of Control under the Indenture
is the disposition of 'all or substantially all' of the Company's assets under
certain circumstances. This term has not been interpreted under New York law
(which is the governing law of the Indenture) to represent a specific
quantitative test. As a consequence, in the event Holders elect to require the
Company to purchase the Notes and the Company elects to contest such election,
there can be no assurance as to how a court interpreting New York law would
interpret the phrase in many circumstances.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the 'Change
of Control' provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the 'Change of Control' provisions of the
Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, become liable, contingently or
otherwise, with respect to, or otherwise become responsible for payment of
(collectively, 'incur') any Indebtedness (other than Permitted Indebtedness);
provided, however, that if no Event of Default shall have occurred and be
continuing at the time of or as a consequence of the incurrence of any such
Indebtedness, the Company and its Restricted Subsidiaries may incur Indebtedness
(including, without limitation, Acquired Indebtedness) if on the date of the
incurrence of such Indebtedness, after giving effect to the incurrence thereof,
the Consolidated Fixed Charge Coverage Ratio of the Company is greater than 1.75
to 1.0 on or before February 15, 2000, greater than 2.0 to 1.0 after February
15, 2000 and greater than 2.25 to 1.0 after February 15, 2002.
For purposes of determining compliance with this covenant, (i) in the event
that an item of Indebtedness meets the criteria of more than one of the types of
Indebtedness permitted by this covenant, the Company in its sole discretion will
classify such item of Indebtedness and will only be required to include the
amount and type of each class of Indebtedness in the test specified in the first
paragraph of this covenant or in one of the clauses of the definition of the
term 'Permitted Indebtedness', (ii) the amount of Indebtedness issued at a price
which is less than the principal amount thereof shall be equal to the amount of
liability in respect thereof determined in accordance with GAAP, (iii)
Indebtedness incurred in connection with, or in contemplation of, any
transaction described in the definition of the term 'Acquired Indebtedness'
shall be deemed to have been incurred by the Company or one of its Restricted
Subsidiaries, as the case may be, at the time an acquired Person becomes such a
Restricted Subsidiary (or is merged into the Company or such a Restricted
Subsidiary) or at the time of the acquisition of assets, as the case may be,
(iv) the maximum amount of Indebtedness that the Company and its Restricted
Subsidiaries may incur pursuant to this covenant shall not be deemed to be
exceeded, with respect to any outstanding Indebtedness, due solely to the result
of fluctuations in the exchange rates of currencies, and (v) guarantees or Liens
supporting Indebtedness permitted to be incurred under this covenant may be
issued or granted if otherwise issued or granted in accordance with the terms of
the Indenture.
Limitation on Restricted Payments. The Company will not, and will not
cause or permit any of its Restricted Subsidiaries to, directly or indirectly,
(a) declare or pay any dividend or make any distribution (other than dividends
or distributions payable in Qualified Capital Stock of the Company or in
options, warrants, or other rights to purchase such Qualified Capital Stock (but
excluding any debt security or Disqualified Capital Stock convertible into, or
exchangeable for, such Qualified Capital Stock)) on or in respect of shares of
the Company's Capital Stock to holders of such Capital Stock, (b) purchase,
redeem or otherwise acquire or retire for value any Capital Stock of the Company
or any warrants, rights or options to purchase or acquire shares of any class of
such Capital Stock (in each case, other than in exchange for Qualified Capital
Stock of the Company or
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options, warrants or other rights to purchase such Qualified Capital Stock (but
excluding any debt security, or Disqualified Capital Stock convertible into, or
exchangeable for, such Qualified Capital Stock)), (c) make any principal payment
on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire
for value, prior to any scheduled final maturity, scheduled repayment or
scheduled sinking fund payment, any Indebtedness of the Company that is
subordinate or junior in right of payment to the Notes or (d) make any
Investment (other than Permitted Investments) (each of the foregoing actions set
forth in clauses (a), (b), (c) and (d) being referred to as a 'Restricted
Payment'), if at the time of such Restricted Payment or immediately after giving
effect thereto, (i) a Default or an Event of Default shall have occurred and be
continuing or (ii) the Company is not able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
'Limitation on Incurrence of Additional Indebtedness' covenant or (iii) the
aggregate amount of Restricted Payments (including such proposed Restricted
Payment) made subsequent to the Issue Date (the amount expended for such
purposes, if other than in cash, being the fair market value of such property as
determined reasonably and in good faith by the Board of Directors of the
Company) shall exceed the sum of: (v) 50% of the cumulative Consolidated Net
Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of
such loss) of the Company earned subsequent to the Issue Date and on or prior to
the date the Restricted Payment occurs (the 'Reference Date') (treating such
period as a single accounting period); plus (w) 100% of the aggregate net cash
proceeds received by the Company from any Person (other than a Subsidiary of the
Company) from the issuance and sale subsequent to the Issue Date and on or prior
to the Reference Date of Qualified Capital Stock of the Company or options,
warrants or other rights to purchase such Qualified Capital Stock (but excluding
any debt security or Disqualified Capital Stock convertible into, or
exchangeable for, such Qualified Capital Stock); plus (x) without duplication of
any amounts included in clause (iii)(w) above, 100% of the aggregate net cash
proceeds of any equity contribution received by the Company from a holder of the
Company's Capital Stock (excluding, in the case of clauses (iii)(x) and (y), any
net cash proceeds from a Public Equity Offering to the extent used to redeem the
Notes in compliance with the provisions set forth under 'Redemption--Optional
Redemption Upon Public Equity Offerings'); plus (y) 100% of the aggregate net
cash proceeds received by the Company from any Person (other than a Subsidiary
of the Company) from the issuance and sale (subsequent to the Issue Date) of
debt securities or shares of Disqualified Capital Stock that have been converted
into or exchanged for Qualified Capital Stock of the Company, together with the
aggregate cash received by the Company at the time of such conversion or
exchange; plus (z) without duplication, the sum of (1) the aggregate amount
returned in cash to the Company or a Restricted Subsidiary of the Company on or
with respect to Investments (other than Permitted Investments) made subsequent
to the Issue Date whether through interest payments, principal payments,
dividends or other distributions or payments, (2) the net cash proceeds received
by the Company or any of its Restricted Subsidiaries from the disposition of all
or any portion of such Investments (other than to a Subsidiary of the Company)
and (3) upon redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary, the fair market value of such Subsidiary; provided, however, that
the sum of clauses (1), (2) and (3) above shall not exceed the aggregate amount
of all such Investments made subsequent to the Issue Date.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the dividend would have
been permitted on the date of declaration; (2) the acquisition of any shares of
Capital Stock of the Company, either (i) solely in exchange for shares of
Qualified Capital Stock of the Company or options, warrants, or other rights to
purchase such Qualified Capital Stock (other than any debt security or
Disqualified Capital Stock convertible into, or exchangeable for, such Qualified
Capital Stock) or (ii) through the application of net proceeds of a
substantially concurrent sale for cash (other than to a Subsidiary of the
Company) of shares of Qualified Capital Stock of the Company or options,
warrants, or other rights to purchase such Qualified Capital Stock (other than
any debt security or Disqualified Capital Stock convertible into, or
exchangeable for, such Qualified Capital Stock); (3) the acquisition of any
Indebtedness of the Company that is subordinate or junior in right of payment to
the Notes either (i) solely in exchange for shares of Qualified Capital Stock of
the Company, or options, warrants, or other rights to purchase such qualified
Capital Stock or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of (A)
shares of Qualified Capital Stock of the Company or (B) Refinancing
Indebtedness; (4) dividends or payments to Holdings of cash to be immediately
applied to repurchases by Holdings of Qualified Capital Stock of Holdings or
options to purchase such Qualified Capital Stock from directors or employees or
former directors or
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former employees of Holdings or any of its Subsidiaries or their authorized
representatives upon the death, disability or termination of employment of such
persons or pursuant to the terms of any customary agreement under which such
Qualified Capital Stock or options were issued, in an aggregate amount not to
exceed $1,000,000 plus any life insurance proceeds in any calendar year; (5)
make payments to Holdings in an amount equal to the cash interest then due and
payable on the Holdings PIK Notes; (6) the repurchase of any Indebtedness which
is subordinated to the Notes at a purchase price not greater than 101% of the
principal amount of such Indebtedness in the event of a change of control in
accordance with provisions similar to the 'Change of Control' covenant; provided
that, prior to or simultaneously with such repurchase, the Company has made the
Change of Control Offer as provided in such covenant with respect to the Notes
and has repurchased all Notes validly tendered for payment in connection with
such Change of Control Offer; (7) the declaration or payment of dividends on the
Common Stock of the Company (or the payment to Holdings to fund the payment by
Holdings of dividends on Common Stock of Holdings) following a Public Equity
Offering of the Company or Holdings, as the case may be, in an amount per annum
not to exceed 6% of the net cash proceeds received by the Company, or
contributed to Holdings, in all Public Equity Offerings; (8) payments or
distributions to dissenting stockholders pursuant to applicable law, pursuant to
or in connection with a consolidation, merger or transfer of assets that
complies with the provisions of the Indenture applicable to mergers,
consolidating and transfers of all or substantially all of the property and
assets of the Company and (9) any dividends or payments to Holdings in respect
of overhead expenses, legal, accounting, commissions reporting and other
professional fees and expenses of Holdings that are directly attributable to the
operations of the Company and its restricted subsidiaries; provided that, except
in the case of clauses (l) and (2), no Default or Event of Default shall have
occurred and be continuing or occur as a consequence of the actions or payments
set forth therein. In determining the aggregate amount of Restricted Payments
made subsequent to the Issue Date in accordance with clause (iii) of the
immediately preceding paragraph, amounts expended, without duplication, pursuant
to clauses (1), (2)(ii) and (4) through (8) shall be included in such
calculation.
Not later than 10 days after the date of making any Restricted Payment (but
not including any transaction described in the preceding paragraph), the Company
shall deliver to the Trustee an officers' certificate stating that such
Restricted Payment complies with the Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available internal quarterly
financial statements.
Limitation on Asset Sales. The Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors), and (ii) at least 75% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be in the form of cash or Cash Equivalents; provided that
(A) the amount of any liabilities of the Company or any such Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Notes) that are assumed by the transferee of any such assets and (B) the fair
market value of any marketable securities received by the Company or any such
Restricted Subsidiary in exchange for any such assets that are promptly
converted into cash shall be deemed to be cash for purposes of this provision;
and provided, further, that in no event shall the aggregate fair market value at
the time of receipt of consideration received by the Company in a form other
than cash or Cash Equivalents exceed 5% of the Company's Consolidated Total
Assets. In the event of an Asset Sale, the Company shall apply, or cause such
Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset
Sale within 360 days of receipt thereof either (A) to repay or prepay any
indebtedness under the Credit Agreement, and effect a permanent reduction
thereof, (B) to make an investment in either (x) properties and assets that
replace the properties and assets that were the subject of such Asset Sale or
(y) any properties or assets that will be used in the business of the Company
and its Restricted Subsidiaries as existing on the Issue Date or in businesses
similar or reasonably related thereto or in the capital stock of any entity a
majority of whose assets consists of the properties or assets described under
(x) or (y) ('Replacement Assets'), or (C) a combination of prepayment and
investment permitted by the foregoing clauses (iii)(A) and (iii)(B). After 360
days from the day on which the aggregate amount of Net Cash Proceeds which have
not been applied as permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the
next preceding sentence (a 'Net Proceeds Offer Amount') exceeds $7,500,000 (the
'Net Proceeds Offer Trigger Date'), the Company shall make an offer to purchase
(the 'Net Proceeds Offer') from all Holders on a pro rata basis, that amount of
Notes equal to the Net
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Proceeds Offer Amount at a price equal to 100% of the Accreted Value of the
Notes to be purchased, plus accrued and unpaid interest thereon, if any, to the
date of purchase. If at any time any non-cash consideration received by the
Company or any Restricted Subsidiary of the Company, as the case may be, in
connection with any Asset Sale is converted into or sold or otherwise disposed
of for cash (other than interest received with respect to any such non-cash
consideration), then such conversion or disposition shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be
applied in accordance with this covenant. To the extent that the aggregate
Accreted Value of Notes tendered pursuant to such Net Proceeds Offer is less
than the Net Proceeds Offer Amount the Company and its Restricted Subsidiaries
may use such deficiency for general corporate purposes. If the aggregate
Accreted Value of Notes validly tendered and not withdrawn by Holders thereof
exceeds the Net Proceeds Offer Amount, the Notes to be purchased will be
selected on a pro rata basis. Upon completion of such Net Proceeds Offer, the
amount of Net Proceeds Offer Amount will be reset to zero.
Notwithstanding the immediately preceding paragraph, the Company and its
Restricted Subsidiaries will be permitted to consummate an Asset Sale without
complying with such paragraphs to the extent (i) at least 80% of the
consideration for such Asset Sale constitutes Replacement Assets and (ii) such
Asset Sale is for fair market value; provided that any consideration not
constituting Replacement Assets received by the Company or any of its Restricted
Subsidiaries in connection with any Asset Sale permitted to be consummated under
this paragraph shall constitute Net Cash Proceeds subject to the provisions of
the preceding paragraph.
Each Net Proceeds Offer will be mailed to the record Holders as shown on
the register of Holders not less than 30 days nor more than 45 days following
the Net Proceeds Offer Trigger Date, with a copy to the Trustee, and shall
comply with the procedures set forth in the Indenture. Upon receiving notice of
the Net Proceeds Offer, Holders may elect to tender their Notes in whole or in
part in integral multiples of $1,000 principal amount at maturity in exchange
for cash. To the extent Holders properly tender Notes in an amount exceeding the
Net Proceeds Offer Amount, Notes of tendering Holders will be purchased on a pro
rata basis (based on amounts tendered). A Net Proceeds Offer shall remain open
for a period of 20 business days or such longer period as may be required by
law, and the purchase of such Note shall be consummated within 60 days following
the mailing of the Net Proceeds Offer.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the 'Asset Sale'
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the 'Asset Sale' provisions of the Indenture by virtue
thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or make
any other distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) the Indenture; (3) the Credit Agreement; (4)
any agreement or instrument governing Acquired Indebtedness, which encumbrance
or restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person or the properties or assets of the Person so
acquired; (5) agreements existing on the Issue Date to the extent and in the
manner such encumbrances and restrictions went into effect on the Issue Date;
(6) in the case of clause (c) above: (A) agreements or instruments arising or
agreed to in the ordinary course of business that restrict in a customary manner
the subletting, assignment or transfer of any property or asset subject to a
lease, license, conveyance or other contract and (B) any transfer of, agreement
to transfer, option or right with respect to, or Lien on, any property or assets
of the Company or any Restricted Subsidiary entered into in compliance with the
Indenture; (7) an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock of, or property and
assets of, any Restricted Subsidiary of the Company; (8) provisions in
agreements or instruments which prohibit the payment of dividends or the making
of other distributions with respect to any Capital Stock of a Person other than
on a pro rata basis; or (9) an agreement governing Indebtedness incurred to
Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement
referred to in clause (2), (3), (4) or (5) above; provided, however, that the
provisions
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relating to such encumbrance or restriction contained in any such Indebtedness
are no less favorable to the Company or the relevant Restricted Subsidiary of
the Company in any material respect as determined by the Board of Directors of
the Company in its reasonable and good faith judgment than the provisions
relating to such encumbrance or restriction contained in agreements referred to
in such clause (2), (3), (4) or (5). Nothing contained in clause (c) of this
'Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries' covenant shall prevent the Company or any of its Restricted
Subsidiaries from creating, incurring, assuming or suffering to exist any Lien
created, incurred, assumed or suffered to exist in accordance with the other
terms of the Indenture.
Limitation on Preferred Stock of Restricted Subsidiaries. The Company will
not permit any of its Restricted Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Wholly Owned Restricted Subsidiary of the
Company) or permit any Person (other than the Company or a Wholly Owned
Restricted Subsidiary of the Company) to own any Preferred Stock of any
Restricted Subsidiary of the Company; provided that the foregoing shall not
prohibit the creation of a Lien in any such Preferred Stock under the Credit
Agreement and otherwise created in accordance with the Indenture.
Limitation on Liens. The Company will not, and will not cause or permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or permit or suffer to exist any Liens of any kind against or upon any
property or assets of the Company or any of its Restricted Subsidiaries whether
owned on the Issue Date or acquired after the Issue Date, or any proceeds
therefrom, or assign or otherwise convey any right to receive income or profits
therefrom unless (i) in the case of Liens securing Indebtedness that is
expressly subordinate or junior in right of payment to the Notes, the Notes are
secured by a Lien on such property, assets or proceeds that is senior in
priority to such Liens and (ii) in all other cases, the Notes are equally and
ratably secured, except for (A) Liens existing as of the Issue Date (other than
Liens securing Indebtedness under the Credit Agreement) to the extent and in the
manner such Liens were in effect on the Issue Date; (B) Liens securing
Indebtedness under the Credit Agreement; (C) Liens securing the Notes and the
Guarantees, if any; (D) Liens of the Company or a Wholly Owned Restricted
Subsidiary of the Company on assets of any Restricted Subsidiary of the Company;
(E) Liens securing Refinancing Indebtedness which is incurred to Refinance any
Indebtedness which has been secured by a Lien permitted under the Indenture and
which has been incurred in accordance with the provisions of the Indenture;
provided, however, that such Liens (a) are no less favorable to the Holders and
are not more favorable to the lienholders with respect to such Liens than the
Liens in respect of the Indebtedness being Refinanced and (b) do not extend to
or cover any property or assets of the Company or any of its Restricted
Subsidiaries not securing the Indebtedness so Refinanced; and (F) Permitted
Liens. In the event that the Lien the existence of which gives rise to a Lien
securing the Notes pursuant to the provisions of this covenant ceases to exist,
the Lien securing the Notes required by this covenant shall automatically be
released and the Trustee shall execute appropriate documentation.
Merger, Consolidation and Sale of Assets. The Company will not, in a
single transaction or series of related transactions, consolidate or merge with
or into any Person, or sell, assign, transfer, lease, convey or otherwise
dispose of (or cause or permit any Restricted Subsidiary of the Company to sell,
assign, transfer, lease, convey or otherwise dispose of) all or substantially
all of the Company's assets (determined on a consolidated basis for the Company
and the Company's Restricted Subsidiaries) whether as an entirety or
substantially as an entirety to any Person unless: (i) either (1) the Company
shall be the surviving or continuing corporation or (2) the Person (if other
than the Company) formed by such consolidation or into which the Company is
merged or the Person which acquires by sale, assignment, transfer, lease,
conveyance or other disposition the properties and assets of the Company and of
the Company's Restricted Subsidiaries substantially as an entirety (the
'Surviving Entity') (x) shall be a corporation organized and validly existing
under the laws of the United States or any State thereof or the District of
Columbia and (y) shall expressly assume, by supplemental indenture (in form
satisfactory in all respects to the Trustee), executed and delivered to the
Trustee, the due and punctual payment of the principal of, and premium, if any,
and interest on all of the Notes and the performance of every covenant of the
Notes, the Indenture and the Registration Rights Agreement on the part of the
Company to be performed or observed; (ii) immediately after giving effect to
such transaction and the assumption contemplated by clause (i)(2)(y) above
(including giving effect to any Indebtedness and Acquired Indebtedness incurred
in connection with or in respect of such transaction), the Company or such
Surviving Entity, as the case may be, (1) shall have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the Company immediately
prior to such transaction, and (2) shall be able to incur at least $1.00 of
additional Indebtedness (other than
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Permitted Indebtedness) pursuant to the '-- Limitation on Incurrence of
Additional Indebtedness' covenant; (iii) immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred and any Lien granted in
connection with or in respect of the transaction), no Default or Event of
Default shall have occurred or be continuing; and (iv) the Company or the
Surviving Entity shall have delivered to the Trustee an officers' certificate
and an opinion of counsel, each stating that such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture shall comply with the applicable provisions of the
Indenture and that all conditions precedent in the Indenture relating to such
transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company and the Company, if surviving, will be automatically discharged from
all of its obligations under the Indenture and the Notes.
The Indenture provides that upon any consolidation, combination or merger
or any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, in which the Company is not the continuing
corporation, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, lease or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture and the Notes with the same effect as if such
surviving entity had been named as such.
Limitations on Transactions with Affiliates. (a) The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with, or for the benefit of, any of
its Affiliates (each an 'Affiliate Transaction'), other than (x) Affiliate
Transactions permitted under paragraph (b) below and (y) Affiliate Transactions
on terms that are no less favorable than those that might reasonably have been
obtained in a comparable transaction at such time on an arm's-length basis from
a Person that is not an Affiliate of the Company or such Restricted Subsidiary.
All Affiliate Transactions (and each series of related Affiliate Transactions
which are similar or part of a common plan) involving aggregate payments or
other property with a fair market value in excess of $1,000,000 shall be
approved by the Board of Directors of the Company or such Restricted Subsidiary,
as the case may be, such approval to be evidenced by a Board Resolution stating
that such Board of Directors has determined that such transaction complies with
the foregoing provisions. If the Company or any Restricted Subsidiary of the
Company enters into an Affiliate Transaction (or a series of related Affiliate
Transactions related to a common plan) that involves an aggregate fair market
value of more than $5,000,000, the Company or such Restricted Subsidiary, as the
case may be, shall, prior to the consummation thereof, obtain a favorable
opinion as to the fairness of such transaction or series of related transactions
to the Company or the relevant Restricted Subsidiary, as the case may be, from a
financial point of view, from a nationally recognized firm qualified to do the
business for which it is engaged and file the same with the Trustee.
(b) The restrictions set forth in clause (a) above shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary of the Company as determined in good faith by the Company's Board of
Directors or senior management; (ii) transactions exclusively between or among
the Company and any of its Wholly Owned Restricted Subsidiaries or exclusively
between or among such Wholly Owned Restricted Subsidiaries, provided such
transactions are not otherwise prohibited by the Indenture; (iii) any agreement
as in effect as of the Issue Date or any amendment thereto or any transaction
contemplated thereby (including pursuant to any amendment thereto) in any
replacement agreement thereto so long as any such amendment or replacement
agreement is not more disadvantageous to the Holders in any material respect
than the original agreement as in effect on the Issue Date; (iv) Restricted
Payments permitted by the Indenture; (v) the Tax Sharing Agreement; (vi)
employment agreements with officers and employees of the Company and its
Restricted Subsidiaries, in the ordinary course of business; (vii) loans and
advances to employees not to exceed $500,000 outstanding at any one time, in the
ordinary course of business; (viii) provided that there is no existing Event of
Default, payments pursuant to the terms of the Management Agreement and (ix)
arrangements with directors of the Company existing on the Issue Date as
disclosed in the Prospectus.
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Limitation of Guarantees by Restricted Subsidiaries. The Company will not
permit any of its Restricted Subsidiaries, directly or indirectly, by way of the
pledge of any intercompany note, or any Preferred Stock or otherwise, to assume,
guarantee or in any other manner become liable with respect to any Indebtedness
of the Company or any other Restricted Subsidiary of the Company that is a
Guarantor (other than guarantees, pledges or other assumptions of or liability
for or in favor of a Foreign Credit Facility by Foreign Restricted
Subsidiaries), unless, in any such case (a) such Restricted Subsidiary executes
and delivers a supplemental indenture to the Indenture, providing a senior
guarantee of payment of the Notes by such Restricted Subsidiary (the
'Guarantee') and (b) if such assumption, guarantee or other liability of such
Restricted Subsidiary is provided in respect of Indebtedness that is expressly
subordinated to the Notes, the guarantee or other instrument provided by such
Restricted Subsidiary in respect of such subordinated Indebtedness shall be
subordinated to the Guarantee pursuant to subordination provisions no less
favorable to the Holders of the Notes than the provisions subordinating such
Indebtedness to the Notes; provided that the foregoing shall not be applicable
to a guarantee of Acquired Indebtedness by another Restricted Subsidiary whose
guarantee also constitutes Acquired Indebtedness incurred by the Company or one
of its Restricted Subsidiaries in the same transaction.
Notwithstanding the foregoing, any such Guarantee by a Restricted
Subsidiary of the Notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged, without any further
action required on the part of the Trustee or any Holder, upon: (i) the
unconditional release of such Restricted Subsidiary from its liability in
respect of the Indebtedness in connection with which such Guarantee was executed
and delivered pursuant to the preceding paragraph; or (ii) any sale or other
disposition (by merger or otherwise) to any Person which is not a Restricted
Subsidiary of the Company of all of the Company's direct or indirect Capital
Stock in, or all or substantially all of the assets of, such Restricted
Subsidiary; provided that (a) such sale or disposition of such Capital Stock or
assets is otherwise in compliance with the terms of the Indenture and (b) such
assumption, guarantee or other liability of such Restricted Subsidiary has been
released by the holders of the other Indebtedness so guaranteed.
Conduct of Business. The Company and its Restricted Subsidiaries will not
engage in any businesses which are not the same, similar or reasonably related
to the businesses in which the Company and its Restricted Subsidiaries were
engaged on the Issue Date.
Reports to Holders. The Indenture provides that the Company will deliver
to the Trustee within 15 days after the filing of the same with the Commission,
copies of the quarterly and annual reports and of the information, documents and
other reports, if any, which the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture further
provides that, notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will provide the Trustee and Holders with such annual reports and such
information, documents and other reports specified in Sections 13 and 15(d) of
the Exchange Act. The Company will also comply with the other provisions of TIA
Section314(a).
EVENTS OF DEFAULT
The following events are defined in the Indenture as 'Events of Default':
(i) the failure to pay interest on any Note when the same becomes due
and payable and the default continues for a period of 30 days;
(ii) the failure to pay the principal of any Notes, when the same
becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase Notes tendered
pursuant to a Change of Control Offer or a Net Proceeds Offer);
(iii) a default in the observance or performance of any other covenant
or agreement contained in the Indenture which default continues for a
period of 30 days after the Company receives written notice specifying the
default (and demanding that such default be remedied and stating that such
notice is a 'Notice of Default') from the Trustee or the Holders of at
least 25% of the outstanding principal amount of the Notes (except in the
case of a default with respect to the 'Merger, Consolidation and Sale of
Assets' covenant, which will constitute an Event of Default with such
notice requirement but without such passage of time requirement);
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(iv) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary (other than
a Foreign Restricted Subsidiary that is not a Significant Subsidiary) of
the Company, or the acceleration of the final stated maturity of any such
Indebtedness if the aggregate principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in
default for failure to pay principal at final maturity or which has been
accelerated, aggregates $5,000,000 or more;
(v) one or more judgments (not covered by insurance as to which the
carrier has assumed the defense or acknowledged coverage) in an aggregate
amount in excess of $5,000,000 shall have been rendered against the Company
or any of its Restricted Subsidiaries (other than a Foreign Restricted
Subsidiary that is not a Significant Subsidiary) and such judgments shall
remain undischarged, unpaid or unstayed in such aggregate amount for a
period of 60 consecutive days after such judgment or judgments become final
and non-appealable;
(vi) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries; or
(vii) any of the Guarantees, if any, ceases to be in full force and
effect or any of the Guarantees is declared to be null and void and
unenforceable or any of the Guarantees is found to be invalid or any of the
Guarantors denies its liability under its Guarantee (other than by reason
of release of a Guarantor in accordance with the terms of the Indenture).
If an Event of Default (other than an Event of Default specified in clause
(vi) above with respect to the Company) shall occur and be continuing, the
Trustee or the Holders of at least 25% in principal amount of outstanding Notes
may declare the Accreted Value of and accrued and unpaid interest on all the
Notes to be due and payable by notice in writing to the Company and the Trustee
specifying the respective Event of Default and that it is a 'notice of
acceleration' (the 'Acceleration Notice'), and the same (i) shall become
immediately due and payable or (ii) if there are any amounts outstanding under
the Senior Secured Credit Facilities, shall become immediately due and payable
upon the first to occur of an acceleration under the Senior Secured Credit
Facilities or 5 business days after receipt by the Company and the
representative under the Senior Secured Credit Facilities of such Acceleration
Notice. In the event of an acceleration because an Event of Default set forth in
clause (iv) above has occurred and is continuing, such acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (iv) shall be remedied or cured by the
Company or the relevant Restricted Subsidiary or waived by the holders of the
relevant Indebtedness within 20 days after the date of the Acceleration Notice
with respect thereto. If an Event of Default specified in clause (vi) above with
respect to the Company occurs and is continuing, then all unpaid principal of,
and premium, if any, and accrued and unpaid interest on all of the outstanding
Notes shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding paragraph,
the Holders of a majority in principal amount of the Notes may rescind and
cancel such declaration and its consequences (i) if the rescission would not
conflict with any judgment or decree, (ii) if all existing Events of Default
have been cured or waived except nonpayment of Accreted Value or interest that
has become due solely because of the acceleration, (iii) to the extent the
payment of such interest is lawful, if interest on overdue installments of
interest and overdue principal, which has become due otherwise than by such
declaration of acceleration, has been paid, (iv) if the Company has paid the
Trustee its reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (vi) of the description above
of Events of Default, the Trustee shall have received an officers' certificate
and an opinion of counsel that such Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
The Holders of a majority in principal amount of the Notes may waive any
existing or past Default or Event of Default under the Indenture, and its
consequences, except a default in the payment of the Accreted Value of or
interest on any Notes.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of
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the Indenture and applicable law, the Holders of a majority in aggregate
principal amount of the then outstanding Notes have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee.
Under the Indenture, the Company is required to provide an officers'
certificate to the Trustee promptly upon obtaining knowledge of any Default or
Event of Default (provided that the Company shall provide such certification at
least annually whether or not it knows of any Default or Event of Default) that
has occurred and, if applicable, describe such Default or Event of Default and
the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors discharged with respect to the
outstanding Notes ('Legal Defeasance'). Such Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Notes, except for (i) the rights of Holders to
receive payments in respect of the principal of, premium, if any, and interest
on the Notes when such payments are due from the trust referred to below, (ii)
the Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payments, (iii) the rights, powers,
trust, duties and immunities of the Trustee and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ('Covenant Defeasance') and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
reorganization and insolvency events) described under 'Events of Default' will
no longer constitute Events of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders cash in U.S. dollars, non-callable U.S. government obligations,
or a combination thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the Notes on the stated date for
payment thereof or on the applicable redemption date, as the case may be; (ii)
in the case of Legal Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be continuing on the
date of such deposit (other than a Default or Event of Default arising in
connection with the substantially contemporaneous borrowing of funds to fund the
deposit referenced in clause (i) above) or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period ending
on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant
Defeasance shall not result in a breach or violation of, or constitute a default
under the Indenture or any other material agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee
an officers' certificate stating that the deposit was not made by the Company
with the intent of preferring the Holders over any other creditors of the
Company or with the intent of defeating, hindering, delaying or defrauding any
other creditors of the Company or others; (vii) the Company shall have delivered
to the Trustee an officers' certificate and an opinion of counsel, each stating
that all conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with; (viii) the Company shall
have delivered to the Trustee an opinion of counsel to the effect that
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after the 91st day following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; and (ix) certain other customary
conditions precedent are satisfied. Notwithstanding the foregoing, the opinion
of counsel required by clause (ii) above with respect to a Legal Defeasance need
not be delivered if all Notes not theretofore delivered to the Trustee for
cancellation (x) have become due and payable or (y) will become due and payable
on the maturity date within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the
Trustee for cancellation have become due and payable or, by their terms, are to
become due and payable, or are to be called for redemption upon delivery of
notice, within one year and the Company has irrevocably deposited or caused to
be deposited with the Trustee funds in an amount sufficient to pay all principal
of, premium, if any, and interest on the Notes to the date of maturity or
redemption, as the case may be, together with irrevocable instructions from the
Company directing the Trustee to apply such funds to the payment thereof at
maturity or redemption, as the case may be; (ii) the Company has paid all other
sums payable under the Indenture by the Company; and (iii) the Company has
delivered to the Trustee an officers' certificate and an opinion of counsel
stating that all conditions precedent under the Indenture relating to the
satisfaction and discharge of the Indenture have been complied with.
MODIFICATION OF THE INDENTURE
From time to time, the Company, the Guarantors and the Trustee, without the
consent of the Holders, may amend, waive or otherwise modify provisions of the
Indenture for certain specified purposes, including curing ambiguities, defects
or inconsistencies, so long as such change does not, in the opinion of the
Trustee, adversely affect the rights of any of the Holders in any material
respect. In formulating its opinion on such matters, the Trustee will be
entitled to rely on such evidence as it deems appropriate, including, without
limitation, solely on an opinion of counsel. Other amendments, waivers and other
modifications of provisions of the Indenture may be made with the consent of the
Holders of a majority in principal amount of the then outstanding Notes issued
under the Indenture, except that, without the consent of each Holder affected
thereby, no such amendment, waiver or other modification may: (i) reduce the
principal amount at maturity of Notes whose Holders must consent to an
amendment; (ii) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any Notes; or
change or have the effect of changing the definition of Accreted Value; (iii)
reduce the principal of or change or have the effect of changing the fixed
maturity of any Notes, or change the date on which any Notes may be subject to
redemption or repurchase, or reduce the redemption or repurchase price therefor;
(iv) make any Notes payable in money other than that stated in the Notes; (v)
make any change in provisions of the Indenture protecting the right of each
Holder to receive payment of principal of and interest on such Holder's Note or
Notes on or after the due date thereof or to bring suit to enforce such payment,
or permitting Holders of a majority in principal amount of Notes to waive
Defaults or Events of Default; (vi) amend, change or modify in any material
respect the obligation of the Company (or any of the provisions or definitions
with respect thereto) to (A) make and consummate a Change of Control Offer in
the event of a Change of Control or (B) make and consummate a Net Proceeds Offer
with respect to any Asset Sale that has been consummated; or (vii) release any
Guarantor from any of its obligations under its Guarantee or the Indenture
otherwise than in accordance with the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it, the Notes and the Guarantees, if any, are
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be required
thereby.
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THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the Indenture, and use the same
degree of care and skill in its exercise as a prudent person would exercise or
use under the circumstances in the conduct of such person's own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
'Accreted Value' means (i) as of any date on or prior to February 15, 2003,
an amount per $1,000 principal amount at maturity of the Notes that is equal to
the sum of (a) the original issue price of each Note and (b) the portion of the
excess of the principal amount at maturity of each Note over such original issue
price which shall have been amortized through such date, such amount to be so
amortized on a daily basis and compounded semi-annually on each August 15 and
February 15 at the rate of 9 7/8% per annum from the Issue Date through the date
of determination computed on the basis of a 360-day year of twelve 30-day months
and (ii) after February 15, 2003, the principal amount of the Notes.
'Acquired Indebtedness' means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or at the time it merges or consolidates with the Company or any of
the Company's Subsidiaries or assumed in connection with the acquisition of
assets from such Person and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of the Company or such acquisition, merger or
consolidation.
'Affiliate' means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
'control' means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms 'controlling' and 'controlled' have meanings correlative of the foregoing.
'Asset Acquisition' means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprise any division or line of business of
such Person or any other properties or assets of such Person other than in the
ordinary course of business.
'Asset Sale' means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business or sales of equipment pursuant to purchase options entered into by
the Company or a Restricted Subsidiary of the Company in the ordinary course of
business), assignment or other transfer for value by the Company or any of its
Restricted Subsidiaries (excluding any Lien granted in accordance with the
'Limitation on Liens' covenant, but including any Sale and Leaseback
Transaction) to any Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company of (a) any Capital Stock of any Restricted Subsidiary
of the Company; or (b) any other property or assets of the Company or any
Restricted Subsidiary of the Company other than in the ordinary course of
business; provided, however, that Asset Sales shall not include (i) a
transaction or series of related transactions for which the Company or its
Restricted Subsidiaries receive aggregate consideration of less than $750,000,
(ii) the sale, lease, conveyance,
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disposition or other transfer of all or substantially all of the assets of the
Company as permitted under 'Merger, Consolidation and Sale of Assets' and (iii)
a Restricted Payment permitted under the 'Limitation on Restricted Payments'
covenant.
'Board of Directors' means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
'Board Resolution' means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
'Capitalized Lease Obligation' means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
'Capital Stock' means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to any
Person that is not a corporation, any and all partnership or other equity
interests of such Person.
'Cash Equivalents' means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Services, a division of McGraw
Hill, Inc. ('S&P') or Moody's Investors Service, Inc. ('Moody's'); (iii)
commercial paper maturing no more than one year from the date of creation
thereof and, at the time of acquisition, having a rating of at least A-1 from
S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers'
acceptances maturing within one year from the date of acquisition thereof issued
by any bank organized under the laws of the United States of America or any
state thereof or the District of Columbia or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus of not
less than $250,000,000; (v) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (iv)
above; (vi) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (i) through (v)
above; and (vii) investments made by Foreign Restricted Subsidiaries in local
currencies in instruments issued by or with entities of such jurisdiction having
correlative attributes to the foregoing.
'Change of Control' means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions, but other than by the granting of a Lien in
accordance with the Indenture or by way of consolidation or merger in accordance
with the Indenture) of all or substantially all of the assets of the Company and
its Subsidiaries, taken as a whole, to any Person or 'group' (as defined in
Section 13(d)(3) of the Exchange Act) (whether or not otherwise in compliance
with the provisions of the Indenture) other than to the Permitted Holders; (ii)
the approval by the holders of Capital Stock of the Company of any plan or
proposal for the liquidation or dissolution of the Company (whether or not
otherwise in compliance with the provisions of the Indenture); (iii) (A) prior
to the initial public offering of Common Stock of the Company or Holdings, the
Permitted Holders shall own, directly or indirectly, less than 50% of the
aggregate voting power of the Capital Stock of the Company or (B) after the
initial public offering of Common Stock of the Company or Holdings, (1) the
Permitted Holders shall own, directly or indirectly, less than 20% of the
aggregate voting power of the Capital Stock of the Company or (2) any Person or
'group' within the meaning of Section 13(d) of the Exchange Act (other than the
Permitted Holders) shall become the 'beneficial owner' as defined in Rule 13d-3
under the Exchange Act, of shares representing more than the aggregate voting
power represented by the Capital Stock of the Company owned directly or
indirectly, by the Permitted Holders; or (iv) the replacement of a majority of
the Board of Directors of the Company or Holdings over a two-year period from
the directors who constituted the Board of Directors of the Company or Holdings,
as the case may
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be, at the beginning of such period, and such replacement shall not have been
approved by a vote of at least a majority of the Board of Directors of the
Company or Holdings, as the case may be, then still in office who either were
members of such Board of Directors at the beginning of such period or whose
election as a member of such Board of Directors was previously so approved.
'Common Stock' of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
'Consolidated EBITDA' means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes of
such Person and its Restricted Subsidiaries paid or accrued in accordance with
GAAP for such period (other than income taxes attributable to extraordinary or
nonrecurring gains or losses or taxes attributable to sales or dispositions
outside the ordinary course of business), (B) Consolidated Interest Expense, (C)
Consolidated Non-cash Charges less any non-cash items increasing Consolidated
Net Income for such period, all as determined on a consolidated basis for such
Person and its Restricted Subsidiaries in accordance with GAAP, (D) any fee to
CHP under the Management Agreement paid or accrued, (E) any expense of the
Company or its Restricted Subsidiaries incurred in connection with the overhaul
of equipment that can be reclassified as a capital expenditure in accordance
with GAAP and (F) any write-off or amortization of fees and expenses incurred in
connection with the financing for the Acquisition.
'Consolidated Fixed Charge Coverage Ratio' means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the 'Four Quarter Period') ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the 'Transaction Date') to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, 'Consolidated EBITDA' and
'Consolidated Fixed Charges' shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of such
Person or one of its Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA (including any pro forma expense and cost reductions
calculated on a basis consistent with Regulation S-X under the Securities Act)
attributable to the assets which are the subject of the Asset Acquisition or
Asset Sale during the Four Quarter Period) occurring during the Four Quarter
Period or at any time subsequent to the last day of the Four Quarter Period and
on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition
(including the incurrence, assumption or liability for any such Acquired
Indebtedness) occurred on the first day of the Four Quarter Period. Furthermore,
in calculating 'Consolidated Fixed Charges' for purposes of determining the
denominator (but not the numerator) of this 'Consolidated Fixed Charge Coverage
Ratio,' (1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness in effect on the Transaction Date; and
(2) notwithstanding clause (1) above, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by agreements relating
to Interest Swap Obligations, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements.
'Consolidated Fixed Charges' means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense, plus
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Qualified Capital
Stock) paid, accrued or scheduled to be paid or accrued during such period times
(y) a fraction, the numerator of which is one
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and the denominator of which is one minus the then current effective
consolidated federal, state and local tax rate of such Person, expressed as a
decimal.
'Consolidated Interest Expense' means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount and amortization or write-off
of deferred financing costs, (b) the net costs under Interest Swap Obligations,
(c) all capitalized interest and (d) the interest portion of any deferred
payment obligation; (ii) the interest component of Capitalized Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period as determined on a consolidated basis
in accordance with GAAP; and (iii) with respect to the Company, cash interest on
the Holdings PIK Notes; excluding, however, (1) any amount of such interest
expense of any Restricted Subsidiary if the net income of such Restricted
Subsidiary is excluded in the calculation of Consolidated Net Income pursuant to
clause (d) of the definition thereof (but only in the same proportion as the net
income of such Restricted Subsidiary is excluded from the calculation of
Consolidated Net Income pursuant to clause (d) of the definition thereof) and
(2) any non-cash amortization or write-off of fees and expenses incurred in
connection with financing arrangements for the Acquisition.
'Consolidated Net Income' means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (without duplication)
(a) after-tax gains or losses from Asset Sales, (b) after-tax items classified
as extraordinary or nonrecurring gains or losses, (c) the net income or loss of
any Person acquired in a 'pooling of interests' transaction accrued prior to the
date it becomes a Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary of the
referent Person, (d) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a contract, operation of law or otherwise, except for any dividends or
distributions actually paid by such Restricted Subsidiary to the referent
Person, (e) the net income but not loss of any Person, other than a Restricted
Subsidiary of the referent Person, except to the extent of cash dividends or
distributions paid to the referent Person or to a Wholly Owned Restricted
Subsidiary of the referent Person by such Person and (f) income or loss
attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued).
'Consolidated Net Worth' of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.
'Consolidated Non-cash Charges' means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges which
require an accrual of or a reserve for cash charges for any future period).
'Consolidated Total Assets' of any Person means such Person's total
consolidated assets calculated in accordance with GAAP.
'Credit Agreement' means the Credit Agreement dated as of February 20,
1998, among the Company, the lenders party thereto in their capacities as
lenders thereunder and Bankers Trust Company, as agent, and any Foreign Credit
Facility together with the documents related thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder or adding Restricted Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.
'Currency Agreement' means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
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'Default' means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
'Disqualified Capital Stock' means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof on or prior to the final
maturity date of the Notes, provided that any Capital Stock that would not
constitute Disqualified Capital Stock but for provisions thereof giving holders
thereof the right to require such Person to repurchase or redeem such Capital
Stock upon the occurrence of an 'asset sale' or 'change of control' occurring
prior to the stated maturity of the Notes shall not constitute Disqualified
Capital Stock if the 'asset sale' or 'change of control' provisions applicable
to such Capital Stock are no more favorable to the holders of such Capital Stock
than the provisions contained in 'Limitation on Asset Sales' and 'Change of
Control' covenants and such Capital Stock specifically provides that such Person
will not repurchase or redeem any such stock pursuant to such provision prior to
the Company's repurchase of such Notes as are required to be repurchased
pursuant to such covenants.
'Exchange Act' means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
'fair market value' means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting in good
faith and shall be evidenced by a Board Resolution of the Board of Directors of
the Company delivered to the Trustee.
'Foreign Credit Facility' means any credit facility of a Foreign Restricted
Subsidiary.
'Foreign Restricted Subsidiary' means any Restricted Subsidiary of the
Company (i) whose jurisdiction of incorporation is other than the United States
of America, any state thereof, the District of Columbia or any possession
thereof and (ii) which derives substantially all of its income from
jurisdictions other than the United States of America.
'GAAP' means 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 of the United States, which were in effect as of the Issue Date,
provided, however, that all reports and other financial information provided by
the Company to the Holders or the Trustee shall be prepared in accordance with
GAAP as in effect on the date of such report or other financial information.
'Guarantor' means each of the Company's Restricted Subsidiaries that in the
future executes a supplemental indenture in which such Restricted Subsidiary
agrees to be bound by the terms of the Indenture as a Guarantor; provided that
any Person constituting a Guarantor as described above shall cease to constitute
a Guarantor when its respective Guarantee is released in accordance with the
terms of the Indenture.
'Indebtedness' means with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such Person, (iv) all Obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 120 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all Obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, (vi) guarantees and other contingent obligations in
respect of Indebtedness of other Persons of the type referred to in clauses (i)
through (v) above and clause (viii) below to the extent such Indebtedness is so
guaranteed, (vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) above which are secured by any lien on any property or
asset of such Person, the amount of such Obligation being deemed to be the
lesser of the fair market value of such property or asset and the amount of the
Obligation so secured, (viii) all Obligations of
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such Person under currency agreements and interest swap agreements of such
Person and (ix) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends, if any. For
purposes hereof, the 'maximum fixed repurchase price' of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined in good faith by the
Board of Directors of the issuer of such Disqualified Capital Stock. The amount
of Indebtedness of any Person at any date shall be the outstanding balance at
such date of all unconditional obligations as described above and, with respect
to contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation, provided that (A) the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the original issue price of such indebtedness and (B) 'Indebtedness' shall
not include any money borrowed and set aside, at the time of the incurrence of
related Indebtedness, to fund cash interest payments on such related
Indebtedness.
'Interest Swap Obligations' means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
'Investment' means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. 'Investment' shall exclude (i) extensions of trade credit by the
Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be, and (ii) the acquisition of Capital Stock,
securities or other properties or assets by the Company or any of its Restricted
Subsidiaries for, and to the extent, consideration consisting of Capital Stock
of the Company. For the purposes of the 'Limitation on Restricted Payments'
covenant, (i) 'Investment' shall (A) include and be valued at the fair market
value of the net assets of any Restricted Subsidiary at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary and (B) exclude
the fair market value of the net assets of any Unrestricted Subsidiary at the
time that such Unrestricted Subsidiary is designated a Restricted Subsidiary and
(ii) the amount of any Investment shall be the original cost of such Investment
plus the cost of all additional Investments by the Company or any of its
Restricted Subsidiaries, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such Investment,
reduced by the payment of dividends or distributions in connection with such
Investment or any other amounts received in respect of such Investment; provided
that no such payment of dividends or distributions or receipt of any such other
amounts shall reduce the amount of any Investment if such payment of dividends
or distributions or receipt of any such amounts would be included in
Consolidated Net Income. If the Company or any Restricted Subsidiary of the
Company sells or otherwise disposes of any Common Stock of any direct or
indirect Restricted Subsidiary of the Company such that, after giving effect to
any such sale or disposition, the Company no longer owns, directly or
indirectly, greater than 50% of the Common Stock of such Restricted Subsidiary,
the Company shall be deemed to have made an investment on the date of such sale
equal to the fair market value of the Common Stock of such Restricted Subsidiary
not sold or disposed of.
'Issue Date' means the date of original issuance of the Notes.
'Lien' means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
'Management Agreement' means the Management Agreement by and among CHP, the
Company and their respective affiliates, as in effect on the Issue Date.
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'Net Cash Proceeds' means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
the Company or any of its Restricted Subsidiaries from such Asset Sale net of
(a) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales or brokerage commissions), (b) net taxes paid or payable as a result
of such Asset Sale, (c) repayment of Indebtedness that is required to be repaid
in connection with such Asset Sale, (d) amounts required to be paid to any
Person (other than the Company or any of its Restricted Subsidiaries) owning a
beneficial interest in the assets which are subject to such Asset Sale and (e)
appropriate amounts to be provided by the Company or any Restricted Subsidiary,
as the case may be, as a reserve, in accordance with GAAP, against any
liabilities associated with such Asset Sale and retained by the Company or any
Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale.
'Obligations' means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
'Permitted Holder(s)' means (i) CHP, Castle Harlan, Inc. and employees,
management and directors of, and Persons owning accounts managed by, any of the
foregoing and their respective Affiliates, including, without limitation,
Holdings and its Subsidiaries and (ii) institutional investors who acquired
Common Stock of Holdings on or within 30 days of the Issue Date.
'Permitted Indebtedness' means, without duplication, each of the following:
(i) Indebtedness under the Notes, the Indenture and the Guarantees, if
any;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed (A) $75
million with respect to the Indebtedness under the Term Loan Credit
Facility, less the amount of all mandatory principal payments actually made
by the Company in respect of the Term Loan Credit Facility (excluding any
such payments to the extent refinanced at the time of payment under a
replacement Credit Agreement) and (B) $85 million in the aggregate with
respect to Indebtedness under (1) the Revolving Credit Loans, reduced by
any required permanent repayments (which are accompanied by a corresponding
permanent commitment reduction) thereunder and (2) any Foreign Credit
Facility, reduced by any required permanent repayments thereof as a result
of any asset sales, but not to exceed $25 million outstanding at any one
time;
(iii) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually paid
or permanent reductions thereon (including the Purchase Price Adjustment
Agreement pursuant to the Stock Purchase Agreement);
(iv) Interest Swap Obligations of the Company covering Indebtedness of
the Company or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of the Company covering
Indebtedness of such Restricted Subsidiary and its Restricted Subsidiaries;
provided, however, that such Interest Swap Obligations are entered into to
protect the Company and its Restricted Subsidiaries from fluctuations in
interest rates on Indebtedness incurred in accordance with the Indenture to
the extent the notional principal amount of such Interest Swap Obligation
does not exceed the principal amount of the Indebtedness to which such
Interest Swap Obligation relates;
(v) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(vi) Indebtedness of a Restricted Subsidiary of the Company to the
Company or to a Restricted Subsidiary of the Company for so long as such
Indebtedness is held by the Company or a Restricted Subsidiary of the
Company, in each case subject to no Lien held by a Person other than the
Company or a
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Restricted Subsidiary of the Company; provided that if as of any date any
Person other than the Company or a Restricted Subsidiary of the Company
owns or holds any such Indebtedness or holds a Lien, other than pursuant to
the Credit Agreement, in respect of such Indebtedness, such date shall be
deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Restricted Subsidiary of the
Company for so long as such Indebtedness is held by a Restricted Subsidiary
of the Company, in each case subject to no Lien, other than pursuant to the
Credit Agreement; provided that (a) any Indebtedness of the Company to any
Restricted Subsidiary of the Company is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations under the
Indenture and the Notes and (b) if as of any date any Person other than a
Restricted Subsidiary of the Company owns or holds any such Indebtedness or
any Person, other than pursuant to the Credit Agreement, holds a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the Company;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within three business days of incurrence;
(ix) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business;
(x) Indebtedness represented by Capitalized Lease Obligations and
Purchase Money Indebtedness of the Company and its Restricted Subsidiaries
incurred in the ordinary course of business not to exceed $10 million at
any one time outstanding;
(xi) Indebtedness (A) in respect of performance, surety or appeal
bonds or letters of credit provided in the ordinary course of business, or
(B) arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from guarantees or letters of
credit, surety bonds or performance bonds securing any such obligations of
the Company or any of its Restricted Subsidiaries, in any case incurred in
connection with the disposition of any business, assets or Restricted
Subsidiary of the Company (excluding herefrom any guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary of the Company for the purpose of
financing such acquisition), in a principal amount not to exceed the gross
proceeds actually received by the Company or any of its Restricted
Subsidiaries in connection with such disposition;
(xii) Indebtedness of the Company or any of its Restricted
Subsidiaries, to the extent the net proceeds thereof are substantially
contemporaneously (A) used to purchase Notes tendered in a Change of
Control Offer or (B) deposited to defease the Notes as described above
under 'Legal Defeasance and Covenant Defeasance';
(xiii) guarantees of Indebtedness of the Company or any of its
Restricted Subsidiaries by any Restricted Subsidiary provided the guarantee
of such Indebtedness is permitted by and made in accordance with the
'Limitation on Guarantees by Restricted Subsidiaries' covenant; and
guarantees of Indebtedness of any Restricted Subsidiary of the Company by
the Company provided that such Indebtedness is permitted by the 'Limitation
of Indebtedness' covenant;
(xiv) Refinancing Indebtedness; and
(xv) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $10 million at
any one time outstanding.
'Permitted Investments' means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Restricted Subsidiary of the Company or that
will merge or consolidate into the Company or a Restricted Subsidiary of the
Company; (ii) Investments in the Company by any Restricted Subsidiary of the
Company; provided that any Indebtedness evidencing such Investment in the
Company is unsecured and subordinated, pursuant to a written agreement, to
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the Company's obligations under the Notes and the Indenture; (iii) investments
in cash and Cash Equivalents; (iv) loans and advances to employees and officers
of the Company and its Restricted Subsidiaries in the ordinary course of
business for bona fide business purposes not in excess of $500,000 at any one
time outstanding; (v) Currency Agreements and Interest Swap Obligations entered
into in the ordinary course of the Company's or its Restricted Subsidiaries'
businesses and otherwise in compliance with the Indenture; (vi) Investments in
Unrestricted Subsidiaries and joint ventures not to exceed $5.0 million at any
one time outstanding; (vii) Investments in securities of trade creditors or
customers received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers; (viii)
Investments made by the Company or its Restricted Subsidiaries as a result of
consideration received in connection with an Asset Sale made in compliance with
the 'Limitation on Asset Sales' covenant; (ix) other Investments not to exceed
$5.0 million at any one time outstanding and (x) Investments existing on the
Issue Date.
'Permitted Liens' means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) being contested in good faith by
appropriate proceedings and as to which the Company or its Restricted
Subsidiaries shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv) Liens arising by reason of any judgment, decree or order of any
court but not giving rise to an Event of Default so long as such Lien is
adequately bonded and any appropriate legal proceedings which may have been
duly initiated for the review of such judgment, decree or order shall not
have been finally terminated or the period within which such proceedings
may be initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(vi) Liens representing the interest or title of a lessor under any
Capitalized Lease Obligation; provided that such Liens do not extend to any
property or assets which is not leased property subject to such Capitalized
Lease Obligation;
(vii) Liens upon specific items of inventory or other goods and
proceeds of the Company or any of its Restricted Subsidiaries securing such
Person's obligations in respect of bankers' acceptances issued or created
for the account of such Person to facilitate the purchase, shipment or
storage of such inventory or other goods;
(viii) Liens securing reimbursement obligations with respect to
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(ix) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset
and set-off;
(x) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xi) Liens securing Capitalized Lease Obligations and Purchase Money
Indebtedness permitted pursuant to the 'Limitation on Indebtedness'
covenant; provided, however, that in the case of Purchase
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Money Indebtedness (A) the Indebtedness shall not exceed the cost of such
property or assets and shall not be secured by any property or assets of
the Company or any Restricted Subsidiary of the Company other than the
property and assets so acquired or constructed and (B) the Lien securing
such Indebtedness shall be created within 180 days of such acquisition or
construction or, in the case of a refinancing of any Purchase Money
Indebtedness, within 180 days of such refinancing;
(xii) Liens securing Indebtedness under Currency Agreements; and
(xiii) Liens securing Acquired Indebtedness incurred in accordance
with the 'Limitation on Incurrence of Additional Indebtedness' covenant;
provided that (A) such Liens secured such Acquired Indebtedness at the time
of and prior to the incurrence of such Acquired Indebtedness by the Company
or a Restricted Subsidiary of the Company and were not granted in
connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company and
(B) such Liens do not extend to or cover any property or assets of the
Company or of any of its Restricted Subsidiaries other than the property or
assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company or a Restricted
Subsidiary of the Company.
'Person' means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
'Preferred Stock' of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
'Purchase Money Indebtedness' means Indebtedness of the Company and its
Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property or equipment.
'Qualified Capital Stock' means any Capital Stock that is not Disqualified
Capital Stock.
'Refinance' means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. 'Refinanced' and 'Refinancing'
shall have correlative meanings.
'Refinancing Indebtedness' means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
the 'Limitation on Incurrence of Additional Indebtedness' covenant (other than
pursuant to clause (ii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi), (xii),
(xiii) or (xv) of the definition of Permitted Indebtedness), in each case (other
than Refinancing Indebtedness incurred to Refinance all of the Notes) that does
not (1) result in an increase in the aggregate principal amount of Indebtedness
of such Person as of the date of such proposed Refinancing (plus accrued
interest and plus the amount of any premium required to be paid under the terms
of the instrument governing such Indebtedness and plus the amount of reasonable
fees, expenses and other amounts payable by the Company or any of its Restricted
Subsidiaries in connection with such Refinancing) or (2) create Indebtedness
with (A) a Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Indebtedness being Refinanced or (B) a final
maturity earlier than the final maturity of the Indebtedness being Refinanced;
provided that (x) if such Indebtedness being Refinanced is Indebtedness solely
of the Company (other than Refinancing Indebtedness incurred to Refinance all of
the Notes), then such Refinancing Indebtedness shall be Indebtedness solely of
the Company and (y) if such Indebtedness being Refinanced is subordinate or
junior to the Notes, then such Refinancing Indebtedness shall be subordinate to
the Notes at least to the same extent and in the same manner as the Indebtedness
being Refinanced.
'Restricted Subsidiary' of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
'Revolving Credit Loans' means one or more revolving credit facilities
under the Credit Agreement.
'Sale and Leaseback Transaction' means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of the Company of any
property, whether owned by the Company or any Restricted Subsidiary of the
Company at the Issue Date or later acquired, which has been or is to be sold or
transferred by the Company or such Restricted Subsidiary to
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such Person or to any other Person from whom funds have been or are to be
advanced by such Person on the security of such Property.
'Significant Subsidiary', with respect to any Person, means any Restricted
Subsidiary of such Person that satisfies the criteria for a 'significant
subsidiary' set forth in Rule 1.02(w) of Regulation S-X under the Securities
Act.
'Subsidiary', with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
'Tax Sharing Agreement' means the tax sharing agreement between the Company
and Holdings as in effect on the date hereof, and as thereafter modified in any
way not adverse to the Company or the Holders.
'Term Loan Credit Facility' means one or more term loan facilities under
the Credit Agreement.
'Unrestricted Subsidiary' of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The
Board of Directors of such Person may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; provided that (x) the
Company certifies to the Trustee that such designation complies with the
'Limitation on Restricted Payments' covenant and (y) each Subsidiary to be so
designated and each of its Subsidiaries has not at the time of designation, and
does not thereafter, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable with respect to any Indebtedness pursuant to which
the lender has recourse to any of the assets of the Company or any of its
Restricted Subsidiaries. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving
effect to such designation, the Company is able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
the 'Limitation on Incurrence of Additional Indebtedness' covenant and (y)
immediately before and immediately after giving effect to such designation, no
Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect to
such designation and an officers' certificate certifying that such designation
complied with the foregoing provisions.
'Weighted Average Life to Maturity' means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
'Wholly Owned Restricted Subsidiary' of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities (other
than directors' qualifying shares or an immaterial amount of shares required to
be owned by other Persons, in each case pursuant to applicable law) are owned by
such Person or any Wholly Owned Restricted Subsidiary of such Person.
DESCRIPTION OF THE HOLDINGS NOTES
Universal Compression Holdings, Inc. issued $43,500,000 of 11 3/8% Senior
Discount Notes due February 15, 2009 yielding gross proceeds of $25,056,435
('Holdings Notes') in a private placement. The proceeds from the Holdings Notes
were contributed to the Company as equity and were used by the Company to
finance a portion of the Purchase Price. See 'Use of Proceeds.'
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The Holdings Notes were offered by Holdings at a substantial discount from
their principal amount. Commencing February 15, 2003, interest will accrue until
maturity on the Holdings Notes at the rate of 11 3/8% per annum and will be
payable semi-annually on August 15 and February 15, commencing August 15, 2003.
The Holdings Notes will be redeemable, in whole or in part, at the option of
Holdings on or at any time prior to February 15, 2003. Holdings may, at its
option, redeem up to 100% of the aggregate principal amount of the Holdings
Notes originally issued with the net cash proceeds of one or more Public Equity
Offerings at a redemption price equal to 111.375% of the Accreted Value of the
Holdings Notes to be redeemed plus accrued and unpaid interest, if any, to the
date of redemption.
In the event of a Change of Control each holder of the Holdings Notes will
have the right to require Holdings to repurchase such holder's Holdings Notes at
a price equal to 101% of the Accreted Value thereof, plus accrued and unpaid
interest, if any, to the date of purchase. In addition, the Holdings will be
obligated to offer to repurchase the Holdings Notes at 100% of the Accreted
Value thereof, plus accrued and unpaid interest, if any, to the date of purchase
in the event of certain Asset Sales.
The Holdings Notes are general unsecured obligations of Holdings and rank
pari passu in right of payment to existing and future senior indebtedness of
Holdings.
The indenture governing the Holdings Notes contains certain covenants,
substantially similar to those in the Notes, that limit the ability of the
Holdings and its subsidiaries to, among other things, incur additional
indebtedness, pay dividends or make investments and certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, incur liens, impose restrictions on the ability of a subsidiary to
pay dividends or make certain payments to Holdings and its subsidiaries, merge
or consolidate with any other person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the assets of Holdings. In
addition, under certain circumstances, Holdings will be required to offer to
purchase the Holdings Notes, in whole or in part, at a purchase price equal to
100% of the Accreted Value thereof plus accrued and unpaid interest, if any, to
the date of repurchase, with the proceeds of certain Asset Sales (as defined).
All of such covenants are subject to significant qualifications and exceptions.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
THE SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW IS FOR
GENERAL INFORMATION ONLY. PROSPECTIVE PURCHASERS OF THE EXCHANGE NOTES ARE URGED
TO CONSULT THEIR OWN TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL AND OTHER TAX
CONSEQUENCES OF ACQUIRING, OWNING AND DISPOSING OF THE EXCHANGE NOTES.
The following discussion summarizes certain material United States federal
income tax consequences to beneficial owners arising from the purchase,
ownership and disposition of the Exchange Notes. The discussion is based on the
United States Internal Revenue Code of 1986, as amended (the 'Code'), currently
applicable Treasury regulations promulgated thereunder, and judicial and
administrative interpretations thereof, all as in effect on the date hereof.
Such authorities may be repealed, revoked or modified so as to result in federal
income tax consequences different from those discussed below, possibly with
retroactive effect. There can be no assurance that the Internal Revenue Service
('IRS') will not take a contrary view, and no ruling from the IRS has been or
will be sought. The following discussion is intended as a descriptive summary
only and is not intended as tax advice for any particular investor. It is not a
complete analysis and does not address tax consequences of holding the Exchange
Notes which may be relevant to investors in special tax situations, such as
insurance companies, banks, investors subject to the alternative minimum tax,
tax-exempt organizations, dealers in securities or other investors holding the
Exchange Notes as other than capital assets, investors holding the Exchange
Notes as a hedge or as part of a hedging, straddle or conversion transaction,
Non-U.S. Holders (as defined below) that own (directly, indirectly or by
attribution) 10% or more of the outstanding stock of the Company or holders
whose 'functional currency' (as defined in Code Section 985) is not the U.S.
dollar. Finally, the discussion does not address the effect of any United States
state or local tax law or foreign tax law on the Exchange Notes.
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U.S. HOLDERS
For purposes of this summary, the term 'U.S. Holder' means a beneficial
owner of an Exchange Note that is (a) an individual who is a United States
citizen or resident, (b) a corporation, partnership or other entity created or
organized under the laws of the United States or any political subdivision
thereof, (c) an estate the income of which is subject to federal income tax
regardless of source, or (d) a trust if a court within the United States is able
to exercise primary supervision over the administration of the trust and one or
more U.S. persons that have the authority to control all substantial decisions
of the trust. The term 'Non-U.S. Holder' means a beneficial owner of an Exchange
Note that is not a U.S. Holder.
Exchange Notes. The exchange of Original Notes for Exchange Notes will not
be a taxable event to holders of the Notes. Accordingly, holders will not
recognize any taxable gain or loss or any income as a result of such an
exchange. Because the Exchange Notes will be treated as a continuation of the
Original Notes for tax purposes, the remainder of this description refers
generally to 'Notes.'
Original Issue Discount
General. A debt obligation that has an issue price that is less than its
stated redemption price at maturity ('SRPM') by more than a de minimis amount
will be treated as issued with original issue document ('OID') for federal
income tax purposes. As explained below, the issue price of the Notes was
substantially less than their SRPM, so the Notes were issued with OID.
Generally, the issue price of a Note was the first price at which a
substantial amount of the Notes were sold to the public (ignoring sales to bond
houses, brokers, or similar persons or organizations acting in the capacity of
underwriters, placement agents, or wholesalers). The SRPM of a Note is the sum
of all payments provided by the Note that are not payments of 'qualified stated
interest'. 'Qualified stated interest' generally means stated interest that is
unconditionally payable in cash or property other than debt instruments of the
Company at least annually at a single fixed rate (or at certain qualifying
variable rates) applied to the outstanding principal amount of the Note. The
Notes were issued at a discount from their stated principal amount. In addition,
stated interest on the Notes is not payable until August 15, 2003. As a result,
the stated interest on the Notes is not 'qualified stated interest' and all
payments of stated interest will be included in the SRPM of the Notes.
Accordingly, the Notes were issued with OID.
U.S. Holders must generally include OID in gross income for federal income
tax purposes on an annual basis under a constant yield method without regard to
the holder's method of accounting for tax purposes. As a result, U.S. Holders
generally will be required to include OID in income in advance of the receipt of
cash attributable to the stated interest. OID accrues based on a compounded,
constant yield to maturity; accordingly U.S. Holders of Notes issued with OID
are required to include in income increasingly greater amounts of OID in
successive accrual periods. However, U.S. Holders generally are not required to
include separately in income cash payments received on the Notes, even if
denominated as interest. The aggregate amount of OID on each Note equals the
excess of such Note's SRPM over such Note's issue price.
The amount of OID includible in income by a U.S. Holder of a Note is the
sum of the 'daily portions' of OID with respect to the Note for each day during
the taxable year (or portion of the taxable year) in which such U.S. Holder held
such Note. The daily portion is determined by allocating to each day in any
'accrual period' a pro rata portion of the OID allocable to that accrual period.
The 'accrual period' for a Note may be of any length and may vary in length over
the term of the Note, provided that each accrual period is no longer than one
year and each scheduled payment of principal or interest occurs on the first day
or the final day of an accrual period.
In general, the amount of OID allocable to an accrual period is an amount
equal to the product of the Note's adjusted issue price at the beginning of such
accrual period and its yield to maturity (determined on the basis of compounding
at the close of each accrual period and properly adjusted for the length of the
accrual period). The Notes' yield to maturity is determined by performing
present value calculations of all principal and interest payments due under the
Note. The rate that produces an amount equal to the issue price of the Note is
the Note's yield to maturity. The yield must be constant over the term of the
Note and must be calculated to at least two decimal places (e.g., 10.50%). OID
allocable to a final accrual period is the difference between the amount
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<PAGE>
payable at maturity and the adjusted issue price at the beginning of the final
accrual period. The 'adjusted issue price' of a Note at the beginning of any
accrual period is equal to its issue price increased by the accrued OID for each
prior accrual period (determined without regard to the amortization of any
acquisition premium, as described below) and reduced by any payments made on
such Note on or before the first day of the accrual period.
The Treasury regulations contain special rules that allow any reasonable
method to be used in determining the amount of OID allocable to a short initial
accrual period, provided all other accrual periods are of equal length, and
require that the amount of OID allocable to the final accrual period equals the
excess of the amount payable at the maturity of the Note (other than any payment
of qualified stated interest) over the Note's adjusted issue price as of the
beginning of such final accrual period. In addition, if an interval between
payments of qualified stated interest contains more than one accrual period,
then the amount of qualified stated interest payable at the end of such interval
is allocated pro rata (on the basis of their relative lengths) between the
accrual periods contained in the interval.
Contingent Payments. In the event of a Change of Control, the Company will
be required to offer to repurchase all the Notes at a purchase price of 101% of
the principal amount thereof, plus accrued and unpaid interest, if any, to the
date of purchase. The right of U.S. Holders to require repurchase upon a Change
of Control will not affect the yield or maturity date of the Notes provided
that, based on all the facts and circumstances as of the issue date, the payment
schedule on such Notes that does not reflect a Change of Control is
significantly more likely than not to occur. The Company does not intend to
treat the Change of Control provisions of the Notes as affecting the computation
of the amount of OID on the Notes.
Optional Redemption. The Notes are redeemable at the option of the Company
in whole or in part and subject to certain conditions (see 'Description of the
Notes--Optional Redemption'). For purposes of computing the Notes' yield to
maturity, the Company will be deemed to exercise its option to redeem the Notes
if such deemed exercise could produce (utilizing the redemption price on any
date on which the option could be exercised as the SRPM) a lower yield on the
Notes than the yield to stated maturity. The Company's option to redeem the
Notes prior to their stated maturity date at a premium should not affect the
computation of the amount of OID on the Notes.
Market Discount. A U.S. Holder that purchases a Note at a market discount
(as described below) generally will be required to treat any principal payments
on, or any gain on the disposition or maturity of, such Note as ordinary income
to the extent of the accrued market discount (not previously included in income)
at the time of such payment or disposition. In general, market discount is the
amount by which a Note's adjusted issue price exceeds the U.S. Holder's basis in
the Note immediately after the Note is acquired. If such difference is less than
a specified de minimis amount, the market discount will be disregarded. Market
discount on a Note will accrue ratably during the period from the date of
acquisition to the maturity of a Note, unless the U.S. Holder elects to accrue
such market discount on the constant yield method. This election is irrevocable
and applies only to the Note for which it is made.
The U.S. Holder may also elect to include market discount in income
currently as it accrues. This election, once made, applies to all market
discount obligations acquired on or after the first day of the first taxable
year to which the election applies and may not be revoked without the consent of
the IRS. Generally, if a Note with market discount is transferred in certain
non-taxable transactions, the market discount will be transferred to the
property received in exchange for the Note; however, under certain limited
circumstances, the market discount will be includible as ordinary income as if
such Note had been sold at its fair market value. A U.S. Holder that does not
elect to include market discount in income currently may be required to defer
deductions for interest on borrowings incurred or continued to purchase or carry
such Note in an amount not exceeding the accrued market discount on such Note,
until the maturity of the Note or, in certain circumstances, the earlier
disposition of such Note.
Acquisition Premium. A U.S. Holder that purchases a Note for an amount
that is greater than the adjusted issue price of such Note, but that is less
than or equal to the sum of the amounts payable on the Note after the purchase
date, will be considered to have purchased such Note at an 'acquisition
premium'. Under the acquisition premium rules of the Code and the Treasury
regulations thereunder, the amount of OID that such U.S.
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<PAGE>
Holder must include in its gross income with respect to such Note will be
reduced (but not below zero) for each accrual period by the portion of
acquisition premium properly allocable to the period.
Purchase, Sale, Retirement and Other Disposition of the Notes. In general,
a U.S. Holder's adjusted tax basis in a Note will equal the cost of such Note to
the U.S. Holder, increased by the amount of any OID or market discount
previously included in the U.S. Holder's income with respect to the Note, and
reduced by the amount of (i) any payments made on the Note and (ii) any
amortizable bond premium applied to reduce interest on the Note.
A U.S. Holder will generally recognize gain or loss on the sale, retirement
or other disposition (including redemption) of a Note in an amount equal to the
difference between (i) the amount of cash and the fair market value of property
received by such U.S. Holder on such disposition (less any amounts attributable
to, and taxable as, accrued but unpaid interest) and (ii) the U.S. Holder's
adjusted tax basis in the Note (as described above). Gain or loss upon the sale,
retirement or other disposition (including redemption) of a Note will be capital
gain or loss (except that any portion of such gain attributable to market
discount will be ordinary income). Under recently enacted legislation, the
maximum individual U.S. federal income tax rate on net capital gains is 20% for
capital assets held for more than 18 months and 28% for capital assets held for
more than 12 months but not more than 18 months. Gains on the sale of capital
assets held for one year or less are subject to U.S. federal income tax at
ordinary income tax rates. Certain limitations exist on the deductibility of
capital losses by both corporations and individual taxpayers.
NON-U.S. HOLDERS
Interest (including OID). Subject to the discussion of backup withholding
below, a Non-U.S. Holder will generally not be subject to U.S. federal income or
withholding tax on payments of principal, premium, if any, and interest
(including OID) on the Notes under the portfolio interest exemption of the Code,
provided that (in the case of interest, including OID): (i) the Non-U.S. Holder
does not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote; (ii) the Non-U.S.
Holder is not a controlled foreign corporation that is related to the Company
through stock ownership; (iii) such interest or OID is not effectively connected
with a United States trade or business of the Non-U.S. Holder; (iv) generally
either (a) the beneficial owner of the Notes certifies to the Company or its
agent, under penalties of perjury, that it is a Non-U.S. Holder and provides a
completed IRS Form W-8 ('Certificate of Foreign Status') or (b) a securities
clearing organization, bank or other financial institution which holds
customers' securities in the ordinary course of its trade or business (a
'financial institution') and which holds the Notes, certifies to the Company or
its agent, under penalties of perjury, that it has received Form W-8 from the
beneficial owner or that it has received from another financial institution a
Form W-8 and furnishes the payor with a copy thereof; and (v) for payments made
on or after January 1, 1999, the payment can be reliably associated (within the
meaning of applicable Treasury Regulations) with IRS Form W-8. If any of the
situations described in proviso (i), (ii) or (iv) of the preceding sentence do
not exist, interest on the Notes when received is subject to United States
withholding tax at the rate of 30% unless an income tax treaty between the
United States and the country of which the Non-U.S. Holder is a tax resident
provides for the elimination or reduction in the rate of U.S. federal
withholding tax.
If a Non-U.S. Holder of a Note is engaged in a trade or business in the
United States and interest (including OID) on the Note is effectively connected
with the conduct of such trade or business, such Non-U.S. Holder, although
exempt from U.S. federal withholding tax by reason of the delivery of a properly
completed Form 4224, will be subject to U.S. federal income tax on such interest
(including OID) and on any gain realized on the sale, exchange or other
disposition of a Note in the same manner as if it were a U.S. Holder. In
addition, if such Non-U.S. Holder is a foreign corporation, it may be subject to
a branch profits tax equal to 30% of its effectively connected earnings and
profits for that taxable year, unless it qualifies for a lower rate under an
applicable income tax treaty.
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Sale, Retirement and Other Disposition of Notes. A Non-U.S. Holder
generally will not be subject to U.S. federal income tax on any gain realized in
connection with the sale, exchange, retirement or other disposition of Notes
(other than gain attributable to accrued interest or OID, which is addressed in
the preceding paragraph), unless: (i) the gain is effectively connected with a
trade or business carried on by the Non-U.S. Holder within the United States;
(ii) if a tax treaty applies, the gain is attributable to an office or other
fixed place of business maintained in the United Stated by the Non-U.S. Holder;
or (iii) in the case of an individual holder, (a) such holder is present in the
United States for 183 days or more in the taxable year of disposition and
certain other conditions are satisfied, or (b) the Non-U.S. Holder is subject to
tax pursuant to provisions of the Code applicable to United States expatriates.
UNITED STATES INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, under current U.S. federal tax law, payments to a U.S. Holder
of (a) principal, premium (if any) and interest (including OID) on a Note, and
(b) the proceeds of sale or other disposition of a Note before maturity will be
subject to U.S. information reporting requirements. Subject to certain
exceptions, such payments will also generally be subject to 'backup' withholding
tax at a rate of 31% if such U.S. Holder fails to supply a correct taxpayer
identification number and certain other information in the required manner. U.S.
Holders should consult their own tax advisors regarding their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption if applicable.
In general, there is no U.S. information reporting requirement or backup
withholding tax on payments to Non-U.S. Holders who provide the appropriate
certification described above regarding qualification for the portfolio interest
exemption from U.S. federal income tax for payments of principal or interest
(including OID) on the Notes.
Payment by the Company of principal on the Notes or payment by a United
States office of a broker of the proceeds of a sale of Notes is subject to both
backup withholding and information reporting unless the beneficial owner
provides a completed IRS Form W-8 which certifies under penalties of perjury
that such owner is a Non-U.S. Holder who meets all the requirements for
exemption from U.S. federal income tax on any gain from the sale, exchange or
retirement of the Notes.
In general, backup withholding and information reporting will not apply to
a payment of the gross proceeds of a sale of Notes effected at a foreign office
of a broker. If, however, such broker is, for U.S. federal income tax purposes,
a U.S. person, a controlled foreign corporation or a foreign person 50% or more
of whose gross income for certain periods is derived from activities that are
effectively connected with the conduct of a trade or business in the United
States, such payments will not be subject to backup withholding, but will be
subject to information reporting unless (i) such broker has documentary evidence
in its records that the beneficial owner is a Non-U.S. Holder and certain other
conditions are met, or (ii) the beneficial owner otherwise establishes an
exemption, provided such broker does not have actual knowledge that the payee is
a United States person. Non-U.S. Holders should consult their tax advisors
regarding the application of these rules to their particular situations, the
availability of an exemption therefrom and the procedure for obtaining such an
exemption, if available.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be allowed as a refund or a credit against such
holder's U.S. federal income tax liability, provided the required information is
furnished to the IRS.
BOOK-ENTRY; DELIVERY AND FORM
Ownership of beneficial interests in the Global Notes is limited to persons
who have accounts with DTC ('participants') or persons who hold interests
through participants. Ownership of beneficial interests in the Global Notes is
shown on, and the transfer of such ownership is effected only through, records
maintained by DTC or its nominee (with respect to interest of participants) and
the records of participants (with respect to interests of persons other than
participants). Holders may hold their interests in the Global Notes directly
through DTC if they are participants in such system, or indirectly through
organizations which are participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Notes for all
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<PAGE>
purposes under the Indenture. No beneficial owner of an interest in the Global
Notes will be able to transfer that interest except in accordance with DTC's
procedures, in addition to those provided for under the Indenture with respect
to the Notes.
Payments of the principal of, premium (if any), interest (including
Additional Interest) on, the Global Notes will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company, the
Trustee or any Paying Agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Notes or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, interest (including Additional Interest) on the
Global Notes, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the Global Notes as shown on the records of DTC or its nominee. The Company
also expects that payments by participants to owners of beneficial interests in
the Global Notes held through such participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Notes to persons in
states which require physical delivery of the Notes, or to pledge such
securities, such holder must transfer its interest in a Global Note, in
accordance with the normal procedures of DTC and with the procedures set forth
in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
account the DTC interests in the Global Notes are credited and only in respect
of such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Notes
for Certificated Securities, which it will distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a 'clearing corporation' within the meaning of the
Uniform Commercial Code and a 'Clearing Agency' registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended
(the 'Exchange Act'). DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations. Indirect
access to the DTC system is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly ('indirect participants').
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Note and a successor depositary is not
appointed by the Company within 90 days, Certificated Securities will be issued
in exchange for the Global Notes.
PLAN OF DISTRIBUTION
Reference is made to 'The Exchange Offer' above for a description of the
Exchange Offer, including the purpose of the Exchange Offer, the basis upon
which the Exchange Notes are offered and expenses incurred in connection with
the Exchange Offer.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus with any resale of such Exchange Notes. To date, the Commission has
taken the position that a broker-dealer may fulfill its prospectus delivery
requirements with respect to transactions involving an exchange of securities
such as the exchange contemplated by the Exchange Offer with
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a Prospectus meeting the requirements of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Original Notes where such Original Notes were acquired as a result of market
making activities or other trading activities. The Company will, during the
period ending 180 days after the consummation of the Exchange Offer, make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale.
Neither the Company nor any of its affiliates has entered into any
arrangement or understanding with any broker-dealer to distribute the Exchange
Notes and will not receive any proceeds from any sale of Exchange Notes by any
broker-dealers or any other persons. Exchange Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of the resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker or dealer and/or the purchaser of any such
Exchange Notes. Any broker or dealer that resells Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Notes may be
deemed to be an 'underwriter' within the meaning of the Securities Act and any
profit on any such resale of Exchange Notes and any commissions or concessions
received by any such person may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an 'underwriter' within the meaning of the Securities
Act.
The Company has agreed in the Registration Rights Agreement to pay all
expenses incident to the Exchange Offer.
In connection with the Offering, certain persons participating in the
Offering may engage in transactions that stabilize, maintain or otherwise affect
the price of the Notes, specifically, the Initial Purchasers may bid for and
purchase Notes in the open markets to stabilize the price of the Notes. The
Initial Purchasers may also overallot the Offering, creating a syndicate short
position, and may bid for and purchase Notes in the open market to cover the
syndicate short position. In addition, the Initial Purchasers may bid for and
purchase the Notes in market making transactions and impose penalty bids. These
activities may stabilize or maintain the market price of the Notes above market
levels that may otherwise prevail. The Initial Purchasers are not required to
engage in these activities, and may end these activities at any time.
LEGAL MATTERS
Certain legal matters in connection with the Notes offered hereby will be
passed upon for the Company by Schulte Roth & Zabel LLP. Certain legal matters
in connection with this Offering will be passed upon for the Initial Purchasers
by Cahill Gordon & Reindel.
EXPERTS
The financial statements of Tidewater Compression Service, Inc. and
subsidiaries as of March 31, 1997 and 1996, and for each of the years in the
three-year period ended March 31, 1997 have been included herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.
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INDEX TO FINANCIAL STATEMENTS
TABLE OF CONTENTS
<TABLE>
<S> <C>
Independent Auditors' Report............................................................................... F-2
Balance Sheets as of March 31, 1996 and 1997 and December 31, 1997 (unaudited)............................. F-3
Income Statements for the Years Ended March 31, 1995, 1996 and 1997 and for the Nine Months Ended December
31, 1996 and 1997 (unaudited)............................................................................ F-4
Statements of Stockholder's Equity for the Years Ended March 31, 1995, 1996 and 1997 and the Nine Months
Ended December 31, 1997 (unaudited)...................................................................... F-5
Statements of Cash Flows for the Years Ended March 31, 1995, 1996 and 1997 and for the Nine Months Ended
December 31, 1996 and 1997 (unaudited)................................................................... F-6
Notes to Financial Statements.............................................................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholder
Tidewater Compression Service, Inc.
We have audited the accompanying balance sheets of Tidewater Compression
Service, Inc. as of March 31, 1996 and 1997, and the related income statements,
and statements of stockholder's equity and cash flows for each of the years in
the three-year period ended March 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tidewater Compression Service,
Inc. as of March 31, 1996 and 1997, and the results of its operations and its
cash flows for each of the years in the three-year period ended March 31, 1997,
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New Orleans, Louisiana
November 21, 1997
F-2
<PAGE>
TIDEWATER COMPRESSION SERVICE, INC.
BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
MARCH 31,
---------------------- DECEMBER 31,
1996 1997 1997
--------- --------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash................................................................... $ 34 $ -- $ --
Receivables, net of allowance for bad debts of $510 in March 1996 and
$318 in March 1997 and $418 in December 1997........................ 11,407 11,099 12,355
Inventories............................................................ 7,917 7,845 7,371
Other.................................................................. 784 181 105
--------- --------- ------------
Total current assets................................................ 20,142 19,125 19,831
--------- --------- ------------
Property and equipment:
Rental equipment....................................................... 324,069 322,512 330,183
Other.................................................................. 14,311 13,391 14,183
Accumulated depreciation............................................... (108,313) (118,925) (135,102)
--------- --------- ------------
230,067 216,978 209,264
--------- --------- ------------
Goodwill, net of amortization............................................ 22,606 20,952 19,711
Other.................................................................... 1,497 35 35
--------- --------- ------------
$ 274,312 $ 257,090 $ 248,841
--------- --------- ------------
--------- --------- ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable......................................................... $ 2,750 $ 4,208 $ 4,826
Accrued expenses......................................................... 1,200 964 646
--------- --------- ------------
Total current liabilities........................................... 3,950 5,172 5,472
Due to Tidewater Inc..................................................... 220,657 194,371 176,160
--------- --------- ------------
Total liabilities................................................... 224,607 199,543 181,632
--------- --------- ------------
Stockholder's equity:
Common stock, $10 par value, 5,000 shares authorized, 4,900 shares
issued and outstanding.............................................. 49 49 49
Additional paid-in capital............................................. 25,627 25,627 25,627
Retained earnings...................................................... 24,029 31,871 41,533
--------- --------- ------------
Total stockholder's equity.......................................... 49,705 57,547 67,209
--------- --------- ------------
$ 274,312 $ 257,090 $ 248,841
--------- --------- ------------
--------- --------- ------------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
TIDEWATER COMPRESSION SERVICE, INC.
INCOME STATEMENTS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
----------------------------- ------------------
1995 1996 1997 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Rentals................................................ $49,235 $72,765 $72,695 $53,978 $59,782
Sales.................................................. 27,920 32,319 36,592 27,153 18,238
Other.................................................. 6,418 6,236 3,477 2,720 2,568
Gain (loss) on asset sales............................. 1,109 (856) 1,122 1,427 968
------- ------- ------- ------- -------
84,682 110,464 113,886 85,278 81,556
------- ------- ------- ------- -------
Costs and Expenses:
Rentals................................................ 21,991 33,191 33,814 24,820 26,054
Cost of sales.......................................... 23,895 26,345 30,339 22,732 13,358
Depreciation and amortization.......................... 15,472 26,997 26,163 19,772 19,527
General and administrative............................. 8,888 10,508 11,004 8,267 7,281
Interest expense....................................... 3,469 3,706 -- -- --
------- ------- ------- ------- -------
73,715 100,747 101,320 75,591 66,220
------- ------- ------- ------- -------
Income before income taxes............................... 10,967 9,717 12,566 9,687 15,336
Income taxes............................................. 4,648 3,745 4,724 3,584 5,674
------- ------- ------- ------- -------
Net income.......................................... $ 6,319 $ 5,972 $ 7,842 $ 6,103 $ 9,662
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
TIDEWATER COMPRESSION SERVICE, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- -------
<S> <C> <C> <C> <C>
Balance March 31, 1994............................................... $ 49 $ 25,627 $ 11,738 $37,414
Net income........................................................... -- -- 6,319 6,319
------ ---------- -------- -------
Balance March 31, 1995............................................... 49 25,627 18,057 43,733
Net income........................................................... -- -- 5,972 5,972
------ ---------- -------- -------
Balance March 31, 1996............................................... 49 25,627 24,029 49,705
Net income........................................................... -- -- 7,842 7,842
------ ---------- -------- -------
Balance March 31, 1997............................................... 49 25,627 31,871 57,547
Net income (unaudited)............................................... -- -- 9,662 9,662
------ ---------- -------- -------
Balance December 31, 1997 (unaudited)................................ $ 49 $ 25,627 $ 41,533 $67,209
------ ---------- -------- -------
------ ---------- -------- -------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
TIDEWATER COMPRESSION SERVICE, INC.
STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
--------------------------------- --------------------
1995 1996 1997 1996 1997
-------- --------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income......................................... $ 6,319 $ 5,972 $ 7,842 $ 6,103 $ 9,662
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 15,472 26,997 26,163 19,772 19,527
(Gain) loss on asset sales...................... (1,109) 856 (1,122) (1,427) (968)
Deferred income taxes........................... 8,799 12,630 6,835 5,100 3,200
Decrease (increase) in receivables.............. (3,366) 5,733 308 (851) (1,256)
Decrease (increase) in inventories.............. 5,260 2,630 72 970 474
Decrease in other current assets................ 426 1,159 603 613 76
Increase (decrease) in accounts payable......... 2,643 (4,898) 1,458 602 618
Increase (decrease) in accrued expenses......... 1,436 (269) (236) (425) (318)
-------- --------- -------- -------- --------
Net cash provided by operating activities..... 35,880 50,810 41,923 30,457 31,015
-------- --------- -------- -------- --------
Cash flows from investing actitivites:
Proceeds from asset sales.......................... 3,571 5,124 7,684 6,925 3,488
Additions to properties and equipment.............. (20,323) (6,394) (16,520) (13,372) (13,092)
Acquisitions....................................... (240,000) -- -- -- --
-------- --------- -------- -------- --------
Net cash used in investing activities......... (256,752) (1,270) (8,836) (6,447) (9,604)
-------- --------- -------- -------- --------
Cash flows from financing activities:
Net change in amount due to Tidewater Inc.......... 108,872 62,494 (33,121) (24,044) (21,411)
Proceeds from issuance of long-term debt........... 150,000 -- -- -- --
Repayments of long-term debt....................... (38,000) (112,000) -- -- --
-------- --------- -------- -------- --------
Net cash provided by (used in) financing
activities................................. 220,872 (49,506) (33,121) (24,044) (21,411)
-------- --------- -------- -------- --------
Net increase (decrease) in cash...................... -- 34 (34) (34) 0
Cash at beginning of period.......................... -- -- 34 34 0
-------- --------- -------- -------- --------
Cash at end of period................................ $ -- $ 34 $ -- $ 0 $ 0
-------- --------- -------- -------- --------
-------- --------- -------- -------- --------
Supplemental cash flow information--cash paid for
interest........................................... $ 2,865 $ 4,310 $ -- $ 0 $ 0
-------- --------- -------- -------- --------
-------- --------- -------- -------- --------
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
TIDEWATER COMPRESSION SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1995, 1996 AND 1997 AND
NINE MONTHS ENDED DECEMBER 31, 1996 AND 1997
(INFORMATION AS OF DECEMBER 31, 1997
AND FOR THE NINE-MONTH PERIODS ENDED
DECEMBER 31, 1996 AND 1997 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
Tidewater Compression Service, Inc. (TCS or the Company) is, and has been
for all periods presented, a wholly-owned subsidiary of Tidewater Inc.
(Tidewater). The accompanying financial statements are presented as if TCS had
been an entity separate from its parent during the periods presented and include
the assets, liabilities, revenues, and expenses that are directly related to
TCS's operations. As a subsidiary of Tidewater, TCS was a participating employer
in certain employee benefit plans and also received certain administrative
services such as data processing, legal, insurance placement and claims handling
from its parent. The costs associated with providing TCS with such employee
benefit programs and administrative services, where significant, have been
allocated to TCS and are included in the accounts of TCS.
(b) Nature of Operations
TCS operates one of the largest rental fleets of natural gas compressors in
the United States. The compressors are rented to oil and gas producers and
processors and are used primarily to boost the pressure of natural gas from the
wellhead into gas gathering systems, into nearby gas processing plants or into
high pressure pipelines. TCS also sells natural gas and air compressor packages
and other related equipment to engineering contractors, oil and gas producers,
as well as other concerns.
Trade accounts receivable are due from companies of varying size engaged
principally in oil and gas activities in the United States and in certain
international locations. The Company reviews the financial condition of
customers prior to extending credit and periodically updates customer credit
information.
(c) Use of Estimates
In preparing TCS's financial statements, management makes estimates and
assumptions that affect the amounts reported in the financial statements and
related disclosures. Actual results may differ from these estimates.
(d) Inventories
Inventories are stated at the lower of cost (FIFO) or market (net
realizable value). Some items of compression equipment are acquired and placed
in inventories for subsequent sale or rent to others. Acquisitions of these
assets are considered operating activities in the Statements of Cash Flows,
although they later may be transferred to the compression rental fleet.
(e) Revenue Recognition
Revenue from equipment rentals and parts sales is recognized when earned.
Compressor fabrication revenue is recognized on the completed-contract method.
This method is used because the typical contract is completed within two months
and financial position and results of operations do not vary significantly from
those which would result from use of the percentage-of-completion method.
F-7
<PAGE>
TIDEWATER COMPRESSION SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995, 1996 AND 1997 AND
NINE MONTHS ENDED DECEMBER 31, 1996 AND 1997
(INFORMATION AS OF DECEMBER 31, 1997
AND FOR THE NINE-MONTH PERIODS ENDED
DECEMBER 31, 1996 AND 1997 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(f) Properties and Equipment
Properties and equipment are carried at cost. Depreciation for financial
reporting purposes is computed on the straight-line basis beginning with the
first rental, with salvage values of 30% for compression equipment, using
estimated useful lives of:
<TABLE>
<S> <C>
Compression equipment:
New......................................................................... 12 years
Used........................................................................ 8 years
Other properties and equipment.............................................. 3-30 years
</TABLE>
Maintenance and repairs are charged to expenses as incurred during the
asset's original estimated useful life. Repair costs incurred after that time
that also have the effect of extending the useful life of the asset are
capitalized and depreciated over 3 years.
On April 1, 1996, TCS adopted the provisions of Statement of Financial
Accounting Standards No. 121 'Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of.' The adoption of this accounting
standard had no impact on TCS's results of operations or financial position.
(g) Goodwill
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on the straight-line basis over 15 years. The
Company assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining life can be
recovered through undiscounted future operating cash flows of the acquired
operation. The amount of goodwill impairment, if any, is measured based on
projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds. The assessment of the
recoverability of goodwill will be impacted if estimated future operating cash
flows are not achieved.
(h) Income Taxes
TCS's operations are included in the consolidated U.S. Federal income tax
returns of Tidewater Inc. The tax provisions presented in these financial
statements have been determined as if TCS's operations were a stand-alone
business filing a separate income tax return with the amount of current tax owed
(refundable) charged or credited to the amounts due to Tidewater Inc. Deferred
tax assets and liabilities, which are also included in the amounts due to
Tidewater Inc., are determined based on the differences between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to be recovered or
settled.
(i) Interim Financial Statements
The financial statements for the interim periods presented herein have not
been audited by independent accountants, but in the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the balance sheet, statements of income, and cash flows at
the dates and for the periods indicated have been made. Results of operations
for interim periods are not necessarily indicative of operations for the
respective full years.
F-8
<PAGE>
TIDEWATER COMPRESSION SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995, 1996 AND 1997 AND
NINE MONTHS ENDED DECEMBER 31, 1996 AND 1997
(INFORMATION AS OF DECEMBER 31, 1997
AND FOR THE NINE-MONTH PERIODS ENDED
DECEMBER 31, 1996 AND 1997 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(j) Pension, Postretirement and Other Benefit Plans
TCS employees participate in Tidewater pension and other postretirement
plans. TCS has accounted for its participation in the Tidewater plans as a
participation in multi-employer plans. Accordingly, the statement of income
includes an allocation from Tidewater for the costs associated with the TCS
employees who participate in these plans that is comparable to TCS's required
contribution to the plans for the periods presented. Additionally, no assets and
liabilities have been reflected in the balance sheets related to the overall
Tidewater pension and other postretirement benefit plans since it is not
practicable to segregate the amounts applicable to TCS. TCS employees also
participate in the medical, dental, life and workers' compensation insurance
plans sponsored by Tidewater. The costs of these plans are allocated to TCS
based on the number of TCS employees participating in the plans.
(k) Environmental Liabilities
A provision for environmental obligations is charged to expense when the
Company's liability for an environmental assessment and/or cleanup is probable
and the cost can be reasonably estimated. Related expenditures are charged
against the provision. Environmental remediation liabilities are not discounted
for the time value of future expected payments. Environmental expenditures that
have future economic benefit are capitalized.
2. BUSINESS COMBINATIONS
In fiscal 1995 the assets of Brazos Gas Compressing Company, a subsidiary
of Mitchell Energy & Development Corporation, were purchased for $35 million and
the natural gas compression assets of Halliburton Company were purchased for
$205 million. The costs of these acquisitions were allocated under the purchase
method of accounting based on the fair value of the assets acquired. In
connection with the purchase of the natural gas compression assets of
Halliburton Company, goodwill of approximately $25 million was recorded and is
being amortized in equal charges to earnings over a 15-year period.
The results of Brazos' and Halliburton's operations have been consolidated
with TCS's effective October 1, 1994 and December 1, 1994, respectively.
Unaudited pro forma combined results of operations of TCS and of Brazos and
Halliburton, including appropriate purchase accounting adjustments for the year
ended March 31, 1995 as though the acquisition had taken place on April 1, 1994,
are as follows (thousands of dollars):
<TABLE>
<S> <C>
Revenues...................................................................... $127,234
Net income.................................................................... 1,482
</TABLE>
3. INVENTORIES
Inventories consist of the following at March 31, 1996 and 1997 (thousands
of dollars):
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Parts and supplies..................................................... $6,102 $5,684
Work in progress....................................................... 1,815 2,161
------ ------
$7,917 $7,845
------ ------
------ ------
</TABLE>
4. INCOME TAXES
For each of the years in the three-year period ended March 31, 1997,
substantially all of TCS's income before income taxes are derived from its U.S.
operations.
F-9
<PAGE>
TIDEWATER COMPRESSION SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995, 1996 AND 1997 AND
NINE MONTHS ENDED DECEMBER 31, 1996 AND 1997
(INFORMATION AS OF DECEMBER 31, 1997
AND FOR THE NINE-MONTH PERIODS ENDED
DECEMBER 31, 1996 AND 1997 IS UNAUDITED)
4. INCOME TAXES--(CONTINUED)
Income tax expense (benefit) for each of the years ended March 31 consists
of the following (thousands of dollars):
<TABLE>
<CAPTION>
1995 1996 1997
-------- --------- --------
<S> <C> <C> <C>
Current:
U.S. Federal............................................... $ (4,451) $ (8,646) $ (2,162)
State and foreign.......................................... 300 (239) 51
Deferred........................................................ 8,799 12,630 6,835
-------- --------- --------
$ 4,648 $ 3,745 $ 4,724
-------- --------- --------
-------- --------- --------
</TABLE>
The actual income tax expense for each of the years ended March 31, 1995,
1996 and 1997 differs from the amount computed by applying the U.S. federal tax
rate of 35% to income before income taxes principally because of state income
taxes.
The significant components of deferred income tax expense for each of the
years ended March 31 are as follows (thousands of dollars):
<TABLE>
<CAPTION>
1995 1996 1997
------- -------- -------
<S> <C> <C> <C>
Tax depreciation in excess of depreciation for financial reporting
purposes......................................................... $ 9,376 $ 12,662 $ 7,276
Other.............................................................. (577) (32) (441)
------- -------- -------
$ 8,799 $ 12,630 $ 6,835
------- -------- -------
------- -------- -------
</TABLE>
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities, which are included in the intercompany
accounts, at March 31, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
1996 1997
--------- --------
<S> <C> <C>
(THOUSANDS OF
DOLLARS)
Deferred tax assets--financial provisions not deducted for income tax
purposes................................................................. $ 656 1,096
Deferred tax liabilities--depreciation differences on property and
equipment................................................................ (28,671) (35,947)
--------- --------
Net deferred tax liability............................................ $ (28,015) (34,851)
--------- --------
--------- --------
</TABLE>
Income tax expense for interim periods is based upon estimates of the
effective tax rate for the entire fiscal year. The effective tax rate was 37%
for the nine months ended December 31, 1996 and 1997, respectively.
5. DUE TO TIDEWATER INC.
Amounts due to Tidewater Inc. include net charges from Tidewater for
various services and cost allocations. These amounts also include liabilities
relating to current and deferred federal, state and foreign income taxes.
Amounts due to Tidewater Inc. do not bear interest. The net changes in amounts
due to Tidewater Inc. are included in cash flows from financing activities.
F-10
<PAGE>
TIDEWATER COMPRESSION SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995, 1996 AND 1997 AND
NINE MONTHS ENDED DECEMBER 31, 1996 AND 1997
(INFORMATION AS OF DECEMBER 31, 1997
AND FOR THE NINE-MONTH PERIODS ENDED
DECEMBER 31, 1996 AND 1997 IS UNAUDITED)
6. EMPLOYEE BENEFITS
Defined Benefit Pension Plans and Defined Contribution Retirement Plan
Until January 1, 1996 substantially all of the TCS personnel participated
in a defined benefit pension plan sponsored by Tidewater. Tidewater's pension
benefits are based principally on years of service and employee compensation.
Beginning April 1996, TCS field service personnel, along with all new employees
of TCS eligible for pension plan membership, were enrolled in a new defined
contribution retirement plan. Tidewater has allocated pension expense to TCS of
approximately $536,000 and $598,000 in the fiscal years 1995 and 1996,
respectively. The cost of the defined contribution plan allocated to TCS in
fiscal 1997 was approximately $298,000.
Postretirement Benefits Other Than Pension
Tidewater sponsors a program which provides limited health care and life
insurance benefits to qualified retired employees. Costs of the program are
based on actuarially determined amounts and are accrued over the period from the
date of hire to the full eligibility date of employees who are expected to
qualify for these benefits. Tidewater has allocated postretirement health care
and life insurance expense to TCS of approximately $178,000 and $384,000 for the
years ended March 31, 1996 and 1997, respectively.
7. COMMITMENTS AND CONTINGENCIES
Rent expense for 1995, 1996 and 1997 was approximately $387,000, $483,000
and $435,000, respectively. Commitments for future minimum lease payments are
not significant at March 31, 1997.
In the ordinary course of business, the Company is involved in various
pending or threatened legal actions. In the opinion of management, the amount of
ultimate liability, if any, with respect to these actions will not have a
materially adverse effect on the Company's financial position or operating
results.
8. SUBSEQUENT EVENTS
During the third quarter of fiscal 1998, Tidewater announced that it had
entered into a stock purchase agreement whereby Tidewater will sell 100% of the
voting securities of TCS for a purchase price of $360 million, subject to
certain adjustments to be made at closing.
An environmental assessment of the operations and current and past physical
premises of the Company completed on February 17, 1998 in conjunction with the
stock purchase agreement determined that the cost to remediate environmental
conditions could range between $17.8 million and $18.8 million (the 'Estimated
Remediation Cost') if each of the identified conditions was ultimately
remediated. In the event that remediation is undertaken by the Company, then,
pursuant to the stock purchase agreement, the cost, to the extent identified as
part of the environmental assessment, shall be paid as follows: (i) Tidewater
shall pay 75% and the Company shall pay 25% of the first $4 million of actual
remediation costs; (ii) Tidewater shall pay 83.33% and the Company shall pay
16.67% of the next $6 million of actual remediation costs; and (iii) Tidewater
shall pay 100% of the amount by which the actual remediation costs exceed $10
million, but only to the extent the actual remediation costs do not exceed the
Estimated Remediation Costs. Tidewater has disputed the amount of the Estimated
Remediation Cost, but has not disputed their obligation to reimburse the Company
for costs actually incurred in remediating environmental situations existing as
of closing and identified in the environmental assessment. The Company has not
recorded a provision at December 31, 1997 related to this assessment.
F-11
<PAGE>
- ---------------------------------------------------------
---------------------------------------------------------
- ---------------------------------------------------------
---------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS OFFERING MEMORANDUM, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASERS. THIS OFFERING
MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER
TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT RELATES, NOR DOES IT CONSTITUTE
AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS OFFERING MEMORANDUM NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF NOR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus summary................................ 1
Summary of the Exchange Offer..................... 5
The Original Notes................................ 8
Summary Historical and Pro Forma Financial and
Other Data...................................... 10
Risk Factors...................................... 11
Use of Proceeds................................... 16
The Exchange Offer................................ 16
Description of the Company Acquisition............ 23
Capitalization.................................... 25
Unaudited Pro Forma Financial Statements and Other
Data............................................ 26
Selected Historical Financial Data................ 32
Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 33
Business.......................................... 37
Business Strategy................................. 38
Management........................................ 47
Principal Stockholders............................ 53
Description of Capital Stock of Holdings.......... 55
Description of Other Indebtedness................. 56
Description of the Exchange Notes................. 57
Description of the Holdings Notes................. 80
Certain United States Federal Income Tax
Considerations.................................. 81
Book-Entry; Delivery and Form..................... 85
Plan of Distribution.............................. 86
Legal Matters..................................... 87
Independent Auditors.............................. 87
</TABLE>
------------------------------
UNTIL , 199 , ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
-------------------
PROSPECTUS
-------------------
------------------------------
UNIVERSAL
COMPRESSION, INC.
Offer to Exchange up to
$242,500,000 of new 9 7/8 Senior Discount
Notes due 2008 for up to
$242,500,000
of any and all outstanding
9 7/8% Senior Discount
Notes due 2008
THE UNITED STATES
TRUST COMPANY
OF NEW YORK,
AS EXCHANGE AGENT
, 1998
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
[The Company is empowered by Art. 2.02-1 of the Texas Business Corporation
Act, subject to the procedures and limitations stated therein, to indemnify any
person who was, is or is threatened to be made a named defendant or respondent
in a proceeding because the person is or was a director or officer against
judgments, penalties (including excise and similar taxes), fines, settlements
and reasonable expenses (including court costs and attorneys' fees) actually
incurred by the person in connection with the proceeding. The Company is
required by Art. 2.02-1 to indemnify a director or officer against reasonable
expenses (including court costs and attorneys' fees) incurred by him in
connection with a proceeding in which he is a named defendant or respondent
because he is or was a director or officer if he has been wholly succesful, on
the merits or otherwise, in the defense of the proceeding. The statute provides
that indemnification pursuant to its provisions is not exclusive of other rights
of indemnification to which a person may be entitled under any bylaw, agreement,
vote of shareholders or disinterested directors, or otherwise. The articles and
bylaws of the Company do not provide for indemnification by the Company of its
directors and officers.
See Item 22 for a statement of the Company's undertaking as to the
Securities and Exchange Commission's position respecting indemnification arising
under the Securities Act of 1933.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------------------------------
<C> <C> <S>
3.1* -- Certificate of Incorporation of Universal Compression, Inc., as amended.
3.2* -- Bylaws of Universal Compression, Inc.
4.1 -- Purchase Agreement, dated as of February 13, 1998, between Universal Compression, Inc. and each of BT
Alex. Brown and Salomon Smith Barney.
4.2 -- Specimen of Universal Compression, Inc.'s 9 7/8% Senior Discount Note due 2008.
4.3 -- Indenture, dated as of February 20, 1998, between Universal Compression, Inc. and The United States
Trust Company of New York, as Trustee.
4.4 -- Registration Rights Agreement, dated July 1, 1997, between Universal Compression Holdings, Inc. and
each of BT Alex. Brown Incorporated and Salomon Smith Barney.
4.5* -- Credit Agreement, dated as of February 20, 1998, among Universal Compression, Inc., Universal
Compression Holdings, Inc., Bankers Trust Company, as agent and the lenders party thereto.
4.6* -- Form of Notes under Credit Agreement.
4.7* -- Security Agreement, dated as of February 20, 1998, among Universal Compression, Inc., Universal
Compression Holdings, Inc., Bankers Trust Company, and the Banks party thereto.
4.8 -- Pledge Agreement, dated as of February 20, 1998, among Universal Compression, Inc., Universal
Compression Holdings, Inc., Bankers Trust Company and the Banks party thereto.
4.9 -- Acknowledgement and Joinder Agreement, dated February 20, 1998, between Universal Compression, Inc.
and Bankers Trust Company.
5.1* -- Opinion of Schulte Roth & Zabel LLP regarding legality.
8.1* -- Opinion of Schulte Roth & Zabel LLP regarding tax matters (contained in Exhibit 5.1).
10.1 -- Stock Purchase Agreement, dated December 18, 1997, between TW Acquisition Corporation and Tidewater
Inc.
10.2 -- Purchase Price Adjustment Agreement, dated February 20, 1998, among TW Acquisition Corporation,
Universal Compression Holdings, Inc., and Tidewater Inc.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.3 -- Transition Services Agreement, dated February 20, 1998, between TW Acquisition Corporation and
Tidewater Inc.
10.4 -- Employment Agreement, dated February 20, 1998, with Stephen Snider.
10.5 -- Employment Agreement, dated February 20, 1998, with Ernie Danner.
10.6 -- Employment Agreement, dated February 20, 1998, with Thomas Hartford.
10.7 -- Employment Agreement, dated February 20, 1998, with Newton Schnoor.
10.8 -- Employment Agreement, dated February 20, 1998, with Robert Ryan.
10.9 -- Management Agreement, dated February 20, 1998, among Universal Compression, Inc., Universal
Compression Holdings, Inc., and Castle Harlan, Inc.
10.10 -- Finders and Consulting Agreement, dated February 20, 1998.
10.11 -- Assignment and Assumption Agreement, dated February 20, 1998, among Universal Compression, Inc., BT
Alex. Brown and Salomon Smith Barney.
10.12 -- Co-Investor Subscription Agreement, dated February 20, 1998, between Universal Compression Holdings,
Inc. and certain co-investors.
10.13 -- Voting Agreement, dated February 20, 1998, among Castle Harlan Partners III, L.P., Universal
Compression Holdings, Inc. and certain other parties.
10.14 -- Registration Rights Agreement, dated February 20, 1998, among Universal Compression Holdings, Inc.
and certain of its stockholders.
10.15 -- Stockholders Agreement, dated February 20, 1998, between Universal Compression Holdings, Inc. and
certain of its stockholders.
10.16 -- Management Subscription Agreement, dated February 20, 1998, between Universal Compression Holdings,
Inc. and certain key members of Universal Compression, Inc.'s management.
10.17 -- Management Stock Buyback Agreement between Universal Compression Holdings, Inc. and certain key
members of Universal Compression, Inc.'s management.
10.18 -- Stock Option Agreements between Universal Compression Holdings, Inc. and each of Ernie Danner,
Stephen Snider, Thomas Hartford, Samuel Urcis, Newton Schnoor and Robert Ryan.
12.1* -- Statement of Computation of the Ratios of Earnings to Fixed Charges.
21.1* -- Subsidiaries of Universal Compression, Inc.
23.1 -- Consent of KMPG Peat Marwick LLP.
23.2* -- Consent of Schulte Roth & Zabel LLP (contained in Exhibit 5.1).
25.1 -- Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of 1939 of The
United States Trust Company of New York.
27.1* -- Financial Data Schedule.
99.1 -- Form of Letter of Transmittal.
99.2 -- Notice of Guaranteed Delivery.
</TABLE>
- ------------------
* To be filed by Amendment.
(b) Financial Statement Schedules.
ITEM 22. UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1993;
II-2
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the 'Calculation of
Registration Fee' table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(5) That every prospectus: (i) that is filed pursuant to paragraph (4)
immediately proceeding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(6) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of form
S-4, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(7) To supply by means of post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
B. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW
YORK ON THE 19TH DAY OF MARCH, 1998.
UNIVERSAL COMPRESSION, INC.
By: /s/ ERNIE DANNER
------------------------------
Ernie Danner
Chief Financial Officer
and Executive Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<C> <S> <C>
/s/ STEPHEN SNIDER President, Chief Executive Officer and March 19, 1998
- ------------------------------------------ Director
Stephen Snider
/s/ ERNIE DANNER Chief Financial Officer, Executive Vice March 19, 1998
- ------------------------------------------ President and Director (Principal Financial
Ernie Danner and Accounting Officer)
/s/ JOHN K. CASTLE Director March 19, 1998
- ------------------------------------------
John K. Castle
/s/ JEFFREY M. SIEGAL Director March 19, 1998
- ------------------------------------------
Jeffrey M. Siegal
/s/ WILLIAM J. LOVEJOY Director March 19, 1998
- ------------------------------------------
William J. Lovejoy
/s/ SAMUEL URCIS Director March 19, 1998
- ------------------------------------------
Samuel Urcis
/s/ C. KENT MAY Director March 19, 1998
- ------------------------------------------
C. Kent May
/s/ THOMAS HARTFORD Executive Vice President March 19, 1998
- ------------------------------------------ and Director
Thomas Hartford
</TABLE>
II-4
<PAGE>
SCHEDULE II
TIDEWATER COMPRESSION SERVICE, INC.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MARCH 31, 1997, 1996, AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------------- ---------- --------- ---------- --------
BALANCE
BALANCE AT AT
BEGINNING ADDITIONS END OF
DESCRIPTION OF PERIOD AT COST DEDUCTIONS PERIOD
- ----------------------------------------------- ---------- --------- ---------- --------
<S> <C> <C> <C> <C>
1997
Deducted in balance sheet from trade accounts
receivable:
Allowance for doubtful accounts.............. $ 510 120 312 318
Deducted in balance sheet from other assets:
Amortization of goodwill, prepaid rent and
debt issuance costs....................... $3,000 1,654 -- 4,654
1996
Deducted in balance sheet from trade accounts
receivables:
Allowance for doubtful accounts.............. $ 702 120 312 510
Deducted in balance sheet from other assets:
Amortization of goodwill and debt issuance
costs..................................... $ 675 2,325 -- 3,000
1995
Deducted in balance sheet from trade accounts
receivables:
Allowance for doubtful accounts.............. $ 344 390 32(A) 702
Deducted in balance sheet from other assets:
Amortization of goodwill and debt issuance
costs..................................... $ -- 675 -- 675
</TABLE>
- ------------------
(A) Accounts receivable amounts considered uncollectible and removed from
accounts receivable by reducing allowance for doubtful accounts.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------ ----------- ----------
<S> <C> <C> <C>
3.1* -- Certificate of Incorporation of Universal Compression, Inc., as amended.
3.2* -- Bylaws of Universal Compression, Inc.
4.1 -- Purchase Agreement, dated as of February 13, 1998, between Universal Compression, Inc.
and each of BT Alex. Brown and Salomon Smith Barney.
4.2 -- Specimen of Universal Compression, Inc.'s 9 7/8% Senior Discount Note due 2008.
4.3 -- Indenture, dated as of February 20, 1998, between Universal Compression, Inc. and The
United States Trust Company of New York, as Trustee.
4.4 -- Registration Rights Agreement, dated July 1, 1997, between Universal Compression
Holdings, Inc. and each of BT Alex. Brown Incorporated and Salomon Smith Barney.
4.5* -- Credit Agreement, dated as of February 20, 1998, among Universal Compression, Inc.,
Universal Compression Holdings, Inc., Bankers Trust Company, as agent and the lenders
party thereto.
4.6 -- Form of Notes under Credit Agreement.
4.7* -- Security Agreement, dated as of February 20, 1998, among Universal Compression, Inc.,
Universal Compression Holdings, Inc., Bankers Trust Company, and the Banks party thereto.
4.8 -- Pledge Agreement, dated as of February 20, 1998, among Universal Compression, Inc.,
Universal Compression Holdings, Inc., Bankers Trust Company and the Banks party thereto.
4.9 -- Acknowledgement and Joinder Agreement, dated February 20, 1998, between Universal
Compression, Inc. and Bankers Trust Company.
5.1* -- Opinion of Schulte Roth & Zabel LLP regarding legality.
8.1* -- Opinion of Schulte Roth & Zabel LLP regarding tax matters (contained in Exhibit 5.1).
10.1 -- Stock Purchase Agreement, dated December 18, 1997, between TW Acquisition Corporation and
Tidewater Inc.
10.2 -- Purchase Price Adjustment Agreement, dated February 20, 1998, among TW Acquisition
Corporation, Universal Compression Holdings, Inc., and Tidewater Inc.
10.3 -- Transition Services Agreement, dated February 20, 1998, between TW Acquisition
Corporation and Tidewater Inc.
10.4 -- Employment Agreement, dated February 20, 1998, with Stephen Snider.
10.5 -- Employment Agreement, dated February 20, 1998, with Ernie Danner.
10.6 -- Employment Agreement, dated February 20, 1998, with Thomas Hartford.
10.7 -- Employment Agreement, dated February 20, 1998, with Newton Schnoor.
10.8 -- Employment Agreement, dated February 20, 1998, with Robert Ryan.
10.9 -- Management Agreement, dated February 20, 1998, among Universal Compression, Inc.,
Universal Compression Holdings, Inc., and Castle Harlan, Inc.
10.10 -- Finders and Consulting Agreement, dated February 20, 1998.
10.11 -- Assignment and Assumption Agreement, dated February 20, 1998, among Universal
Compression, Inc., BT Alex. Brown and Salomon Smith Barney.
10.12 -- Co-Investor Subscription Agreement, dated February 20, 1998, between Universal
Compression Holdings, Inc. and certain co-investors.
10.13 -- Voting Agreement, dated February 20, 1998, among Castle Harlan Partners III, L.P.,
Universal Compression Holdings, Inc. and certain other parties.
10.14 -- Registration Rights Agreement, dated February 20, 1998, among Universal Compression
Holdings, Inc. and certain of its stockholders.
10.15 -- Stockholders Agreement, dated February 20, 1998, between Universal Compression Holdings,
Inc. and certain of its stockholders.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------ ----------- ----------
<S> <C> <C> <C>
10.16 -- Management Subscription Agreement, dated February 20, 1998, between Universal Compression
Holdings, Inc. and certain key members of Universal Compression, Inc.'s management.
10.17 -- Management Stock Buyback Agreement between Universal Compression Holdings, Inc. and
certain key members of Universal Compression, Inc.'s management.
10.18 -- Stock Option Agreements between Universal Compression Holdings, Inc. and each of Ernie
Danner, Stephen Snider, Thomas Hartford, Samuel Urcis, Newton Schnoor and Robert Ryan.
12.1* -- Statement of Computation of the Ratios of Earnings to Fixed Charges.
21.1* -- Subsidiaries of Universal Compression, Inc.
23.1 -- Consent of KMPG Peat Marwick LLP.
23.2* -- Consent of Schulte Roth & Zabel LLP (contained in Exhibit 5.1).
25.1 -- Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of
1939 of The United States Trust Company of New York.
27.1* -- Financial Data Schedule.
99.1 -- Form of Letter of Transmittal.
99.2 -- Notice of Guaranteed Delivery.
</TABLE>
- ------------------
* To be filed by Amendment.
<PAGE>
TW ACQUISITION CORPORATION
9 7/8% Senior Discount Notes
PURCHASE AGREEMENT
February 13, 1998
BT ALEX. BROWN INCORPORATED
SALOMON BROTHERS INC
c/o BT Alex. Brown Incorporated
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
TW Acquisition Corporation, a Delaware corporation (the
"Company"), hereby confirms its agreement with you (the "Initial Purchasers"),
as set forth below.
1. The Securities. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Initial Purchasers
$242,500,000 aggregate principal amount at maturity of its Senior Discount
Notes, Series A (the "Notes"). The Notes are to be issued under an indenture
(the "Indenture") to be dated as of February 20, 1998 by and between the Company
and United States Trust Company of New York, as Trustee (the "Trustee").
The Notes will be offered and sold to the Initial Purchasers
without being registered under the Securities Act of 1933, as amended (the
"Act"), in reliance on exemptions therefrom.
In connection with the sale of the Notes, the Company has
prepared a preliminary offering memorandum dated January 27, 1998 (the
"Preliminary Memorandum") and a final offering memorandum dated February 13,
1998 (the "Final Memorandum"; the Preliminary Memorandum and the Final
Memorandum each herein being referred to as a "Memorandum") setting forth or
including a description of the terms of the Notes, the terms of the offering of
the Notes, a description of the Company and any material developments relating
to the Company occurring after
<PAGE>
-2-
the date of the most recent historical financial statements included therein.
The Initial Purchasers and their direct and indirect
transferees of the Notes will be entitled to the benefits of the Registration
Rights Agreement, substantially in the form attached hereto as Exhibit A (the
"Registration Rights Agreement"), pursuant to which the Company has agreed,
among other things, to file a registration statement (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission")
registering the Notes or the Exchange Notes (as defined in the Registration
Rights Agreement) under the Act.
The Notes are being issued in connection with the consummation
of the transactions contemplated in the Stock Purchase Agreement, dated as of
December 18, 1997 (the "Stock Purchase Agreement") among Tidewater, Inc.
("Tidewater") and the Company, pursuant to which the Company will acquire 100%
of the voting securities of Tidewater Compression Service, Inc. from Tidewater
(the "Acquisition") for a purchase price of $360 million (the "Purchase Price").
The Company will fund the Purchase Price with (i) the gross proceeds of the
Notes offered hereby; (ii) an aggregate equity contribution of $105 million (the
"Equity Contribution") from Universal Compression Holdings, Inc. ("Holdings"),
the Company's parent, derived from an $81 million cash contribution from Castle
Harlan Partners III, L.P. ("CHP") (which organized both the Company and Holdings
and is the controlling stockholder of Holdings) and other parties to Holdings
(the "Cash Contribution") and $24 million net proceeds from the issuance of the
Holdings senior discount notes due 2009 ("Holdings Notes"); and (iii) a Term
Loan Credit Facility of $75 million and a Revolving Credit Facility of $85
million ($38 million of which will be drawn at the closing of the Acquisition),
each with Bankers Trust Company, as agent, and other lending institutions (the
"Credit Agreement"). Immediately following the issuance of the Notes and the
completion of the Acquisition, the Company will be merged (the "Merger")
pursuant to a Merger Agreement (the "Merger Agreement") with and into Tidewater
Compression Service, Inc., which will change its name to Universal Compression,
Inc. The Stock Purchase Agreement, the Credit Agreement and the Merger Agreement
are collectively referred to herein as the "Transaction Documents". All
references in this Agreement to the "Company" mean Universal Compression, Inc.
2. Representations and Warranties. The Company represents and
warrants to and agrees with each of the Initial Purchasers that:
<PAGE>
-3-
(a) Neither the Preliminary Memorandum as of the date thereof
nor the Final Memorandum nor any amendment or supplement thereto as of the date
thereof and at all times subsequent thereto up to the Closing Date (as defined
in Section 3 below) contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this Section 2(a) do not apply to statements or omissions made in reliance
upon and in conformity with information relating to either of the Initial
Purchasers furnished to the Company in writing by the Initial Purchasers
expressly for use in the Preliminary Memorandum, the Final Memorandum or any
amendment or supplement thereto.
(b) As of the Closing Date, the Company will have the
authorized, issued and outstanding capitalization set forth in the Final
Memorandum; all of the outstanding shares of capital stock of the Company have
been, and as of the Closing Date will be, duly authorized and validly issued,
are fully paid and nonassessable and were not issued in violation of any
preemptive or similar rights; except as set forth in the Final Memorandum, all
of the outstanding shares of capital stock of the Company will be free and clear
of all liens, encumbrances (other than as may be imposed by the Credit
Agreement), equities and claims or restrictions on transferability (other than
those imposed by the Act and the securities or "Blue Sky" laws of certain
jurisdictions) or voting; except as set forth in the Final Memorandum, there are
no (i) options, warrants or other rights to purchase, (ii) agreements or other
obligations to issue or (iii) other rights to convert any obligation into, or
exchange any securities for, shares of capital stock of or ownership interests
in the Company outstanding. Except as disclosed in the Final Memorandum, the
Company does not own, directly or indirectly, any shares of capital stock or any
other equity or long-term debt securities or have any equity interest in any
firm, partnership, joint venture or other entity.
(c) The Company is duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own its properties and conduct its
business as now conducted and as described in the Final Memorandum; the Company
is duly qualified to do business as a foreign corporation in good standing in
all other jurisdictions where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the failure to
be so
<PAGE>
-4-
qualified would not, individually or in the aggregate, have a material adverse
effect on the management, business, condition (financial or otherwise),
prospects or results of operations of the Company, taken as a whole (any such
event, a "Material Adverse Effect").
(d) The Company has all requisite corporate power and
authority to execute, deliver and perform each of its obligations under the
Notes, the Exchange Notes and the Private Exchange Notes (as defined in the
Registration Rights Agreement). The Notes, when issued, will be in the form
contemplated by the Indenture. The Notes, the Exchange Notes and the Private
Exchange Notes have each been duly and validly authorized by the Company and,
when executed by the Company and authenticated by the Trustee in accordance with
the provisions of the Indenture and, in the case of the Notes, when delivered to
and paid for by the Initial Purchasers in accordance with the terms of this
Agreement, will constitute valid and legally binding obligations of the Company,
entitled to the benefits of the Indenture, and enforceable against the Company
in accordance with their terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally,
and (ii) general principles of equity and the discretion of the court before
which any proceeding therefor may be brought.
(e) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the Indenture.
The Indenture meets the requirements for qualification under the Trust Indenture
Act of 1939, as amended (the "TIA"). The Indenture has been duly and validly
authorized by the Company and, when executed and delivered by the Company
(assuming the due authorization, execution and delivery by the Trustee), will
constitute a valid and legally binding agreement of the Company, enforceable
against the Company in accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought.
(f) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the Registration
Rights Agreement. The Registration Rights Agreement has been duly and validly
authorized by the Company and, when executed and delivered by the Company, will
<PAGE>
-5-
constitute a valid and legally binding agreement of the Company enforceable
against the Company in accordance with its terms, except that (A) the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought and (B) any rights to indemnity or contribution thereunder may be
limited by federal and state securities laws and public policy considerations.
(g) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement,
each of the Transaction Documents and to consummate the transactions
contemplated hereby and thereby. This Agreement, each of the Transaction
Documents and the consummation by the Company of the transactions contemplated
hereby and thereby have been duly and validly authorized by the Company. This
Agreement has been duly executed and delivered by the Company.
(h) No consent, approval, authorization or order of any court
or governmental agency or body, or third party is required for the issuance and
sale by the Company of the Notes to the Initial Purchasers or the consummation
by the Company of each of the Transaction Documents and the other transactions
contemplated hereby and thereby, except such as have been obtained and such as
may be required under state securities or "Blue Sky" laws in connection with the
purchase and resale of the Notes by the Initial Purchasers. The Company is not
(i) in violation of its certificate of incorporation or bylaws (or similar
organizational document), (ii) in breach or violation of any statute, judgment,
decree, order, rule or regulation applicable to it or any of its properties or
assets, except for any such breach or violation which would not, individually or
in the aggregate, have a Material Adverse Effect, or (iii) in breach of or
default under (nor has any event occurred which, with notice or passage of time
or both, would constitute a default under) or in violation of any of the terms
or provisions of any indenture, mortgage, deed of trust, loan agreement, note,
lease, license, franchise agreement, permit, certificate, contract or other
agreement or instrument to which it is a party or to which it or any of its
properties or assets is subject (collectively, "Contracts"), except for any such
breach, default, violation or event which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
<PAGE>
-6-
(i) The execution, delivery and performance by the Company of
this Agreement, the Indenture, the Registration Rights Agreement and each of the
Transaction Documents and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance and
sale of the Notes to the Initial Purchasers) will not conflict with or
constitute or result in a breach of or a default under (or an event which with
notice or passage of time or both would constitute a default under) or violation
of any of (i) the terms or provisions of any Contract, except for any such
conflict, breach, violation, default or event which would not, individually or
in the aggregate, have a Material Adverse Effect, (ii) the certificate of
incorporation or bylaws (or similar organizational document) of the Company, or
(iii) (assuming compliance with all applicable state securities or "Blue Sky"
laws and assuming the accuracy of the representations and warranties of the
Initial Purchasers in Section 8 hereof) any statute, judgment, decree, order,
rule or regulation applicable to the Company or any of its properties or assets,
except for any such conflict, breach or violation which would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(j) The audited financial statements of the Company included
in the Final Memorandum present fairly in all material respects the financial
position, results of operations and cash flows of the Company at the respective
dates and for the respective periods to which they relate and have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis, except as otherwise stated therein. The summary and selected
financial and statistical data in the Final Memorandum present fairly in all
material respects the information shown therein and have been prepared and
compiled on a basis consistent with the audited financial statements included
therein, except as otherwise stated therein. KPMG Peat Marwick LLP and Deloitte
& Touche (the "Independent Accountants") are independent public accounting firms
within the meaning of the Act and the rules and regulations promulgated
thereunder.
(k) The pro forma financial statements (including the notes
thereto) and the other pro forma financial information included in the Final
Memorandum (i) comply as to form in all material respects with the applicable
requirements of Regulation S-X promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (ii) have been prepared in all material
respects in accordance with the Commission's rules and guidelines with respect
to pro forma financial state-
<PAGE>
-7-
ments, and (iii) have been properly computed on the bases described therein; the
assumptions used in the preparation of the pro forma financial data and other
pro forma financial information included in the Final Memorandum are reasonable
and the adjustments used therein are appropriate in all material respects to
give effect to the transactions or circumstances referred to therein.
(l) There is not pending or, to the knowledge of the Company,
threatened any action, suit, proceeding, inquiry or investigation to which the
Company is a party, or to which the property or assets of the Company are
subject, before or brought by any court, arbitrator or governmental agency or
body which, if determined adversely to the Company, would reasonably be expected
to have individually or in the aggregate, have a Material Adverse Effect or
which seeks to restrain, enjoin, prevent the consummation of or otherwise
challenge the issuance or sale of the Notes to be sold hereunder or the
consummation of the other transactions described in the Final Memorandum.
(m) The Company possesses all licenses, permits, certificates,
consents, orders, approvals and other authorizations from, and has made all
declarations and filings with, all federal, state, local and other governmental
authorities, all self-regulatory organizations and all courts and other
tribunals, presently required or necessary to own or lease, as the case may be,
and to operate its properties and to carry on its businesses as now or proposed
to be conducted as set forth in the Final Memorandum ("Permits"), except where
the failure to obtain such Permits would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect; the Company has
fulfilled and performed all of its obligations with respect to such Permits and
no event has occurred which allows, or after notice or lapse of time would
allow, revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such Permit; the Company has not
received any notice of any proceeding relating to revocation or modification of
any such Permit, except as described in the Final Memorandum and except where
such revocation or modification would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(n) Since the date of the most recent financial statements
appearing in the Final Memorandum, except as described therein, (i) the Company
has not incurred any liabilities or obligations, direct or contingent, or
entered into or agreed to enter into any transactions or contracts (written or
oral) not in the ordinary course of business which liabilities,
<PAGE>
-8-
obligations, transactions or contracts would, individually or in the aggregate,
be material to the management, business, condition (financial or otherwise), or
results of operations of the Company, (ii) the Company has not purchased any of
its outstanding capital stock or declared, paid or otherwise made any dividend
or distribution of any kind on its capital stock and (iii) there shall not have
been any change in the capital stock or long-term indebtedness of the Company.
(o) The Company has filed all necessary federal, state and
foreign income and franchise tax returns, except where the failure to so file
such returns would not, individually or in the aggregate, have a Material
Adverse Effect, and has, except for delinquent sales and use taxes (and a late
payment penalty related thereto) owed to the State of Louisiana, paid all taxes
shown due with respect to the periods covered by such returns; and other than
tax deficiencies which the Company is contesting in good faith and for which the
Company has provided adequate reserves, there is no tax deficiency that has been
asserted against the Company that would have, individually or in the aggregate,
a Material Adverse Effect.
(p) The statistical and market-related data included in the
Final Memorandum are based on or derived from sources which the Company believes
to be reliable and accurate.
(q) The Company or any agent acting on its behalf has not
taken or will not take any action that might cause this Agreement or the sale of
the Notes to violate Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System, in each case as in effect, or as the same may hereafter
be in effect, on the Closing Date.
(r) The Company has good and marketable title to all real
property or good title to all personal property described in the Final
Memorandum as being owned by it and good and marketable title to a leasehold
estate in the real and personal property described in the Final Memorandum as
being leased by it free and clear of all liens, charges, encumbrances or
restrictions, except as described in the Final Memorandum or to the extent the
failure to have such title or the existence of such liens, charges, encumbrances
or restrictions would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. All leases, contracts and agreements
to which the Company is a party or by which it is bound are valid and
enforceable against the Company, and are valid and enforceable against the other
party or parties thereto and are in full force and effect with only such
excep-
<PAGE>
-9-
tions as would not, individually or in the aggregate, have a Material Adverse
Effect. The Company owns or possesses adequate licenses or other rights to use
all patents, trademarks, service marks, trade names, copyrights and know-how
necessary to conduct the businesses now or proposed to be operated by it as
described in the Final Memorandum, and the Company has not received any notice
of infringement of or conflict with (or knows of any such infringement of or
conflict with) asserted rights of others with respect to any patents,
trademarks, service marks, trade names, copyrights or know-how which, if such
assertion of infringement or conflict were sustained, would reasonably be
expected to have a Material Adverse Effect.
(s) There are no legal or governmental proceedings involving
or affecting the Company or any of its properties or assets which would be
required to be described in a prospectus pursuant to the Act that are not
described in the Final Memorandum, nor are there any material contracts or other
documents which would be required to be described in a prospectus pursuant to
the Act that are not described in the Final Memorandum.
(t) Except as would not, individually or in the aggregate and
except as disclosed in the Final Memorandum reasonably be expected to have a
Material Adverse Effect (A) the Company is in compliance with and not subject to
liability under applicable Environmental Laws (as defined below), (B) the
Company has made all filings and provided all notices required under any
applicable Environmental Law, and has and is in compliance with all Permits
required under any applicable Environmental Laws and each of them is in full
force and effect, (C) there is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, investigation, proceeding,
notice or demand letter or request for information pending or, to the knowledge
of the Company, threatened against the Company under any Environmental Law, (D)
no lien, charge, encumbrance or restriction has been recorded under any
Environmental Law with respect to any assets, facility or property owned,
operated, leased or controlled by the Company, (E) the Company has not received
notice that it has been identified as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA") or any comparable state law, (F) no property or facility of
the Company is (i) listed or proposed for listing on the National Priorities
List under CERCLA or (ii) listed in the Comprehensive Environmental Response,
Compensation, Liability Information System List promulgated pursuant to CERCLA,
or on any comparable list maintained by any state or local governmental
authority.
<PAGE>
-10-
For purposes of this Agreement, "Environmental Laws" means the
common law and all applicable federal, state and local laws or regulations,
codes, orders, decrees, judgments or injunctions issued, promulgated, approved
or entered thereunder, relating to pollution or protection of public or employee
health and safety or the environment, including, without limitation, laws
relating to (i) emissions, discharges, releases or threatened releases of
hazardous materials into the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata), (ii) the
manufacture, processing, distribution, use, generation, treatment, storage,
disposal, transport or handling of hazardous materials, and (iii) underground
and above ground storage tanks and related piping, and emissions, discharges,
releases or threatened releases therefrom.
(u) There is no organized strike, labor dispute, slowdown or
work stoppage with the employees of the Company which is pending or, to the
knowledge of the Company, threatened.
(v) As of the Closing Date, the Company will have in place
insurance in such amounts and covering such risks as is adequate for the conduct
of its business and the value of its properties.
(w) The Company (i) makes and keeps books and records which,
in reasonable detail, accurately and fairly reflect the transactions and
disposition of assets of the Company and (ii) maintains internal accounting
controls which provide reasonable assurance that (A) transactions are executed
in accordance with management's general or specific authorization, (B)
transactions are recorded as necessary to permit preparation of its financial
statements and to maintain accountability for its assets, (C) access to its
assets is permitted only in accordance with management's general or specific
authorization and (D) the reported accountability for its assets is compared
with existing assets at reasonable intervals.
(x) The Company will not be an "investment company" or
"promoter" or "principal underwriter" for an "investment company," as such terms
are defined in the Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
(y) The Notes, the Indenture, the Registration Rights
Agreement and each of the Transaction Documents will
<PAGE>
-11-
conform in all material respects to the descriptions thereof in the Final
Memorandum.
(z) No holder of securities of the Company will be entitled to
have such securities registered under the registration statements required to be
filed by the Company pursuant to the Registration Rights Agreement other than as
expressly permitted thereby.
(aa) Immediately after the consummation of the transactions
contemplated by this Agreement, the fair value and present fair saleable value
of the assets of the Company will exceed the sum of its stated liabilities and
identified contingent liabilities; the Company is not nor will the Company be,
after giving effect to the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby, (a) left with
unreasonably small capital with which to carry on its business as it is proposed
to be conducted, (b) unable to pay its debts (contingent or otherwise) as they
mature or (c) otherwise insolvent.
(bb) The Company or any of its Affiliates (as defined in Rule
501(b) of Regulation D under the Act) has not directly, or through any agent,
(i) sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of any "security" (as defined in the Act) which is or could be
integrated with the sale of the Notes in a manner that would require the
registration under the Act of the Notes or (ii) engaged in any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Act) in connection with the offering of the Notes or in any manner
involving a public offering within the meaning of Section 4(2) of the Act.
Assuming the accuracy of the representations and warranties of the Initial
Purchasers in Section 8 hereof, it is not necessary in connection with the
offer, sale and delivery of the Notes to the Initial Purchasers in the manner
contemplated by this Agreement to register any of the Notes under the Act or to
qualify the Indenture under the TIA.
(cc) No securities of the Company are of the same class
(within the meaning of Rule 144A under the Act) as the Notes and listed on a
national securities exchange registered under Section 6 of the Exchange Act, or
quoted in a U.S. automated inter-dealer quotation system.
(dd) The Company has not taken, nor will it take, directly or
indirectly, any action designed to, or that might
<PAGE>
-12-
be reasonably expected to, cause or result in stabilization or manipulation of
the price of the Notes.
(ee) The Company or any of its Affiliates or any person acting
on its or their behalf (other than the Initial Purchasers) has not engaged in
any directed selling efforts (as that term is defined in Regulation S under the
Act ("Regulation S")) with respect to the Notes; the Company and its Affiliates
and any person acting on its or their behalf (other than the Initial Purchasers)
have complied with the offering restrictions requirement of Regulation S.
(ff) The Company has delivered to counsel to the Initial
Purchasers a true and correct copy of each of the Transaction Documents that has
been executed and delivered prior to the date of this Agreement and each other
Transaction Document in the form substantially as it will be executed and
delivered on or prior to the Closing Date, together with all related agreements
and all schedules and exhibits thereto, and there shall have been no amendments,
alterations, modifications or waivers of any of the provisions of any of the
Transaction Documents since their respective dates of execution or from the form
in which it has been delivered to the Initial Purchasers, other than any such
amendments, alterations, modifications and waivers as to which the Initial
Purchasers have been advised in writing and which would not be required to be
disclosed in the Preliminary Memorandum or the Final Memorandum, as the case may
be; and to the knowledge of the Company there exists no event or condition which
would constitute a default or an event of default under any of the Transaction
Documents which would reasonably be expected to result in a Material Adverse
Effect or materially adversely affect the ability to consummate the transactions
contemplated by the Transaction Documents or the Final Memorandum.
Any certificate signed by any officer of the Company and
delivered to any Initial Purchaser or to counsel for the Initial Purchasers
shall be deemed a joint and several representation and warranty by the Company
to each Initial Purchaser as to the matters covered thereby.
3. Purchase, Sale and Delivery of the Notes. On the basis of
the representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Initial Purchasers, and the Initial Purchasers, acting
severally and not jointly, agree to purchase the Notes in the respective amounts
set forth on Schedule 1, hereto from the Com-
<PAGE>
-13-
pany at 58.84% of their principal amount at maturity of the Senior Discount
Notes. One or more certificates in definitive form for the Notes that the
Initial Purchasers have agreed to purchase hereunder, and in such denomination
or denominations and registered in such name or names as the Initial Purchasers
request upon notice to the Company at least 36 hours prior to the Closing Date,
shall be delivered by or on behalf of the Company to the Initial Purchasers,
against payment by or on behalf of the Initial Purchasers of the purchase price
therefor by wire transfer (same day funds), to such account or accounts as the
Company shall specify prior to the Closing Date, or by such means as the parties
hereto shall agree prior to the Closing Date. Such delivery of and payment for
the Notes shall be made at the offices of Schulte Roth & Zabel LLP, 900 Third
Avenue, New York, New York at 10:00 A.M., New York time, on February 20, 1998,
or at such other place, time or date as the Initial Purchasers, on the one hand,
and the Company, on the other hand, may agree upon, such time and date of
delivery against payment being herein referred to as the "Closing Date." The
Company will make such certificate or certificates for the Notes available for
checking and packaging by the Initial Purchasers at the offices of BT Alex.
Brown Incorporated in New York, New York, or at such other place as BT Alex.
Brown Incorporated may designate, at least 24 hours prior to the Closing Date.
4. Offering by the Initial Purchasers. The Initial Purchasers
propose to make an offering of the Notes at the price and upon the terms set
forth in the Final Memorandum, as soon as practicable after this Agreement is
entered into and as in the judgment of the Initial Purchasers is advisable.
5. Covenants of the Company. The Company covenants and agrees
with each of the Initial Purchasers that:
(a) The Company will not amend or supplement the Final
Memorandum or any amendment or supplement thereto of which the Initial
Purchasers shall not previously have been advised and furnished a copy for a
reasonable period of time prior to the proposed amendment or supplement and as
to which the Initial Purchasers shall reasonably object to in writing. The
Company will promptly, upon the reasonable request of the Initial Purchasers or
counsel for the Initial Purchasers, make any amendments or supplements to the
Preliminary Memorandum or the Final Memorandum that may be necessary or
advisable in connection with the resale of the Notes by the Initial Purchasers.
<PAGE>
-14-
(b) The Company will cooperate with the Initial Purchasers in
arranging for the qualification of the Notes for offering and sale under the
securities or "Blue Sky" laws of which jurisdictions as the Initial Purchasers
may designate and will continue such qualifications in effect for as long as may
be necessary to complete the resale of the Notes; provided, however, that in
connection therewith, the Company shall not be required to qualify as a foreign
corporation or to execute a general consent to service of process in any
jurisdiction or subject itself to taxation in excess of a nominal dollar amount
in any such jurisdiction where it is not then so subject.
(c) If, at any time prior to the completion of the
distribution by the Initial Purchasers of the Notes or the Private Exchange
Notes, any event occurs or information becomes known as a result of which the
Final Memorandum as then amended or supplemented would include any untrue
statement of a material fact, or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, or if for any other reason it is necessary at any time to
amend or supplement the Final Memorandum to comply with applicable law, the
Company will promptly notify the Initial Purchasers thereof and will prepare, at
the expense of the Company, an amendment or supplement to the Final Memorandum
that corrects such statement or omission or effects such compliance.
(d) The Company will, without charge, provide to the Initial
Purchasers and to counsel for the Initial Purchasers as many copies of the
Preliminary Memorandum and the Final Memorandum or any amendment or supplement
thereto as the Initial Purchasers may reasonably request.
(e) The Company will apply the net proceeds from the sale of
the Notes as set forth under "Use of Proceeds" in the Final Memorandum.
(f) For so long as any of the Notes remain outstanding, the
Company will furnish to the Initial Purchasers copies of all reports and other
communications (financial or otherwise) furnished by the Company to the Trustee
or to the holders of the Notes and, as soon as available, copies of any reports
or financial statements furnished to or filed by the Company with the Commission
or any national securities exchange on which any class of securities of the
Company may be listed.
(g) Prior to the Closing Date, the Company will furnish to the
Initial Purchasers, as soon as they have been pre-
<PAGE>
-15-
pared, a copy of any unaudited interim financial statements of the Company for
any period subsequent to the period covered by the most recent financial
statements appearing in the Final Memorandum.
(h) None of the Company or any of its Affiliates will sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) which could be integrated with the sale of
the Notes in a manner which would require the registration under the Act of the
Notes.
(i) The Company will not engage in any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Act) in connection with the offering of the Notes or in any manner
involving a public offering within the meaning of Section 4(2) of the Act.
(j) For so long as any of the Notes remain outstanding, the
Company will make available at its expense, upon request, to any holder of such
Notes and any prospective purchasers thereof the information specified in Rule
144A(d)(4) under the Act, unless the Company is then subject to Section 13 or
15(d) of the Exchange Act.
(k) The Company will use its best efforts to (i) permit the
Notes to be designated PORTAL securities in accordance with the rules and
regulations adopted by the NASD relating to trading in the Private Offerings,
Resales and Trading through Automated Linkages market (the "Portal Market") and
(ii) permit the Notes to be eligible for clearance and settlement through The
Depository Trust Company.
(l) In connection with Notes offered and sold in an off shore
transaction (as defined in Regulation S) the Company will not register any
transfer of such Notes not made in accordance with the provisions of Regulation
S and will not, except in accordance with the provisions of Regulation S, if
applicable, issue any such Notes in the form of definitive securities.
6. Expenses. The Company agrees to pay all costs and expenses
incident to the performance of its obligations under this Agreement, whether or
not the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and expenses
incident to (i) the printing, word processing or other production of documents
with respect to the transactions contemplated hereby, including any costs of
printing the Preliminary Memo-
<PAGE>
-16-
randum and the Final Memorandum and any amendment or supplement thereto, and any
"Blue Sky" memoranda, (ii) all arrangements relating to the delivery to the
Initial Purchasers of copies of the foregoing documents, (iii) the fees and
disbursements of the counsel, the accountants and any other experts or advisors
retained by the Company, (iv) preparation (including printing), issuance and
delivery to the Initial Purchasers of the Notes, (v) the qualification of the
Notes under state securities and "Blue Sky" laws, including filing fees and fees
and disbursements of counsel for the Initial Purchasers relating thereto, (vi)
expenses in connection with any meetings with prospective investors in the
Notes, (vii) fees and expenses of the Trustee including reasonable fees and
expenses of counsel, (viii) all expenses and listing fees incurred in connection
with the application for quotation of the Notes on the Portal Market and (ix)
any fees charged by investment rating agencies for the rating of the Notes. If
the sale of the Notes provided for herein is not consummated because any
condition to the obligations of the Initial Purchasers set forth in Section 7
hereof is not satisfied, because this Agreement is terminated or because of any
failure, refusal or inability on the part of the Company to perform all
obligations and satisfy all conditions on their part to be performed or
satisfied hereunder (other than solely by reason of a default by the Initial
Purchasers of their obligations hereunder or by reason of Section 11(a)) the
Company agrees to promptly reimburse the Initial Purchasers upon demand for all
out-of-pocket expenses (including reasonable fees, disbursements and charges of
Cahill Gordon & Reindel, counsel for the Initial Purchasers) that shall have
been incurred by the Initial Purchasers in connection with the proposed purchase
and sale of the Notes.
7. Conditions of the Initial Purchasers' Obligations. The
obligation of the Initial Purchasers to purchase and pay for the Notes shall, in
their sole discretion, be subject to the satisfaction or waiver of the following
conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchasers shall have
received the opinion, dated as of the Closing Date and addressed to the Initial
Purchasers, of Schulte Roth & Zabel LLP, counsel for the Company, in form and
substance satisfactory to counsel for the Initial Purchasers, to the effect
that:
(i) The Company is duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation
and has all requisite corporate
<PAGE>
-17-
power and authority to own its properties and to conduct its business
as described in the Final Memorandum. The Company is duly qualified to
do business as a foreign corporation in good standing in all other
domestic jurisdictions where it conducts operations as disclosed in the
Final Memorandum except where the failure to be so qualified would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(ii) The Company has the authorized, issued and outstanding
capitalization set forth in the Final Memorandum; all of the
outstanding shares of capital stock of the Company have been duly
authorized and validly issued, are fully paid and nonassessable and
were not issued in violation of any preemptive or similar rights.
(iii) Except as set forth in or contemplated by the Final
Memorandum to the knowledge of such counsel (A) no options, warrants or
other rights to purchase from the Company shares of capital stock or
ownership interests in the Company are outstanding, (B) no agreements
or other obligations to issue, or other rights to convert, any
obligation into, or exchange any securities for, shares of capital
stock or ownership interests in the Company are outstanding and (C) no
holder of securities of the Company is entitled to have such securities
registered under a registration statement filed by the Company pursuant
to the Registration Rights Agreement.
(iv) The Company has all requisite corporate power and
authority to execute, deliver and perform each of its obligations under
the Indenture, the Notes, the Exchange Notes and the Private Exchange
Notes; the Indenture meets the requirements for qualification under the
TIA in all material respects; the Indenture has been duly and validly
authorized by the Company and, when duly executed and delivered by the
Company (assuming the due authorization, execution and delivery thereof
by the Trustee), will constitute the valid and legally binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought.
<PAGE>
-18-
(v) The Notes are in the form contemplated by the Indenture.
The Notes have each been duly and validly authorized by the Company
and, when duly executed and delivered by the Company and paid for by
the Initial Purchasers in accordance with the terms of this Agreement
(assuming the due authorization, execution and delivery of the
Indenture by the Trustee and due authentication and delivery of the
Notes by the Trustee in accordance with the Indenture), will constitute
the valid and legally binding obligations of the Company, entitled to
the benefits of the Indenture, and enforceable against the Company in
accordance with their terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought.
(vi) The Exchange Notes and the Private Exchange Notes have
been duly and validly authorized by the Company, and when the Exchange
Notes and the Private Exchange Notes have been duly executed and
delivered by the Company in accordance with the terms of the
Registration Rights Agreement and the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the Trustee
and due authentication and delivery of the Exchange Notes and the
Private Exchange Notes by the Trustee in accordance with the
Indenture), will constitute the valid and legally binding obligations
of the Company, entitled to the benefits of the Indenture, and
enforceable against the Company in accordance with their terms, except
that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought.
(vii) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Registration Rights Agreement; the Registration Rights Agreement has
been duly and validly authorized by the Company and, when duly executed
and delivered by the Company (assuming due authorization, execution and
delivery thereof by the Initial Purchasers), will constitute the valid
and legally binding agreement of the Company, enforceable against the
Company in accordance with
<PAGE>
-19-
its terms, except that (A) the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought, (B) any rights to
indemnity or contribution thereunder may be limited by federal and
state securities laws and public policy considerations and (C) such
counsel may exclude the enforceability of liquidated damages provisions
from its opinion.
(viii) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this
Agreement, and to consummate the transactions contemplated hereby; this
Agreement and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by the
Company. This Agreement has been duly executed and delivered by the
Company.
(ix) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under each of
the Transaction Documents; each of the Transaction Documents has been
duly and validly authorized by the Company and, when duly executed and
delivered by the Company (assuming due authorization, execution and
delivery thereof by the Initial Purchasers), will constitute the valid
and legally binding agreement of the Company, enforceable against the
Company in accordance with its terms, except that (A) the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity and
the discretion of the court before which any proceeding therefor may be
brought and (B) any rights to indemnity or contribution thereunder may
be limited by federal and state securities laws and public policy
considerations.
(x) The Indenture, the Notes, the Registration Rights
Agreement and each of the Transaction Documents conform in all material
respects to the descriptions thereof contained in the Final Memorandum.
(xi) To the knowledge of such counsel, no legal or
governmental proceedings are pending or, to the knowledge of such
counsel, threatened to which the Company is a
<PAGE>
-20-
party or to which the property or assets of the Company are subject
which, if determined adversely to the Company, would reasonably be
expected to result, individually or in the aggregate, in a Material
Adverse Effect, or which seek to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the
Notes to be sold hereunder or the consummation of the other
transactions described in the Final Memorandum under the caption
"Description of Company Acquisition".
(xii) The execution, delivery and performance of this
Agreement, the Indenture, the Registration Rights Agreement, each of
the Transaction Documents and the consummation of the transactions
contemplated hereby and thereby (including, without limitation, the
issuance and sale of the Notes to the Initial Purchasers) will not
conflict with or constitute or result in a breach or a default under
(or an event which with notice or passage of time or both would
constitute a default under) or violation of any of (i) the terms or
provisions of any Contract listed on a schedule reasonably acceptable
to the Initial Purchasers, except for any such conflict, breach,
violation, default or event which would not, individually or in the
aggregate, have a Material Adverse Effect, (ii) the certificate of
incorporation or bylaws of the Company or (iii) (assuming compliance
with all applicable state securities or "Blue Sky" laws and assuming
the accuracy of the representations and warranties of the Initial
Purchasers in Section 8 hereof) any statute, judgment, decree, order,
rule or regulation known to such counsel to be applicable to the
Company or any of its properties or assets, except for any such
conflict, breach or violation which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(xiii) No consent, approval, authorization or order of any
governmental authority is required for the issuance and sale by the
Company of the Notes to the Initial Purchasers, the consummation by the
Company of each of the Transaction Documents or of the other
transactions contemplated hereby and thereby, except such as may be
required under the Federal Securities laws or Blue Sky laws, as to
which such counsel need express no opinion, and those which have
previously been obtained.
(xiv) The Company is not, nor immediately after the sale of
the Notes to be sold hereunder and the application of the proceeds from
such sale (as described in the Final
<PAGE>
-21-
Memorandum under the caption "Use of Proceeds") will it be, an
"investment company" as such term is defined in the Investment Company
Act of 1940, as amended.
(xv) No registration under the Act of the Notes is required
in connection with the sale of the Notes to the Initial Purchasers as
contemplated by this Agreement and the Final Memorandum or in
connection with the initial resale of the Notes by the Initial
Purchasers in accordance with Section 8 of this Agreement, and prior to
the commencement of the Exchange Offer (as defined in the Registration
Rights Agreement) or the effectiveness of the Shelf Registration
Statement (as defined in the Registration Rights Agreement), the
Indenture is not required to be qualified under the TIA, in each case
assuming (i) (A) that the purchasers who buy such Notes in the initial
resale thereof are qualified institutional buyers as defined in Rule
144A promulgated under the Act ("QIBs") or accredited investors as
defined in Rule 501(a)(1), (2), (3) or (7) promulgated under the Act
("Accredited Investors") or (B) that the offer or sale of the Notes is
made in an offshore transaction as defined in and in compliance with
Regulation S, (ii) the accuracy of the Initial Purchasers'
representations in Section 8 and those of the Company contained in this
Agreement regarding the absence of a general solicitation in connection
with the offer and sale of such Notes to the Initial Purchasers and the
initial resale thereof and (iii) the due performance by the Initial
Purchasers of the agreements set forth in Section 8 hereof.
(xvi) Neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance, execution or
delivery of the Notes will violate Regulation G, T, U or X of the Board
of Governors of the Federal Reserve System.
At the time the foregoing opinion is delivered, Schulte Roth &
Zabel LLP shall additionally state that it has participated in conferences with
officers and other representatives of the Company, representatives of the
independent public accountants for the Company, representatives of the Initial
Purchasers and counsel for the Initial Purchasers, at which conferences the
contents of the Final Memorandum and related matters were discussed, and,
although it has not independently verified and is not passing upon and assumes
no responsibility for the accuracy, completeness or fairness of the statements
contained in the Final Memorandum (except to the extent speci-
<PAGE>
-22-
fied in subsection 7(a)(x)), no facts have come to its attention which lead it
to believe that the Final Memorandum, on the date thereof or at the Closing
Date, contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading (it being understood that such firm need express no opinion with
respect to the financial statements and related notes thereto and the other
financial, statistical and accounting data included in the Final Memorandum).
The opinion and statement of Schulte Roth & Zabel LLP described in this Section
shall be rendered to the Initial Purchasers at the request of the Company and
shall so state therein. In rendering such opinion, Schulte Roth & Zabel LLP
shall have received and may rely upon such certificates and other documents and
information as it may reasonably request to pass upon such matters.
References to the Final Memorandum in this subsection (a)
shall include any amendment or supplement thereto prepared in accordance with
the provisions of this Agreement at the Closing Date.
(b) On the Closing Date, the Initial Purchasers shall have
received the opinion, in form and substance satisfactory to the Initial
Purchasers, dated as of the Closing Date and addressed to the Initial
Purchasers, of Cahill Gordon & Reindel, counsel for the Initial Purchasers, with
respect to certain legal matters relating to this Agreement and such other
related matters as the Initial Purchasers may reasonably require. In rendering
such opinion, Cahill Gordon & Reindel shall have received and may rely upon such
certificates and other documents and information as it may reasonably request to
pass upon such matters.
(c) The Initial Purchasers shall have received from each of
the Independent Accountants a comfort letter or letters dated the date hereof
and the Closing Date, in form and substance satisfactory to counsel for the
Initial Purchasers.
(d) The representations and warranties of the Company
contained in this Agreement shall be true and correct on and as of the date
hereof and on and as of the Closing Date as if made on and as of the Closing
Date; the statements of the Company's officers made pursuant to any certificate
delivered in accordance with the provisions hereof shall be true and correct in
all material respects on and as of the date made and on and as of the Closing
Date; the Company shall have performed in
<PAGE>
-23-
all material respects all covenants and agreements and satisfied all conditions
on their part to be performed or satisfied hereunder at or prior to the Closing
Date; and, except as described in the Final Memorandum (exclusive of any
amendment or supplement thereto after the date hereof), subsequent to the date
of the most recent financial statements in such Final Memorandum, there shall
have been no event or development, and no information shall have become known,
that, individually or in the aggregate, has or would be reasonably likely to
have a Material Adverse Effect.
(e) The sale of the Notes hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(f) Subsequent to the date of the most recent financial
statements in the Final Memorandum (exclusive of any amendment or supplement
thereto after the date hereof), the Company shall not have sustained any loss or
interference with respect to its business or properties from fire, flood,
hurricane, accident or other calamity, whether or not covered by insurance, or
from any strike, labor dispute, slowdown or work stoppage or from any legal or
governmental proceeding, order or decree, which loss or interference,
individually or in the aggregate, has or would be reasonably likely to have a
Material Adverse Effect.
(g) The Initial Purchasers shall have received a certificate
of the Company, dated the Closing Date, signed on behalf of the Company by its
Chairman of the Board, President or any Senior Vice President and the Chief
Financial Officer, to the effect that:
(i) After giving effect to the Offering of the Notes and the
consummation of each of the Transaction Documents, the representations
and warranties of the Company contained in this Agreement are true and
correct in all material respects on and as of the date hereof and on
and as of the Closing Date, and the Company has performed in all
material respects all covenants and agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or
prior to the Closing Date;
(ii) At the Closing Date, since the date hereof or since the
date of the most recent financial statements in the Final Memorandum
(exclusive of any amendment or supplement thereto after the date
hereof), no event or development has occurred, and no information has
become known,
<PAGE>
-24-
that, individually or in the aggregate, has or would be reasonably
likely to have a Material Adverse Effect; and
(iii) The sale of the Notes hereunder has not been enjoined
(temporarily or permanently).
(h) On the Closing Date, the Initial Purchasers shall have
received the Registration Rights Agreement executed by the Company.
(i) On the Closing Date, all material conditions (other than
the payment of the purchase price) to the consummation of the Stock Purchase
Agreement shall have been satisfied and such Stock Purchase Agreement shall be
in full force and effect. Since the date of this Agreement, except as previously
disclosed to the Initial Purchasers and reasonably acceptable to them, there
have been no amendments, modifications, restatements or waivers to the Stock
Purchase Agreement that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, or materially adversely affect the
holders of the Notes, or which would be required to be disclosed in the Final
Memorandum and are not so disclosed.
(j) On the Closing Date, all material conditions to the
consummation of the Merger Agreement shall have been satisfied; the Certificate
of Merger merging the Company with and into Tidewater Compression Service, Inc.
shall have been pre-cleared under the laws of the State of Delaware and the
State of Texas, and the Certificate of Name Change changing Tidewater
Compression Services, Inc.'s name to Universal Compression, Inc. shall have been
pre-cleared under the laws of the State of Texas. The Merger Agreement conforms
in all material respects to the description of the Merger set forth in the Final
Memorandum.
(k) On the Closing Date, all material conditions to the
consummation of the Credit Agreement and the making of the initial Loans (as
defined in the Credit Agreement) shall have been satisfied. The Credit Agreement
conforms in all material respects to the description thereof in the Final
Memorandum.
(l) On the Closing Date, all material conditions to the
consummation of the Equity Contribution shall have been satisfied and the Cash
Contribution shall have been consummated prior to the consummation of the
offering of Notes. The Equity Contribution conforms in all material respects to
the description thereof in the Final Memorandum.
<PAGE>
-25-
(m) The Initial Purchasers shall have received a true, correct
and executed copy of the (i) Credit Agreement; (ii) Stock Purchase Agreement;
(iii) Merger Agreement; and (iv) Assumption Agreement, a form of which is
attached hereto as Exhibit A.
On or before the Closing Date, the Initial Purchasers and
counsel for the Initial Purchasers shall have received such further documents,
opinions, certificates, letters and schedules or instruments relating to the
business, corporate, legal and financial affairs of the Company as they shall
have heretofore reasonably requested from the Company.
All such documents, opinions, certificates, letters, schedules
or instruments delivered pursuant to this Agreement will comply with the
provisions hereof only if they are reasonably satisfactory in all material
respects to the Initial Purchasers and counsel for the Initial Purchasers. The
Company shall furnish to the Initial Purchasers such conformed copies of such
documents, opinions, certificates, letters, schedules and instruments in such
quantities as the Initial Purchasers shall reasonably request.
8. Offering of Notes; Restrictions on Transfer.
(a) Each of the Initial Purchasers represents and warrants (as
to itself only) that it is a QIB. Each of the Initial Purchasers agrees with the
Company (as to itself only) that (i) it has not and will not solicit offers for,
or offer or sell, the Notes by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) or in any
manner involving a public offering within the meaning of Section 4(2) of the
Act; and (ii) it has and will solicit offers for the Notes only from, and will
offer the Notes only to (A) in the case of offers inside the United States,
persons whom the Initial Purchasers reasonably believe to be QIBs or, if any
such person is buying for one or more institutional accounts for which such
person is acting as fiduciary or agent, only when such person has represented to
the Initial Purchasers that each such account is a QIB, to whom notice has been
given that such sale or delivery is being made in reliance on Rule 144A, and, in
each case, in transactions under Rule 144A and (B) in the case of offers outside
the United States, to persons other than U.S. persons ("foreign purchasers,"
which term shall include dealers or other professional fiduciaries in the United
States acting on a discretionary basis for foreign beneficial owners (other than
an estate or trust)); provided, however, that, in the case of this clause
<PAGE>
-26-
(B), in purchasing such Notes such persons are deemed to have represented and
agreed as provided under the caption "Transfer Restrictions" contained in the
Final Memorandum (or, if the Final Memorandum is not in existence, in the most
recent Memorandum).
(b) Each of the Initial Purchasers represents and warrants (as
to itself only) with respect to offers and sales outside the United States that
(i) it has and will comply with all applicable laws and regulations in each
jurisdiction in which it acquires, offers, sells or delivers Notes or has in its
possession or distributes any Memorandum or any such other material, in all
cases at its own expense; (ii) the Notes have not been and will not be offered
or sold within the United States or to, or for the account or benefit of, U.S.
persons except in accordance with Regulation S under the Act or pursuant to an
exemption from the registration requirements of the Act; (iii) it has offered
the Notes and will offer and sell the Notes (A) as part of its distribution at
any time and (B) otherwise until 40 days after the later of the commencement of
the offering and the Closing Date, only in accordance with Rule 903 of
Regulation S and, accordingly, neither it nor any persons acting on its behalf
have engaged or will engage in any directed selling efforts (within the meaning
of Regulation S) with respect to the Notes, and any such persons have complied
and will comply with the offering restrictions requirement of Regulation S; and
(iv) it agrees that, at or prior to confirmation of sales of the Notes, it will
have sent to each distributor, dealer or person receiving a selling concession,
fee or other remuneration that purchases Notes from it during the restricted
period a confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
United States Securities Act of 1933 (the "Securities Act") and may not
be offered and sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of the distribution of the
Securities at any time or (ii) otherwise until 40 days after the later
of the commencement of the offering and the closing date of the
offering, except in either case in accordance with Regulation S (or
Rule 144A if available) under the Securities Act. Terms used above have
the meaning given to them in Regulation S."
Terms used in this Section 8 and not defined in this
Agreement have the meanings given to
them in Regulation S.
<PAGE>
-27-
9. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless the Initial Purchasers, and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities to which any Initial Purchaser or such controlling person may become
subject under the Act, the Exchange Act or otherwise, insofar as any such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in any Memorandum or any amendment or
supplement thereto or any application or other document, or any
amendment or supplement thereto, executed by the Company or based upon
written information furnished by or on behalf of the Company filed in
any jurisdiction in order to qualify the Notes under the securities or
"Blue Sky" laws thereof or filed with any securities association or
securities exchange (each an "Application"); or
(ii) the omission or alleged omission to state, in any
Memorandum or any amendment or supplement thereto or any Application, a
material fact required to be stated therein or necessary to make the
statements therein not misleading,
and will reimburse, as incurred, the Initial Purchasers and each such
controlling person for any legal or other expenses reasonably incurred by the
Initial Purchasers or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action; provided, however, the Company
will not be liable in any such case to the extent that any such loss, claim,
damage, or liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in any Memorandum
or any amendment or supplement thereto or any Application in reliance upon and
in conformity with written information concerning the Initial Purchasers
furnished to the Company by the Initial Purchasers specifically for use therein.
This indemnity agreement will be in addition to any liability that the Company
may otherwise have to the indemnified parties. The Company shall not be liable
under this Section 9 for any settlement of any claim or action effected without
its prior written consent, which shall not be unreasonably withheld.
<PAGE>
-28-
(b) The Initial Purchasers agree to indemnify and hold
harmless the Company, its directors, its officers and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act against any losses, claims, damages or liabilities to which
the Company or any such director, officer or controlling person may become
subject under the Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any Memorandum or any amendment or supplement thereto
or any Application, or (ii) the omission or the alleged omission to state
therein a material fact required to be stated in any Memorandum or any amendment
or supplement thereto or any Application, or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
concerning such Initial Purchaser, furnished to the Company by the Initial
Purchasers specifically for use therein; and subject to the limitation set forth
immediately preceding this clause, will reimburse, as incurred, any legal or
other expenses reasonably incurred by the Company or any such director, officer
or controlling person in connection with investigating or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action in respect thereof. This indemnity agreement will be
in addition to any liability that the Initial Purchasers may otherwise have to
the indemnified parties. The Initial Purchasers shall not be liable under this
Section 9 for any settlement of any claim or action effected without their
consent, which shall not be unreasonably withheld. The Company shall not,
without the prior written consent of the Initial Purchasers, effect any
settlement or compromise of any pending or threatened proceeding in respect of
which any Initial Purchaser is or could have been a party, or indemnity could
have been sought hereunder by any Initial Purchaser, which settlement or
compromise would be applicable to the Initial Purchasers unless such settlement
(A) includes an unconditional written release of the Initial Purchasers, in form
and substance reasonably satisfactory to the Initial Purchasers, from all
liability on claims that are the subject matter of such proceeding and (B) does
not include any statement as to an admission of fault, culpability or failure to
act by or on behalf of any Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any ac-
<PAGE>
-29-
tion for which such indemnified party is entitled to indemnification under this
Section 9, such indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this Section 9, notify the
indemnifying party of the commencement thereof in writing; but the omission to
so notify the indemnifying party (i) will not relieve it from any liability
under paragraph (a) or (b) above unless and to the extent such failure results
in material prejudice to the indemnifying party and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraphs (a) and (b)
above. In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it and/or other indemnified parties that are different from or
additional to those available to the indemnifying party, or (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after receipt by the indemnifying party of notice of the institution of
such action, then, in each such case, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party
or parties and such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof and approval by such indemnified
party of counsel appointed to defend such action, the indemnifying party will
not be liable to such indemnified party under this Section 9 for any legal or
other expenses, other than reasonable costs of investigation, subsequently
incurred by such indemnified party in connection with the defense thereof,
unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the immediately preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one
<PAGE>
-30-
action or separate but substantially similar actions in the same jurisdiction
arising out of the same general allegations or circumstances, designated by the
Initial Purchasers in the case of paragraph (a) of this Section 9 or the Company
in the case of paragraph (b) of this Section 9, representing all of the
indemnified parties under such paragraph (a) or paragraph (b), as the case may
be, who are parties to such action or actions) or (ii) the indemnifying party
has authorized in writing the employment of counsel for the indemnified party at
the expense of the indemnifying party. After such notice from the indemnifying
party to such indemnified party, the indemnifying party will not be liable for
the costs and expenses of any settlement of such action effected by such
indemnified party without the prior written consent of the indemnifying party
(which consent shall not be unreasonably withheld), unless such indemnified
party waived in writing its rights under this Section 9, in which case the
indemnified party may effect such a settlement without such consent.
(d) In circumstances in which the indemnity agreement provided
for in the preceding paragraphs of this Section 9 is unavailable to, or
insufficient to hold harmless, an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Notes or (ii) if the
allocation provided by the foregoing clause (i) is not permitted by applicable
law, not only such relative benefits but also the relative fault of the
indemnifying party or parties on the one hand and the indemnified party on the
other in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by the Company on
the one hand and any Initial Purchaser on the other shall be deemed to be in the
same proportion as the total proceeds from the offering (before deducting
expenses) received by the Company bear to the total discounts and commissions or
other compensation received by such Initial Purchaser with respect to the Notes
purchased hereunder. The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to infor-
<PAGE>
-31-
mation supplied by the Company on the one hand, or such Initial Purchaser on the
other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission or alleged
statement or omission, and any other equitable considerations appropriate in the
circumstances. The Company and the Initial Purchasers agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the first sentence of this
paragraph (d). Notwithstanding any other provision of this paragraph (d), no
Initial Purchaser shall be obligated to make contributions hereunder that in the
aggregate exceed the total discounts, commissions and other compensation
received by such Initial Purchaser under this Agreement, less the aggregate
amount of any damages that such Initial Purchaser has otherwise been required to
pay by reason of the untrue or alleged untrue statements or the omissions or
alleged omissions to state a material fact, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any, who
controls an Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act shall have the same rights to contribution as the
Initial Purchasers, and each director of the Company, each officer of the
Company and each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, shall have the same
rights to contribution as the Company.
10. Survival Clause. The respective representations,
warranties, agreements, covenants, indemnities and other statements of the
Company, its officers and the Initial Purchasers set forth in this Agreement or
made by or on behalf of them pursuant to this Agreement shall remain in full
force and effect, regardless of (i) any investigation made by or on behalf of
the Company, any of its officers or directors, the Initial Purchasers or any
controlling person referred to in Section 9 hereof and (ii) delivery of and
payment for the Notes. The respective agreements, covenants, indemnities and
other statements set forth in Sections 6, 9 and 15 hereof shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement.
11. Termination. (a) This Agreement may be terminated in the
sole discretion of the Initial Purchasers by notice to the Company given prior
to the Closing Date in the
<PAGE>
-32-
event that the Company shall have failed, refused or been unable to perform in
all material respects all obligations and satisfy all conditions on its part to
be performed or satisfied hereunder at or prior thereto or, if at or prior to
the Closing Date:
(i) the Company shall have sustained any loss or
interference with respect to its businesses or properties from fire,
flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any strike, labor dispute, slowdown or work stoppage
or any legal or governmental proceeding, which loss or interference, in
the sole judgment of the Initial Purchasers, has had or has a Material
Adverse Effect, or there shall have been, in the sole judgment of the
Initial Purchasers, any event or development that, individually or in
the aggregate, has or could be reasonably likely to have a Material
Adverse Effect (including without limitation a change in control of the
Company), except in each case as described in the Final Memorandum
(exclusive of any amendment or supplement thereto);
(ii) trading in securities generally on the New York Stock
Exchange, American Stock Exchange or the NASDAQ National Market shall
have been suspended or minimum or maximum prices shall have been
established on any such exchange or market;
(iii) a banking moratorium shall have been declared by New
York or United States authorities; or
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international
calamity or emergency, or (C) any material change in the financial
markets of the United States which, in the case of (A), (B) or (C)
above and in the sole judgment of the Initial Purchasers, makes it
impracticable or inadvisable to proceed with the offering or the
delivery of the Notes as contemplated by the Final Memorandum.
(b) Termination of this Agreement pursuant to this Section 11
shall be without liability of any party to any other party except as provided in
Section 10 hereof.
<PAGE>
-33-
12. Information Supplied by the Initial Purchasers. The
statements set forth in the last paragraph on the front cover page, the first
paragraph on page (ii), in the second and third sentences of the third paragraph
and the third and fourth sentences of the fifth paragraph and the last paragraph
under the heading "Private Placement" in the Final Memorandum (to the extent
such statements relate to the Initial Purchasers) constitute the only
information furnished by the Initial Purchasers to the Company for the purposes
of Sections 2(a) and 9 hereof.
13. Notices. All communications hereunder shall be in writing
and, if sent to the Initial Purchasers, shall be mailed or delivered to BT Alex.
Brown Incorporated, 130 Liberty Street, New York, New York 10006, Attention:
Corporate Finance Department; if sent to the Company, shall be mailed or
delivered to the Company at 4430 Brittmoore, Houston, Texas 77041, Attention:
Ernie Danner, Chief Financial Officer; with a copy to (i) Castle Harlan Partners
III, L.P., 150 East 58th Street, New York, NY 10155, Attention: Jeffrey M.
Siegel and William J. Lovejoy and (ii) Schulte Roth & Zabel LLP, 900 Third
Avenue, New York, NY 10022, Attention: Andre Weiss, Esq.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; and one
business day after being timely delivered to a next-day air courier.
14. Successors. This Agreement shall inure to the benefit of
and be binding upon the Initial Purchasers, the Company and their respective
successors and legal representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained; this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnities of the Company contained in Section 9 of this Agreement shall
also be for the benefit of any person or persons who control the Initial
Purchasers within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (ii) the indemnities of the Initial Purchasers contained in
Section 9 of this Agreement shall also be for the benefit of the directors of
the Company, its officers and any person or persons who control the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act.
No purchaser of Notes from the
<PAGE>
-34-
Initial Purchasers will be deemed a successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
16. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
-35-
If the foregoing correctly sets forth our understanding,
please indicate your acceptance thereof in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement between the
Company and the Initial Purchasers.
Very truly yours,
TW ACQUISITION CORPORATION
By: /s/ Ernie Danner
-----------------------------
Name: Ernie Danner
Title: Chief Financial Officer
<PAGE>
-36-
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
BT ALEX. BROWN INCORPORATED
By: /s/ Keith Stimson
----------------------------
Name: Keith Stimson
Title: Vice President
SALOMON BROTHERS INC
By: /s/ David Gelobter
----------------------------
Name: David Gelobter
Title: Vice President
<PAGE>
SCHEDULE 1
Principal
Amount of
Initial Purchaser Notes at Maturity
- ----------------- -----------------
BT Alex. Brown Incorporated............................. $145,500,000
Salomon Brothers Inc.................................... $ 97,000,000
------------
Total......................................... $242,500,000
<PAGE>
CUSIP No.: 913433AA6
TW ACQUISITION CORPORATION
9 7/8% SENIOR DISCOUNT NOTE DUE 2008
No. 1A $100,000,000
TW ACQUISITION CORPORATION, a Delaware corporation (the
"Company", which term includes any successor entities), for value received
promise to pay to Cede & Co. or registered assigns the principal sum of One
Hundred Million ($100,000,000) Dollars on February 15, 2008.
Interest Payment Dates: August 15 and February 15, commencing
August 15, 2003
Record Dates: August 1 and February l
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers and a facsimile
of its corporate seal to be affixed hereto or imprinted hereon.
TW ACQUISITION CORPORATION
By: _________________________________
Name:
Title:
By: __________________________________
Name:
Title:
Dated: February 20, 1998
Certificate of Authentication
This is one of the 9 7/8% Senior Discount Notes due 2008
referred to in the within-mentioned Indenture.
UNITED STATES TRUST COMPANY OF NEW
YORK, as Trustee
By: ____________________________________
Authorized Signatory
Date of Authentication: February 20, 1998
<PAGE>
-2-
9 7/8% Senior Discount Note due 2008
1. Interest. TW ACQUISITION CORPORATION, a Delaware
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at the rate per annum shown above. Interest on the Notes will accrete
from the Issue Date. Cash interest on the Notes will not accrue or be payable
prior to February 15, 2003. Thereafter, interest on the Notes will accrue at a
rate of 9 7/8% per annum and will be payable semi-annually in cash on August 15
and February 15, commencing August 15, 2003. Interest will be computed on the
basis of a 360-day year of twelve 30-day months and, in the case of a partial
month, the actual number of days elapsed.
The Company shall pay interest on overdue Accreted Value or
principal and on overdue installments of interest from time to time on demand at
the rate borne by the Notes and on overdue installments of interest (without
regard to any applicable grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the
Notes (except defaulted interest) to the Persons who are the registered Holders
at the close of business on the Record Date immediately preceding the Interest
Payment Date even if the Notes are canceled on registration of transfer or
registration of exchange (including pursuant to an Exchange Offer (as defined in
the Registration Rights Agreement)) after such Record Date. Holders must
surrender Notes to a Paying Agent to collect principal payments. The Company
shall pay Accreted Value or principal and interest in money of the United States
that at the time of payment is legal tender for payment of public and private
debts ("U.S. Legal Tender"). However, the Company may pay Accreted Value or
principal and interest by its check payable in such U.S. Legal Tender. The
Company may deliver any such interest payment to the Paying Agent or to a Holder
at the Holder's registered address.
3. Paying Agent and Registrar. Initially, United States Trust
Company of New York, (the "Trustee"), will act as Paying Agent and Registrar.
The Company may change any Paying Agent, Registrar or co-Registrar without
notice to the Holders.
4. Indenture. The Company issued the Notes under an
Indenture, dated as of February 20, 1998 (the "Indenture"), between the Company
and the Trustee. This Note is one of a duly authorized issue of Initial Notes of
the Company designated as its 9 7/8% Senior Discount Notes due 2008 (the
"Initial Notes"). The Notes are limited in aggregate principal amount at
maturity to $242,500,000. The Notes include the Initial Notes and the Exchange
Notes (as defined in the Indenture) issued in exchange for the Initial Notes
pursuant to the Registration Rights Agreement. The Initial Notes and the
Exchange
<PAGE>
-3-
Notes are treated as a single class of securities under the Indenture.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code (Section)(Section) 77aaa-77bbbb) (the "TIA"), as in effect on the
date of the Indenture. Notwithstanding anything to the contrary herein, the
Notes are subject to all such terms, and Holders of Notes are referred to the
Indenture and said Act for a statement of them. The Notes are general unsecured
obligations of the Company.
Each Holder, by accepting a Note, agrees to be bound by all of
the terms and provisions of the Indenture, as the same may be amended from time
to time in accordance with its terms.
5. Optional Redemption. The Notes will be redeemable, at the
Company's option, in whole at any time or in part from time to time, on and
after February l5, 2003, upon not less than 30 nor more than 60 days' notice, at
the following redemption prices (expressed as percentages of the principal
amount at maturity thereof) if redeemed during the twelve-month period
commencing on February 15 of the year set forth below, plus, in each case,
accrued and unpaid interest thereon, if any, to the date of redemption:
Year Percentage
---- ----------
2003................................. 104.938%
2004................................. 103.292%
2005................................. 101.646%
2006 and thereafter.................. 100.000%
6. Optional Redemption upon Equity Offering. At any time, or
from time to time, on or prior to February 15, 2001, the Company may, at its
option, use the net cash proceeds of one or more Public Equity Offerings to
redeem up to 35% of the Notes at a redemption price equal to 109.875% of the
Accreted Value of the Notes to be redeemed on the date of redemption, plus
accrued and unpaid interest, if any; provided that at least 65% of the aggregate
principal amount at maturity of Notes originally issued remains outstanding
immediately after any such redemption. In order to effect the foregoing
redemption with the proceeds of any Public Equity Offering, the Company shall
make such redemption not more than 120 days after the consummation of any such
Public Equity Offering. In the event of a Public Equity Offering by Holdings,
Holdings contributes to the capital of the Company the portion of the net cash
proceeds of such Public Equity Offering necessary to pay
<PAGE>
-4-
the aggregate redemption price of the Notes to be redeemed pursuant to this
paragraph.
7. Notice of Redemption. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date, then, unless the Company
defaults in the payment of such redemption price plus accrued interest, if any,
the Notes called for redemption will cease to accrete or interest will cease to
accrue from and after such Redemption Date and the only right of the Holders of
such Notes will be to receive payment of the redemption price plus accrued
interest, if any.
8. Change of Control Offer. Upon a Change of Control, any
Holder of Notes will have the right, subject to certain conditions specified in
the Indenture, to cause the Company to repurchase all or any part of the Notes
of such Holder at a repurchase price equal to 101% of the principal amount at
maturity of the Notes to be repurchased plus the Accreted Value and/or accrued
interest, if any, to the date of repurchase (subject to the right of Holders of
record on the relevant record date to receive interest due on the related
interest payment date) as provided in, and subject to the terms of, the
Indenture.
9. Offers to Purchase. Sections 4.14 and 4.15 of the
Indenture provide that, after certain Asset Sales (as defined in the Indenture)
and upon the occurrence of a Change of Control (as defined in the Indenture),
and subject to further limitations contained therein, the Company will make an
offer to purchase certain amounts of the Notes in accordance with the procedures
set forth in the Indenture.
10. Registration Rights. Pursuant to a registration rights
agreement between the Company and the Initial Purchasers, the Company will be
obligated to consummate an exchange offer pursuant to which the Holder of this
Note shall have the right to exchange this Note for Exchange Notes (as defined
in the Indenture), which have been registered under the Securities Act, in like
principal amount and having terms identical in all material respects as the
Initial Notes. The Holders of the Initial Notes shall be entitled to receive
certain additional interest payments in the event such exchange offer is not
consummated and upon certain other conditions, all pursuant to and
<PAGE>
-5-
in accordance with the terms of the registration rights agreement.
11. Denominations; Transfer; Exchange. The Notes are in
registered form, without coupons, and in denominations of $1,000 and integral
multiples of $1,000. A Holder shall register the transfer of or exchange Notes
in accordance with the Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar need not register the
transfer of or exchange of any Notes or portions thereof selected for
redemption.
12. Persons Deemed Owners. The registered Holder of a Note
shall be treated as the owner of it for all purposes.
13. Unclaimed Money. If money for the payment of Accreted
Value or principal or interest remains unclaimed for one year, the Trustee and
the Paying Agent will pay the money back to the Company. After that, all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
14. Discharge Prior to Redemption or Maturity. If the Company
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but including, under
certain circumstances, its obligation to pay the principal of and interest on
the Notes but without affecting the rights of the Holders to receive such
amounts from such deposits).
15. Amendment; Supplement; Waiver. Subject to certain
exceptions set forth in the Indenture, the Indenture or the Notes may be amended
or supplemented with the written consent of the Holders of a majority in
aggregate principal amount at maturity of the Notes then outstanding, and any
past Default or Event of Default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in aggregate
principal amount at maturity of the Notes then outstanding. Without notice to or
consent of any Holder, the parties thereto may amend or supplement the Indenture
or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes, comply with any requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the TIA or comply
with Article Five of
<PAGE>
-6-
the Indenture or make any other change that does not adversely affect the rights
of any Holder of a Note.
16. Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur additional Indebtedness, make payments in respect of
their Capital Stock or certain Indebtedness, make certain Investments, create or
incur liens, enter into transactions with Affiliates, create dividend or other
payment restrictions affecting any Subsidiaries of the Company, issue Preferred
Stock of any Subsidiaries of the Company, and on the ability of the Company to
merge or consolidate with any other Person or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of the Company's or its
Subsidiaries' assets or adopt a plan of liquidation. Such limitations are
subject to a number of important qualifications and exceptions. Pursuant to
Section 4.06 of the Indenture, the Company must annually report to the Trustee
on compliance with such limitations.
17. Successors. When a successor assumes, in accordance with
the Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
18. Defaults and Remedies. If an Event of Default occurs and
is continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount at maturity of Notes then outstanding may declare all the Notes
to be due and payable in the manner, at the time and with the effect provided in
the Indenture. Holders of Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. The Trustee is not obligated to enforce the
Indenture or the Notes unless it has received indemnity reasonably satisfactory
to it. The Indenture permits, subject to certain limitations therein provided,
Holders of a majority in aggregate principal amount at maturity of the Notes
then outstanding to direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of Notes notice of any continuing Default
or Event of Default (except a Default in payment of principal or interest when
due, for any reason or a Default in compliance with Article Five of the
Indenture) if it determines that withholding notice is in their interest.
19. Trustee Dealings with the Company and Its Subsidiaries.
The Trustee under the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Notes and may otherwise deal with the Company,
its Subsidiaries or their respective Affiliates as if it were not the Trustee.
<PAGE>
-7-
20. No Recourse Against Others. No partner, director, officer,
employee or stockholder, as such, of the Company, as such, shall have any
liability for any obligations of the Company under the Notes, the Indenture or
the Registration Rights Agreement or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
21. Guarantees. This Note will be entitled to the benefits of
certain Guarantees, if any, made for the benefit of the Holders. Reference is
hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations thereunder of the Guarantors, the
Trustee and the Holders.
22. Authentication. This Note shall not be valid until the
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Note.
23. Governing Law. This Note and the Indenture shall be
governed by and construed in accordance with the laws of the State of New York,
as applied to contracts made and performed within the State of New York, without
regard to principles of conflict of laws. Each of the parties hereto agrees to
submit to the jurisdiction of the courts of the State of New York in any action
or proceeding arising out of or relating to this Note.
24. Abbreviations and Defined Terms. Customary abbreviations
may be used in the name of a Holder of a Note or an assignee, such as: TEN COM
(= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
25. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes as a convenience to the Holders
of the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note. Requests may be made to TW Acquisition Corporation, 4430 Brittmoore Road,
Houston, TX 77041.
<PAGE>
-8-
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Note to:
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
(Print or type name, address and zip code and social security or tax ID number
of assignee)
and irrevocably appoint _____________________________________________________,
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Dated: __________________________ Signed: _________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: ________________________________________________________
In connection with any transfer of this Note occurring prior
to the date which is the earlier of (i) the date of the declaration by the
Commission of the effectiveness of a registration statement under the Securities
Act of 1933, as amended (the "Securities Act") covering resales of this Note
(which effectiveness shall not have been suspended or terminated at the date of
the transfer) and (ii) the undersigned confirms that it has not utilized any
general solicitation or general advertising in connection with the transfer:
[Check One]
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended) that has furnished to the Trustee a signed letter containing
certain representations and agreements (the form of which letter can
be obtained from the Trustee); or
<PAGE>
-9-
(4) __ outside the United states to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act of 1933, as amended;
or
(5) __ pursuant to the exemption from registration provided by Rule 144 under
the Securities Act of 1933, as amended; or
(6) __ pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
(7) __ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
/ / The transferee is an Affiliate of the Company.
Unless one of the items is checked, the Trustee will refuse to
register any of the Notes evidenced by this certificate in the name of any
person other than the registered Holder thereof; provided, however, that if item
(3), (4), (5) or (7) is checked, the Company or the Trustee may require, prior
to registering any such transfer of the Notes, in their sole discretion, such
written legal opinions, certifications (including an investment letter in the
case of box (3) or (4)) and other information as the Trustee or the Company has
reasonably requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, as amended.
If none of the foregoing items are checked, the Trustee or
Registrar shall not be obligated to register this Note in the name of any person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 2.17 of the Indenture
shall have been satisfied.
Dated: ____________________ Signed: _____________________________________
(Sign exactly as name appears on the
other side of this Note)
Signature Guarantee: _________________________________________________________
<PAGE>
-10-
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: _________________ _______________________________________________
NOTICE: To be executed by an executive officer
<PAGE>
-11-
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.14 or Section 4.15 of the Indenture, check the
appropriate box:
Section 4.14 [ ]
Section 4.15 [ ]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.14 or Section 4.15 of the Indenture, state
the amount you elect to have purchased:
$-------------------
Dated: ________________ _____________________________________________
NOTICE: The signature on this assignment
must correspond with the name as it appears
upon the face of the within Note in every
particular without alteration or enlargement
or any change whatsoever and be guaranteed.
Signature Guarantee: ______________________________________________________
<PAGE>
================================================================================
TW ACQUISITION CORPORATION
as Company
and
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee
Dated as of February 20, 1998
$242,500,000 Principal Amount at Maturity
9 7/8% Senior Discount Notes due 2008
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
310(a)(1)................................................... 7.10
(a)(2)................................................... 7.10
(a)(3)................................................... N.A.
(a)(4)................................................... N.A.
(a)(5)................................................... 7.10
(b)...................................................... 7.08; 7.10;
10.02
(c)...................................................... N.A.
311(a)...................................................... 7.11
(b)...................................................... 7.11
(c)...................................................... N.A.
312(a)...................................................... 2.05
(b)...................................................... 10.03
(c)...................................................... 10.03
313(a)...................................................... 7.06
(b)(1)................................................... N.A.
(b)(2)................................................... 7.06
(c)...................................................... 7.06; 10.02
(d)...................................................... 7.06
314(a)...................................................... 4.06; 4.08;
10.02
(b)...................................................... N.A.
(c)(1)................................................... 10.04
(c)(2)................................................... 10.04
(c)(3)................................................... N.A.
(d)...................................................... N.A.
(e)...................................................... 10.05
(f)...................................................... N.A.
315(a)...................................................... 7.01(b)
(b)...................................................... 7.05; 10.02
(c)...................................................... 7.01(a)
(d)...................................................... 7.01(c)
(e)...................................................... 6.11
316(a)(last sentence)....................................... 2.09
(a)(1)(A)................................................ 6.05
(a)(1)(B)................................................ 6.04
(a)(2)................................................... N.A.
(b)...................................................... 6.07
(c)...................................................... 9.04
317(a)(1)................................................... 6.08
(a)(2)................................................... 6.09
(b)...................................................... 2.04
318(a)...................................................... 10.01
(c)...................................................... 10.01
N.A. means Not Applicable.
- -----------------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.....................................................1
SECTION 1.02. Incorporation by Reference of TIA..............................26
SECTION 1.03. Rules of Construction..........................................27
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating................................................28
SECTION 2.02. Execution and Authentication; Aggregate Principal Amount.......29
SECTION 2.03. Registrar and Paying Agent.....................................30
SECTION 2.04. Paying Agent To Hold Assets in Trust...........................30
SECTION 2.05. Holder Lists...................................................31
SECTION 2.06. Transfer and Exchange..........................................31
SECTION 2.07. Replacement Notes..............................................32
SECTION 2.08. Outstanding Notes..............................................32
SECTION 2.09. Treasury Notes.................................................33
SECTION 2.10. Temporary Notes................................................33
SECTION 2.11. Cancellation...................................................33
SECTION 2.12. Defaulted Interest.............................................34
SECTION 2.13. CUSIP Number...................................................35
SECTION 2.14. Deposit of Monies..............................................35
SECTION 2.15. Restrictive Legends............................................35
SECTION 2.16. Book-Entry Provisions for Global Security......................37
SECTION 2.17. Special Transfer Provisions....................................39
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.............................................41
SECTION 3.02. Selection of Notes To Be Redeemed..............................42
SECTION 3.03. Optional Redemption............................................43
SECTION 3.04. Notice of Redemption...........................................44
SECTION 3.05. Effect of Notice of Redemption.................................45
SECTION 3.06. Deposit of Redemption Price....................................45
SECTION 3.07. Notes Redeemed in Part.........................................45
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<PAGE>
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes...............................................46
SECTION 4.02. Maintenance of Office or Agency................................46
SECTION 4.03. Corporate Existence............................................46
SECTION 4.04. Payment of Taxes and Other Claims..............................47
SECTION 4.05. Maintenance of Properties and Insurance........................47
SECTION 4.06. Compliance Certificate; Notice of Default......................48
SECTION 4.07. Compliance with Laws...........................................48
SECTION 4.08. Reports to Holders.............................................49
SECTION 4.09. Waiver of Stay, Extension or Usury Laws........................49
SECTION 4.10. Limitation on Restricted Payments..............................49
SECTION 4.11. Limitations on Transactions with Affiliates....................53
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness............54
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.....................................55
SECTION 4.14. Change of Control..............................................56
SECTION 4.15. Limitation on Asset Sales......................................58
SECTION 4.16. Limitation on Preferred Stock of Restricted Subsidiaries.......62
SECTION 4.17. Limitation on Liens............................................62
SECTION 4.18. Limitation of Guarantees by Restricted Subsidiaries............63
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets.......................64
SECTION 5.02. Successor Corporation Substituted..............................65
ARTICLE SIX
REMEDIES
SECTION 6.01. Events of Default..............................................66
SECTION 6.02. Acceleration. ................................................68
SECTION 6.03. Other Remedies. .............................................69
SECTION 6.04. Waiver of Past Defaults........................................69
SECTION 6.05. Control by Majority............................................69
SECTION 6.06. Limitation on Suits............................................70
-ii-
<PAGE>
SECTION 6.07. Right of Holders To Receive Payment............................70
SECTION 6.08. Collection Suit by Trustee.....................................70
SECTION 6.09. Trustee May File Proofs of Claim...............................71
SECTION 6.10. Priorities. ................................................71
SECTION 6.11. Undertaking for Costs..........................................72
SECTION 6.12. Restoration of Rights and Remedies.............................72
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee..............................................72
SECTION 7.02. Rights of Trustee..............................................74
SECTION 7.03. Individual Rights of Trustee...................................75
SECTION 7.04. Trustee's Disclaimer...........................................75
SECTION 7.05. Notice of Default..............................................76
SECTION 7.06. Reports by Trustee to Holders..................................76
SECTION 7.07. Compensation and Indemnity.....................................76
SECTION 7.08. Replacement of Trustee.........................................78
SECTION 7.09. Successor Trustee by Merger, Etc...............................79
SECTION 7.10. Eligibility; Disqualification..................................79
SECTION 7.11. Preferential Collection of Claims Against Company..............79
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Company's Obligations...........................80
SECTION 8.02. Application of Trust Money.....................................83
SECTION 8.03. Repayment to the Company.......................................83
SECTION 8.04. Reinstatement..................................................83
SECTION 8.05. Acknowledgment of Discharge by Trustee.........................84
ARTICLE NINE
MODIFICATION OF THE INDENTURE
SECTION 9.01. Without Consent of Holders.....................................84
SECTION 9.02. With Consent of Holders........................................85
SECTION 9.03. Compliance with TIA............................................86
SECTION 9.04. Revocation and Effect of Consents..............................87
SECTION 9.05. Notation on or Exchange of Notes...............................87
SECTION 9.06. Trustee To Sign Amendments, Etc................................87
ARTICLE TEN
GUARANTEE OF NOTES
SECTION 10.01. Unconditional Guarantee.......................................88
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<PAGE>
SECTION 10.02. Limitations on Guarantees.....................................90
SECTION 10.03. Execution and Delivery of Guarantee...........................90
SECTION 10.04. Release of the Guarantor......................................91
SECTION 10.05. Waiver of Subrogation.........................................91
SECTION 10.06. Immediate Payment.............................................92
SECTION 10.07. Obligations Continuing........................................92
SECTION 10.08. Obligations Reinstated........................................92
SECTION 10.09. Obligations Not Affected......................................93
SECTION 10.10. Waiver........................................................93
SECTION 10.11. No Obligation To Take Action Against the Company..............93
SECTION 10.12. Dealing with the Company and Others...........................94
SECTION 10.13. Default and Enforcement.......................................94
SECTION 10.14. Amendment, Etc................................................94
SECTION 10.15. Acknowledgment................................................95
SECTION 10.16. Costs and Expenses............................................95
SECTION 10.17. No Waiver; Cumulative Remedies................................95
SECTION 10.18. Survival of Obligations.......................................95
SECTION 10.19. Severability. ................................................95
SECTION 10.20. Successors and Assigns........................................96
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls..................................................96
SECTION 11.02. Notices.......................................................96
SECTION 11.03. Communications by Holders with Other Holders..................97
SECTION 11.04. Certificate and Opinion as to Conditions Precedent............97
SECTION 11.05. Statements Required in Certificate or Opinion.................98
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.....................98
SECTION 11.07. Legal Holidays. .............................................98
SECTION 11.08. Governing Law. .............................................99
SECTION 11.09. No Adverse Interpretation of Other Agreements.................99
SECTION 11.10. No Personal Liability.........................................99
SECTION 11.11. Successors. ................................................99
SECTION 11.12. Duplicate Originals...........................................99
SECTION 11.13. Severability..................................................99
SECTION 11.14. Independence of Covenants....................................100
-iv-
<PAGE>
Exhibit A - Form of Initial Note............................................A-1
Exhibit B - Form of Exchange Note...........................................B-1
Exhibit C - Form of Certificate To Be Delivered in Connection with
Transfers to Non-QIB Accredited Investors...................C-1
Exhibit D - Form of Certificate To Be Delivered in Connection with
Transfers Pursuant to Regulation S..........................D-1
Exhibit E - Form of Guarantee...............................................E-1
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of this Indenture
-v-
<PAGE>
INDENTURE, dated as of February 20, 1998, between TW ACQUISITION
CORPORATION, a Delaware corporation (the "Company"), and UNITED STATES TRUST
COMPANY OF NEW YORK, as Trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of the other party
and for the equal and ratable benefit of the Holders of the Company's 9 7/8%
Senior Discount Notes due 2008 Series A (the "Initial Notes") and, when and if
issued as provided in the Registration Rights Agreement of even date herewith,
the Company's 9 7/8% Senior Discount Notes due 2008 Series B (the "Exchange
Notes" and together with the Initial Notes, the "Notes").
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Accreted Value" means (i) as of any date prior to February 15, 2003, an
amount per $1,000 principal amount at maturity of the Notes that is equal to
the sum of (a) the original issue price of each Note and (b) the portion of
the excess of the principal amount at maturity of each Note over such original
issue price which shall have been amortized through such date, such amount to
be so amortized on a daily basis and compounded semi-annually on each August
15 and February 15 at the rate of 9 7/8% per annum from the Issue Date through
the date of determination computed on the basis of a 360-day year of twelve
30-day months and (ii) after February 15, 2003, the principal amount of the
Notes.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
of the Company or at the time it merges or consolidates with the Company or
any of the Company's Subsidiaries or assumed in connection with the
acquisition of assets from such Person and in each case not incurred by such
Person in connection with, or in anticipation or contemplation of, such Person
becoming a Restricted Subsidiary or such acquisition, merger or consolidation.
"Acquisition" means the purchase by TW Acquisition Corporation of all of
the outstanding shares of common stock of Tidewater Compression Service, Inc.,
a wholly owned subsidiary of Tidewater Inc. ("TCSI"). Immediately following
the Acquisition, TW Acquisition Corporation will merge with and into TCSI
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and the surviving corporation will thereupon change its name to Universal
Compression, Inc.
"Additional Interest" has the meaning set forth in the Registration
Rights Agreement.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Agent Members" has the meaning provided in Section 2.16.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which
such Person shall become a Restricted Subsidiary of the Company, or shall be
merged with or into the Company or any Restricted Subsidiary of the Company,
or (b) the acquisition by the Company or any Restricted Subsidiary of the
Company of the assets of any Person (other than a Restricted Subsidiary of the
Company) which constitute all or substantially all of the assets of such
Person or comprise any division or line of business of such Person or any
other properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business or sales of equipment pursuant to purchase options entered
into by the Company or a Restricted Subsidiary of the Company in the ordinary
course of business), assignment or other transfer for value by the Company or
any of its Restricted Subsidiaries (excluding any Lien granted in accordance
with Section 4.17 hereof, but including any Sale and Leaseback Transaction) to
any Person other than the Company or a Wholly Owned Restricted Subsidiary of
the Company of (a) any Capital Stock of any Restricted Subsidiary of the
Company or (b) any other property or assets of the Company or any Restricted
Subsidiary of the Company other than in the ordinary course of business;
provided, however, that Asset Sales shall not include (i) a transaction or
series of related transactions for which the Company or its Restricted
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Subsidiaries receive aggregate consideration of less than $750,000, (ii) the
sale, lease, conveyance, disposition or other transfer of all or substantially
all of the assets of the Company as permitted under Section 5.01 and (iii) any
Restricted Payment permitted under Section 4.10 hereof.
"Authenticating Agent" has the meaning provided in Section 2.02.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state
or foreign law for the relief of debtors.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be
in full force and effect on the date of such certification, and delivered to
the Trustee.
"Business Day" means any day other than a Saturday, Sunday or any other
day on which commercial banking institutions in the City of New York are
required or authorized by law or other governmental action to be closed.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other
equivalents (however designated and whether or not voting) of corporate stock,
including each class of Common Stock and Preferred Stock of such Person and
(ii) with respect to any Person that is not a corporation, any and all
partnership or other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligations
of such Person under a lease that are required to be classified and accounted
for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the
capitalized amount of such obligations at such date, determined in accordance
with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the
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United States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's; (iii) commercial paper
maturing no more than one year from the date of creation thereof and, at the
time of acquisition, having a rating of at least A-1 from S&P or at least P-1
from Moody's; (iv) certificates of deposit or bankers' acceptances maturing
within one year from the date of acquisition thereof issued by any bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250,000,000; (v) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (iv)
above; (vi) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (i) through (v)
above; and (vii) investments made by Foreign Restricted Subsidiaries in local
currencies in instruments issued by or with entities of such jurisdiction
having correlative attributes to the foregoing.
"Certificated Securities" means Notes in definitive registered form.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions, but other than by the granting of a Lien in
accordance with this Indenture or by way of consolidation or merger in
accordance with this Indenture) of all or substantially all of the assets of
the Company and its Subsidiaries, taken as a whole, to any Person or "group"
(as defined in Section 13(d)(3)of the Exchange Act)(whether or not otherwise
in compliance with the provisions of this Indenture) other than to the
Permitted Holders; (ii) the approval by the holders of the Capital Stock of
the Company of any plan or proposal for the liquidation or dissolution of the
Company (whether or not otherwise in compliance with the provisions of this
Indenture); (iii)(A) prior to the initial public offering of Common Stock of
the Company or Holdings, the Permitted Holders shall own, directly or
indirectly, less than 50% of the aggregate voting power of the Capital Stock
of the Company or (B) after the initial public offering of Common Stock of the
Company or Holdings, (1) the Permitted Holders shall own, directly or
indirectly, less than 20% of the aggregate voting power of the Capital Stock
of the Company or (2) any Person or "group" within the meaning of Section
13(d) of the Exchange Act (other
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than the Permitted Holders) shall become the "beneficial owner" as defined in
Rule 13d-3 under the Exchange Act, of shares representing more than the
aggregate voting power represented by the Capital Stock of the Company owned
directly or indirectly, by the Permitted Holders; or (iv) the replacement of a
majority of the Board of Directors of the Company or Holdings over a two-year
period from the directors who constituted the Board of Directors of the
Company or Holdings, as the case may be, at the beginning of such period, and
such replacement shall not have been approved by a vote of at least a majority
of the Board of Directors of the Company or Holdings, as the case may be, then
still in office who either were members of such Board of Directors at the
beginning of such period or whose election as a member of such Board of
Directors was previously so approved.
"Change of Control Offer" has the meaning provided in Section 4.14.
"Change of Control Payment Date" has the meaning provided in Section
4.14.
"CHP" means Castle Harlan Partners III, L.P., a private investment fund
managed by Castle Harlan, Inc., a Delaware corporation.
"Commission" means the U.S. Securities and Exchange Commission.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on
the Issue Date or issued after the Issue Date, and includes, without
limitation, all series and classes of such common stock.
"Company" means (i) prior to the Merger, TW Acquisition Corporation, a
Delaware corporation, and (ii) from and after the consummation of the Merger,
Universal Compression, Inc., as the surviving corporation in the Merger.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes
of such Person and its Restricted Subsidiaries paid or accrued in accordance
with GAAP for such period (other than income taxes attributable to
extraordinary or nonrecurring gains or losses or taxes attributable to sales
or dispositions outside the ordinary course of business), (B) Consolidated
Interest Expense, (C) Consolidated Non-cash Charges less any non-cash items
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creasing Consolidated Net Income for such period, all as determined on a
consolidated basis for such Person and its Restricted Subsidiaries in
accordance with GAAP, (D) any fee to CHP under the Management Agreement paid
or accrued, (E) any expense of the Company or its Restricted Subsidiaries
incurred in connection with the overhaul of equipment that can be reclassified
as a capital expenditure in accordance with GAAP and (F) any write-off or
amortization of fees and expenses incurred in connection with the financing
for the Acquisition.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges
of such Person for the Four Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving
effect on a pro forma basis for the period of such calculation to (i) the
incurrence or repayment of any Indebtedness of such Person or any of its
Restricted Subsidiaries (and the application of the proceeds thereof) giving
rise to the need to make such calculation and any incurrence or repayment of
other Indebtedness (and the application of the proceeds thereof), other than
the incurrence or repayment of Indebtedness in the ordinary course of business
for working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of
the Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the
proceeds thereof), occurred on the first day of the Four Quarter Period and
(ii) any Asset Sales or Asset Acquisitions (including, without limitation, any
Asset Acquisition giving rise to the need to make such calculation as a result
of such Person or one of its Restricted Subsidiaries (including any Person who
becomes a Restricted Subsidiary as a result of the Asset Acquisition)
incurring, assuming or otherwise being liable for Acquired Indebtedness and
also including any Consolidated EBITDA (including any pro forma expense and
cost reductions calculated on a basis consistent with Regulation S-X under the
Securities Act) attributable to the assets which are the subject of the Asset
Acquisition or Asset Sale during the Four Quarter Period) occurring during the
Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such Asset Sale
or Asset Acquisition (including the incurrence, assumption or liability for
any such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. Furthermore, in calculating "Consolidated Fixed Charges" for
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purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; and (2) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to the Company for any
period, the sum, without duplication, of (i) Consolidated Interest Expense,
plus (ii) the product of (x) the amount of all dividend payments on any series
of Preferred Stock of such Person (other than dividends paid in Qualified
Capital Stock) paid, accrued or scheduled to be paid or accrued during such
period times (y) a fraction, the numerator of which is one and the denominator
of which is one minus the then current effective consolidated federal, state
and local tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount or any amortization or
write-off of deferred financing costs, (b) the net costs under Interest Swap
Obligations, (c) all capitalized interest and (d) the interest portion of any
deferred payment obligation; (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such
Person and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP; and (iii) with respect to the
Company, cash interest on the Holdings PIK Notes; excluding, however, (1) any
amount of such interest expense of any Restricted Subsidiary if the net income
of such Restricted Subsidiary is excluded in the calculation of Consolidated
Net Income pursuant to clause (d) of the definition thereof (but only in the
same proportion as the net income of such Restricted Subsidiary is excluded
from the calculation of Consolidated Net Income pursuant to clause (d) of the
definition thereof) and (2) any non-cash amortization or write-off of fees and
expenses incurred in connection with financing arrangements for the
Acquisition.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of
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such Person and its Restricted Subsidiaries for such period on a consolidated
basis, determined in accordance with GAAP; provided that there shall be
excluded therefrom (without duplication) (a) after-tax gains and losses from
Asset Sales, (b) after-tax items classified as extraordinary or nonrecurring
gains and losses, (c) the net income or loss of any Person acquired in a
"pooling of interests" transaction accrued prior to the date it becomes a
Restricted Subsidiary of the referent Person or is merged or consolidated with
the referent Person or any Restricted Subsidiary of the referent Person, (d)
the net income (but not loss) of any Restricted Subsidiary of the referent
Person to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is restricted by
contract, operation of law or otherwise, except for any dividends or
distributions actually paid by such Restricted Subsidiary to the referenced
Person, (e) the net income but not loss of any Person, other than a Restricted
Subsidiary of the referent Person, except to the extent of cash dividends or
distributions paid to the referent Person or to a Wholly Owned Restricted
Subsidiary of the referent Person by such Person and (f) income or loss
attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued).
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person, for
any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Restricted Subsidiaries reducing Consolidated
Net Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP (excluding any such
charges which require an accrual of or a reserve for cash charges for any
future period).
"Consolidated Total Assets" of any Person means such Person's total
consolidated assets calculated in accordance with GAAP.
"Covenant Defeasance" has the meaning set forth in Section 8.01.
"Credit Agreement" means the Credit Agreement dated as of February 20,
1998, by and among Holdings, the Company, the lenders party thereto in their
capacities as lenders thereunder and Bankers Trust Company, as agent, and any
Foreign
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Credit Facility, together with the documents related thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder or adding Restricted Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Depository" means The Depository Trust Company, its nominees and
successors.
"Disqualified Capital Stock" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof on or prior to the final maturity date of the Notes, provided that any
Capital Stock that would not constitute Disqualified Capital Stock but for
provisions thereof giving holders thereof the right to require such Person to
repurchase or redeem such Capital Stock upon the occurrence of an "asset sale"
or "change of control" occurring prior to the stated maturity of the Notes
shall not constitute Disqualified Capital Stock if the "asset sale" or "change
of control" provisions applicable to such Capital Stock are no more favorable
to the holders of such Capital Stock than the provisions contained in Sections
4.14 and 4.15 hereof and such Capital Stock specifically provides that such
Person will not repurchase or redeem any such stock pursuant to such provision
prior to the Company's repurchase of such Notes as are required to be
repurchased pursuant to such Sections.
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"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"Exchange Notes" means the 9 7/8% Senior Discount Notes due 2008 Series B
to be issued pursuant to this Indenture in connection with the offer to
exchange Notes for the Initial Notes pursuant to the Registration Rights
Agreement.
"Exchange Offer Registration Statement" means the registration statement
filed by the Company pursuant to the Registration Rights Agreement.
"fair market value" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length, free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. Fair
market value shall be determined by the Board of Directors of the Company
acting in good faith and shall be evidenced by a Board Resolution of the Board
of Directors of the Company delivered to the Trustee.
"Foreign Credit Facility" means any credit facility of a Foreign
Restricted Subsidiary.
"Foreign Restricted Subsidiary" means any Restricted Subsidiary of the
Company (i) whose jurisdiction of incorporation is other than the United
States of America, any state thereof, the District of Columbia or any
possession thereof and (ii) which derives substantially all of its income from
jurisdictions other than the United States of America.
"GAAP" means 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 of the United States, which are in effect as of the Issue Date;
provided, however, that all reports and other financial information provided
by the Company to the Holders or the Trustee shall be prepared in accordance
with GAAP as in effect on the date of such report or other financial
information.
"Global Note" has the meaning provided in Section 2.01.
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"guarantee" means, as applied to any obligation, (a) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of non-performance) of all
or any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantee" has the meaning set forth in Section 10.01.
"Guarantor" means each of the Company's Restricted Subsidiaries that in
the future executes a supplemental indenture in which such Restricted
Subsidiary agrees to be bound by the terms of the Indenture as a Guarantor;
provided that any Person constituting a Guarantor as described above shall
cease to constitute a Guarantor when its respective Guarantee is released in
accordance with Section 4.18.
"Holder" means a holder of Notes.
"Holdings" means Universal Compression Holdings, Inc. a Delaware
corporation.
"incur" has the meaning set forth in Section 4.12.
"Indebtedness" means with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all Capitalized Lease Obligations of such Person, (iv) all
Obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations and all Obligations under any title
retention agreement (but excluding trade accounts payable and other accrued
liabilities arising in the ordinary course of business that are not overdue by
120 days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted), (v) all Obligations
of such Person for the reimbursement of any obligor on any letter of credit,
bankers' acceptance or similar credit transaction, (vi) guarantees and other
contingent obligations in respect of Indebtedness of other Persons of the type
referred to in clauses (i) through (v) above and clause (viii) below to the
extent such Indebtedness is so guaranteed, (vii) all Obligations of any other
Person of the type referred to in clauses (i) through (vi) above which are
secured by any lien on any property or asset of such Person, the amount of
such Obligation being deemed to be the lesser of
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the fair market value of such property or asset or the amount of the
Obligation so secured, (viii) all Obligations of such Person under currency
agreements and interest swap agreements of such Person and (ix) all
Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends, if any. For purposes
hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Disqualified Capital Stock as if such Disqualified
Capital Stock were purchased on any date on which Indebtedness shall be
required to be determined pursuant to this Indenture, and if such price is
based upon, or measured by, the fair market value of such Disqualified Capital
Stock, such fair market value shall be determined in good faith by the Board
of Directors of the issuer of such Disqualified Capital Stock. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at
such date of all unconditional obligations as described above and, with
respect to contingent obligations, maximum liability upon the occurrence of
the contingency giving rise to the obligation, provided that (A) the amount
outstanding at any time of any Indebtedness issued with original issue
discount is the original issue price of such indebtedness and (B)
"Indebtedness" shall not include any money borrowed and set aside, at the time
of the incurrence of related Indebtedness, to fund cash interest payments on
such related Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time in accordance with the terms hereof.
"Independent Financial Advisor" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified
to perform the task for which it is to be engaged.
"Initial Notes" means the 9 7/8% Senior Discount Notes due 2008 Series A,
issued under this Indenture on or about the date hereof.
"Initial Purchasers" means BT Alex. Brown Incorporated and Salomon
Brothers Inc.
"interest" when used with respect to any Note means the sum of any cash
interest on such Note, including any appli-
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cable defaulted interest pursuant to Section 2.12 and any Additional Interest
pursuant to the Registration Rights Agreement.
"Interest Payment Date" means the stated maturity date of an installment
of interest on the Notes.
"Interest Swap Obligations" means the obligations of any Person pursuant
to any arrangement with any other Person, whereby, directly or indirectly,
such Person is entitled to receive from time to time periodic payments
calculated by applying either a floating or a fixed rate of interest on a
stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the
same notional amount and shall include, without limitation, interest rate
swaps, caps, floors, collars and similar agreements.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"Investment" means, with respect to any Person, any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude (i) extensions of trade
credit by the Company and its Restricted Subsidiaries on commercially
reasonable terms in accordance with normal trade practices of the Company or
such Restricted Subsidiary, as the case may be, and (ii) the acquisition of
Capital Stock, securities or other properties or assets by the Company or any
of its Restricted Subsidiaries for, and to the extent, consideration
consisting of Capital Stock of the Company. For the purposes of the
"Limitation on Restricted Payments" covenant, (i) "Investment" shall (A)
include and be valued at the fair market value of the net assets of any
Restricted Subsidiary at the time that such Restricted Subsidiary is
designated an Unrestricted Subsidiary and (B) exclude the fair market value of
the net assets of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) the
amount of any Investment shall be the original cost of such Investment plus
the cost of all additional Investments by the Company or any of its Restricted
Subsidiaries, without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment, reduced
by the payment of dividends or distributions in connection with such
Investment or any other amounts received in re-
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spect of such Investment; provided that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount of
any Investment if such payment of dividends or distributions or receipt of any
such amounts would be included in Consolidated Net Income. If the Company or
any Restricted Subsidiary of the Company sells or otherwise disposes of any
Common Stock of any direct or indirect Restricted Subsidiary of the Company
such that, after giving effect to any such sale or disposition, the Company no
longer owns, directly or indirectly, greater than 50% of the Common Stock of
such Restricted Subsidiary, the Company shall be deemed to have made an
investment on the date of such sale equal to the fair market value of the
Common Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the Notes.
"Legal Defeasance" has the meaning set forth in Section 8.01.
"Legal Holiday" has the meaning provided in Section 11.07.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Management Agreement" means the Management Agreement by and among CHP,
the Company and their respective affiliates, as in effect on the Issue Date.
"Maturity Date" means February 15, 2008.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales or brokerage commissions), (b) net taxes
paid or payable as a result of such Asset Sale, (c) repayment of Indebtedness
that is required to be repaid in
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connection with such Asset Sale, (d) amounts required to be paid to any Person
(other than the Company or any of its Restricted Subsidiaries) owning a
beneficial interest in the assets which are subject to such Asset Sale and (e)
appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations associated with such Asset Sale.
"Net Proceeds Offer" has the meaning set forth in Section 4.15.
"Net Proceeds Offer Amount" has the meaning set forth in Section 4.15.
"Net Proceeds Offer Payment Date" has the meaning set forth in Section
4.15.
"Net Proceeds Offer Trigger Date" has the meaning set forth in Section
4.15.
"Notes" means, collectively, the Initial Notes and, when and if issued as
provided in the Registration Rights Agreement, the Exchange Notes.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Offering Memorandum" means the confidential final Offering Memorandum
dated February 13, 1998 of the Company relating to the offering of the Notes.
"Officer" means, with respect to any Person, the Chairman of the Board of
Directors, the Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer, the Treasurer, the Controller, or the Secretary of
such Person, or any other officer designated by the Board of Directors serving
in a similar capacity.
"Officers' Certificate" means a certificate signed by two Officers of the
Company.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee comply-
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ing with the requirements of Sections 11.04 and 11.05, as they relate to the
giving of an Opinion of Counsel.
"Paying Agent" has the meaning provided in Section 2.03.
"Permitted Holder(s)" means (i) CHP, Castle Harlan, Inc. and employees,
management and directors of, and Persons owning accounts managed by, any of
the foregoing and their respective Affiliates, including, without limitation,
Holdings and its Subsidiaries and (ii) institutional investors who acquire
Common Stock of Holdings on or within 30 days of the Issue Date.
"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness under the Notes, this Indenture and the
Guarantees, if any;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed (A)
$75 million with respect to the Indebtedness under the Term Loan
Credit Facility, less the amount of all mandatory principal payments
actually made by the Company in respect of the Term Loan Credit
Facility (excluding any such payments to the extent refinanced at
the time of payment under a replacement Credit Agreement) and (B)
$85 million in the aggregate with respect to Indebtedness under (1)
the Revolving Credit Loans, reduced by any required permanent
repayments (which are accompanied by a corresponding permanent
commitment reduction) thereunder and (2) any Foreign Credit
Facility, reduced by any required permanent repayments thereof as a
result of any asset sales, but not to exceed $25 million outstanding
at any one time;
(iii) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of
any scheduled amortization payments or mandatory prepayments when
actually paid or permanent reductions thereon (including the Purchase
Price Adjustment Agreement pursuant to the Stock Purchase Agreement);
(iv) Interest Swap Obligations of the Company covering
Indebtedness of the Company or any of its Restricted Subsidiaries and
Interest Swap Obligations of any Restricted Subsidiary of the Company
covering Indebtedness of such Restricted Subsidiary and its Restricted
Subsidiaries; provided, however, that such Interest Swap Obligations
are entered into to protect the Company and the Re-
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stricted Subsidiaries from fluctuations in interest rates on
Indebtedness incurred in accordance with this Indenture to the
extent the notional principal amount of such Interest Swap
Obligation does not exceed the principal amount of the Indebtedness
to which such Interest Swap Obligation relates;
(v) Indebtedness under Currency Agreements; provided that in the
case of Currency Agreements which relate to Indebtedness, such
Currency Agreements do not increase the Indebtedness of the Company
and its Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of
fees, indemnities and compensation payable thereunder;
(vi) Indebtedness of a Restricted Subsidiary of the Company to
the Company or to a Restricted Subsidiary of the Company for so long
as such Indebtedness is held by the Company or a Restricted Subsidiary
of the Company, in each case subject to no Lien held by a Person
other than the Company or a Restricted Subsidiary of the Company;
provided that if as of any date any Person other than the Company or
a Restricted Subsidiary of the Company owns or holds any such
Indebtedness or holds a Lien, other than pursuant to the Credit
Agreement, in respect of such Indebtedness, such date shall be
deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Restricted Subsidiary of
the Company for so long as such Indebtedness is held by a Restricted
Subsidiary of the Company, in each case subject to no Lien, other
than pursuant to the Credit Agreement; provided that (a) any
Indebtedness of the Company to any Restricted Subsidiary of the
Company is unsecured and subordinated, pursuant to a written
agreement, to the Company's obligations under this Indenture and the
Notes and (b) if as of any date any Person other than a Restricted
Subsidiary of the Company owns or holds any such Indebtedness or any
Person, other than pursuant to the Credit Agreement, holds a Lien in
respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness
by the Company;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn
against insufficient funds in the ordinary course of business;
provided, however, that such
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Indebtedness is extinguished within three business days of
incurrence;
(ix) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company or such Restricted Subsidiary of the Company, as the case may
be, in order to provide security for workers' compensation claims,
payment obligations in connection with self-insurance or similar
requirements in the ordinary course of business;
(x) Indebtedness represented by Capitalized Lease Obligations and
Purchase Money Indebtedness of the Company and its Restricted
Subsidiaries incurred in the ordinary course of business not to
exceed $10 million at any one time outstanding;
(xi) Indebtedness (A) in respect of performance, surety or appeal
bonds or letters of credit provided in the ordinary course of
business, or (B) arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations,
or from guarantees or letters of credit, surety bonds or performance
bonds securing any such obligations of the Company or any of its
Restricted Subsidiaries, in any case incurred in connection with the
disposition of any business, assets or Restricted Subsidiary of the
Company (excluding herefrom any guarantees of Indebtedness incurred
by any Person acquiring all or any portion of such business, assets
or Restricted Subsidiary of the Company for the purpose of financing
such acquisition), in a principal amount not to exceed the gross
proceeds actually received by the Company or any of its Restricted
Subsidiaries in connection with such disposition;
(xii) Indebtedness of the Company or any of its Restricted
Subsidiaries, to the extent the net proceeds thereof are
substantially contemporaneously (A) used to purchase Notes tendered
in a Change of Control Offer or (B) deposited to defease the Notes as
described under Section 8.10;
(xiii) guarantees of Indebtedness of the Company or any of its
Restricted Subsidiaries by any Restricted Subsidiary, provided the
guarantee of such Indebtedness is permitted by and made in accordance
with Section 4.18; and guarantees of Indebtedness of any Restricted
Subsidiary of the Company by the Company provided that such
Indebtedness is permitted by Section 4.12;
(xiv) Refinancing Indebtedness; and
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(xv) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $10
million at any one time outstanding.
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Restricted Subsidiary of the Company or
that will merge or consolidate into the Company or a Restricted Subsidiary of
the Company, (ii) Investments in the Company by any Restricted Subsidiary of
the Company; provided that any Indebtedness evidencing such Investment in the
Company is unsecured and subordinated, pursuant to a written agreement, to the
Company's obligations under the Notes and this Indenture; (iii) investments in
cash and Cash Equivalents; (iv) loans and advances to employees and officers
of the Company and its Restricted Subsidiaries in the ordinary course of
business for bona fide business purposes not in excess of $500,000 at any one
time outstanding; (v) Currency Agreements and Interest Swap Obligations
entered into in the ordinary course of the Company's or its Restricted
Subsidiaries' businesses and otherwise in compliance with this Indenture; (vi)
Investments in Unrestricted Subsidiaries and joint ventures not to exceed $5.0
million at any one time outstanding; (vii) Investments in securities of trade
creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors
or customers; (viii) Investments made by the Company or its Restricted
Subsidiaries as a result of consideration received in connection with an Asset
Sale made in compliance with Section 4.15; (ix) Other Investments not to
exceed $5.0 million at any one time outstanding and (x) Investments existing
on the Issue Date.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or
claims which are either (a) not delinquent or (b) being contested in
good faith by appropriate proceedings and as to which the Company or
its Restricted Subsidiaries shall have set aside on its books such
reserves as may be required pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be required
by GAAP shall have been made in respect thereof;
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(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance, and other types of social security, including any Lien
securing letters of credit issued in the ordinary course of business
consistent with past practice in connection therewith, or to secure
the performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(iv) Liens arising by reason of any judgment, decree or order
of any court but not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings
which may have been duly initiated for the review of such judgment,
decree or order shall not have been finally terminated or the period
within which such proceedings may be initiated shall not have
expired;
(v) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not
interfering in any material respect with the ordinary conduct of the
business of the Company or any of its Restricted Subsidiaries;
(vi) Liens representing the interest or title of a lessor under
any Capitalized Lease Obligation; provided that such Liens do not
extend to any property or assets which is not leased property
subject to such Capitalized Lease Obligation;
(vii) Liens upon specific items of inventory or other goods and
proceeds of the Company or any of its Restricted Subsidiaries
securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or
other goods;
(viii) Liens securing reimbursement obligations with respect to
letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds
thereof;
(ix) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty
requirements of the Company or any of its Restricted Subsidiaries,
including rights of offset and set-off;
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(x) Liens securing Interest Swap Obligations which Interest
Swap Obligations relate to Indebtedness that is otherwise permitted
under this Indenture;
(xi) Liens securing Capitalized Lease Obligations and Purchase
Money Indebtedness permitted pursuant to Section 4.12; provided,
however, that in the case of Purchase Money Indebtedness (A) the
Indebtedness shall not exceed the cost of such property or assets
and shall not be secured by any property or assets of the Company or
any Restricted Subsidiary of the Company other than the property and
assets so acquired or constructed and (B) the Lien securing such
Indebtedness shall be created within 180 days of such acquisition or
construction or, in the case of a refinancing of any Purchase Money
Indebtedness, within 180 days of such refinancing;
(xii) Liens securing Indebtedness under Currency Agreements;
and
(xiii) Liens securing Acquired Indebtedness incurred in
accordance with Section 4.12; provided that (A) such Liens secured
such Acquired Indebtedness at the time of and prior to the
incurrence of such Acquired Indebtedness by the Company or a
Restricted Subsidiary of the Company and were not granted in
connection with, or in anticipation of, the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary of
the Company and (B) such Liens do not extend to or cover any
property or assets of the Company or of any of its Restricted
Subsidiaries other than the property or assets that secured the
Acquired Indebtedness prior to the time such Indebtedness became
Acquired Indebtedness of the Company or a Restricted Subsidiary of
the Company.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Physical Notes" has the meaning provided in Section 2.01.
"PIK Notes" means any Notes issued as payment in kind in lieu of interest
payments in cash to a holder of the Notes.
"plan of liquidation" means, with respect to any Person, a plan
(including by operation of law) that provides for, contemplates or the
effectuation of which is preceded or accompanied by (whether or not
substantially contemporaneously) (a) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of such Person otherwise
than
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as an entirety or substantially as an entirety and (b) the distribution of all
or substantially all of the proceeds of such sale, lease, conveyance or other
disposition and all or substantially all of the remaining assets of such Person
to holders of Capital Stock of such Person.
"Preferred Stock" of any Person means any Capital Stock of
such Person that has preferential rights to any other Capital Stock of such
Person with respect to dividends or redemptions or upon liquidation.
"principal" of any Indebtedness (including the Notes) means the principal
amount of such Indebtedness plus the premium, if any, on such Indebtedness.
"Private Exchange Notes" has the meaning set forth in the Registration
Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth in Section 2.15.
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of this Indenture, a calculation in accordance with
Article 11 of Regulation S-X under the Securities Act, as determined by the
Board of Directors of the Company in consultation with its independent public
accountants.
"Public Equity Offering" means an underwritten public offering of
Qualified Capital Stock of the Company pursuant to a registration statement
filed with the Commission in accordance with the Securities Act.
"Purchase Money Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of any property.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning specified
in Rule 144A under the Securities Act.
"Record Date" means the Record Date specified in the Notes.
"Redemption Date," when used with respect to any Note to be redeemed,
means the date fixed for such redemption pursuant to this Indenture and the
Notes.
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"redemption price," when used with respect to any Note to be redeemed,
means the price fixed for such redemption, including principal and premium, if
any, pursuant to this Indenture and the Notes.
"Reference Date" has the meaning set forth in Section 4.10.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance
with Section 4.12 (other than pursuant to clause (ii), (iv), (v), (vi), (vii),
(viii), (ix), (x), (xi), (xii), (xiii) or (xv) of the definition of Permitted
Indebtedness), in each case (other than Refinancing Indebtedness incurred to
Refinance all of the Notes) that does not (1) result in an increase in the
aggregate principal amount of Indebtedness of such Person as of the date of
such proposed Refinancing (plus accrued interest and plus the amount of any
premium required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable fees, expenses and other
amounts payable by the Company or any of its Restricted Subsidiaries in
connection with such Refinancing) or (2) create Indebtedness with (A) a
Weighted Average Life to Maturity that is less than the Weighted Average Life
to Maturity of the Indebtedness being Refinanced or (B) a final maturity
earlier than the final maturity of the Indebtedness being Refinanced; provided
that (x) if such Indebtedness being Refinanced is Indebtedness solely of the
Company (other than Refinancing Indebtedness incurred to Refinance all of the
Notes), then such Refinancing Indebtedness shall be Indebtedness solely of the
Company and (y) if such Indebtedness being Refinanced is subordinate or junior
to the Notes, then such Refinancing Indebtedness shall be subordinate to the
Notes at least to the same extent and in the same manner as the Indebtedness
being Refinanced.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Issue Date between the Company and the Initial Purchasers.
"Regulation S" means Regulation S under the Securities Act.
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"Restricted Payment" shall have the meaning set forth in Section 4.10.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided, however, that the Trustee shall
be entitled to request and conclusively rely on an Opinion of Counsel with
respect to whether any Note constitutes a Restricted Security.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"Revocation" has the meaning set forth in Section 4.19.
"Revolving Credit Facility" means one or more revolving credit facilities
under the Credit Agreement.
"Revolving Credit Loans" means one or more revolving credit facilities
under the Credit Agreement.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of the Company of any
property, whether owned by the Company or any Restricted Subsidiary of the
Company at the Issue Date or later acquired, which has been or is to be sold
or transferred by the Company or such Restricted Subsidiary to such Person or
to any other Person from whom funds have been or are to be advanced by such
Person on the security of such property.
"S&P" means Standard & Poor's Rating Services, a division of the McGraw
Hill Companies, Inc., and its successors.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Significant Subsidiary," with respect to any Person, means any
Restricted Subsidiary of such Person that satisfies the criteria for a
"significant subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the
Securities Act.
"Stock Purchase Agreement" dated as of December 18, 1997 by and between
Tidewater Inc. and the Company, whereby the Company will acquire 100% of the
voting securities of Tidewater Compression Service, Inc.
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"Subsidiary" with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under
ordinary circumstances is at the time, directly or indirectly, owned by such
Person.
"Surviving Entity" shall have the meaning set forth in Section 5.01.
"Tax Sharing Agreement" means the tax sharing agreement between the
Company and Holdings as in effect on the date hereof, and as thereafter
modified in any way not adverse to the Company or the Holders.
"Term Loan Credit Facility" means one or more term loan facilities under
the Credit Agreement.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb), as amended, as in effect on the date of this Indenture, except
as otherwise provided in Section 9.03.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer this Indenture, or in the case of a
successor trustee, an officer assigned to the department, division or group
performing the corporation trust work of such successor and assigned to
administer this Indenture.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors of such Person may designate any Subsidiary (including
any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, the Company or any other Subsidiary of the
Company that is not a Subsidiary of the Subsidiary to be so designated;
provided that (x) the Company certifies to the Trustee that such designation
complies with Section 4.10 hereof and (y) each Subsidiary to be so designated
and each of its Subsidiaries has
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not at the time of designation, and does not thereafter, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable with
respect to any Indebtedness pursuant to which the lender has recourse to any
of the assets of the Company or any of its Restricted Subsidiaries. The Board
of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary only if (x) immediately after giving effect to such designation,
the Company is able to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in compliance with Section 4.12 hereof and (y)
immediately before and immediately after giving effect to such designation, no
Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect
to such designation and an officers' certificate certifying that such
designation complied with the foregoing provisions.
"U.S. Government Obligations" mean direct obligations of, and obligations
guaranteed by, the United States of America for the payment of which the full
faith and credit of the United States of America is pledged.
"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding aggregate principal amount of such Indebtedness into (b) the
sum of the total of the products obtained by multiplying (i) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payment of principal, including payment at final maturity, in respect
thereof, by (ii) the number of years (calculated to the nearest one-twelfth)
which will elapse between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities
(other than directors' qualifying shares or an immaterial amount of shares
required to be owned by other Persons, in each case pursuant to applicable
law) are owned by such Person or any Wholly Owned Restricted Subsidiary of
such Person.
SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such provision
is incorporated by reference in, and made a
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part of, this Indenture. The following TIA terms used in this Indenture have
the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the Indenture securities means the Company or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP on any date of determination;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision; and
(6) any reference to a statute, law or regulation means that statute, law
or regulation as amended and in effect from time to time and includes any
successor statute, law or regulation; provided, however, that any reference to
the Bankruptcy Law shall mean the Bankruptcy Law as applicable to the relevant
case.
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ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.
The Initial Notes and the Trustee's certificate of authentication
relating thereto shall be substantially in the form of Exhibit A. The Exchange
Notes and the Trustee's certificate of authentication relating thereto shall
be substantially in the form of Exhibit B. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or depository
rule or usage. The Company and the Trustee shall approve the form of the Notes
and any notation, legend or endorsement on them. If required, the Notes may
bear the appropriate legend regarding any original issue discount for federal
income tax purposes. Each Note shall be dated the date of its issuance and
shall show the date of its authentication.
The terms and provisions contained in the Notes, annexed hereto as
Exhibits A and B, shall constitute, and are hereby expressly made, a part of
this Indenture and, to the extent applicable, the Company and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A and Notes offered and
sold in reliance on Regulation S shall be issued initially in the form of one
or more permanent global Notes in registered form, substantially in the form
set forth in Exhibit A (the "Global Note"), deposited with the Trustee, as
custodian for the Depository, duly executed by the Company and authenticated
by the Trustee as hereinafter provided and shall bear the legend set forth in
Section 2.15. The aggregate principal amount at maturity of the Global Note
may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depository, as hereinafter
provided.
Notes issued in exchange for interests in a Global Note pursuant to
Section 2.16 may be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A (the
"Physical Notes"). All Notes offered and sold in reliance on Regulation S
shall remain in the form of a Global Note until the consummation of the
Exchange Offer pursuant to the Registration Rights Agreement; provided,
however, that all of the time periods specified in the Registration Rights
Agreement to be complied with by the Company have been so complied with.
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SECTION 2.02. Execution and Authentication; Aggregate Principal Amount.
Two Officers of the Company shall sign (each of whom shall have been duly
authorized by all requisite corporate actions) the Notes for the Company by
manual or facsimile signature.
If an Officer whose signature is on a Note was an Officer at the time of
such execution but no longer holds that office or position at the time the
Trustee authenticates the Note, the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue in
the aggregate principal amount at maturity not to exceed $242,500,000 and (ii)
Exchange Notes for original issue only in an exchange offer, pursuant to the
Registration Rights Agreement, for a like principal amount of Initial Notes,
in each case upon a written order of the Company in the form of an Officers'
Certificate of the Company and, in the case of the original issuance of any
Exchange Note, upon the valid surrender for cancellation of one or more
Initial Notes in the same aggregate principal amount in accordance with such
exchange offer. Each such written order shall specify the amount of Notes to
be authenticated and the date on which the Notes are to be authenticated,
whether the Notes are to be Initial Notes or Exchange Notes and whether the
Notes are to be issued as Physical Notes or Global Notes or such other
information as the Trustee may reasonably request. In addition, with respect
to authentication pursuant to clause (ii) of the first sentence of this
paragraph, the first such written order from the Company shall be accompanied
by an Opinion of Counsel of the Company in a form reasonably satisfactory to
the Trustee stating that the issuance of the Exchange Notes does not give rise
to an Event of Default, complies with this Indenture and has been duly
authorized by the Company. The aggregate principal amount at maturity of Notes
outstanding at any time may not exceed $242,500,000, except as provided in
Sections 2.07 and 2.08.
The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may
authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
Authenticating Agent. An Authenticating Agent has the same
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rights as an Agent to deal with the Company or with any Affiliate of the
Company.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall be located in
the Borough of Manhattan in the City of New York, State of New York) where (a)
Notes may be presented or surrendered for registration of transfer or for
exchange ("Registrar") and (b) Notes may be presented or surrendered for
payment ("Paying Agent"). The Registrar shall keep a register of the Notes and
of their transfer and exchange. The Company, upon prior written notice to the
Trustee, may have one or more co-Registrars and one or more additional paying
agents reasonably acceptable to the Trustee. The term "Paying Agent" includes
any additional Paying Agent. The Company may act as the Paying Agent, except
that for the purposes of payments on the Notes pursuant to Sections 4.14 and
4.15, neither the Company nor any Affiliate of the Company may act as Paying
Agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee in writing, in
advance, of the name and address of any such Agent. If the Company fails to
maintain a Registrar or Paying Agent, or fails to give the foregoing notice,
the Trustee shall act as such and shall be entitled to appropriate
compensation in accordance with Section 7.07.
The Company initially appoints the Trustee as Registrar and Paying Agent,
until such time as the Trustee has resigned or a successor has been appointed.
Any of the Registrar, the Paying Agent or any other agent may resign upon 30
days' notice to the Company.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that such Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all assets held by the Paying Agent for the payment
of Accreted Value or principal of or interest on, the Notes (whether such
assets have been distributed to it by the Company or any other obligor on the
Notes), and the Paying Agent shall notify the Trustee of any Default by the
Company (or any other obligor
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on the Notes) in making any such payment. The Company at any time may require
a Paying Agent to distribute all assets held by it to the Trustee and account
for any assets disbursed and the Trustee may at any time during the
continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee
and to account for any assets distributed. Upon distribution to the Trustee of
all assets that shall have been delivered by the Company to the Paying Agent,
the Paying Agent shall have no further liability for such assets.
SECTION 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Trustee is not the Registrar, the Company shall furnish or
cause the Registrar to furnish to the Trustee at least five days before each
Record Date and at such other times as the Trustee may request in writing a
list as of such date and in such form as the Trustee may reasonably require of
the names and addresses of the Holders, which list may be conclusively relied
upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
When Notes are presented to the Registrar or a co-Registrar with a
request to register the transfer of such Notes or to exchange such Notes for
an equal principal amount at maturity of Notes or other authorized
denominations, the Registrar or co-Registrar shall register the transfer or
make the exchange as requested if its requirements for such transaction are
met; provided, however, that the Notes presented or surrendered for
registration of transfer or exchange shall be duly endorsed or accompanied by
a written instrument of transfer in form satisfactory to the Company, the
Trustee and the Registrar or co-Registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing. To permit registration of
transfers and exchanges, the Company shall execute and the Trustee shall
authenticate Notes at the Registrar or co-Registrar's written request. No
service charge shall be made for any registration of transfer or exchange, but
the Company may require payment of a sum sufficient to cover any transfer tax,
fee or similar governmental charge payable in connection therewith (other than
any such transfer taxes or similar governmental charge payable upon exchanges
or transfers pursuant to Section 2.10, 3.04, 4.14, 4.15 or 9.05, in which
event the Company shall be responsible for the payment of such taxes).
The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period beginning at the
opening of business 15 days before
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the day of any mailing of a notice of redemption of Notes and ending at the
close of business on the day of such mailing,(ii) selected for redemption in
whole or in part pursuant to Article Three, except the unredeemed portion of
any Note being redeemed in part or (iii) between a Record Date and the next
succeeding Interest Payment Date.
Any Holder of a beneficial interest in a Global Note shall, by acceptance
of such Global Note, agree that transfers of beneficial interests in such
Global Notes may be effected only through a book entry system maintained by
the Holder of such Global Note (or its agent), and that ownership of a
beneficial interest in the Note shall be required to be reflected in a book
entry system.
SECTION 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the Holder of a
Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Note if
the Trustee's requirements for replacement of the Notes are met. If required
by the Trustee or the Company, such Holder must provide satisfactory evidence
of such loss, destruction or taking, and an indemnity bond or other indemnity
of reasonable tenor, sufficient in the reasonable judgment of the Company and
the Trustee, to protect the Company, the Trustee or any Agent from any loss
which any of them may suffer if a Note is replaced. Every replacement Note
shall constitute an obligation of the Company. The Company and the Trustee
each may charge such Holder for its expenses in replacing such Note.
SECTION 2.08. Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those canceled by it, those delivered to
it for cancellation and those described in this Section as not outstanding.
Subject to the provisions of Section 2.09, a Note does not cease to be
outstanding because the Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds U.S.
Legal Tender or U.S. Government Obliga-
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tions sufficient to pay all of the Accreted Value or principal and interest
due on the Notes payable on that date and is not prohibited from paying such
money to the Holders thereof pursuant to the terms of this Indenture, then on
and after that date such Notes shall be deemed not to be outstanding and
interest on them shall cease to accrue.
SECTION 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount at
maturity of Notes have concurred in any direction, waiver or consent, Notes
owned by the Company or an Affiliate of the Company shall be considered as
though they are not outstanding, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction,
waiver or consent, only Notes which a Trust Officer of the Trustee actually
knows are so owned shall be so considered. The Company shall notify the
Trustee, in writing, when it or, to its knowledge, any of its Affiliates
repurchases or otherwise acquires Notes, of the aggregate principal amount at
maturity of such Notes so repurchased or otherwise acquired and such other
information as the Trustee may reasonably request and the Trustee shall be
entitled to rely thereon.
SECTION 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon receipt of a written
order of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of temporary Notes to be authenticated
and the date on which the temporary Notes are to be authenticated. Temporary
Notes shall be substantially in the form of definitive Notes but may have
variations that the Company considers appropriate for temporary Notes and so
indicate in the Officers' Certificate. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate, upon receipt of a written
order of the Company pursuant to Section 2.02, definitive Notes in exchange
for temporary Notes.
SECTION 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee,
or at the direction of the Trustee, the Registrar or the Paying Agent, and no
one else, shall cancel and, at the written direction of the Company, shall
dispose, in its customary manner, of all Notes surrendered for transfer,
exchange, payment or cancellation. The Trustee shall maintain a record of all
Notes disposed of by
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it and, upon request by the Company, provide a copy of such record to the
Company. Subject to Section 2.07, the Company may not issue new Notes to
replace Notes that it has paid or delivered to the Trustee for cancellation.
If the Company shall acquire any of the Notes, such acquisition shall not
operate as a redemption or satisfaction of the Indebtedness represented by
such Notes unless and until the same are surrendered to the Trustee for
cancellation pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
The Company will pay interest on overdue principal from time to time on
demand at the rate of interest then borne by the Notes. The Company shall, to
the extent lawful, pay interest on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the
rate of interest then borne by the Notes. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months, and, in the case of
a partial month, the actual number of days elapsed.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest, plus (to the extent lawful) any interest payable
on the defaulted interest, to the Persons who are Holders on a subsequent
special record date, which special record date shall be the fifteenth day next
preceding the date fixed by the Company for the payment of defaulted interest
or the next succeeding Business Day if such date is not a Business Day. The
Company shall notify the Trustee in writing of the amount of defaulted
interest proposed to be paid on each Note and the date of the proposed payment
(a "Default Interest Payment Date"), and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such defaulted interest or shall make
arrangements satisfactory to the Trustee for such deposit on or prior to the
date of the proposed payment, such money when deposited to be held in trust
for the benefit of the Persons entitled to such defaulted interest as provided
in this Section; provided, however, that in no event shall the Company deposit
monies proposed to be paid in respect of defaulted interest later than 11:00
a.m. New York City time of the proposed Default Interest Payment Date. At
least 15 days before the subsequent special record date, the Company shall
mail (or cause to be mailed) to each Holder, as of a recent date selected by
the Company, with a copy to the Trustee, a notice that states the subsequent
special record date, the payment date and the amount of defaulted interest,
and interest payable on such defaulted interest, if any, to be paid.
Notwithstanding the foregoing, any interest which is paid prior to the
expiration of the 30-day period set forth in Section 6.01(a) shall be paid to
Holders as of the regular rec-
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ord date for the Interest Payment Date for which interest has not been paid.
Notwithstanding the foregoing, the Company may make payment of any defaulted
interest in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange.
SECTION 2.13. CUSIP Number.
The Company in issuing the Notes may use a "CUSIP" number, and, if so,
the Trustee shall use the CUSIP number in notices of redemption or exchange as
a convenience to Holders; provided, however, that no representation is hereby
deemed to be made by the Trustee as to the correctness or accuracy of the
CUSIP number printed in the notice or on the Notes, and that reliance may be
placed only on the other identification numbers printed on the Notes. The
Company shall promptly notify the Trustee of any change in the CUSIP number.
SECTION 2.14. Deposit of Monies.
Prior to 10:00 a.m. New York City time on each Interest Payment Date,
Maturity Date, Redemption Date, Change of Control Payment Date and Net
Proceeds Offer Payment Date, the Company shall have deposited with the Paying
Agent in immediately available funds money sufficient to make cash payments,
if any, due on such Interest Payment Date, Maturity Date, Redemption Date,
Change of Control Payment Date and Net Proceeds Offer Payment Date, as the
case may be, in a timely manner which permits the Paying Agent to remit
payment to the Holders on such Interest Payment Date, Maturity Date,
Redemption Date, Change of Control Payment Date and Net Proceeds Offer Payment
Date, as the case may be.
SECTION 2.15. Restrictive Legends.
Each Global Note and Physical Note that constitutes a Restricted Security
or is sold in compliance with Regulation S shall bear the following legend
(the "Private Placement Legend") on the face thereof until after the second
anniversary of the later of the Issue Date and the last date on which the
Company or any Affiliate of the Company was the owner of such Note (or any
predecessor security) (or such shorter period of time as permitted by Rule
144(k) under the Securities Act or any successor provision thereunder) (or
such longer period of time as may be required under the Securities Act or
applicable state securities laws in the opinion of counsel for the Company,
unless otherwise agreed by the Company and the Holder thereof):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE
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"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND
IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 903 OR 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY THEREOF OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR
TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT
WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE
COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Each Global Note shall also bear the following legend on the face
thereof:
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UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES
IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH
NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH
SUCCESSOR DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO AN COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 2.17 OF THE INDENTURE GOVERNING THIS
NOTE.
SECTION 2.16. Book-Entry Provisions for Global Security.
(a) The Global Notes initially shall (i) be registered in the name of the
Depository or the nominee of such Depository, (ii) be delivered to the Trustee
as custodian for such Depository and (iii) bear legends as set forth in
Section 2.15.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Notes, and the Depository may be treated by the Company, the Trustee
and any Agent of the Company or the Trustee as the absolute owner of such
Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any Agent of the
Company or the Trustee from giving effect to any written certification, proxy
or other authorization furnished by the Depository or impair, as between
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the Depository and its Agent Members, the operation of customary practices
governing the exercise of the rights of a Holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers in whole,
but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in a Global Note may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depository and the provisions of Section 2.17. In addition, Physical Notes
shall be transferred to all beneficial owners in exchange for their beneficial
interests in a Global Note if (i) the Depository notifies the Company that it
is unwilling or unable to continue as Depository for the Global Notes and a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depository to issue Physical
Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in a Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount at maturity of such Global Note in an amount equal to the
principal amount at maturity of the beneficial interest in the Global Note to
be transferred, and the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Notes of like tenor and amount.
(d) In connection with the transfer of an entire Global Note to
beneficial owners pursuant to paragraph (b), such Global Note shall be deemed
to be surrendered to the Trustee for cancellation, and the Company shall
execute and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depository in exchange for its beneficial interest in
the Global Note, an equal aggregate principal amount at maturity of Physical
Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in a Global Note pursuant to paragraph (b) or (c)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.17, bear the legend regarding transfer restrictions applicable to the
Physical Notes set forth in Section 2.15.
(f) The Holder of a Global Note may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests
through Agent Members, to take
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any action which a Holder is entitled to take under this Indenture or the
Notes.
SECTION 2.17. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors and
Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after the
second anniversary of the Issue Date (provided, however, that neither the
Company nor any Affiliate of the Company has held any beneficial interest
in such Note, or portion thereof, at any time on or prior to the second
anniversary of the Issue Date) or (y) (1) in the case of a transfer to an
Institutional Accredited Investor which is not a QIB (excluding Non-U.S.
Persons), the proposed transferee has delivered to the Registrar a
certificate substantially in the form of Exhibit C and any legal opinions
and certifications required thereby or (2) in the case of a transfer to a
Non-U.S. Person, the proposed transferor has delivered to the Registrar a
certificate substantially in the form of Exhibit D; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar of
(x) the certificate, if any, required by paragraph (i) above and (y)
written instructions given in accordance with the Depository's and the
Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date
and (if the transfer does not involve a transfer of outstanding Physical
Notes) a decrease in the principal amount of such Global Note in an amount
equal to the principal amount of the beneficial interest in the Global Note to
be transferred, and (b) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
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(i) the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the
box provided for on the form of Note stating, or has otherwise
advised the Company and the Registrar in writing, that the sale has
been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form
of Note stating, or has otherwise advised the Company and the
Registrar in writing, that it is purchasing the Note for its own
account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB
within the meaning of Rule 144A, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and
the Notes to be transferred consist of Physical Notes which after
transfer are to be evidenced by an interest in a Global Note, upon
receipt by the Registrar of written instructions given in accordance
with the Depository's and the Registrar's procedures, the Registrar
shall reflect on its books and records the date and an increase in
the principal amount at maturity of such Global Note in an amount
equal to the principal amount at maturity of the Physical Notes to be
transferred, and the Trustee shall cancel the Physical Notes so
transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement
Legend, the Registrar shall deliver only Notes that bear the Private Placement
Legend unless (i) the requested transfer is after the second anniversary of
the Issue Date (provided, however, that neither the Company nor any Affiliate
of the Company has held any beneficial interest in such Note, or portion
thereof, at any time prior to or on the second anniversary of the Issue Date),
or (ii) there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(d) General. By its acceptance of any Note bearing the
Private Placement Legend, each Holder of such a Note ac-
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knowledges the restrictions on transfer of such Note set forth in this
Indenture and in the Private Placement Legend and agrees that it will transfer
such Note only as provided in this Indenture.
The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Note (including any transfers between or among participants or
beneficial owners of interest in any Global Note) other than to require
delivery of such certificates and other documentation or evidence as is
expressly required by, and to do so if and when expressly required by the
terms of, this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this Section 2.17.
The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time during
the Registrar's normal business hours upon the giving of reasonable written
notice to the Registrar.
(e) Transfers of Notes Held by Affiliates. Any certificate (i) evidencing
a Note that has been transferred to an Affiliate of an Company within three
years after the Issue Date, as evidenced by a notation on the Assignment Form
for such transfer or in the representation letter delivered in respect thereof
or (ii) evidencing a Note that has been acquired from an Affiliate (other than
by an Affiliate) in a transaction or a chain of transactions not involving any
public offering, shall, until two years after the last date on which either
the Company or any Affiliate of the Company was an owner of such Note, in each
case, bear a legend in substantially the form set forth in Section 2.15,
unless otherwise agreed by the Company (with written notice thereof to the
Trustee).
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to Paragraph 5 of the
Notes and Section 3.03, it shall notify the Trustee and the Paying Agent in
writing of the Redemption Date
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and the principal amount at maturity of the Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.01 at
least 30 but not more than 60 days before the Redemption Date (unless a
shorter notice period shall be satisfactory to the Trustee, as evidenced in a
writing signed on behalf of the Trustee), together with an Officers'
Certificate stating that such redemption shall comply with the conditions
contained herein and in the Notes, the Redemption Date, the redemption price
and the principal amount at maturity of the Notes to be redeemed.
If the Company is required to make an offer to redeem Notes pursuant to
the provisions of Section 4.14 or 4.15 hereof, it shall furnish to the Trustee
at least 30 days but not more than 60 days before a Redemption Date (or such
shorter period as may be agreed to by the Trustee in writing), an Officers'
Certificate setting forth (i) the Section of this Indenture pursuant to which
the redemption shall occur, (ii) the Redemption Date, (iii) the principal
amount at maturity of Notes to be redeemed, (iv) the redemption price and (v)
a statement to the effect that (a) the Company or one of its Subsidiaries has
effected an Asset Sale and the conditions set forth in Section 4.15 have been
satisfied or (b) a Change of Control has occurred and the conditions set forth
in Section 4.14 have been satisfied, as applicable.
SECTION 3.02. Selection of Notes To Be Redeemed.
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which such Notes are listed or, if such Notes are not
then listed on a national securities exchange, on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate; provided,
however, that no Notes of a principal amount at maturity of U.S. $1,000 or
less shall be redeemed in part; provided, further, that if a partial
redemption is made with the proceeds of a Public Equity Offering, selection of
the Notes or portions thereof for redemption shall be made by the Trustee only
on a pro rata basis or on as nearly a pro rata basis as is practicable
(subject to DTC procedures), unless such method is otherwise prohibited.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption. Notice of redemption shall
be mailed by the Company by first-class mail at least 30 but not more than 60
days before the redemption date to each Holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to
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such Note shall state the portion of the principal amount at maturity thereof
to be redeemed. A new Note in a principal amount at maturity equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note. On and after the redemption date,
Accreted Value will cease to accrete or interest will cease to accrue on Notes
or portions thereof called for redemption as long as the Company has deposited
with the Paying Agent funds in satisfaction of the applicable redemption price
pursuant to this Indenture.
SECTION 3.03. Optional Redemption.
(a) Optional Redemption. The Notes will be redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after
February 15, 2003, upon not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of the Accreted Value
thereof) if redeemed during the twelve-month period commencing on February 15
of the year set forth below, plus, in each case, accrued and unpaid interest
thereon, if any, to the date of redemption:
Year Percentage
---- ----------
2003................................. 104.938%
2004................................. 103.292%
2005................................. 104.646%
2006 and thereafter.................. 100.000%
(b) Optional Redemption upon Public Equity Offerings. At any time, or
from time to time, on or prior to February 15, 2001, the Company may, at its
option, use the net cash proceeds of one or more Public Equity Offerings to
redeem up to 35% of the Notes at a redemption price equal to 109.875% of the
Accreted Value of the Notes to be redeemed on the date of redemption, plus
accrued and unpaid interest, if any; provided that at least 65% of the
aggregate principal amount at maturity of Notes originally issued remains
outstanding immediately after any such redemption. In order to effect the
foregoing redemption with the proceeds of any Public Equity Offering, the
Company shall make such redemption not more than 120 days after the
consummation of any such Public Equity Offering. In the event of a Public
Equity Offering by Holdings, Holdings contributes to the capital of the
Company the portion of the net cash proceeds of such Public Equity Offering
necessary to pay the aggregate redemption price of the Notes to be redeemed
pursuant to this paragraph.
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SECTION 3.04. Notice of Redemption.
At least 30 days but not more than 60 days before the Redemption Date,
the Company shall mail or cause to be mailed a notice of redemption by first
class mail to each Holder of Notes to be redeemed at its registered address,
with a copy to the Trustee and any Paying Agent. At the Company's request, the
Trustee shall give the notice of redemption in the Company's name and at the
Company's expense. The Company shall provide such notices of redemption to the
Trustee at least five days before the intended mailing date. In any case,
failure to give such notice or any defect in the notice to the holder of any
Note shall not affect the validity of the proceeding for the redemption of any
other Note.
Each notice of redemption shall identify (including the CUSIP number) the
Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the redemption price and the amount of accrued interest, if any, to
be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such redemption is
being made;
(5) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price plus accrued interest, if any;
(6) that, unless the Company defaults in making the redemption payment,
Accreted Value interest on Notes or applicable portions thereof called for
redemption ceases to accrue on and after the Redemption Date, and the only
remaining right of the Holders of such Notes is to receive payment of the
redemption price plus accrued interest as of the Redemption Date, if any, upon
surrender to the Paying Agent of the Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the principal
amount at maturity of such Note to be redeemed and that, after the Redemption
Date, and upon surrender of such Note, a new Note or Notes in the aggregate
principal amount at maturity equal to the unredeemed portion thereof will be
issued; and
(8) if fewer than all the Notes are to be redeemed, the identification of
the particular Notes (or portion thereof) to be redeemed, as well as the
aggregate princi-
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pal amount at maturity of Notes to be redeemed and the aggregate principal
amount at maturity of Notes to be outstanding after such partial redemption.
No representation is made as to the accuracy of the CUSIP numbers listed
in such notice or printed on the Notes.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
purchase of Notes.
SECTION 3.05. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.04, such
notice of redemption shall be irrevocable and Notes called for redemption
become due and payable on the Redemption Date and at the redemption price plus
accrued interest as of such date, if any. Upon surrender to the Trustee or
Paying Agent, such Notes called for redemption shall be paid at the redemption
price plus accrued interest thereon to the Redemption Date, but installments
of interest, the maturity of which is on or prior to the Redemption Date,
shall be payable to Holders of record at the close of business on the relevant
record dates referred to in the Notes. Interest shall accrue on or after the
Redemption Date and shall be payable only if the Company defaults in payment
of the redemption price.
SECTION 3.06. Deposit of Redemption Price.
Not later than 10:00 AM on the Redemption Date and in accordance with
Section 2.14, the Company shall deposit with the Paying Agent U.S. Legal
Tender sufficient to pay the redemption price plus accrued interest, if any,
of all Notes to be redeemed on that date. The Paying Agent shall promptly
return to the Company any U.S. Legal Tender so deposited which is not required
for that purpose, except with respect to monies owed as obligations to the
Trustee pursuant to Article Seven.
Unless the Company fails to comply with the preceding paragraph and
defaults in the payment of such redemption price plus accrued interest, if
any, interest on the Notes to be redeemed will cease to accrue on and after
the applicable Redemption Date, whether or not such Notes are presented for
payment.
SECTION 3.07. Notes Redeemed in Part.
Upon surrender of a Note that is to be redeemed in part, the Company
shall execute and the Trustee shall authenticate for the Holder a new Note or
Notes equal in principal
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amount at maturity to the unredeemed portion of the Note surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.
(a) The Company shall pay the Accreted Value or principal of and interest
on the Notes on the dates and in the manner provided in the Notes and in this
Indenture.
(b) An installment of Accreted Value or principal of or interest on the
Notes shall be considered paid on the date it is due if the Trustee or Paying
Agent (other than the Company or any of its Affiliates) holds, prior to 12:00
noon New York City time on that date, U.S. Legal Tender designated for and
sufficient to pay the installment in full and is not prohibited from paying
such money to the Holders pursuant to the terms of this Indenture or the
Notes.
(c) Notwithstanding anything to the contrary contained in this Indenture,
the Company may, to the extent it is required to do so by law, deduct or
withhold income or other similar taxes imposed by the United States of America
from principal or interest payments hereunder.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain the office or agency required under Section
2.03. The Company shall give prior written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations
and surrenders may be made or served at the address of the Trustee set forth
in Section 11.02.
SECTION 4.03. Corporate Existence.
Except as provided in Article Four or Article Five, the Company shall do
or shall cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and the corporate, partnership or
other existence of each of its Restricted Subsidiaries in accordance with the
respective organizational documents of the Company and such Restricted
Subsidiaries and the rights (charter and statutory)
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and material franchises of the Company and its Restricted Subsidiaries;
provided that the Company shall not be required to preserve any such right,
license or franchise, or the existence of any of its Restricted Subsidiaries,
if the maintenance or preservation thereof is no longer desirable, as
determined in good faith by the Company's Board of Directors, in the conduct
of the business of the Company and its Restricted Subsidiaries taken as a
whole; and provided further that any Restricted Subsidiary of the Company may
consolidate with, merge into, or sell, convey, transfer, lease or otherwise
dispose of all or part of its property and assets to the Company or any
Restricted Subsidiary of the Company or any other Person to the extent not
prohibited by any other provision in Article Four or Article Five.
SECTION 4.04. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments
and governmental charges (including withholding taxes and any penalties,
interest and additions to taxes) levied or imposed upon the Company or any of
its Restricted Subsidiaries or properties of the Company or any of its
Restricted Subsidiaries and (ii) all material lawful claims for labor,
materials and supplies that, if unpaid, might by law become a Lien upon the
property of the Company or any of its Restricted Subsidiaries; provided,
however, that the Company shall not be required to pay or discharge or cause
to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate negotiations or proceedings properly instituted and diligently
conducted for which adequate reserves, to the extent required under GAAP, have
been taken.
SECTION 4.05. Maintenance of Properties and Insurance.
(a) The Company shall cause all properties owned by or leased to it and
used or useful in the conduct of its business or the business of any
Restricted Subsidiary of the Company and material to the Company and its
Restricted Subsidiaries taken as a whole to be maintained and kept in normal
condition, repair and working order and supplied with all necessary equipment
and shall cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company
may be necessary so that the business carried on in connection therewith may
be properly and advantageously conducted at all times; provided, however, that
nothing in this Section shall prevent the Company or such Restricted
Subsidiary from discontinuing the use, operation or maintenance of any of such
properties, or disposing of any of
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them, if such discontinuance or disposal is, in the judgment of the Board of
Directors of the Company or of the Board of Directors of such Restricted
Subsidiary concerned, or of an officer (or other agent employed by the Company
or any of its Restricted Subsidiaries) of the Company or such Restricted
Subsidiary having managerial responsibility for any such property, desirable
in the conduct of the business of the Company or any of its Restricted
Subsidiaries.
(b) The Company shall cause to be provided insurance (including
appropriate self-insurance) against loss or damage of the kinds that, in the
good faith judgment of the Board of Directors or an officer of the Company,
are adequate and appropriate for the conduct of the business of the Company
and its Restricted Subsidiaries with reputable insurers or with the government
of the United States of America or an agency or instrumentality thereof, in
such amounts, with such deductibles, and by such methods as shall be
customary, in the good faith judgment of the Board of Directors or an officer
of the Company, for companies similarly situated in the industry.
SECTION 4.06. Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee, within 105 days after the
end of each of its fiscal years, an Officers' Certificate (provided, however,
that one of the signatories to such Officers' Certificate shall be the
Company's principal executive officer, principal financial officer or
principal accounting officer), as to such Officers' knowledge of the Company's
compliance with all conditions and covenants under this Indenture (without
regard to any period of grace or requirement of notice provided hereunder) and
in the event any Default of the Company exists, such Officers shall specify
the nature of such Default. Each such Officers' Certificate shall also notify
the Trustee should the Company elect to change the manner in which it fixes
its fiscal year end.
(b) If any Default or Event of Default has occurred and is continuing,
the Company shall deliver to the Trustee, at its address set forth in Section
11.02, by registered or certified mail or by facsimile transmission followed
by hard copy by registered or certified mail an Officers' Certificate
specifying such event within 10 days of its becoming aware of such occurrence.
SECTION 4.07. Compliance with Laws.
The Company shall comply, and shall cause each of its Restricted
Subsidiaries to comply, with all applicable statutes, rules, regulations,
orders and restrictions of the United
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States of America, all states and municipalities thereof and of any
governmental department, commission, board, regulatory authority, bureau,
agency and instrumentality of the foregoing, in respect of the conduct of
their respective businesses and the ownership of their respective properties,
except for such noncompliances (i) as could not singly or in the aggregate
reasonably be expected to have a material adverse effect on the financial
condition, business, prospects or results of operations of the Company and its
Restricted Subsidiaries taken as a whole or (ii) that are being contested in
good faith.
SECTION 4.08. Reports to Holders.
The Company will deliver to the Trustee within 15 days after the filing
of the same with the Commission, copies of the quarterly and annual reports
and of the information, documents and other reports, if any, which the Company
is required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will provide the Trustee and the Holders with such annual reports and such
information, documents and other reports specified in Sections 13 and 15(d) of
the Exchange Act. The Company will also comply with the other provisions of
TIA Section 314(a).
SECTION 4.09. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law
or other law that would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect
the covenants or the performance of this Indenture; and (to the extent that it
may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not by resort to any
such law hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law had been enacted.
SECTION 4.10. Limitation on Restricted Payments.
The Company will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, (a) declare or pay any dividend or
make any distribution (other
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than dividends or distributions payable in Qualified Capital Stock of the
Company or in options, warrants, or other rights to purchase such Qualified
Capital Stock (but excluding any debt security or Disqualified Capital Stock
convertible into, or exchangeable for, such Qualified Capital Stock)) on or in
respect of shares of the Company's Capital Stock to holders of such Capital
Stock, (b) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any warrants, rights or options to purchase or
acquire shares of any class of such Capital Stock (in each case, other than in
exchange for Qualified Capital Stock of the Company or options, warrants or
other rights to purchase such Qualified Capital Stock (but excluding any debt
security, or Disqualified Capital Stock convertible into, or exchangeable for,
such Qualified Capital Stock)), (c) make any principal payment on, purchase,
defease, redeem, prepay, decrease or otherwise acquire or retire for value,
prior to any scheduled final maturity, scheduled repayment or scheduled
sinking fund payment, any Indebtedness of the Company that is subordinate or
junior in right of payment to the Notes or (d) make any Investment (other than
Permitted Investments) (each of the foregoing actions set forth in clauses
(a), (b), (c) and (d) being referred to as a "Restricted Payment"), if at the
time of such Restricted Payment or immediately after giving effect thereto,
(i) a Default or an Event of Default shall have occurred and be continuing or
(ii) the Company is not able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with Section
4.12 hereof or (iii) the aggregate amount of Restricted Payments (including
such proposed Restricted Payment) made subsequent to the Issue Date (the
amount expended for such purposes, if other than in cash, being the fair
market value of such property as determined reasonably and in good faith by
the Board of Directors of the Company) shall exceed the sum of: (v) 50% of the
cumulative Consolidated Net Income (or if cumulative Consolidated Net Income
shall be a loss, minus 100% of such loss) of the Company earned subsequent to
the Issue Date and on or prior to the date the Restricted Payment occurs (the
"Reference Date") (treating such period as a single accounting period); plus
(w) 100% of the aggregate net cash proceeds received by the Company from any
Person (other than a Subsidiary of the Company) from the issuance and sale
subsequent to the Issue Date and on or prior to the Reference Date of
Qualified Capital Stock of the Company or options, warrants or other rights to
purchase such Qualified Capital Stock (but excluding any debt security or
Disqualified Capital Stock convertible into, or exchangeable for, such
Qualified Capital Stock); plus (x) without duplication of any amounts included
in clause (iii)(w) above, 100% of the aggregate net cash proceeds of any
equity contribution received by the Company from a holder of the Company's
Capital Stock (excluding, in the case of clauses (iii)(x) and (y), any net
cash proceeds from a Pub-
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lic Equity Offering to the extent used to redeem the Notes in compliance with
the provisions set forth under Section 3.03); plus (y) 100% of the aggregate net
cash proceeds received by the Company from any Person (other than a Subsidiary
of the Company) from the issuance and sale (subsequent to the Issue Date) of
debt securities or shares of Disqualified Capital Stock that have been converted
into or exchanged for Qualified Capital Stock of the Company, together with the
aggregate cash received by the Company at the time of such conversion or
exchange; plus (z) without duplication, the sum of (1) the aggregate amount
returned in cash to the Company or a Restricted Subsidiary of the Company on or
with respect to Investments (other than Permitted Investments) made subsequent
to the Issue Date whether through interest payments, principal payments,
dividends or other distributions or payments, (2) the net cash proceeds received
by the Company or any of its Restricted Subsidiaries from the disposition of all
or any portion of such Investments (other than to a Subsidiary of the Company)
and (3) upon redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary, the fair market value of such Subsidiary; provided, however, that
the sum of clauses (1), (2) and (3) above shall not exceed the aggregate amount
of all such Investments made subsequent to the Issue Date.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any
dividend within 60 days after the date of declaration of such dividend if the
dividend would have been permitted on the date of declaration; (2) the
acquisition of any shares of Capital Stock of the Company, either (i) solely
in exchange for shares of Qualified Capital Stock of the Company or options,
warrants, or other rights to purchase such Qualified Capital Stock (other than
any debt security or Disqualified Capital Stock convertible into, or
exchangeable for, such Qualified Capital Stock) or (ii) through the
application of net proceeds of a substantially concurrent sale for cash (other
than to a Subsidiary of the Company) of shares of Qualified Capital Stock of
the Company or options, warrants, or other rights to purchase such Qualified
Capital Stock (other than any debt security or Disqualified Capital Stock
convertible into, or exchangeable for, such Qualified Capital Stock); (3) the
acquisition of any Indebtedness of the Company that is subordinate or junior
in right of payment to the Notes either (i) solely in exchange for shares of
Qualified Capital Stock of the Company, or options, warrants, or other rights
to purchase such qualified Capital Stock or (ii) through the application of
net proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of (A) shares of Qualified Capital Stock of the
Company or (B) Refinancing Indebtedness; (4) dividends or payments to Holdings
of cash to be immediately applied to repurchases by Holdings of Qualified
Capital Stock
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of Holdings or options to purchase such Qualified Capital Stock from directors
or employees or former directors or former employees of Holdings or any of its
Subsidiaries or their authorized representatives upon the death, disability or
termination of employment of such persons or pursuant to the terms of any
customary agreement under which such Qualified Capital Stock or options were
issued, in an aggregate amount not to exceed $1,000,000 plus any life
insurance proceeds in any calendar year; (5) make payments to Holdings in an
amount equal to the cash interest then due and payable on the Holdings PIK
Notes; (6) the repurchase of any Indebtedness which is subordinated to the
Notes at a purchase price not greater than 101% of the principal amount of
such Indebtedness in the event of a change of control in accordance with
provisions similar to the ; provided that, prior to or simultaneously with
such repurchase, the Company has made the Change of Control Offer as provided
in Section 4.14 hereof with respect to the Notes and has repurchased all Notes
validly tendered for payment in connection with such Change of Control Offer;
(7) the declaration or payment of dividends on the Common Stock of the Company
(or the payment to Holdings to fund the payment by Holdings of dividends on
Common Stock of Holdings) following a Public Equity Offering of the Company or
Holdings, as the case may be, in an amount per annum not to exceed 6% of the
net cash proceeds received by the Company, or contributed to Holdings, in all
Public Equity Offerings; (8) payments or distributions to dissenting
stockholders pursuant to applicable law, pursuant to or in connection with a
consolidation, merger or transfer of assets that complies with the provisions
of this Indenture applicable to mergers, consolidating and transfers of all or
substantially all of the property and assets of the Company; and (9) any
dividends or payments to Holdings in respect of overhead expenses, legal,
accounting, commissions reporting and other professional fees and expenses of
Holdings that are directly attributable to the operations of the Company and
its Restricted Subsidiaries; provided that, except in the case of clauses (l)
and (2), no Default or Event of Default shall have occurred and be continuing
or occur as a consequence of the actions or payments set forth therein. In
determining the aggregate amount of Restricted Payments made subsequent to the
Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended, without duplication, pursuant to clauses (1),
(2)(ii) and (4) through (8) shall be included in such calculation.
Not later than 10 days after the date of making any Restricted Payment
(but not including any transaction described in the preceding paragraph), the
Company shall deliver to the Trustee an officers' certificate stating that
such Restricted Payment complies with this Indenture and setting forth in
reasonable detail the basis upon which the required calculations
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were computed, which calculations may be based upon the Company's latest
available internal quarterly financial statements.
SECTION 4.11. Limitations on Transactions with Affiliates.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (each an
"Affiliate Transaction"), other than (x) Affiliate Transactions permitted
under paragraph (b) below and (y) Affiliate Transactions on terms that are no
less favorable than those that might reasonably have been obtained in a
comparable transaction at such time on an arm's-length basis from a Person
that is not an Affiliate of the Company or such Restricted Subsidiary. All
Affiliate Transactions (and each series of related Affiliate Transactions
which are similar or part of a common plan) involving aggregate payments or
other property with a fair market value in excess of $1,000,000 shall be
approved by the Board of Directors of the Company or such Restricted
Subsidiary, as the case may be, such approval to be evidenced by a Board
Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions. If the Company or any
Restricted Subsidiary of the Company enters into an Affiliate Transaction (or
a series of related Affiliate Transactions related to a common plan) that
involves an aggregate fair market value of more than $5,000,000, the Company
or such Restricted Subsidiary, as the case may be, shall, prior to the
consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the relevant
Restricted Subsidiary, as the case may be, from a financial point of view,
from a nationally recognized firm qualified to do the business for which it is
engaged and file the same with the Trustee.
(b) The restrictions set forth in clause (a) above shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary of the Company as determined in good faith by the Company's Board
of Directors or senior management; (ii) transactions exclusively between or
among the Company and any of its Wholly Owned Restricted Subsidiaries or
exclusively between or among such Wholly Owned Restricted Subsidiaries,
provided such transactions are not otherwise prohibited by this Indenture;
(iii) any agreement as in effect as of the Issue Date or any
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amendment thereto or any transaction contemplated thereby (including pursuant
to any amendment thereto) in any replacement agreement thereto so long as any
such amendment or replacement agreement is not more disadvantageous to the
Holders in any material respect than the original agreement as in effect on
the Issue Date; (iv) Restricted Payments permitted by this Indenture; (v) the
Tax Sharing Agreement; (vi) employment agreements with officers and employees
of the Company and its Restricted Subsidiaries, in the ordinary course of
business; (vii) loans and advances to employees not to exceed $500,000
outstanding at any one time, in the ordinary course of business; (viii)
provided that there is no existing Event of Default, payments pursuant to the
terms of the Management Agreement; and (ix) arrangements with directors of the
Company existing on the Issue Date as disclosed in the Offering Memorandum.
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
become liable, contingently or otherwise, with respect to, or otherwise become
responsible for payment of (collectively, "incur") any Indebtedness (other
than Permitted Indebtedness); provided, however, that if no Event of Default
shall have occurred and be continuing at the time of or as a consequence of
the incurrence of any such Indebtedness, the Company and its Restricted
Subsidiaries may incur Indebtedness (including, without limitation, Acquired
Indebtedness) if on the date of the incurrence of such Indebtedness, after
giving effect to the incurrence thereof, the Consolidated Fixed Charge
Coverage Ratio of the Company is greater than 1.75 to 1.0 on or before
February 15, 2000, greater than 2.0 to 1.0 after February 15, 2000 and greater
than 2.25 to 1.0 after February 15, 2002.
For purposes of determining compliance with this Section, (i) in the
event that an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness permitted by this Section, the Company in its sole
discretion will classify such item of Indebtedness and will only be required
to include the amount and type of each class of Indebtedness in the test
specified in the first paragraph of this Section or in one of the clauses of
the definition of the term "Permitted Indebtedness," (ii) the amount of
Indebtedness issued at a price which is less than the principal amount thereof
shall be equal to the amount of liability in respect thereof determined in
accordance with GAAP, (iii) Indebtedness incurred in connection with, or in
contemplation of, any transaction described in the definition of the term
"Acquired Indebtedness" shall be deemed
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to have been incurred by the Company or one of its Restricted Subsidiaries, as
the case may be, at the time an acquired Person becomes such a Restricted
Subsidiary (or is merged into the Company or such a Restricted Subsidiary) or
at the time of the acquisition of assets, as the case may be, (iv) the maximum
amount of Indebtedness that the Company and its Restricted Subsidiaries may
incur pursuant to this Section shall not be deemed to be exceeded, with
respect to any outstanding Indebtedness, due solely to the result of
fluctuations in the exchange rates of currencies, and (v) guarantees or Liens
supporting Indebtedness permitted to be incurred under this Section may be
issued or granted if otherwise issued or granted in accordance with the terms
of this Indenture.
SECTION 4.13. Limitation on Dividend and Other
Payment Restrictions Affecting Subsidiaries.
The Company will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit
to exist or become effective any encumbrance or restriction on the ability of
any Restricted Subsidiary of the Company to (a) pay dividends or make any
other distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) this Indenture; (3) the Credit Agreement;
(4) any agreement or instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to any Person, or the properties
or assets of any Person, other than the Person or the properties or assets of
the Person so acquired; (5) agreements existing on the Issue Date to the
extent and in the manner such encumbrances and restrictions are in effect on
the Issue Date; (6) in the case of clause (c) above: (A) agreements or
instruments arising or agreed to in the ordinary course of business that
restrict in a customary manner the subletting, assignment or transfer of any
property or asset subject to a lease, license, conveyance or other contract
and (B) any transfer of, agreement to transfer, option or right with respect
to, or Lien on, any property or assets of the Company or any Restricted
Subsidiary entered into in compliance with this Indenture; (7) an agreement
that has been entered into for the sale or disposition of all or substantially
all of the Capital Stock of, or property and assets of, any Restricted
Subsidiary of the Company; (8) provisions in agreements or instruments which
prohibit the payment of dividends or the making of other distributions with
respect to any Capital Stock of a Person other than on a pro rata basis; or
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(9) an agreement governing Indebtedness incurred to Refinance the Indebtedness
issued, assumed or incurred pursuant to an agreement referred to in clause
(2), (3), (4) or (5) above; provided, however, that the provisions relating to
such encumbrance or restriction contained in any such Indebtedness are no less
favorable to the Company or the relevant Restricted Subsidiary of the Company
in any material respect as determined by the Board of Directors of the Company
in its reasonable and good faith judgment than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such clause
(2), (3), (4) or (5). Nothing contained in clause (c) of this Section shall
prevent the Company or any of its Restricted Subsidiaries from creating,
incurring assuming or suffering to exist any Lien created, incurred, assumed
or suffered to exist in accordance with the other terms of this Indenture.
SECTION 4.14. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder shall have
the right to require that the Company purchase all or a portion of such
Holder's Notes pursuant to the offer described below (the "Change of Control
Offer"), at a purchase price equal to 101% of the Accreted Value thereof plus
accrued and unpaid interest, if any, thereon to the date of purchase.
(b) Within 30 days following the date upon which the Change of Control
occurs, the Company shall send, by first class mail, a notice to each Holder
at such Holder's last registered address, with a copy to the Trustee, which
notice shall govern the terms of the Change of Control Offer. The notice to
the Holders shall contain all instructions and materials necessary to enable
such Holders to tender Notes pursuant to the Change of Control Offer. Such
notice shall state:
(i) that the Change of Control Offer is being made pursuant to this
Section 4.14 and that all Notes tendered and not withdrawn shall be
accepted for payment;
(ii) the purchase price (equal to 101% of the Accreted Value thereof
plus accrued and unpaid interest, if any, thereon to the date of
purchase) and the purchase date (which shall be no earlier than 30 days
nor later than 45 days from the date such notice is mailed, other than as
may be required by law) (the "Change of Control Payment Date");
(iii) that any Note not tendered shall continue to accrete and
accrue interest in accordance with the terms thereof;
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(iv) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Change of Control Offer
shall cease to accrete or accrue interest after the Change of Control
Payment Date;
(v) that Holders electing to have a Note purchased pursuant to a
Change of Control Offer shall be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third business day prior to
the Change of Control Payment Date;
(vi) that Holders shall be entitled to withdraw their election if
the Paying Agent receives, not later than the second business day prior
to the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Notes the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Notes
purchased; and
(vii) that Holders whose Notes are purchased only in part shall be
issued new Notes in a principal amount at maturity equal to the
unpurchased portion of the Notes surrendered; provided, however, that
each Note purchased and each new Note issued shall be in an original
principal amount at maturity of $1,000 or integral multiples thereof.
(c) On the Change of Control Payment Date, the Company shall, to the
extent permitted by law, (i) accept for payment all Notes or portions thereof
properly tendered pursuant to the Change of Control Offer, (ii) deposit with
the Paying Agent an amount equal to the aggregate Change of Control Payment in
respect of all Notes or portions thereof so tendered and (iii) deliver, or
cause to be delivered, to the Trustee for cancellation the Notes so accepted
together with an Officers' Certificate stating that such Notes or portions
thereof have been tendered to and purchased by the Company. The Paying Agent
will promptly either (x) pay to the Holder against presentation and surrender
(or, in the case of partial payment, endorsement) of the Global Notes or (y)
in the case of Certificated Securities, mail to each Holder of Notes the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and deliver to the Holder of the Global Notes a new Global Note
or Notes or, in the case of Definitive Notes, mail to each Holder new
Certificated Securities, as applicable, equal in principal amount to any
unpurchased portion of the Notes surrendered, if any, provided that each new
Certificated Security will be in a principal amount at maturity of $1,000 or
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an integral multiple thereof. The Company will notify in writing the Trustee
and the Holders of the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(d) The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer at
the Change of Control Purchase Price, at the same times and otherwise in
compliance with the requirements applicable to a Change of Control Offer made
by the Company and purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer.
(e) Neither the Board of Directors of the Company nor the Trustee may
waive the provisions of this Section 4.14 relating to the Company's obligation
to make a Change of Control Offer or a Holder's right to redemption upon a
Change of Control.
(f) The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.14, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the provisions of this Section 4.14 by virtue thereof.
SECTION 4.15. Limitation on Asset Sales.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company or the
applicable Restricted Subsidiary, as the case may be, receives consideration
at the time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good faith by the
Company's Board of Directors), and (ii) at least 75% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be in the form of cash or Cash Equivalents; provided
that (A) the amount of any liabilities of the Company or any such Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Notes) that are assumed by the transferee of any such assets and (B) the fair
market value of any marketable securities received by the Company or any such
Restricted Subsidiary in exchange for any such assets that are promptly
converted into cash shall be deemed to be cash for purposes of this provision;
and provided, further, that in no event shall the aggregate fair market value
at the time of receipt of con-
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sideration received by the Company in a form other than cash or Cash
Equivalents exceed 5% of the Company's Consolidated Total Assets. In the event
of an Asset Sale, the Company shall apply, or cause such Restricted Subsidiary
to apply, the Net Cash Proceeds relating to such Asset Sale within 360 days of
receipt thereof either (A) to repay or prepay any indebtedness under the
Credit Agreement, and effect a permanent reduction thereof, (B) to make an
investment in either (x) properties and assets that replace the properties and
assets that were the subject of such Asset Sale or (y) any properties or
assets that will be used in the business of the Company and its Restricted
Subsidiaries as existing on the Issue Date or in businesses similar or
reasonably related thereto or in the capital stock of any entity a majority of
whose assets consists of the properties or assets described under (x) or (y)
("Replacement Assets"), or (C) to a combination of prepayment and investment
permitted by the foregoing clauses (iii)(A) and (iii)(B). After 360 days from
the day on which the aggregate amount of Net Cash Proceeds which have not been
applied as permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the next
preceding sentence (a "Net Proceeds Offer Amount") exceeds $7,500,000 (the
"Net Proceeds Offer Trigger Date"), the Company shall make an offer to
purchase (the "Net Proceeds Offer") from all Holders on a pro rata basis, that
amount of Notes equal to the Net Proceeds Offer Amount at a price equal to
100% of the Accreted Value of the Notes to be purchased, plus accrued and
unpaid interest thereon, if any, to the date of purchase. If at any time any
non-cash consideration received by the Company or any Restricted Subsidiary of
the Company, as the case may be, in connection with any Asset Sale is
converted into or sold or otherwise disposed of for cash (other than interest
received with respect to any such non-cash consideration), then such
conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance
with this Section. To the extent that the aggregate Accreted Value of Notes
tendered pursuant to such Net Proceeds Offer is less than the Net Proceeds
Offer Amount the Company and its Restricted Subsidiaries may use such
deficiency for general corporate purposes. If the aggregate Accreted Value of
Notes validly tendered and not withdrawn by Holders thereof exceeds the Net
Proceeds Offer Amount, the Notes to be purchased will be selected on a pro
rata basis. Upon completion of such Net Proceeds Offer, the amount of Net
Proceeds Offer Amount will be reset to zero.
Notwithstanding the immediately preceding paragraph, the Company and its
Restricted Subsidiaries will be permitted to consummate an Asset Sale without
complying with such paragraphs to the extent (i) at least 80% of the
consideration for such Asset Sale constitutes Replacement Assets and (ii) such
Asset Sale is for fair market value; provided that any consid-
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eration not constituting Replacement Assets received by the Company or any of
its Restricted Subsidiaries in connection with any Asset Sale permitted to be
consummated under this paragraph shall constitute Net Cash Proceeds subject to
the provisions of the preceding paragraph.
Each Net Proceeds Offer will be mailed to the record Holders as shown on
the register of Holders not less than 30 days nor more than 45 days following
the Net Proceeds Offer Trigger Date, with a copy to the Trustee, and shall
comply with the procedures set forth in this Indenture. Upon receiving notice
of the Net Proceeds Offer, Holders may elect to tender their Notes in whole or
in part in integral multiples of $1,000 principal amount at maturity in
exchange for cash. To the extent Holders properly tender Notes in an amount
exceeding the Net Proceeds Offer Amount, Notes of tendering Holders will be
purchased on a pro rata basis (based on amounts tendered). A Net Proceeds
Offer shall remain open for a period of 20 business days or such longer period
as may be required by law, and the purchase of such Note shall be consummated
within 60 days following the mailing of the Net Proceeds Offer.
The notice, which shall govern the terms of the Net Proceeds Offer, shall
include such disclosures as are required by law and shall state:
(i) that the Net Proceeds Offer is being made pursuant to this
Section 4.15;
(ii) the purchase price (equal to 100% of the Accreted Value thereof
plus of accrued and unpaid interest, if any) to be paid for Notes
purchased pursuant to the Net Proceeds Offer and the Net Proceeds Payment
Date;
(iii) that any Note not tendered for payment will continue to
accrete and accrue interest in accordance with the terms thereof;
(iv) that, unless the Company defaults on making the payment, any
Note accepted for payment pursuant to the Net Proceeds Offer shall cease
to accrete and accrue interest after the Net Proceeds Payment Date;
(v) that Holders accepting the Offer to have their Notes purchased
pursuant to the Net Proceeds Offer will be required to surrender their
Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the Excess Net Payment Date;
(vi) that Holders will be entitled to withdraw their acceptance if
the Paying Agent receives, not later than
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the close of business on the second Business Day prior to the Net
Proceeds Payment Date, a facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Notes the Holder
delivered for purchase and a statement that such Holder is withdrawing
his election to have such Notes purchased;
(vii) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount at maturity equal to the
unpurchased portion of the Notes surrendered; provided that each Note
purchased and each such new Note issued shall be in an original principal
amount at maturity in denominations of $1,000 and integral multiples
thereof;
(viii) any other procedures that a Holder must follow to accept a
Net Proceeds Offer or effect withdrawal of such acceptance; and
(ix) the name and address of the Paying Agent.
On the Net Proceeds Payment Date, the Company shall (i) accept for
payment Notes or portions thereof tendered pursuant to the Net Proceeds Offer
in accordance with this Section 4.15, (ii) deposit with the Paying Agent U.S.
Legal Tender sufficient to pay the Net Proceeds Offer Amount to be purchased
in accordance with this Section 4.15 and (iii) deliver to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof tendered to and accepted for payment by the Company.
For purposes of this Section 4.15, the Trustee shall act as the Paying
Agent. The Paying Agent shall promptly (but in any case no later than 10
calendar days after the Net Proceeds Payment Date) mail or deliver to the
Holders of Notes so accepted payment in an amount equal to the purchase price
for such Notes, and the Company shall execute and issue, and the Trustee shall
promptly authenticate and mail to such Holders, a new Note equal in principal
amount at maturity to any unpurchased portion of the Note surrendered;
provided that each such new Note shall be issued in an original principal
amount at maturity in denominations of $1,000 and integral multiples thereof.
The Company will send to the Trustee and the Holders of Notes on or as soon as
practicable after the Net Proceeds Payment Date a notice setting forth the
results of the Net Proceeds Offer. Any Notes not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations
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are applicable in connection with the repurchase of Notes pursuant to a Net
Proceeds Offer. To the extent that the provisions of any securities laws or
regulations conflict with Section 4.15, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section 4.15 by virtue thereof.
SECTION 4.16. Limitation on Preferred Stock
of Restricted Subsidiaries.
The Company will not permit any of its Restricted Subsidiaries to issue
any Preferred Stock (other than to the Company or to a Wholly Owned Restricted
Subsidiary of the Company) or permit any Person (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company) to own any Preferred Stock
of any Restricted Subsidiary of the Company; provided that the foregoing shall
not prohibit the creation of a Lien in any such Preferred Stock under the
Credit Agreement and otherwise created in accordance with this Indenture.
SECTION 4.17. Limitation on Liens.
The Company will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or permit or
suffer to exist any Liens of any kind against or upon any property or assets
of the Company or any of its Restricted Subsidiaries whether owned on the
Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless (i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes, the Notes are secured
by a Lien on such property, assets or proceeds that is senior in priority to
such Liens and (ii) in all other cases, the Notes are equally and ratably
secured, except for (A) Liens existing as of the Issue Date (other than Liens
securing Indebtedness under the Credit Agreement) to the extent and in the
manner such Liens are in effect on the Issue Date; (B) Liens securing
Indebtedness under the Credit Agreement; (C) Liens securing the Notes and the
Guarantees, if any; (D) Liens of the Company or a Wholly Owned Restricted
Subsidiary of the Company on assets of any Restricted Subsidiary of the
Company; (E) Liens securing Refinancing Indebtedness which is incurred to
Refinance any Indebtedness which has been secured by a Lien permitted under
this Indenture and which has been incurred in accordance with the provisions
of this Indenture; provided, however, that such Liens (a) are no less
favorable to the Holders and are not more favorable to the lienholders with
respect to such Liens than the Liens in respect of the Indebtedness being
Refinanced and (b) do not extend to or cover any property or assets of the
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Company or any of its Restricted Subsidiaries not securing the Indebtedness so
Refinanced; and (F) Permitted Liens. In the event that the Lien the existence
of which gives rise to a Lien securing the Notes pursuant to the provisions of
this Indenture ceases to exist, (and the Trustee shall be furnished with
evidence that such Lien ceases to exist) the Lien securing the Notes required
by this Section shall automatically be released and the Trustee shall execute
appropriate documentation.
SECTION 4.18. Limitation of Guarantees by Restricted Subsidiaries
The Company will not permit any of its Restricted Subsidiaries, directly
or indirectly, by way of the pledge of any intercompany note, or any Preferred
Stock or otherwise, to assume, guarantee or in any other manner become liable
with respect to any Indebtedness of the Company or any other Restricted
Subsidiary of the Company that is a Guarantor (other than guarantees, pledges
or other assumptions of or liability for or in favor of a Foreign Credit
Facility by Foreign Restricted Subsidiaries), unless, in any such case (a)
such Restricted Subsidiary executes and delivers a supplemental indenture to
this Indenture, providing a senior guarantee of payment of the Notes by such
Restricted Subsidiary (the "Guarantee") and (b) if such assumption, guarantee
or other liability of such Restricted Subsidiary is provided in respect of
Indebtedness that is expressly subordinated to the Notes, the guarantee or
other instrument provided by such Restricted Subsidiary in respect of such
subordinated Indebtedness shall be subordinated to the Guarantee pursuant to
subordination provisions no less favorable to the Holders of the Notes than
the provisions subordinating such Indebtedness to the Notes; provided that the
foregoing shall not be applicable to a guarantee of Acquired Indebtedness by
another Restricted Subsidiary whose guarantee also constitutes Acquired
Indebtedness incurred by the Company or one of its Restricted Subsidiaries in
the same transaction.
Notwithstanding the foregoing, any such Guarantee by a Restricted
Subsidiary of the Notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged, without any further
action required on the part of the Trustee or any Holder, upon: (i) the
unconditional release of such Restricted Subsidiary from its liability in
respect of the Indebtedness in connection with which such Guarantee was
executed and delivered pursuant to the preceding paragraph; or (ii) any sale
or other disposition (by merger or otherwise) to any Person which is not a
Restricted Subsidiary of the Company of all of the Company's direct or
indirect Capital Stock in, or all or substantially all of the assets of, such
Restricted Subsidiary; provided that (a) such sale or disposition of such
Capital Stock or assets is otherwise in compliance with the
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terms of this Indenture and (b) such assumption, guarantee or other liability
of such Restricted Subsidiary has been released by the holders of the other
Indebtedness so guaranteed.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets.
The Company will not, in a single transaction or series of related
transactions, consolidate or merge with or into any Person, or sell, assign,
transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey
or otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and the Company's
Restricted Subsidiaries) whether as an entirety or substantially as an
entirety to any Person unless: (i) either (1) the Company shall be the
surviving or continuing corporation or (2) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or
the Person which acquires by sale, assignment, transfer, lease, conveyance or
other disposition the properties and assets of the Company and of the
Company's Restricted Subsidiaries substantially as an entirety (the "Surviving
Entity") (x) shall be a corporation organized and validly existing under the
laws of the United States or any State thereof or the District of Columbia and
(y) shall expressly assume, by supplemental indenture (in form satisfactory in
all respects to the Trustee), executed and delivered to the Trustee, the due
and punctual payment of the principal of and interest on all of the Notes and
the performance of every covenant of the Notes, this Indenture and the
Registration Rights Agreement on the part of the Company to be performed or
observed; (ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving effect to
any Indebtedness and Acquired Indebtedness incurred in connection with or in
respect of such transaction), the Company or such Surviving Entity, as the
case may be, (1) shall have a Consolidated Net Worth equal to or greater than
the Consolidated Net Worth of the Company immediately prior to such
transaction, and (2) shall be able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.12;
(iii) immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including, without limitation, giving
effect to any Indebtedness and Acquired Indebtedness incurred or an-
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ticipated to be incurred and any Lien granted in connection with or in respect
of the transaction), no Default or Event of Default shall have occurred or be
continuing; and (iv) the Company or the Surviving Entity shall have delivered
to the Trustee an officers' certificate and an opinion of counsel, each
stating that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply with
the applicable provisions of this Indenture and that all conditions precedent
in the Indenture relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale
or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company and the Company, if surviving, will be automatically discharged
from all of its obligations under this Indenture and the Notes.
Upon any consolidation, combination or merger or any transfer of all or
substantially all of the assets of the Company in accordance with the
foregoing, in which the Company is not the continuing corporation, the
successor Person formed by such consolidation or into which the Company is
merged or to which such conveyance, lease or transfer is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture and the Notes with the same effect as if such
surviving entity had been named as such.
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation, combination or merger or any transfer of all or
substantially all of the assets of the Company in accordance with Section 5.01
in which the Company is not the Surviving Entity, the Surviving Entity shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture and the Notes with the same effect as if such
Surviving Entity had been named as such.
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ARTICLE SIX
REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" means any of the following events:
(a) the failure to pay interest on any Notes when the same becomes due
and payable and the default continues for a period of 30 days;
(b) the failure to pay the principal of any Notes, when such principal
becomes due and payable, at maturity, upon redemption or otherwise (including
the failure to make a payment to purchase Notes tendered pursuant to a Change
of Control Offer or a Net Proceeds Offer);
(c) a default in the observance or performance of any other covenant or
agreement contained in this Indenture which default continues for a period of
30 days after the Company receives written notice specifying the default (and
demanding that such default be remedied and stating that such notice is a
"Notice of Default") from the Trustee or the Holders of at least 25% of the
outstanding principal amount of the Notes (except in the case of a default
with respect to Section 5.01, which will constitute an Event of Default with
such notice requirement but without such passage of time requirement);
(d) the failure to pay at final maturity (giving effect to any applicable
grace periods and any extensions thereof) the principal amount of any
Indebtedness of the Company or any Restricted Subsidiary (other than a Foreign
Restricted Subsidiary that is not a Significant Subsidiary) of the Company or
the acceleration of the final stated maturity of any such Indebtedness if the
aggregate principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness in default for failure to pay principal
at final maturity or which has been accelerated, aggregates $5,000,000 or
more;
(e) one or more judgments (not covered by insurance as to which the
carrier has assumed the defense or acknowledged coverage) in an aggregate
amount in excess of $5,000,000 shall have been rendered against the Company or
any of its Restricted Subsidiaries (other than a Foreign Restricted Subsidiary
that is not a Significant Subsidiary) and such judgments remain undischarged,
unpaid or un-
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stayed for a period of 60 days after such judgment or judgments become final
and non-appealable;
(f) the Company or any of its Significant Subsidiaries pursuant to or
under or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case or proceeding;
(ii) consents to the entry of an order for relief against it in an
involuntary case or proceeding;
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property;
(iv) makes a general assignment for the benefit of its creditors; or
(v) shall generally not pay its debts when such debts become due or shall
admit in writing its inability to pay its debts generally; or
(g) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any of its Significant
Subsidiaries in an involuntary case or proceeding,
(ii) appoints a Custodian of the Company or any of its Significant
Subsidiaries for all or substantially all of their properties taken as a
whole, or
(iii) orders the liquidation of the Company or any of its Significant
Subsidiaries,
and in each case the order or decree remains unstayed and in effect for 60 days.
(h) any of the Guarantees, if any, ceases to be in full force and effect
or any of the Guarantees is declared to be null and void and unenforceable or
any of the Guarantees is found to be invalid or any of the Guarantors denies
its liability under its Guarantee (other than by reason of release of a
Guarantor in accordance with the terms of this Indenture).
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SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in
Section 6.01(f) or (g) above with respect to the Company) shall occur and be
continuing, the Trustee or the Holders of at least 25% in principal amount of
outstanding Notes may declare the Accreted Value of and accrued and unpaid
interest on all the Notes to be due and payable by notice in writing to the
Company (and the Trustee if given by the Holders) specifying the respective
Event of Default and that it is a "notice of acceleration" (the "Acceleration
Notice"), and the same (i) shall become immediately due and payable or (ii) if
there are any amounts outstanding under the Senior Secured Credit Facilities,
shall become immediately due and payable upon the first to occur of an
acceleration under the Senior Secured Credit Facilities or 5 business days
after receipt by the Company and the representative under the Senior Secured
Credit Facilities of such Acceleration Notice. In the event of an acceleration
because an Event of Default set forth in clause (d) above has occurred and is
continuing, such acceleration shall be automatically rescinded and annulled if
the event of default triggering such Event of Default pursuant to clause (d)
shall be remedied or cured by the Company or the relevant Restricted
Subsidiary or waived by the holders of the relevant Indebtedness within 20
days after the date of the Acceleration Notice with respect thereto. If an
Event of Default specified in Section 6.01(f) or (g) with respect to the
Company occurs and is continuing, then all unpaid principal of and accrued and
unpaid interest on all of the outstanding Notes shall ipso facto become and be
immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder.
At any time after a declaration of acceleration with respect to the Notes
as described in the preceding paragraph, the Holders of a majority in
principal amount of the Notes may rescind and cancel such declaration and its
consequences (i) if the rescission would not conflict with any judgment or
decree, (ii) if all existing Events of Default have been cured or waived
except nonpayment of Accreted Value or interest that has become due solely
because of the acceleration, (iii) to the extent the payment of such interest
is lawful, if interest on overdue installments of interest and overdue
principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in Section 6.01(f) or (g), the Trustee
shall have received an officers' certificate and an opinion of counsel that
such Event of Default has been cured or waived. No such rescission shall
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affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies.
(a) If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of Accreted Value or principal of or interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture.
(b) All rights of action and claims under this Indenture or the Notes may
be enforced by the Trustee even if it does not possess any of the Notes or
does not produce any of them in the proceeding. A delay or omission by the
Trustee or any Holder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Prior to the acceleration of the Notes, the Holders of a majority in
aggregate principal amount of the Notes then outstanding by notice to the
Trustee may, on behalf of the Holders of all the Notes, waive any existing
Default or Event of Default and its consequences under this Indenture, except
a Default or Event of Default specified in Section 6.01(a) or (b) or in
respect of any provision hereof which cannot be modified or amended without
the consent of the Holder so affected pursuant to Section 9.02. When a Default
or Event of Default is so waived, it shall be deemed cured and shall cease to
exist. This Section 6.04 shall be in lieu of ss. 316(a)(1)(B) of the TIA and
such ss. 316(a)(1)(B) of the TIA is hereby expressly excluded from this
Indenture and the Notes, as permitted by the TIA.
SECTION 6.05. Control by Majority.
Holders of the Notes may not enforce this Indenture or the Notes except
as provided in this Article Six and under the TIA. The Holders of a majority
in principal amount at maturity of the then outstanding Notes have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee; provided, however, that the Trustee may refuse to follow any
direction (a) that conflicts with any rule of law or this Indenture, (b) that
the Trustee, in its sole discretion, determines may be unduly prejudicial to
the rights of another Holder, or (c) that may expose the Trustee to personal
liability for which adequate indemnity provided
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to the Trustee against such liability is not reasonably assured to it; provided,
further, however, that the Trustee may take any other action deemed proper by
the Trustee that is not inconsistent with such direction or this Indenture. This
Section 6.05 shall be in lieu of Section 316(a)(1)(A) of the TIA, and such
Section 316(a)(1)(A) of the TIA is hereby expressly excluded from this Indenture
and the Notes, as permitted by the TIA.
SECTION 6.06. Limitation on Suits.
A Holder may not pursue any remedy with respect to this Indenture or the
Notes unless: (i) the Holder gives to the Trustee written notice of a
continuing Event of Default; (ii) the Holders of at least 25% in aggregate
principal amount of the outstanding Notes make a written request to the
Trustee to pursue a remedy; (iii) such Holder or Holders offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense; (iv) the Trustee does not comply with
the request within 60 days after receipt of the request and the offer and, if
requested, the provision of indemnity; and (v) during such 60-day period the
Holders of a majority in principal amount of the outstanding Notes do not give
the Trustee a direction which, in the opinion of the Trustee, is inconsistent
with the request. A Holder may not use this Indenture to prejudice the rights
of another Holder or to obtain a preference or priority over such other
Holder.
SECTION 6.07. Right of Holders To Receive Payment.
Notwithstanding any other provision in this Indenture, the right of any
Holder of a Note to receive payment of Accreted Value or principal of and
interest on such Note, on or after the respective due dates expressed or
provided for in such Note, or to bring suit for the enforcement of any such
payment on or after the respective due dates, is absolute and unconditional
and shall not be impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default specified in clause (a) or (b) of Section 6.01
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company, or any other obligor on
the Notes for the whole amount of Accreted Value or principal of and accrued
interest remaining unpaid, together with interest on overdue on Accreted Value
or principal and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate per
annum provided for by the Notes and such further amount as shall be suf-
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ficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel and any other amounts due the Trustee pursuant to the
provisions of Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents, counsel, accountants and experts) and
the Holders allowed in any judicial proceedings relative to the Company (or
any other obligor upon the Notes), its creditors or its property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each Holder
to make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any
other amounts due the Trustee under Section 7.07. Nothing herein contained
shall be deemed to authorize the Trustee to authorize or consent to or accept
or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article Six it shall
pay out such money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Notes for Accreted
Value or principal and interest accrued on the Notes, ratably, without
preference or priority of any kind, according to the amounts due and payable
on the Notes for Accreted Value or principal and interest, respectively;
Third: the balance, if any, to the Company.
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The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Holders pursuant to this Section
6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as Trustee, a court may in its discretion require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit, and
the court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to any suit by the Trustee, any
suit by a Holder pursuant to Section 6.07, or a suit by a Holder or Holders of
more than 10% in aggregate principal amount at maturity of the outstanding
Notes.
SECTION 6.12. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture or any Note and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the
Holders shall continue as though no such proceeding had been instituted.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default known to the Trustee has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in its exercise
thereof as a prudent person would exercise or use under the circumstances in
the conduct of his own affairs.
(b) Except during the continuance of an Event of Default known to the
Trustee:
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(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no covenants or
obligations shall be implied in this Indenture that are adverse to
the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, in the case of any such certificates or
opinions that by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein
contained, the Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph
(b) of this Section 7.01.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of
its rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it in its sole discretion against such risk,
liability, loss, fees or expense which might be incurred in compliance with
such request or direction.
(e) Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this
Section 7.01 and Section 7.02.
(f) The Trustee shall not be liable for interest on any
money or assets received by it except as the Trustee may agree in writing with
the Company. Assets held in trust by the
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Trustee need not be segregated from other assets except to the extent required
by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any document believed by it to be genuine and
to have been signed or presented by the proper Person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel of its selection and may require an Officers' Certificate or
an Opinion of Counsel, which shall conform to Sections 11.04 and 11.05.
The Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on such Officers' Certificate or Opinion of
Counsel. The Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection from liability in respect to any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and, if the Trustee shall determine
to make such further inquiry or investigation, it shall be entitled, upon
reasonable notice to the Company, to examine the books, records, and
premises of the Company, personally or by agent or attorney and to
consult with the officers and representatives of the Company, including
the Company's accountants and attorneys.
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(f) The Trustee shall be under no obligation to exercise any of its
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders have offered to the Trustee reasonable
indemnity satisfactory to the Trustee against the costs, expenses and
liabilities which may be incurred by it in compliance with such request,
order or direction.
(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(h) Delivery of reports, information and documents to the Trustee
under Section 4.08 is for informational purposes only and the Trustee's
receipt of the foregoing shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of their covenants
hereunder (as to which the Trustee is entitled to rely exclusively on
Officers' Certificates).
(i) The Trustee shall not be deemed to have notice of any Event of
Default unless a Trust Officer of the Trustee has actual knowledge
thereof or unless the Trustee shall have received written notice thereof
at the Corporate Trust Office of the Trustee, and such notice references
the Notes and this Indenture.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Company, or any of the
Subsidiaries, or their respective Affiliates with the same rights it would
have if it were not Trustee. Any Agent may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Notes, and it shall not be accountable for the Company's
use of the proceeds from the Notes, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement of the Company in this
Indenture or the Notes other than the Trustee's certificate of authentication.
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SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if it is
known to a Trust Officer, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after obtaining knowledge
thereof. Except in the case of a Default or an Event of Default in payment of
Accreted Value or principal of, or interest on, any Note, including an
accelerated payment, a Default in payment on the Change of Control Payment
Date pursuant to a Change of Control Offer or on the Net Proceeds Offer
Payment Date pursuant to a Net Proceeds Offer and a Default in compliance with
Article Five hereof, the Trustee may withhold the notice if and so long as its
Board of Directors, the executive committee of its Board of Directors or a
committee of its directors and/or Trust Officers in good faith determines that
withholding the notice is in the interest of the Holders. The foregoing
sentence of this Section 7.05 shall be in lieu of the proviso to Section 315(b)
of the TIA and such proviso to Section 315(b) of the TIA is hereby expressly
excluded from this Indenture and the Notes, as permitted by the TIA.
SECTION 7.06. Reports by Trustee to Holders.
Within 60 days after May 15 of each year beginning with 1998, the Trustee
shall, to the extent that any of the events described in TIA Section 313(a)
occurred within the previous twelve months, but not otherwise, mail to each
Holder a brief report dated as of such date that complies with TIA Section
313(a). The Trustee also shall comply with TIA Sections 313(b), (c) and (d).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the Commission and each stock exchange,
if any, on which the Notes are listed.
The Company shall promptly notify the Trustee if the Notes become listed
on any stock exchange and the Trustee shall comply with TIA Section 313(d).
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such compensation
for its services as has been agreed to in writing signed by the Company and
the Trustee. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable out-of-pocket expenses incurred or
made by it in connection with the performance of its duties under this
Indenture. Such expenses shall
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include the reasonable fees and expenses of the Trustee's agents and counsel.
The Company shall indemnify each of the Trustee (or any predecessor
Trustee) and its agents, employees, stockholders, Affiliates and directors and
officers for, and hold them each harmless against, any and all loss,
liability, damage, claim or expense (including reasonable fees and expenses of
counsel), including taxes (other than taxes based on the income of the
Trustee) incurred by them except for such actions to the extent caused by any
negligence, bad faith or willful misconduct on the part of any of them,
arising out of or in connection with the acceptance or administration of this
trust including the reasonable costs and expenses of defending themselves
against any claim or liability in connection with the exercise or performance
of any of their rights, powers or duties hereunder. The Trustee shall notify
the Company promptly of any claim asserted against the Trustee for which it
may seek indemnity. Failure by the Trustee to so notify the Company shall not
relieve the Company of its Obligations hereunder except to the extent such
failure shall have prejudiced the Company. The Company shall defend the claim
and the Trustee shall cooperate in the defense; provided, however, that any
settlement of a claim shall be approved in writing by the Trustee if such
settlement would result in an admission of liability by the Trustee or if such
settlement would not be accompanied by a full release of the Trustee for all
liability arising out of the events giving rise to such claim. The Trustee may
at its option have separate counsel of its own choosing and the Company shall
pay the reasonable fees and expenses of such counsel. The Company need not pay
for any settlement made without its consent, which consent shall not be
unreasonably withheld.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or interest on particular Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(f) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
The provisions of this Section 7.07 shall survive the resignation or
removal of a Trustee and the termination of this Indenture.
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SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company. The
Holders of a majority in principal amount at maturity of the outstanding Notes
may remove the Trustee and appoint a successor Trustee with the Company's
consent, by so notifying the Company and the Trustee in writing. The Company
may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall notify each Holder of such event
and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in aggregate
principal amount at maturity of the outstanding Notes may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. As promptly as possible after
that, the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, subject to the lien provided in Section 7.07, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The Company shall mail notice of such successor
Trustee's appointment to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in aggregate principal amount at maturity of the
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
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Notwithstanding any resignation or replacement of the Trustee pursuant to
this Section 7.08, the Company's obligations under Section 7.07 shall continue
for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; provided, however,
that such corporation shall be otherwise qualified and eligible under this
Article Seven.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the requirement
of TIA Sections 310(a)(1), (2) and (5). The Trustee (or, in the case of a
Trustee that is a subsidiary of another Bank or a corporation included in a
bank holding company system, the related bank or bank holding company) shall
have a combined capital and surplus of at least $50,000,000 million as set
forth in its most recent published annual report of condition, and have a
Corporate Trust Office in the City of New York. In addition, if the Trustee is
a subsidiary of another Bank or a corporation included in a bank holding
company system, the Trustee, independently of such bank or bank holding
company, shall meet the capital requirements of TIA Section 310(a)(2). The
Trustee shall comply with TIA Section 310(b); provided, however, that there
shall be excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities, or certificates of interest or
participation in other securities, of the Company are outstanding, if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met. The
provisions of TIA Section 310 shall apply to the Company, as obligor of the
Notes.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
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ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Company's Obligations.
This Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in this Indenture) as to all outstanding
Notes when (a) either (i) all Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (ii) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable or, by their terms, are to become due
and payable, or are to be called for redemption upon delivery of notice,
within one year and the Company has irrevocably deposited or caused to be
deposited with the Trustee funds in an amount sufficient to pay and discharge
the principal of and interest on the Notes to the date of maturity or
redemption, as the case may be, together with irrevocable instructions from
the Company directing the Trustee to apply such funds to the payment thereof
at maturity or redemption, as the case may be; (b) the Company has paid all
other sums payable under this Indenture by the Company; and (c) the Company
has delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel stating that all conditions precedent under this Indenture relating to
the satisfaction and discharge of this Indenture have been complied with.
The Company may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors discharged with respect to
the outstanding Notes ("Legal Defeasance"). Upon any such Legal Defeasance
this Indenture shall cease to be of further effect and the Company and the
Guarantors shall have no further obligations hereunder or under the Notes and
the entire indebtedness represented by the outstanding Notes shall be deemed
to have been paid and discharged, except for (a) the rights of Holders to
receive payments in respect of the principal of and interest on the Notes when
such payments are due, (b) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payments, (c) the rights, powers, trust, duties and immunities of the Trustee
and the Company's obligations in connection therewith and (d) the Legal
Defeasance provisions of this Section 8.01. In addition, the
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Company may, at its option and at any time, elect to have the obligations of
the Company released with respect to covenants contained in Sections 4.03
(except with respect to the corporate existence of the Company) through 4.18
and Article Five ("Covenant Defeasance") and thereafter any omission to comply
with such obligations shall not constitute a Default or Event of Default with
respect to the Notes. In the event of Covenant Defeasance, those events
described under Section 6.01 (except those events described in Section
6.01(a),(b),(f) and (g)) will no longer constitute an Event of Default with
respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders cash in United States dollars,
non-callable U.S. Government Obligations, or a combination thereof, in
such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal
of and interest on the Notes on the stated date for payment thereof or on
the applicable Redemption Date, as the case may be;
(b) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (i) the Company has
received from, or there has been published by, the Internal Revenue
Service a ruling or (ii) since the date of this Indenture, there has been
a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion of counsel shall confirm
that, the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and in either
case, and (iii) the Holders will be subject to U.S. federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred;
(c) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders will not
recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
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(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default arising in connection with the substantially contemporaneous
borrowing of funds to fund the deposit referenced in clause (a) above) or
insofar as Events of Default under Section 6.01(f) or (g) from bankruptcy
or insolvency events are concerned, at any time in the period ending on
the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under this Indenture or
any other material agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company
or with the intent of defeating, hindering, delaying or defrauding any
other creditors of the Company or others;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance, as the case may be, have been complied with;
(h) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and
(i) certain other customary conditions precedent are satisfied.
Notwithstanding the foregoing, the Opinion of Counsel required by clauses
(b)(i) and (c) above need not be delivered if all the Notes not theretofore
delivered to the Trustee for cancellation (i) have become due and payable,
(ii) will become due and payable on the maturity date within one year, or
(iii) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by such
Trustee in the name, and at the expense, of the Company.
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SECTION 8.02. Application of Trust Money.
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or U.S.
Government Obligations deposited with it pursuant to Section 8.01, and shall
apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of the principal
of and interest on the Notes. The Trustee shall be under no obligation to
invest said U.S. Legal Tender or U.S. Government Obligations.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.01 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of outstanding Notes.
SECTION 8.03. Repayment to the Company.
Subject to Sections 7.07 and 8.01, the Trustee and the Paying Agent shall
promptly pay to the Company upon request any excess U.S. Legal Tender or U.S.
Government Obligations held by them at any time and thereupon shall be
relieved from all liability with respect to such money. The Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of principal or interest that remains unclaimed for one year;
provided, however, that the Company shall, if requested by the Trustee or
Paying Agent, give to the Trustee or Paying Agent, indemnification reasonably
satisfactory to it against any and all liability which may be incurred by it
by reason of such paying; provided, further, that the Trustee or such Paying
Agent, before being required to make any payment, may at the expense of the
Company cause to be published once in a newspaper of general circulation in
the City of New York or mail to each Holder entitled to such money notice that
such money remains unclaimed and that after a date specified therein which
shall be at least 30 days from the date of such publication or mailing any
unclaimed balance of such money then remaining will be repaid to the Company.
After payment to the Company, Holders entitled to such money must look to the
Company for payment as general creditors unless an applicable law designates
another Person, and all liability of the Trustee and such Paying Agent with
respect to such money shall cease.
SECTION 8.04. Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender
or U.S. Government Obligations in accordance
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with Section 8.01 by reason of any legal proceeding or by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit
had occurred pursuant to Section 8.01 until such time as the Trustee or Paying
Agent is permitted to apply all such U.S. Legal Tender or U.S. Government
Obligations in accordance with Section 8.01; provided, however, that if the
Company has made any payment of interest on or principal of any Notes because
of the reinstatement of its obligations, the Company shall be subrogated to
the rights of the Holders of such Notes to receive such payment from the U.S.
Legal Tender or U.S. Government Obligations held by the Trustee or Paying
Agent.
SECTION 8.05. Acknowledgment of Discharge by Trustee.
After (i) the conditions of Section 8.01 have been satisfied, (ii) the
Company has paid or caused to be paid all other sums payable hereunder by the
Company and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent referred to in clause (i) above relating to the satisfaction and
discharge of this Indenture have been complied with, the Trustee upon written
request shall acknowledge in writing the discharge of the Company's
obligations under this Indenture except for those surviving obligations
specified in Section 8.01; provided the legal counsel delivering such Opinion
of Counsel may rely as to matters of fact on one or more Officers'
Certificates of the Company.
ARTICLE NINE
MODIFICATION OF THE INDENTURE
SECTION 9.01. Without Consent of Holders.
Subject to the provisions of Section 9.02, the Company and the Trustee
may amend, waive or supplement this Indenture without notice to or consent of
any Holder: (a) to cure any ambiguity, defect or inconsistency, provided that
the same does not adversely affect the rights of any Holder in any material
respect; (b) to comply with Section 5.01 of this Indenture; (c) to provide for
uncertificated Notes in addition to certificated Notes; (d) to comply with any
requirements of the Commission in order to effect or maintain the
qualification of this Indenture under the TIA; or (e) to make any change that
would provide any additional benefit or rights to the Holders
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or that does not adversely affect the rights of any Holder in any material
respect. In formulating its opinion on such matters, the Trustee will be
entitled to rely on such evidence as it deems appropriate, including, without
limitation, solely on an Opinion of Counsel.
Upon the request of the Company accompanied by a resolution of its Board
of Directors authorizing the execution of any such amendment, waiver or
supplement or any such amended or supplemental Indenture, and upon receipt by
the Trustee of the documents described in Section 9.06, the Trustee shall join
with the Company in the execution of any such amendment, waiver or supplement
or amended or supplemental Indenture authorized or permitted by the terms of
this Indenture and to make any further appropriate agreements and stipulations
which may be therein contained, but the Trustee may but shall not be obligated
to enter into any such amendment, waiver or supplement or amended or
supplemental Indenture which adversely affects its own rights, duties or
immunities under this Indenture, in which case the Trustee may in its sole
discretion, but shall not be obligated to, enter into such amended or
supplemental Indenture.
SECTION 9.02. With Consent of Holders.
The Company and the Trustee may amend, waive or supplement this Indenture
or the Notes or any amended or supplemental Indenture with the written consent
of the Holders of Notes of not less than a majority in aggregate principal
amount of the Notes then outstanding (including consents obtained in
connection with a tender offer or exchange offer for the Notes).
Upon the request of the Company accompanied by a resolution of its Board
of Directors authorizing the execution of any such amendment, waiver or
supplement or any such amended or supplemental Indenture, and upon the filing
with the Trustee of evidence satisfactory to the Trustee of the consent of the
Holders of Notes as aforesaid, and upon receipt by the Trustee of the
documents described in Section 9.06, the Trustee shall join with the Company
in the execution of any such amendment, waiver or supplement or such amended
or supplemental Indenture unless such amended or supplemental Indenture
adversely affects the Trustee's own rights, duties or immunities under this
Indenture, in which case the Trustee may in its sole discretion, but shall not
be obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the par-
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ticular form of any proposed amendment or waiver, but it shall be sufficient
if such consent approves the substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Holder of the
Notes affected thereby, an amendment or waiver may not, directly or
indirectly: (i) reduce the principal amount at maturity of Notes whose Holders
must consent to an amendment; (ii) reduce the rate of or change or have the
effect of changing the time for payment of interest, including defaulted
interest, on any Notes or change or have the effect of changing the definition
of Accreted Value; (iii) reduce the principal of or change or have the effect
of changing the fixed maturity of any Notes, or change the date on which any
Notes may be subject to redemption or repurchase, or reduce the redemption or
repurchase price therefor; (iv) make any Notes payable in money other than
that stated in the Notes; (v) make any change in provisions of this Indenture
protecting the right of each Holder to receive payment of principal of and
interest on such Holder's Note or Notes on or after the due date thereof or to
bring suit to enforce such payment, or permitting Holders of a majority in
principal amount of Notes to waive Defaults or Events of Default; (vi) amend,
change or modify in any material respect the obligation of the Company (or any
of the provisions or definitions with respect thereto) to (A) make and
consummate a Change of Control Offer in the event of a Change of Control or
(B) make and consummate a Net Proceeds Offer with respect to any Asset Sale
that has been consummated; or (vii) release any Guarantor from any of its
obligations under its Guarantee or this Indenture otherwise than in accordance
with the terms of this Indenture.
SECTION 9.03. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect; provided, however, that this
Section 9.03 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
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SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
notice to the Trustee or the Company received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented (and not theretofore
revoked such consent) to the amendment, supplement or waiver. An amendment,
supplement or waiver becomes effective upon receipt by the Trustee of such
Officers' Certificate and evidence of consent by the Holders of the requisite
percentage in principal amount of outstanding Notes.
The Company may, but shall not be obligated to, fix a Record Date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a Record Date is fixed, then notwithstanding the
second sentence of the immediately preceding paragraph, those Persons who were
Holders at such Record Date (or their duly designated proxies), and only those
Persons, shall be entitled to revoke any consent previously given, whether or
not such Persons continue to be Holders after such Record Date. No such
consent shall be valid or effective for more than 90 days after such Record
Date unless consents from Holders of the requisite percentage in principal
amount of outstanding Notes required hereunder for the effectiveness of such
consents shall have also been given and not revoked within such 90 day period.
SECTION 9.05. Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder of such Note to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Note about the changed terms
and return it to the Holder. Alternatively, if the Company or the Trustee so
determine, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms.
SECTION 9.06. Trustee To Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver authorized
pursuant to this Article Nine; provided, however, that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects
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the Trustee's own rights, duties or immunities under this Indenture. In
executing such amendment, supplement or waiver the Trustee shall be entitled
to receive indemnity reasonably satisfactory to it, and shall be fully
protected in relying upon an Opinion of Counsel and an Officers' Certificate
of the Company, stating that no Event of Default shall occur as a result of
such amendment, supplement or waiver and that the execution of such amendment,
supplement or waiver is authorized or permitted by this Indenture; provided,
however, that the legal counsel delivering such Opinion of Counsel may rely as
to matters of fact on one or more Officers' Certificates of the Company. Such
Opinion of Counsel shall not be an expense of the Trustee.
ARTICLE TEN
GUARANTEE OF NOTES
SECTION 10.01. Unconditional Guarantee.
Subject to the provisions of this Article Ten, each Guarantor, if any,
hereby, jointly and severally, unconditionally and irrevocably guarantees, on
a senior basis (such guarantee to be referred to herein as a "Guarantee") to
each Holder of a Note authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity and
enforceability of this Indenture, the Notes or the obligations of the Company
or any other Guarantor to the Holders or the Trustee hereunder or thereunder,
that: (a) Accreted Value or principal of and interest on the Notes (and any
Additional Interest payable thereon) shall be duly and punctually paid in full
when due, whether at maturity, upon redemption at the option of Holders
pursuant to the provisions of the Notes relating thereto, by acceleration or
otherwise, and interest on the overdue principal and (to the extent permitted
by law) interest, if any, on the Notes and all other obligations of the
Company or the Guarantors to the Holders or the Trustee hereunder or
thereunder (including amounts due the Trustee under Section 7.07) and all
other obligations shall be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and (b) in case of any extension
of time of payment or renewal of any Notes or any of such other obligations,
the same shall be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at maturity, by
acceleration or otherwise. Failing payment when due of any amount so
guaranteed, or failing performance of any other obligation of the Company to
the Holders under this Indenture or under the Notes, for whatever reason, each
Guarantor shall be obligated to pay, or to perform or cause the perform-
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ance of, the same immediately. An Event of Default under this Indenture or the
Notes shall constitute an event of default under this Guarantee, and shall
entitle the Holders of Notes to accelerate the obligations of the Guarantors
hereunder in the same manner and to the same extent as the obligations of the
Company.
Each of the Guarantors hereby agrees that its obligations hereunder shall
be unconditional, irrespective of the validity, regularity or enforceability
of the Notes or this Indenture, the absence of any action to enforce the same,
any waiver or consent by any Holder of the Notes with respect to any
provisions hereof or thereof, any release of any other Guarantor, the recovery
of any judgment against the Company, any action to enforce the same, whether
or not a Guarantee is affixed to any particular Note, or any other
circumstance which might otherwise constitute a legal or equitable discharge
or defense of a Guarantor. Each of the Guarantors hereby waives the benefit of
diligence, presentment, demand of payment, filing of claims with a court in
the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands
whatsoever and covenants that its Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes, this Indenture
and this Guarantee. This Guarantee is a guarantee of payment and not of
collection. If any Holder or the Trustee is required by any court or otherwise
to return to the Company or to any Guarantor, or any custodian, trustee,
liquidator or other similar official acting in relation to the Company or such
Guarantor, any amount paid by the Company or such Guarantor to the Trustee or
such Holder, this Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Guarantor further agrees that, as
between it, on the one hand, and the Holders of Notes and the Trustee, on the
other hand, (a) subject to this Article Eleven, the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article Six
for the purposes of this Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (b) in the event of any acceleration of such
obligations as provided in Article Six, such obligations (whether or not due
and payable) shall forthwith become due and payable by the Guarantors for the
purpose of this Guarantee.
No stockholder, officer, director, employee or incorporator, past,
present or future, or any Guarantor, as such, shall have any personal
liability under this Guarantee by reason of his, her or its status as such
stockholder, officer, director, employee or incorporator.
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Each Guarantor that makes a payment or distribution under its Guarantee
shall be entitled to a contribution from each other Guarantor, determined
based on the Adjusted Net Assets of each of the Subsidiary Guarantors.
"Adjusted Net Assets" of any Person at any date shall mean the lesser of the
amount by which (x) the fair value of the property of such Person exceeds the
total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date), but excluding liabilities under a
Subsidiary Guarantee of such Person at such date and (y) the present fair
salable value of the assets of such Person at such date exceeds the amount
that will be required to pay the probable liability of such Person on its
debts (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date), excluding debt in respect of the Subsidiary
Guarantee of such Person, as they become absolute and matured.
SECTION 10.02. Limitations on Guarantees.
The obligations of any Guarantor under its Guarantee are limited to the
maximum amount which, after giving effect to all other contingent and fixed
liabilities of the Guarantor will result in the obligations of the Guarantor
under the Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under any laws of the United States, any state of the United States
or the District of Columbia.
SECTION 10.03. Execution and Delivery of Guarantee.
To further evidence the Guarantee set forth in Section 10.01, each
Guarantor hereby agrees that a notation of such Guarantee, substantially in
the form of Exhibit E, shall be endorsed on each Note authenticated and
delivered by the Trustee. Such Guarantee shall be executed on behalf of each
Guarantor by either manual or facsimile signature of two Officers of the
Guarantor, each of whom, in each case, shall have been duly authorized to so
execute by all requisite corporate action. The validity and enforceability of
any Guarantee shall not be affected by the fact that it is not affixed to any
particular Note.
Each of the Guarantors hereby agrees that its Guarantee set forth in
Section 10.01 shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Guarantee.
If an Officer of a Guarantor whose signature is on this Indenture or a
Guarantee no longer holds that office at the time the Trustee authenticates
the Note on which such Guar-
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antee is endorsed or at any time thereafter, such Guarantor's Guarantee of
such Note shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of any Guarantee set forth in this
Indenture on behalf of each Guarantor.
SECTION 10.04. Release of the Guarantor.
(a) If no Default exists or would exist under this Indenture, upon (i)
the sale or other disposition of all of the Capital Stock of the Guarantor, or
(ii) the sale or disposition of all or substantially all of the assets of the
Guarantor in compliance with all of the terms of this Indenture, the
Guarantor's Guarantee shall be released, and the Guarantor shall be deemed
released from all obligations under this Article Ten without any further
action required on the part of the Trustee or any Holder. If the Guarantor is
not so released the Guarantor or the entity surviving the Guarantor, as
applicable, shall remain or be liable under its Guarantee as provided in this
Article Ten.
(b) The Trustee shall deliver an appropriate instrument evidencing the
release of the Guarantor upon receipt of a request by the Company or the
Guarantor accompanied by an Officers' Certificate and an Opinion of Counsel
certifying as to the compliance with this Section 10.04; provided the legal
counsel delivering such Opinion of Counsel may rely as to matters of fact on
one or more Officers Certificates of the Company.
The Trustee shall execute any documents reasonably requested by the
Company or the Guarantor in order to evidence the release of the Guarantor
from its obligations under its Guarantee endorsed on the Notes and under this
Article Eleven.
Except as set forth in Articles Four and Five and this Section 10.04,
nothing contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of the Guarantor with or into the Company or shall
prevent any sale or conveyance of the property of the Guarantor as an entirety
or substantially as an entirety to the Company.
SECTION 10.05. Waiver of Subrogation.
Until this Indenture is discharged and all of the Notes are discharged
and paid in full, each Guarantor hereby irrevocably waives and agrees not to
exercise any claim or other rights which it may now or hereafter acquire
against the Company that arise from the existence, payment, performance or
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enforcement of the Company's obligations under the Notes or this Indenture and
such Guarantor's obligations under this Guarantee and this Indenture, in any
such instance including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, indemnification, and any right to
participate in any claim or remedy of the Holders against the Company, whether
or not such claim, remedy or right arises in equity, or under contract,
statute or common law, including, without limitation, the right to take or
receive from the Company, directly or indirectly, in cash or other property or
by set-off or in any other manner, payment or security on account of such
claim or other rights. If any amount shall be paid to any Guarantor in
violation of the preceding sentence and any amounts owing to the Trustee or
the Holders of Notes under the Notes, this Indenture, or any other document or
instrument delivered under or in connection with such agreements or
instruments, shall not have been paid in full, such amount shall have been
deemed to have been paid to such Guarantor for the benefit of, and held in
trust for the benefit of, the Trustee or the Holders and shall forthwith be
paid to the Trustee for the benefit of itself or such Holders to be credited
and applied to the obligations in favor of the Trustee or the Holders, as the
case may be, whether matured or unmatured, in accordance with the terms of
this Indenture. Each Guarantor acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated by this
Indenture and that the waiver set forth in this Section 10.05 is knowingly
made in contemplation of such benefits.
SECTION 10.06. Immediate Payment.
Each Guarantor agrees to make immediate payment to the Trustee on behalf
of the Holders of all Obligations owing or payable to the respective Holders
upon receipt of a demand for payment therefor by the Trustee to such Guarantor
in writing.
SECTION 10.07. Obligations Continuing.
The obligations of each Guarantor hereunder shall be continuing and shall
remain in full force and effect until all the obligations have been paid and
satisfied in full. Each Guarantor agrees with the Trustee that it will from
time to time deliver to the Trustee suitable acknowledgments of this continued
liability hereunder.
SECTION 10.08. Obligations Reinstated.
The obligations of each Guarantor hereunder shall continue to be
effective or shall be reinstated, as the case may be, if at any time any
payment which would otherwise have
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reduced the obligations of any Guarantor hereunder (whether such payment shall
have been made by or on behalf of the Company or by or on behalf of a
Guarantor) is rescinded or reclaimed from any of the Holders upon the
insolvency, bankruptcy, liquidation or reorganization of the Company or any
Guarantor or otherwise, all as though such payment had not been made. If
demand for, or acceleration of the time for, payment by the Company is stayed
upon the insolvency, bankruptcy, liquidation or reorganization of the Company,
all such Indebtedness otherwise subject to demand for payment or acceleration
shall nonetheless be payable by each Guarantor as provided herein.
SECTION 10.09. Obligations Not Affected.
The obligations of each Guarantor hereunder shall not be affected,
impaired or diminished in any way by any act, omission, matter or thing
whatsoever, occurring before, upon or after any demand for payment hereunder
(and whether or not known or consented to by any Guarantor or any of the
Holders) which, but for this provision, might constitute a whole or partial
defense to a claim against any Guarantor hereunder or might operate to release
or otherwise exonerate any Guarantor from any of its obligations hereunder or
otherwise affect such obligations, whether occasioned by default of any of the
Holders or otherwise.
SECTION 10.10. Waiver.
Without in any way limiting the provisions of Section 10.01 hereof, each
Guarantor hereby waives notice or proof of reliance by the Holders upon the
obligations of any Guarantor hereunder, and diligence, presentment, demand for
payment on the Company, protest or notice of dishonor of any of the
Obligations, or other notice or formalities to the Company of any kind
whatsoever.
SECTION 10.11. No Obligation To Take Action Against the Company.
Neither the Trustee nor any other Person shall have any obligation to
enforce or exhaust any rights or remedies or to take any other steps under any
security for the Obligations or against the Company or any other Person or any
property of the Company or any other Person before the Trustee is entitled to
demand payment and performance by any or all Guarantors of their liabilities
and obligations under their Guarantees or under this Indenture.
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SECTION 10.12. Dealing with the Company and Others.
The Holders, without releasing, discharging, limiting or otherwise
affecting in whole or in part the obligations and liabilities of any Guarantor
hereunder and without the consent of or notice to any Guarantor, may
(a) grant time, renewals, extensions, compromises, concessions,
waivers, releases, discharges and other indulgences to the Company or any
other Person;
(b) take or abstain from taking security or collateral from the
Company or from perfecting security or collateral of the Company;
(c) release, discharge, compromise, realize, enforce or otherwise
deal with or do any act or thing in respect of (with or without
consideration) any and all collateral, mortgages or other security given
by the Company or any third party with respect to the obligations or
matters contemplated by this Indenture or the Notes;
(d) accept compromises or arrangements from the Company;
(e) apply all monies at any time received from the Company or from
any security upon such part of the Obligations as the Holders may see fit
or change any such application in whole or in part from time to time as
the Holders may see fit; and
(f) otherwise deal with, or waive or modify their right to deal
with, the Company and all other Persons and any security as the Holders
or the Trustee may see fit.
SECTION 10.13. Default and Enforcement.
If any Guarantor fails to pay in accordance with Section 10.06, the
Trustee may proceed in its name as trustee hereunder in the enforcement of the
Guarantee of any such Guarantor and such Guarantor's obligations thereunder
and hereunder by any remedy provided by law, whether by legal proceedings or
otherwise, and to recover from such Guarantor the obligations.
SECTION 10.14. Amendment, Etc.
No amendment, modification or waiver of any provision of this Indenture
relating to any Guarantor or consent to any departure by any Guarantor or any
other Person from any such provision will in any event be effective unless it
is signed by such Guarantor and the Trustee.
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SECTION 10.15. Acknowledgment.
Each Guarantor hereby acknowledges communication of the terms of this
Indenture and the Notes and consents to and approves of the same.
SECTION 10.16. Costs and Expenses.
Each Guarantor shall pay on demand by the Trustee any and all reasonable
costs, fees and expenses (including, without limitation, reasonable legal fees
on a solicitor and client basis) incurred by the Trustee, its agents, advisors
and counsel or any of the Holders in enforcing any of their rights under any
Guarantee.
SECTION 10.17. No Waiver; Cumulative Remedies.
No failure to exercise and no delay in exercising, on the part of the
Trustee or the Holders, any right, remedy, power or privilege hereunder or
under this Indenture or the Notes, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder or under this Indenture or the Notes preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges in the Guarantee and
under this Indenture, the Notes and any other document or instrument between a
Guarantor and/or the Company and the Trustee are cumulative and not exclusive
of any rights, remedies, powers and privilege provided by law.
SECTION 10.18. Survival of Obligations.
Without prejudice to the survival of any of the other obligations of each
Guarantor hereunder, the obligations of each Guarantor under Section 10.01
shall be enforceable against such Guarantor without regard to and without
giving effect to any right of offset or counterclaim available to or which may
be asserted by the Company or any Guarantor.
SECTION 10.19. Severability.
Any provision of this Article Ten which is prohibited or unenforceable in
any jurisdiction shall not invalidate the remaining provisions and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction unless its
removal would substantially defeat the basic intent, spirit and purpose of
this Indenture and this Article Ten.
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SECTION 10.20. Successors and Assigns.
Each Guarantee shall be binding upon and inure to the benefit of each
Guarantor and the Trustee and the other Holders and their respective
successors and permitted assigns, except that no Guarantor may assign any of
its obligations hereunder or thereunder.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
another provision which is required to be included in this Indenture by the
TIA, the required provision shall control; provided, however, that this
Section 11.01 shall not of itself require that this Indenture or the Trustee
be qualified under the TIA or constitute any admission or acknowledgment by
any party hereto that any such qualification is required prior to the time
this Indenture and the Trustee are required by the TIA to be so qualified.
SECTION 11.02. Notices.
Any notices or other communications required or permitted hereunder shall
be in writing, and shall be sufficiently given if made by hand delivery, by
telex, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
if to the Company:
TW Acquisition Corporation
P.O. Box 40009
Houston, TX 77041
Telephone: (713) 466-4103
Facsimile: (713) 466-6574
Attention:
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if to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, NY 10036-1532
Telephone: (212) 852-1614
Facsimile: (212) 852-1626/1627
Attention: Corporate Trust Division
The Company and the Trustee by written notice to the other may designate
additional or different addresses for notices to such Person. Any notice or
communication to the Company or the Trustee shall be deemed to have been given
or made as of the date so delivered if hand delivered; when answered back, if
telexed; when receipt is acknowledged, if faxed; and five (5) calendar days
after mailing if sent by registered or certified mail, postage prepaid (except
that a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed to him by
first class mail or other equivalent means at his address as it appears on the
registration books of the Registrar ten (10) days prior to such mailing and
shall be sufficiently given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. If a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
SECTION 11.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and any other Person shall have the protection of TIA ss.
312(c).
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance reasonably
satisfactory to the Trustee, stating that, in the opinion of the
signers, all conditions precedent to be
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performed by the Company, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent to be performed by the
Company, if any, provided for in this Indenture relating to the
proposed action have been complied with (which counsel, as to factual
matters, may rely on an Officers' Certificate).
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with
a condition or covenant provided for in this Indenture, other than the
Officers' Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is reasonably necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each
such Person, such condition or covenant has been complied with.
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Holders. The Paying Agent
or Registrar may make reasonable rules for its functions.
SECTION 11.07. Legal Holidays.
A "Legal Holiday" used with respect to a particular place of payment is a
Saturday, a Sunday or a day on which banking institutions in New York, New York
or at such place of payment are not required to be open. If a payment date is a
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Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 11.08. Governing Law.
This Indenture and the Notes shall be governed by and construed in
accordance with the laws of the State of New York but without giving effect to
applicable principles of conflicts of law.
SECTION 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or any of its Subsidiaries. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 11.10. No Personal Liability.
No past, present or future incorporator, director, officer, employee or
stockholder, as such, of the Company, as such, shall have any liability for any
obligations of the Company under the Notes, this Indenture or the Registration
Rights Agreement or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
SECTION 11.11. Successors.
All agreements of the Company in this Indenture and the Notes shall bind
its successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 11.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together shall represent the same
agreement.
SECTION 11.13. Severability.
In case any one or more of the provisions in this Indenture or in the Notes
shall be held invalid, illegal or unenforceable, in any respect for any reason,
the validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions shall not in any way be affected or
impaired thereby, it being intended that all of the
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provisions hereof shall be enforceable to the full extent permitted by law.
SECTION 11.14. Independence of Covenants.
All covenants and agreements in this Indenture and the Notes shall be given
independent effect so that if any particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or otherwise be within the limitations of, another covenant shall
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
TW ACQUISITION CORPORATION
By:
-----------------------------------------
Name:
Title:
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By:
-----------------------------------------
Name:
Title:
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EXHIBIT A
---------
CUSIP No.: 913433AA6
TW ACQUISITION CORPORATION
9 7/8% SENIOR DISCOUNT NOTE DUE 2008
No.
TW ACQUISITION CORPORATION, a Delaware corporation (the "Company", which
term includes any successor entities), for value received promise to pay to Cede
& Co. or registered assigns the principal sum of ($ ) Dollars on
February 15, 2008.
Interest Payment Dates: August 15 and February 15, commencing August 15,
2003
Record Dates: August 1 and February l
Reference is made to the further provisions of this Note contained herein,
which will for all purposes have the same effect as if set forth at this place.
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IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers and a facsimile of its corporate
seal to be affixed hereto or imprinted hereon.
TW ACQUISITION CORPORATION
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
Dated: February 20, 1998
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Certificate of Authentication
This is one of the 9 7/8% Senior Discount Notes due 2008 referred to in the
within-mentioned Indenture.
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By:
-------------------------------------
Authorized Signatory
Date of Authentication: February 20, 1998
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(REVERSE OF SECURITY)
9 7/8% Senior Discount Note due 2008
1. Interest. TW ACQUISITION CORPORATION, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. Interest on the Notes will accrete from the Issue
Date. Cash interest on the Notes will not accrue or be payable prior to February
15, 2003. Thereafter, interest on the Notes will accrue at a rate of 9 7/8% per
annum and will be payable semi-annually in cash on August 15 and February 15,
commencing August 15, 2003. Interest will be computed on the basis of a 360-day
year of twelve 30-day months and, in the case of a partial month, the actual
number of days elapsed.
The Company shall pay interest on overdue Accreted Value or principal and
on overdue installments of interest from time to time on demand at the rate
borne by the Notes and on overdue installments of interest (without regard to
any applicable grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Notes (except
defaulted interest) to the Persons who are the registered Holders at the close
of business on the Record Date immediately preceding the Interest Payment Date
even if the Notes are canceled on registration of transfer or registration of
exchange (including pursuant to an Exchange Offer (as defined in the
Registration Rights Agreement)) after such Record Date. Holders must surrender
Notes to a Paying Agent to collect principal payments. The Company shall pay
Accreted Value or principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts
("U.S. Legal Tender"). However, the Company may pay Accreted Value or principal
and interest by its check payable in such U.S. Legal Tender. The Company may
deliver any such interest payment to the Paying Agent or to a Holder at the
Holder's registered address.
3. Paying Agent and Registrar. Initially, United States Trust Company of
New York (the "Trustee") will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or co-Registrar without notice to the
Holders.
4. Indenture. The Company issued the Notes under an Indenture, dated as of
February 20, 1998 (the "Indenture"), between the Company and the Trustee. This
Note is one of a duly authorized issue of Initial Notes of the Company
designated as its 9 7/8% Senior Discount Notes due 2008 (the "Initial
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Notes"). The Notes are limited in aggregate principal amount at maturity to
$242,500,000. The Notes include the Initial Notes and the Exchange Notes (as
defined in the Indenture) issued in exchange for the Initial Notes pursuant to
the Registration Rights Agreement. The Initial Notes and the Exchange Notes are
treated as a single class of securities under the Indenture. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture.
Notwithstanding anything to the contrary herein, the Notes are subject to all
such terms, and Holders of Notes are referred to the Indenture and said Act for
a statement of them. The Notes are general unsecured obligations of the Company.
Each Holder, by accepting a Note, agrees to be bound by all of the terms
and provisions of the Indenture, as the same may be amended from time to time in
accordance with its terms.
5. Optional Redemption. The Notes will be redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after February
l5, 2003, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount at maturity
thereof) if redeemed during the twelve-month period commencing on February 15 of
the year set forth below, plus, in each case, accrued and unpaid interest
thereon, if any, to the date of redemption:
Year Percentage
---- ----------
2003..................................................... 104.938%
2004..................................................... 103.292%
2005..................................................... 101.646%
2006 and thereafter...................................... 100.000%
6. Optional Redemption upon Equity Offering. At any time, or from time to
time, on or prior to February 15, 2001, the Company may, at its option, use the
net cash proceeds of one or more Public Equity Offerings to redeem up to 35% of
the Notes at a redemption price equal to 109.875% of the Accreted Value of the
Notes to be redeemed on the date of redemption, plus accrued and unpaid
interest, if any; provided that at least 65% of the aggregate principal amount
at maturity of Notes originally issued remains outstanding immediately after any
such redemption. In order to effect the foregoing redemption with the proceeds
of any Public Equity Offering, the Company shall make such redemption not more
than 120 days after
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the consummation of any such Public Equity Offering. In the event of a Public
Equity Offering by Holdings, Holdings contributes to the capital of the Company
the portion of the net cash proceeds of such Public Equity Offering necessary to
pay the aggregate redemption price of the Notes to be redeemed pursuant to this
paragraph.
7. Notice of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at such Holder's registered address. Notes in denominations
larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of the
Notes called for redemption shall have been deposited with the Paying Agent for
redemption on such Redemption Date, then, unless the Company defaults in the
payment of such redemption price plus accrued interest, if any, the Notes called
for redemption will cease to accrete or interest will cease to accrue from and
after such Redemption Date and the only right of the Holders of such Notes will
be to receive payment of the redemption price plus accrued interest, if any.
8. Change of Control Offer. Upon a Change of Control, any Holder of Notes
will have the right, subject to certain conditions specified in the Indenture,
to cause the Company to repurchase all or any part of the Notes of such Holder
at a repurchase price equal to 101% of the principal amount at maturity of the
Notes to be repurchased plus the Accreted Value and/or accrued interest, if any,
to the date of repurchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the related interest payment
date) as provided in, and subject to the terms of, the Indenture.
9. Offers to Purchase. Sections 4.14 and 4.15 of the Indenture provide
that, after certain Asset Sales (as defined in the Indenture) and upon the
occurrence of a Change of Control (as defined in the Indenture), and subject to
further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
10. Registration Rights. Pursuant to a registration rights
agreement between the Company and the Initial Purchasers, the Company will be
obligated to consummate an exchange offer pursuant to which the Holder of this
Note shall have the right to exchange this Note for Exchange Notes (as defined
in the Indenture), which have been registered under the Securities Act, in
like principal amount and having terms identical in all material respects as
the Initial Notes. The Holders of the
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Initial Notes shall be entitled to receive certain additional interest payments
in the event such exchange offer is not consummated and upon certain other
conditions, all pursuant to and in accordance with the terms of the registration
rights agreement.
11. Denominations; Transfer; Exchange. The Notes are in registered form,
without coupons, and in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
12. Persons Deemed Owners. The registered Holder of a Note shall be treated
as the owner of it for all purposes.
13. Unclaimed Money. If money for the payment of Accreted Value or principal
or interest remains unclaimed for one year, the Trustee and the Paying Agent
will pay the money back to the Company. After that, all liability of the Trustee
and such Paying Agent with respect to such money shall cease.
14. Discharge Prior to Redemption or Maturity. If the Company at any time
deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but including, under certain
circumstances, its obligation to pay the principal of and interest on the Notes
but without affecting the rights of the Holders to receive such amounts from
such deposits).
15. Amendment; Supplement; Waiver. Subject to certain exceptions set forth
in the Indenture, the Indenture or the Notes may be amended or supplemented with
the written consent of the Holders of a majority in aggregate principal amount
at maturity of the Notes then outstanding, and any past Default or Event of
Default or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in aggregate principal amount at maturity
of the Notes then outstanding. Without notice to or consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Notes to, among
other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in
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place of certificated Notes, comply with any requirements of the Commission in
order to effect or maintain the qualification of the Indenture under the TIA or
comply with Article Five of the Indenture or make any other change that does not
adversely affect the rights of any Holder of a Note.
16. Restrictive Covenants. The Indenture imposes certain limitations on the
ability of the Company and its Restricted Subsidiaries to, among other things,
incur additional Indebtedness, make payments in respect of their Capital Stock
or certain Indebtedness, make certain Investments, create or incur liens, enter
into transactions with Affiliates, create dividend or other payment restrictions
affecting any Subsidiaries of the Company, issue Preferred Stock of any
Subsidiaries of the Company, and on the ability of the Company to merge or
consolidate with any other Person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the Company's or its
Subsidiaries' assets or adopt a plan of liquidation. Such limitations are
subject to a number of important qualifications and exceptions. Pursuant to
Section 4.06 of the Indenture, the Company must annually report to the Trustee
on compliance with such limitations.
17. Successors. When a successor assumes, in accordance with the Indenture,
all the obligations of its predecessor under the Notes and the Indenture, the
predecessor, subject to certain exceptions, will be released from those
obligations.
18. Defaults and Remedies. If an Event of Default occurs and is continuing,
the Trustee or the Holders of not less than 25% in aggregate principal amount at
maturity of Notes then outstanding may declare all the Notes to be due and
payable in the manner, at the time and with the effect provided in the
Indenture. Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee is not obligated to enforce the Indenture
or the Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount at maturity of the Notes then outstanding
to direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Notes notice of any continuing Default or Event of
Default (except a Default in payment of principal or interest when due, for any
reason or a Default in compliance with Article Five of the Indenture) if it
determines that withholding notice is in their interest.
19. Trustee Dealings with the Company and Its Subsidiaries. The Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Notes
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and may otherwise deal with the Company, its Subsidiaries or their respective
Affiliates as if it were not the Trustee.
20. No Recourse Against Others. No partner, director, officer, employee or
stockholder, as such, of the Company, as such, shall have any liability for any
obligations of the Company under the Notes, the Indenture or the Registration
Rights Agreement or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
21. Guarantees. This Note will be entitled to the benefits of certain
Guarantees, if any, made for the benefit of the Holders. Reference is hereby
made to the Indenture for a statement of the respective rights, limitations of
rights, duties and obligations thereunder of the Guarantors, the Trustee and the
Holders.
22. Authentication. This Note shall not be valid until the Trustee or
Authenticating Agent manually signs the certificate of authentication on this
Note.
23. Governing Law. This Note and the Indenture shall be governed by and
construed in accordance with the laws of the State of New York, as applied to
contracts made and performed within the State of New York, without regard to
principles of conflict of laws. Each of the parties hereto agrees to submit to
the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Note.
24. Abbreviations and Defined Terms. Customary abbreviations may be used in
the name of a Holder of a Note or an assignee, such as: TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with
right of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
25. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee
on Uniform Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Notes as a convenience to the Holders of the Notes.
No representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Note upon written request and
without charge a copy of the Indenture, which has the text of this Note.
Requests may be made to TW
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Acquisition Corporation, 4430 Brittmoore Road, Houston, TX 77041.
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ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and social security or tax ID number
of assignee)
and irrevocably appoint _____________________________________________________,
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Dated: ___________________ Signed: ___________________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:
In connection with any transfer of this Note occurring prior to the date
which is the earlier of (i) the date of the declaration by the Commission of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) the undersigned confirms that it has not utilized any general
solicitation or general advertising in connection with the transfer:
[Check One]
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended) that has furnished to the Trustee a signed letter containing
certain representations and agreements (the form of which letter can be
obtained from the Trustee); or
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(4) __ outside the United states to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act of 1933, as amended;
or
(5) __ pursuant to the exemption from registration provided by Rule 144 under
the Securities Act of 1933, as amended; or
(6) __ pursuant to an effective registration statement under the Securities\
Act of 1933, as amended; or
(7) __ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
|_| The transferee is an Affiliate of the Company.
Unless one of the items is checked, the Trustee will refuse to register any
of the Notes evidenced by this certificate in the name of any person other than
the registered Holder thereof; provided, however, that if item (3), (4), (5) or
(7) is checked, the Company or the Trustee may require, prior to registering any
such transfer of the Notes, in their sole discretion, such written legal
opinions, certifications (including an investment letter in the case of box (3)
or (4)) and other information as the Trustee or the Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act of 1933, as amended.
If none of the foregoing items are checked, the Trustee or Registrar shall
not be obligated to register this Note in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.17 of the Indenture shall have
been satisfied.
Dated: ____________________ Signed: _________________________________________
(Sign exactly as name appears on the other
side of this Note)
Signature Guarantee: __________________________________________________________
A-12
<PAGE>
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Note for
its own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act of 1933, as amended and
is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: ______________ _______________________________________________
NOTICE: To be executed by an executive officer
A-13
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.14 or Section 4.15 of the Indenture, check the appropriate box:
Section 4.14 [ ]
Section 4.15 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.14 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$______________________
Dated: ________________ _____________________________________________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the face of
the within Note in every particular without alteration
or enlargement or any change whatsoever and be
guaranteed.
Signature Guarantee: _________________________________________________________
A-14
<PAGE>
EXHIBIT B
CUSIP No.: 913433AA6
TW ACQUISITION CORPORATION
9 7/8% SENIOR DISCOUNT NOTE DUE 2008, SERIES B
No. $
TW ACQUISITION CORPORATION, a Delaware corporation (the "Company", which
term includes any successor entities), for value received, promises to pay to
Cede & Co. or registered assigns the principal sum of
($ ) Dollars on February l5, 2008.
Interest Payment Dates: August 15 and February 15, commencing August 15,
2003
Record Dates: August 1 and February 1
Reference is made to the further provisions of this Note contained herein,
which will for all purposes have the same effect as if set forth at this place.
B-1
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers and a facsimile of its corporate
seal to be affixed hereto or imprinted hereon.
TW ACQUISITION CORPORATION
By:
------------------------------------------
Name:
Title:
By:
------------------------------------------
Name:
Title:
Dated: February 20, 1998
B-2
<PAGE>
Certificate of Authentication
This is one of the 9 7/8% Senior Discount Notes due 2008, Series B referred
to in the within-mentioned Indenture.
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By:
---------------------------------------
Authorized Signatory
Date of Authentication: February 20, 1998
B-3
<PAGE>
(REVERSE OF SECURITY)
9 7/8% Senior Discount Note due 2008, Series B
1. Interest. TW ACQUISITION CORPORATION, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. Interest on the Notes will accrete from the Issue
Date. Cash interest on the Notes will not accrue prior to February 15, 2003.
Thereafter, interest will accrue until maturity on the notes at a rate of 9 7/8%
per annum and will be payable semi-annually on August 15 and February 15,
commencing August 15, 2003. Interest will be computed on the basis of a 360-day
year of twelve 30-day months and, in the case of a partial month, the actual
number of days elapsed.
The Company shall pay interest on overdue Accreted Value or principal and
on overdue installments of interest from time to time on demand at the rate
borne by the Notes and on overdue installments of interest (without regard to
any applicable grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Notes (except
defaulted interest) to the Persons who are the registered Holders at the close
of business on the Record Date immediately preceding the Interest Payment Date
even if the Notes are canceled on registration of transfer or registration of
exchange after such Record Date. Holders must surrender Notes to a Paying Agent
to collect principal payments. The Company shall pay Accreted Value or principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay Accreted Value or principal and interest by its check
payable in such U.S. Legal Tender. The Company may deliver any such interest
payment to the Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, United States Trust Company of
New York (the "Trustee") will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or co-Registrar without notice to the
Holders.
4. Indenture. The Company issued the Notes under an Indenture, dated as of
February 20, 1998 (the "Indenture"), between the Company and the Trustee. This
Note is one of a duly authorized issue of Exchange Notes of the Company
designated as its 9 7/8% Senior Discount Notes due 2008, Series B (the "Exchange
Notes"). The Notes are limited in aggregate principal amount at maturity to
$242,500,000. The Notes include the 9 7/8% Notes due 2008 (the "Initial Notes")
and the
B-4
<PAGE>
Exchange Notes, issued in exchange for the Initial Notes pursuant to a
registration rights agreement. The Initial Notes and the Exchange Notes are
treated as a single class of securities under the Indenture. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture.
Notwithstanding anything to the contrary herein, the Notes are subject to all
such terms, and Holders of Notes are referred to the Indenture and said Act for
a statement of them. The Notes are general unsecured obligations of the Company.
Each Holder, by accepting a Note, agrees to be bound by all of the terms
and provisions of the Indenture, as the same may be amended from time to time in
accordance with its terms.
5. Optional Redemption. The Notes will be redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after February
15, 2003, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount at maturity
thereof) if redeemed during the twelve-month period commencing on February 15 of
the years set forth below, plus, in each case, accrued and unpaid interest, if
any, thereon to the date of redemption:
Year Percentage
---- ----------
2003........................................... 104.938%
2004........................................... 103.292%
2005........................................... 101.646%
2006 and thereafter............................ 100.000%
6. Optional Redemption upon Equity Offering. At any time, or from time to
time, on or prior to February 15, 2001, the Company may, at its option, use the
net cash proceeds of one or more Public Equity Offerings to redeem up to 35% of
the Notes at a redemption price equal to 109.875% of the Accreted Value of the
Notes to be redeemed on the date of redemption, plus accrued and unpaid
interest, if any; provided that at least 65% of the aggregate principal amount
at maturity of Notes originally issued remains outstanding immediately after any
such redemption. In order to effect the foregoing redemption with the proceeds
of any Public Equity Offering, the Company shall make such redemption not more
than 120 days after the consummation of any such Public Equity Offering. In the
event of a Public Equity Offering by Holdings, Holdings contributes to the
capital of the Company the portion of the net
B-5
<PAGE>
cash proceeds of such Public Equity Offering necessary to pay the aggregate
redemption price of the Notes to be redeemed pursuant to this paragraph.
7. Notice of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at such Holder's registered address. Notes in denominations
larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of the
Notes called for redemption shall have been deposited with the Paying Agent for
redemption on such Redemption Date, then, unless the Company defaults in the
payment of such redemption price plus accrued interest, if any, the Notes called
for redemption will cease to accrete or interest will cease to accrue from and
after such Redemption Date and the only right of the Holders of such Notes will
be to receive payment of the redemption price plus accrued interest, if any.
8. Change of Control Offer. Upon a Change of Control, any Holder of Notes
will have the right, subject to certain conditions specified in the Indenture,
to cause the Company to repurchase all or any part of the Notes of such Holder
at a repurchase price equal to 101% of the principal amount at maturity of the
Notes to be repurchased plus the Accreted Value and/or the accrued interest, if
any, to the date of repurchase (subject to the right of holders of record on the
relevant record date to receive interest due on the related interest payment
date) as provided in, and subject to the terms of, the Indenture.
9. Offers to Purchase. Sections 4.14 and 4.15 of the Indenture provide
that, after certain Asset Sales (as defined in the Indenture) and upon the
occurrence of a Change of Control (as defined in the Indenture), and subject to
further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
10. Denominations; Transfer; Exchange. The Notes are in registered form,
without coupons, and in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
B-6
<PAGE>
11. Persons Deemed Owners. The registered Holder of a Note shall be treated
as the owner of it for all purposes.
12. Unclaimed Money. If money for the payment of Accreted Value or principal
or interest remains unclaimed for one year, the Trustee and the Paying Agent
will pay the money back to the Company. After that, all liability of the Trustee
and such Paying Agent with respect to such money shall cease.
13. Discharge Prior to Redemption or Maturity. If the Company at any time
deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption and
complies with the other provisions of the Indenture relating thereto, the
Company will be discharged from certain provisions of the Indenture and the
Notes (including certain covenants, including, under certain circumstances, its
obligation to pay the principal of and interest on the Notes but without
affecting the rights of the Holders to receive such amounts from such deposit).
14. Amendment; Supplement; Waiver. Subject to certain exceptions set forth
in the Indenture, the Indenture or the Notes may be amended or supplemented with
the written consent of the Holders of a majority in aggregate principal amount
at maturity of the Notes then outstanding, and any past Default or Event of
Default or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in aggregate principal amount at maturity
of the Notes then outstanding. Without notice to or consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Notes to, among
other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes, comply
with any requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the TIA or comply with Article Five of the
Indenture or make any other change that does not adversely affect the rights of
any Holder of a Note.
15. Restrictive Covenants. The Indenture imposes certain limitations on the
ability of the Company and its Restricted Subsidiaries to, among other things,
incur additional Indebtedness, make payments in respect of their Capital Stock
or certain Indebtedness, make certain Investments, create or incur liens, enter
into transactions with Affiliates, create dividend or other payment restrictions
affecting any Subsidiaries of the Company, issue Preferred Stock of any
Subsidiaries of the Company, and on the ability of the Company to merge or
consolidate with any other Person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the Company's or its
Subsidiaries' assets or adopt a plan of
B-7
<PAGE>
liquidation. Such limitations are subject to a number of important
qualifications and exceptions. Pursuant to Section 4.06 of the Indenture, the
Company must annually report to the Trustee on compliance with such limitations.
16. Successors. When a successor assumes, in accordance with the Indenture,
all the obligations of its predecessor under the Notes and the Indenture, the
predecessor, subject to certain exceptions, will be released from those
obligations.
17. Defaults and Remedies. If an Event of Default occurs and is continuing,
the Trustee or the Holders of not less than 25% in aggregate principal amount at
maturity of Notes then outstanding may declare all the Notes to be due and
payable in the manner, at the time and with the effect provided in the
Indenture. Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee is not obligated to enforce the Indenture
or the Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount at maturity of the Notes then outstanding
to direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Notes notice of any continuing Default or Event of
Default (except a Default in payment of principal or interest when due, for any
reason or a Default in compliance with Article Five of the Indenture) if it
determines that withholding notice is in their interest.
18. Trustee Dealings with the Company and Its Subsidiaries. The Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Notes and may otherwise deal with the Company, its
Subsidiaries or their respective Affiliates as if it were not the Trustee.
19. No Recourse Against Others. No partner, director, officer, employee or
stockholder, as such, of the Company or any Guarantor, as such, shall have any
liability for any obligations of the Company or any Guarantor under the Notes,
the Indenture, the Guarantees or the Registration Rights Agreement or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
20. Guarantees. This Note will be entitled to the benefits of certain
Guarantees, if any, made for the benefit of the Holders. Reference is hereby
made to the Indenture for a statement of the respective rights, limitations of
rights, du-
B-8
<PAGE>
ties and obligations thereunder of the Guarantors, the Trustee and the
Holders.
21. Authentication. This Note shall not be valid until the Trustee or
Authenticating Agent manually signs the certificate of authentication on this
Note.
22. Governing Law. This Note and the Indenture shall be governed by and
construed in accordance with the laws of the State of New York, as applied to
contracts made and performed within the State of New York, without regard to
principles of conflict of laws. Each of the parties hereto agrees to submit to
the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Note.
23. Abbreviations and Defined Terms. Customary abbreviations may be used in
the name of a Holder of a Note or an assignee, such as: TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with
right of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
24. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee
on Uniform Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Notes as a convenience to the Holders of the Notes.
No representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Note upon written request and
without charge a copy of the Indenture, which has the text of this Note.
Requests may be made to: TW Acquisition Corporation, 4430 Brittmoore Road,
Houston, TX 77041.
B-9
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Note to:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type name, address and zip code and social security or tax ID number
of assignee)
and irrevocably appoint ______________________________________________________,
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Dated: __________________________ Signed:________________________________
(Sign exactly as name appears on the
other side of this Note)
Signature Guarantee:_____________________________________
B-10
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.14 or Section 4.15 of the Indenture, check the appropriate box:
Section 4.14 [ ]
Section 4.15 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.14 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$_____________________
Dated: _______________ ________________________________________
NOTICE: The signature on this assignment
must correspond with the name as it
appears upon the face of the within Note
in every particular without alteration or
enlargement or any change whatsoever and
be guaranteed.
Signature Guarantee: _____________________________________________
B-11
<PAGE>
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
[ ], [ ]
[ ]
[ ]
[ ]
Ladies and Gentlemen:
In connection with our proposed purchase of 9 7/8% Senior
Discount Notes due 2008 (the "Notes") of TW ACQUISITION CORPORATION, a
Delaware corporation (the "Company"), we confirm that:
1. We have received a copy of the Offering Memorandum (the
"Offering Memorandum"), dated February 20, 1998, relating to the
Notes and such other information as we deem necessary in order to
make our investment decision. We acknowledge that we have read and
agreed to the matters stated in the section entitled "Transfer
Restrictions" of such Offering Memorandum.
2. We understand that any subsequent transfer of the Notes
is subject to certain restrictions and conditions set forth in the
Indenture relating to the Notes (the "Indenture") as described in the
Offering Memorandum and the undersigned agrees to be bound by, and
not to resell, pledge or otherwise transfer the Notes except in
compliance with, such restrictions and conditions and the Securities
Act of 1933, as amended (the "Securities Act"), and all applicable
State securities laws.
3. We understand that the offer and sale of the Notes have
not been registered under the Securities Act, and that the Notes may
not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except as permitted in the
following sentence. We agree, on our own behalf and on behalf of any
accounts for which we are acting as hereinafter stated, that if we
should sell any Notes, we will do so only (i) to the Company or any
subsidiary thereof, (ii) inside the United States in accordance with
Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined in Rule 144A promulgated under the Securities
Act), (iii) inside the United States to an institutional
C-1
<PAGE>
"accredited investor" (as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the
Trustee (as defined in the Indenture) a signed letter containing
certain representations and agreements relating to the restrictions
on transfer of the Notes (the form of which letter can be obtained
from the Trustee), (iv) outside the United States in accordance with
Rule 904 of Regulation S promulgated under the Securities Act to
non-U.S. persons, (v) pursuant to the exemption from registration
provided by Rule 144 under the Securities Act (if available), or (vi)
pursuant to an effective registration statement under the Securities
Act, and we further agree to provide to any person purchasing any of
the Notes from us a notice advising such purchaser that resales of
the Notes are restricted as stated herein.
4. We understand that, on any proposed resale of any Notes,
we will be required to furnish to the Trustee and the Company such
certification, legal opinions and other information as the Trustee
and the Company may reasonably require to confirm that the proposed
sale complies with the foregoing restrictions. We further understand
that the Notes purchased by us will bear a legend to the foregoing
effect.
5. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) and have such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and
risks of our investment in the Notes, and we and any accounts for
which we are acting are each able to bear the economic risk of our or
their investment, as the case may be.
6. We are acquiring the Notes purchased by us for our
account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise
sole investment discretion.
C-2
<PAGE>
You, the Company, the Trustee and others are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a copy hereof to
any interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
-------------------------------------
Name:
Title:
C-3
<PAGE>
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
[ ], [ ]
[ ]
[ ]
[ ]
[ ]
Re: TW Acquisition Corporation
(the "Company") 9 7/8% Senior Discount
Notes due 2008 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $242,500,000 aggregate principal
amount of the Notes, we confirm that such sale has been effected pursuant to and
in accordance with Regulation S under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting
on our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through
the facilities of a designated off-shore securities market and
neither we nor any person acting on our behalf knows that the
transaction has been pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
You, the Company and counsel for the Company are entitled to
rely upon this letter and are irrevocably authorized
D-1
<PAGE>
to produce this letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with respect to the
matters covered hereby. Terms used in this certificate have the meanings set
forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
--------------------------------------
Authorized Signature
D-2
<PAGE>
EXHIBIT E
FORM OF GUARANTEE
For value received, the undersigned hereby unconditionally guarantees, as
principal obligor and not only as a surety, to the Holder of this Note the cash
payments in United States dollars of Accreted Value or principal of, premium, if
any, and interest on this Note (and including Additional Interest payable
thereon) in the amounts and at the times when due and interest on the overdue
principal and interest, if any, of this Note, if lawful, and the payment or
performance of all other obligations of the Company under the Indenture (as
defined below) or the Notes, to the Holder of this Note and the Trustee, all in
accordance with and subject to the terms and limitations of this Note, Article
Eleven of the Indenture and this Guarantee. This Guarantee will become effective
in accordance with Article Eleven of the Indenture and its terms shall be
evidenced therein. The validity and enforceability of any Guarantee shall not be
affected by the fact that it is not affixed to any particular Note. Capitalized
terms used but not defined herein shall have the meanings ascribed to them in
the Indenture dated as of February 20, 1998, between TW ACQUISITION CORPORATION,
a Delaware corporation, as Company (the "Company"), and United States Trust
Company of New York, as trustee (the "Trustee"), as amended or supplemented (the
"Indenture").
The obligations of the undersigned to the Holders of Notes and to the
Trustee pursuant to this Guarantee and the Indenture are expressly set forth in
Article Eleven of the Indenture and reference is hereby made to the Indenture
for the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS
OF LAW. Each Guarantor hereby agrees to submit to the jurisdiction of the courts
of the State of New York in any action or proceeding arising out of or relating
to this Guarantee.
This Guarantee is subject to release upon the terms set
forth in the Indenture.
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<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused its Guarantee to be duly
executed.
Date:____________________
[NAME OF GUARANTOR], as Guarantor
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
E-2
<PAGE>
===============================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of February 20, 1998
Among
TW ACQUISITION CORPORATION
as Issuer
and
BT ALEX BROWN INCORPORATED
and
SALOMON BROTHERS INC
as Initial Purchasers
================================================================================
$242,500,000 Aggregate Principal Amount at Maturity
9 7/8% SENIOR DISCOUNT NOTES DUE 2008
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions..................................................... 1
2. Exchange Offer.................................................. 5
3. Shelf Registration.............................................. 8
4. Liquidated Damages.............................................. 9
5. Registration Procedures......................................... 11
6. Registration Expenses........................................... 22
7. Indemnification................................................. 24
8. Rule 144 and 144A............................................... 27
9. Underwritten Registrations...................................... 28
10. Miscellaneous................................................... 28
(a) No Inconsistent Agreements............................. 28
(b) Adjustments Affecting Registrable Note................. 29
(c) Amendments and Waivers................................. 29
(d) Notices................................................ 29
(e) Successors and Assigns................................. 30
(f) Counterparts........................................... 31
(g) Headings............................................... 31
(h) Governing Law.......................................... 31
(i) Severability........................................... 31
(j) Securities Held by the Company or Its Affiliates....... 31
(k) Third Party Beneficiaries................................ 31
(l) Entire Agreement......................................... 32
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated
as of February 20, 1998 by and among TW Acquisition Corporation, a Delaware
corporation (the "Company") and BT Alex. Brown Incorporated and Salomon Brothers
Inc (the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of February 13, 1998 by and among the Company and the
Initial Purchasers (the "Purchase Agreement") that provides for the sale by the
Company to the Initial Purchasers of $242,500,000 aggregate principal amount at
maturity of the Company's 9 7/8% Senior Discount Notes due 2008 (the "Notes").
In order to induce the Initial Purchasers to enter into the Purchase Agreement,
the Company has agreed to provide the registration rights set forth in this
Agreement for the benefit of the Initial Purchasers and their direct and
indirect transferees and assigns. The execution and delivery of this Agreement
is a condition to the Initial Purchasers' obligation to purchase the Notes under
the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Advice: See the last paragraph of Section 5 hereof.
Agreement: See the first introductory paragraph hereto.
Applicable Period: See Section 2(b) hereof.
Closing Date: The Closing Date as defined in the Purchase
Agreement.
Company: See the first introductory paragraph hereto.
Effectiveness Date: The date that is 210 days after the Issue
Date.
Effectiveness Period: See Section 3(a) hereof.
<PAGE>
-2-
Event Date: See Section 4(b) hereof.
Exchange Act: The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a) hereof.
Exchange Offer: See Section 2(a) hereof.
Exchange Registration Statement: See Section 2(a) hereof.
Filing Date: Within 90 days after the Issue Date.
Holder: Any holder of a Registrable Note or Registrable
Notes.
Indemnified Person: See Section 7(c) hereof.
Indemnifying Person: See Section 7(c) hereof.
Indenture: The Indenture, dated as of February , 1998 between
the Company and United States Trust Company of New York, as Trustee, pursuant to
which the Notes are being issued, as amended or supplemented from time to time
in accordance with the terms thereof.
Initial Purchasers: See the first introductory paragraph
hereto.
Inspectors: See Section 5(o) hereof.
Issue Date: The date on which the original Notes were sold to
the Initial Purchasers pursuant to the Purchase Agreement.
NASD: See Section 5(t) hereof.
Notes: See the second introductory paragraph hereto.
Participant: See Section 7(a) hereof.
Participating Broker-Dealer: See Section 2(b) hereof.
Person: An individual, trustee, corporation, partnership,
limited liability company, joint stock company, trust,
<PAGE>
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unincorporated association, union, business association, firm or other legal
entity.
Private Exchange: See Section 2(b) hereof.
Private Exchange Notes: See Section 2(b) hereof.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, and all other amendments and supplements to the
Prospectus, with respect to the terms of the offering of any portion of the
Registrable Notes covered by such Registration Statement including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
Purchase Agreement: See the second introductory paragraph
hereto.
Records: See Section 5(o) hereof.
Registrable Notes: Each Note upon original issuance of the
Notes and at all times subsequent thereto, each Exchange Note as to which
Section 2(c)(v) hereof is applicable upon original issuance and at all times
subsequent thereto and each Private Exchange Note upon original issuance thereof
and at all times subsequent thereto, until in the case of any such Note,
Exchange Note or Private Exchange Note, as the case may be, the earliest to
occur of (i) a Registration Statement (other than, with respect to any Exchange
Note as to which Section 2(c)(v) hereof is applicable, the Exchange Registration
Statement) covering such Note, Exchange Note or Private Exchange Note, as the
case may be, has been declared effective by the SEC and such Note, Exchange Note
or Private Exchange Note, as the case may be, has been disposed of in accordance
with such effective Registration Statement, (ii) such Note, Exchange Note or
Private Exchange Note, as the case may be, is sold in compliance with Rule 144,
(iii) such Note has been exchanged for an Exchange Note or Exchange Notes
pursuant to an Exchange Offer and is entitled to be resold without complying
with the prospectus delivery requirements of the Securities Act or (iv) such
Note, Exchange Note or Private Exchange Note, as the case may be, ceases to be
outstanding for purposes of the Indenture.
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Registration Statement: Any registration statement of the
Company under the Securities Act, including, but not limited to, the Exchange
Registration Statement and any registration statement filed in connection with a
Shelf Registration, filed with the SEC pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c) hereof.
Shelf Registration: See Section 3(a) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if existent,
the trustee under any indenture governing the Exchange Notes and Private
Exchange Notes (if any).
Underwritten registration or underwritten offering: A
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
<PAGE>
-5-
2. Exchange Offer
(a) The Company shall file with the SEC, to the extent not
prohibited by any applicable law or applicable interpretation of the staff of
the SEC, no later than the Filing Date an offer to exchange (the "Exchange
Offer") any and all of the Registrable Notes (other than the Private Exchange
Notes, if any) for a like aggregate principal amount of debt securities of the
Company that are identical in all material respects to the Notes (the "Exchange
Notes") (and that are entitled to the benefits of the Indenture or a trust
indenture that is identical in all material respects to the Indenture (other
than such changes to the Indenture or any such identical trust indenture as are
necessary to comply with any requirements of the SEC to effect or maintain the
qualification thereof under the TIA) and that, in either case, has been
qualified under the TIA), except that the Exchange Notes (other than Private
Exchange Notes, if any) shall have been registered pursuant to an effective
Registration Statement under the Securities Act and shall contain no restrictive
legend thereon. The Exchange Offer shall be registered under the Securities Act
on the appropriate form (the "Exchange Registration Statement") and shall comply
with all applicable tender offer rules and regulations under the Exchange Act.
The Company agrees to use its best efforts to (x) cause the Exchange
Registration Statement to be declared effective under the Securities Act on or
before the Effectiveness Date; (y) keep the Exchange Offer open for at least 20
business days (or longer if required by applicable law) after the date that
notice of the Exchange Offer is mailed to Holders; and (z) consummate the
Exchange Offer on or prior to the 240th day following the Issue Date. If after
such Exchange Registration Statement is declared effective by the SEC, the
Exchange Offer or the issuance of the Exchange Notes thereunder is interfered
with by any stop order, injunction or other order or requirement of the SEC or
any other governmental agency or court, such Exchange Registration Statement
shall be deemed not to have become effective for purposes of this Agreement.
Each Holder who participates in the Exchange Offer will be required to represent
that any Exchange Notes received by it will be acquired in the ordinary course
of its business, that at the time of the consummation of the Exchange Offer such
Holder will have no arrangement or understanding with any Person to participate
in the distribution of the Exchange Notes in violation of the provisions of the
Securities Act and that such Holder is not an affiliate of the Company within
the meaning of the Securities Act and is not acting on behalf of any persons or
entities who could not truthfully make the foregoing representations. Upon
consummation of the Exchange Offer in accor-
<PAGE>
-6-
dance with this Section 2, the provisions of this Agreement shall continue
to apply, mutatis mutandis, solely with respect to Registrable Notes that are
Private Exchange Notes and Exchange Notes held by Participating Broker-Dealers,
and the Company shall have no further obligation to register Registrable Notes
(other than Private Exchange Notes and other than in respect of any Exchange
Notes as to which clause 2(c)(v) hereof applies) pursuant to Section 3 hereof.
No securities other than the Exchange Notes shall be included in the Exchange
Registration Statement.
(b) The Company shall include within the Prospectus contained
in the Exchange Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchasers, that shall
contain a summary statement of the positions taken or policies made by the Staff
of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange
Offer (a "Participating Broker-Dealer"), whether such positions or policies have
been publicly disseminated by the staff of the SEC or such positions or
policies, in the judgment of the Initial Purchasers, represent the prevailing
views of the Staff of the SEC. Such "Plan of Distribution" section shall also
expressly permit the use of the Prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including all
Participating Broker-Dealers, and include a statement describing the means by
which Participating Broker-Dealers may resell the Exchange Notes.
The Company shall use its reasonable best efforts to keep the
Exchange Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be lawfully
delivered by all Persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as is necessary to comply with applicable
law in connection with any resale of the Exchange Notes; provided, however, that
such period shall not exceed 180 days after the consummation of the Exchange
Offer (or such longer period if extended pursuant to the last paragraph of
Section 5 hereof) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by it and having, or that are reasonably
likely to be determined to have, the status of an unsold allotment in the
initial distribution, the Company, upon the written request of the Initial
Purchasers simul-
<PAGE>
-7-
taneously with the delivery of the Exchange Notes in the Exchange Offer, shall
issue and deliver to the Initial Purchasers in exchange (the "Private Exchange")
for such Notes held by the Initial Purchasers a like principal amount of debt
securities of the Company that are identical in all material respects to the
Exchange Notes (the "Private Exchange Notes") (and that are issued pursuant to
the same indenture as the Exchange Notes), except for the placement of a
restrictive legend on such Private Exchange Notes. The Private Exchange Notes
shall bear the same CUSIP number as the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes
will accrue from the Issue Date.
In connection with the Exchange Offer, the Company shall:
(1) mail to each Holder a copy of the Prospectus forming
part of the Exchange Registration Statement, together with an
appropriate letter of transmittal and related documents;
(2) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(3) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last business day
on which the Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all
applicable laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer
or the Private Exchange, as the case may be, the Company shall:
(1) accept for exchange all Notes properly tendered and not
validly withdrawn pursuant to the Exchange Offer or the Private
Exchange;
(2) deliver to the Trustee for cancellation all Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to
each Holder of Notes, Exchange Notes or Private Exchange Notes, as the
case may be, equal in princi-
<PAGE>
-8-
pal amount to the Notes of such Holder so accepted for exchange.
The Exchange Notes and the Private Exchange Notes may be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture, which in either event shall provide that (1) the
Exchange Notes shall not be subject to the transfer restrictions set forth in
the Indenture and (2) the Private Exchange Notes shall be subject to the
transfer restrictions set forth in the Indenture. The Indenture or such
indenture shall provide that the Exchange Notes, the Private Exchange Notes and
the Notes not exchanged in the Exchange Offer shall vote and consent together on
all matters as one class and that neither the Exchange Notes, the Private
Exchange Notes or such Notes will have the right to vote or consent as a
separate class on any matter.
(c) If (i) the Company is not permitted to file the Exchange
Offer Registration Statement or to consummate the Exchange Offer because the
Exchange Offer is not permitted by any applicable law or applicable
interpretation of the staff of the Commission or (ii) any holder of a Note
notifies the Company that (A) due to a change in law or policy it is not
entitled to participate in the Exchange Offer, (B) due to a change in law or
policy it may not resell Exchange Notes acquired by it in the Exchange Offer to
the public without delivering a prospectus and the prospectus contained in the
Exchange Registration Statement is not appropriate or available for such resales
by such holder or (C) it owns Notes (including any Initial Purchaser that holds
Notes as part of an unsold allotment from the original offering of the Notes)
acquired directly from the Company or an affiliate of the Company or (iii) any
holder of Private Exchange Notes so requests after the consummation of the
Private Exchange or (iv) the Company has not consummated the Exchange Offer
within 240 days after the Issue Date (each such event referred to in clauses (i)
through (iv), a "Shelf Filing Event"), then the Company shall promptly deliver
written notice thereof (the "Shelf Notice") to the Holders and the Trustee and
shall file a Shelf Registration pursuant to Section 3 hereof.
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section 2(c)
hereof, then:
(a) Shelf Registration. The Company shall as promptly as
reasonably practicable file with the SEC a Registration Statement for an
offering to be made on a continuous
<PAGE>
-9-
basis pursuant to Rule 415 covering all of the Registrable Notes (the "Shelf
Registration"). If the Company shall not have yet filed an Exchange Registration
Statement, the Company shall use its best efforts to file with the SEC the Shelf
Registration on or prior to the Filing Date. The Shelf Registration shall be on
Form S-1 or another appropriate form permitting registration of such Registrable
Notes for resale by Holders in the manner or manners designated by them
(including, without limitation, one or more underwritten offerings). The Company
shall not permit any securities other than the Registrable Notes to be included
in the Shelf Registration.
The Company shall use its best efforts to cause the Shelf
Registration to be declared effective under the Securities Act on or prior to
the Effectiveness Date and to keep the Shelf Registration continuously effective
under the Securities Act until the date that is two years (or such shorter
period as may be established by any amendment to the two year period set forth
in Rule 144(k) under the Securities Act) from the Issue Date (the "Effectiveness
Period"), or such shorter period ending when all Registrable Notes covered by
the Shelf Registration have been sold in the manner set forth and as
contemplated in the Shelf Registration.
(b) Withdrawal of Stop Orders. If the Shelf Registration
ceases to be effective for any reason at any time during the Effectiveness
Period (other than because of the sale of all of the securities registered
thereunder), the Company shall use its best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof.
(c) Supplements and Amendments. The Company shall promptly
supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any underwriter
of such Registrable Notes.
4. Liquidated Damages
(a) The Company and the Initial Purchasers agree that the
Holders of Registrable Notes will suffer damages if the Company fails to fulfill
its obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Company agrees to pay as liquidated damages, additional inter-
<PAGE>
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est on the notes (the "Liquidated Damages" or "Additional Interest") under the
circumstances and to the extent as follows (without duplication):
(i) if (A) neither the Exchange Registration Statement nor the
Shelf Registration Statement has been filed with the SEC on or prior to
the Filing Date or (B) notwithstanding that the Company has consummated
or will consummate an Exchange Offer, the Company is required to file a
Shelf Registration Statement and such Shelf Registration Statement is
not filed on or prior to the date required hereunder, then commencing on
the day after either such required filing date, Liquidated Damages shall
accrue on the principal amount of the Notes at a rate of 0.5% per annum
for the first 90 days immediately following each such filing date, such
Liquidated Damages rate increasing by an additional 0.5% per annum at
the beginning of each subsequent 90 day period; or
(ii) if (A) neither the Exchange Registration Statement nor
the Shelf Registration Statement has been declared effective on or prior
to 210 days after the Issue Date or (B) notwithstanding that the Company
has consummated or will consummate an Exchange Offer, the Company is
required to file a Shelf Registration Statement and such Shelf
Registration Statement is not declared effective by the SEC on or prior
to the 210th day following the Issue Date, then, commencing on the day
after the 210th day following the Issue Date, Liquidated Damages shall
accrue on the principal amount of the Notes at a rate of 0.5% per annum
for the first 90 days immediately following such date, such Liquidated
Damages rate increasing by an additional 0.5% per annum at the beginning
of each subsequent 90-day period; or;
(iii) if (A) the Company has not exchanged the Exchange Notes
for all Notes validly tendered in accordance with the terms of the
Exchange Offer on or prior to the 240th day after the Issue Date or (B)
if applicable, the Shelf Registration Statement has been declared
effective and such Shelf Registration Statement ceases to be effective
at any time prior to the second anniversary of its effective date (other
than after such time as all Notes have been disposed of thereunder),
then Liquidated Damages shall accrue on the principal amount of the
Notes at a rate of 0.5% per annum for the first 90 days commencing on
(x) the 241st day after the Issue Date, in the case of (A) above, or (y)
the day such Shelf Registration Statement
<PAGE>
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ceases to be effective in the case of (B) above, such Liquidated Damages
rate by increasing by an additional 0.5% per annum at the beginning of
each subsequent 90-day period;
provided, however, that the Liquidated Damages rate on the
Notes may not exceed in the aggregate 2.0% per annum; provided,
further, however, that (1) upon the filing of the Exchange Registration
Statement or a Shelf Registration Statement (in the case of Section
2(c)(i)), (2) upon the effectiveness of the Exchange Registration
Statement or Shelf Registration Statement (in the case of Section
2(c)(iv)), or (3) upon the exchange of Exchange Notes for all Notes
tendered (in the case of Section 2(c)(iii)), or upon the effectiveness
of the Shelf Registration Statement which had ceased to remain
effective (in the case of Section 3(b)), Liquidated Damages on the
Notes as a result of such Section, as the case may be, shall cease to
accrue.
(b) The Company shall notify the Trustee within one business
day after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). Any amounts of
Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section
4 will be payable in cash semiannually on each August 15 and February 15 (to the
holders of record on August 1 and February 1), commencing with the first such
date occurring after any such Additional Interest commences to accrue. The
amount of Additional Interest will be determined by multiplying the applicable
Additional Interest rate by the principal amount of the Registrable Notes,
multiplied by a fraction, the numerator of which is the number of days such
Additional Interest rate was applicable during such period (determined on the
basis of a 360-day year comprised of twelve 30-day months and, in the case of a
partial month, the actual number of days elapsed), and the denominator of which
is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement
pursuant to Sections 2 or 3 hereof, the Company shall effect such registrations
to permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Company hereunder, the
Company shall:
<PAGE>
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(a) Prepare and file with the SEC on or prior to the Filing
Date, a Registration Statement or Registration Statements as prescribed
by Sections 2 or 3 hereof, and use its best efforts to cause each such
Registration Statement to become effective and remain effective as
provided herein; provided, however, that, if (1) such filing is pursuant
to Section 3 hereof or (2) a Prospectus contained in an Exchange
Registration Statement filed pursuant to Section 2 hereof is required to
be delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable Period, before
filing any Registration Statement or Prospectus or any amendments or
supplements thereto, the Company shall furnish to and afford the Holders
of the Registrable Notes covered by such Registration Statement or each
such Participating Broker-Dealer, as the case may be, their counsel and
the managing underwriters, if any, a reasonable opportunity to review
copies of all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto) proposed to
be filed (in each case at least five business days prior to such
filing). The Company shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto if the Holders of a
majority in aggregate principal amount of the Registrable Notes covered
by such Registration Statement, or any such Participating Broker-Dealer,
as the case may be, or their counsel, or the managing underwriters, if
any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration or Exchange
Registration Statement, as the case may be, as may be necessary to keep
such Registration Statement continuously effective for the Effectiveness
Period or the Applicable Period, as the case may be; cause the related
Prospectus to be supplemented by any prospectus supplement required by
applicable law, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the
Securities Act; and comply in all material respects with the provisions
of the Securities Act and the Exchange Act applicable to it with respect
to the disposition of all securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented and
with respect to the subsequent resale of any securities being sold by a
Participating Broker-Dealer covered by any such Prospectus; the Company
shall be deemed not to have used its best efforts to keep
<PAGE>
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a Registration Statement effective during the Applicable Period if the
Company voluntarily takes any action that would result in selling
Holders of the Registrable Notes covered thereby or Participating
Broker-Dealers seeking to sell Exchange Notes not being able to sell
such Registrable Notes or such Exchange Notes during that period, unless
such action is required by applicable law or unless the Company complies
in all material respects with this Agreement, including without
limitation, the provisions of paragraph 5(k) hereof and the last
paragraph of this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, notify the selling
Holders of Registrable Notes, or each such Participating Broker-Dealer,
as the case may be, their counsel and the managing underwriters, if any,
promptly (but in any event within two business days) and confirm such
notice in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same
has become effective under the Securities Act (including in such notice
a written statement that any Holder may, upon request, obtain, at the
sole expense of the Company, one conformed copy of such Registration
Statement or post-effective amendment including financial statements and
schedules, documents incorporated or deemed to be incorporated by
reference and exhibits), (ii) of the issuance by the SEC of any stop
order suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of any preliminary prospectus or
the initiation of any proceedings for that purpose, (iii) if at any time
when a prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Notes or resales of Exchange
Notes by Participating Broker-Dealers the representations and warranties
of the Company contained in any agreement (including any underwriting
agreement), contemplated by Section 5(n) hereof cease to be true and
correct, (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable
Notes or the Exchange Notes to be sold by any Participating
Bro-
<PAGE>
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ker-Dealer for offer or sale in any jurisdiction, or the initiation or
written threat of any proceeding for such purpose, (v) of the happening
of any event, the existence of any condition or any information becoming
known that makes any statement made in such Registration Statement or
related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any material changes in or amendments or
supplements to such Registration Statement, Prospectus or documents so
that, in the case of the Registration Statement, it will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading and (vi) of the Company's determination that a
post-effective amendment to a Registration Statement would be
appropriate.
(d) Use its reasonable best efforts to prevent the issuance of
any order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of a Prospectus or suspending
the qualification (or exemption from qualification) of any of the
Registrable Notes or the Exchange Notes for sale in any jurisdiction
and, if any such order is issued, to use its best efforts to obtain the
withdrawal of any such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and
if requested by the managing underwriter or underwriters, if any, or the
Holders of a majority in aggregate principal amount of the Registrable
Notes being sold in connection with an underwritten offering, (i)
promptly incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriter or underwriters,
if any, such Holders or counsel for any of them determine is reasonably
necessary to be included therein, (ii) make all required filings of such
prospectus supplement or such post-effective amendment as soon as
practicable after the Company has received notification of the matters
to be incorporated in such prospectus supplement or post-effective
amendment and
<PAGE>
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(iii) supplement or make amendments to such Registration
Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, furnish to each
selling Holder of Registrable Notes and to each such Participating
Broker-Dealer who so requests and to their respective counsel and each
managing underwriter, if any, at the sole expense of the Company, one
conformed copy of the Registration Statement or Registration Statements
and each post-effective amendment thereto, including financial
statements and schedules and, if requested, all documents incorporated
or deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, deliver to each
selling Holder of Registrable Notes, or each such Participating
Broker-Dealer, as the case may be, their respective counsel and the
underwriters, if any, at the sole expense of the Company, as many copies
of the Prospectus or Prospectuses (including each form of preliminary
prospectus) and each amendment or supplement thereto and any documents
incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the
Company hereby consents to the use of such Prospectus and each amendment
or supplement thereto by each of the selling Holders of Registrable
Notes or each such Participating Broker-Dealer, as the case may be, and
the underwriters or agents, if any, and dealers, if any, in connection
with the offering and sale of the Registrable Notes covered by, or the
sale by Participating Broker-Dealers of the Exchange Notes pursuant to,
such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or
Exchange Notes or any delivery of a Prospectus contained in the Exchange
Registration Statement by any Participating Broker-Dealer who seeks to
sell Exchange
<PAGE>
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Notes during the Applicable Period, use its best efforts to register or
qualify and to cooperate with the selling Holders of Registrable Notes
or each such Participating Broker-Dealer, as the case may be, the
managing underwriter or underwriters, if any, and their respective
counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Notes for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any selling Holder,
Participating Broker-Dealer or the managing underwriter or underwriters
reasonably request in writing; provided, however, that where Exchange
Notes held by Participating Broker-Dealers or Registrable Notes are
offered other than through an underwritten offering, the Company agrees
to cause its counsel to perform Blue Sky investigations and file
registrations and qualifications required to be filed pursuant to this
Section 5(h); keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is
required to be kept effective and do any and all other acts or things
reasonably necessary or advisable to enable the disposition in such
jurisdictions of the Exchange Notes held by Participating Broker-Dealers
or the Registrable Notes covered by the applicable Registration
Statement; provided, however, that the Company shall not be required to
(A) qualify generally to do business in any jurisdiction where it is not
then so qualified, (B) take any action that would subject it to general
service of process in any such jurisdiction where it is not then so
subject or (C) subject itself to taxation in any such jurisdiction where
it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3
hereof, cooperate with the selling Holders of Registrable Notes and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Notes
to be sold, which certificates shall not bear any restrictive legends
and shall be in a form eligible for deposit with The Depository Trust
Company; and enable such Registrable Notes to be in such denominations
and registered in such names as the managing underwriter or
underwriters, if any, or Holders may reasonably request.
(j) Use its best efforts to cause the Registrable Notes
covered by the Registration Statement to be registered with or approved
by such other governmental agencies
<PAGE>
-17-
or authorities as may be necessary to enable the Holders thereof or the
underwriter or underwriters, if any, to consummate the disposition of
such Registrable Notes, except as may be required solely as a
consequence of the nature of such selling Holder's business, in which
case the Company will cooperate in all reasonable respects with the
filing of such Registration Statement and the granting of such
approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3
hereof or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, upon the occurrence of
any event contemplated by paragraph 5(c)(v) or 5(c)(vi), hereof, as
promptly as practicable prepare and (subject to Section 5(a) hereof)
file with the SEC, at the Company's sole expense, a supplement or
post-effective amendment to the Registration Statement or a supplement
to the related Prospectus or any document incorporated or deemed to be
incorporated therein by reference, or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Notes being sold thereunder or to the purchasers of the Exchange Notes
to whom such Prospectus will be delivered by a Participating
Broker-Dealer, any such Prospectus will not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(l) Use its reasonable best efforts to cause the Registrable
Notes covered by a Registration Statement or the Exchange Notes, as the
case may be, to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement or the Exchange
Notes, as the case may be, or the managing underwriter or underwriters,
if any.
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee
with certificates for the Registrable Notes or Exchange Notes, as the
case may be, in a form eligible for deposit with The Depository Trust
Company and (ii) provide a CUSIP number for the Registrable Notes or
Exchange Notes, as the case may be.
<PAGE>
-18-
(n) In connection with any underwritten offering of
Registrable Notes pursuant to a Shelf Registration, enter into an
underwriting agreement as is customary in underwritten offerings of debt
securities similar to the Notes and take all such other actions as are
reasonably requested by the managing underwriter or underwriters in
order to expedite or facilitate the registration or the disposition of
such Registrable Notes and, in such connection, (i) make such
representations and warranties to, and covenants with, the underwriters
with respect to the business of the Company and its subsidiaries
(including any acquired business, properties or entity, if applicable)
and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each
case, as are customarily made by issuers to underwriters in underwritten
offerings of debt securities similar to the Notes, and confirm the same
in writing if and when requested; (ii) obtain the written opinion of
counsel to the Company and written updates thereof in form, scope and
substance reasonably satisfactory to the managing underwriter or
underwriters, addressed to the underwriters covering the matters
customarily covered in opinions requested in underwritten offerings of
debt similar to the Notes and such other matters as may be reasonably
requested by the managing underwriter or underwriters; (iii) obtain
"cold comfort" letters and updates thereof in form, scope and substance
reasonably satisfactory to the managing underwriter or underwriters from
the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data are, or are required to
be, included or incorporated by reference in the Registration
Statement), addressed to each of the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings of debt
securities similar to the Notes and such other matters as reasonably
requested by the managing underwriter or underwriters; and (iv) if an
underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable than those
set forth in Section 7 hereof (or such other provisions and procedures
acceptable to Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement and the
managing underwriter or underwriters or agents) with respect to all
parties to be indemnified pur-
<PAGE>
-19-
suant to said Section. The above shall be done at each closing under
such underwriting agreement, or as and to the extent required
thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section 3
hereof or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Notes being sold,
or each such Participating Broker-Dealer, as the case may be, any
underwriter participating in any such disposition of Registrable Notes,
if any, and any attorney, accountant or other agent retained by any such
selling Holder or each such Participating Broker-Dealer, as the case may
be, or underwriter (collectively, the "Inspectors"), at the offices
where normally kept, during reasonable business hours, all relevant
financial and other records, pertinent corporate documents and
instruments of the Company and its subsidiaries (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise
any applicable due diligence responsibilities, and cause the respective
officers, directors and employees of the Company and its subsidiaries to
supply all information reasonably requested by any such Inspector in
connection with such Registration Statement. Any such access granted to
the Inspectors under this Section 5(o) shall be subject to the prior
receipt by the Company of undertakings to preserve the confidentiality
of any information deemed to the Company to be confidential in form and
substance reasonably satisfactory to the Company. Records that the
Company determines, in good faith, to be confidential and any Records
that it notifies the Inspectors are confidential shall not be disclosed
by the Inspectors unless (i) the disclosure of such Records is necessary
to avoid or correct a misstatement or omission in such Registration
Statement, (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction, (iii)
disclosure of such information is, in the opinion of counsel for any
Inspector, necessary or advisable in connection with any action, claim,
suit or proceeding, directly or indirectly, involving or potentially
involving such Inspector and arising out of, based upon, relating to or
involving this Agreement or any transactions contemplated hereby or
arising hereunder or (iv) the information in such Records has been made
generally available to the
<PAGE>
-20-
public. Each selling Holder of such Registrable Securities and each such
Participating Broker-Dealer will be required to agree that information
obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Company unless and until such
information is generally available to the public. Each selling Holder of
such Registrable Notes and each such Participating Broker-Dealer will be
required to further agree that it will, upon learning that disclosure of
such Records is sought in a court of competent jurisdiction, give notice
to the Company and allow the Company to undertake appropriate action to
prevent disclosure of the Records deemed confidential at the Company's
sole expense.
(p) Provide an indenture trustee for the Registrable Notes or
the Exchange Notes, as the case may be, and cause the Indenture or the
trust indenture provided for in Section 2(a) hereof, as the case may be,
to be qualified under the TIA not later than the effective date of the
Exchange Offer or the first Registration Statement relating to the
Registrable Notes; and in connection therewith, cooperate with the
trustee under any such indenture and the Holders of the Registrable
Notes, to effect such changes to such indenture as may be required for
such indenture to be so qualified in accordance with the terms of the
TIA; and execute, and use its reasonable best efforts to cause such
trustee to execute, all documents as may be required to effect such
changes and all other forms and documents required to be filed with the
SEC to enable such indenture to be so qualified in a timely manner.
(q) Comply in all material respects with all applicable rules
and regulations of the SEC and make generally available to its
securityholders earning statements satisfying the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 45 days after the
end of any fiscal quarter (or 90 days after the end of any fiscal year)
(i) commencing at the end of any fiscal quarter in which Registrable
Notes are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which
statements shall cover said fiscal periods.
<PAGE>
-21-
(r) Upon consummation of an Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Company, who may, at the
Company's election, be internal counsel to the Company, in a form
customary for underwritten transactions, addressed to the Trustee for
the benefit of all Holders of Registrable Notes participating in the
Exchange Offer or the Private Exchange, as the case may be, that the
Exchange Notes or Private Exchange Notes, as the case may be, and the
related indenture constitute legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with its
respective terms, subject to customary exceptions and qualifications.
(s) If an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the
Company (or to such other Person as directed by the Company) in exchange
for the Exchange Notes or the Private Exchange Notes, as the case may
be, the Company shall mark, or cause to be marked, on such Registrable
Notes that such Registrable Notes are being cancelled in exchange for
the Exchange Notes or the Private Exchange Notes, as the case may be; in
no event shall such Registrable Notes be marked as paid or otherwise
satisfied.
(t) Cooperate with each seller of Registrable Notes covered by
any Registration Statement and each underwriter, if any, participating
in the disposition of such Registrable Notes and their respective
counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD").
(u) Use its best efforts to take all other steps necessary or
advisable to effect the registration of the Registrable Notes covered by
a Registration Statement contemplated hereby.
The Company may require each seller of Registrable Notes as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the distribution of such Registrable Notes
as the Company may, from time to time, reasonably request. The Company may
exclude from such registration the Registrable Notes of any seller who
unreasonably fails to furnish such information within a reasonable time after
receiving such request and in such event shall have no further obligation under
this Agreement (including,
<PAGE>
-22-
without limitation, obligations under Section 4 hereof) with respect to such
seller or any subsequent holder of such Registrable Notes. Each seller as to
which any Shelf Registration is being effected agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such seller not materially
misleading.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, that, upon
actual receipt of any notice from the Company of the happening of any event of
the kind described in Sections 5(c)(ii), 5(c)(iv), 5(c)(v) or 5(c)(vi) hereof,
such Holder will forthwith discontinue disposition of such Registrable Notes
covered by such Registration Statement or Prospectus or Exchange Notes to be
sold by such Holder or Participating Broker-Dealer, as the case may be, until
such Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto. In the event that the Company shall give any such
notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and including the date
of the giving of such notice to and including the date when each seller of
Registrable Notes covered by such Registration Statement or Exchange Notes to be
sold by such Participating Broker-Dealer, as the case may be, shall have
received (x) the copies of the supplemented or amended Prospectus contemplated
by Section 5(k) hereof or (y) the Advice.
6. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Exchange Offer or a Shelf Registration is filed or becomes
effective, including, without limitation, (i) all registration and filing fees
(including, without limitation, (A) fees with respect to filings required to be
made with the NASD in connection with an underwritten offering and (B) fees and
expenses of compliance with state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of counsel in connection
with Blue Sky qualifications of the Registrable Notes or Exchange Notes and
determination of the eligibility of
<PAGE>
-23-
the Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions (x) where the holders of Registrable Notes are located, in the
case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the
case of Registrable Notes or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses, including,
without limitation, expenses of printing certificates for Registrable Notes or
Exchange Notes in a form eligible for deposit with The Depository Trust Company
and of printing prospectuses if the printing of prospectuses is requested by the
managing underwriter or underwriters, if any, by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any Registration
Statement or sold by any Participating Broker-Dealer, as the case may be, (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and fees and disbursements of special counsel for the
sellers of Registrable Notes (subject to the provisions of Section 6(b) hereof),
(v) fees and disbursements of all independent certified public accountants
referred to in Section 5(n)(iii) hereof (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), (vi) rating agency fees, if any, and any fees associated
with making the Registrable Notes or Exchange Notes eligible for trading through
the Depository Trust Company, (vii) Securities Act liability insurance, if the
Company desires such insurance, (viii) fees and expenses of all other Persons
retained by the Company, (ix) internal expenses of the Company (including,
without limitation, all salaries and expenses of officers and employees of the
Company performing legal or accounting duties), (x) the expense of any annual
audit, (xi) the fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange, if applicable, and (xii)
the expenses relating to printing, word processing and distributing of all
Registration Statements, underwriting agreements, securities sales agreements,
indentures and any other documents necessary to comply with this Agreement.
(b) The Company shall (i) reimburse the Holders of the
Registrable Notes being registered in a Shelf Registration for the reasonable
fees and disbursements of not more than one counsel chosen by the Holders of a
majority in aggregate principal amount of the Registrable Notes to be included
in such Registration Statement. All other out-of-pocket costs incurred by such
Holders shall be the responsibility of such Holders.
<PAGE>
-24-
7. Indemnification
(a) The Company agrees to indemnify and hold harmless each
Holder of Registrable Notes offered pursuant to a Shelf Registration Statement
and each Participating Broker-Dealer selling Exchange Notes during the
Applicable Period, the officers and directors of each such Person or its
affiliates, and each other Person, if any, who controls any such Person or its
affiliates within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act (each, a "Participant"), from and against any and
all losses, claims, damages and liabilities (including, without limitation, the
reasonable legal fees and other expenses actually incurred in connection with
any suit, action or proceeding or any claim asserted) caused by, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement pursuant to which the offering of
such Registrable Notes or Exchange Notes, as the case may be, is registered (or
any amendment thereto) or related Prospectus (or any amendments or supplements
thereto) or any related preliminary prospectus, or caused by, arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that the Company will not be required to indemnify a
Participant if (i) such losses, claims, damages or liabilities are caused by any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information relating to any Participant
furnished to the Company in writing by or on behalf of such Participant
expressly for use therein or (ii) if such Participant sold to the person
asserting the claim the Registrable Notes or Exchange Notes that are the subject
of such claim and such untrue statement or omission or alleged untrue statement
or omission was contained or made in any preliminary prospectus and corrected in
the Prospectus or any amendment or supplement thereto and the Prospectus does
not contain any other untrue statement or omission or alleged untrue statement
or omission of a material fact that was the subject matter of the related
proceeding and it is established by the Company in the related proceeding that
such Participant failed to deliver or provide a copy of the Prospectus (as
amended or supplemented) to such Person with or prior to the confirmation of the
sale of such Registrable Notes or Exchange Notes sold to such Person if required
by applicable law, unless such failure to deliver or provide a copy of the
Prospectus (as amended or supplemented) was a result of noncompliance by the
Company with Section 5 of this Agreement.
<PAGE>
-25-
(b) Each Participant agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Company's directors and officers
and each Person who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to each Participant, but only (i) with
reference to information relating to such Participant furnished to the Company
in writing by or on behalf of such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto or any
preliminary prospectus or (ii) with respect to any untrue statement or
representation made by such Participant in writing to the Company. The liability
of any Participant under this paragraph shall in no event exceed the proceeds
received by such Participant from sales of Registrable Notes or Exchange Notes
giving rise to such obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any Person in respect of which indemnity may be sought pursuant
to either of the two preceding paragraphs, such Person (the "Indemnified
Person") shall promptly notify the Person against whom such indemnity may be
sought (the "Indemnifying Person") in writing, and the Indemnifying Person, upon
request of the Indemnified Person, shall retain counsel reasonably satisfactory
to the Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding; provided, however, that the failure to so notify the
Indemnifying Person shall not relieve it of any obligation or liability that it
may have hereunder or otherwise (unless and only to the extent that such failure
directly results in material prejudice to the Indemnifying Person and the
Indemnifying Person was not otherwise aware of such action or claim). In any
such proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless (i) the Indemnifying Person and the Indemnified
Person shall have mutually agreed in writing to the contrary, (ii) the
Indemnifying Person shall have failed within a reasonable period of time to
retain counsel reasonably satisfactory to the Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person and representation of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that, un-
<PAGE>
-26-
less there exists a conflict among Indemnified Persons, the Indemnifying Person
shall not, in connection with any one such proceeding or separate but
substantially similar related proceedings in the same jurisdiction arising out
of the same general allegations, be liable for the fees and expenses of more
than one separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed promptly as
they are incurred. Any such separate firm for the Participants and such control
Persons of Participants shall be designated in writing by Participants who sold
a majority in interest of Registrable Notes and Exchange Notes sold by all such
Participants and any such separate firm for the Company, its directors, its
officers and such control Persons of the Company shall be designated in writing
by the Company. The Indemnifying Person shall not be liable for any settlement
of any proceeding effected without its prior written consent, but if settled
with such consent or if there be a final non-appealable judgment for the
plaintiff for which the Indemnified Person is entitled to indemnification
pursuant to this Agreement, the Indemnifying Person agrees to indemnify and hold
harmless each Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. No Indemnifying Person shall, without the
prior written consent of the Indemnified Person, effect any settlement or
compromise of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party, and indemnity could have been
sought hereunder by such Indemnified Person, unless such settlement (A) includes
an unconditional written release of such Indemnified Person, in form and
substance reasonably satisfactory to such Indemnified Person, from all liability
on claims that are the subject matter of such proceeding and (B) does not
include any statement as to an admission of fault, culpability or failure to act
by or on behalf of any Indemnified Person.
(d) If the indemnification provided for in the first and
second paragraphs of this Section 7 is for any reason unavailable to, or
insufficient to hold harmless, an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraphs, in lieu of indemnifying such Indemnified Person
thereunder and in order to provide for just and equitable contribution, shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Person or Persons
on the one hand and the Indemnified Person or Persons on the other in connection
with the statements or omissions or al-
<PAGE>
-27-
leged statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof). The relative fault of the parties
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company on the
one hand or such Participant or such other Indemnified Person, as the case may
be, on the other, the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in
this Section 7 will be in addition to any liability that the Indemnifying
Persons may otherwise have to the Indemnified Persons referred to above.
8. Rule 144 and 144A
The Company covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC
<PAGE>
-28-
thereunder in a timely manner in accordance with the requirements of the
Securities Act and the Exchange Act and, if at any time the Company is not
required to file such reports, it will, upon the request of any Holder of
Registrable Notes, make publicly available annual reports and such information,
documents and other reports of the type specified in Sections 13 and 15(d) of
the Exchange Act. The Company further covenants for so long as any Registrable
Notes remain outstanding, to make available to any Holder or beneficial owner of
Registrable Notes in connection with any sale thereof and any prospective
purchaser of such Registrable Notes from such Holder or beneficial owner the
information required by Rule 144A(d)(4) under the Securities Act in order to
permit resales of such Registrable Notes pursuant to Rule 144A.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering and reasonably acceptable to the
Company.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. Miscellaneous
(a) No Inconsistent Agreements. The Company has not, as of the
date hereof, and shall not, after the date of this Agreement, enter into any
agreement with respect to any of the Company's securities that is inconsistent
with the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not entered and
will not enter into any agreement with respect to any of its securities that
will grant to any Person piggy-back registration rights with respect to a
Registration Statement.
<PAGE>
-29-
(b) Adjustments Affecting Registrable Notes. The Company shall
not, directly or indirectly, take any action with respect to the Registrable
Notes as a class that would adversely affect the ability of the Holders of
Registrable Notes to include such Registrable Notes in a registration undertaken
pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, otherwise than with the
prior written consent of the Holders of not less than a majority in aggregate
principal amount of the then outstanding Registrable Notes. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders of Registrable
Notes whose securities are being sold pursuant to a Registration Statement and
that does not directly or indirectly affect, impair, limit or compromise the
rights of other Holders of Registrable Notes may be given by Holders of at least
a majority in aggregate principal amount of the Registrable Notes being sold by
such Holders pursuant to such Registration Statement; provided, however, that
the provisions of this sentence may not be amended, modified or supplemented
except in accordance with the provisions of the immediately preceding sentence.
(d) Notices. All notices and other communications (including
without limitation any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
1. if to a Holder of the Registrable Notes or any
Participating Broker-Dealer, at the most current address of such Holder
or Participating Broker-Dealer, as the case may be, set forth on the
records of the registrar under the Indenture, with a copy in like manner
to the Initial Purchasers as follows:
BT ALEX. BROWN INCORPORATED
130 Liberty Street
New York, New York 10006
Facsimile No.: (212) 250-7200
Attention: Corporate Finance Department
<PAGE>
-30-
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Facsimile No.: (212) 269-5420
Attention: William M. Hartnett, Esq.
2. if to the Initial Purchasers, at the addresses specified in
Section 10(d)(1);
3. if to the Company, at the address as follows:
TW ACQUISITION CORPORATION
4440 Brittmoore Road
Houston, TX 77241
Telephone: (713) 466-4103
Facsimile: (713) 466-6574
with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Telephone: (212) 756-2000
Facsimile: (212) 593-5955
Attn: Andre Weiss, Esq.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto; provided, however, that this Agreement shall not inure to the benefit of
or be binding upon a successor or assign of a Holder unless and to the extent
such successor or assign holds Registrable Notes.
<PAGE>
-31-
(f) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT
TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) Securities Held by the Company or Its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Notes is required hereunder, Registrable Notes held by the Company or its
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(k) Third Party Beneficiaries. Holders of Registrable Notes
and Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
<PAGE>
-32-
(l) Entire Agreement. This Agreement, together with the
Purchase Agreement and the Indenture, is intended by the parties as a final and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein and any and all prior
oral or written agreements, representations, or warranties, contracts,
understandings, correspondence, conversations and memoranda between the Initial
Purchasers on the one hand and the Company on the other, or between or among any
agents, representatives, parents, subsidiaries, affiliates, predecessors in
interest or successors in interest with respect to the subject matter hereof and
thereof are merged herein and replaced hereby.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
TW ACQUISITION CORPORATION
By: /s/ Ernie Danner
______________________________
Name: Ernie Danner
Title: Chief Financial Officer
BT ALEX. BROWN INCORPORATED
By: /s/ Keith Stimson
______________________________
Name: Keith Stimson
Title: Vice President
SALOMON BROTHERS INC
By: /s/ David Gelobter
______________________________
Name: David Gelobter
Title: Vice President
<PAGE>
CREDIT AGREEMENT
among
UNIVERSAL COMPRESSION HOLDINGS, INC.,
TW ACQUISITION CORPORATION (WHICH WILL BE MERGED WITH AND INTO
TIDEWATER COMPRESSION SERVICE, INC. WHICH IN TURN WILL CHANGE ITS
NAME TO UNIVERSAL COMPRESSION, INC.),
VARIOUS BANKS
and
BANKERS TRUST COMPANY,
as AGENT
----------------------------------
Dated as of February 20, 1998
----------------------------------
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Amount and Terms of Credit 1
1.01 The Commitments 1
1.02 Minimum Amount of Each Borrowing 3
1.03 Notice of Borrowing 3
1.04 Disbursement of Funds 3
1.05 Notes 4
1.06 Conversions 5
1.07 Pro Rata Borrowings 5
1.08 Interest 5
1.09 Interest Periods 6
1.10 Increased Costs, Illegality, etc. 7
1.11 Compensation 8
1.12 Change of Lending Office 9
1.13 Replacement of Banks 9
SECTION 2. Letters of Credit 10
2.01 Letters of Credit 10
2.02 Minimum Stated Amount 11
2.03 Letter of Credit Requests 11
2.04 Letter of Credit Participations 11
2.05 Agreement to Repay Letter of Credit Drawings 13
2.06 Increased Costs 13
SECTION 3. Commitment Commission; Fees; Reductions of
Commitment. 14
3.01 Fees 14
3.02 Voluntary Termination of Unutilized Commitments 15
3.03 Mandatory Reduction of Commitments 15
SECTION 4. Prepayments; Payments; Taxes 16
4.01 Voluntary Prepayments 16
4.02 Mandatory Repayments and Commitment Reductions 17
4.03 Method and Place of Payment 20
4.04 Net Payments 20
SECTION 5. Conditions Precedent to Initial Credit Events 22
5.01 Execution of Agreement; Notes 22
5.02 Officer's Certificate 22
5.03 Opinions of Counsel 22
<PAGE>
5.04 Corporate Documents; Proceedings; etc. 22
5.05 Employee Benefit Plans; Shareholders' Agreements;
Management Agreements; Collective Bargaining
Agreements; Employment Agreements; Debt Agreements 23
5.06 Financings 23
5.07 Consummation of the Acquisition 24
5.08 Refinancing 24
5.09 Pledge Agreement 25
5.10 Security Agreement 25
5.11 Consent Letter 25
5.12 Adverse Change, etc. 26
5.13 Litigation 26
5.14 Fees, etc. 26
5.15 Solvency Letter; Environmental Analyses; Insurance
Certificate 26
5.16 Financial Statements; Pro Forma Financial
Statements; Financial Projections 27
SECTION 6. Conditions Precedent to All Credit Events 27
6.01 No Default; Representations and Warranties 27
6.02 Notice of Borrowing; Letter of Credit Request 27
SECTION 7. Representations, Warranties and Agreements 27
7.01 Corporate and Other Status 28
7.02 Corporate and Other Power and Authority 28
7.03 No Violation 28
7.04 Governmental Approvals 28
7.05 Financial Statements; Financial Condition;
Undisclosed Liabilities; Projections; etc. 28
7.06 Litigation 30
7.07 True and Complete Disclosure 30
7.08 Use of Proceeds; Margin Regulations 30
7.09 Tax Returns and Payments 30
7.10 Compliance with ERISA 31
7.11 The Security Documents 32
7.12 Representations and Warranties in Documents 32
7.13 Properties 32
7.14 Capitalization 32
7.15 Subsidiaries 33
7.16 Compliance with Statutes, etc. 33
7.17 Investment Company Act 33
7.18 Public Utility Holding Company Act 33
7.19 Environmental Matters 33
7.20 Labor Relations 34
7.21 Patents, Licenses, Franchises and Formulas 34
7.22 Indebtedness 34
7.23 Transaction 34
7.24 Insurance 34
<PAGE>
SECTION 8. Affirmative Covenants 35
8.01 Information Covenants 35
8.02 Books, Records and Inspections 37
8.03 Maintenance of Property; Insurance 37
8.04 Corporate Franchises 38
8.05 Compliance with Statutes, etc. 38
8.06 Compliance with Environmental Laws 38
8.07 ERISA 39
8.08 End of Fiscal Years; Fiscal Quarters 40
8.09 Performance of Obligations 40
8.10 Payment of Taxes 40
8.11 Additional Security; Further Assurances 40
8.12 Foreign Subsidiaries Security 41
8.13 Merger 42
SECTION 9. Negative Covenants 42
9.01 Liens 42
9.02 Consolidation, Merger, Purchase or Sale of Assets,
etc. 43
9.03 Dividends 47
9.04 Indebtedness 47
9.05 Advances, Investments and Loans 49
9.06 Transactions with Affiliates 50
9.07 Capital Expenditures 51
9.08 Consolidated Adjusted EBITDA to Total Interest
Expense 52
9.09 Maximum Adjusted Leverage Ratio 52
9.10 Limitation on Voluntary Payments and Modifications
of Indebtedness; Modifications of Certificate of
Incorporation, By-Laws and Certain Other
Agreements; etc. 54
9.11 Limitation on Certain Restrictions on Subsidiaries 55
9.12 Limitation on Issuance of Capital Stock 55
9.13 Business 55
9.14 Limitation on Creation of Subsidiaries and
Entering into Partnerships and Joint Ventures 55
9.15 Special Purpose Corporation 55
SECTION 10. Events of Default 56
10.01 Payments. 56
10.02 Representations, etc. 56
10.03 Covenants 56
10.04 Default Under Other Agreements 56
10.05 Bankruptcy, etc. 56
10.06 ERISA 57
10.07 Security Documents 57
10.08 Subsidiary Guaranty 58
10.09 Judgments 58
<PAGE>
10.10 Change of Control 58
SECTION 11. Definitions and Accounting Terms 58
11.01 Defined Terms 58
SECTION 12. The Agent 79
12.01 Appointment 79
12.02 Nature of Duties 79
12.03 Lack of Reliance on the Agent 80
12.04 Certain Rights of the Agent 80
12.05 Reliance 80
12.06 Indemnification 80
12.07 The Agent in its Individual Capacity 80
12.08 Holders 81
12.09 Resignation by the Agent 81
SECTION 13. Miscellaneous 81
13.01 Payment of Expenses, etc 81
13.02 Right of Setoff 82
13.03 Notices 83
13.04 Benefit of Agreement; Assignments; Participations 83
13.05 No Waiver; Remedies Cumulative 84
13.06 Payments Pro Rata 84
13.07 Calculations; Computations; Accounting Terms 85
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE;
WAIVER OF JURY TRIAL 85
13.09 Counterparts 86
13.10 Effectiveness 86
13.12 Amendment or Waiver 87
13.13 Survival 88
13.14 Domicile of Loans 88
13.15 Limitation on Additional Amounts, Etc. 88
13.16 Register 88
13.17 Confidentiality 89
SECTION 14. Holdings Guaranty 89
14.01 Guaranty 89
14.02 Bankruptcy 90
14.03 Nature of Liability 90
14.04 Independent Obligation 90
SCHEDULE I Commitments
SCHEDULE II ERISA
<PAGE>
SCHEDULE III Existing Indebtedness
SCHEDULE IV Insurance
SCHEDULE V Existing Liens
SCHEDULE VI Indebtedness to be Refinanced
SCHEDULE VII Bank Addresses
EXHIBIT A Form of Notice of Borrowing
EXHIBIT B-1 Form of Term Note
EXHIBIT B-2 Form of Revolving Note
EXHIBIT B-3 Form of Swingline Note
EXHIBIT C Form of Letter of Credit Request
EXHIBIT D Form of Section 4.04(b)(ii) Certificate
EXHIBIT E Form of Opinion of Schulte Roth & Zabel LLP,
counsel to each Credit Party
EXHIBIT F Form of Officer's Certificate
EXHIBIT G Form of Pledge Agreement
EXHIBIT H Form of Security Agreement
EXHIBIT I Form of Subsidiaries Guaranty
EXHIBIT J Form of Consent Letter
EXHIBIT K Form of Assignment and Assumption Agreement
EXHIBIT L Form of Acknowledgment and Joinder Agreement
EXHIBIT M Form of Intercompany Note
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Amount and Terms of Credit 1
1.01 The Commitments 1
1.02 Minimum Amount of Each Borrowing 3
1.03 Notice of Borrowing 3
1.04 Disbursement of Funds 3
1.05 Notes 4
1.06 Conversions 5
1.07 Pro Rata Borrowings 5
1.08 Interest 5
1.09 Interest Periods 6
1.10 Increased Costs, Illegality, etc. 7
1.11 Compensation 8
1.12 Change of Lending Office 9
1.13 Replacement of Banks 9
SECTION 2. Letters of Credit 10
2.01 Letters of Credit 10
2.02 Minimum Stated Amount 11
2.03 Letter of Credit Requests 11
2.04 Letter of Credit Participations 11
2.05 Agreement to Repay Letter of Credit Drawings 13
2.06 Increased Costs 13
SECTION 3. Commitment Commission; Fees; Reductions of
Commitment. 14
3.01 Fees 14
3.02 Voluntary Termination of Unutilized Commitments 15
3.03 Mandatory Reduction of Commitments 15
SECTION 4. Prepayments; Payments; Taxes 16
4.01 Voluntary Prepayments 16
4.02 Mandatory Repayments and Commitment Reductions 17
4.03 Method and Place of Payment 20
4.04 Net Payments 20
SECTION 5. Conditions Precedent to Initial Credit Events 22
5.01 Execution of Agreement; Notes 22
5.02 Officer's Certificate 22
5.03 Opinions of Counsel 22
<PAGE>
5.04 Corporate Documents; Proceedings; etc. 22
5.05 Employee Benefit Plans; Shareholders' Agreements;
Management Agreements; Collective Bargaining
Agreements; Employment Agreements; Debt Agreements 23
5.06 Financings 23
5.07 Consummation of the Acquisition 24
5.08 Refinancing 24
5.09 Pledge Agreement 25
5.10 Security Agreement 25
5.11 Consent Letter 25
5.12 Adverse Change, etc. 26
5.13 Litigation 26
5.14 Fees, etc. 26
5.15 Solvency Letter; Environmental Analyses; Insurance
Certificate 26
5.16 Financial Statements; Pro Forma Financial
Statements; Financial Projections 27
SECTION 6. Conditions Precedent to All Credit Events 27
6.01 No Default; Representations and Warranties 27
6.02 Notice of Borrowing; Letter of Credit Request 27
SECTION 7. Representations, Warranties and Agreements 27
7.01 Corporate and Other Status 28
7.02 Corporate and Other Power and Authority 28
7.03 No Violation 28
7.04 Governmental Approvals 28
7.05 Financial Statements; Financial Condition;
Undisclosed Liabilities; Projections; etc. 28
7.06 Litigation 30
7.07 True and Complete Disclosure 30
7.08 Use of Proceeds; Margin Regulations 30
7.09 Tax Returns and Payments 30
7.10 Compliance with ERISA 31
7.11 The Security Documents 32
7.12 Representations and Warranties in Documents 32
7.13 Properties 32
7.14 Capitalization 32
7.15 Subsidiaries 33
7.16 Compliance with Statutes, etc. 33
7.17 Investment Company Act 33
7.18 Public Utility Holding Company Act 33
7.19 Environmental Matters 33
7.20 Labor Relations 34
7.21 Patents, Licenses, Franchises and Formulas 34
7.22 Indebtedness 34
7.23 Transaction 34
7.24 Insurance 34
<PAGE>
SECTION 8. Affirmative Covenants 35
8.01 Information Covenants 35
8.02 Books, Records and Inspections 37
8.03 Maintenance of Property; Insurance 37
8.04 Corporate Franchises 38
8.05 Compliance with Statutes, etc. 38
8.06 Compliance with Environmental Laws 38
8.07 ERISA 39
8.08 End of Fiscal Years; Fiscal Quarters 40
8.09 Performance of Obligations 40
8.10 Payment of Taxes 40
8.11 Additional Security; Further Assurances 40
8.12 Foreign Subsidiaries Security 41
8.13 Merger 42
SECTION 9. Negative Covenants 42
9.01 Liens 42
9.02 Consolidation, Merger, Purchase or Sale of Assets,
etc. 43
9.03 Dividends 47
9.04 Indebtedness 47
9.05 Advances, Investments and Loans 49
9.06 Transactions with Affiliates 50
9.07 Capital Expenditures 51
9.08 Consolidated Adjusted EBITDA to Total Interest
Expense 52
9.09 Maximum Adjusted Leverage Ratio 52
9.10 Limitation on Voluntary Payments and Modifications
of Indebtedness; Modifications of Certificate of
Incorporation, By-Laws and Certain Other
Agreements; etc. 54
9.11 Limitation on Certain Restrictions on Subsidiaries 55
9.12 Limitation on Issuance of Capital Stock 55
9.13 Business 55
9.14 Limitation on Creation of Subsidiaries and
Entering into Partnerships and Joint Ventures 55
9.15 Special Purpose Corporation 55
SECTION 10. Events of Default 56
10.01 Payments. 56
10.02 Representations, etc. 56
10.03 Covenants 56
10.04 Default Under Other Agreements 56
10.05 Bankruptcy, etc. 56
10.06 ERISA 57
10.07 Security Documents 57
10.08 Subsidiary Guaranty 58
10.09 Judgments 58
<PAGE>
10.10 Change of Control 58
SECTION 11. Definitions and Accounting Terms 58
11.01 Defined Terms 58
SECTION 12. The Agent 79
12.01 Appointment 79
12.02 Nature of Duties 79
12.03 Lack of Reliance on the Agent 80
12.04 Certain Rights of the Agent 80
12.05 Reliance 80
12.06 Indemnification 80
12.07 The Agent in its Individual Capacity 80
12.08 Holders 81
12.09 Resignation by the Agent 81
SECTION 13. Miscellaneous 81
13.01 Payment of Expenses, etc 81
13.02 Right of Setoff 82
13.03 Notices 83
13.04 Benefit of Agreement; Assignments; Participations 83
13.05 No Waiver; Remedies Cumulative 84
13.06 Payments Pro Rata 84
13.07 Calculations; Computations; Accounting Terms 85
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE;
WAIVER OF JURY TRIAL 85
13.09 Counterparts 86
13.10 Effectiveness 86
13.12 Amendment or Waiver 87
13.13 Survival 88
13.14 Domicile of Loans 88
13.15 Limitation on Additional Amounts, Etc. 88
13.16 Register 88
13.17 Confidentiality 89
SECTION 14. Holdings Guaranty 89
14.01 Guaranty 89
14.02 Bankruptcy 90
14.03 Nature of Liability 90
14.04 Independent Obligation 90
<PAGE>
CREDIT AGREEMENT, dated as of February 20, 1998, among UNIVERSAL
COMPRESSION HOLDINGS, INC., a Delaware corporation ("Holdings"), TW
ACQUISITION CORPORATION, a Delaware corporation ("Acquisition Corp.", which
will be merged with and into Tidewater Compression Service, Inc. which in turn
will change its name to Universal Compression, Inc.), the Banks party hereto
from time to time, and BANKERS TRUST COMPANY, as Agent (all capitalized terms
used herein and defined in Section 11 are used herein as therein defined).
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Banks are willing to make available to the Borrower the respective
credit facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 The Commitments. (a) Subject to and upon the terms and
conditions set forth herein, each Bank with a Term Loan Commitment severally
agrees to make, on the Initial Borrowing Date, a term loan or term loans
(each, a "Term Loan" and, collectively, the "Term Loans") to the Borrower,
which Term Loans (i) shall be made and initially maintained as a single
Borrowing of Base Rate Loans (subject to the option to convert such Term Loans
pursuant to Section 1.06) and (ii) shall not exceed for any Bank, in initial
aggregate principal amount, that amount which equals the Term Loan Commitment
of such Bank on any such date (before giving effect to any reductions thereto
on such date pursuant to Section 3.03(b)(i) but after giving effect to any
reductions thereto prior to such date pursuant to Section 3.03(b)(i) or on or
prior to such date pursuant to Section 3.03(b)(ii)). Once repaid, Term Loans
incurred hereunder may not be reborrowed.
(b) Subject to and upon the terms and conditions set forth herein,
each Bank with a Revolving Loan Commitment severally agrees, at any time and
from time to time on and after the Initial Borrowing Date and prior to the
Revolving Loan Maturity Date, to make a revolving loan or revolving loans
(each, a "Revolving Loan" and, collectively, the "Revolving Loans") to the
Borrower, which Revolving Loans (i) shall, at the option of the Borrower, be
Base Rate Loans or Eurodollar Loans, provided that except as otherwise
specifically provided in Section 1.10(b), all Revolving Loans comprising the
same Borrowing shall at all times be of the same Type, (ii) may be repaid and
reborrowed in accordance with the provisions hereof, (iii) shall not exceed
for any Bank at any time outstanding that aggregate principal amount which,
when added to the product of (x) such Bank's Adjusted Percentage and (y) the
sum of (I) the aggregate amount of all Letter of Credit Outstandings
(exclusive of Unpaid Drawings which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective incurrence of Revolving
Loans) at such time and (II) the aggregate principal amount of all Swingline
Loans (exclusive of Swingline Loans which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective incurrence of Revolving
Loans) then outstanding, equals the Revolving Loan Commitment of such Bank at
such time and (iv) shall not exceed for all Banks at any time outstanding that
aggregate principal amount which, when added to (x) the amount of all Letter of
Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the
proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving Loans) at such time and (y) the aggregate principal
amount of all Swingline Loans (exclusive of Swingline Loans which are repaid
with the proceeds of, and simultaneously
<PAGE>
with the incurrence of, the respective incurrence of Revolving Loans) then
outstanding, equals the Total Revolving Loan Commitment at such time.
(c) Subject to and upon the terms and conditions herein set forth,
BTCo in its individual capacity agrees to make at any time and from time to
time on and after the Initial Borrowing Date and prior to the Swingline Expiry
Date, a revolving loan or revolving loans (each, a "Swingline Loan" and,
collectively, the "Swingline Loans") to the Borrower, which Swingline Loans
(i) shall be made and maintained as Base Rate Loans, (ii) may be repaid and
reborrowed in accordance with the provisions hereof, (iii) shall not exceed in
aggregate principal amount at any time outstanding, when combined with the
aggregate principal amount of all Revolving Loans made by Non-Defaulting Banks
then outstanding and the Letter of Credit Outstandings at such time, an amount
equal to the Adjusted Total Revolving Loan Commitment at such time (after
giving effect to any reductions to the Adjusted Total Revolving Loan
Commitment on such date) and (iv) shall not exceed in aggregate principal
amount at any time outstanding the Maximum Swingline Amount.
(d) On any Business Day, BTCo may, in its sole discretion, give
notice to the Banks that its outstanding Swingline Loans shall be funded with
a Borrowing of Revolving Loans (provided that such notice shall be deemed to
have been automatically given upon the occurrence of a Default or an Event of
Default under Section 10.05 or upon the exercise of any of the remedies
provided in the last paragraph of Section 10), in which case a Borrowing of
Revolving Loans constituting Base Rate Loans (each such Borrowing, a
"Mandatory Borrowing") shall be made on the immediately succeeding Business
Day by all Banks with a Revolving Loan Commitment (without giving effect to
any termination thereof pursuant to the last paragraph of Section 10) pro rata
based on each Bank's Adjusted Percentage (determined before giving effect to
any termination of the Revolving Loan Commitments pursuant to the last
paragraph of Section 10) and the proceeds thereof shall be applied directly to
BTCo to repay BTCo for such outstanding Swingline Loans. Each such Bank hereby
irrevocably agrees to make Revolving Loans upon one Business Day's notice
pursuant to each Mandatory Borrowing in the amount and in the manner specified
in the preceding sentence and on the date specified in writing by BTCo
notwithstanding (i) the amount of the Mandatory Borrowing may not comply with
the minimum amount for Borrowings otherwise required hereunder, (ii) whether
any conditions specified in Section 6 are then satisfied, (iii) whether a
Default or an Event of Default then exists, (iv) the date of such Mandatory
Borrowing and (v) the amount of the Total Revolving Loan Commitment or the
Adjusted Total Revolving Loan Commitment at such time. In the event that any
Mandatory Borrowing cannot for any reason be made on the date otherwise
required above (including, without limitation, as a result of the commencement
of a proceeding under the Bankruptcy Code with respect to the Borrower), then
each such Bank hereby agrees that it shall forthwith purchase (as of the date
the Mandatory Borrowing would otherwise have occurred, but adjusted for any
payments received from the Borrower on or after such date and prior to such
purchase) from BTCo such participations in the outstanding Swingline Loans as
shall be necessary to cause such Banks to share in such Swingline Loans
ratably based upon their respective Adjusted Percentages (determined before
giving effect to any termination of the Revolving Loan Commitments pursuant to
the last paragraph of Section 10), provided that (x) all interest payable on
the Swingline Loans shall be for the account of BTCo until the date as of
which the respective participation is required to be purchased and, to the
extent attributable to the purchased participation, shall be payable to the
participant from and after such date and (y) at the time any purchase of
participations pursuant to this sentence is actually made, the purchasing Bank
shall be required to pay BTCo interest on the principal amount of
participation purchased for each day from and including the day upon which the
Mandatory Borrowing would otherwise have occurred to but excluding the date of
payment for such participation, at the overnight Federal Funds Rate for the
first three days and at the rate otherwise applicable to Revolving Loans
maintained as Base Rate Loans hereunder for each day thereafter.
-2-
<PAGE>
1.02 Minimum Amount of Each Borrowing. The aggregate principal
amount of each Borrowing of Term Loans shall not be less than $3,000,000 and,
if greater, shall be in an integral multiple of $100,000. The aggregate
principal amount of each Borrowing of Revolving Loans shall not be less than
$1,000,000 and, if greater, shall be in an integral multiple of $100,000;
provided that Mandatory Borrowings shall be made in the amounts required by
Section 1.01(d). The aggregate principal amount of each Borrowing of Swingline
Loans shall not be less than $100,000 and, if greater, shall be in an integral
multiple of $50,000. More than one Borrowing may occur on the same date, but
at no time shall there be outstanding more than ten Borrowings of Eurodollar
Loans.
1.03 Notice of Borrowing. (a) Whenever the Borrower desires to make
a Borrowing hereunder (excluding Borrowings of Swingline Loans and Mandatory
Borrowings), it shall give the Agent at its Notice Office at least one
Business Day's prior notice of each Base Rate Loan and at least three Business
Days' prior notice of each Eurodollar Loan to be made hereunder, provided that
any such notice shall be deemed to have been given on a certain day only if
given before 12:00 Noon (New York time) on such day. Each such notice (each a
"Notice of Borrowing"), except as otherwise expressly provided in Section
1.10, shall be irrevocable and shall be given by the Borrower in writing, or
by telephone promptly confirmed in writing, in the form of Exhibit A,
appropriately completed to specify the aggregate principal amount of the Loans
to be made pursuant to such Borrowing, the date of such Borrowing (which shall
be a Business Day), whether the Loans being made pursuant to such Borrowing
shall constitute Term Loans or Revolving Loans and whether the Loans being
made pursuant to such Borrowing are to be initially maintained as Base Rate
Loans or Eurodollar Loans and, if Eurodollar Loans, the initial Interest
Period to be applicable thereto. The Agent shall promptly give each Bank which
is required to make Loans of the Tranche specified in the respective Notice of
Borrowing, notice of such proposed Borrowing, of such Bank's proportionate
share thereof and of the other matters required by the immediately preceding
sentence to be specified in the Notice of Borrowing.
(b)(i) Whenever the Borrower desires to make a Borrowing of
Swingline Loans hereunder, it shall give BTCo not later than 12:00 Noon (New
York time) on the date that a Swingline Loan is to be made, written notice or
telephonic notice confirmed in writing of each Swingline Loan to be made
hereunder. Each such notice shall be irrevocable and specify in each case (A)
the date of Borrowing (which shall be a Business Day) and (B) the aggregate
principal amount of the Swingline Loans to be made pursuant to such Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice specified in
Section 1.01(d), with the Borrower irrevocably agreeing, by its incurrence of
any Swingline Loan, to the making of the Mandatory Borrowings as set forth in
Section 1.01(d).
(c) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice of such Borrowing of Loans, BTCo may
act without liability upon the basis of telephonic notice of such Borrowing,
believed by BTCo in good faith to be from the President, any Vice President or
the Treasurer of the Borrower, or from any other authorized officer of the
Borrower designated by the Borrower to the Agent, prior to receipt of written
confirmation. In each such case, the Borrower hereby waives the right to
dispute BTCo's record of the terms of such telephonic notice of such Borrowing
of Loans.
1.04 Disbursement of Funds. Except as otherwise specifically
provided in the immediately succeeding sentence, no later than 12:00 Noon (New
York time) on the date specified in each Notice of Borrowing (or (x) in the
case of Swingline Loans, not later than 2:00 P.M. (New York time) on the date
specified pursuant to Section 1.03(b)(i) or (y) in the case of Mandatory
Borrowings, not later than 12:00
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Noon (New York time) on the date specified in Section 1.01(d)), each Bank with
a Commitment of the respective Tranche will make available its pro rata
portion of each such Borrowing requested to be made on such date (or in the
case of Swingline Loans, BTCo shall make available the full amount thereof).
All such amounts shall be made available in Dollars and in immediately
available funds at the Payment Office of the Agent, and the Agent will make
available to the Borrower at the Payment Office the aggregate of the amounts
so made available by the Banks. Unless the Agent shall have been notified by
any Bank prior to the date of Borrowing that such Bank does not intend to make
available to the Agent such Bank's portion of any Borrowing to be made on such
date, the Agent may assume that such Bank has made such amount available to
the Agent on such date of Borrowing and the Agent may, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Agent by such Bank,
the Agent shall be entitled to recover such corresponding amount on demand
from such Bank. If such Bank does not pay such corresponding amount forthwith
upon the Agent's demand therefor, the Agent shall promptly notify the Borrower
and the Borrower shall immediately pay such corresponding amount to the Agent.
The Agent shall also be entitled to recover on demand from such Bank or the
Borrower, as the case may be, interest on such corresponding amount in respect
of each day from the date such corresponding amount was made available by the
Agent to the Borrower until the date such corresponding amount is recovered by
the Agent, at a rate per annum equal to (i) if recovered from such Bank, at
the overnight Federal Funds Rate and (ii) if recovered from the Borrower, the
rate of interest applicable to the respective Borrowing, as determined
pursuant to Section 1.08. Nothing in this Section 1.04 shall be deemed to
relieve any Bank from its obligation to make Loans hereunder or to prejudice
any rights which the Borrower may have against any Bank as a result of any
failure by such Bank to make Loans hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal of,
and interest on, the Loans made by each Bank shall be evidenced (i) if Term
Loans, by a promissory note duly executed and delivered by the Borrower
substantially in the form of Exhibit B-1 with blanks appropriately completed
in conformity herewith (each, a "Term Note" and, collectively, the "Term
Notes"), (ii) if Revolving Loans, by a promissory note duly executed and
delivered by the Borrower substantially in the form of Exhibit B-2, with
blanks appropriately completed in conformity herewith (each, a "Revolving
Note" and, collectively, the "Revolving Notes") and (iii) if Swingline Loans,
by a promissory note duly executed and delivered by the Borrower substantially
in the form of Exhibit B-3, with blanks appropriately completed in conformity
herewith (the "Swingline Note").
(b) The Term Note issued to each Bank shall (i) be executed by the
Borrower, (ii) be payable to the order of such Bank and be dated the Initial
Borrowing Date, (iii) be in a stated principal amount equal to the Term Loans
made by such Bank and be payable in the principal amount of Term Loans
evidenced thereby, (iv) mature on the Term Loan Maturity Date, (v) bear
interest as provided in the appropriate clause of Section 1.08 in respect of
the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced
thereby, (vi) be subject to mandatory repayment as provided in Section 4.02
and (vii) be entitled to the benefits of this Agreement and the other Credit
Documents.
(c) The Revolving Note issued to each Bank shall (i) be executed by
the Borrower, (ii) be payable to the order of such Bank and be dated the
Initial Borrowing Date, (iii) be in a stated principal amount equal to the
Revolving Loan Commitment of such Bank and be payable in the principal amount
of the Revolving Loans evidenced thereby, (iv) mature on the Revolving Loan
Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the
case may be, evidenced thereby, (vi) be subject to mandatory repayment as
provided in Section 4.02 and (vii) be entitled to the benefits of this
Agreement and the other Credit Documents.
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(d) The Swingline Note issued to BTCo shall (i) be executed by the
Borrower, (ii) be payable to the order of BTCo and be dated the Initial
Borrowing Date, (iii) be in a stated principal amount equal to the Maximum
Swingline Amount and be payable in the principal amount of the outstanding
Swingline Loans evidenced thereby from time to time, (iv) mature on the
Swingline Expiry Date, (v) bear interest as provided in the appropriate clause
of Section 1.08 in respect of the Base Rate Loans evidenced thereby and (vi)
be entitled to the benefits of this Agreement and the other Credit Documents.
(e) Each Bank will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the
outstanding principal amount of Loans evidenced thereby. Failure to make any
such notation shall not affect the Borrower's obligations in respect of such
Loans.
1.06 Conversions. The Borrower shall have the option to convert, on
any Business Day occurring on or after the Initial Borrowing Date, all or a
portion equal to at least $3,000,000 in the case of a Borrowing of Term Loans
and equal to at least $1,000,000 in the case of a Borrowing of Revolving Loans
of the outstanding principal amount of such Loans made pursuant to one or more
Borrowings (so long as of the same Tranche) of one or more Types of Loans into
a Borrowing (of the same Tranche) of another Type of Loan, provided that (i)
except as otherwise provided in Section 1.10(b), Eurodollar Loans may be
converted into Base Rate Loans only on the last day of an Interest Period
applicable to the Loans being converted and no such partial conversion of
Eurodollar Loans shall reduce the outstanding principal amount of such
Eurodollar Loans made pursuant to a single Borrowing to less than $3,000,000
in the case of a Borrowing of Term Loans and to less than $1,000,000 in the
case of a Borrowing of Revolving Loans, (ii) Base Rate Loans may only be
converted into Eurodollar Loans if no Default or Event of Default is in
existence on the date of the conversion, (iii) no conversion pursuant to this
Section 1.06 shall result in a greater number of Borrowings than is permitted
under Section 1.02 and (iv) Swingline Loans may not be converted pursuant to
this Section 1.06. Each such conversion shall be effected by the Borrower by
giving the Agent at its Notice Office prior to 12:00 Noon (New York time) at
least three Business Days' prior notice (each a "Notice of Conversion")
specifying the Loans to be so converted, the Borrowing(s) pursuant to which
such Loans were made and, if to be converted into Eurodollar Loans, the
Interest Period to be initially applicable thereto. The Agent shall give each
Bank prompt notice of any such proposed conversion affecting any of its Loans.
Upon any such conversion the proceeds thereof will be deemed to be applied
directly on the day of such conversion to prepay the outstanding principal
amount of the Loans being converted.
1.07 Pro Rata Borrowings. All Borrowings of Term Loans and Revolving
Loans under this Agreement shall be incurred from the Banks pro rata on the
basis of their Term Loan Commitments or Revolving Loan Commitments, as the
case may be; provided that all Borrowings of Revolving Loans made pursuant to
a Mandatory Borrowing shall be incurred from the Banks pro rata on the basis
of their Adjusted Percentages. It is understood that no Bank shall be
responsible for any default by any other Bank of its obligation to make Loans
hereunder and that each Bank shall be obligated to make the Loans provided to
be made by it hereunder, regardless of the failure of any other Bank to make
its Loans hereunder.
1.08 Interest. (a) The Borrower agrees to pay interest in respect of
the unpaid principal amount of each Base Rate Loan from the date the proceeds
thereof are made available to the Borrower until the maturity thereof (whether
by acceleration or otherwise) at a rate per annum which shall be equal to the
sum of the Applicable Base Rate Margin plus the Base Rate in effect from time
to time.
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(b) The Borrower agrees to pay interest in respect of the unpaid
principal amount of each Eurodollar Loan from the date the proceeds thereof
are made available to the Borrower until the maturity thereof (whether by
acceleration or otherwise) at a rate per annum which shall, during each
Interest Period applicable thereto, be equal to the sum of the Applicable
Eurodollar Rate Margin plus the Eurodollar Rate for such Interest Period.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and any other overdue amount payable
hereunder shall, in each case, bear interest at a rate per annum equal to 2%
per annum in excess of the rate otherwise applicable to Base Rate Loans of the
respective Tranche of Loans from time to time.
(d) Accrued (and theretofore unpaid) interest shall be payable (i)
in respect of each Base Rate Loan, quarterly in arrears on each Quarterly
Payment Date, (ii) in respect of each Eurodollar Loan, on the last day of each
Interest Period applicable thereto and, in the case of an Interest Period in
excess of three months, on each date occurring at three month intervals after
the first day of such Interest Period and (iii) in respect of each Loan, on
any repayment or prepayment (on the amount repaid or prepaid), at maturity
(whether by acceleration or otherwise) and, after such maturity, on demand.
(e) Upon each Interest Determination Date, the Agent shall determine
the Eurodollar Rate for each Interest Period applicable to Eurodollar Loans
and shall promptly notify the Borrower and the Banks thereof. Each such
determination shall, absent manifest error, be final and conclusive and
binding on all parties hereto.
1.09 Interest Periods. At the time it gives any Notice of Borrowing
or Notice of Conversion in respect of the making of, or conversion into, any
Eurodollar Loan (in the case of the initial Interest Period applicable
thereto) or on the third Business Day prior to the expiration of an Interest
Period applicable to such Eurodollar Loan (in the case of any subsequent
Interest Period), the Borrower shall have the right to elect, by giving the
Agent notice thereof, the interest period (each an "Interest Period")
applicable to such Eurodollar Loan, which Interest Period shall, at the option
of the Borrower, be a one, two, three or six-month period or, to the extent
then available to all Banks, a nine or twelve-month period, provided that:
(i) all Eurodollar Loans comprising a Borrowing shall at all times
have the same Interest Period;
(ii) the initial Interest Period for any Eurodollar Loan shall
commence on the date of Borrowing of such Eurodollar Loan (including the
date of any conversion thereto from a Loan of a different Type) and each
Interest Period occurring thereafter in respect of such Eurodollar Loan
shall commence on the day on which the next preceding Interest Period
applicable thereto expires;
(iii) if any Interest Period relating to a Eurodollar Loan begins on a
day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period, such Interest Period shall end
on the last Business Day of such calendar month;
(iv) 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, however, that if any Interest Period
for a Eurodollar Loan would otherwise expire on a day which 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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(v) no Interest Period may be selected at any time when a Default or
Event of Default is then in existence;
(vi) no Interest Period in respect of any Borrowing of any Tranche of
Loans shall be selected which extends beyond the respective Maturity Date
for such Tranche of Loans; and
(vii) no Interest Period in respect of any Borrowing of Term Loans
shall be selected which extends beyond any date upon which a mandatory
repayment of such Term Loans will be required to be made under Section
4.02(b), if the aggregate principal amount of Term Loans which have
Interest Periods which will expire after such date will be in excess of
the aggregate principal amount of Term Loans then outstanding less the
aggregate amount of such required prepayment.
If upon the expiration of any Interest Period applicable to a
Borrowing of Eurodollar Loans, the Borrower has failed to elect, or is not
permitted to elect, a new Interest Period to be applicable to such Eurodollar
Loans as provided above, the Borrower shall be deemed to have elected to
convert such Eurodollar Loans into Base Rate Loans effective as of the
expiration date of such current Interest Period.
1.10 Increased Costs, Illegality, etc. (a) In the event that any
Bank shall have determined (which determination shall, absent manifest error,
be final and conclusive and binding upon all parties hereto but, with respect
to clause (i) below, may be made only by the Agent):
(i) on any Interest Determination Date that, by reason of any changes
arising after the date of this Agreement affecting the interbank
Eurodollar market, adequate and fair means do not exist for ascertaining
the applicable interest rate on the basis provided for in the definition
of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect
to any Eurodollar Loan because of (x) any change since the date of this
Agreement in any applicable law or governmental rule, regulation, order,
guideline or request (whether or not having the force of law) or in the
interpretation or administration thereof and including the introduction
of any new law or governmental rule, regulation, order, guideline or
request, such as, for example, but not limited to: (A) a change in the
basis of taxation of payment to any Bank of the principal of or interest
on the Notes or any other amounts payable hereunder (except for changes
in the rate of tax on, or determined by reference to, the net income or
profits of such Bank pursuant to the laws of the jurisdiction in which it
is organized or in which its principal office or applicable lending
office is located or any subdivision thereof or therein) or (B) a change
in official reserve requirements, but, in all events, excluding reserves
required under Regulation D to the extent included in the computation of
the Eurodollar Rate and/or (y) other circumstances since the date of this
Agreement affecting such Bank or the interbank Eurodollar market or the
position of such Bank in such market; or
(iii) at any time, that the making or continuance of any Eurodollar
Loan has been made (x) unlawful by any law or governmental rule,
regulation or order, (y) impossible by compliance by any Bank in good
faith with any governmental request (whether or not having force of law)
or (z) impracticable as a result of a contingency occurring after the
date of this Agreement which materially and adversely affects the
interbank Eurodollar market;
then, and in any such event, such Bank (or the Agent, in the case of clause
(i) above) shall promptly give notice (by telephone promptly confirmed in
writing) to the Borrower and, except in the case of clause (i)
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above, to the Agent of such determination (which notice the Agent shall
promptly transmit to each of the other Banks). Thereafter (x) in the case of
clause (i) above, Eurodollar Loans shall no longer be available until such
time as the Agent notifies the Borrower and the Banks that the circumstances
giving rise to such notice by the Agent no longer exist, and any Notice of
Borrowing or Notice of Conversion given by the Borrower with respect to
Eurodollar Loans which have not yet been incurred (including by way of
conversion) shall be deemed rescinded by the Borrower, (y) in the case of
clause (ii) above, the Borrower shall pay to such Bank, within 15 days of such
Bank's written request therefor, such additional amounts (in the form of an
increased rate of, or a different method of calculating, interest or otherwise
as such Bank reasonably shall determine) as shall be required to compensate
such Bank for such increased costs or reductions in amounts received or
receivable hereunder as set forth in such written request as to the additional
amounts owed to such Bank, showing in reasonable detail the basis for the
calculation thereof, submitted to the Borrower by such Bank shall, absent
manifest error, be final and conclusive and binding on all the parties hereto)
and (z) in the case of clause (iii) above, the Borrower shall take one of the
actions specified in Section 1.10(b) as promptly as possible and, in any
event, within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected by the circumstances described in
Section 1.10(a)(iii) shall) either (x) if the affected Eurodollar Loan is then
being made initially or pursuant to a conversion, by giving the Agent
telephonic notice (confirmed in writing) on the same date that the Borrower
was notified by the affected Bank or the Agent pursuant to Section 1.10(a)(ii)
or (iii) or (y) if the affected Eurodollar Loan is then outstanding, upon at
least three Business Days' written notice to the Agent, require the affected
Bank to convert such Eurodollar Loan into a Base Rate Loan, provided that, if
more than one Bank is affected at any time, then all affected Banks must be
treated the same pursuant to this Section 1.10(b).
(c) If at any time after the date of this Agreement any Bank
determines that the introduction of or any change in any applicable law or
governmental rule, regulation, order, guideline, directive or request (whether
or not having the force of law) concerning capital adequacy, or any change in
interpretation or administration thereof by any governmental authority,
central bank or comparable agency, will have the effect of increasing the
amount of capital required or expected to be maintained by such Bank or any
corporation controlling such Bank based on the existence of such Bank's
Commitments hereunder or its obligations hereunder, then the Borrower shall
pay to such Bank, upon its written demand therefor, such additional amounts as
shall be required to compensate such Bank or such other corporation for the
increased cost to such Bank or such other corporation or the reduction in the
rate of return to such Bank or such other corporation as a result of such
increase of capital. In determining such additional amounts, each Bank will
act reasonably and in good faith and will use averaging and attribution
methods which are reasonable, provided that such Bank's determination of
compensation owing under this Section 1.10(c) shall, absent manifest error, be
final and conclusive and binding on all the parties hereto. Each Bank, upon
determining that any additional amounts will be payable pursuant to this
Section 1.10(c), will give prompt written notice thereof to the Borrower,
which notice shall show in reasonable detail the basis for calculation of such
additional amounts.
(d) The provisions of this Section 1.10 are subject to Section 13.15
(to the extent same is applicable in accordance with the terms thereof).
1.11 Compensation. The Borrower shall compensate each Bank, within
15 days of its written request (which request shall set forth in reasonable
detail the basis for requesting such compensation), for all reasonable losses,
expenses and liabilities (including, without limitation, any loss, expense or
liability incurred by reason of the liquidation or reemployment of deposits or
other funds required by such
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Bank to fund its Eurodollar Loans but excluding loss of anticipated profits)
which such Bank may sustain: (i) if for any reason (other than a default by
such Bank or the Agent) a Borrowing of, or conversion from or into, Eurodollar
Loans does not occur on a date specified therefor in a Notice of Borrowing or
Notice of Conversion (whether or not withdrawn by the Borrower or deemed
withdrawn pursuant to Section 1.10(a)); (ii) if any repayment (including any
repayment made pursuant to Section 4.02 or as a result of an acceleration of
the Loans pursuant to Section 10) or conversion of any of its Eurodollar Loans
occurs on a date which is not the last day of an Interest Period with respect
thereto; (iii) if any prepayment of any of its Eurodollar Loans is not made on
any date specified in a notice of prepayment given by the Borrower; or (iv) as
a consequence of (x) any other default by the Borrower to repay its Loans when
required by the terms of this Agreement or any Note held by such Bank or (y)
any election made pursuant to Section 1.10(b). Calculation of all amounts
payable to each Bank under clause (ii) of the immediately preceding sentence
shall be made as if such Bank (x) had actually funded its relevant Eurodollar
Loan through the purchase of a Eurodollar deposit bearing interest at the
Eurodollar Rate in an amount equal to the amount of that Loan, having a
maturity comparable to the relevant Interest Period and (y) is actually
required to terminate such deposit on the date of the respective repayment or
conversion and pay the customary breakage charges in connection therewith;
provided, however, that each Bank may fund each of its Eurodollar Loans in any
manner it sees fit and the foregoing assumption shall be utilized only for the
calculation of amounts payable under clause (ii) of the first sentence of this
Section 1.11.
1.12 Change of Lending Office. Each Bank agrees that on the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), Section 1.10(c), Section 2.06 or Section 4.04 with respect to such
Bank, it will, if requested by the Borrower, use reasonable efforts (subject
to overall policy considerations of such Bank) to designate another lending
office for any Loans or Letters of Credit affected by such event, provided
that such designation is made on such terms that such Bank and its lending
office suffer no economic, legal or regulatory disadvantage, with the object
of avoiding the consequence of the event giving rise to the operation of such
Section. Nothing in this Section 1.12 shall affect or postpone any of the
obligations of the Borrower or the right of any Bank provided in Sections
1.10, 2.06 and 4.04.
1.13 Replacement of Banks. If (x) any Bank becomes a Defaulting Bank
or otherwise defaults in its obligations to make Loans or fund Unpaid
Drawings, (y) upon the occurrence of an event giving rise to the operation of
Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.06 or Section 4.04
with respect to any Bank which results in such Bank charging to the Borrower
increased costs in excess of those being generally charged by the Banks or (z)
as provided in Section 13.12(b) in the case of certain refusals by a Bank to
consent to certain proposed changes, waivers, discharges or terminations with
respect to this Agreement which have been approved by the Required Banks, the
Borrower shall have the right, if no Default or Event of Default then exists,
to either (1) replace such Bank (the "Replaced Bank") with one or more other
Eligible Transferee or Transferees, none of whom shall constitute a Defaulting
Bank at the time of such replacement (collectively, the "Replacement Bank")
reasonably acceptable to the Agent or (2) at the option of the Borrower,
replace only the Revolving Loan Commitment (and outstandings pursuant thereto)
of the Replaced Bank with an identical Revolving Loan Commitment provided by
the Replacement Bank, provided that (i) at the time of any replacement
pursuant to this Section 1.13, the Replacement Bank shall enter into one or
more Assignment and Assumption Agreements pursuant to Section 13.04(b) (and
with all fees payable pursuant to said Section 13.04(b) to be paid by the
Replacement Bank) pursuant to which the Replacement Bank shall acquire all of
the Commitments and outstanding Loans (or, in the case of the replacement of
only the Revolving Loan Commitment, the Revolving Loan Commitment and
outstanding Revolving Loans) of, and in each case participations in Letters of
Credit by, the Replaced Bank and, in connection therewith, shall pay to (x)
the Replaced Bank in respect thereof an amount equal to the sum of (A) an
amount equal to the principal of, and all accrued interest on, all outstanding
Loans (or, in the case of the replacement of only the Revolving Loan
Commitment, the outstanding Revolving Loans) of
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the Replaced Bank, (B) an amount equal to all Unpaid Drawings that have been
funded by (and not reimbursed to) such Replaced Bank, together with all then
unpaid interest with respect thereto at such time and (C) an amount equal to
all accrued, but theretofore unpaid, Fees owing to the Replaced Bank pursuant
to Section 3.01 and (y) BTCo an amount equal to such Replaced Bank's Adjusted
Percentage (for this purpose, determined as if the adjustment described in
clause (y) of the immediately succeeding sentence had been made with respect
to such Replaced Bank) of any Unpaid Drawing (which at such time remains an
Unpaid Drawing) to the extent such amount was not theretofore funded by such
Replaced Bank, and (ii) all obligations of the Borrower owing to the Replaced
Bank (other than those specifically described in clause (i) above in respect
of which the assignment purchase price has been, or is concurrently being,
paid) shall be paid in full to such Replaced Bank concurrently with such
replacement. Upon the execution of the respective Assignment and Assumption
Agreements, the payment of amounts referred to in clauses (i) and (ii) above
and, if so requested by the Replacement Bank, delivery to the Replacement Bank
of the appropriate Note or Notes executed by the Borrower, (x) the Replacement
Bank shall become a Bank hereunder and, unless the respective Replaced Bank
continues to have outstanding Term Loans hereunder, the Replaced Bank shall
cease to constitute a Bank hereunder, except with respect to indemnification
provisions under this Agreement, which shall survive as to such Replaced Bank
and (y) the Adjusted Percentages of the Banks shall be automatically adjusted
at such time to give effect to such replacement (and to give effect to the
replacement of a Defaulting Bank with one or more Non-Defaulting Banks).
SECTION 2. Letters of Credit.
2.01 Letters of Credit. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower may request that BTCo issue, at any
time and from time to time on and after the Initial Borrowing Date and prior
to the Revolving Loan Maturity Date, (x) for the account of the Borrower and
for the benefit of any holder (or any trustee, agent or other similar
representative for any such holders) of L/C Supportable Obligations of the
Borrower or any of its Subsidiaries, an irrevocable sight standby letter of
credit in Dollars and in a form customarily used by BTCo or in such other form
as has been approved by BTCo (each such standby letter of credit, a "Standby
Letter of Credit") in support of such L/C Supportable Obligations and (y) for
the account of the Borrower, an irrevocable sight documentary letter of credit
in Dollars and in a form customarily used by BTCo or in such other form as has
been approved by BTCo (each such documentary letter of credit, a "Trade Letter
of Credit", and each such Trade Letter of Credit and each Standby Letter of
Credit, a "Letter of Credit") in support of customary commercial transactions
of the Borrower and its Subsidiaries.
(b) BTCo hereby agrees that it will, at any time and from time to
time on or after the Initial Borrowing Date and prior to the Revolving Loan
Maturity Date, following its receipt of the respective Letter of Credit
Request, issue for the account of the Borrower one or more Letters of Credit
(x) in the case of Standby Letters of Credit, in support of such L/C
Supportable Obligations of the Borrower or any of its Subsidiaries as are
permitted to remain outstanding without giving rise to a Default or Event of
Default hereunder and (y) in the case of Trade Letters of Credit, in support
of sellers of goods as referenced in Section 2.01(a), provided that BTCo shall
be under no obligation to issue any Letter of Credit of the types described
above if at the time of such issuance.
(i) any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain BTCo from
issuing such Letter of Credit or any requirement of law applicable to
BTCo or any request or directive (whether or not having the force of law)
from any governmental authority with jurisdiction over BTCo shall
prohibit, or request that BTCo refrain from, the issuance of letters of
credit generally or such Letter of Credit in particular or shall impose
upon BTCo with respect to such Letter of Credit any restriction or
reserve or capital
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requirement (for which BTCo is not otherwise compensated) not in effect
on the date hereof, or any unreimbursed loss, cost or expense which was
not applicable, in effect or known to BTCo as of the date hereof and
which BTCo reasonably and in good faith deems material to it; or
(ii) BTCo shall have received notice from any Bank prior to the
issuance of such Letter of Credit of the type described in the second
sentence of Section 2.03(b).
(c) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of,
and prior to the issuance of, the respective Letter of Credit) at such time
would exceed either (x) $10,000,000 or (y) when added to the aggregate
principal amount of all Revolving Loans made by Non-Defaulting Banks and
Swingline Loans then outstanding, an amount equal to the Adjusted Total
Revolving Loan Commitment at such time and (ii) each Letter of Credit shall by
its terms terminate on or before the earlier of (x) (A) in the case of Standby
Letters of Credit, the date which occurs 12 months after the date of the
issuance thereof (although any such Standby Letter of Credit may be extendible
for successive periods of up to 12 months, but not beyond the date which is
five Business Days prior to the Revolving Loan Maturity Date, on terms
acceptable to BTCo) and (B) in the case of Trade Letters of Credit, the date
which occurs 12 months after the date of issuance thereof and (y) the date
which is 30 days prior to the Revolving Loan Maturity Date.
2.02 Minimum Stated Amount. The Stated Amount of each Letter of
Credit shall be not less than $20,000 or such lesser amount as is acceptable
to BTCo.
2.03 Letter of Credit Requests. (a) Whenever the Borrower desires
that a Letter of Credit be issued for its account, the Borrower shall give the
Agent and BTCo at least three Business Days' (or two Business Days' in the
case of Trade Letters of Credit after the time at which BTCo and the Borrower
agree on a standard form of Trade Letter of Credit to be issued hereunder, or,
in each case such shorter period as is acceptable to BTCo in any given case)
written notice thereof. Each notice shall be in the form of Exhibit C (each a
"Letter of Credit Request").
(b) The making of each Letter of Credit Request shall be deemed to
be a representation and warranty by the Borrower that such Letter of Credit
may be issued in accordance with, and will not violate the requirements of,
Section 2.01(c). Unless BTCo has received notice from the Required Banks
before it issues a Letter of Credit that one or more of the conditions
specified in Section 5 are not satisfied on the Initial Borrowing Date or
Section 6 are not then satisfied, or that the issuance of such Letter of
Credit would violate Section 2.01(c), then BTCo may issue the requested Letter
of Credit for the account of the Borrower in accordance with BTCo's usual and
customary practices. Upon its issuance of any Letter of Credit, BTCo shall
promptly notify each Bank of such issuance, which notice shall be accompanied
by a copy of the Letter of Credit actually issued.
2.04 Letter of Credit Participations. (a) Immediately upon the
issuance by BTCo of any Letter of Credit, BTCo shall be deemed to have sold
and transferred to each Bank with a Revolving Loan Commitment, other than BTCo
(each such Bank, in its capacity under this Section 2.04, a "Participant"),
and each such Participant shall be deemed irrevocably and unconditionally to
have purchased and received from BTCo, without recourse or warranty, an
undivided interest and participation, to the extent of such Participant's
Adjusted Percentage in such Letter of Credit, each drawing made thereunder and
the obligations of the Borrower under this Agreement with respect thereto, and
any security therefor or guaranty pertaining thereto. Upon any change in the
Revolving Loan Commitments or Adjusted Percentages of the Banks pursuant to
Section 1.13 or 13.04 or as a result of a Bank Default, it is hereby agreed
that, with
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respect to all outstanding Letters of Credit and Unpaid Drawings, there shall
be an automatic adjustment to the participations pursuant to this Section 2.04
to reflect the new Adjusted Percentages of the assignor and assignee Bank or
of all Banks with Revolving Loan Commitments, as the case may be.
(b) In determining whether to pay under any Letter of Credit, BTCo
shall have no obligation relative to the other Banks other than to confirm
that any documents required to be delivered under such Letter of Credit appear
to have been delivered and that they appear to substantially comply on their
face with the requirements of such Letter of Credit. Any action taken or
omitted to be taken by BTCo under or in connection with any Letter of Credit
if taken or omitted in the absence of gross negligence or willful misconduct
(as determined by a court of competent jurisdiction) shall not create for BTCo
any resulting liability to the Borrower or any Bank.
(c) In the event that BTCo makes any payment under any Letter of
Credit and the Borrower shall not have reimbursed such amount in full to BTCo
pursuant to Section 2.05(a), BTCo shall promptly notify the Agent, which shall
promptly notify each Participant of such failure, and each Participant shall
promptly and unconditionally pay to BTCo the amount of such Participant's
Adjusted Percentage of such unreimbursed payment in Dollars and in same day
funds. If BTCo so notifies, prior to 11:00 A.M. (New York time) on any
Business Day, any Participant required to fund a payment under a Letter of
Credit, such Participant shall make available to BTCo in Dollars such
Participant's Adjusted Percentage of the amount of such payment on such
Business Day in same day funds. If and to the extent such Participant shall
not have so made its Adjusted Percentage of the amount of such payment
available to BTCo, such Participant agrees to pay to BTCo, forthwith on demand
such amount, together with interest thereon, for each day from such date until
the date such amount is paid to BTCo at the overnight Federal Funds Rate for
the first three days and at the rate applicable to Revolving Loans maintained
as Base Rate Loans hereunder for each day thereafter. The failure of any
Participant to make available to BTCo its Adjusted Percentage of any payment
under any Letter of Credit shall not relieve any other Participant of its
obligation hereunder to make available to BTCo its Adjusted Percentage of any
Letter of Credit on the date required, as specified above, but no Participant
shall be responsible for the failure of any other Participant to make
available to BTCo such other Participant's Adjusted Percentage of any such
payment.
(d) Whenever BTCo receives a payment of a reimbursement obligation
as to which it has received any payments from the Participants pursuant to
clause (c) above, BTCo shall pay to each Participant which has paid its
Adjusted Percentage thereof, in Dollars and in same day funds, an amount equal
to such Participant's share (based upon the proportionate aggregate amount
originally funded by such Participant to the aggregate amount funded by all
Participants) of the principal amount of such reimbursement obligation and
interest thereon accruing after the purchase of the respective participations.
(e) Upon the request of any Participant, BTCo shall furnish to such
Participant copies of any Letter of Credit issued by it and such other
documentation as may reasonably be requested by such Participant.
(f) The obligations of the Participants to make payments to BTCo
with respect to Letters of Credit issued by it shall be irrevocable and not
subject to any qualification or exception whatsoever and shall be made in
accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement
or any of the other Credit Documents;
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(ii) the existence of any claim, setoff, defense or other right which
the Borrower or any of its Subsidiaries may have at any time against a
beneficiary named in a Letter of Credit, any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the
Agent, any Participant, or any other Person, whether in connection with
this Agreement, any Letter of Credit, the transactions contemplated
herein or any unrelated transactions (including any underlying
transaction between the Borrower and the beneficiary named in any such
Letter of Credit);
(iii) any draft, certificate or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Credit Documents; or
(v) the occurrence of any Default or Event of Default.
2.05 Agreement to Repay Letter of Credit Drawings. (a) The Borrower
hereby agrees to reimburse BTCo, by making payment to BTCo in immediately
available funds at the Payment Office, for any payment or disbursement made by
BTCo under any Letter of Credit (each such amount, so paid until reimbursed,
an "Unpaid Drawing"), upon receipt of notice by BTCo of such payment or
disbursement prior to 11:00 A.M. (New York time) on the date of, such payment
or disbursement, with interest on the amount so paid or disbursed by BTCo, to
the extent not reimbursed prior to 12:00 Noon (New York time) on the date of
such payment or disbursement, from and including the date paid or disbursed to
but excluding the date BTCo was reimbursed by the Borrower therefor at a rate
per annum which shall be the Base Rate in effect from time to time plus the
Applicable Base Rate Margin for Revolving Loans, provided, however, to the
extent such amounts are not reimbursed prior to 12:00 Noon (New York time) on
the third Business Day following the receipt by the Borrower of notice of such
payment or disbursement or the occurrence of a Default under Section 10.05,
interest shall thereafter accrue on the amounts so paid or disbursed by BTCo
(and until reimbursed by the Borrower) at a rate per annum which shall be the
Base Rate in effect from time to time plus the Applicable Base Rate Margin for
Revolving Loans plus 2%, in each such case, with interest to be payable on
demand. BTCo shall give the Borrower prompt written notice of each Drawing
under any Letter of Credit, provided that the failure to give any such notice
shall in no way affect, impair or diminish the Borrower's obligations
hereunder.
(b) The obligations of the Borrower under this Section 2.05 to
reimburse BTCo with respect to Unpaid Drawings (including, in each case,
interest thereon) shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to
payment which the Borrower may have or have had against any Bank (including in
its capacity as issuer of the Letter of Credit or as Participant), including,
without limitation, any defense based upon the failure of any drawing under a
Letter of Credit (each a "Drawing") to conform to the terms of the Letter of
Credit or any nonapplication or misapplication by the beneficiary of the
proceeds of such Drawing; provided, however, that the Borrower shall not be
obligated to reimburse BTCo for any wrongful payment made by BTCo under a
Letter of Credit as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of BTCo.
2.06 Increased Costs. (a) If at any time after the date of this
Agreement, the introduction of or any change in any applicable law, rule,
regulation, order, guideline or request or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration
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thereof, or compliance by BTCo or any Participant with any request or
directive by any such authority (whether or not having the force of law),
shall either (i) impose, modify or make applicable any reserve, deposit,
capital adequacy or similar requirement against letters of credit issued by
BTCo or participated in by any Participant, or (ii) impose on BTCo or any
Participant any other conditions relating, directly or indirectly, to this
Agreement; and the result of any of the foregoing is to increase the cost to
BTCo or any Participant of issuing, maintaining or participating in any Letter
of Credit, or reduce the amount of any sum received or receivable by BTCo or
any Participant hereunder or reduce the rate of return on its capital with
respect to Letters of Credit (except for changes in the rate of tax on, or
determined by reference to, the net income or profits of BTCo or such
Participant pursuant to the laws of the jurisdiction in which it is organized
or in which its principal office or applicable lending office is located or
any subdivision thereof or therein), then, within 15 days of the delivery of
the certificate referred to below to the Borrower by BTCo or any Participant
(a copy of which certificate shall be sent by BTCo or such Participant to the
Agent), the Borrower shall pay to BTCo or such Participant such additional
amount or amounts as will compensate such Bank for such increased cost or
reduction in the amount receivable or reduction on the rate of return on its
capital. BTCo or any Participant, upon determining that any additional amounts
will be payable pursuant to this Section 2.06, will give prompt written notice
thereof to the Borrower, which notice shall include a certificate submitted to
the Borrower by BTCo or such Participant (a copy of which certifi cate shall
be sent by BTCo or such Participant to the Agent), setting forth in reasonable
detail the basis for the calculation of such additional amount or amounts
necessary to compensate BTCo or such Participant. The certificate required to
be delivered pursuant to this Section 2.06 shall, absent manifest error, be
final and conclusive and binding on the Borrower.
(b) The provisions of this Section 2.06 are subject to Section 13.15
(to the extent same is applicable in accordance with the terms thereof).
SECTION 3. Commitment Commission; Fees; Reductions of
Commitment.
3.01 Fees. (a) The Borrower agrees to pay to the Agent for
distribution to each Non-Defaulting Bank with a Revolving Loan Commitment a
commitment commission (the "Commitment Commission") for the period from the
Initial Borrowing Date to and including the Revolving Loan Maturity Date (or
such earlier date as the Total Revolving Loan Commitment shall have been
terminated), computed at a rate for each day equal to 1/2 of 1% per annum on
the daily average Unutilized Revolving Loan Commitment of such Non-Defaulting
Bank. Accrued Commitment Commission shall be due and payable quarterly in
arrears on each Quarterly Payment Date and on the Revolving Loan Maturity Date
or such earlier date upon which the Total Revolving Loan Commitment is
terminated.
(b) The Borrower agrees to pay to the Agent for distribution to each
Non-Defaulting Bank with a Revolving Loan Commitment (based on their
respective Adjusted Percentages) a fee in respect of each Letter of Credit
issued hereunder (the "Letter of Credit Fee") in the case of each Letter of
Credit, for the period from and including the date of issuance of such Letter
of Credit to and including the termination of such Letter of Credit (or, in
the case of a Trade Letter of Credit, the date of the stated expiration
thereof), computed at a rate per annum equal to the Applicable Eurodollar Rate
Margin for Revolving Loans on the daily average Stated Amount of such Letter
of Credit (or, in the case of a Trade Letter of Credit, on the initial Stated
Amount of such Letter of Credit). Accrued Letter of Credit Fees payable with
respect to Standby Letters of Credit shall be due and payable quarterly in
arrears on each Quarterly Payment Date and on the first day after the
termination of the Total Revolving Loan Commitment upon which no Standby
Letters of Credit remain outstanding and all Letter of Credit Fees payable
with respect to each Trade Letter of Credit shall be due and payable on the
date of issuance of such Trade Letter of Credit.
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<PAGE>
(c) The Borrower agrees to pay to BTCo, for its own account, a
facing fee in respect of each Letter of Credit issued for its account
hereunder (the "Facing Fee") (x) in the case of each Standby Letter of Credit,
for the period from and including the date of issuance of such Standby Letter
of Credit to and including the termination of such Standby Letter of Credit,
computed at a rate equal to 1/4 of 1% per annum of the daily average Stated
Amount of such Standby Letter of Credit, provided, that in any event the
minimum amount of the Facing Fee payable in any 12 month period for each
Standby Letter of Credit shall be $500 (it being agreed that, on each
anniversary of the issuance of any Standby Letter of Credit or upon any
earlier termination or expiration of a Standby Letter of Credit, if $500
exceeds the amount of Facing Fees theretofore paid or then accrued with
respect to such Standby Letter of Credit, in either case after the date of the
issuance thereof or, if later, after the date of the last anniversary of the
issuance thereof (but excluding any amounts paid after such anniversary with
respect to periods ending on or prior to such anniversary, including, without
limitation, as a result of the operation of this parenthetical), the amount of
such excess shall be payable on the next date upon which accrued Facing Fees
are otherwise payable with respect to Standby Letters of Credit as provided in
the following sentence), and (y) in the case of each Trade Letter of Credit,
in an amount equal to the greater of (A) the Applicable Eurodollar Rate Margin
for Revolving Loans maintained as Eurodollar Loans multiplied by the Stated
Amount of such Trade Letter of Credit as of the date of issuance thereof and
(B) $500. Except as otherwise provided in the proviso to the immediately
preceding sentence, accrued Facing Fees payable with respect to Standby
Letters of Credit shall be due and payable quarterly in arrears on each
Quarterly Payment Date and upon the first day after the termination of the
Total Revolving Loan Commitment upon which no Standby Letters of Credit remain
outstanding and all Facing Fees payable with respect to each Trade Letter of
Credit shall be due and payable on the date of issuance of such Trade Letter
of Credit.
(d) The Borrower shall pay, upon each drawing under, issuance of, or
amendment to, any Letter of Credit, such amount as shall at the time of such
event be the administrative charge and reasonable out-of-pocket expenses which
BTCo is generally imposing in connection with such occurrence with respect to
letters of credit.
(e) The Borrower shall pay to the Agent, for its own account, such
other fees as have been agreed to in writing by the Borrower and the Agent.
3.02 Voluntary Termination of Unutilized Commitments. Upon at least
two Business Days' prior notice to the Agent at its Notice Office (which
notice the Agent shall promptly transmit to each of the Banks), the Borrower
shall have the right, at any time or from time to time, without premium or
penalty, to terminate the Total Unutilized Revolving Loan Commitment, in whole
or in part, in integral multiples of $1,000,000 in the case of partial
reductions to the Total Unutilized Revolving Loan Commitment, provided that
(i) each such reduction shall apply proportionately to permanently reduce the
Revolving Loan Commitment of each Bank with such a Commitment and (ii) the
reduction to the Total Unutilized Revolving Loan Commitment shall in no case
be in an amount which would cause the Revolving Loan Commitment of any Bank to
be reduced (as required by preceding clause (i)) by an amount which exceeds
the remainder of (x) the Unutilized Revolving Loan Commitment of such Bank as
in effect immediately before giving effect to such reduction minus (y) such
Bank's Adjusted Percentage of the aggregate principal amount of Swingline
Loans then outstanding.
3.03 Mandatory Reduction of Commitments. (a) The Total Commitment
(and the Term Loan Commitment and the Revolving Loan Commitment of each Bank)
shall terminate in its entirety on March 31, 1998 unless the Initial Borrowing
Date has occurred on or before such date.
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<PAGE>
(b) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Term Loan Commitment (and the Term
Loan Commitment of each Bank) shall (i) terminate in its entirety on the
Initial Borrowing Date (after giving effect to the making of Term Loans on
such date) and (ii) prior to the termination of the Total Term Loan Commitment
as provided in clause (i) above, be reduced from time to time to the extent
required by Section 4.02.
(c) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Revolving Loan Commitment (and the
Revolving Loan Commitment of each Bank) shall terminate in its entirety on the
Revolving Loan Maturity Date.
(d) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on each date after the Initial Borrowing Date
upon which a mandatory repayment of Term Loans or a mandatory reduction to the
Total Term Loan Commitment pursuant to any of Sections 4.02(d) through (g),
inclusive, is required (and exceeds in amount the aggregate principal amount
of Term Loans then outstanding) or would be required if Term Loans were then
outstanding, the Total Revolving Loan Commitment shall be permanently reduced
by the amount, if any, by which the amount required to be applied pursuant to
said Sections (determined as if an unlimited amount of Term Loans were
actually outstanding) exceeds the aggregate principal amount of Term Loans
then outstanding, provided that, so long as (i) such excess arises from a
mandatory repayment or commitment reduction pursuant to Section 4.02(c), (d),
(f) or (g), (ii) no Default or Event of Default then exists and (iii) any
Holdings Senior Discount Notes or Borrower Senior Discount Notes remain
outstanding, such excess shall not give rise to a reduction to the Total
Revolving Loan Commitment to the extent such excess is used to pay outstanding
Holdings Senior Discount Notes or Borrower Senior Discount Notes.
(e) Each reduction to the Total Term Loan Commitment, and the Total
Revolving Loan Commitment pursuant to this Section 3.03 (or pursuant to
Section 4.02) shall be applied proportionately to reduce the Term Loan
Commitment or the Revolving Loan Commitment, as the case may be, of each Bank
with such a Commitment.
SECTION 4. Prepayments; Payments; Taxes.
4.01 Voluntary Prepayments. The Borrower shall have the right to
prepay the Loans, without premium or penalty, in whole or in part at any time
and from time to time on the following terms and conditions: (i) the Borrower
shall give the Agent prior to 12:00 Noon (New York time) at its Notice Office
(x) at least one Business Day's prior written notice (or telephonic notice
promptly confirmed in writing) of its intent to prepay Base Rate Loans (or
same day notice in the case of Swingline Loans provided such notice is given
prior to 12:00 Noon (New York time) on such Business Day) and (y) at least
three Business Days' prior written notice (or telephonic notice promptly
confirmed in writing) of its intent to prepay Eurodollar Loans, whether Term
Loans, Revolving Loans or Swingline Loans shall be prepaid, the amount of such
prepayment and the Types of Loans to be prepaid and, in the case of Eurodollar
Loans, the specific Borrowing or Borrowings pursuant to which made, which
notice the Agent shall promptly transmit to each of the Banks; (ii) each
prepayment shall be in an aggregate principal amount of at least $100,000,
provided that if any partial prepayment of Eurodollar Loans made pursuant to
any Borrowing shall reduce the outstanding Eurodollar Loans made pursuant to
such Borrowing to an amount less than $3,000,000 in the case of a Borrowing of
Term Loans or $1,000,000 in the case of a Borrowing of Revolving Loans, then
such Borrowing may not be continued as a Borrowing of Eurodollar Loans and any
election of an Interest Period with respect thereto given by the Borrower
shall have no force or effect; (iii) prepayments of Eurodollar Loans made
pursuant to this Section 4.01 may only be made on the last day of an Interest
Period applicable thereto; (iv) each prepayment in respect of any Loans made
pursuant to a
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Borrowing shall, except as provided in clause (vi) below, be applied pro rata
among such Loans; (v) each voluntary prepayment of Term Loans pursuant to this
Section 4.01 shall be applied to reduce the then remaining Term Loan Scheduled
Repayments on a pro rata basis (based upon the then remaining number of Term
Loan Scheduled Repayments after giving effect to all prior reductions
thereto); provided that if the amount to be applied to any Term Loan Scheduled
Repayment would exceed the then remaining amount of such Term Loan Scheduled
Repayment, then an amount equal to such excess shall be applied to reduce the
other then remaining Term Loan Scheduled Repayments pro rata based upon the
then remaining number of such Term Loan Scheduled Repayments after giving
effect to all reductions thereto; and (vi) at the Borrower's election in
connection with any prepayment of Revolving Loans pursuant to this Section
4.01, such prepayment shall not be applied to any Revolving Loan of a
Defaulting Bank.
4.02 Mandatory Repayments and Commitment Reductions. (a)(i) On any
day on which the sum of the aggregate outstanding principal amount of the
Revolving Loans made by Non-Defaulting Banks, Swingline Loans and the Letter
of Credit Outstandings exceeds the Adjusted Total Revolving Loan Commitment as
then in effect, the Borrower shall prepay principal of Swingline Loans and,
after the Swingline Loans have been repaid in full, Revolving Loans of
Non-Defaulting Banks in an amount equal to such excess. If, after giving
effect to the prepayment of all outstanding Swingline Loans and Revolving
Loans of Non-Defaulting Banks, the aggregate amount of the Letter of Credit
Outstandings exceeds the Adjusted Total Revolving Loan Commitment as then in
effect, the Borrower shall pay to the Agent at the Payment Office on such date
an amount of cash or Cash Equivalents equal to the amount of such excess (up
to a maximum amount equal to the Letter of Credit Outstandings at such time),
such cash or Cash Equivalents to be held as security for all obligations of
the Borrower to Non-Defaulting Banks hereunder in a cash collateral account to
be established by the Agent.
(ii) On any day on which the aggregate outstanding principal amount
of the Revolving Loans made by any Defaulting Bank exceeds the Revolving Loan
Commitment of such Defaulting Bank, the Borrower shall prepay principal of
Revolving Loans of such Defaulting Bank in an amount equal to such excess.
(b) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date set forth below, the
Borrower shall be required to repay that principal amount of Term Loans, to
the extent then outstanding, as is set forth opposite such date (each such
repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(d)
through (g), inclusive, a "Term Loan Scheduled Repayment," and each such date,
a "Term Loan Scheduled Repayment Date"):
Term Loan
Scheduled Repayment Date Amount
Each Quarterly Payment Date
occurring in 1998 $187,500
Each Quarterly Payment Date
occurring in 1999 $187,500
Each Quarterly Payment Date
occurring in 2000 $187,500
Each Quarterly Payment Date
occurring in 2001 $187,500
Each Quarterly Payment Date
occurring in 2002 $187,500
Each Quarterly Payment Date
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Term Loan
Scheduled Repayment Date Amount
occurring in 2003 $6,562,500
Each Quarterly Payment Date
occurring in 2004 $11,250,000
(c) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on the Business Day after each date
after the Effective Date upon which Holdings or any of its Subsidiaries
receives any cash proceeds from any Securities Issuance (other than (i)
proceeds received on the Initial Borrowing Date pursuant to the Equity
Financing, (ii) so long as no Default or Event of Default then exists or would
result therefrom, proceeds received from the sale or issuance of shares of
Holdings' common stock or Qualified Preferred Stock to be used to make
principal, premium, interest, purchase price or defeasance payments on the
Holdings Senior Discount Notes, (iii) so long as no Default or Event of
Default then exists or would result therefrom, proceeds received from the sale
or issuance of Holdings' common stock or Qualified Preferred Stock in
connection with repurchase and issuance transactions of Holdings' common stock
or Qualified Preferred Stock involving Permitted Investors and (iv) so long as
no Default or Event of Default then exists, proceeds received from the
issuance by Holdings of shares of its common stock as a result of (A) the
exercise of any options to purchase its common stock by officers, directors
and employees of Holdings and its Subsidiaries which are outstanding on the
Initial Borrowing Date and which, in any event, do not exceed $1,800,000 and
(B) the exercise of any options to purchase its common stock by officers,
directors and employees of Holdings and its Subsidiaries in an aggregate
amount not to exceed $750,000 in any fiscal year of Holdings), an amount equal
to 50% of the cash proceeds of such Securities Issuance (net of underwriting
discounts and commissions and other reasonable costs associated therewith)
shall be applied as a mandatory repayment of principal of outstanding Term
Loans (or, if the Initial Borrowing Date has not yet occurred, as a mandatory
reduction to the Total Term Loan Commitment) in accordance with the
requirements of Sections 4.02(h) and (i).
(d) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on the Business Day after each date
after the Effective Date upon which Holdings or any of its Subsidiaries
receives any proceeds from any incurrence by Holdings or any of its
Subsidiaries of Indebt edness for borrowed money (other than Indebtedness for
borrowed money permitted to be incurred pursuant to Section 9.04 as such
Section is in effect on the Effective Date), an amount equal to the cash
proceeds of the respective incurrence of Indebtedness (net of underwriting or
placement discounts and commissions and other reasonable costs associated
therewith) shall be applied as a mandatory repayment of principal of
outstanding Term Loans (or, if the Initial Borrowing Date has not yet
occurred, as a mandatory reduction to the Total Term Loan Commitment) in
accordance with the requirements of Sections 4.02(h) and (i).
(e) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on the Business Day after each date
after the Effective Date upon which Holdings or any of its Subsidiaries
receives Net Sale Proceeds from any Asset Sale, an amount equal to 100% of the
Net Sale Proceeds therefrom shall be applied as a mandatory repayment of
principal of outstanding Term Loans (or, if the Initial Borrowing Date has not
yet occurred, as a mandatory reduction to the Total Term Loan Commitment) in
accordance with the requirements of Sections 4.02(h) and (i), provided that
Net Sale Proceeds received by Holdings or any of its Subsidiaries in
connection with any Asset Sale shall not be required to be so applied on such
date so long as no Default or Event of Default then exists and such Net Sale
Proceeds are used to purchase replacement assets within 18 months following
the date of such Asset Sale, and provided further, that if all or any portion
of such Net Sale Proceeds not required to be applied to the repayment of
outstanding Term Loans (or to reduce the Total Term Loan Commitment, as the
case may
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be) are not so reinvested in replacement assets within such 18 month period,
such remaining portion shall be applied on the last day of such period as a
mandatory repayment of principal of outstanding Term Loans as provided above
in this Section 4.02(e) without regard to the immediately preceding proviso.
(f) In addition to any other mandatory repayments pursuant to this
Section 4.02, on each Excess Cash Payment Date, an amount equal to 50% of the
Excess Cash Flow for the relevant Excess Cash Payment Period shall be applied
as a mandatory repayment of principal of outstanding Term Loans in accordance
with the requirements of Sections 4.02(h) and (i).
(g) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, within 10 days following each date
after the Effective Date on which Holdings or any of its Subsidiaries receives
any proceeds from any Recovery Event, an amount equal to 100% of the proceeds
of such Recovery Event (net of reasonable costs and taxes incurred in
connection with such Recovery Event) shall be applied as a mandatory repayment
of principal of outstanding Term Loans (or, if the Initial Borrowing Date has
not yet occurred, such amounts shall be applied as a mandatory reduction to
the Total Term Loan Commitment) in accordance with the requirements of
Sections 4.02(h) and (i), provided that (x) so long as no Default or Event of
Default then exists and such proceeds do not exceed $5,000,000, such proceeds
shall not be required to be so applied on such date to the extent that the
Borrower has delivered a certificate to the Agent on or prior to such date
stating that such proceeds shall be used to replace or restore any properties
or assets in respect of which such proceeds were paid within 18 months
following the date of such Recovery Event (which certificate shall set forth
the estimates of the proceeds to be so expended) and (y) so long as no Default
or Event of Default then exists and if (a) the amount of such proceeds exceeds
$5,000,000, (b) the amount of such proceeds together with other amounts
available to Holdings and its Subsidiaries is at least equal to 100% of the
cost of replacement or restoration of the properties or assets in respect of
which such proceeds were paid as determined by the Borrower and as supported
by such estimates or bids from contractors or subcontractors or such other
supporting information as the Agent may reasonably request, (c) the Borrower
has delivered to the Agent a certificate on or prior to the date the
application would otherwise be required pursuant to this Section 4.02(g) in
the form described in clause (x) above and also certifying its determination
as required by preceding clause (b) and certifying the sufficiency of business
interruption insurance as required by succeeding clause (d), and (d) the
Borrower has delivered to the Agent such evidence as the Agent may reasonably
request in form and substance satisfactory to the Agent establishing that the
Borrower has sufficient business interruption insurance and that the Borrower
will be receiving regular payments thereunder in such amounts and at such
times as are necessary to satisfy all obligations and expenses of the Borrower
(including, without limitation, all debt service requirements, including
pursuant to this Agreement) without any delay or extension thereof, for the
period from the date of the respective casualty, condemnation or other event
giving rise to the Recovery Event and continuing through the completion of the
replacement or restoration of the respective properties or assets, then the
entire amount and not just the portion in excess of $5,000,000 shall be
deposited with the Agent pursuant to a cash collateral arrangement
satisfactory to the Agent whereby such proceeds together with other amounts
available to Holdings and its Subsidiaries shall be disbursed to the Borrower
from time to time as needed to pay actual costs incurred by it in connection
with the replacement or restoration of the respective properties or assets
(pursuant to such certification requirements as may reasonably be established
by the Agent), provided further that at any time while an Event of Default has
occurred and is continuing, the Required Banks may direct the Agent (in which
case the Agent shall, and is hereby authorized by the Borrower to, follow said
directions) to apply any or all proceeds then on deposit in such collateral
account to the repayment of Obligations hereunder in the same manner as
proceeds would be applied pursuant to the Security Agreement, and provided
further, that if all or any portion of such proceeds not required to be
applied to the repayment of Term Loans pursuant to the second preceding
proviso (whether pursuant to clause (x) or (y) thereof) are not so used within
18 months after the date of
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the respective Recovery Event, such remaining portion shall be applied on the
date which is 18 months after the date of the respective Recovery Event as a
mandatory repayment of principal of outstanding Term Loans in accordance with
the requirements of Section 4.02(h) and (i).
(h) With respect to each repayment of Loans required by this Section
4.02, the Borrower may designate the Types of Loans of the respective Tranche
which are to be repaid and, in the case of Eurodollar Loans, the specific
Borrowing or Borrowings of the respective Tranche pursuant to which made,
provided that: (i) repayments of Eurodollar Loans pursuant to this Section
4.02 may only be made on the last day of an Interest Period applicable thereto
unless all Eurodollar Loans of the respective Tranche with Interest Periods
ending on such date of required repayment and all Base Rate Loans of the
respective Tranche have been paid in full; (ii) if any repayment of Eurodollar
Loans made pursuant to a single Borrowing shall reduce the outstanding
Eurodollar Loans made pursuant to such Borrowing to an amount less than
$3,000,000 in the case of a Borrowing of Term Loans or $1,000,000 in the case
of a Borrowing of Revolving Loans, such Borrowing shall be converted at the
end of the then current Interest Period into a Borrowing of Base Rate Loans;
and (iii) each repayment of any Loans made pursuant to a Borrowing shall be
applied pro rata among such Loans. In the absence of a designation by the
Borrower as described in the preceding sentence, the Agent shall, subject to
the above, make such designation in its sole discretion.
(i) Each amount required to be applied to Term Loans (or to the
Total Term Loan Commitment) pursuant to Sections 4.02(c), (d), (e), (f) and
(g) shall be applied to reduce the then remaining Term Loan Scheduled
Repayments pro rata based upon the then remaining amount of each Term Loan
Scheduled Repayment after giving effect to all prior reductions thereto.
(j) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, (i) all then outstanding Swingline Loans shall be repaid in
full on the Swingline Expiry Date and (ii) all other then outstanding Loans of
any Tranche shall be repaid in full on the respective Maturity Date for such
Tranche of Loans.
4.03 Method and Place of Payment. Except as otherwise specifically
provided herein, all payments under this Agreement or any Note shall be made
to the Agent for the account of the Bank or Banks entitled thereto not later
than 12:00 Noon (New York time) on the date when due and shall be made in
Dollars in immediately available funds at the Payment Office of the Agent.
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 shall be payable at the applicable rate during such
extension.
4.04 Net Payments. (a) All payments made by the Borrower hereunder
or under any Note will be made without setoff, counterclaim or other defense.
Except as provided in Section 4.04(b), all such payments will be made free and
clear of, and without deduction or withholding for, any present or future
taxes, levies, imposts, duties, fees, assessments or other charges of whatever
nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such
payments (but excluding any tax imposed on or measured by the net income or
net profits of a Bank pursuant to the laws of the jurisdiction in which it is
organized or in which the principal office or applicable lending office of
such Bank is located or any subdivision thereof or therein) and all interest,
penalties or similar liabilities with respect thereto (all such non-excluded
taxes, levies, imposts, duties, fees, assessments or other charges being
referred to collectively, as "Taxes"). If any Taxes are so levied or imposed,
the Borrower agrees to pay the full amount of such Taxes, and such additional
amounts as may be necessary so that every payment of all amounts due under
this Agreement or under any Note, after
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withholding or deduction for or on account of any Taxes, will not be less than
the amount provided for herein or in such Note. The Borrower will furnish to
the Agent within 45 days after the date the payment of any Taxes is due
pursuant to applicable law certified copies of tax receipts evidencing such
payment by the Borrower or, if the relevant taxing authority does not issue
such receipts, such other evidence of payment as may be reasonably
satisfactory to the Agent. The Borrower agrees to indemnify and hold harmless
each Bank, and reimburse such Bank upon its written request, for the amount of
any Taxes so levied or imposed and paid by such Bank.
(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax
purposes agrees to deliver to the Borrower and the Agent on or prior to the
Effective Date, or in the case of a Bank that is an assignee or transferee of
an interest under this Agreement pursuant to Section 1.13 or 13.04 (unless the
respective Bank was already a Bank hereunder immediately prior to such
assignment or transfer) on the date of such assignment or transfer to such
Bank, (i) two accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001 (or successor forms) certifying to such Bank's
entitlement as of such date to a complete exemption from United States
withholding tax with respect to payments to be made under this Agreement and
under any Note or (ii) if the Bank is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit D (any such certificate, a "Section
4.04(b)(ii) Certificate") and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8 (or successor form) certifying to
such Bank's entitlement on the date of such certificate to a complete
exemption from United States withholding tax with respect to payments of
interest to be made under this Agreement and under any Note. In addition, each
Bank agrees that from time to time after the Effective Date, when a lapse in
time or change in circumstances renders the previous certification obsolete or
inaccurate in any material respect, it will deliver to the Borrower and the
Agent two new accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001, or Form W-8 and a Section 4.04(b)(ii) Certificate,
as the case may be, and such other forms as may be required in order to
confirm or establish the entitlement of such Bank to a continued exemption
from or reduction in United States withholding tax with respect to payments
under this Agreement and any Note, or it shall immediately notify the Borrower
and the Agent of its inability to deliver any such Form or Certificate. Such
Bank shall not be required to deliver any such Form or Certificate pursuant to
this Section 4.04(b) if such inability results from a change after the
Effective Date (or, in the case of a Bank that is not a Bank hereunder on the
Effective Date, a change after the date such Bank became an assignee or a
transferee of an interest hereunder) in any applicable law, treaty,
governmental rule, regulation, guideline or order, or in the interpretation
thereof. Notwithstanding anything to the contrary contained in Section
4.04(a), but subject to Section 13.04(b) and the immediately succeeding
sentence, (x) the Borrower shall be entitled, to the extent it is required to
do so by law, to deduct or withhold income or similar taxes imposed by the
United States (or any political subdivision or taxing authority thereof or
therein) from interest, Fees or other amounts payable hereunder for the
account of any Bank which is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax
purposes to the extent that such Bank has not provided to the Borrower U.S.
Internal Revenue Service Forms that establish a complete exemption from such
deduction or withholding and (y) the Borrower shall not be obligated pursuant
to Section 4.04(a) hereof to gross-up payments to be made to a Bank in respect
of income or similar taxes imposed by the United States if (I) such Bank has
not provided to the Borrower the Internal Revenue Service Forms required to be
provided to the Borrower pursuant to this Section 4.04(b) or (II) in the case
of a payment, other than interest, to a Bank described in clause (ii) above,
to the extent that such Forms do not establish a complete exemption from
withholding of such taxes. Notwithstanding anything to the contrary contained
in the preceding sentence or elsewhere in this Section 4.04 and except as set
forth in Section 13.04(b), the Borrower agrees to pay any additional amounts
and to indemnify each Bank in the
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manner set forth in Section 4.04(a) (without regard to the identity of the
jurisdiction requiring the deduction or withholding) in respect of any Taxes
deducted or withheld by it as described in the immediately preceding sentence
as a result of any change on or after the Effective Date in any applicable
law, treaty, governmental rule, regulation, guideline or order, or in the
interpretation thereof, relating to the deducting or withholding of such
Taxes.
(c) If the Borrower pays any additional amount under this Section
4.04 to a Bank and such Bank determines in its sole discretion that it has
actually received or realized in connection therewith any refund or any
reduction of, or credit against, its Tax liabilities in or with respect to the
taxable year in which the additional amount is paid (a "Tax Benefit"), such
Bank shall pay to the Borrower an amount that the Bank shall, in its sole
discretion, determine is equal to the net benefit, after tax, which was
obtained by the Bank in such year as a consequence of such Tax Benefit;
provided, however, that (i) any Bank may determine, in its sole discretion
consistent with the policies of such Bank, whether to seek a Tax Benefit; (ii)
any Taxes that are imposed on a Bank as a result of a disallowance or
reduction (including through the expiration of any tax credit carryover or
carryback of such Bank that otherwise would not have expired) of any Tax
Benefit with respect to which such Bank has made a payment to the Borrower
pursuant to this Section 4.04(c) shall be treated as a Tax for which the
Borrower is obligated to indemnify such Bank pursuant to this Section 4.04
without any exclusions or defenses; and (iii) nothing in this Section 4.04(c)
shall require the Bank to disclose any confidential information to the
Borrower (including, without limitation, its tax returns).
SECTION 5. Conditions Precedent to Initial Credit Events. The
obligation of each Bank to make Loans, and the obligation of BTCo to issue
Letters of Credit, on the Initial Borrowing Date, is subject at the time of
the making of such Loans or the issuance of such Letters of Credit to the
satisfaction of the following conditions:
5.01 Execution of Agreement; Notes. On or prior to the Initial
Borrowing Date (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Agent for the account of each of the Banks the
appropriate Term Note and Revolving Note executed by the Borrower, and to BTCo
the Swingline Note executed by the Borrower, in each case in the amount,
maturity and as otherwise provided herein.
5.02 Officer's Certificate. On the Initial Borrowing Date, the Agent
shall have received a certificate dated the Initial Borrowing Date signed on
behalf of the Borrower by the President or any Vice President of the Borrower
stating that all of the conditions in Sections 5.06, 5.07, 5.08, 5.12, 5.13
and 6.01 have been satisfied on such date (except to the extent that any such
condition is required to be satisfactory to the Agent or any Bank).
5.03 Opinions of Counsel. On the Initial Borrowing Date, the Agent
shall have received (i) from Schulte Roth & Zabel LLP, counsel to each Credit
Party, an opinion addressed to the Agent and each of the Banks and dated the
Initial Borrowing Date covering the matters set forth in Exhibit E and such
other matters incident to the transaction contemplated herein as the Agent may
request and (ii) from local counsel to the Borrower satisfactory to the Agent,
opinions each of which shall be in form and substance satisfactory to the
Agent and the Required Banks and shall cover the perfection of the security
interests granted pursuant to the Security Documents and such other matters
incident to the transactions contemplated herein as the Agent may reasonably
request.
5.04 Corporate Documents; Proceedings; etc. (a) On the Initial
Borrowing Date, the Agent shall have received a certificate, dated the Initial
Borrowing Date, signed by the President or any
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Vice President of each Credit Party, and attested to by the Secretary or any
Assistant Secretary of such Credit Party, in the form of Exhibit F with
appropriate insertions, together with copies of the Certificate of
Incorporation and By-Laws of such Credit Party and the resolutions of such
Credit Party referred to in such certificate, and the foregoing shall be
reasonably acceptable to the Agent.
(b) On the Initial Borrowing Date, all corporate and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated by this Agreement and the other Documents shall be
satisfactory in form and substance to the Agent and the Required Banks, and
the Agent shall have received all information and copies of all documents and
papers, including records of corporate proceedings, governmental approvals,
good standing certificates and bring-down telegrams, if any, which the Agent
reasonably may have requested in connection therewith, such documents and
papers where appro priate to be certified by proper corporate or governmental
authorities.
5.05 Employee Benefit Plans; Shareholders' Agreements; Management
Agreements; Collective Bargaining Agreements; Employment Agreements; Debt
Agreements. On the Initial Borrowing Date, there shall have been delivered to
the Agent true and correct copies, certified as true and complete by an
appropriate officer of the relevant Credit Party of (i) all Plans that are
subject to Title IV of ERISA (and for each Plan that is required to file an
annual report on Internal Revenue Service Form 5500- series, a copy of the
most recent such report (including, to the extent required, the related
financial and actuarial statements and opinions and other supporting
statements, certifications, schedules and information), and for each Plan that
is a "single- employer plan," as defined in Section 4001(a)(15) of ERISA, the
most recently prepared actuarial valuation therefor) (provided that the
foregoing shall apply in the case of any multiemployer plan, as defined in
4001(a)(3) of ERISA, only to the extent that any document described therein is
in the possession of Holdings or any Subsidiary of Holdings or any ERISA
Affiliate or reasonably available thereto from the sponsor or trustee of any
such plan) (collectively, the "Employee Benefit Plans"), (ii) all agreements
entered into by such Credit Party or any of its Subsidiaries governing the
terms and relative rights of its capital stock and any agreements entered into
by shareholders relating to any such entity with respect to its capital stock
(collectively, the "Shareholders' Agreements"), (iii) all agreements with
members of, or with respect to, the management of such Credit Party
(collectively, the "Management Agreements"), (iv) all collective bargaining
agreements applying or relating to any employee of such Credit Party or any of
its Subsidiaries (collectively, the "Collective Bargaining Agreements"), (v)
all material employment agreements entered into by Holdings or any of its
Subsidiaries (collectively, the "Employment Agreements") and (vi) all
agreements evidencing or relating to Indebtedness of such Credit Party or any
of its Subsidiaries which is to remain outstanding after giving effect to the
incurrence of Loans on the Initial Borrowing Date (collectively, the "Debt
Agreements"); all of which Employee Benefit Plans, Shareholders' Agreements,
Management Agreements, Collective Bargaining Agreements, Employment Agreements
and Debt Agreements shall be in form and substance reasonably satisfactory to
the Agent and the Required Banks and shall be in full force and effect on the
Initial Borrowing Date.
5.06 Financings. (a) On or prior to the Initial Borrowing Date, (i)
Holdings shall have received gross cash proceeds of at least $81,000,000 from
the Equity Financing (of which no more than [$64,800,000] may be received from
the issuance of Holdings Preferred Stock), (ii) Holdings shall have received
gross cash proceeds in an aggregate principal amount of at least $25,000,000
from the issuance by it of the Holdings Senior Discount Notes, (iii) Holdings
shall have contributed the full amount of the gross cash proceeds received by
it from the Equity Financing and the issuance of the Holdings Senior Discount
Notes to the capital of the Borrower as a common equity contribution in
exchange for 100% of the issued and outstanding shares of common stock of the
Borrower and (iv) the Borrower shall have utilized the full amount of such
cash contributions to make payments owing in connection with the Transaction
prior to utilizing any proceeds of Loans for such purpose.
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(b) On or prior to the Initial Borrowing Date, the Borrower shall
have received gross cash proceeds in an aggregate principal amount of at least
$150,000,000 from the issuance by it of the Borrower Senior Discount Notes.
(c) On or prior to the Initial Borrowing Date, there shall have been
delivered to the Agent true and correct copies of the Equity Financing
Documents, the Holdings Senior Note Documents and the Borrower Senior Note
Documents, and all of the terms and conditions of the Equity Financing
Documents, the Holdings Senior Note Documents and the Borrower Senior Note
Documents shall be reasonably satisfactory in form and substance to the Agent
and the Required Banks. All conditions precedent to the consummation of the
Equity Financing, the issuance of the Holdings Senior Discount Notes and the
issuance of the Borrower Senior Discount Notes as set forth in the Equity
Financing Documents, the Holdings Senior Note Documents and the Borrower
Senior Note Documents, respectively, shall have been satisfied, and not waived
unless consented to by the Agent and the Required Banks (which consent shall
not be unreasonably withheld or delayed), to the reasonable satisfaction of
the Agent and the Required Banks. The Equity Financing, the issuance of the
Holdings Senior Discount Notes and the issuance of the Borrower Senior
Discount Notes shall have been consummated, in each case in all material
respects in accordance with the terms and conditions of the applicable
Documents therefor and all applicable laws.
5.07 Consummation of the Acquisition . (a) On the Initial Borrowing
Date, the Acquisition shall have been consummated in all material respects in
accordance with the Acquisition Documents and all applicable laws, and each of
the conditions precedent to the consummation of the Acquisition shall have
been satisfied and not waived in any material respect except with the consent
of the Agent and the Required Banks (which consent shall not be unreasonably
withheld).
(b) On or prior to the Initial Borrowing Date, there shall have been
delivered to the Agent true and correct copies of the Acquisition Documents
and the Merger Documents, and all of the terms and conditions of the
Acquisition Documents and the Merger Documents shall be reasonably
satisfactory in form and substance to the Agent and the Required Banks.
5.08 Refinancing. (a) On or prior to the Initial Borrowing Date, the
total commitments in respect of the Indebtedness to be Refinanced shall have
been terminated, and all loans and notes with respect thereto shall have been
repaid in full, together with interest thereon, all letters of credit issued
thereunder shall have been terminated and all other amounts (including
premiums) owing pursuant to the Indebtedness to be Refinanced shall have been
repaid in full and all documents in respect of the Indebtedness to be
Refinanced and all guarantees with respect thereto shall have been terminated
(except as to indemnification provisions which may survive to the extent
provided therein) and be of no further force and effect.
(b) On or prior to the Initial Borrowing Date, the creditors in
respect of the Indebtedness to be Refinanced shall have terminated and
released any and all security interests and Liens on the assets owned by
Holdings and its Subsidiaries. The Agent shall have received such releases of
security interests in and Liens on the assets owned by Holdings and its
Subsidiaries as may have been reasonably requested by the Agent, which
releases shall be in form and substance reasonably satisfactory to the Agent.
Without limiting the foregoing, there shall have been delivered (i) proper
termination statements (Form UCC-3 or the appropriate equivalent) for filing
under the UCC of each jurisdiction where a financing statement (Form UCC-1 or
the appropriate equivalent) was filed with respect to Holdings or any of its
Subsidiaries in connection with the security interests created with respect to
the Indebtedness to be Refinanced and the documentation related thereto, (ii)
termination or reassignment of any security interest in, or Lien on, any
patents, trademarks, copyrights, or similar interests of Holdings or any of
its Subsidiaries on which filings
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have been made, (iii) terminations of all mortgages, leasehold mortgages,
deeds of trust and leasehold deeds of trust created with respect to property
of Holdings or any of its Subsidiaries, in each case, to secure the
obligations in respect of the Indebtedness to be Refinanced, all of which
shall be in form and substance reasonably satisfactory to the Agent, and (iv)
all collateral owned by Holdings and its Subsidiaries in the possession of any
of the creditors in respect of the Indebtedness to be Refinanced or any
collateral agent or trustee under any related security document shall have
been returned to Holdings or its respective Subsidiary, as the case may be.
(c) The Agent shall have received evidence, in form and substance
reasonably satisfactory to it, that the matters set forth in this Section 5.08
have been satisfied as of the Initial Borrowing Date.
5.09 Pledge Agreement. On the Initial Borrowing Date, each Credit
Party shall have duly authorized, executed and delivered the Pledge Agreement
in the form of Exhibit G (as amended, modified or supplemented from time to
time, the "Pledge Agreement") and shall have delivered to the Collateral
Agent, as pledgee thereunder, all of the Pledged Securities, if any, referred
to therein and owned by such Credit Party, (x) endorsed in blank in the case
of promissory notes constituting Pledged Securities and (y) together with
executed and undated stock powers in the case of capital stock constituting
Pledged Securities.
5.10 Security Agreement. On the Initial Borrowing Date, each Credit
Party shall have duly authorized, executed and delivered the Security
Agreement in the form of Exhibit H (as modified, supplemented or amended from
time to time, the "Security Agreement") covering all of such Credit Party's
present and future Security Agreement Collateral, together with:
(i) proper Financing Statements (Form UCC-1 or the equivalent) fully
executed for filing under the UCC or other appropriate filing offices of
each jurisdiction as may be necessary or, in the reasonable opinion of
the Collateral Agent, desirable to perfect the security interests
purported to be created by the Security Agreement;
(ii) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, listing all effective financing
statements that name any Credit Party or any of its Subsidiaries as
debtor and that are filed in the jurisdictions referred to in clause (i)
above, together with copies of such other financing statements that name
any Credit Party or any of its Subsidiaries as debtor (none of which
shall cover the Collateral except to the extent evidencing Permitted
Liens or in respect of which the Collateral Agent shall have received
termination statements (Form UCC-3 or the equivalent) as shall be
required by local law fully executed for filing);
(iii) evidence of the completion of all other recordings and filings
of, or with respect to, the Security Agreement as may be necessary or, in
the reasonable opinion of the Collateral Agent, desirable to perfect the
security interests intended to be created by the Security Agreement; and
(iv) evidence that all other actions necessary or, in the reasonable
opinion of the Collateral Agent, desirable to perfect and protect the
security interests purported to be created by the Security Agreement have
been taken.
5.11 Consent Letter. On the Initial Borrowing Date, the Agent shall
have received a letter from CT Corporation System, presently located at 1633
Broadway, New York, New York 10019, substantially in the form of Exhibit J,
indicating its consent to its appointment by each Credit Party as such Credit
Party's agent to receive service of process as specified in Section 13.08.
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5.12 Adverse Change, etc. (a) On the Initial Borrowing Date, nothing
shall have occurred since September 30, 1997 (and the Banks shall not have
become aware of any facts or conditions not previously known) which the Agent
or the Required Banks shall determine has, or could reasonably be expected to
have, a material adverse effect on the rights or remedies of the Agent or the
Banks, or on the ability of any Credit Party to perform its Obligations to the
Agent and the Banks or which has, or could reasonably be expected to have, a
materially adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of Holdings and
its Subsidiaries taken as a whole.
(b) On or prior to the Initial Borrowing Date, all necessary
governmental (domestic and foreign) and material third party approvals in
connection with the Transaction and the transactions contemplated by the
Credit Documents and otherwise referred to herein or therein shall have been
obtained and remain in effect, and all applicable waiting periods shall have
expired without any action being taken by any competent governmental authority
which restrains, prevents or imposes materially adverse conditions upon the
consummation of the Transaction or the other transactions contemplated by the
Credit Documents and otherwise referred to herein or therein. Additionally,
there shall not exist any judgment, order, injunction or other restraint of
any governmental authority issued or filed or a hearing seeking injunctive
relief or other restraint pending or notified prohibiting or imposing
materially adverse conditions upon the consummation of the Transaction, the
other transactions contemplated by the Credit Documents or the making of the
Loans.
(c) On the Initial Borrowing Date, there shall not have occurred and
be continuing any material adverse change to the syndication market for credit
facilities similar in nature to this Agreement and there shall not have
occurred and be continuing a material disruption or a material adverse change
in financial, banking or capital markets that would have a material adverse
effect on the syndication, in each case as determined by the Agent in its
reasonable discretion.
5.13 Litigation. On the Initial Borrowing Date, no litigation by any
entity (private or governmental) shall be pending or threatened in writing
against any Credit Party with respect to this Agreement or any documentation
executed in connection herewith or the transactions contemplated hereby, or
with respect to the Transaction or which the Agent or the Required Banks shall
determine could reasonably be expected to have a materially adverse effect on
the Transaction or on the business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of Holdings and its
Subsidiaries taken as a whole.
5.14 Fees, etc. On the Initial Borrowing Date, the Borrower shall
have paid to the Agent and the Banks all costs, fees and expenses (including,
without limitation, the reasonable legal fees and expenses of the Agent's
counsel and local counsel) payable to the Agent and the Banks to the extent
then due.
5.15 Solvency Letter; Environmental Analyses; Insurance Certificate.
On the Initial Borrowing Date, the Borrower shall cause to be delivered to the
Agent (i) a solvency letter from Valuation Research, Inc., in form and
substance satisfactory to the Required Banks, setting forth the conclusion
that, after giving effect to the Transaction and the incurrence of all
financings contemplated herein, the Borrower and its Subsidiaries, taken as a
whole, are not insolvent and will not be rendered insolvent by the
indebtedness incurred in connection herewith, will not be left with
unreasonably small capital with which to engage in their businesses and will
not have incurred debts beyond their ability to pay such debts as they mature,
(ii) environmental and hazardous material assessments and analysis in scope
and in form and substance reasonably satisfactory to the Agent and the
Required Banks, and (iii) evidence of insurance complying with the
requirements of Section 8.03 for the business and properties of the Borrower
and its Subsidiaries, in scope, form and substance satisfactory to the Agent
and the Required Banks and naming the Collateral
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Agent as an additional insured and/or loss payee where appropriate, and
stating that such insurance shall not be canceled or revised without 30 days'
prior written notice by the insurer to the Agent.
5.16 Financial Statements; Pro Forma Financial Statements; Financial
Projections. On or prior to the Initial Borrowing Date, the Agent shall have
received true and correct copies of the historical financial statements, the
pro forma financial statements and the Projections referred to in Sections
7.05(a) and (d), which historical financial statements, pro forma financial
statements and projections shall be in form and substance reasonably
satisfactory to the Agent and the Required Banks.
SECTION 6. Conditions Precedent to All Credit Events. The obligation
of each Bank to make Loans (including Loans made on the Initial Borrowing
Date, but excluding Mandatory Borrowings made thereafter, which shall be made
as provided in Section 1.01(d)), and the obligation of BTCo to issue any
Letter of Credit, is subject, at the time of each such Credit Event (except as
hereinafter indicated), to the satisfaction of the following conditions:
6.01 No Default; Representations and Warranties. At the time of each
such Credit Event and also after giving effect thereto (i) there shall exist
no Default or Event of Default and (ii) all representations and warranties
contained herein shall be true and correct in all material respects with the
same effect as though such representations and warranties had been made on the
date of the making of such Credit Event (it being understood and agreed that
any representation or warranty which by its terms is made as of a specified
date shall be required to be true and correct in all material respects only as
of such specified date).
6.02 Notice of Borrowing; Letter of Credit Request. (a) Prior to the
making of each Loan (excluding Swingline Loans), the Agent shall have received
a Notice of Borrowing meeting the requirements of Section 1.03(a). Prior to
the making of any Swingline Loan, BTCo shall have received the notice required
by Section 1.03(b)(i).
(b) Prior to the issuance of each Letter of Credit, the Agent and
BTCo shall have received a Letter of Credit Request meeting the requirements
of Section 2.03.
The acceptance of the proceeds of each Credit Event (occurring on
the Initial Borrowing Date and thereafter) shall constitute a representation
and warranty by Holdings and the Borrower to the Agent and each of the Banks
that all the conditions specified in Section 5 (with respect to Credit Events
on the Initial Borrowing Date) and in this Section 6 (with respect to Credit
Events on and after the Initial Borrowing Date) and applicable to such Credit
Event exist as of that time. All of the Notes, certificates, legal opinions
and other documents and papers referred to in Section 5 and in this Section 6,
unless otherwise specified, shall be delivered to the Agent at the Notice
Office for the account of each of the Banks and, except for the Notes, in
sufficient counterparts or copies for each of the Banks and shall be in form
and substance reasonably satisfactory to the Agent and the Required Banks.
SECTION 7. Representations, Warranties and Agreements. In order to
induce the Banks to enter into this Agreement and to make the Loans, and issue
(or participate in) the Letters of Credit as provided herein, each of Holdings
and the Borrower makes the following representations, warranties and
agreements, in each case after giving effect to the Transaction, all of which
shall survive the execution and delivery of this Agreement and the Notes and
the making of the Loans and issuance of the Letters of Credit, with the
occurrence of each Credit Event on or after the Initial Borrowing Date being
deemed to constitute a representation and warranty that the matters specified
in this Section 7 are true and correct on and as of the Initial Borrowing Date
and in all material respects on the date of each such Credit Event (it being
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understood and agreed that any representation or warranty which by its terms
is made as of a specified date shall be required to be true and correct in all
material respects only as of such specified date).
7.01 Corporate and Other Status. Each Credit Party and each of its
Subsidiaries (i) is a duly organized and validly existing corporation in good
standing under the laws of the jurisdiction of its incorporation, (ii) has the
corporate power and authority to own its property and assets and to transact the
business in which it is engaged and presently proposes to engage and (iii) is
duly qualified and is authorized to do business and is in good standing in each
jurisdiction where the ownership, leasing or operation of its property or the
conduct of its business requires such qualifications except for failures to be
so qualified which, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect on the business, operations,
property, assets, liabilities, condition (financial or otherwise) or prospects
of Holdings and its Subsidiaries taken as a whole.
7.02 Corporate and Other Power and Authority. Each Credit Party has
the corporate power and authority to execute, deliver and perform the terms
and provisions of each of the Documents to which it is party and has taken all
necessary corporate action to authorize the execution, delivery and per
formance by it of each of such Documents. Each Credit Party has duly executed
and delivered each of the Documents to which it is party, and each of such
Documents constitutes its legal, valid and binding obligation enforceable in
accordance with its terms, except to the extent that the enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws generally affecting creditors' rights and by
equitable principles (regardless of whether enforcement is sought in equity or
at law).
7.03 No Violation. Neither the execution, delivery or performance by
any Credit Party of the Documents to which it is a party, nor compliance by it
with the terms and provisions thereof, (i) will contravene any provision of
any law, statute, rule or regulation or any order, writ, injunction or decree
of any court or governmental instrumentality, (ii) will, after giving effect
to any waivers, conflict with or result in any material breach of any of the
terms, covenants, conditions or provisions of, or constitute a default under,
or result in the creation or imposition of (or the obligation to create or
impose) any Lien (except pursuant to the Security Documents) upon any of the
property or assets of Holdings or any of its Subsidiaries pursuant to the
terms of any indenture, mortgage, deed of trust, credit agreement or loan
agreement, or any other material agreement, contract or instrument, to which
Holdings or any of its Subsidiaries of Holdings is a party or by which it or
any of its property or assets is bound or to which it may be subject or (iii)
will violate any provision of the Certificate of Incorporation or By-Laws of
Holdings or any of its Subsidiaries.
7.04 Governmental Approvals. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with
(other than the filing of the Financing Statements relating to the Security
Agreement and except as have otherwise been obtained or made on or prior to
the Initial Borrowing Date), or exemption by, any governmental or public body
or authority, or any subdivision thereof, is required to authorize, or is
required in connection with, (i) the execution, delivery and performance of
any Document or (ii) the legality, validity, binding effect or enforceability
of any such Document.
7.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; Projections; etc. (a) (i) The balance sheets of Universal as at
September 30, 1997 and the related statements of income, cash flows and
shareholders' equity of Universal for the fiscal six month period ended on
such date, copies of which have been furnished to the Banks prior to the
Effective Date and (ii) the audited balance sheets of Universal for the fiscal
years ended in March 31, 1995, March 31, 1996 and March 31, 1997 and the
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related statements of income, cash flows and shareholders' equity of Universal
for the fiscal years ended on such dates, which annual financial statements
have been examined by KPMG Peat Marwick LLP, certified public accountants, who
delivered an unqualified opinion with respect thereto and copies of which have
heretofore been delivered to each Bank, present fairly in all material
respects the financial position of Universal at the date of such balance
sheets and the results of the operations of Universal for the periods covered
thereby. Subject to year end audit adjustments and footnote disclosures
required by GAAP in the case of clause (i), all of the foregoing historical
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied. The pro forma consolidated
financial statements of Holdings and its Subsidiaries as of December 31, 1997,
in each case after giving effect to the Transaction and the financing
therefor, copies of which have been furnished to the Banks prior to the
Initial Borrowing Date, present fairly in all material respects the pro forma
consolidated financial position of Holdings and its Subsidiaries as of
December 31, 1997. After giving effect to the Transaction (but for this
purpose assuming that the Transaction and the related financing had occurred
prior to March 31, 1997), since September 30, 1997, there has been no material
adverse change in the business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of the Borrower or of Holdings
and its Subsidiaries taken as a whole.
(b) On and as of the Initial Borrowing Date and after giving effect
to the Transaction and to all Indebtedness (including any Loans) being
incurred or assumed and Liens created by the Credit Parties in connection
therewith (i) the sum of the assets, at a fair valuation, of each of the
Borrower on a stand-alone basis and of Holdings and its Subsidiaries taken as
a whole will exceed its debts; (ii) each of the Borrower on a stand-alone
basis and Holdings and its Subsidiaries taken as a whole has not incurred and
does not intend to incur, and does not believe that it will incur, debts
beyond its ability to pay such debts as such debts mature; and (iii) each of
the Borrower on a stand alone basis and Holdings and its Subsidiaries taken as
a whole will have sufficient capital with which to conduct its business. For
purposes of this Section 7.05(b), "debt" means any liability on a claim, and
"claim" means (A) right to payment, whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured, or unsecured or (B) right to
an equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured. The amount of contingent liabilities at any time shall be
computed as the amount that, in the light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected
to become an actual or matured liability.
(c) Except as fully disclosed in the financial statements delivered
pursuant to Section 7.05(a) or the Documents, there are as of the Initial
Borrowing Date no liabil ities or obligations with respect to Holdings or any
of its Subsidiaries of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether or not due) which, either in dividually or
in aggregate, could reasonably be expected to be material to the Borrower or
to Holdings and its Subsidiaries taken as a whole. As of the Initial Borrowing
Date, neither Holdings nor the Borrower knows of any basis for the assertion
against it or any of its Subsidiaries of any liability or obli gation of any
nature whatsoever that is not fully disclosed in the financial statements
delivered pursuant to Section 7.05(a) or the Documents which, either
individually or in the aggregate, could reasonably be expected to be material
to the Borrower or to Holdings and its Subsidiaries taken as a whole.
(d) On and as of the Initial Borrowing Date, the Projections
delivered to the Agent and the Banks prior to the Initial Borrowing Date have
been prepared in good faith and are based on reasonable assumptions, and there
are no statements or conclusions in the Projections which are based upon or
include information known to Holdings or the Borrower to be misleading in any
material respect or which fail to
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take into account material information known to Holdings or the Borrower
regarding the matters reported therein. On the Initial Borrowing Date,
Holdings and the Borrower believe that the Projections are reasonable and
attainable, it being recognized by the Banks, however, that projections as to
future events are not to be viewed as facts and that the actual results during
the period or periods covered by the Projections may differ from the projected
results and that the differences may be material.
7.06 Litigation. There are no actions, suits or proceedings pending
or, to the best knowledge of Holdings and the Borrower, threatened (i) with
respect to the Transaction or any Document, or (ii) that could reasonably be
expected to materially and adversely affect the business, operations,
property, assets, liabilities, condition (financial or otherwise) or prospects
of Holdings and its Subsidiaries taken as a whole.
7.07 True and Complete Disclosure. All factual information (taken as
a whole) furnished by any Credit Party in writing to the Agent (including,
without limitation, all information contained in the Documents) for purposes
of or in connection with this Agreement, the other Credit Documents or any
transaction contemplated herein or therein is, and all other such factual
information (taken as a whole) hereafter furnished by any Credit Party in
writing to the Agent or any Bank will be, true and accurate in all material
respects on the date as of which such information is dated or certified and
not incomplete by omitting to state any fact necessary to make such
information (taken as a whole) not misleading in any material respect at such
time in light of the circumstances under which such information was provided.
7.08 Use of Proceeds; Margin Regulations. (a) All proceeds of the
Term Loans shall be used by the Borrower (i) to effect the Transaction and
(ii) to pay fees and expenses related to the Transaction.
(b)(i) Up to $38,000,000 of Revolving Loans may be used for the
purposes described in Section 7.08(a) and (ii) proceeds of all other Revolving
Loans and all Swingline Loans shall be used for the Borrower's general
corporate and working capital purposes.
(c) No part of the proceeds of any Loan will be used to purchase or
carry any Margin Stock or to extend credit for the purpose of purchasing or
carrying any Margin Stock. Neither the making of any Loan nor the use of the
proceeds thereof nor the occurrence of any other Credit Event will violate or
be inconsistent with the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
7.09 Tax Returns and Payments. Holdings and each of its Subsidiaries
have timely filed or caused to be timely filed with the appropriate taxing
authority, all Federal, state and other returns, statements, forms and reports
for taxes, domestic and foreign (the "Returns") required to be filed by or
with respect to the income, properties or operations of Holdings and/or any of
its Subsidiaries. The Returns accurately reflect all material liability for
taxes of Holdings and its Subsidiaries for the periods covered thereby.
Holdings and each of its Subsidiaries have paid all taxes payable by them
other than taxes contested in good faith and for which adequate reserves have
been established in accordance with generally accepted accounting principles.
Except as disclosed in the financial statements referred to in Section
7.05(a), as of the Initial Borrowing Date, there is no action, suit,
proceeding, investigation, audit, or claim now pending or, to the knowledge of
Holdings and the Borrower, threatened by any authority regarding any taxes
relating to Holdings or any of its Subsidiaries. As of the Initial Borrowing
Date, neither Holdings nor any of its Subsidiaries has entered into an
agreement or waiver or been requested to enter into an agreement or waiver
extending any statute of limitations relating to the payment or collection of
U.S. Federal income taxes of Holdings or any of its Subsidiaries or is aware
of any agreement or waiver
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extending any statute of limitations relating to the payment or collection of
other taxes of Holdings or any of its Subsidiaries. None of Holdings or any of
its Subsidiaries has provided, with respect to itself or property held by it,
any consent under Section 341 of the Code.
7.10 Compliance with ERISA. (a) Except as set forth on Schedule II;
each Plan (and each related trust, insurance contract or fund) is in
substantial compliance with its terms and with all applicable laws, including,
without limitation, ERISA and the Code; each Plan (and each related trust, if
any) which is intended to be qualified under Section 401(a) of the Code has
received a determination letter from the Internal Revenue Service to the
effect that it meets the requirements of Sections 401(a) and 501(a) of the
Code; no Reportable Event has occurred; to the best knowledge of Holdings and
the Borrower, each Plan which is a multiemployer plan (as defined in Section
4001(a)(3) of ERISA) is in substantial compliance with its terms and with all
applicable laws, including, without limitation, ERISA and the Code; no Plan
which is a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) is
insolvent or in reorganization; no Plan which is subject to Title IV of ERISA
has an Unfunded Current Liability; no Plan which is subject to Section 412 of
the Code or Section 302 of ERISA has an accumulated funding deficiency, within
the meaning of such sections of the Code or ERISA, or has applied for or
received a waiver of an accumulated funding deficiency or an extension of any
amortization period, within the meaning of Section 412 of the Code or Section
303 or 304 of ERISA; to the best knowledge of Holdings and the Borrower, no
Plan which is a multiemployer plan (as defined in Section 4001(a)(3) of ERISA)
has an Unfunded Current Liability; all contributions required to be made with
respect to a Plan have been timely made, neither Holdings nor any Subsidiary
of Holdings nor any ERISA Affiliate has incurred any material liability
(including any indirect, contingent or secondary liability) to or on account
of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064,
4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the
Code or expects to incur any such liability under any of the foregoing
sections with respect to any Plan; no condition exists which presents a
material risk to Holdings or any Subsidiary of Holdings or any ERISA Affiliate
of incurring a liability to or on account of a Plan pursuant to the foregoing
provisions of ERISA and the Code; no proceedings have been instituted to
terminate or appoint a trustee to administer any Plan which is subject to
Title IV of ERISA; no action, suit, proceeding, hearing, audit or
investigation with respect to the administration, operation or the investment
of assets of any Plan (other than routine claims for benefits) is pending, to
the best knowledge of Holdings and the Borrower, expected or threatened; to
the best knowledge of Holdings, using actuarial assumptions and computation
methods consistent with Part 1 of subtitle E of Title IV of ERISA, the
aggregate liabilities of Holdings and its Subsidiaries and its ERISA
Affiliates to all Plans which are multiemployer plans (as defined in Section
4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as of
the close of the most recent fiscal year of each such Plan ended prior to the
date of the most recent Credit Event, would not exceed $50,000; no lien
imposed under the Code or ERISA on the assets of Holdings or any Subsidiary of
Holdings or any ERISA Affiliate exists or is likely to arise on account of any
Plan; and Holdings and its Subsidiaries may cease contributions to or
terminate any employee benefit plan maintained by any of them without
incurring any material liability.
(b) Each Foreign Pension Plan has been maintained in substantial
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities. All
contributions required to be made with respect to a Foreign Pension Plan have
been timely made. Neither Holdings nor any of its Subsidiaries has incurred
any obligation in connection with the termination of or withdrawal from any
Foreign Pension Plan. The present value of the accrued benefit liabilities
(whether or not vested) under each Foreign Pension Plan, determined as of the
end of Holdings' most recently ended fiscal year on the basis of actuarial
assumptions, each of which is reasonable, did not exceed the current value of
the assets of such Foreign Pension Plan allocable to such benefit liabilities.
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7.11 The Security Documents. (a) The provisions of the Security
Agreement are effective to create in favor of the Collateral Agent for the
benefit of the Secured Creditors a legal, valid and enforceable security
interest in all right, title and interest of the Credit Parties in the
Security Agreement Collateral described therein, and the Security Agreement
creates a perfected lien on, and security interest in, all right, title and
interest of the Credit Parties, in all of the Security Agreement Collateral
described therein, subject to no other Liens other than Permitted Liens. The
recordation of the Assignment of Security Interest in U.S. Patents and
Trademarks in the form attached to the Security Agreement in the United States
Patent and Trademark Office together with filings on Form UCC-1 made pursuant
to the Security Agreement will be effective, under federal law, to perfect the
security interest granted to the Collateral Agent in the trademarks and
patents covered by the Security Agreement and the recordation of the
Assignment of Security Interest in U.S. Copyrights in the form attached to the
Security Agreement with the United States Copyright Office together with
filings on Form UCC-1 made pursuant to the Security Agreement will be
effective under federal law to perfect the security interest granted to the
Collateral Agent in the copyrights covered by the Security Agreement. The
Credit Parties have good and marketable title to all Security Agreement
Collateral, free and clear of all Liens except those described above in this
clause (a).
(b) The security interests created in favor of the Collateral Agent,
as pledge, for the benefit of the Secured Creditors, under the Pledge
Agreement constitute first priority perfected security interests in the
Pledged Securities described in the Pledge Agreement, subject to no security
interests of any other Person. No filings or recordings are required to
perfect (or maintain the perfection or priority of) the security interest
created in the Pledged Securities under the Pledge Agreement.
7.12 Representations and Warranties in Documents. All
representations and warranties of the Credit Parties (or their predecessors in
interest) set forth in the other Documents were true and correct in all
material respects at the time as of which such representations and warranties
were made (or deemed made) and shall be true and correct in all material
respects as of the Initial Borrowing Date if such representations and
warranties were made on and as of such date, unless stated to relate to a
specific earlier date, in which case such representations and warranties shall
be true and correct in all material respects as of such earlier date.
7.13 Properties. Holdings and each of its Subsidiaries have good and
marketable title to all material properties owned by them, including all
property owned by them, including all property reflected in the balance sheets
referred to in Section 7.05(a) (except as sold or otherwise disposed of since
the date of such balance sheet in the ordinary course of business), free and
clear of all Liens, other than (i) as referred to in the balance sheet or in
the notes thereto or (ii) Liens otherwise permitted by Section 9.01.
7.14 Capitalization. On the Initial Borrowing Date and after giving
effect to the Transaction and the other transactions contemplated hereby, (i)
the authorized capital stock of Holdings shall consist of (a) 1,000,000 shares
of common stock, $.01 par value per share, of which 325,000 shares shall be
issued and outstanding and (b) 5,000,000 shares of preferred stock, of which
2,000,000 have been designated Series A Preferred Stock, of which 1,300,000
shall be issued and outstanding and (ii) the authorized capital stock of the
Borrower shall consist of 5,000 shares of common stock, $10 par value per
share, of which 4,900 shall be issued and outstanding, all of the shares of
which shall be issued and outstanding and owned by Holdings. All such
outstanding shares of common stock have been duly and validly issued, are
fully paid and nonassessable and are free of preemptive rights. No Credit
Party has outstanding any securities convertible into or exchangeable for its
capital stock or outstanding any rights to subscribe for or to purchase, or
any options for the purchase of, or any agreements providing for the
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issuance (contingent or otherwise) of, or any calls, commitments or claims of
any character relating to, its capital stock.
7.15 Subsidiaries. As of the Initial Borrowing Date, Holdings has no
Subsidiaries other than the Borrower and the Borrower has no Subsidiaries.
7.16 Compliance with Statutes, etc. Each of Holdings and its
Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property (including applicable statutes, regulations, orders
and restrictions relating to environmental standards and controls), except
such noncompliances as could not, individually or in the aggregate, reasonably
be expected to have a material adverse effect on the business, operations,
property, assets, liabilities, condition (financial or otherwise) or prospects
of Holdings and its Subsidiaries taken as a whole.
7.17 Investment Company Act. Neither Holdings nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of
1940, as amended.
7.18 Public Utility Holding Company Act. Neither Holdings nor any of
its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
7.19 Environmental Matters. (a) Holdings and each of its
Subsidiaries have complied in all material respects with, and on the date of
such Credit Event are in compliance in all material respects with, all
applicable Environmental Laws and the requirements of any permits issued under
such Environmental Laws. There are no pending, past or threatened
Environmental Claims against Holdings or any of its Subsidiaries (including
any such claim arising out of the ownership or operation by Holdings or any of
its Subsidiaries of any Real Property no longer owned by Holdings or any of
its Subsidiaries) or any Real Property owned or operated by Holdings or any of
its Subsidiaries. There are no facts, circumstances, conditions or occurrences
with respect to any Real Property owned or operated by Holdings or any of its
Subsidiaries or any business or operations of Holdings or any of its
Subsidiaries (including any Real Property formerly owned or operated by
Holdings or any of its Subsidiaries but no longer owned by Holdings or any of
its Subsidiaries or any business or operations thereof) or any property
adjoining or in the vicinity of any such Real Property that could reasonably
be expected (i) to form the basis of an Environmental Claim against Holdings
or any of its Subsidiaries or any Real Property owned or operated by Holdings
or any of its Subsidiaries, or (ii) to cause any Real Property owned or
operated by Holdings or any of its Subsidiaries to be subject to any
restrictions on the ownership, occupancy or transferability of such Real
Property by Holdings or any of its Subsidiaries under any applicable
Environmental Law.
(b) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, any Real Property owned or
operated by Holdings or any of its Subsidiaries except in a manner so as not
to give rise to an Environmental Claim. Hazardous Materials have not at any
time been Released on or from any Real Property owned or operated by Holdings
or any of its Subsidiaries.
(c) Notwithstanding anything to the contrary in this Section 7.19,
the representations made in this Section 7.19 shall not be untrue unless the
aggregate effect of all violations, claims, restrictions, failures and
noncompliances of the types described above could reasonably be expected to
have
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a material adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of Holdings and
its Subsidiaries taken as a whole.
7.20 Labor Relations. Neither Holdings nor any of its Subsidiaries
is engaged in any unfair labor practice that could reasonably be expected to
have a material adverse effect on Holdings and its Subsidiaries taken as a
whole. There is (i) no unfair labor practice complaint pending against
Holdings or any of its Subsidiaries or, to the best knowledge of Holdings or
the Borrower, threatened against any of them, before the National Labor
Relations Board, and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending against Holdings or any of its Subsidiaries or, to the best knowledge
of Holdings or the Borrower, threatened against any of them, (ii) no strike,
labor dispute, slowdown or stoppage pending against Holdings or any of its
Subsidiaries or, to the best knowledge of Holdings or the Borrower, threatened
against Holdings or any of its Subsidiaries and (iii) to the best knowledge of
Holdings or the Borrower, no union representation question existing with
respect to the employees of Holdings or any of its Subsidiaries, except (with
respect to any matter specified in clause (i), (ii) or (iii) above, either
individually or in the aggregate) such as could not reasonably be expected to
have a material adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of Holdings and
its Subsidiaries taken as a whole.
7.21 Patents, Licenses, Franchises and Formulas. Each of Holdings
and its Subsidiaries owns all the patents, trademarks, permits, service marks,
trade names, copyrights, licenses, franchises and formulas, or rights with
respect to the foregoing, and has obtained assignments of all leases and other
rights of whatever nature, necessary for the present conduct of its business,
without any known conflict with the rights of others which, or the failure to
obtain which, as the case may be, would result in a material adverse effect on
the business, operations, property, assets, liabilities, condition (financial
or otherwise) or prospects of Holdings and its Subsidiaries taken as a whole.
7.22 Indebtedness. Schedule III sets forth a true and complete list
of all Indebtedness (including Contingent Obligations) of Holdings and its
Subsidiaries as of the Initial Borrowing Date and which is to remain
outstanding after giving effect to the Transaction, (excluding the Loans, the
Letters of Credit, the Holdings Senior Discount Notes and the Borrower Senior
Discount Notes, the "Existing Indebtedness"), in each case showing the
aggregate principal amount thereof and the name of the respective borrower and
any other entity which directly or indirectly guaranteed such debt.
7.23 Transaction. At the time of consummation thereof, all material
consents and approvals of, and filings and registrations with, and all other
actions in respect of, all governmental agencies, authorities or
instrumentalities required in order to make or consummate the Transaction to
the extent then required have been obtained, given, filed or taken and are or
will be in full force and effect (or effective judicial relief with respect
thereto has been obtained). All applicable waiting periods with respect
thereto have or, prior to the time when required, will have, expired without,
in all such cases, any action being taken by any competent authority which
restrains, prevents, or imposes material adverse conditions upon the
Transaction. Additionally, there does not exist any judgment, order or
injunction prohibiting or imposing material adverse conditions upon the
Transaction, or the occurrence of any Credit Event or the performance by each
Credit Party of its obligations under the respective Documents. All actions
taken by each Credit Party pursuant to or in furtherance of the Transaction
have been taken in compliance with the Documents and all applicable laws
except to the extent consented to by the Agent pursuant to Section 6.01.
7.24 Insurance. Schedule IV sets forth a true and complete listing
of all insurance maintained by Holdings and its Subsidiaries as of the Initial
Borrowing Date, and with the amounts insured (and any deductibles) set forth
therein.
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SECTION 8. Affirmative Covenants. Each of Holdings and the Borrower
covenants and agrees with respect to itself and its Subsidiaries that on and
after the Effective Date and until the Total Commitments and all Letters of
Credit have terminated and the Loans, Notes and Unpaid Drawings, together with
interest, Fees and all other Obligations (other than indemnities described in
Section 13.13) incurred hereunder and thereunder, are paid in full:
8.01 Information Covenants. Holdings will furnish to each Bank:
(a) Monthly Reports. Within 45 days after the end of each fiscal
month of Holdings, the consolidated balance sheets of Holdings and its
Subsidiaries on a consolidated basis and the Borrower and its Consolidated
Subsidiaries on a stand-alone basis as at the end of such month and the
related consolidated statements of income and retained earnings and statement
of cash flows for such month and for the elapsed portion of the fiscal year
ended with the last day of such month, in each case accompanied by an
abbreviated discussion of the operating results in such preceding fiscal
month.
(b) Quarterly Financial Statements. Within 45 days after the close
of the first three quarterly accounting periods in each fiscal year of
Holdings, the consolidated balance sheets of Holdings and its Subsidiaries on
a consolidated basis and the Borrower and its Consolidated Subsidiaries on a
stand-alone basis as at the end of such quarterly accounting period and the
related consolidated statements of income and retained earnings and statement
of cash flows for such quarterly accounting period and for the elapsed portion
of the fiscal year ended with the last day of such quarterly accounting
period, in each case setting forth comparative figures for the related periods
in the prior fiscal year, all of which shall be certified by the chief
financial officer of Holdings, subject to normal year-end audit adjustments.
(c) Annual Financial Statements. Within 90 days after the close of
each fiscal year of Holdings, the consolidated balance sheets of Holdings and
its Subsidiaries on a consolidated basis and the Borrower and its Consolidated
Subsidiaries on a stand-alone basis as at the end of such fiscal year and the
related consolidated statements of income and retained earnings and of cash
flows for such fiscal year setting forth comparative figures for the preceding
fiscal year and certified, in the case of the consolidated financial
statements of Holdings, by Deloitte & Touche LLP or such other independent
certified public accountants of recognized national standing reasonably
acceptable to the Agent, and in the case of the other financial statements,
certified by the chief financial officer of Holdings, together with a report
of such accounting firm stating that in the course of its regular audit of the
financial statements of Holdings and its Subsidiaries, which audit was
conducted in accordance with generally accepted auditing standards, such
accounting firm obtained no knowledge of any Default or Event of Default which
has occurred and is continuing or, if in the opinion of such accounting firm
such a Default or Event of Default has occurred and is continuing, a statement
as to the nature thereof.
(d) Management Letters. Promptly after Holdings' or any of its
Subsidiaries' receipt thereof, a copy of any "management letter" addressed to
the board of directors of Holdings or such Subsidiary from its certified
public accountants and any internal control memoranda relating thereto.
(e) Budgets. No later than the first day of each fiscal year of
Holdings, a budget in form satisfactory to the Required Banks (including
budgeted statements of income and sources and uses of cash and balance sheets)
prepared by Holdings for (x) each of the twelve months of such fiscal year
prepared in detail and (y) each of the five years immediately following such
fiscal year prepared in summary form, in each case, of Holdings and its
Subsidiaries, accompanied by the statement of the chief financial officer of
Holdings to the effect that, to the best of his knowledge, the budget is a
reasonable estimate for the period covered thereby.
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(f) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Section 8.01(b) and (c), a certificate of
the President or any Vice President of Holdings to the effect that, to the
best of such officer's knowledge, no Default or Event of Default has occurred
and is continuing or, if any Default or Event of Default has occurred and is
continuing, specifying the nature and extent thereof, which certificate shall
(x) set forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the provisions of Sections 4.02(e)
and (f) (but with respect to Section 4.02(g) only to the extent delivered with
the financial statements required by Section 8.01(c)), 9.04 and 9.07 through
9.09 (but with respect to Section 9.07 only to the extent delivered with the
financial statements required by Section 8.01(c)), inclusive, at the end of
such fiscal quarter or year, as the case may be and (y) if delivered with the
financial statements required by Section 8.01(c), set forth the amount of
Excess Cash Flow for the respective Excess Cash Payment Period and the amount,
if any, of the Available Retained Cash Flow Amount at such time.
(g) Notice of Default or Litigation. Promptly, and in any event
within three Business Days after a senior officer of Holdings or the Borrower
obtains knowledge thereof, notice of (i) the occurrence of any event which
constitutes a Default or Event of Default and (ii) any litigation or
governmental investigation or proceeding pending (x) against Holdings or any
of its Subsidiaries which could reasonably be expected to materially and
adversely affect the business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of Holdings or any of its
Subsidiaries or (y) with respect to the Transaction or any Document.
(h) Other Reports and Filings. Promptly, copies of all financial
information, proxy materials and reports, if any, which Holdings or any of its
Subsidiaries shall publicly file with the Securities and Exchange Commission
or any successor thereto (the "SEC") and all material financial information
delivered to holders of its Indebtedness pursuant to the terms of the
documentation governing such Indebtedness (or any trustee, agent or other
representative therefor).
(i) Environmental Matters. Promptly upon, and in any event within
ten Business Days after, an officer of any Credit Party obtains knowledge
thereof, notice of one or more of the following environmental matters, unless
such environmental matters could not, individually or when aggregated with all
other such environmental matters, be reasonably expected to materially and
adversely affect the business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of Holdings and its
Subsidiaries taken as a whole: (i) any pending or threatened Environmental
Claim against Holdings or any of its Subsidiaries or any Real Property owned
or operated by Holdings or any of its Subsidiaries; (ii) any condition or
occurrence on or arising from any Real Property owned or operated by Holdings
or any of its Subsidiaries that (a) results in noncompliance by Holdings or
any of its Subsidiaries with any applicable Environmental Law or (b) could
reasonably be expected to form the basis of an Environmental Claim against
Holdings or any of its Subsidiaries or any such Real Property; (iii) any
condition or occurrence on any Real Property owned or operated by Holdings or
any of its Subsidiaries that could reasonably be expected to cause such Real
Property to be subject to any restrictions on the ownership, occupancy, use or
transferability by Holdings or any of its Subsidiaries of such Real Property
under any Environmental Law; and (iv) the taking of any removal or remedial
action in response to the actual or alleged presence of any Hazardous Material
on any Real Property owned or operated by Holdings or any of its Subsidiaries
as required by any Environmental Law or any governmental or other
administrative agency; provided, that in any event Holdings shall deliver to
the Agent all notices received by Holdings or any of its Subsidiaries from any
government or governmental agency under, or pursuant to, CERCLA which identify
Holdings or any of its Subsidiaries as potentially responsible parties for
remediation costs or which otherwise notify Holdings or any of its
Subsidiaries of potential liability under CERCLA. All such notices shall
describe in reasonable detail the nature of the claim, investigation,
condition, occurrence or removal or remedial action
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and Holdings' or such Subsidiary's response thereto. In addition, Holdings
will provide the Agent with copies of all material communications between
Holdings or any of its Subsidiaries and any government or governmental agency
relating to Environmental Laws which could reasonably be expected to
materially and adversely effect the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of Holdings and
its Subsidiaries taken as a whole, all notice of any Environmental Claims, and
such detailed reports of any Environmental Claim as may reasonably be
requested by the Banks.
(j) Annual Meetings with Banks. At a date to be mutually agreed upon
between the Agent and the Borrower, Holdings shall hold a meeting with all of
the Banks at which meeting shall be reviewed the financial results of the
previous fiscal year and the financial condition of Holdings and its
Subsidiaries and the budgets presented for the current fiscal year of
Holdings.
(k) Other Information. From time to time, such other information or
documents (financial or otherwise) with respect to Holdings or its
Subsidiaries as any Bank may reasonably request.
8.02 Books, Records and Inspections. Holdings will, and will cause
each of its Subsidiaries to, keep proper books of record and account in which
full, true and correct entries in conformity with generally accepted
accounting principles and all requirements of law shall be made of all
dealings and transactions in relation to its business and activities. Holdings
will, and will cause each of its Subsidiaries to, permit upon two Business
Days' prior notice officers and designated representatives of the Agent or the
Required Banks to visit and inspect, under guidance of officers of Holdings or
such Subsidi ary, any of the properties of Holdings or such Subsidiary, and to
examine the books of account of Holdings or such Subsidiary and discuss the
affairs, finances and accounts of Holdings or such Subsidiary with, and be
advised as to the same by, its and their officers and independent accountants,
all at such reasonable times and intervals and to such reasonable extent as
the Agent or the Required Banks may reasonably request, all such inspections
to be subject to any binding confidentiality agreement for the benefit of a
third party that prohibits the foregoing. Holdings will, and will cause each
of its Subsidiaries to, permit officers and designated representatives of the
Agent to conduct, at Holdings' expense, an annual audit of the accounts
receivable and inventories of Holdings and its Subsidiaries.
8.03 Maintenance of Property; Insurance. (a) Holdings will, and will
cause each of its Subsidiaries to, (i) keep all property necessary to the
business of Holdings and its Subsidiaries taken as a whole in reasonably good
working order and condition, (ii) maintain insurance on all such property in
at least such amounts and against at least such risks as is consistent and in
accordance with industry practice, and (iii) furnish to the Agent or the
Required Banks, upon written request, full information as to the insurance
carried. At any time that Holdings or any Subsidiary of Holdings fails to
maintain insurance (other than property or business interruption insurance) at
the levels maintained on the Initial Borrowing Date, Holdings will, or will
cause one of its Subsidiaries to, notify the Agent and the Required Banks in
writing within three Business Days thereof and, if thereafter notified by the
Required Banks to do so, Holdings or any such Subsidiary, as the case may be,
shall obtain such insurance at such levels to the extent such insurance is
reasonably available. In addition to the requirements of the immediately
preceding sentence, Holdings and the Borrower will at all times cause property
and business interruption insurance of the type maintained on the Initial
Borrowing to be maintained (with the same scope of coverage as on the Initial
Borrowing Date) at levels which are at least as great as the respective
amounts maintained on the Initial Borrowing Date.
(b) Holdings will, and will cause its Subsidiaries to, at all times
keep its insured property insured in favor of the Collateral Agent, and all
policies or certificates (or certified copies thereof) with respect to such
insurance (and any other insurance maintained by Holdings and/or its
Subsidiaries) (i)
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shall be endorsed to the Collateral Agent's reasonable satisfaction for the
benefit of the Collateral Agent (including, without limitation, by naming the
Collateral Agent as loss payee and/or additional insured), (ii) shall state
that such insurance policies shall not be canceled or revised without 30 days'
prior written notice thereof by the respective insurer to the Collateral
Agent, (iii) shall provide that the respective insurers irrevocably waive any
and all rights of subrogation with respect to the Collateral Agent and the
Secured Creditors, (iv) shall, except in the case of public liability
insurance, workers' compensation and cargo insurance, provide that any losses
shall be payable notwithstanding (A) any act or neglect of Holdings or any of
its Subsidiaries, (B) the occupation or use of the properties for purposes
more hazardous than those permitted by the terms of the respective policy if
such coverage is obtainable at commercially reasonable rates and is of the
kind from time to time customarily insured against by Persons owning or using
similar property and in such amounts as are customary, (C) any foreclosure or
other proceeding relating to the insured properties or (D) any change in the
title to or ownership or possession of the insured properties and (v) shall be
deposited with the Collateral Agent. If Holdings or any of its Subsidiar ies
shall fail to insure its property in accordance with this Section 8.03, or if
Holdings or any of its Subsidiaries shall fail to so endorse and deposit all
policies or certificates with respect thereto, the Collateral Agent shall have
the right (but shall be under no obligation), upon ten Business Days' prior
notice to the Borrower, to procure such insurance and the Borrower agrees to
reimburse the Collateral Agent for all costs and expenses of procuring such
insurance.
8.04 Corporate Franchises. Holdings will, and will cause each of its
Subsidiaries to, do or cause to be done, all things necessary to preserve and
keep in full force and effect its existence and its material rights,
franchises, licenses and patents; provided, however, that nothing in this
Section 8.04 shall prevent (i) transactions in accordance with Section 9.02 or
(ii) the withdrawal by Holdings or any of its Subsidiaries of its
qualification as a foreign corporation in any jurisdiction where such
withdrawal could not reasonably be expected to have a material adverse effect
on the business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of Holdings and its Subsidiaries taken
as a whole.
8.05 Compliance with Statutes, etc. Holdings will, and will cause
each of its Subsidiaries to, comply with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property, except such noncompliances as could not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of Holdings and its
Subsidiaries taken as a whole.
8.06 Compliance with Environmental Laws. (a) Holdings will comply,
and will cause each of its Subsidiaries to comply, in all material respects
with all Environmental Laws applicable to the ownership or use of its Real
Property now or hereafter owned or operated by Holdings or any of its
Subsidiaries (except such noncompliances as could not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
business, operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of Holdings and its Subsidiaries taken as a whole) ,
will promptly pay or cause to be paid all costs and expenses incurred in
connection with such compliance, and will keep or cause to be kept all such
Real Property free and clear of any Liens imposed pursuant to such
Environmental Laws. Neither Holdings nor any of its Subsidiaries will
generate, use, treat, store, release or dispose of, or permit the generation,
use, treatment, storage, release or disposal of Hazardous Materials on any
Real Property now or hereafter owned or operated by Holdings or any of its
Subsidiaries, or transport or permit the transportation of Hazardous Materials
to or from any such Real Property, except for Hazardous Materials generated,
used, treated, stored, released or disposed of at any such Real Properties in
compliance in all material respects with all applicable Environmental Laws and
reasonably
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required in connection with the operation, use and maintenance of the business
or operations of Holdings or any of its Subsidiaries.
(b) At the written request of the Agent or the Required Banks, which
request shall specify in reasonable detail the basis therefor, at any time and
from time to time, Holdings will provide, at Holdings' sole cost and expense,
an environmental site assessment report concerning any Real Property owned or
operated by Holdings and its Subsidiaries, prepared by an environmental
consulting firm reasonably satisfactory to the Agent, indicating the presence
or absence of Hazardous Materials and the potential cost of any removal or
remedial action in connection with any Hazardous Materials on such Real
Property, provided that in no event shall such request be made more often that
once every three years for any particular Real Property unless (i) the
Obligations have been declared due and payable pursuant to Section 10; (ii)
the Banks receive notice under Section 8.01(i) of any event for which notice
is required to be delivered for any such Real Property or any business or
operations of Holdings or any of its Subsidiaries; or (iii) a Default or an
Event of Default then exists. If Holdings or the Borrower fails to provide the
same within ninety days after such request was made, the Agent may order the
same, the cost of which shall be borne by the Borrower, and Holdings and the
Borrower shall grant and hereby grant to the Agent and the Banks and their
agents access to such Real Property and specifically grant the Agent and the
Banks an irrevocable non-exclusive license to under take such an assessment,
all at Holdings' expense.
8.07 ERISA. As soon as possible and, in any event, within ten (10)
business days after Holdings, any Subsidiary of Holdings or any ERISA
Affiliate knows or has reason to know of the occurrence of any of the
following, Holdings will deliver to each of the Banks a certificate of the
chief financial officer of Holdings setting forth the full details as to such
occurrence and the action, if any, that Holdings, such Subsidiary or such
ERISA Affiliate is required or proposes to take, together with any notices
required or proposed to be given to or filed with or by Holdings, the
Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or the Plan
administrator with respect thereto: (i) that a Reportable Event has occurred
(except to the extent that Holdings has previously delivered to the Banks a
certificate and notices (if any) concerning such event pursuant to the next
clause hereof); (ii) that a contributing sponsor (as defined in Section
4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject to the
advance reporting requirement of PBGC Regulation Section 4043.61 (without
regard to subparagraph (b)(1) thereof), and an event described in subsection
.62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is rea
sonably expected to occur with respect to such Plan within the following 30
days; (iii) that an accumulated funding deficiency, within the meaning of
Section 412 of the Code or Section 302 of ERISA, has been incurred or an
application may be or has been made for a waiver or modification of the
minimum funding standard (including any required installment payments) or an
extension of any amortization period under Section 412 of the Code or Section
303 or 304 of ERISA with respect to a Plan; (iv) that any contribution
required to be made with respect to a Plan or Foreign Pension Plan has not
been timely made; (v) that a Plan which is subject to Title IV of ERISA has
been or may be terminated, reorganized, partitioned or declared insolvent
under Title IV of ERISA; (vi) that a Plan has an Unfunded Current Liability;
(vii) that proceedings may be or have been instituted to terminate or appoint
a trustee to administer a Plan which is subject to Title IV of ERISA; (viii)
that a proceeding has been instituted pursuant to Section 515 of ERISA to
collect a delinquent contribution to a Plan; (ix) that Holdings or any
Subsidiary of Holdings will or may incur any liability (including any
indirect, contingent, or secondary liability) to or on account of the
termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069,
4201, 4204 or 4212 of ERISA or with respect to a Plan under Section
401(a)(29), 4971, 4975 or 4980 of the Code or Section 409, 502(i) or 502(l) of
ERISA or with respect to a group health plan (as defined in Section 607(1) of
ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code; or
(x) that Holdings or any Subsidiary of Holdings may incur any material
liability pursuant to any employee welfare benefit plan (as defined in Section
3(1) of ERISA) that provides benefits to retired employees or other former
employees (other than
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as required by Section 601 of ERISA) or any Plan or any Foreign Pension Plan
in addition to the liability that existed on the Initial Borrowing Date
pursuant to any such plan or plans. Holdings will deliver to each of the Banks
copies of any records, documents or other information that must be furnished
to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA.
Holdings will also deliver to each of the Banks a complete copy of the annual
report (on Internal Revenue Service Form 5500- series) of each Plan which is
subject to Title IV of ERISA (including, to the extent required, the related
financial and actuarial statements and opinions and other supporting
statements, certifications, schedules and information) required to be filed
with the Internal Revenue Service. In addition to any certificates or notices
delivered to the Banks pursuant to the first sentence hereof, copies of annual
reports and any records, documents or other information required to be
furnished to the PBGC, and any material notices received by Holdings, any
Subsidiary of Holdings or any ERISA Affiliate with respect to any Plan or
Foreign Pension Plan shall be delivered to the Banks no later than twenty (20)
days after the date such annual report has been filed with the Internal
Revenue Service or such records, documents and/or information has been
furnished to the PBGC or such notice has been received by Holdings, the
Subsidiary or the ERISA Affiliate, as applicable.
8.08 End of Fiscal Years; Fiscal Quarters. Holdings shall cause (i)
each of its, and each of its Subsidiaries', fiscal years and fourth fiscal
quarter to end on March 31 of each year, and (ii) each of its, and each of its
Subsidiaries', first three fiscal quarters to end on June 30, September 30 and
December 31 of each year.
8.09 Performance of Obligations. Holdings will, and will cause each
of its Subsidiaries to, perform all of its obligations under the terms of each
mortgage, indenture, security agreement and other debt instrument by which it
is bound, except such non-performances as could not, individually or in the
aggre gate, reasonably be expected to have a material adverse effect on the
business, operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of Holdings and its Subsidiaries taken as a whole.
8.10 Payment of Taxes. Holdings will pay and discharge or cause to
be paid and discharged, and will cause each of its Subsidiaries to pay and
discharge, all lawful claims, taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits, or upon any properties
belonging to it, in each case on a timely basis; provided that neither
Holdings nor any of its Subsidiaries shall be required to pay any such tax,
assessment, charge, levy or claim which is being contested in good faith and
by proper proceedings if it has maintained adequate reserves with respect
thereto in accordance with generally accepted accounting principles.
8.11 Additional Security; Further Assurances. (a) Holdings will, and
will cause each of its Domestic Subsidiaries (and subject to Section 8.12,
each of its Foreign Subsidiaries) to, grant to the Collateral Agent security
interests in such assets and properties of Holdings and its Subsidiaries as
are not covered by the original Security Documents, and as may be reasonably
requested from time to time by the Agent or the Required Banks (collectively,
the "Additional Security Documents"). All such security interests shall be
granted pursuant to documentation reasonably satisfactory in form and
substance to the Agent and shall constitute valid and enforceable perfected
security interests superior to and prior to the rights of all third Persons
and subject to no other Liens except for Permitted Liens. The Additional
Security Documents or instruments related thereto shall have been duly
recorded or filed in such manner and in such places as are required by law to
establish, perfect, preserve and protect the Liens in favor of the Collateral
Agent required to be granted pursuant to the Additional Security Documents and
all taxes, fees and other charges payable in connection therewith shall have
been paid in full.
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(b) Holdings will, and will cause each of its Subsidiaries to, at
the expense of Holdings and the Borrower, make, execute, endorse, acknowledge,
file and/or deliver to the Collateral Agent from time to time such vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing state
ments, transfer endorsements, powers of attorney, certificates, reports and
other assurances or instruments and take such further steps relating to the
Collateral covered by any of the Security Documents as the Collateral Agent
may reasonably require to obtain the benefits intended to be conferred to the
Agent and the Banks pursuant to the Security Documents. Furthermore, Holdings
and the Borrower will cause to be delivered to the Collateral Agent such
opinions of counsel, title insurance and other related documents as may be
reasonably requested by the Agent to assure itself that this Section 8.11 has
been complied with.
(c) Holdings and the Borrower agree that each action required above
by this Section 8.11 shall be completed as soon as possible, but in no event
later than 90 days after such action is either requested to be taken by the
Agent or the Required Banks or required to be taken by Holdings and/or its
Subsidiaries pursuant to the terms of this Section 8.11; provided that, in no
event will Holdings or any of its Subsidiaries be required to take any action,
other than using its reasonable best efforts, to obtain consents from third
parties with respect to its compliance with this Section 8.11.
8.12 Foreign Subsidiaries Security. If following a change in the
relevant sections of the Code or the regulations, rules, rulings, notices or
other official pronouncements issued or promulgated thereunder, counsel for
the Borrower acceptable to the Agent and the Required Banks does not within
120 days after a request from the Agent or the Required Banks deliver
evidence, in form and substance satisfactory to the Agent and the Required
Banks, with respect to any Foreign Subsidiary which has not already had all of
its stock pledged pursuant to the Pledge Agreement that (i) a pledge (x) of
66-2/3% or more of the total combined voting power of all classes of capital
stock of such Foreign Subsidiary entitled to vote, and (y) of any promissory
note issued by such Foreign Subsidiary to Holdings or any of its Domestic
Subsidiaries, (ii) the entering into by such Foreign Subsidiary of a security
agreement in substantially the form of the Security Agreement and (iii) the
entering into by such Foreign Subsidiary of a guaranty in substantially the
form of the Subsidiary Guaranty, in any such case would cause the undistrib
uted earnings of such Foreign Subsidiary as determined for Federal income tax
purposes to be treated as a deemed dividend to such Foreign Subsidiary's
United States parent for Federal income tax purposes, then in the case of a
failure to deliver the evidence described in clause (i) above, that portion of
such Foreign Subsidiary's outstanding capital stock or any promissory notes so
issued by such Foreign Subsidiary, in each case not theretofore pledged
pursuant to the Pledge Agreement shall be pledged to the Collateral Agent for
the benefit of the Secured Creditors pursuant to the Pledge Agreement (or
another pledge agreement in substantially similar form, if needed), and in the
case of a failure to deliver the evidence described in clause (ii) above, such
Foreign Subsidiary shall execute and deliver the Security Agreement (or
another security agreement in substantially similar form, if needed), granting
the Secured Creditors a security interest in all of such Foreign Subsidiary's
assets and securing the Obligations of the Borrower under the Credit Documents
and under any Interest Rate Protection Agreement or Other Hedging Agreement
and, in the event the Subsidiary Guaranty shall have been executed by such
Foreign Subsidiary, the obligations of such Foreign Subsidiary thereunder, and
in the case of a failure to deliver the evidence described in clause (iii)
above, such Foreign Subsidiary shall execute and deliver the Subsidiary
Guaranty (or another guaranty in substantially similar form, if needed),
guaranteeing the Obligations of the Borrower under the Credit Documents and
under any Interest Rate Protection Agreement or Other Hedging Agreement, in
each case to the extent that the entering into such Security Agreement or
Subsidiary Guaranty is permitted by the laws of the respective foreign
jurisdiction and with all documents delivered pursuant to this Section 8.12 to
be in form and substance reasonably satisfactory to the Agent and the Required
Banks.
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8.13 Merger Immediately after the Acquisition, but in any event on
the Initial Borrowing Date, Acquisition Corp. and Universal will consummate
the Merger in accordance with the Merger Documents and all applicable laws,
and Universal, as the surviving corporation of the Merger, will execute and
deliver an Acknowledgment and Joinder Agreement in the form of Exhibit L and
new Notes in replacement of the Notes which were delivered pursuant to Section
5.01. After giving effect to the Merger, Universal shall succeed to all rights
and obligations of Acquisition Corp. as were existing immediately prior to
such Merger (including, without limitation, all obligations under this
Agreement and the other Credit Documents to which Acquisition Corp. is a
party). On the Initial Borrowing Date, the Agent shall have received evidence
in form and substance satisfactory to it, that the matters set forth in this
Section 8.13 have been satisfied.
SECTION 9. Negative Covenants. Each of Holdings and the Borrower
covenants and agrees with respect to itself and its Subsidiaries that on and
after the Effective Date and until the Total Commitments and all Letters of
Credit have terminated and the Loans, Notes and Unpaid Drawings, together with
interest, Fees and all other Obligations incurred hereunder and thereunder,
are paid in full:
9.01 Liens. Holdings will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or
with respect to any property or assets (real or personal, tangible or
intangible) of Holdings or any of its Subsidiaries, whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such
property or assets (including sales of accounts receivable with recourse to
Holdings or any of its Subsidiaries), or assign any right to receive income or
permit the filing of any financing statement under the UCC or any other
similar notice of Lien under any similar recording or notice statute; provided
that the provisions of this Section 9.01 shall not prevent the creation,
incurrence, assumption or existence of the following (Liens described below
are herein referred to as "Permitted Liens"):
(i) inchoate Liens for taxes, assessments or governmental charges or
levies not yet due or Liens for taxes, assessments or governmental
charges or levies being contested in good faith and by appropriate
proceedings for which adequate reserves have been established in
accordance with generally accepted accounting principles;
(ii) Liens in respect of property or assets of Holdings or any of its
Subsidiaries imposed by law, which were incurred in the ordinary course
of business and do not secure Indebt edness for borrowed money, such as
carriers', warehousemen's, materialmen's and mechanics' liens and other
similar Liens arising in the ordinary course of business, and (x) which
do not in the aggregate materially detract from the value of Holdings' or
such Subsidiary's property or assets or materially impair the use thereof
in the operation of the business of Holdings' or such Subsidiary or (y)
which are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the
property or assets subject to any such Lien;
(iii) Liens in existence on the Effective Date which are listed, and
the property subject thereto described, in Schedule V, but only to the
respective date, if any, set forth in such Schedule V for the removal and
termination of any such Liens, plus renewals and extensions of such Liens
to the extent set forth on Schedule V, provided that (x) the aggregate
principal amount of the Indebtedness, if any, secured by such Liens does
not increase from that amount outstanding at the time of any such renewal
or extension and (y) any such renewal or extension does not encumber any
additional assets or properties of Holdings or any of its Subsidiaries;
(iv) Permitted Encumbrances;
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(v) Liens created pursuant to the Security Documents;
(vi) leases or subleases granted to other Persons not materially
interfering with the conduct of the business of Holdings and its
Subsidiaries taken as a whole;
(vii) Liens upon assets of the Borrower or its Subsidiaries subject to
Capitalized Lease Obligations to the extent permitted by Section 9.04(v),
provided that (x) such Liens only serve to secure the payment of
Indebtedness arising under such Capitalized Lease Obligation and (y) the
Lien encumbering the asset giving rise to the Capitalized Lease
Obligation does not encumber any other asset of Holdings or any
Subsidiary of Holdings;
(viii) Liens placed upon any property acquired or held by the Borrower or
any of its Subsidiaries in the ordinary course of business to secure
Indebtedness incurred to finance the acquisition, construction or
improvements thereof provided that (x) the aggregate outstanding
principal amount of all Indebtedness secured by Liens permitted by this
clause (viii) shall not at any time exceed $5,000,000 and (y) in all
events, the Lien encumbering the property so acquired does not encumber
any other asset of the Borrower or such Subsidiary;
(ix) easements, rights-of-way, restrictions, encroachments and other
similar charges or encumbrances, and minor title deficiencies, in each
case not securing Indebtedness and not materially interfering with the
conduct of the business of Holdings and its Subsidiaries taken as a
whole;
(x) Liens arising from precautionary UCC financing statement filings
regarding operating leases permitted under Section 9.04;
(xi) Liens arising out of judgments or awards in respect of which
Holdings or any of its Subsidiaries shall in good faith be prosecuting an
appeal or proceedings for review in respect of which there shall have
been secured a subsisting stay of execution pending such appeal or
proceedings, provided that the aggregate amount of all such judgments or
awards (and any cash and the fair market value of any property subject to
such Liens) does not exceed $1,000,000 at any time outstanding;
(xii) statutory and common law landlords' liens under leases to which
Holdings or any of its Subsidiaries is a party;
(xiii) Liens incurred in the ordinary course of business in connection
with workers compensation claims, unemployment insurance and social
security benefits and Liens securing the performance of bids, tenders,
leases and contracts in the ordinary course of business, provided that
the aggregate outstanding amount of obligations secured by Liens
permitted by this clause (xiii) (and the value of all cash and property
encumbered by Liens permitted pursuant to this clause (xiii)) shall not
at any time exceed $2,000,000;
(xiv) Liens placed upon inventory and receivables owned by Holdings and
its Subsidiaries to secure a replacement working capital facility as
provided in Section 9.04(xiii); and
(xv) Liens securing indebtedness permitted pursuant to Section
9.04(xiv).
9.02 Consolidation, Merger, Purchase or Sale of Assets, etc.
Holdings will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of (or agree to do
any of the fore-
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going at any future time) all or any part of its property or assets, or enter
into any sale-leaseback transactions, or purchase or otherwise acquire (in one
or a series of related transactions) any part of the property or assets (other
than purchases or other acquisitions of inventory, materials and equipment in
the ordinary course of business) of any Person, except that:
(i) Capital Expenditures by the Borrower and its Subsidiaries shall
be permitted to the extent not in violation of Section 9.07;
(ii) each of the Borrower and its Subsidiaries may in the ordinary
course of business sell or otherwise dispose of any assets which, in the
reasonable judgment of such Person, are obsolete, worn out or otherwise
no longer useful in the conduct of such Person's business, provided that
the proceeds of all assets subject to sales or other dispositions
pursuant to this clause (ii) shall not exceed $5,000,000 in any fiscal
year of the Borrower;
(iii) investments may be made to the extent permitted by Section 9.05;
(iv) each of the Borrower and its Subsidiaries may lease (as lessee)
real or personal property to the extent permitted by Section 9.04 (so
long as any such lease does not create a Capitalized Lease Obligation
except to the extent permitted by Section 9.04(v));
(v) each of the Borrower and its Subsidiaries may make sales of
inventory in the ordinary course of business;
(vi) any Subsidiary of the Borrower may be merged or consolidated with
or into the Borrower or any other Wholly- Owned Domestic Subsidiary of
the Borrower or be liquidated, wound up or dissolved, or all or
substantially all of its business, property or assets may be conveyed,
sold, leased, transferred or otherwise disposed of, in one transaction or
a series of transactions, to the Borrower or any other Wholly-Owned
Domestic Subsidiary of the Borrower;
(vii) the Acquisition and the Merger shall be permitted;
(viii) each of the Borrower and its Subsidiaries may acquire all or
substantially all of the assets of the any Person (or all or
substantially all of the assets of a product line or division of any
Person) or 100% of the capital stock of any Person (any such acquisition
permitted by this clause (viii), a "Permitted Section 9.02(viii)
Acquisition"), so long as (i) no Default of Event of Default then exists
or would result therefrom, (ii) each of the representations and
warranties contained in Section 7 shall be true and correct in all
material respects both before and after giving effect to such Permitted
Section 9.02(viii) Acquisition, (iii) any Liens or Indebtedness assumed
or issued in connection with such acquisition are otherwise permitted
under Section 9.01 or 9.04, as the case may be, (iv) the only
consideration paid by the Borrower or any Subsidiary in connection with
any Permitted Section 9.02(viii) Acquisition consists solely of cash,
common stock of Holdings and/or Qualified Preferred Stock of Holdings,
(v) at least 10 Business Days prior to the consummation of any Permitted
Section 9.02(viii) Acquisition, the Borrower shall have delivered to the
Agent and each of the Banks a certificate of Holdings' Chief Financial
Officer certifying (and showing the calculations therefor in reasonable
detail) that Holdings and its Subsidiaries would have been in compliance
with the financial covenants set forth in Section 9.07 through 9.09,
inclusive, for the Test Period then most recently ended prior to the date
of the consummation of such Permitted Section 9.02(viii) Acquisition, in
each case with such financial covenants to be determined on a pro forma
basis (subject to the methodology to give effect to such pro forma
adjustments being
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satisfactory to the Agent) as if such Permitted Section 9.02(viii)
Acquisition had been consummated on the first day of such Test Period
(and assuming that any Indebtedness incurred, issued or assumed in
connection therewith had been incurred, issued or assumed on the first
day of, and had remained outstanding through out, such Test Period), (vi)
the sum of (A) the aggregate cash consideration paid in connection with
all Permitted Section 9.02(viii) Acquisitions (including, without
limitation, any earn-out, non-compete or deferred compen sation
arrangements, the aggregate principal amount of any Indebtedness assumed
in connection therewith and the fair market value of any capital stock of
Holdings issued in connection therewith) and (B) the aggregate
consideration paid in connection with sale and leaseback transactions
permitted pursuant to Section 9.02(xii)(C) and treated as Permitted
Section 9.02(viii) Acquisitions does not exceed $200,000,000 in the
aggregate, (vii) after giving effect to any Permitted Section 9.02(viii)
Acquisition, the Unutilized Revolving Loan Commitment is at least
$5,000,000 and (viii) the assets acquired pursuant to each such Permitted
Section 9.02(viii) Acquisition are employed in a business permitted by
Section 9.13;
(ix) any Foreign Subsidiary may be merged with and into, or be
dissolved or liquidated into, or transfer any of its assets to, any
Wholly-Owned Foreign Subsidiary so long as (i) such Wholly-Owned Foreign
Subsidiary is the surviving corporation of any such merger, dissolution
or liquidation and (ii) in each case at least 65% of the total combined
voting power of all classes of capital stock of all first-tier Foreign
Subsidiaries are pledged pursuant to the Pledge Agreement;
(x) the assets of any Foreign Subsidiary may be transferred to the
Borrower or any of its Wholly-Owned Domestic Subsidiaries and any Foreign
Subsidiary may be merged with and into, or be dissolved or liquidated
into, the Borrower or any of its Wholly-Owned Domestic Subsidiaries so
long as the Borrower or such Wholly-Owned Domestic Subsidiary is the
surviving corporation of any such merger, dissolution or liquidation;
(xi) the Borrower or any of its Wholly-Owned Domestic Subsidiaries may
transfer to one or more Wholly-Owned Foreign Subsidiaries those assets
theretofore transferred to the Borrower or such Wholly-Owned Domestic
Subsidiary by a Foreign Subsidiary (whether by merger, liquidation,
dissolution or otherwise) pursuant to clause (x) of this Section 9.02;
(xii) each of the Borrower and its Subsidiaries may enter into sale and
leaseback transactions with respect to their equipment and Real Property,
so long as (A) in sale and leaseback transactions in which the Borrower
or any of its Subsidiaries acts as seller of the equipment and Real
Property that is the subject of the transaction, (u) no Default or Event
of Default then exists or would result therefrom, (v) each such sale and
leaseback transaction is in an arm's-length transaction and the Borrower
or the respective Subsidiary receives at least fair market value (as
determined in good faith by the Borrower or such Subsidiary, as the case
may be), (w) the total consideration received by the Borrower or such
Subsidiary is cash and is paid at the time of the closing of such sale,
(x) the Net Sale Proceeds therefrom are applied and/or reinvested as (and
to the extent) required by Section 4.02(e), (y) the aggregate amount of
proceeds received from all sale and leaseback transactions pursuant to
this clause (xii)(A) shall not exceed $5,000,000 in any fiscal year of
the Borrower and (z) to the extent that any such sale and leaseback
transaction results in a Capitalized Lease obligation, such Capitalized
Lease Obligation is permitted under Section 9.04(v), (B) in sale and
leaseback transactions in which the Borrower or any of its Subsidiaries
acts as buyer of the equipment and Real Property that is the subject of
such transaction and the purchase price of such equipment and Real
Property is less than $5,000,000, (x) no Default or Event of Default then
exists or would result therefrom and (y) the aggregate
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consideration paid by the Borrower and its Subsidiaries in all sale and
leaseback transactions pursuant to this clause (xii)(B) shall not exceed
$25,000,000 in any fiscal year of the Borrower and (C) in sale and
leaseback transactions in which the Borrower or any of its Subsidiaries
acts as buyer of the equipment and Real Property that is the subject of
such transaction and the purchase price of such equipment and Real
Property equals or exceeds $5,000,000, (x) no Default or Event of Default
then exists or would result therefrom and (y) (1) if the Borrower elects
to treat such sale and leaseback transaction as a Permitted Section
9.02(viii) Acquisition, the sum of (i) the aggregate consideration paid
by the Borrower and its Subsidiaries in all sale and leaseback
transactions permitted pursuant to this clause (xii)(C) and treated as
Permitted Section 9.02(viii) Acquisitions and (ii) the aggregate
consideration paid in connection with other Permitted Section 9.02(viii)
Acquisitions shall not exceed $200,000,000 or (2) if the Borrower elects
to treat such sale and leaseback transaction as a Capital Expenditure,
such Capital Expenditure is permitted under Section 9.07;
(xiii) so long as (x) no Default or Event of Default then exists or would
result therefrom and (y) the Borrower shall be in compliance with the
financial covenants contained in Sections 9.07 through 9.09, inclusive,
with such covenants to be calculated on a pro forma basis, the Borrower
may, and may permit its Subsidiaries to, simultaneously exchange (for
reasonably equivalent value, a portion thereof which may include cash)
any equipment and other assets (each such transaction an "Asset Swap"),
provided that the sum of (A) the total value of all assets to be swapped
in any fiscal year of the Borrower and (B) the total value of assets sold
in accordance with Section 9.02(xiv) in such fiscal year shall not exceed
in the aggregate 10% of the total value of all assets of the Borrower and
its Subsidiaries as of the end of the most recently ended fiscal year,
provided further, that any such cash proceeds received by the Borrower or
any of its Subsidiaries in connection with any such Asset Swap shall be
applied and/or reinvested as (and to the extent) required by Section
4.02(e);
(xiv) each of the Borrower and its Subsidiaries may sell assets (other
than the capital stock of any Subsidiary Guarantor), so long as (v) no
Default or Event of Default then exists or would result therefrom, (w)
each sale is in an arm's length transaction and the Borrower or the
respective Subsidiary receives at least fair market value (as determined
in good faith by the Borrower or such Subsidiary, as the case may be),
(x) the total consideration received by the Borrower or such Subsidiary
is at least 75% cash and is paid at the time of the closing of such sale,
(y) the Net Sale Proceeds therefrom are applied and/or reinvested as (and
to the extent) required by Section 4.02(e) and (z) the aggregate amount
of the proceeds received from all assets sold pursuant to this clause
(xiv) plus the total value of the assets swapped pursuant to Section
9.02(xiii) in any fiscal year of the Borrower does not exceed 10% of the
total value of all assets of the Borrower and its Subsidiaries as of the
end of the most recently ended fiscal year of the Borrower; and
(xv) any of Holdings and its Subsidiaries may enter into agreements to
effectuate any transaction otherwise prohibited by this Section 9.02 so
long as the consummation of any such agreement is conditioned upon
obtaining the consent of the Required Banks or repaying the Obligations
in full (other than indemnification obligations under Section 1.10, 1.11,
2.06, 4.04 and 13.01) and terminating the Commitments.
To the extent the Required Banks waive the provisions of this Section 9.02
with respect to the sale of any Collateral, or any Collateral is sold to a
Person other than Holdings or a Subsidiary of Holdings as permitted by this
Section 9.02, such Collateral shall be sold free and clear of the Liens
created by the Security
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Documents, and the Agent and Collateral Agent shall be authorized to take any
actions deemed appropriate in order to effect the foregoing.
9.03 Dividends. Holdings shall not, and will not permit any of its
Subsidiaries to, authorize, declare or pay any Dividends with respect to
Holdings or any of its Subsidiaries, except that:
(i) any Subsidiary of the Borrower may pay Dividends to
the Borrower or any Wholly-Owned Subsidiary of the Borrower;
(ii) so long as there shall exist no Default or Event of Default (both
before and after giving effect to the payment thereof) the Borrower may
pay cash Dividends to Holdings, so long as such proceeds are promptly
used by Holdings to pay (x) corporate overhead costs, directors' fees and
other expenses (including, without limitation, the fees and expenses
permitted pursuant to Section 9.06(vi)), provided that the aggregate
amount of cash Dividends paid during the respective fiscal year pursuant
to this clause (ii), together with the amount of any outstanding loans
and advances made during the respective fiscal year by the Borrower
pursuant to Section 9.05(vi) (without reduction for any writedowns or
write-offs thereof), shall at no time during any fiscal year of the
Borrower exceed $1,000,000 or (y) franchise taxes and federal, state and
local income taxes and interest and penalties with respect thereto, if
any, payable by Holdings (provided that any refund shall be promptly
returned by Holdings to the Borrower);
(iii) so long as there shall exist no Default or Event of Default (both
before and after giving effect to the payment thereof) the Borrower may
pay cash Dividends to Holdings so long as the proceeds thereof are
immediately used by Holdings to purchase shares of common stock or
options to purchase shares of common stock of Holdings held by former
employees of the Borrower following the termination of their employment
by the Borrower or any of its Subsidiaries, provided that the aggregate
amount of cash Dividends paid pursuant to this clause (iii) shall (x) be
funded with life insurance proceeds received by the Borrower under life
insurance policies maintained with respect to such employee or (y) to the
extent not funded as described in preceding clause (x), at no time during
any fiscal year of the Borrower exceed $1,000,000; and
(iv) so long as there shall exist no Default or Event of Default (both
before and after giving effect to the payment thereof) the Borrower may
pay cash Dividends to Holdings so long as the proceeds thereof are
promptly used by Holdings to pay interest, when and as due, on the
Holdings Senior Discount Notes in accordance with the terms of the
Holdings Senior Note Documents; provided that any payments of Dividends
to Holdings by the Borrower pursuant to this Section 9.03(iv) shall not
be made until the fifth year after the Effective Date.
9.04 Indebtedness. Holdings will not, and will not permit any of its
Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(i) Indebtedness incurred pursuant to this Agreement and
the other Credit Documents;
(ii) Existing Indebtedness outstanding on the Effective Date and
listed on Schedule III, without giving effect to any subsequent
extensions, renewal or refinancing thereof except to the extent set forth
on Schedule III, provided that the aggregate principal amount of
Indebtedness to be extended, renewed or refinanced does not increase from
that amount outstanding at the time of any such extension, renewal or
refinancing;
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(iii) Indebtedness with respect to surety bonds, appeal bonds or
customs bonds required in the ordinary course of business or in
connection with the enforcement of rights or claims of the Borrower or
any of its Subsidiaries or in connection with judgments that do not
result in a Default or an Event of Default, provided that the aggregate
outstanding amount of all such surety bonds, appeal bonds and customs
bonds permitted by this clause (iii) shall not at any time exceed
$2,000,000;
(iv) Indebtedness under Interest Rate Protection Agreements which the
Borrower may enter into with respect to the Loans, on terms acceptable to
the Agent, and with respect to other obligations, on terms acceptable to
the Agent and the Required Banks;
(v) Indebtedness evidenced by Capitalized Lease Obligations to the
extent permitted pursuant to Section 9.07, provided that in no event
shall the aggregate principal amount of Capitalized Lease Obligations
permitted by this clause (v) exceed $5,000,000 at any time outstanding;
(vi) Indebtedness subject to Liens permitted under Section 9.01(viii);
(vii) Indebtedness of Holdings and the Subsidiary Guarantors evidenced
by the Holdings Senior Discount Notes (and guarantees thereof) not to
exceed $25,000,000 in aggregate principal amount;
(viii) Indebtedness of the Borrower and the Subsidiary Guarantors
evidenced by the Borrower Senior Discount Notes (and guarantees thereof)
not to exceed $150,000,000 in aggregate principal amount;
(ix) accrued expenses and current trade accounts payable incurred in
the ordinary course of business and unsecured guarantees of the Borrower
or any of its Subsidiaries of such trade accounts payable, and
obligations under trade letters of credit incurred by the Borrower or
such Subsidiary in the ordinary course of business, which are to be
repaid in full not more than one year after the date on which such
Indebtedness is originally incurred to finance the purchase of goods by
the Borrower or such Subsidiary;
(x) Indebtedness of the Borrower under any Other Hedging Agreement
which is entered into to protect the Borrower against fluctuations in
currency values so long as the aggregate Net Hedging Exposure Amount
under all such Other Hedging Agreements does not exceed $3,000,000 at any
time outstanding;
(xi) Indebtedness of the Borrower not to exceed $3,000,000 at any time
outstanding and secured by insurance cancellation premiums relating to
insurance maintained by the Borrower in the ordinary course of business;
(xii) intercompany Indebtedness among the Borrower and the Subsidiary
Guarantors to the extent permitted by Section 9.05;
(xiii) Indebtedness of the Borrower under a working capital facility to
replace the Total Revolving Loan Commitment so long as (A) such
Indebtedness is only incurred after the earlier of (x) the Revolving Loan
Maturity Date and (y) the termination of the Total Revolving Loan
Commitment pursuant to Section 3.03(d), (B) no Default or Event of
Default then exists or would result therefrom and (C) all of the terms
and conditions of such working capital facility are in form and substance
reasonably satisfactory to the Required Banks (it being understood that
Holdings
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and its Subsidiaries may grant a first priority perfected lien on all
inventory and receivables owned by them to the creditors under such
replacement working capital facility);
(xiv) Indebtedness of any Foreign Subsidiary of the Borrower the
proceeds of which indebtedness are used for such Foreign Subsidiary's
working capital and general corporate purposes, provided that the
aggregate principal amount of all such Indebtedness incurred pursuant to
this clause (xiv), shall not exceed $25,000,000 (or the Dollar Equivalent
thereof in the case of Indebtedness incurred in a currency other than
Dollars) at any time outstanding (the "Foreign Subsidiary Indebtedness");
(xv) Indebtedness of a Subsidiary acquired pursuant to a Permitted
Section 9.02(viii) Acquisition (or Indebtedness assumed at the time of a
Permitted Section 9.02(viii) Acquisition of an Asset securing such
Indebtedness), provided that (x) such Indebtedness was not incurred in
connection with, or in anticipation or contemplation of, such Permitted
Section 9.02(viii) Acquisition and (y) such Indebtedness does not
constitute debt for borrowed money, it being understood and agreed that
Capitalized Lease Obligations and purchase money Indebtedness shall not
constitute debt for borrowed money for purposes of this clause (xv);
(xvi) Indebtedness of the Borrower and its Subsidiaries consisting of
letters of credit and reimbursement obligations with respect thereto,
including renewals or extensions thereof, so long as the aggregate stated
amount of such letters of credit at any time outstanding does not exceed
$2,500,000; and
(xvii) Indebtedness of the Borrower and its Subsidiaries to the extent
not permitted by the foregoing clauses of this Section 9.04 not to exceed
$10,000,000 in aggregate principal amount at any time outstanding.
9.05 Advances, Investments and Loans. Holdings will not, and will
not permit any of its Subsidiaries to, directly or indirectly, lend money or
credit or make advances to any Person, or purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any other Person, or purchase or own a futures contract or
otherwise become liable for the purchase or sale of currency or other
commodities at a future date in the nature of a futures contract, or hold any
cash or Cash Equivalents, except that the following shall be permitted:
(i) the Borrower and its Subsidiaries may acquire and hold accounts
receivables, trade receivables, prepaid expenses and similar items owing
to any of them, if created or acquired in the ordinary course of
business;
(ii) the Borrower and its Subsidiaries may acquire and hold cash and
Cash Equivalents, provided that during any time that Revolving Loans of
Non-Defaulting Banks or Swingline Loans are outstanding the aggregate
amount of cash and Cash Equivalents permitted to be held by the Borrower
and its Domestic Subsidiaries shall not exceed for any period of five
consecutive days $5,000,000 less any amount delivered to the Agent and
held in a blocked account or other similar arrangement satisfactory to
the Agent;
(iii) non-cash consideration received by Holdings or any of its
Subsidiaries in connection with any asset sale to the extent permitted by
Section 9.02;
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(iv) the Borrower and its Subsidiaries may receive and hold
investments in connection with the bankruptcy or reorganization of
suppliers and customers and in settlement of delinquent obligations of,
and other disputes with, customers and suppliers arising in the ordinary
course of business;
(v) the Borrower and its Subsidiaries may make payroll advances in
the ordinary course of business;
(vi) so long as no Default or Event of Default then exists (both before
and after giving effect to the payment thereof), the Borrower may make
loans to Holdings to enable Holdings to pay the amounts described in
Section 9.03(ii), 9.03(iii) and 9.03(iv), in an aggregate amount not to
exceed in any fiscal year $1,000,000 less any amounts paid pursuant to
Sections 9.03(ii), 9.03(iii) and 9.03(iv) during such fiscal year;
(vii) the Borrower and its Subsidiaries may hold the investments held
by them on the Effective Date;
(viii) the Borrower and its Subsidiaries may enter into, invest in and
make loans and advances to (x) corporations, associations, partnerships,
business trusts and other business entities which would not, after the
respective investment, be a Subsidiary of Holdings (each a "Joint
Venture") and (y) Foreign Subsidiaries, provided that (i) neither
Holdings nor any of its Subsidiaries is liable for any Indebtedness or
other obligations of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether or not due) of any such Joint Venture
or Foreign Subsidiary and (ii) the aggregate amount of all such
investments and loans in Joint Ventures and Foreign Subsidiaries shall at
no time exceed $30,000,000;
(ix) Holdings and its Subsidiaries may make loans and advances in the
ordinary course of business to their respective employees so long as the
aggregate principal amount thereof at any time outstanding (determined
without regard to any write-downs or write-offs of such loans and
advances) shall not exceed $500,000;
(x) the Borrower may enter into Interest Protection Agreements or
Other Hedging Agreements to the extent permitted by Section 9.04(iv) and
(x); and
(xi) the Borrower and the Subsidiary Guarantors may make intercompany
loans and advances between or among one another (collectively,
"Intercompany Loans") or equity investments, so long as no such
Intercompany Loan shall be evidenced by a promissory note or other
instrument except an Intercompany Note that is pledged to the Collateral
Agent pursuant to the Pledge Agreement.
9.06 Transactions with Affiliates. Holdings will not, and will not
permit any of its Subsidiaries to, enter into any transaction or series of
related transactions, whether or not in the ordinary course of business, with
any Affiliate of Holdings or any of its Subsidiaries, other than in the
ordinary course of business and on terms and conditions substantially as
favorable to Holdings or such Subsidiary as would reasonably be obtained by
Holdings or such Subsidiary at that time in a comparable arm's- length
transaction with a Person other than an Affiliate, except that (i) Dividends
may be paid to the extent provided in Section 9.03, (ii) loans may be made and
other transactions may be entered into by Holdings and its Subsidiaries to the
extent permitted by Section 9.05, (iii) customary fees may be paid to
directors of Holdings and its Subsidiaries, (iv) options to purchase common
stock of Holdings may be granted to
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officers and directors of Holdings and its Subsidiaries in the ordinary course
of business, (v) Holdings and its Subsidiaries may enter into employment
arrangements with their respective officers in the ordinary course of
business, (vi) so long as there shall exist no Event of Default under Section
10.01 (both before and after giving effect to the payment thereof), Holdings
or any of its Subsidiaries may pay management fees to Castle Harlan in
accordance with the terms of the CH Management Agreement, (vii) payments may
be made to the directors of Holdings and its Subsidiaries pursuant to
arrangements which have been entered into on or prior to the Initial Borrowing
Date and which have been disclosed in the Documents and (viii) Holdings or its
Subsidiaries may pay directors' fees to the directors of Holdings or any of
its Subsidiaries in an aggregate amount for all such Persons not to exceed
$500,000 per year. Except as specifically provided above, no management or
similar fees shall be paid or payable by Holdings or any of its Subsidiaries
to any Person other than customary investment banking, financing and similar
fees arising in connection with transactions after the date hereof.
9.07 Capital Expenditures. (a) Holdings will not, and will not
permit any of its Subsidiaries to, make any Capital Expenditures, except that
during any fiscal year set forth below (taken as one accounting period) the
Borrower and its Subsidiaries may make Capital Expenditures so long as the
aggregate amount of such Capital Expenditures does not exceed (x) for the
period commencing on the Initial Borrowing Date and ending on March 31, 1998,
20,000,000 and (y) thereafter, in any fiscal year, the amount set forth
opposite such fiscal year below:
Fiscal Year Ending Amount
March 31, 1999 $55,000,000
March 31, 2000 $65,000,000
March 31, 2001 $60,000,000
March 31, 2002 $55,000,000
March 31, 2003 $55,000,000
March 31, 2004 $45,000,000
March 31, 2005 $45,000,000
(b) In addition to the foregoing, to the extent that the amount of
Capital Expenditures made by the Borrower and its Subsidiaries during any
fiscal year of the Borrower (exclusive, however, of Capital Expenditures made
pursuant to Section 9.07(c), (d), (e) and (f)) is less than the amount
applicable to the respective fiscal year as set forth in the table in clause
(a)(y) of this Section 9.07 (and without increasing any such amount set forth
in such table by the amount of any additional amounts permitted to be spent in
such fiscal year pursuant to this sentence), such amount may be carried
forward and utilized to make Capital Expenditures in excess of the amount
permitted in clause (a)(y) above in the following fiscal year; provided that
the aggregate amount expended on Capital Expenditures in any fiscal year shall
not exceed 125% of the amount permitted to be made in such fiscal year as set
forth in clause (a) of this Section 9.07.
(c) In addition to the foregoing, the amount of Net Sale Proceeds
received by the Borrower or any of its Subsidiaries from any Asset Sale may be
reinvested in replacement assets within 18 months following the date of such
Asset Sale to the extent such Net Sale Proceeds are not required to be applied
pursuant to Section 4.02(e), and, to the extent so applied, shall not count as
Capital Expenditures for purposes of determining compliance with clauses (a)
and (b) of this Section 9.07.
(d) In addition to the foregoing, the amount of insurance proceeds
received by Holdings or any of its Subsidiaries from any Recovery Event may be
used to replace or restore any
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properties or assets in respect of which such proceeds were paid within 18
months following the date of such Recovery Event (in each case to the extent
such proceeds are not required to be applied pursuant to Section 4.02(g)) and,
to the extent so applied, shall not count as Capital Expenditures for purposes
of determining compliance with clauses (a) and (b) of this Section 9.07.
(e) In addition to the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures consisting of Section 9.02(viii) Acquisitions
and Sale and Leaseback transactions permitted pursuant to Section
9.02(xii)(C).
(f) In addition to the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures in the amount of Net Sale Proceeds received by
the Borrower or any of its Subsidiaries from any sale of assets permitted
pursuant to Section 9.02(ii).
9.08 Consolidated Adjusted EBITDA to Total Interest Expense.
Holdings will not permit the ratio of (i) Consolidated Adjusted EBITDA to (ii)
Total Interest Expense for any Test Period ending on the last day of a fiscal
quarter set forth below to be less than the ratio set forth opposite such
fiscal quarter below:
Period Ratio
June 30, 1998 1.30:1.00
September 30, 1998 1.30:1.00
December 31, 1998 1.30:1.00
March 31, 1999 1.30:1.00
June 30, 1999 1.30:1.00
September 30, 1999 1.30:1.00
December 31, 1999 1.35:1.00
March 31, 2000 1.35:1.00
June 30, 2000 1.40:1.00
September 30, 2000 1.40:1.00
December 31, 2000 1.40:1.00
March 31, 2001 1.40:1.00
June 30, 2001 1.50:1.00
September 30, 2001 1.50:1.00
December 31, 2001 1.50:1.00
March 31, 2002 1.50:1.00
June 30, 2002 and the last 1.60:1.00
day of each fiscal quarter
thereafter
9.09 Maximum Adjusted Leverage Ratio. Holdings will not permit the
Adjusted Leverage Ratio at any time during a period set forth below to be
greater than the ratio set forth opposite such period below:
Period Ratio
Initial Borrowing Date 3.50:1.00
Through and including June 30, 1998
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Period Ratio
July 1, 1998 3.50:1.00
Through and including September 30, 1998
October 1, 1998 3.50:1.00
Through and including December 31, 1998
January 1, 1999 3.50:1.00
Through and including March 31, 1999
April 1, 1999 3.50:1.00
Through and including June 30, 1999
July 1, 1999 3.50:1.00
Through and including September 30, 1999
October 1, 1999 3.50:1.00
Through and including December 31, 1999
January 1, 2000 3.50:1.00
Through and including March 31, 2000
April 1, 2000 3.25:1.00
Through and including June 30, 2000
July 1, 2000 3.25:1.00
Through and including September 30, 2000
October 1, 2000 3.25:1.00
Through and including December 31, 2000
January 1, 2001 3.25:1.00
Through and including March 31, 2001
April 1, 2001 3.00:1.00
Through and including June 30, 2001
July 1, 2001 3.00:1.00
Through and including September 30, 2001
October 1, 2001 3.00:1.00
Through and including December 31, 2001
January 1, 2002 3.00:1.00
Through and including March 31, 2002
April 1, 2002 2.50:1.00
Through and including June 30, 2002
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Period Ratio
July 1, 2002 2.50:1.00
Through and including September 30, 2002
October 1, 2002 2.50:1.00
Through and including December 31, 2002
January 1, 2003 2.50:1.00
Through and including March 31, 2003
April 1, 2003 2.25:1.00
Through and including June 30, 2003
July 1, 2003 2.25:1.00
Through and including September 30, 2003
October 1, 2003 2.25:1.00
Through and including December 31, 2003
January 1, 2004 2.25:1.00
Through and including March 31, 2004
Thereafter 2.00:1.00
9.10 Limitation on Voluntary Payments and Modifications of
Indebtedness; Modifications of Certificate of Incorporation, By-Laws and
Certain Other Agreements; etc. Holdings will not, and will not permit any of
its Subsidiaries to, (i) make (or give any notice in respect of) any voluntary
or optional payment or prepayment on or redemption or acquisition for value of
any Holdings Senior Discount Notes or any Borrower Senior Discount Notes,
provided that (A) so long as no Default or Event of Default then exists
(before and after giving effect to such payment), the Borrower may prepay,
redeem or otherwise acquire for value Holdings Senior Discount Notes or
Borrower Senior Discount Notes, as the case may be, so long as the total
amount payable in connection therewith shall not exceed the then Available
Retained Cash Flow Amount (after giving effect to all reductions to such
amount occurring prior to, or on the date of, such payment) and (B) so long as
no Default or Event of Default then exist or would result therefrom, Holdings
may use the proceeds from an issuance of its Qualified Preferred Stock or
common stock to prepay, redeem or otherwise acquire for value Holdings Senior
Discount Notes, (ii) amend or modify, or permit the amendment or modification
of, any provision of the Existing Indebtedness or the Holdings Senior Discount
Notes or Borrower Senior Discount Notes (it being understood, however, that
Holdings and its Subsidiaries may amend or modify the Holdings Senior Discount
Notes or the Borrower Senior Discount Notes, as the case may be, to the extent
the trustee of the respective note can approve such amendment or modification
without obtaining the consent of the holders of such note) or of any agreement
(including, without limitation, any purchase agreement, indenture, loan
agreement or security agreement) relating thereto, or the CH Management
Agreement or the Equity Financing Documents or (iii) amend, modify or change
its Certificate of Incorporation (including, without limitation, by the filing
or modification of any certificate of designation) or By-Laws or any agreement
entered into by it, with respect to its capital stock (including any
Shareholders' Agreement), or enter into any new agreement with respect to its
capital stock unless such amendment, modification, change or other action
contemplated by this clause (iii) could not reasonably be determined to be
adverse to the Banks.
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9.11 Limitation on Certain Restrictions on Subsidiaries. Holdings
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective
any encumbrance or restriction on the ability of any such Subsidiary to (a)
pay dividends or make any other distributions on its capital stock or any
other interest or participation in its profits owned by the Borrower or any
Subsidiary of the Borrower, or pay any Indebtedness owed to the Borrower or a
Subsidiary of the Borrower, (b) make loans or advances to the Borrower or any
of the Borrower's Subsidiaries or (c) transfer any of its properties or assets
to the Borrower, except for such encumbrances or restrictions existing under
or by reason of (i) applicable law, (ii) this Agreement and the other Credit
Documents, (iii) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest of the Borrower or a Subsidiary of
the Borrower, (iv) customary provisions restricting assignment of any
licensing agreement entered into by the Borrower or a Subsidiary of the
Borrower in the ordinary course of business, (v) the Holdings Senior Note
Documents, the Borrower Senior Note Documents and agreements evidencing
Existing Indebtedness and (vi) Foreign Subsidiary Indebtedness.
9.12 Limitation on Issuance of Capital Stock. (a) Holdings will not,
and will not permit any of its Subsidiaries to, issue (i) any preferred stock
other than Qualified Preferred Stock of Holdings or (ii) any redeemable common
stock other than common stock that is redeemable at the sole option of
Holdings or such Subsidiary.
(b) Holdings shall not permit any of its Subsidiaries to issue any
capital stock (including by way of sales of treasury stock) or any options or
warrants to purchase, or securities convertible into, capital stock, except
(i) for transfers and replacements of then outstanding shares of capital
stock, (ii) for stock splits, stock dividends and similar issuances which do
not decrease the percentage ownership of Holdings or any of its Subsidiaries
in any class of the capital stock of such Subsidiary, (iii) to qualify
directors to the extent required by applicable law and (iv) capital stock
issued by newly created or acquired Subsidiaries, in accordance with the other
requirements of this Agreement.
9.13 Business. The Borrower will not, and will not permit any of its
Subsidiaries to, engage (directly or indirectly) in any business other than
the business in which the Borrower is engaged on the Effective Date and
reasonable extensions thereof.
9.14 Limitation on Creation of Subsidiaries and Entering into
Partnerships and Joint Ventures. (a) Holdings shall not establish, create or
acquire any additional Subsidiaries without the prior written consent of the
Required Banks. In connection with any establishment, creation or acquisition
of any Subsidiary, it is understood that the Required Banks may require that
any such new Subsidiary (other than a Foreign Subsidiary but subject to
Section 8.12) (x) execute and deliver to the Agent a counterpart of the
Subsidiaries Guaranty, the Pledge Agreement and the Security Agreement, (y)
take all actions required pursuant to Section 8.11, and/or (z) execute and
deliver, or cause to be executed and delivered, to the Agent all other
relevant documentation of the type described in Section 5 as such Subsidiary
would have to deliver if such new Subsidiary were a Credit Party on the
Initial Borrowing Date.
(b) Holdings will not, and will not permit any of its Subsidiaries
to, enter into any partnerships or joint ventures, except to the extent
permitted under Section 9.05(viii).
9.15 Special Purpose Corporation. (a) Holdings shall not engage in
any business activities other than the ownership of the capital stock of the
Borrower, the issuance of Qualified Preferred Stock, and the execution,
delivery and performance of the Documents. In no event shall Holdings be
permitted to incur or suffer to exist any Indebtedness on, or create or suffer
to exist any Liens on, its assets; provided that Holdings may engage in any
necessary activity with respect to (i) the maintenance of its
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corporate or trust existence and compliance with applicable law, (ii)
accounting, legal, public relations, investor relations, financial or
management activities (including the employment of employees, counsel,
accountants, consultants, bankers, advisors or other professionals in
connection with any of the foregoing activities), and (iii) entering into,
performing its obligations and exercising its rights under the Documents to
which it is a party.
(b) Holdings shall have no Subsidiaries other than the Borrower and
its Subsidiaries.
SECTION 10. Events of Default. Upon the occurrence of
any of the following specified events (each an "Event of
Default"):
10.01 Payments. The Borrower shall (i) default in the payment when
due of any principal of any Loan or any Note, (ii) default, and such default
shall continue unremedied for three or more Business Days, in the payment when
due of any interest on any Loan or Note, any Unpaid Drawing (to the extent the
Borrower has knowledge that such Unpaid Drawings are past due) or any Fees or
(iii) default, and such default shall continue unremedied for ten or more
Business Days, in the payment of any other amounts owing hereunder or
thereunder; or
10.02 Representations, etc. Any representation or warranty made by
any Credit Party herein or in any other Credit Document or in any certificate
delivered to the Agent or any Bank pursuant hereto or thereto shall prove to
be untrue in any material respect on the date as of which made or deemed made
as provided in Section 7; or
10.03 Covenants. Any Credit Party shall (i) default in the due
performance or observance by it of any term, covenant or agreement contained
in Section 8.01(g)(i) or 8.08 or Section 9 or (ii) default in the due
performance or observance by it of any other term, covenant or agreement
contained in this Agreement (other than those set forth in Sections 10.01 and
10.02) and such default shall continue unremedied for a period of 30 days
after written notice thereof to the Borrower by the Agent or the Required
Banks; or
10.04 Default Under Other Agreements. Holdings or any of its
Subsidiaries shall (i) default in any payment of any Indebtedness (other than
the Notes) beyond the period of grace, if any, provided in the instrument or
agreement under which such Indebtedness was created or (ii) default in the
observance or performance of any agreement or condition relating to any
Indebtedness (other than the Notes) or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause
(determined without regard to whether any notice is required), any such
Indebtedness to become due prior to its stated maturity, or (iii) any
Indebtedness (other than the Notes) of Holdings or any of its Subsidiaries
shall be declared to be due and payable, or required to be prepaid other than
by a regularly scheduled required prepayment, prior to the stated maturity
thereof, provided that it shall not be a Default or Event of Default under
this Section 10.04 unless the aggregate principal amount of all Indebtedness
as described in preceding clauses (i) through (iii), inclusive, is at least
$2,500,000; or
10.05 Bankruptcy, etc. Holdings or any of its Significant
Subsidiaries shall commence a voluntary case concerning itself under Title 11
of the United States Code entitled "Bankruptcy," as now or hereafter in
effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary
case is commenced against Holdings or any of its Significant Subsidiaries, and
the petition is not controverted within 10 days, or is not dismissed within 60
days, after commencement of the case; or a custodian (as defined in the
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Bankruptcy Code) is appointed for, or takes charge of, all or substantially
all of the property of Holdings or any of its Significant Subsidiaries, or
Holdings or any of its Significant Subsidiaries commences any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to Holdings or any of its
Significant Subsidiaries, or there is commenced against Holdings or any of its
Significant Subsidiaries any such proceeding which remains undismissed for a
period of 60 days, or Holdings or any of its Significant Subsidiaries is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or Holdings or any of its
Significant Subsidiaries suffers any appointment of any custodian or the like
for it or any substantial part of its property to continue undischarged or
unstayed for a period of 60 days; or Holdings or any of its Significant
Subsidiaries makes a general assignment for the benefit of creditors; or any
corporate action is taken by Holdings or any of its Significant Subsidiaries
for the purpose of effecting any of the foregoing; or
10.06 ERISA. (a) (i) Any Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof under Section 412
of the Code or Section 302 of ERISA or a waiver of such standard or extension
of any amortization period is sought or granted under Section 412 of the Code
or Section 303 or 304 of ERISA, (ii) a Reportable Event shall have occurred,
(iii) a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a
Plan subject to Title IV of ERISA shall be subject to the advance reporting
requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph
(b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66,
.67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to
occur with respect to such Plan within the following 30 days, (iv) any Plan
which is subject to Title IV of ERISA shall have had or is likely to have a
trustee appointed to administer such Plan, (v) any Plan which is subject to
Title IV of ERISA is, shall have been or is likely to be terminated or to be
the subject of termination proceedings under ERISA, (vi) any Plan shall have
an Unfunded Current Liability, (vii) a contribution required to be made with
respect to a Plan or a Foreign Pension Plan has not been timely made, (viii)
Holdings or any Subsidiary of Holdings or any ERISA Affiliate has incurred or
is likely to incur any liability to or on account of a Plan under Section 409,
502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or
Section 401(a)(29), 4971 or 4975 of the Code or (ix) on account of a group
health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of
the Code) under Section 4980B of the Code, or (ix) Holdings or any Subsidiary
of Holdings has incurred or is likely to incur liabilities pursuant to one or
more employee welfare benefit plans (as defined in Section 3(1) of ERISA) that
provide benefits to retired employees or other former employees (other than as
required by Section 601 of ERISA) or Plans or Foreign Pension Plans; (b) there
shall result from any such event or events the imposition of a lien, the
granting of a security interest, or a liability or a material risk of
incurring a liability; and (c) such lien, security interest or liability,
individually, and/or in the aggregate, in the opinion of the Required Banks,
has had, or could reasonably be expected to have, a material adverse effect
upon the business, operations, condition (financial or otherwise) or prospects
of Holdings and its Subsidiaries taken as a whole; or
10.07 Security Documents. At any time after the execution and
delivery thereof, any of the Security Documents shall cease to be in full
force and effect, or shall cease to give the Collateral Agent for the benefit
of the Secured Creditors the Liens, rights, powers and privileges purported to
be created thereby (including, without limitation, a perfected security
interest in, and Lien on, all of the Collateral (other than Collateral with a
value not to exceed $1,000,000), in favor of the Collateral Agent, superior to
and prior to the rights of all third Persons (except as permitted by Section
9.01), and subject to no other Liens (except as permitted by Section 9.01), or
Holdings or any of its Subsidiaries shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or
observed pursuant to any of the Security Documents and such default, other
than with respect to Sections 2.4 and 2.5 of the Security Agreement (in which
case an Event of Default shall immediately exist without the giving
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of any notice), shall continue unremedied for a period of 30 days after
written notice thereof to the Borrower from the Agent or the Required Banks;
or
10.08 Subsidiary Guaranty. At any time after the execution and
delivery thereof, (x) any Subsidiary Guaranty or any provision thereof shall
cease to be in full force or effect as to any Subsidiary Guarantor, (y) if any
Subsidiary Guarantor or Person acting by or on behalf of any Subsidiary
Guarantor shall deny or disaffirm such Subsidiary Guarantor's obligations
under the respective Subsidiary Guaranty, or (z) any Subsidiary Guarantor
shall default in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant to the respective
Subsidiary Guaranty; or
10.09 Judgments. One or more judgments or decrees shall be entered
against Holdings or any Subsidiary of Holdings involving in the aggregate for
Holdings and its Subsidiaries a liability (not paid or fully covered by a
reputable and solvent insurance company) and such judgments and decrees either
shall be final and non-appealable or shall not be vacated, discharged or
stayed or bonded pending appeal for any period of 30 consecutive days, and the
aggregate amount of all such judgments exceeds $2,500,000; or
10.10 Change of Control. A Change of Control shall
occur;
then, and in any such event, and at any time thereafter, if any
Event of Default shall then be continuing, the Agent, upon the written request
of the Required Banks, shall by written notice to the Borrower, take any or
all of the following actions, without prejudice to the rights of the Agent,
any Bank or the holder of any Note to enforce its claims against the Borrower
(provided, that, if an Event of Default specified in Section 10.05 shall occur
with respect to the Borrower, the result which would occur upon the giving of
written notice by the Agent to the Borrower as specified in clauses (i) and
(ii) below shall occur automatically without the giving of any such notice):
(i) declare the Total Commitments terminated, whereupon all Commitments of
each Bank shall forthwith terminate immediately and any Commitment Commission
shall forthwith become due and payable without any other notice of any kind;
(ii) declare the principal of and any accrued interest in respect of all Loans
and the Notes and all Obligations owing hereunder and thereunder to be,
whereupon the same shall become, forthwith due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by each Credit Party; (iii) terminate any Letter of Credit which
may be terminated, in accordance with its terms; (iv) direct the Borrower to
pay (and the Borrower agrees that upon receipt of such notice, or upon the
occurrence of an Event of Default specified in Section 10.05 with respect to
the Borrower, it will pay) to the Collateral Agent at the Payment Office such
additional amount of cash, to be held as security by the Collateral Agent, as
is equal to the aggregate Stated Amount of all Letters of Credit issued for
the account of the Borrower and then outstanding; (v) enforce, as Collateral
Agent, all of the Liens and security interests created pursuant to the
Security Documents and (vi) apply any cash collateral held by the Agent
pursuant to Section 4.02 to the repayment of the Obligations.
SECTION 11. Definitions and Accounting Terms.
11.01 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Acquisition" shall mean the acquisition by the Borrower of all of
the outstanding shares of capital stock of TCSI pursuant to, and in accordance
with the terms of, the Acquisition Agreement.
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"Acquisition Agreement" shall mean the Stock Purchase Agreement,
dated as of December 18, 1997, by and between Tidewater and Acquisition Corp.
"Acquisition Documents" shall mean the Acquisition Agreement and all
other agreements and documents relating to the Acquisition.
"Additional Security Documents" shall have the meaning
provided in Section 8.11.
"Adjusted Certificate of Deposit Rate" shall mean, on any day, the
sum (rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing
(x) the most recent weekly average dealer offering rate for negotiable
certificates of deposit with a three-month maturity in the secondary market as
published in the most recent Federal Reserve System publication entitled
"Select Interest Rates," published weekly on Form H.15 as of the date hereof,
or if such publication or a substitute containing the foregoing rate
information shall not be published by the Federal Reserve System for any week,
the weekly average offering rate determined by the Agent on the basis of
quotations for such certificates received by it from three certificate of
deposit dealers in New York of recognized standing or, if such quotations are
unavailable, then on the basis of other sources reasonably selected by the
Agent, by (y) a percentage equal to 100% minus the stated maximum rate of all
reserve requirements as specified in Regulation D applicable on such day to a
three-month certificate of deposit of a member bank of the Federal Reserve
System in excess of $100,000 (including, without limitation, any marginal,
emergency, supplemental, special or other reserves), plus (2) the then daily
net annual assessment rate as estimated by the Agent for determining the
current annual assessment payable by the Agent to the Federal Deposit
Insurance Corporation for insuring three-month certificates of deposit.
"Adjusted Consolidated Net Income" for any period shall mean
Consolidated Net Income for such period plus, without duplication, the sum of
the amount of all net non-cash charges (including, without limitation,
depreciation, amortization, deferred tax expense and non-cash interest
expense) and net non-cash losses which were included in arriving at
Consolidated Net Income for such period less the sum of the amount of all net
non-cash gains (exclusive of items reflected in Adjusted Working Capital)
included in arriving at Consolidated Net Income for such period.
"Adjusted Consolidated Working Capital" at any time shall mean
Consolidated Current Assets (but excluding therefrom all cash and Cash
Equivalents) less Consolidated Current Liabilities.
"Adjusted Leverage Ratio" shall mean, at any time, the ratio of
Secured Consolidated Debt at such time to Consolidated EBITDA for the Test
Period then most recently ended.
"Adjusted Percentage" shall mean (x) at a time when no Bank Default
exists, for each Bank, such Bank's Percentage and (y) at a time when a Bank
Default exists (i) for each Bank that is a Defaulting Bank, zero and (ii) for
each Bank that is a Non- Defaulting Bank, the percentage determined by
dividing such Bank's Revolving Loan Commitment at such time by the Adjusted
Total Revolving Loan Commitment at such time, it being understood that all
references herein to Revolving Loan Commitments and the Adjusted Total
Revolving Loan Commitment at a time when the Total Revolving Loan Commitment
or Adjusted Total Revolving Loan Commitment, as the case may be, has been
terminated shall be references to the Revolving Loan Commitments or Adjusted
Total Revolving Loan Commitment, as the case may be, in effect immediately
prior to such termination, provided that (A) no Bank's Adjusted Percentage
shall change upon the occurrence of a Bank Default from that in effect
immediately prior to such Bank Default if after giving effect to such Bank
Default, and any repayment of Revolving Loans and Swingline Loans at such time
pursuant to Section 4.02(a) or otherwise, the sum of (i) the aggregate
outstanding principal amount of Revolving Loans of all Non-Defaulting Banks
plus (ii) the aggregate outstanding principal amount of Swingline Loans plus
(iii) the Letter of Credit Outstandings, exceed the Adjusted Total Revolving
Loan Commitment; (B) the changes to the Adjusted Percentage that would have
become effective upon the occurrence of a Bank Default but that did not become
effective as a result of the preceding clause (A) shall become effective on
the first date after the occurrence of the relevant Bank Default on which the
sum of (i) the aggregate
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outstanding principal amount of the Revolving Loans of all Non-Defaulting
Banks plus (ii) the aggregate outstanding principal amount of the Swingline
Loans plus (iii) the Letter of Credit Outstandings is equal to or less than
the Adjusted Total Revolving Loan Commitment; and (C) if (i) a Non-Defaulting
Bank's Adjusted Percentage is changed pursuant to the preceding clause (B) and
(ii) any repayment of such Bank's Revolving Loans, or of Unpaid Drawings with
respect to Letters of Credit or of Swingline Loans, that were made during the
period commencing after the date of the relevant Bank Default and ending on
the date of such change to its Adjusted Percentage must be returned to the
Borrower as a preferential or similar payment in any bankruptcy or similar
proceeding of the Borrower, then the change to such Non-Defaulting Bank's
Adjusted Percentage effected pursuant to said clause (B) shall be reduced to
that positive change, if any, as would have been made to its Adjusted
Percentage if (x) such repayments had not been made and (y) the maximum change
to its Adjusted Percentage would have resulted in the sum of the outstanding
principal of Revolving Loans made by such Bank plus such Bank's new Adjusted
Percentage of the outstanding principal amount of Swingline Loans and of
Letter of Credit Outstandings equaling such Bank's Revolving Loan Commitment
at such time.
"Adjusted Total Revolving Loan Commitment" shall mean at any time
the Total Revolving Loan Commitment less the aggregate Revolving Loan
Commitments of all Defaulting Banks.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person; provided, however, that for purposes of
Section 9.06, an Affiliate of Holdings shall include any Person that directly
or indirectly owns more than 5% of any class of the capital stock of Holdings
and any officer or director of Holdings or the Borrower. A Person shall be
deemed to control another Person if such 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.
"Agent" shall mean Bankers Trust Company, in its capacity as Agent
for the Banks hereunder, and shall include any successor to the Agent
appointed pursuant to Section 12.09.
"Agreement" shall mean this Credit Agreement, as modified,
supplemented or amended from time to time.
"Applicable Base Rate Margin" shall mean (i) for the period from the
Initial Borrowing Date through but not including the first Start Date, after
the Initial Borrowing Date (x) in the case of Term Loans which are maintained
as Base Rate Loans, 1.50% and (y) in the case of Revolving Loans which are
maintained as Base Rate Loans, 1.25% and (ii) from and after any Start Date to
an including the corresponding End Date, the respective percentage per annum
set forth in clause (A), (B), (C) or (D) below if, but only if, as of the Test
Date for such Start Date the applicable condition set forth in clause (A),
(B), (C) or (D) below, as the case may be, is met:
(A) 1.50% in the case of Term Loans which are maintained as Base
Rate Loans and 1.25% in the case of Revolving Loans which are maintained as
Base Rate Loans, in each case if, but only if, as of the Test Date of such
Start Date the Leverage Ratio for the Test Period ended on such Test Date
shall be greater than or equal to 5.00:1.00;
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(B) 1.25% in the case of Term Loans which are maintained as Base
Rate Loans and 1.00% in the case of Revolving Loans which are maintained as
Base Rate Loans, in each case if, but only if, as of the Test Date for such
Start Date the Leverage Ratio for the Test Period ended on such Test Date
shall be less than 5.00:1.00 and greater than or equal to 4.50:1.00;
(C) 1.00% in the case of Term Loans which are maintained as Base
Rate Loans and 0.75% in the case of Revolving Loans which are maintained as
Base Rate Loans, in each case if, but only if, as of the Test Date for such
Start Date the Leverage Ratio for the Test Period ended on such Test Date
shall be less than 4.50:1.00 and greater than or equal to 4.00:1.00; and
(D) 0.75% in the case of Term Loans which are maintained as Base
Rate Loans and 0.50% in the case of Revolving Loans which are maintained as
Base Rate Loans, in each case if, but only if, as of the Test Date for such
Start Date the Leverage Ratio for the Test Period ended on such Test Date
shall be less than 4.00:1.00.
Notwithstanding anything to the contrary above in this definition,
the Applicable Base Rate Margin shall be, in the case of Term Loans which are
maintained as Base Rate Loans, 1.50%, and, in the case of Revolving Loans
which we maintained as Base Rate Loans, 1.25% at all times when a Default or
an Event of Default shall exist.
"Applicable Eurodollar Rate Margin" shall mean (i) for the period
from the Initial Borrowing Date through but not including the first Start Date
after the Initial Borrowing Date, (x) in the case of Term Loans which are
maintained as Eurodollar Loans, 2.50% and (y) in the case of Revolving Loans
which are maintained as Eurodollar Loans, 2.25%, and (ii) from and after any
Start Date to and including the corresponding End Date, the respective
percentage per annum set forth in clause (A), (B), (C) or (D) below if, but
only if, as of the Test Date for such Start Date the applicable condition set
forth in clause (A), (B), (C) or (D) below, as the case may be, is met:
(A) 2.50% in the case of Term Loans which are maintained as
Eurodollar Loans and 2.25% in the case of Revolving Loans which are maintained
as Eurodollar Loans, in each case if, but only if, as of the Test Date for
such Start Date the Leverage Ratio for the Test Period ended on such Test Date
shall be greater than or equal to 5.00:1.00;
(B) 2.25% in the case of Term Loans which are maintained as
Eurodollar Loans and 2.00% in the case of Revolving Loans which are maintained
as Eurodollar Loans, in each case if, but only if, as of the Test Date for
such Start Date the Leverage Ratio for the Test Period ended on such Test Date
shall be less than 5.00:1.00 and greater than or equal to 4.50:1.00;
(C) 2.00% in the case of Term Loans which are maintained as
Eurodollar Loans and 1.75% in the case of Revolving Loans which are maintained
as Eurodollar Loans, in each case if, but only if, as of the Test Date for
such Start Date the Leverage Ratio for the Test Period ended on such Test Date
shall be less than 4.50:1.00 and greater than or equal to 4.00:1.00; and
(D) 1.75% in the case of Term Loans which are maintained as
Eurodollar Loans and 1.50% in the case of Revolving Loans which are maintained
as Eurodollar Loans, in each case if, but only if, as of the Test Date for
such Start Date the Leverage Ratio for the Test Period ended on such Test Date
shall be less than 4.00:1.00.
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Notwithstanding anything to the contrary above in this definition, the
Applicable Eurodollar Rate Margin shall be, in the case of Term Loans which
are maintained as Eurodollar Loans, 2.50%, and, in the case of Revolving Loans
which we maintained as Eurodollar Loans, 2.25% at all times when a Default or
an Event of Default shall exist.
"Applicable Margin Period" shall mean each period which shall
commence on a date on which the financial statements are delivered pursuant to
Section 8.01(b) or (c), as the case may be, and which shall end on the earlier
of (i) the date of the actual delivery of the next financial statements
pursuant to Section 8.01(b) or (c), as the case may be, and (ii) the latest
date on which the next financial statements are required to be delivered
pursuant to Section 8.01(b) or (c), as the case may be, provided that the
first Applicable Margin Period shall commence with the delivery of Holdings'
financial statements for the Test Period ending on June 30, 1998.
" Asset Sale" shall mean any sale, transfer or other disposition by
Holdings or any of its Subsidiaries to any Person (including by-way-of
redemption by such Person) other than to Holdings or a Wholly-Owned Subsidiary
of Holdings of any asset (including, without limitation, any capital stock or
other securities of, or equity interests in, another Person) other than (i)
sales of assets pursuant to Sections 9.02(ii), (v) and (xii)(A) and (ii) sales
of assets which individually, or together with related sales, do not exceed
$50,000 per sale.
"Asset Swap" shall have the meaning provided in Section
9.02(xiii).
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement substantially in the form of Exhibit K (appropriately
completed).
"Available Retained Cash Flow Amount" shall be an amount equal to
zero, plus an amount equal to the 50% of Excess Cash Flow permitted to be
retained by the Borrower (determined on a cumulative basis, but including only
those Excess Cash Payment Periods ended after the Initial Borrowing Date where
the respective Excess Cash Payment Date has occurred and any required
repayment pursuant to Section 4.02(f) has been made; provided that if Excess
Cash Flow is negative for any Excess Cash Payment Period, 100% of such
negative amount shall be included in determining the Borrower's cumulative
retained share of Excess Cash Flow (it being understood, however, that the
cumulative retained share of Excess Cash Flow shall, under no circumstances be
reduced below zero at any time) and not required to be utilized to repay Term
Loans pursuant to Section 4.02(f), minus (ii) any amounts utilized to make
prepayments of Holdings Senior Discount Notes or Borrower Senior Discount
Notes, as the case may be, pursuant to clause (A) of the proviso to Section
9.10(i).
"Bank" shall mean each financial institution listed on Schedule I,
as well as any Person which becomes a "Bank" hereunder pursuant to Section
1.13 or 13.04(b).
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing (including
any Mandatory Borrowing) or to fund its portion of any unreimbursed payment
under Section 2.04(c) or (ii) a Bank having notified in writing the Borrower
and/or the Agent that it does not intend to comply with its obligations under
Section 1.01(b) or 1.01(d) or Section 2, in the case of either clause (i) or
(ii) as a result of any takeover of such Bank by any regulatory authority or
agency.
"Bankruptcy Code" shall have the meaning provided in
Section 10.05.
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"Base Rate" at any time shall mean the higher of (i) 1/2 of 1% in
excess of the Adjusted Certificate of Deposit Rate, (ii) the Prime Lending
Rate and (iii) 1/2 of 1% in excess of the Federal Funds Rate.
"Base Rate Loan" shall mean (i) each Swingline Loan and (ii) any
other Loan designated or deemed designated as such by the Borrower at the time
of the incurrence thereof or conversion thereto.
"Borrower" shall mean (i) prior to the Merger,
Acquisition Corp. and (ii) from and after the consummation of the
Merger, Universal.
"Borrower Senior Discount Note Indenture" shall mean the Indenture,
dated as of February 20, 1998 between the Borrower and United States Trust
Company of New York, as trustee.
"Borrower Senior Discount Note Purchase Agreement" shall mean the
Purchase Agreement, dated February 20, 1998, among the Borrower and the
initial purchasers of Borrower Senior Discount Notes.
"Borrower Senior Discount Notes" shall mean the Borrower's 9 7/8%
Senior Discount Notes due 2008, which will be issued pursuant to the Borrower
Senior Discount Note Indenture.
"Borrower Senior Note Documents" shall mean (i) the Borrower Senior
Discount Notes, (ii) the Borrower Senior Discount Note Indenture, (iii) the
Borrower Senior Discount Note Purchase Agreement and (iv) all other
agreements, documents and instruments effectuating the foregoing and all
amendments and exhibits to any of the foregoing.
"Borrowing" shall mean the borrowing of one Type of Loan of a single
Tranche from all the Banks having Commitments of the respective Tranche (or
from BTCo in the case of Swingline Loans) on a given date (or resulting from a
conversion or conversions on such date) having in the case of Eurodollar Loans
the same Interest Period, provided that Base Rate Loans incurred pursuant to
Section 1.10(b) shall be considered part of the related Borrowing of
Eurodollar Loans.
"BTCo" shall mean Bankers Trust Company in its
individual capacity.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day except Saturday, Sunday and any day which shall
be in New York City a legal holiday or a day on which banking institutions are
authorized or required by law or other government action to close and (ii)
with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (i) above and which is also a day for trading
by and between banks in the New York interbank Eurodollar market.
"Capital Expenditures" shall mean, with respect to any Person,
without duplication, all expenditures by such Person which are capitalized in
accordance with generally accepted accounting principles and the amount of
Capitalized Lease Obligations incurred by such Person.
"Capitalized Lease Obligations" of any Person shall mean all rental
obligations which, under generally accepted accounting principles, are or will
be required to be capitalized on the books of such Person, in each case taken
at the amount thereof accounted for as indebtedness in accordance with such
principles.
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"Cash Equivalents" shall mean, as to any Person, (i) securities
issued or directly and fully guaranteed or insured by the United States or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States is pledged in support thereof) having maturities of not more
than six months from the date of acquisition, (ii) time deposits and
certificates of deposit of any commercial bank having, or which is the
principal banking subsidiary of a bank holding company having, a long-term
unsecured debt rating of at least "A" or the equivalent thereof from Standard
& Poor's Ratings Services, a division of McGraw Hill, Inc. Corporation or "A2"
or the equivalent thereof from Moody's Investors Service, Inc. with maturities
of not more than six months from the date of acquisition by such Person, (iii)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any
bank meeting the qualifications specified in clause (ii) above, (iv)
commercial paper issued by any Person incorporated in the United States rated
at least A-1 or the equivalent thereof by Standard & Poor's Ratings Services,
a division of McGraw Hill, Inc. or at least P-1 or the equivalent thereof by
Moody's Investors Service, Inc. and in each case maturing not more than six
months after the date of acquisition by such Person, (v) Eurodollar
certificates of deposit maturing within six months after the date of
acquisition thereof issued by any commercial bank organized under the laws of
the United States of America or any State thereof or the District of Columbia
or by any foreign bank, which is a Bank, or United States branches of foreign
banks, and in any case having a combined capital and surplus of not less than
$100,000,000, (vi) investments in money market funds substantially all of
whose assets are comprised of securities of the types described in clauses (i)
through (v) above and (vi) investments made by Foreign Subsidiaries in local
currencies in instruments issued by or with entities of such jurisdiction
having correlative attributes to the foregoing.
"Castle Harlan" shall mean Castle Harlan, Inc., a
Delaware corporation.
"CERCLA" shall mean the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as the same
may be amended from time to time, 42 U.S.C. 9601 et seq.
"CH Management Agreement" shall mean the Management Agreement, dated
as of February 20, 1998, between Castle Harlan, Holdings and Universal.
"Change of Control" means (a) (i) prior to a Qualified Public Equity
Offering, the Permitted Investors shall cease to own on a fully diluted basis
in the aggregate at least 51% of the economic and voting interest in the
capital stock of Holdings or shall cease to have the right to elect a majority
of the directors of Holdings and (ii) on and after the consummation of a
Qualified Public Equity Offering, the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of
which is that any "person" (as such term is defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or group or
related persons, together with Affiliates thereof (other than the Permitted
Investors), becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more
than 35% of the Voting Stock of Holdings (as determined on a fully diluted
basis and measured by voting power rather than number of shares) provided that
the Permitted Investors "beneficially own" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, in the
aggregate a lesser percentage of the Voting Stock of Holdings than such other
"person" or group of related persons and do not have the right or ability by
voting, contract or otherwise to elect or designate for election a majority of
the Board of Directors of Holdings or (b) the Borrower shall cease to be a
direct Wholly-Owned Subsidiary of Holdings or (c) a "Change of Control" or
similar event shall occur under the Holdings Senior Note Documents or the
Borrower Senior Note Documents.
"CHP-III" shall mean Castle Harlan Partners III, L.P., a Delaware
limited partnership.
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"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and the regulations promulgated and the rulings issued
thereunder. Section references to the Code are to the Code, as in effect at
the date of this Agreement, and to any subsequent provision of the Code,
amendatory thereof, supplemental thereto or substituted therefor.
"Collateral" shall mean all property (whether real or personal) with
respect to which any security interests have been granted (or purport to be
granted) pursuant to any Security Document, including, without limitation, all
Security Agreement Collateral, and all cash and Cash Equivalents delivered as
collateral pursuant to Section 4.02 or 10 hereof.
"Collateral Agent" shall mean the Agent acting as collateral agent
for the Secured Creditors pursuant to the Security Documents.
"Collective Bargaining Agreements" shall have the
meaning provided in Section 5.05.
"Commitment" shall mean any of the commitments of any Bank, i.e.,
whether the Term Loan Commitment or Revolving Loan Commitment.
"Commitment Commission" shall have the meaning provided
in Section 3.01(a).
"Consolidated Adjusted EBITDA" shall mean Consolidated EBITDA, for
any period, adjusted by subtracting therefrom any management fees attributable
to such period pursuant to the CH Management Agreement.
"Consolidated Current Assets" shall mean, at any time, the
consolidated current assets of Holdings and its Consolidated Subsidiaries.
"Consolidated Current Liabilities" shall mean, at any time, the
consolidated current liabilities of Holdings and its Consolidated Subsidiaries
at such time, but excluding the current portion of and accrued but unpaid
interest on any Indebtedness under this Agreement and any other long-term
Indebtedness which would otherwise be included therein.
"Consolidated Debt" shall mean, at any time, the sum of the
aggregate outstanding principal amount of all Indebtedness for borrowed money,
the amount of any unreimbursed drawings under any letter of credit (which have
been unreimbursed for three or more days) and the principal component of
Capitalized Lease Obligations of Holdings and its Consolidated Subsidiaries.
"Consolidated EBIT" shall mean, for any period, the Consolidated Net
Income of Holdings and its Consolidated Subsidiaries, before Consolidated Net
Interest Expense and provision for taxes and without giving effect to any
extraordinary gains or losses or gains or losses from sales of assets other
than inventory sold in the ordinary course of business or any extraordinary or
non-recurring charges relating to the Transaction and adding back the
management fees attributable to such period pursuant to the CH Management
Agreement.
"Consolidated EBITDA" shall mean, for any period, Consolidated EBIT,
adjusted by adding thereto the amount of all amortization of intangibles and
depreciation that were deducted in arriving at Consolidated EBIT for such
period.
"Consolidated Net Income" shall mean, for any period, net after tax
income of Holdings and its Consolidated Subsidiaries.
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"Consolidated Net Interest Expense" shall mean, for any period, the
total consolidated interest expense of Holdings and its Consolidated
Subsidiaries for such period (calculated without regard to any limitations on
the payment thereof) plus, without duplication, that portion of Capitalized
Lease Obligations of Holdings and its Consolidated Subsidiaries representing
the interest factor for such period, in each case net of the total
consolidated cash interest income of Holdings and its Consolidated
Subsidiaries for such period.
"Consolidated Subsidiaries" shall mean, as to any Person, all
Subsidiaries of such Person which are consolidated with such Person for
financial reporting purposes in accordance with generally accepted accounting
principles in the United States.
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or not
contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of any such primary obligation or (y) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (iv) otherwise
to assure or hold harmless the holder of such primary obligation against loss
in respect thereof; provided, however, that the term Contingent Obligation
shall not include endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent Obligation is made or,
if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof (assuming such Person is required to perform thereunder) as
determined by such Person in good faith.
"Credit Documents" shall mean this Agreement and, after the
execution and delivery thereof pursuant to the terms of this Agreement, each
Note and each Security Document and the Subsidiary Guaranty.
"Credit Event" shall mean the making of any Loan or the
issuance of any Letter of Credit.
"Credit Party" shall mean Holdings, the Borrower and
each Subsidiary Guarantor.
"Debt Agreements" shall have the meaning provided in
Section 5.05.
"Default" shall mean any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Dividend" with respect to any Person shall mean that such Person
has declared or paid a dividend or returned any equity capital to its
stockholders or authorized or made any other distribution, payment or delivery
of property (other than common stock of such Person) or cash to its
stockholders as such, or redeemed, retired, purchased or otherwise acquired,
directly or indirectly, for a consideration any shares of any class of its
capital stock outstanding on or after the Effective Date (or any options or
warrants issued by such Person with respect to its capital stock), or set
aside any funds for any of the
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foregoing purposes, or shall have permitted any of its Subsidiaries to
purchase or otherwise acquire for a consideration any shares of any class of
the capital stock of such Person outstanding on or after the Effective Date
(or any options or warrants issued by such Person with respect to its capital
stock). Without limiting the foregoing, "Dividends" with respect to any Person
shall also include all payments made or required to be made by such Person
with respect to any stock appreciation rights, plans, equity incentive or
achievement plans or any similar plans or setting aside of any funds for the
foregoing purposes.
"Documents" shall mean the Credit Documents, the Acquisition
Documents, the Merger Documents, the Equity Financing Documents, the
Refinancing Documents, the Holdings Senior Note Documents and the Borrower
Senior Note Documents.
"Dollar Equivalent" shall mean, at any time of determination
thereof, the amount of Dollars which could be purchased with the amount of
currency involved in such computation at the spot exchange rate therefor as
published in the New York edition of The Wall Street Journal on the date one
Business Day prior to the date of any determination thereof, provided that if
the New York edition of The Wall Street Journal is not published on such date,
reference shall be made to such rate as set forth in the most recently
published New York edition of The Wall Street Journal, and provided further,
that if at any time the New York edition of The Wall Street Journal ceases to
publish such exchange rates, the Dollar Equivalent shall be the amount of
Dollars which could be purchased with the amount of currency involved in such
computation at the spot rate therefor as quoted by the Agent at approximately
11:00 a.m. (London time) on the date two Business Days prior to the date of
any determination thereof for purchase on such date.
"Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States.
"Domestic Subsidiary" shall mean each Subsidiary of the Borrower
which is not a Foreign Subsidiary.
"Drawing" shall have the meaning provided in Section
2.05(b).
"Effective Date" shall have the meaning provided in
Section 13.10.
"Eligible Transferee" shall mean and include a commercial bank,
financial institution or other "accredited investor" (as defined in Regulation
D of the Securities Act).
"Employee Benefit Plans" shall have the meaning
provided in Section 5.05.
"Employment Agreements" shall have the meaning provided
in Section 5.05.
"End Date" shall mean, for any Applicable Margin Period, the last
day of such Applicable Margin Period.
"Environmental Claims" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims,
liens, notices of noncompliance or violation, investigations or proceedings
relating in any way to any Environmental Law or any permit issued, or any
approval given, under any such Environmental Law (hereafter, "Claims"),
including, without limitation, (a) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response, remedial
or other actions or damages pursuant to any applicable Environmental Law, and
(b) any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or
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injunctive relief in connection with alleged injury or threat of injury to
health, safety or the environment due to the presence of Hazardous Materials.
"Environmental Law" shall mean any Federal, state, foreign or local
statute, law, rule, regulation, ordinance, code, guideline, written policy and
rule of common law now or hereafter in effect and in each case as amended, and
any judicial or administrative interpretation thereof, including any judicial
or administrative order, consent decree or judgment, relating to the
environment, employee health and safety or Hazardous Materials, including,
without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33
U.S.C. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. 2601 et seq.;
the Clean Air Act, 42 U.S.C. 7401 et seq.; the Safe Drinking Water Act, 42
U.S.C. 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C.
2701 et seq.; the Emergency Planning and the Community Right-to- Know Act of
1986, 42 U.S.C. 11001 et seq., the Hazardous Material Transportation Act, 49
U.S.C. 1801 et seq. and the Occupational Safety and Health Act, 29 U.S.C. 651
et seq. ; and any state and local or foreign counterparts or equivalents, in
each case as amended from time to time.
"Equity Financing" shall mean the issuance by Holdings of (x)
Holdings Preferred Stock and (y) shares of its common stock, in each case to
the Permitted Investors and pursuant to the Equity Financing Documents and as
part of the Transaction.
"Equity Financing Documents" shall mean each of the documents and
agreements entered into in connection with the consummation of the Equity
Financing.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with Holdings or any Subsidiary of Holdings would be
deemed to be a "single employer" within the meaning of Section 414(b), (c),
(m) or (o) of the Code.
"Eurodollar Loan" shall mean each Loan (excluding Swingline Loans)
designated as such by the Borrower at the time of the incurrence thereof or
conversion thereto.
"Eurodollar Rate" shall mean (a) the offered quotation to
first-class banks in the New York interbank Eurodollar market by BTCo for
Dollar deposits of amounts in immediately available funds comparable to the
outstanding principal amount of the Eurodollar Loan of BTCo with maturities
comparable to the Interest Period applicable to such Eurodollar Loan
commencing two Business Days thereafter as of 10:00 A.M. (New York time) on
the date which is two Business Days prior to the commencement of such Interest
Period, divided (and rounded off to the nearest 1/16 of 1%) by (b) a
percentage equal to 100% minus the then stated maximum rate of all reserve
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves required by applicable law) applicable
to any member bank of the Federal Reserve System in respect of Eurocurrency
funding or liabilities as defined in Regulation D (or any successor category
of liabilities under Regulation D).
"Event of Default" shall have the meaning provided in
Section 10.
"Excess Cash Flow" shall mean, for any period, the remainder of (i)
the sum of (a) Adjusted Consolidated Net Income for such period, (b) the
aggregate amount of all Net Sale Proceeds
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received during such period (excluding any Net Sale Proceeds received from
sales of assets permitted by Section 9.02(v)), (c) the decrease, if any, in
Adjusted Consolidated Working Capital from the first day to the last day of
such period and (d) the aggregate amount of taxes accrued in such period but
not paid as a result of deferral options available under the Code, minus (ii)
the sum of (a) the amount of Capital Expenditures (but excluding Capital
Expenditures (x) financed with Indebtedness or (y) made with insurance
proceeds) made by the Borrower and its Subsidiaries on a consolidated basis
during such period in accordance with Section 9.07, (b) the aggregate
principal amount of permanent principal payments of Indebtedness for borrowed
money of the Borrower (other than repayments pursuant to the Refinancings,
repayments of the Holdings Senior Discount Notes or the Borrower Senior
Discount Notes and repayments of Loans, provided that repayments of Loans
shall be deducted in determining Excess Cash Flow if such repayments were (x)
required as a result of a Term Loan Scheduled Repayment under Section 4.02(b)
or repayments required by Section 4.02(e) or (y) made as a voluntary
prepayment with internally generated funds (but in the case of a voluntary
prepayment of Revolving Loans, only to the extent accompanied by a voluntary
reduction to the Total Revolving Loan Commitment)) during such period, (c) the
increase, if any, in Adjusted Consolidated Working Capital from the first day
to the last day of such period and (d) the aggregate amount, if any, paid in
such period in connection with taxes previously deferred.
"Excess Cash Payment Date" shall mean the date occurring 90 days
after the last day of each fiscal year of the Borrower (beginning with its
fiscal year ended closest to March 31, 1999).
"Excess Cash Payment Period" shall mean with respect to the
repayment required on each Excess Cash Payment Date, the immediately preceding
fiscal year of the Borrower.
"Existing Indebtedness" shall have the meaning provided
in Section 7.22.
"Facing Fee" shall have the meaning provided in Section
3.01(c).
"Federal Funds Rate" shall mean for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such
day on such transactions received by the Agent from three Federal Funds
brokers of recognized standing selected by the Agent.
"Fees" shall mean all amounts payable pursuant to or
referred to in Section 3.01.
"Foreign Pension Plan" shall mean any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by Holdings or any one or more
of its Subsidiaries primarily for the benefit of employees of Holdings or such
Subsidiaries residing outside the United States of America, which plan, fund
or other similar program provides, or results in, retirement income, a
deferral of income in contemplation of retirement or payments to be made upon
termination of employment, and which plan is not subject to ERISA or the Code.
"Foreign Subsidiary" shall mean each Subsidiary of the Borrower that
is incorporated under the laws of any jurisdiction other than the United
States of America, any State thereof, or any territory thereof.
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"Foreign Subsidiary Indebtedness" shall have the
meaning provided in Section 9.04(xiv).
"Guaranteed Obligations" shall mean (i) the full and prompt payment
when due (whether at the stated maturity, by acceleration or otherwise) of the
principal and interest on each Note issued by, and Loans made to, the Borrower
under this Agreement and all reimbursement obligations and Unpaid Drawings
with respect to Letters of Credit, together with all the other obligations
(including obligations which, but for the automatic stay under Section 362(a)
of the Bankruptcy Code, would become due) and liabilities (including, without
limitation, indemnities, fees and interest thereon) of the Borrower to the
Banks, the Agent, the Issuing Bank and the Collateral Agent now existing or
hereafter incurred under, arising out of or in connection with this Agreement
or any other Credit Document and (ii) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) of the Borrower owing
under any Interest Rate Protection Agreement or Other Hedging Agreement
entered into by the Borrower with any Bank or any affiliate thereof (even if
such Bank subsequently ceases to be a Bank under this Agreement for any
reason) so long as such Bank or affiliate participates in such Interest Rate
Protection Agreement or Other Hedging Agreement, and their subsequent assigns,
if any, whether now in existence or hereafter arising, and the due performance
and compliance with all terms, conditions and agreements contained therein.
"Guarantor" shall mean Holdings and each Subsidiary
Guarantor.
"Guaranty" shall mean and include the Holdings Guaranty
and the Subsidiaries Guaranty.
"Hazardous Materials" shall mean (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment
that contain dielectric fluid containing levels of polychlorinated biphenyls,
and radon gas; (b) any chemicals, materials or substances defined as or
included in the definition of "hazardous substances," "hazardous waste,"
"hazardous materials," "extremely hazardous substances," "restricted hazardous
waste," "toxic substances," "toxic pollutants," "contaminants," or
"pollutants," or words of similar import, under any applicable Environmental
Law; and (c) any other chemical, material or substance, the Release of which
is prohibited, limited or regulated by any governmental authority.
"Holdings" shall have the meaning provided in the first
paragraph of this Agreement.
"Holdings Guaranty" shall mean the guaranty of Holdings
pursuant to Section 14.
"Holdings Preferred Stock" shall mean the preferred stock of
Holdings issued to the Permitted Investors as part of the Equity Financing.
"Holdings Senior Discount Note Indenture" shall mean the Indenture,
dated as of February 20, 1998 between the Borrower and United States Trust of
New York, as trustee.
"Holdings Senior Discount Note Purchase Agreement" shall mean the
Purchase Agreement, dated February 20, 1998, among the Borrower and the
initial purchasers of Holdings Senior Discount Notes.
"Holdings Senior Discount Notes" shall mean Holdings 11 3/8% Senior
Discount Notes due 2009, which will be issued pursuant to the Holdings Senior
Discount Note Indenture.
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"Holdings Senior Note Documents" shall mean (i) the Holdings Senior
Discount Notes, (ii) the Holdings Senior Discount Note Indenture, (iii) the
Holdings Senior Discount Note Purchase Agreement and (iv) all other
agreements, documents and instruments effectuating the foregoing and all
amendments and exhibits to any of the foregoing.
"Indebtedness" shall mean, as to any Person, without duplication,
(i) all indebtedness (including principal, interest, fees and charges) of such
Person for borrowed money or for the deferred purchase price of property or
services, (ii) the maximum amount available to be drawn under all letters of
credit issued for the account of such Person and all unpaid drawings in
respect of such letters of credit, (iii) all Indebtedness of the types
described in clause (i), (ii), (iv), (v), (vi) or (vii) of this definition
secured by any Lien on any property owned by such Person, whether or not such
Indebtedness has been assumed by such Person (provided, that, if the Person
has not assumed or otherwise become liable in respect of such Indebtedness,
such Indebtedness shall be deemed to be in an amount equal to the lesser of
the fair market value of the property to which such Lien relates as determined
in good faith by such Person and the stated amount of such Indebtedness), (iv)
the aggregate amount required to be capitalized under leases under which such
Person is the lessee, (v) all obligations of such person to pay a specified
purchase price for goods or services, whether or not delivered or accepted,
i.e., take-or-pay and similar obligations, (vi) all Contingent Obligations of
such Person and (vii) all obligations under any Interest Rate Protection
Agreement or Other Hedging Agreement or under any similar type of agreement.
Notwithstanding the foregoing, Indebtedness shall not include trade payables
and accrued expenses incurred by any Person in accordance with customary
practices and in the ordinary course of business of such Person.
"Indebtedness to be Refinanced" shall mean all
indebtedness set forth in Schedule VIII.
"Initial Borrowing Date" shall mean the date occurring on or after
the Effective Date on which the initial Borrowing hereunder occurs.
"Insignificant Foreign Subsidiary" shall mean, as to any Person, any
Foreign Subsidiary whose assets represent less than 10% of the total value of
all assets owned by such Person and its Subsidiaries.
"Intercompany Loan" shall have the meaning provided in
Section 9.05(xi).
"Intercompany Note" shall mean a promissory note, in the form of
Exhibit M, evidencing Intercompany Loans.
"Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
"Interest Period" shall have the meaning provided in
Section 1.09.
"Interest Rate Protection Agreement" shall mean any interest rate
swap agreement, interest rate cap agreement, interest collar agreement,
interest rate hedging agreement or other similar agreement or arrangement.
"Joint Venture" shall have the meaning provided in
Section 9.05(viii).
"L/C Supportable Obligations" shall mean (i) obligations of the
Borrower or its Subsidiaries incurred in the ordinary course of business with
respect to workers compensation, surety bonds and other similar statutory
obligations and (ii) such other obligations of the Borrower or any of its
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Subsidiaries as are reasonably acceptable to BTCo and otherwise permitted to
exist pursuant to the terms of this Agreement.
"Leaseholds" of any Person means all the right, title and interest
of such Person as lessee or licensee in, to and under leases or licenses of
land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Letter of Credit Fee" shall have the meaning provided
in Section 3.01(b).
"Letter of Credit Outstandings" shall mean, at any time, the sum of
(i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii)
the amount of all Unpaid Drawings.
"Letter of Credit Request" shall have the meaning
provided in Section 2.03(a).
"Leverage Ratio" shall mean, at any time, the ratio of Consolidated
Debt at such time to Consolidated EBITDA for the Test Period then most
recently ended.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), preference,
priority or other security agreement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC or
any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing).
"Loan" shall mean each Term Loan, each Revolving Loan
and each Swingline Loan.
"Management Agreements" shall have the meaning provided
in Section 5.05.
"Mandatory Borrowing" shall have the meaning provided
in Section 1.01(d).
"Margin Stock" shall have the meaning provided in
Regulation U.
"Maturity Date" shall mean, with respect to any Tranche of Loans,
the Term Loan Maturity Date, the Revolving Loan Maturity Date or the Swingline
Expiry Date, as the case may be.
"Maximum Swingline Amount" shall mean $10,000,000.
"Merger" shall mean the merger of Acquisition Corp.
with and into Universal pursuant to the Merger Documents, with
Universal as the surviving corporation of such merger.
"Merger Documents" shall mean and include (i) the Agreement and Plan
of Merger, dated as of February 20, 1998, among Holdings, the Borrower and
TCSI, as the same may be amended, modified or supplemented from time to time
pursuant to the terms hereof and thereof and (ii) all other agreements and
documents, governing, or relating to, the Merger.
"Net Hedging Exposure Amount" shall mean at any time, the net
exposure amount determined on a mark-to-market basis at such time, of the
Borrower under any Other Hedging Agreement.
"Net Sale Proceeds" shall mean for any sale of assets, the gross
cash proceeds (including any cash received by way of deferred payment pursuant
to a promissory note, receivable or otherwise, but
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only as and when received) received from such sale of assets, net of the
reasonable costs of such sale (including payments of unassumed liabilities
relating to the assets sold and required payments of any Indebtedness (other
than Indebtedness secured pursuant to the Security Documents) which is secured
by the respective assets which were sold), and the taxes paid or payable by
Holdings' consolidated group as a result of such sale and appropriate amounts
to be provided by Holdings or any of its Subsidiaries, as the case may be, as
a reserve, in accordance with GAAP, against any liabilities associated with
such Asset Sale and retained by Holdings or any of its Subsidiaries, after
such Asset Sale, including without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations with such Asset
Sale (it being understood, however, that, to the extent such reserves are
released or reduced, an amount equal to such release or reduction shall be
required to be applied as a mandatory repayment or mandatory commitment
reduction in accordance with Sections 3.03 and 4.02).
"Non-Defaulting Bank" shall mean and include each Bank other than a
Defaulting Bank.
"Note" shall mean each Term Note, each Revolving Note
and the Swingline Note.
"Notice of Borrowing" shall have the meaning provided
in Section 1.03.
"Notice of Conversion" shall have the meaning provided
in Section 1.06.
"Notice Office" shall mean the office of the Agent located at 130
Liberty Street, New York, New York 10006, Attention: Keith Stimpson, or such
other office as the Agent may hereafter designate in writing as such to the
other parties hereto.
"Obligations" shall mean all amounts owing to the Agent, the
Collateral Agent or any Bank pursuant to the terms of this Agreement or any
other Credit Document.
"Other Hedging Agreement" shall mean any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect against the fluctuations in currency values.
"Participant" shall have the meaning provided in
Section 2.04(a).
"Payment Office" shall mean the office of the Agent located at One
Bankers Trust Plaza, New York, New York 10006, or such other office as the
Agent may hereafter designate in writing as such to the other parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" of any Bank at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the Revolving Loan
Commitment of such Bank at such time and the denominator of which is the Total
Revolving Loan Commitment at such time, provided that if the Percentage of any
Bank is to be determined after the Total Revolving Loan Commitment has been
terminated, then the Percentages of the Banks shall be determined immediately
prior (and without giving effect) to such termination.
"Permitted Encumbrance" shall mean, with respect to any Mortgaged
Property, such exceptions to title as are set forth in the title insurance
policy or title commitment delivered with respect thereto, all of which
exceptions must be acceptable to the Agent in its reasonable discretion.
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"Permitted Investors" shall mean (x) Castle Harlan Partners III
L.P., Castle Harlan, Inc. and employees, management and directors of, and
persons owning accounts managed by, any of the foregoing and their respective
Affiliates (including, without limitation, Holdings and the Borrower) and (y)
other investors reasonably satisfactory to the Agent and the Required Banks.
"Permitted Liens" shall have the meaning provided in
Section 9.01.
"Permitted Section 9.02(viii) Acquisition" shall have the meaning
provided in Section 9.02(viii).
"Person" shall mean any individual, partnership, joint venture,
firm, corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" shall mean any pension plan as defined in Section 3(2) of
ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) Holdings or a Subsidiary of Holdings or an ERISA
Affiliate, and each such plan for the five year period immediately following
the latest date on which Holdings, or a Subsidiary of Holdings or an ERISA
Affiliate maintained, contributed to or had an obligation to contribute to
such plan.
"Pledge Agreement" shall have the meaning provided in
Section 5.09.
"Pledge Agreement Collateral" shall mean all
"Collateral" as defined in the Pledge Agreement.
"Pledged Securities" shall mean all "Pledged
Securities" as defined in the Pledge Agreement.
"Prime Lending Rate" shall mean the rate which BTCo announces from
time to time as its prime lending rate, the Prime Lending Rate to change when
and as such prime lending rate changes. The Prime Lending Rate is a reference
rate and does not necessarily represent the lowest or best rate actually
charged to any customer. BTCo may make commercial loans or other loans at
rates of interest at, above or below the Prime Lending Rate.
"Projections" shall mean the projections prepared by the Borrower in
connection with the Transaction, dated January 28, 1998 and furnished to the
Banks prior to the Initial Borrowing Date.
"Qualified Preferred Stock" shall mean the Holdings Preferred Stock
and any other preferred stock of Holdings so long as the terms of any such
preferred stock (i) do not contain any mandatory put, redemption, repayment,
sinking fund or other similar provision occurring before February __, 2006
other than any such provision which is comparable to a provision in the
Holdings Preferred Stock, (ii) do not require the cash payment of dividends
before February __, 2006, (iii) do not contain any covenants other than those
covenants of the type (but no more restrictive than those) set forth in the
Holdings Preferred Stock and (iv) are otherwise reasonably satisfactory to the
Agent.
"Qualified Public Equity Offering" means a bona fide underwritten
sale to the public of common stock of Holdings pursuant to a registration
statement filed with the SEC in accordance with the Securities Act.
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"Quarterly Payment Date" shall mean the last Business Day of each
March, June, September and December occurring after the Initial Borrowing
Date.
"RCRA" shall mean the Resource Conservation and
Recovery Act, as the same may be amended from time to time, 42
U.S.C. ss. 6901 et seq.
"Real Property" of any Person shall mean all the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recovery Event" shall mean the receipt by the Holdings or any of
its Subsidiaries of any cash insurance proceeds or condemnation award payable
(i) by reason of theft, loss, physical destruction or damage or any other
similar event with respect to any property or assets of Holdings or any of its
Subsidiaries and (ii) under any policy of insurance required to be maintained
by Holdings and its Subsidiaries under Section 8.03.
"Refinancing Documents" shall mean all agreements and
documents related to the Refinancing.
"Refinancings" shall mean the repayment in full by the
Borrower of the Indebtedness to be Refinanced.
"Regulations D, G, T, U and X" shall mean Regulations D, G, T, U and
X of the Board of Governors of the Federal Reserve System as from time to time
in effect and any successors to all or a portion thereof.
"Release" means disposing, discharging, injecting, spilling,
pumping, leaking, leaching, dumping, emitting, escaping, emptying, pouring or
migrating, into or upon any land or water or air, or otherwise entering into
the environment.
"Replaced Bank" shall have the meaning provided in
Section 1.13.
"Replacement Bank" shall have the meaning provided in
Section 1.13.
"Reportable Event" shall mean an event described in Section 4043(c)
of ERISA with respect to a Plan that is subject to Title IV of ERISA other
than those events as to which the 30- day notice period is waived under PBGC
Regulation Section 4043.
"Required Banks" shall mean Non-Defaulting Banks, the sum of whose
outstanding Term Loans (or, if prior to the Initial Borrowing Date, Term Loan
Commitments) and Revolving Loan Commitments (or after the termination thereof,
outstanding Revolving Loans and Adjusted Percentage of outstanding Swingline
Loans and Letter of Credit Outstandings) represent an amount greater than
fifty percent of the sum of all outstanding Term Loans (or, if prior to the
Initial Borrowing Date, the Term Loan Commitments) of Non-Defaulting Banks and
the Adjusted Total Revolving Loan Commitment (or after the termination
thereof, the sum of the then total outstanding Revolving Loans of Non-
Defaulting Banks, and the aggregate Adjusted Percentages of all Non-Defaulting
Banks of the total outstanding Swingline Loans and Letter of Credit
Outstandings at such time).
"Returns" shall have the meaning provided in Section
7.09.
"Revolving Loan" shall have the meaning provided in
Section 1.01(b)
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"Revolving Loan Commitment" shall mean, for each Bank, the amount
set forth opposite such Bank's name in Schedule I hereto directly below the
column entitled "Revolving Loan Commitment," as same may be (x) reduced from
time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10 or (y) adjusted
from time to time as a result of assignments to or from such Bank pursuant to
Section 1.13 or 13.04(b).
"Revolving Loan Maturity Date" shall mean February 20,
2003.
"Revolving Note" shall have the meaning provided in
Section 1.05(a).
"SEC" shall have the meaning provided in Section
8.01(h).
"Section 4.04(b)(ii) Certificate" shall have the
meaning provided in Section 4.04(b).
"Secured Consolidated Debt" shall mean, at any time, all
Consolidated Debt (including any Foreign Subsidiary Indebtedness) which is
secured by any of the assets of Holdings and its Subsidiaries.
"Secured Creditors" shall have the meaning assigned that term in the
Security Documents.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
"Securities Issuance" shall mean any issuance or sale by Holdings or
any of its Subsidiaries of any of its equity securities after the Initial
Borrowing Date other than (i) grants or sales of common stock or options or
other rights to acquire common stock of Holdings or any of its Subsidiaries to
directors, management or employees of Holdings or any of its Subsidiaries
under any employee stock option or stock purchase plan or other employee
compensation arrangements and (ii) issuances or sales of any such equity
securities by any Subsidiary of the Borrower to a Wholly-Owned Subsidiary of
the Borrower or to the Borrower or by the Borrower to any of its Wholly-Owned
Subsidiaries, so long as the aggregate cash proceeds (net of reasonable costs
associated therewith) to Holdings and its Subsidiaries from all issuances and
sales pursuant to preceding clause (i) do not exceed $10,000,000 in any fiscal
year of Holdings.
"Security Agreement" shall have the meaning provided in
Section 5.10.
"Security Agreement Collateral" shall mean all
"Collateral" as defined in the Security Agreement.
"Security Document" shall mean and include each of the Security
Agreement, the Pledge Agreement and, after the execution and delivery thereof,
each Additional Security Document.
"Sellers" shall mean Tidewater.
"Shareholders' Agreements" shall have the meaning
provided in Section 5.05.
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"Significant Subsidiary" shall mean, as to any Person, all
Subsidiaries of such Person other than its Insignificant Foreign Subsidiaries.
"Standby Letter of Credit" shall have the meaning
provided in Section 2.01(a).
"Start Date" shall mean, with respect to any Applicable Margin
Period, the first day of such Applicable Margin Period.
"Stated Amount" of each Letter of Credit shall, at any time, mean
the maximum amount available to be drawn thereunder (in each case determined
without regard to whether any conditions to drawing could then be met).
"Subsidiary" shall mean, as to any Person, (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one
or more Subsidiaries of such Person and (ii) any partnership, association,
joint venture or other entity in which such Person and/or one or more
Subsidiaries of such Person has more than a 50% equity interest at the time.
"Subsidiary Guarantor" shall mean each Subsidiary of the Borrower
(other than a Foreign Subsidiary except to the extent otherwise provided in
Section 8.12) that is or becomes a party to the Subsidiary Guaranty.
"Subsidiaries Guaranty" shall mean the Subsidiaries Guaranty
substantially in the form of Exhibit I.
"Supermajority Banks" shall mean those Non-Defaulting Banks which
would constitute the Required Banks under, and as defined in, this Agreement
if (x) all outstanding Obligations in respect of the Revolving Loan Commitment
were repaid in full and the Total Revolving Loan Commitment was terminated and
(y) the percentage "50%" contained therein were changed to "66-2/3%."
"Swingline Expiry Date" shall mean, at any time, the date which is
two Business Days prior to the Revolving Loan Maturity Date.
"Swingline Loan" shall have the meaning provided in
Section 1.01(c).
"Swingline Note" shall have the meaning provided in
Section 1.05(a).
"Syndication Date" shall have the meaning provided in
Section 1.01(a).
"Taxes" shall have the meaning provided in Section
4.04(a).
"TCSI" shall mean Tidewater Compression Service, Inc.,
a Texas corporation.
"Term Loan" shall have the meaning provided in Section
1.01(a).
"Term Loan Commitment" shall mean, for each Bank, the amount set
forth opposite such Bank's name in Schedule I hereto directly below the column
entitled "Term Loan Commitment", as same
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may be (x) reduced from time to time pursuant to Sections 3.03, 4.02 and/or 10
or (y) adjusted from time to time as a result of assignments to or from such
Bank pursuant to Section 1.13 or 13.04.
"Term Loan Maturity Date" shall mean February 20, 2005.
"Term Loan Scheduled Repayment" shall have the meaning provided in
Section 4.02(b).
"Term Loan Scheduled Repayment Date" shall have the meaning provided
in Section 4.02(b).
"Term Note" shall have the meaning provided in Section
1.05(a).
"Test Date" shall mean, with respect to any Start Date, the last day
of the most recent fiscal quarter of Holdings ended immediately prior to such
date.
"Test Period" shall mean each period of four consecutive fiscal
quarters of Holdings then last ended (in each case taken as one accounting
period).
"Tidewater" shall mean Tidewater, Inc., a Delaware
corporation.
"Total Commitments" shall mean, at any time, the sum of
the Commitments of each of the Banks.
"Total Interest Expense" shall mean, for any period, the total
consolidated interest expense (net of interest income) of Holdings and its
Consolidated Subsidiaries for such period (including, without limitation, the
interest expense associated with Capitalized Lease Obligations), provided that
(x) the amortization or write-off of debt issuance costs, commissions, fees
and expenses, (y) the amortization of original issue discounts and (z) any
interest on the Holdings Senior Discount Notes which is not payable in cash
shall (in each case) be excluded from Total Interest Expense to the extent
same would otherwise have been included therein.
"Total Revolving Loan Commitment" shall mean, at any time, the sum
of the Revolving Loan Commitments of each of the Banks.
"Total Term Loan Commitment" shall mean, at any time, the sum of the
Term Loan Commitments of each of the Banks.
"Trade Letter of Credit" shall have the meaning
provided in Section 2.01(a).
"Tranche" shall mean the respective facility and commitments
utilized in making Loans hereunder, with there being three separate Tranches,
i.e., Term Loans, Revolving Loans and Swingline Loans.
"Transaction" shall mean, collectively, (i) the consummation of the
Acquisition, (ii) the issuance of the Holdings Senior Discount Notes, (iii)
the issuance of the Borrower Senior Discount Notes, (iv) the consummation of
the Equity Financing, (v) the consummation of the Refinancing, (vi) the
entering into of the Credit Documents and (vii) the payment of fees and
expenses in connection with the foregoing.
"Type" shall mean the type of Loan determined with regard to the
interest option applicable thereto, i.e., whether a Base Rate Loan or a
Eurodollar Loan.
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"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the value of the accumulated plan benefits under the Plan
determined on a plan termination basis in accordance with actuarial
assumptions at such time consistent with those prescribed by the PBGC for
purposes of Section 4044 of ERISA, exceeds the fair market value of all plan
assets allocable to such liabilities under Title IV of ERISA (excluding any
accrued but unpaid contributions).
"United States" and "U.S." shall each mean the United
States of America.
"Universal" shall mean (i) prior to the Merger, TCSI and (ii) from
and after the consummation of the Merger, Universal Compression, Inc.
"Unpaid Drawing" shall have the meaning provided for in
Section 2.05(a).
"Unutilized Revolving Loan Commitment" with respect to any Bank, at
any time, shall mean such Bank's Revolving Loan Commitment at such time less
the sum of (i) the aggregate outstanding principal amount of Revolving Loans
made by such Bank and (ii) such Bank's Adjusted Percentage of the Letter of
Credit Outstandings.
"Voting Stock" of any Person as of any date means the capital stock
of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying
shares) is at the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Wholly-Owned
Subsidiaries of such Person has a 100% equity interest at such time.
SECTION 12. The Agent.
12.01 Appointment. The Banks hereby designate Bankers Trust Company
as Agent (for purposes of this Section 12, the term "Agent" shall include
Bankers Trust Company in its capacity as Collateral Agent pursuant to the
Security Documents) to act as specified herein and in the other Credit
Documents. Each Bank hereby irrevocably authorizes, and each holder of any
Note by the acceptance of such Note shall be deemed irrevocably to authorize,
the Agent to take such action on its behalf under the provisions of this
Agreement, the other Credit Documents and any other instruments and agreements
referred to herein or therein and to exercise such powers and to perform such
duties hereunder and thereunder as are specifically delegated to or required
of the Agent by the terms hereof and thereof and such other powers as are
reasonably incidental thereto. The Agent may perform any of its duties
hereunder by or through its respective officers, directors, agents, employees
or affiliates.
12.02 Nature of Duties. The Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement and the
other Credit Documents. Neither the Agent nor any of its respective officers,
directors, agents, employees or affiliates shall be liable for any action
taken or omitted by it or them hereunder or under any other Credit Document or
in connection herewith or therewith, unless caused by its or their gross
negligence or willful misconduct. The duties of the Agent shall be mechanical
and administrative in nature; the Agent shall not have by reason of this
Agreement or any other Credit Document a fiduciary relationship in respect of
any Bank or the holder of any Note; and nothing in
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this Agreement or any other Credit Document, expressed or implied, is intended
to or shall be so construed as to impose upon the Agent any obligations in
respect of this Agreement or any other Credit Document except as expressly set
forth herein or therein.
12.03 Lack of Reliance on the Agent. Independently and without
reliance upon the Agent, each Bank and the holder of each Note, to the extent
it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of Holdings
and its Subsidiaries in connection with the making and the continuance of the
Loans and the taking or not taking of any action in connection herewith and
(ii) its own appraisal of the creditworthiness of the Credit Parties and their
Subsidiaries and, except as expressly provided in this Agreement, the Agent
shall not have any duty or responsibility, either initially or on a continuing
basis, to provide any Bank or the holder of any Note with any credit or other
information with respect thereto, whether coming into its possession before
the making of the Loans or at any time or times thereafter. The Agent shall
not be responsible to any Bank or the holder of any Note for any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or for
the execution, effectiveness, genuineness, validity, enforceability,
perfection, collectibility, priority or sufficiency of this Agreement or any
other Credit Document or the financial condition of Holdings and its
Subsidiaries or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of
this Agreement or any other Credit Document, or the financial condition of
Holdings and its Subsidiaries or the existence or possible existence of any
Default or Event of Default.
12.04 Certain Rights of the Agent. If the Agent shall request
instructions from the Required Banks with respect to any act or action
(including failure to act) in connection with this Agreement or any other
Credit Document, the Agent shall be entitled to refrain from such act or
taking such action unless and until the Agent shall have received instructions
from the Required Banks; and the Agent shall not incur liability to any Person
by reason of so refraining. Without limiting the foregoing, no Bank or the
holder of any Note shall have any right of action whatsoever against the Agent
as a result of the Agent acting or refraining from acting hereunder or under
any other Credit Document in accordance with the instructions of the Required
Banks.
12.05 Reliance. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made
by any Person that the Agent believed to be the proper Person, and, with
respect to all legal matters pertaining to this Agreement and any other Credit
Document and its duties hereunder and thereunder, upon advice of counsel
selected by the Agent.
12.06 Indemnification. To the extent the Agent is not reimbursed and
indemnified by the Parties the Banks will reimburse and indemnify the Agent,
in proportion to their respective "percentages" as used in determining the
Required Banks, for and against any and all liabilities, obligations, losses,
damages, penalties, claims, actions, judgments, costs, expenses or
disbursements of whatsoever kind or nature which may be imposed on, asserted
against or incurred by the Agent in performing its respective duties hereunder
or under any other Credit Document, in any way relating to or arising out of
this Agreement or any other Credit Document; provided that no Bank shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct.
12.07 The Agent in its Individual Capacity. With respect to its
obligation to make Loans, or issue or participate in Letters of Credit, under
this Agreement, the Agent shall have the rights and
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powers specified herein for a "Bank" and may exercise the same rights and
powers as though it were not performing the duties specified herein; and the
term "Banks," "Required Banks," "Supermajority Banks," "holders of Notes" or
any similar terms shall, unless the context clearly otherwise indicates,
include the Agent in its individual capacity. The Agent may accept deposits
from, lend money to, and generally engage in any kind of banking, trust or
other business with any Credit Party or any Affiliate of any Credit Party as
if it were not performing the duties specified herein, and may accept fees and
other consideration from the Borrower or any other Credit Party for services
in connection with this Agreement and otherwise without having to account for
the same to the Banks.
12.08 Holders. The Agent may deem and treat the payee of any Note as
the owner thereof for all purposes hereof unless and until a written notice of
the assignment, transfer or endorsement thereof, as the case may be, shall
have been filed with the Agent. Any request, authority or consent of any
Person who, at the time of making such request or giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee, assignee or indorsee, as the case may be, of
such Note or of any Note or Notes issued in exchange therefor.
12.09 Resignation by the Agent. (a) The Agent may resign from the
performance of all its functions and duties hereunder and/or under the other
Credit Documents at any time by giving 15 Business Days' prior written notice
to the Borrower and the Banks. Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation, the Required Banks shall
appoint a successor Agent hereunder or thereunder who shall be a commercial
bank or trust company reasonably acceptable to the Borrower (it being
understood and agreed that any Non- Defaulting Bank is deemed to be acceptable
to the Borrower).
(c) If a successor Agent shall not have been so appointed within
such 15 Business Day period, the Agent, with the consent of the Borrower,
shall then appoint a successor Agent who shall serve as Agent hereunder or
thereunder until such time, if any, as the Banks appoint a successor Agent as
provided above.
(d) If no successor Agent has been appointed pursuant to clause (b)
or (c) above by the 20th Business Day after the date such notice of
resignation was given by the Agent, the Agent's resignation shall become
effective and the Required Banks shall thereafter perform all the duties of
the Agent hereunder and/or under any other Credit Document until such time, if
any, as the Required Banks appoint a successor Agent as provided above.
SECTION 13. Miscellaneous.
13.01 Payment of Expenses, etc. The Borrower shall: (i) whether or
not the transactions herein contemplated are consummated, pay within 15 days
following written demand by the Agent (other than any payments due on the
Initial Borrowing Date, which the Borrower shall pay on such date) all
reasonable out-of-pocket costs and expenses of the Agent (including, without
limitation, the reasonable fees and disbursements of White & Case LLP and the
Agent's local counsel) in connection with the preparation, execution and
delivery of this Agreement and the other Credit Documents and the documents
and instruments referred to herein and therein and any amendment, waiver or
consent relating hereto or thereto, of the Agent in connection with its
syndication efforts with respect to this Agreement and of the Agent and, after
the occurrence and during the continuance of an Event of Default, each of the
Banks in connection
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with the enforcement of this Agreement and the other Credit Documents and the
documents and instruments referred to herein and therein (including, without
limitation, the reasonable fees and disbursements of counsel for the Agent
and, after the occurrence and during the continuance of an Event of Default,
for each of the Banks); (ii) pay within 15 days following written demand by
the Agent (other than any payments due on the Initial Borrowing Date, which
the Borrower shall pay on such date) and hold each of the Banks harmless from
and against any and all present and future stamp, excise and other similar
taxes with respect to the foregoing matters and save each of the Banks
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to such
Bank) to pay such taxes; and (iii) indemnify the Agent and each Bank, and each
of their respective officers, directors, employees, representatives and agents
from and hold each of them harmless against any and all liabilities,
obligations (including removal or remedial actions), losses, damages,
penalties, claims, actions, judgments, suits, costs, expenses and
disbursements (including reasonable attorneys' and consultants' fees and
disbursements) incurred by, imposed on or assessed against any of them as a
result of, or arising out of, or in any way related to, or by reason of, (a)
any investigation, litigation or other proceeding (whether or not the Agent or
any Bank is a party thereto) related to the entering into and/or performance
of this Agreement or any other Credit Document or the use of any Letter of
Credit or the proceeds of any Loans hereunder or the consummation of any
transactions contemplated herein (including, without limitation, the
Acquisition) or in any other Credit Document or the exercise of any of their
rights or remedies provided herein or in the other Credit Documents, or (b)
the actual or alleged presence of Hazardous Materials in the air, surface
water or groundwater or on the surface or subsurface of any Real Property
owned or at any time operated by Holdings or any of its Subsidiaries, the
generation, storage, transportation, handling or disposal of Hazardous
Materials at any location, whether or not owned or operated by Holdings or any
of its Subsidiaries, the non-compliance of any Real Property with foreign,
federal, state and local laws, regulations, and ordinances (including
applicable permits thereunder) applicable to any Real Property, or any
Environmental Claim in connection with Holdings, any of its Subsidiaries or
their business or operations or any Real Property owned or at any time
operated by Holdings or any of its Subsidiaries, including, in each case,
without limitation, the reasonable fees and disbursements of counsel and other
consultants incurred in connection with any such investigation, litigation or
other proceeding (but excluding any losses, liabilities, claims, damages or
expenses to the extent incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified). To the extent that the
undertaking to indemnify, pay or hold harmless the Agent or any Bank set forth
in the preceding sentence may be unenforceable because it is violative of any
law or public policy, the Borrower shall make the maximum contribution to the
payment and satisfaction of each of the indemnified liabilities which is
permissible under applicable law.
13.02 Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, each Bank is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to the Borrower or to any other Person,
any such notice being hereby expressly waived, to set off and to appropriate
and apply any and all deposits (general or special) and any other Indebtedness
at any time held or owing by such Bank (including, without limitation, by
branches and agencies of such Bank wherever located) to or for the credit or
the account of any Credit Party against and on account of the Obligations and
liabilities of the Credit Parties to such Bank under this Agreement or under
any of the other Credit Documents, including, without limitation, all
interests in Obligations purchased by such Bank pursuant to Section 13.06(b),
and all other claims of any nature or description arising out of or connected
with this Agreement or any other Credit Document, irrespective of whether or
not such Bank shall have made any demand hereunder and although said
Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
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13.03 Notices. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered: if to any Credit Party,
at such Credit Party's address specified opposite its signature below; if to
any Bank, at its address specified opposite its name on Schedule VII below;
and if to the Agent, at its Notice Office; or, as to any Credit Party or the
Agent, at such other address as shall be designated by such party in a written
notice to the other parties hereto and, as to each Bank, at such other address
as shall be designated by such Bank in a written notice to the Borrower and
the Agent. All such notices and communications shall, when mailed,
telegraphed, telexed, telecopied, or cabled or sent by overnight courier, be
effective when deposited in the mails, delivered to the telegraph company,
cable company or overnight courier, as the case may be, or sent by telex or
telecopier, except that notices and communications to the Agent and the
Borrower shall not be effective until received by the Agent or the Borrower,
as the case may be.
13.04 Benefit of Agreement; Assignments; Participations. (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,
however, the Borrower may not assign or transfer any of its rights,
obligations or interest hereunder without the prior written consent of the
Banks and, provided further, that, although any Bank may transfer, assign or
grant participations in its rights hereunder, such Bank shall remain a "Bank"
for all purposes hereunder (and may not transfer or assign all or any portion
of its Commitments hereunder except as provided in Sections 1.13 and 13.04(b))
and the transferee, assignee or participant, as the case may be, shall not
constitute a "Bank" hereunder and, provided further, that no Bank shall
transfer or grant any participation under which the participant shall have
rights to approve any amendment to or waiver of this Agreement or any other
Credit Document except to the extent such amendment or waiver would (i) extend
the final scheduled maturity of any Loan, Note or Letter of Credit (unless
such Letter of Credit is not extended beyond the Revolving Loan Maturity Date)
in which such participant is participating, or reduce the rate or extend the
time of payment of interest or Fees thereon (except in connection with a
waiver of applicability of any post-default increase in interest rates) or
reduce the principal amount thereof, or increase the amount of the
participant's participation over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default or of a mandatory
reduction in the Total Commitment shall not constitute a change in the terms
of such participation, and that an increase in any Commitment or Loan shall be
permitted without the consent of any participant if the participant's
participation is not increased as a result thereof), (ii) consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement or (iii) release all or substantially all of the
Collateral under all of the Security Documents (except as expressly provided
in the Credit Documents) supporting the Loans hereunder in which such
participant is participating. In the case of any such participation, the
participant shall not have any rights under this Agreement or any of the other
Credit Documents (the participant's rights against such Bank in respect of
such participation to be those set forth in the agreement executed by such
Bank in favor of the participant relating thereto) and all amounts payable by
the Borrower hereunder shall be determined as if such Bank had not sold such
participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank together
with one or more other Banks) may (x) assign all or a portion of its
Commitments and related outstanding Obligations hereunder to (i) its parent
company and/or any affiliate of such Bank which is at least 50% owned by such
Bank or its parent company or to one or more Banks or (ii) in the case of any
Bank that is a fund that invests in loans, any other fund that invests in
loans and is managed or advised by the same investment advisor of such Bank or
by an Affiliate of such investment advisor or (y) assign all, or if less than
all, a portion equal to at least $5,000,000 in the aggregate for the assigning
Bank or assigning Banks, of such Commitments and related outstanding
Obligations hereunder to one or more Eligible Transferees (treating any fund
that invests in loans and any other fund that invests in loans and is managed
or advised by the
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same investment advisor of such fund or by an Affiliate of such investment
advisor as a single Eligible Transferee), each of which assignees shall become
a party to this Agreement as a Bank by execution of an Assignment and
Assumption Agreement, provided that, (i) at such time Schedule I shall be
deemed modified to reflect the Commitments (or outstanding Term Loans, as the
case may be) of such new Bank and of the existing Banks, (ii) new Notes will
be issued, at the Borrower's expense, to such new Bank and to the assigning
Bank upon the request of such new Bank or assigning Bank, such new Notes to be
in conformity with the requirements of Section 1.05 (with appropriate
modifications) to the extent needed to reflect the revised Commitments (or
outstanding Term Loans, as the case may be), (iii) the consent of the Agent
and the Borrower shall be required in connection with any assignment to an
Eligible Transferee pursuant to clause (y) above (which consents shall not be
unreasonably withheld), provided that the consent of the Borrower shall not be
required at any time that an Event of Default has occurred and is continuing,
and the consent of BTCo shall be required in connection with any assignment of
all or a portion of any Revolving Loan Commitment, (iv) the Agent shall
receive at the time of each such assignment, from the assigning or assignee
Bank, the payment of a non-refundable assignment fee of $3,000 and (v)
promptly after such assignment, the Borrower shall have received from the
Agent notice of any such assignment, together with the copy of the Assignment
and Assumption Agreement relating thereto. To the extent of any assignment
pursuant to this Section 13.04(b), the assigning Bank shall be relieved of its
obligations hereunder with respect to its assigned Commitments. At the time of
each assignment pursuant to this Section 13.04(b) to a Person which is not
already a Bank hereunder and which is not a United States person (as such term
is defined in Section 7701(a)(30) of the Code) for Federal income tax
purposes, the respective assignee Bank shall, to the extent legally entitled
to do so, provide to the Borrower in the case of a Bank described in clause
(ii) or (iv) of Section 4.04(b), the forms described in such clause (ii) or
(iv), as the case may be. To the extent that an assignment of all or any
portion of a Bank's Commitments and related outstanding Obligations pursuant
to Section 1.13 or this Section 13.04(b) would, at the time of such
assignment, result in increased costs under Section 1.10, 2.06 or 4.04 from
those being charged by the respective assigning Bank prior to such assignment,
then the Borrower shall not be obligated to pay such increased costs (although
the Borrower shall be obligated to pay any other increased costs of the type
described above resulting from changes after the date of the respective
assignment).
(c) Nothing in this Agreement shall prevent or prohibit any Bank
from pledging its Loans and Notes hereunder to a Federal Reserve Bank in
support of borrowings made by such Bank from such Federal Reserve Bank.
13.05 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Agent or any Bank or any holder of any Note in exercising any
right, power or privilege hereunder or under any other Credit Document and no
course of dealing between Holdings or any other Credit Party and the Agent or
any Bank or the holder of any Note shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege
hereunder or under any other Credit Document preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights, powers and remedies herein or in any
other Credit Document expressly provided are cumulative and not exclusive of
any rights, powers or remedies which the Agent or any Bank or the holder of
any Note would otherwise have. No notice to or demand on any Credit Party in
any case shall entitle any Credit Party to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights
of the Agent or any Bank or the holder of any Note to any other or further
action in any circumstances without notice or demand.
13.06 Payments Pro Rata. (a) Except as otherwise provided in this
Agreement, the Agent agrees that promptly after its receipt of each payment
from or on behalf of the Borrower in respect of any Obligations hereunder, it
shall distribute such payment to the Banks (other than any Bank that has
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consented in writing to waive its pro rata share of any such payment) pro rata
based upon their respective percentages, if any, of the Obligations with
respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise), which is applicable to the payment of the principal of, or
interest on, the Loans, Unpaid Drawings, Commitment Commission or Letter of
Credit Fees, of a sum which with respect to the related sum or sums received
by other Banks is in a greater proportion than the total of such Obligation
then owed and due to such Bank bears to the total of such Obligation then owed
and due to all of the Banks immediately prior to such receipt, then such Bank
receiving such excess payment shall purchase for cash without recourse or
warranty from the other Banks an interest in the Obligations of the respective
Party to such Banks in such amount as shall result in a proportional
participation by all the Banks in such amount; provided that if all or any
portion of such excess amount is thereafter recovered from such Bank, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
(c) Notwithstanding anything to the contrary contained herein, the
provisions of the preceding Sections 13.06(a) and (b) shall be subject to the
express provisions of this Agreement which require, or permit, differing
payments to be made to Non- Defaulting Banks as opposed to Defaulting Banks.
13.07 Calculations; Computations; Accounting Terms. (a) The
financial statements to be furnished to the Banks pursuant hereto shall be
made and prepared in accordance with generally accepted accounting principles
in the United States consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Banks); provided that, except as otherwise specifically
provided herein, all computations of Excess Cash Flow and Available Retained
Cash Flow Amount, and all computations and all definitions used in determining
compliance with Sections 9.07 through 9.09, inclusive, shall utilize
accounting principles and policies in conformity with those used to prepare
the historical financial statements (except that overhaul expenses will be
capitalized instead of expensed) delivered to the Banks pursuant to Section
7.05(a) (including, in any event, that all obligations in respect of the
Holdings Senior Discount Notes and the Borrower Senior Discount Notes shall be
treated as obligations in respect of Indebtedness and any recharacterization,
after the Initial Borrowing Date, of the prepayment penalties paid in
connection with the Refinancings as expenses shall be ignored for purposes of
such calculations).
(b) All computations of (i) interest on Eurodollar Loans, Commitment
Commission and other Fees hereunder shall be made on the basis of a year of
360 days (ii) interest on Base Rate Loans shall be made on the basis of a year
of 365 or 366 days, as the case may be, in each case for the actual number of
days (including the first day but excluding the last day, except that in the
case of Letter of Credit Fees, the last day shall be included) occurring in
the period for which such interest, Commitment Commission or Fees are payable.
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
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OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK,
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF HOLDINGS AND THE
BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH
OF HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND
EMPOWERS CT CORPORATION SYSTEM, WITH OFFICES ON THE DATE HEREOF AT 1633
BROADWAY, NEW YORK, NEW YORK 10019 AS ITS DESIGNEE, APPOINTEE AND AGENT TO
RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS
PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS
WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH
DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, EACH
OF HOLDINGS AND THE BORROWER AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND
AGENT IN NEW YORK CITY ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION
SATISFACTORY TO THE AGENT UNDER THIS AGREEMENT. EACH OF HOLDINGS AND THE
BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ANY CREDIT
PARTY AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO
BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE AGENT UNDER THIS AGREEMENT, ANY BANK OR THE HOLDER OF ANY NOTE TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER
JURISDICTION.
(b) EACH OF HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF
THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN
CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD
OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
13.09 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Agent.
13.10 Effectiveness. This Agreement shall become effective on the
date (the "Effective Date") on which Holdings, the Borrower, the Agent and
each of the Banks shall have signed a counterpart hereof (whether the same or
different counterparts) and shall have delivered the same to the Agent at its
Notice Office or, in the case of the Banks, shall have given to the Agent
telephonic (confirmed in writing),
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written or telex notice (actually received) at such office that the same has
been signed and mailed to it. The Agent will give the Borrower and each Bank
prompt written notice of the occurrence of the Effective Date.
13.11 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not
in any way affect the meaning or construction of any provision of this
Agreement.
13.12 Amendment or Waiver. (a) Neither this Agreement nor any other
Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination
is in writing signed by the respective Credit Parties party thereto and the
Required Banks, provided that no such change, waiver, discharge or termination
shall, without the consent of each Bank (other than a Defaulting Bank) (with
Obligations being directly affected in the case of following clause (i)), (i)
extend the final scheduled maturity of any Loan or Note or extend the stated
maturity of any Letter of Credit beyond the Revolving Loan Maturity Date, or
reduce the rate or extend the time of payment of interest or Fees thereon
(except in connection with a waiver of applicability of any post-default
increase in interest rates), or reduce the principal amount thereof, (ii)
release all or substantially all of the Collateral (except as expressly
provided in the Security Documents) under all the Security Documents, (iii)
amend, modify or waive any provision of this Section 13.12, (iv) reduce the
percentage specified in the definition of Required Banks (it being understood
that, with the consent of the Required Banks, additional extensions of credit
pursuant to this Agreement may be included in the determination of the
Required Banks on substantially the same basis as the extensions of Term Loans
and Revolving Loan Commitments are included on the Effective Date) or (v)
consent to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement; provided further, that no such change,
waiver, discharge or termination shall (v) increase the Commitments of any
Bank over the amount thereof then in effect without the consent of such Bank
(it being understood that waivers or modifications of conditions precedent,
covenants, Defaults or Events of Default or of a mandatory reduction in the
Total Commitment shall not constitute an increase of the Commitment of any
Bank, and that an increase in the available portion of any Commitment of any
Bank shall not constitute an increase in the Commitment of such Bank), (w)
without the consent of BTCo, amend, modify or waive any provision of Section 2
or alter its rights or obligations with respect to Letters of Credit or
Swingline Loans, (x) without the consent of the Agent, amend, modify or waive
any provision of Section 12 as same applies to such Agent or any other
provision as same relates to the rights or obligations of such Agent, (y)
without the consent of the Collateral Agent, amend, modify or waive any
provision relating to the rights or obligations of the Collateral Agent or (z)
without the consent of the Supermajority Banks, amend the definition of
Supermajority Banks or Section 4.02(b) or alter the required application of
any prepayments or repayments (or commitment reductions), as between the
various Tranches, pursuant to Section 4.01 or 4.02 (although the Required
Banks may waive, in whole or in part, any such prepayment, repayment or
commitment reduction, except pursuant to Section 4.02(b), so long as the
application, as amongst the various Tranches, of any such prepayment,
repayment or commitment reduction which is still required to be made is not
altered).
(b) If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated by
clause (a)(i) through (v), inclusive, of this Section 13.12, the consent of
the Required Banks is obtained but the consent of one or more of other Banks
whose consent is required is not obtained, then the Borrower shall have the
right to replace each such non-consenting Bank or Banks (so long as all
non-consenting Banks are so replaced) with one or more Replacement Banks
pursuant to Section 1.13 so long as at the time of such replacement, each such
Replacement Bank consents to the proposed change, waiver, discharge or
termination, provided that the Borrower shall not have the right to replace a
Bank solely as a result of the exercise of such Bank's rights
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(and the withholding of any required consent by such Bank) pursuant to the
second proviso to Section 13.12(a).
13.13 Survival. All indemnities set forth herein including, without
limitation, in Sections 1.10, 1.11, 2.06, 4.04, 12.06 and 13.01 shall survive
the execution, delivery and termination of this Agreement and the Notes and
the making and repayment of the Obligations.
13.14 Domicile of Loans. Each Bank may transfer and carry its Loans
at, to or for the account of any office, Subsidiary or Affiliate of such Bank.
Notwithstanding anything to the contrary contained herein, to the extent that
a transfer of Loans pursuant to this Section 13.14 would, at the time of such
transfer, result in increased costs under Section 1.10, 1.11, 2.06 or 4.04
from those being charged by the respective Bank prior to such transfer, then
the Borrower shall not be obligated to pay such increased costs (although the
Borrower shall be obligated to pay any other increased costs of the type
described above resulting from changes after the date of the respective
transfer).
13.15 Limitation on Additional Amounts, Etc. Notwithstanding
anything to the contrary contained in Sections 1.10 and 2.06 of this
Agreement, unless a Bank gives notice to the Borrower that it is obligated to
pay an amount under the respective such Section within 180 days after the
later of (x) the date the Bank incurs the respective increased costs,
reduction in amounts received or receivable or reduction in return on capital
or (y) the date such Bank has actual knowledge of its incurrence of the
respective increased costs, reductions in amounts received or receivable or
reduction in return on capital, then such Bank shall only be entitled to be
compensated for such amount by the Borrower pursuant to said Section 1.10 or
2.06, as the case may be, to the extent the costs, loss, expense or liability,
reduction in amounts received or receivable or reduction in return on capital
are incurred or suffered on or after the date which occurs 180 days prior to
such Bank giving notice to the Borrower that it is obligated to pay the
respective amounts pursuant to said Section 1.10 or 2.06, as the case may be.
Furthermore, no Bank shall be entitled to compensation for any increased costs
or reduction in amounts received or receivable or reduction in return on
capital under Section 1.10 or 2.06 unless at the time it is the policy or
general practice of such Bank to request compensation for comparable costs or
reductions, if any, in similar circumstances, if any, under comparable
provisions of other credit agreements for comparable customers (unless
specific facts or circumstances applicable to the Borrower or the transactions
contemplated by this Agreement would alter the application of such policy or
general practice). This Section 13.15 shall have no applicability to any
Section of this Agreement other than said Sections 1.10 and 2.06.
13.16 Register. The Borrower hereby designates the Agent to serve as
the Borrower's agent, solely for purposes of this Section 13.16, to maintain a
register (the "Register") on which it will record the Commitments from time to
time of each of the Banks, the Loans made by each of the Banks and each
repayment in respect of the principal amount of the Loans of each Bank.
Failure to make any such recordation, or any error in such recordation shall
not affect the Borrower's obligations in respect of such Loans. With respect
to any Bank, the transfer of the Commitments of such Bank and the rights to
the principal of, and interest on, any Loan made pursuant to such Commitments
shall not be effective until such transfer is recorded on the Register
maintained by the Agent with respect to ownership of such Commitments and
Loans and prior to such recordation all amounts owing to the transferor with
respect to such Commitments and Loans shall remain owing to the transferor.
The registration of assignment or transfer of all or part of any Commitments
and Loans shall be recorded by the Agent on the Register only upon the
acceptance by the Agent of a properly executed and delivered Assignment and
Assumption Agreement pursuant to Section 13.04(b). Coincident with the
delivery of such an Assignment and Assumption Agreement to the Agent for
acceptance and registration of assignment or transfer of all or part of a
Loan, or as soon thereafter as practicable, the assigning or transferor Bank
shall surrender the Note
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evidencing such Loan, and thereupon one or more new Notes in the same
aggregate principal amount shall be issued to the assigning or transferor Bank
and/or the new Bank. The Borrower agrees to indemnify the Agent from and
against any and all losses, claims, damages and liabilities of whatsoever
nature which may be imposed on, asserted against or incurred by the Agent in
performing its duties under this Section 13.16.
13.17 Confidentiality. (a) Subject to the provisions of clause (b)
of this Section 13.17, each Bank agrees that it will use its reasonable
efforts not to disclose without the prior consent of the Borrower (other than
to its employees, auditors, advisors or counsel or to another Bank if the Bank
or such Bank's holding or parent company in its sole discretion determines
that any such party should have access to such information, provided such
Persons shall be subject to the provisions of this Section 13.17 to the same
extent as such Bank) any information with respect to Holdings or any of its
Subsidiaries which is now or in the future furnished pursuant to this
Agreement or any other Credit Document and which is designated by the Borrower
to the Banks in writing as confidential, provided that any Bank may disclose
any such information (i) as has become generally available to the public other
than by virtue of a breach of this Section 13.17(a) by the respective Bank,
(ii) as may be required or appropriate in any report, statement or testimony
submitted to any municipal, state or Federal Reserve Board, the Federal
Deposit Insurance Corporation or similar organizations (whether in the United
States or elsewhere) or their successors, (iii) as may be required or
appropriate in respect to any summons or subpoena or in connection with any
litigation, (iv) in order to comply with any law, order, regulation or ruling
applicable to such Bank, (v) to the Agent or the Collateral Agent and (vi) to
any prospective or actual transferee or participant in connection with any
contemplated transfer or participation of any of the Notes or Commitments or
any interest therein by such Bank, provided that such prospective transferee
agrees to be bound by the confidentiality provisions contained in this Section
13.17.
(b) Each of Holdings and the Borrower hereby acknowledges and agrees
that each Bank may share with any of its affiliates any information related to
Holdings or any of its Subsidiaries (including, without limitation, any
nonpublic customer information regarding the creditworthiness of Holdings and
its Subsidiaries), provided such Persons shall be subject to the provisions of
this Section 13.17 to the same extent as such Bank).
SECTION 14. Holdings Guaranty.
14.01 Guaranty. In order to induce the Agent, the Collateral Agent,
the Issuing Bank and the Banks to enter into this Agreement and to extend
credit hereunder, and to induce the other Guaranteed Creditors to enter into
Interest Rate Protection Agreements or Other Hedging Agreements, and in
recognition of the direct benefits to be received by Holdings from the
proceeds of the Loans, the issuance of the Letters of Credit and the entering
into of such Interest Rate Protection Agreements or Other Hedging Agreements,
Holdings hereby agrees with the Guaranteed Creditors as follows: Holdings
hereby unconditionally and irrevocably guarantees as primary obligor and not
merely as surety the full and prompt payment when due, whether upon maturity,
acceleration or otherwise, of any and all of the Guaranteed Obligations of the
Borrower to the Guaranteed Creditors. If any or all of the Guaranteed
Obligations of the Borrower to the Guaranteed Creditors becomes due and
payable hereunder, Holdings unconditionally and irrevocably promises to pay
such indebtedness to the Agent and/or the other Guaranteed Creditors, or
order, on demand, together with any and all expenses which may be incurred by
the Agent or the other Guaranteed Creditors in collecting any of the
Guaranteed Obligations. If claim is ever made upon any Guaranteed Creditor for
repayment or recovery of any amount or amounts received in payment or on
account of any of the Guaranteed Obligations and any of the aforesaid payees
repays all or part of said amount by reason of (i) any judgment, decree or
order of any court or administrative body having jurisdiction over such payee
or any of its property or (ii) any settlement or compromise of any such claim
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effected by such payee with any such claimant (including the Borrower), then
and in such event Holdings agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon Holdings, notwithstanding any
revocation of this Guaranty or other instrument evidencing any liability of
the Borrower, and Holdings shall be and remain liable to the aforesaid payees
hereunder for the amount so repaid or recovered to the same extent as if such
amount had never originally been received by any such payee.
14.02 Bankruptcy. Additionally, Holdings unconditionally and
irrevocably guarantees the payment of any and all of the Guaranteed
Obligations of the Borrower to the Guaranteed Creditors whether or not due or
payable by the Borrower upon the occurrence of any of the events specified in
Section 10.05, and irrevocably and unconditionally promises to pay such
indebtedness to the Guaranteed Creditors, or order, on demand, in lawful money
of the United States.
14.03 Nature of Liability. The liability of Holdings hereunder is
exclusive and independent of any security for or other guaranty of the
Guaranteed Obligations of the Borrower whether executed by Holdings, any other
guarantor or by any other party, and the liability of Holdings hereunder is
not affected or impaired by (a) any direction as to application of payment by
the Borrower or by any other party, or (b) any other continuing or other
guaranty, undertaking or maximum liability of a guarantor or of any other
party as to the Guaranteed Obligations of the Borrower, or (c) any payment on
or in reduction of any such other guaranty or undertaking, or (d) any
dissolution, termination or increase, decrease or change in personnel by the
Borrower, or (e) any payment made to any Guaranteed Creditor on the Guaranteed
Obligations which any such Guaranteed Creditor repays to the Borrower pursuant
to court order in any bankruptcy, reorgani zation, arrangement, moratorium or
other debtor relief pro ceeding, and Holdings waives any right to the deferral
or modification of its obligations hereunder by reason of any such proceeding.
14.04 Independent Obligation. The obligations of Holdings hereunder
are independent of the obligations of any other guarantor, any other party or
the Borrower, and a separate action or actions may be brought and prosecuted
against Holdings whether or not action is brought against any other guarantor,
any other party or the Borrower and whether or not any other guarantor, any
other party or the Borrower be joined in any such action or actions. Holdings
waives, to the fullest extent permitted by law, the benefit of any statute of
limitations affecting its liability hereunder or the enforcement thereof. Any
payment by the Borrower or other circumstance which operates to toll any
statute of limitations as to the Borrower shall operate to toll the statute of
limitations as to Holdings.
14.05 Authorization. Holdings authorizes the Guaranteed Creditors
without notice or demand (except as shall be required by applicable statute
and cannot be waived), and without affecting or impairing its liability
hereunder, from time to time to:
(a) change the manner, place or terms of payment of, and/or change
or extend the time of payment of, renew, increase, accelerate or alter,
any of the Guaranteed Obligations (including any increase or decrease in
the rate of interest or fees thereon), any security therefor, or any
liability incurred directly or indirectly in respect there of, and the
Guaranty herein made shall apply to the Guaranteed Obligations as so
changed, extended, renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, impair, surrender, realize upon
or otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
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securing, the Guaranteed Obligations or any liabilities (including any of
those hereunder) incurred directly or indirectly in respect thereof or
hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower, any other Credit Party or others or otherwise act or refrain
from acting;
(d) release or substitute any one or more endorsers, guarantors, the
Borrower, other Credit Parties or other obligors;
(e) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Borrower to its credi tors other
than the Guaranteed Creditors;
(f) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Borrower to the Guaranteed Creditors
regardless of what liability or lia bilities of the Borrower remain
unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement, any other Credit Document or any of the
instruments or agreements referred to herein or therein, or otherwise
amend, modify or supplement this Agreement, any other Credit Document or
any of such other instruments or agreements; and/or
(h) take any other action which would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of
Holdings from its liabilities under this Guaranty.
14.06 Reliance. It is not necessary for any Guaranteed Creditor to
inquire into the capacity or powers of Holdings or any of its Subsidiaries or
the officers, directors, partners or agents acting or purporting to act on
their behalf, and any Guaranteed Obligations made or created in reliance upon
the professed exercise of such powers shall be guaranteed hereunder.
14.07 Subordination. Any indebtedness of the Borrower now or
hereafter owing to Holdings is hereby subordinated to the Guaranteed
Obligations of the Borrower owing to the Guaranteed Creditors; and if the
Agent so requests at a time when an Event of Default exists, all such
indebtedness of the Borrower to Holdings shall be collected, enforced and
received by Holdings for the benefit of the Guaranteed Creditors and be paid
over to the Agent on behalf of the Guaranteed Creditors on account of the
Guaranteed Obligations of the Borrower to the Guaranteed Creditors, but
without affecting or impairing in any manner the liability of Holdings under
the other provisions of this Guar anty. Prior to the transfer by Holdings of
any note or nego tiable instrument evidencing any such indebtedness of the
Borrower to Holdings, Holdings shall mark such note or negotiable instrument
with a legend that the same is subject to this sub ordination. Without
limiting the generality of the foregoing, Holdings hereby agrees with the
Guaranteed Creditors that it will not exercise any right of subrogation which
it may at any time otherwise have as a result of this Guaranty (whether
contractual, under Section 509 of the Bankruptcy Code or otherwise) until all
Guaranteed Obligations have been irrevocably paid in full in cash.
14.08 Waiver. (a) Holdings waives any right (except as shall be
required by applicable statute and cannot be waived) to require any Guaranteed
Creditor to (i) proceed against the Borrower, any other guarantor or any other
party, (ii) proceed against or exhaust any security held from the Borrower,
any other guarantor or any other party or (iii) pursue any other remedy in any
Guaranteed Creditor's power
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whatsoever. Holdings waives any defense based on or arising out of any defense
of the Borrower, any other guarantor or any other party, other than payment in
full of the Guaranteed Obligations, based on or arising out of the disability
of the Borrower, any other guarantor or any other party, or the validity,
legality or unenforceability of the Guaranteed Obligations or any part thereof
from any cause, or the cessation from any cause of the liability of the
Borrower other than payment in full of the Guaranteed Obligations. The
Guaranteed Creditors may, at their election, foreclose on any security held by
the Agent, the Collateral Agent or any other Guaranteed Creditor by one or
more judicial or nonjudicial sales, whether or not every aspect of any such
sale is commercially reasonable (to the extent such sale is permitted by
applicable law), or exercise any other right or remedy the Guaranteed
Creditors may have against the Borrower or any other party, or any security,
without affecting or impairing in any way the liability of Holdings hereunder
except to the extent the Guaranteed Obligations have been paid. Holdings
waives any defense arising out of any such election by the Guaranteed
Creditors, even though such election operates to impair or extin guish any
right of reimbursement or subrogation or other right or remedy of Holdings
against the Borrower or any other party or any security.
(b) Holdings waives all presentments, demands for performance,
protests and notices, including without limitation notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this
Guaranty, and notices of the existence, creation or incurring of new or
additional Guaranteed Obligations. Holdings assumes all responsibility for
being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks which
Holdings assumes and incurs hereunder, and agrees that the Agent and the Banks
shall have no duty to advise Holdings of information known to them re garding
such circumstances or risks.
(c) Holdings hereby acknowledges and affirms that it understands
that to the extent the Guaranteed Obligations are secured by Real Property
located in California, Holdings shall be liable for the full amount of the
liability hereunder notwithstanding the foreclosure on such Real Property by
trustee sale or any other reason impairing Holdings' or any Guaranteed
Creditor's right to proceed against the Borrower or any other guarantor of the
Guaranteed Obligations. In accordance with Section 2856 of the California
Civil Code, Holdings hereby waives:
(i) all rights of subrogation, reimbursement, indemnification, and
contribution and any other rights and defenses that are or may become
available to Holdings by reason of Sections 2787 to 2855, inclusive, 2899
and 3433 of the California Civil Code;
(ii) all rights and defenses that Holdings may have because the
Guaranteed Obligations are secured by Real Property located in
California. This means, among other things: (A) the Guaranteed Creditors
may collect from Holdings without first foreclosing on any real or
personal property collateral pledged by the Borrower or any other Credit
Party; and (B) if the Guaranteed Creditors foreclose on any Real Property
collateral pledged by the Borrower or any other Credit Party, (1) the
amount of the Guaranteed Obligations may be reduced only by the price for
which that collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price, and (2) the Guaranteed
Creditors may collect from Holdings even if the Guaranteed Creditors, by
foreclosing on the Real Property collateral, have destroyed any right
Holdings may have to collect from the Borrower. This is an unconditional
and irrevocable waiver of any rights and defenses Holdings may have
because the Guaranteed Obligations are secured by Real Property. These
rights and defenses include, but are not limited to, any rights or
defenses based upon Section 580a, 580b, 580d or 726 of the California
Code of Civil Procedure; and
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(iii) all rights and defenses arising out of an election of remedies
by the Guaranteed Creditors, even though that election of remedies, such
as a nonjudicial foreclosure with respect to security for the Guaranteed
Obligations, has destroyed Holdings' rights of subrogation and
reimbursement against the Borrower by the operation of Section 580d of
the Code of Civil Procedure or otherwise.
Holdings warrants and agrees that each of the waivers set forth
above is made with full knowledge of its significance and consequences and
that if any of such waivers are determined to be contrary to any applicable
law or public policy, such waivers shall be effective only to the maximum
extent permitted by law.
14.09 Nature of Liability. It is the desire and intent of Holdings
and the Guaranteed Creditors that this Guaranty shall be enforced against
Holdings to the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which enforcement is sought. If, however, and
to the extent that, the obligations of Holdings under this Guaranty shall be
adjudicated to be invalid or unenforceable for any reason (including, without
limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers), then the amount of Holdings obligations
under this Guaranty shall be deemed to be reduced and Holdings shall pay the
maximum amount of the Guaranteed Obligations which would be permissible under
applicable law.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
Address:
4440 Brittmoore UNIVERSAL COMPRESSION HOLDINGS,
Houston, Texas 77041 INC.
Attn: President
Tel: (713) 466-4103
Fax: (713) 466-6574
By
-------------------------------
Title:
<PAGE>
150 East 58th Street TW ACQUISITION CORPORATION
4440 Brittmoore
Houston, Texas 77041
Attn: President By
Tel: (713) 466-4103 _______________________________
Fax: (713) 466-6574 Title:
<PAGE>
130 Liberty Street BANKERS TRUST COMPANY,
New York, New York 10006 Individually and as Agent
Telephone No.: 212-250-9535
Telecopier No.: 212-250-1530
Attention: Marcus Tarkington By
-------------------------------
Title:
<PAGE>
BANK OF SCOTLAND
By
-------------------------------
Title:
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By
-------------------------------
Title:
<PAGE>
FIRST NATIONAL BANK OF COMMERCE
By
-------------------------------
Title:
<PAGE>
FIRST UNION NATIONAL BANK
By
-------------------------------
Title:
<PAGE>
ABN AMRO BANK N.V.
By
-------------------------------
Title:
By
-------------------------------
Title:
<PAGE>
BANQUE PARIBAS
By
-------------------------------
Title:
By
-------------------------------
Title:
<PAGE>
WELLS FARGO BANK (TEXAS)
NATIONAL ASSOCIATION
By
-------------------------------
Title:
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By
-------------------------------
Title:
<PAGE>
SOCIETE GENERALE,
SOUTHWEST AGENCY
By
-------------------------------
Title:
<PAGE>
THE BANK OF NOVA SCOTIA
By
-------------------------------
Title:
<PAGE>
BANKBOSTON, N.A.
By
-------------------------------
Title:
<PAGE>
SCHEDULE I
COMMITMENTS
Revolving
Loan Term Loan
Bank Commitment Commitment
Bankers Trust Company 8,500,000 7,500,000
Credit Lyonnais New York 7,968,750 7,031,250
Branch
Union Bank of California, N.A. 7,968,750 7,031,250
First Union National Bank 7,968,750 7,031,250
Societe Generale, Southwest 7,968,750 7,031,250
Agency
ABN Amro Bank N.V. 6,375,000 5,625,000
BankBoston, N.A. 6,375,000 5,625,000
First National Bank of 6,375,000 5,625,000
Commerce
The Bank of Nova Scotia 6,375,000 5,625,000
Banque Paribas 6,375,000 5,625,000
Bank of Scotland 6,375,000 5,625,000
Wells Fargo Bank (Texas) 6,375,000 5,625,000
National Association
- ------------------------- ------------ -----------
TOTAL: $85,000,000 $75,000,000
<PAGE>
SCHEDULE II
EXISTING INDEBTEDNESS
<PAGE>
SCHEDULE VII
Bank Addresses
Bank Addresses
Bankers Trust Company 130 Liberty Street
New York, New York 10006
Attn: Marcus Tarkington
Tel: (212) 250-7684
Fax: (212) 250-2923
ABN Amro Bank N.V. Three River Way - Suite 1700
Houston, Texas 77056
Attn: Stephanie Balette
Tel: (713) 964-3321
Fax: (713) 621-5801
The Bank of Nova Scotia 600 Peachtree Street N.E.
Suite 2700
Atlanta, Georgia 30308
Attn: Cleve Bushey
Tel: (404) 877-1500
Fax: (404) 888-8998
with a copy to:
1100 Louisiana Street
Suite 3000
Houston, Texas 77002
Attn: Jamie Conn
Tel: (713) 752-0900
Fax: (713) 752-2425
Bank of Scotland 1750 Two Allen Center
1200 Smith Street
Houston, Texas 77002-4312
Attn: Paul Grieg
Tel: (713) 651-1870
Fax: (713) 651-9714
Societe Generale, Southwest 1111 Bagby Street
Agency Suite 2020
Houston, Texas 77002
Attn: Thierry Namavroy
Tel: (713) 759-6316
Fax: (713) 650-0824
<PAGE>
Schedule VII
Page 2
Union Bank of California, N.A. 70 South Lake Avenue
Suite 900
Pasadena, California 91101
Attn: Richard Degrey
Tel: (626) 304-1850
Fax: (626) 304-1845
Wells Fargo Bank (Texas) 1000 Louisiana Street
National Association 3rd Floor
Houston, Texas 77002
Attn: Frank Shageman
Tel: (713) 250-4352
Fax: (713) 250-7912
Credit Lyonnais 1000 Louisiana Street
Houston, Texas 77002
Attn: Page Dillehunt
Tel: (713) 753-8717
Fax: (713) 751-0307
First National Bank of Commerce 201 St. Charles Avenue
28th Floor
New Orleans, Louisiana 70170
Attn: Charlie Freel
Tel: (504) 623-1638
Fax: (504) 623-1316
<PAGE>
Exhibit B-1
FORM OF TERM NOTE
$________________ New York, New York
February 20, 1998
FOR VALUE RECEIVED, [NAME OF BORROWER], a [ ] corporation (the
"Borrower"), hereby promises to pay to the order of _________________________
(the "Bank"), in lawful money of the United States of America in immediately
available funds, at the office of Bankers Trust Company (the "Agent") located at
One Bankers Trust Plaza, New York, New York 10006 on the Term Loan Maturity Date
(as defined in the Agreement referred to below) the principal sum of
_______________ DOLLARS ($_____________) or, if less, the then unpaid principal
amount of all Term Loans (as defined in the Agreement) made by the Bank pursuant
to the Agreement.
The Borrower promises also to pay interest on the unpaid
principal amount hereof in like money at said office from the date hereof until
paid at the rates and at the times provided in Section 1.08 of the Agreement.
This Note is one of the Term Notes referred to in the Credit
Agreement, dated as of February 20, 1998, among Universal Compression Holdings,
Inc., the Borrower, the lenders from time to time party thereto (including the
Bank) and Bankers Trust Company, as Agent (as from time to time in effect, the
"Agreement"), and is entitled to the benefits thereof and the other Credit
Documents (as defined in the Agreement). This Note is secured by the Security
Documents (as defined in the Agreement). As provided in the Agreement, this Note
is subject to voluntary prepayment and mandatory repayment prior to the Term
Loan Maturity Date, in whole or in part.
In case an Event of Default (as defined in the Agreement)
shall occur and be continuing, the principal of and accrued interest on this
Note may be declared to be due and payable in the manner and with the effect
provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or
notice of any kind in connection with this Note.
<PAGE>
EXHIBIT A
Page 2
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
[NAME OF BORROWER]
By
-------------------------
Title:
<PAGE>
Exhibit B-2
FORM OF REVOLVING NOTE
$___________________ New York, New York
February 20, 1998
FOR VALUE RECEIVED, [NAME OF BORROWER], a [ ] corporation (the
"Borrower"), hereby promises to pay to the order of _______________ (the
"Bank"), in lawful money of the United States of America in immediately
available funds, at the office of Bankers Trust Company (the "Agent") located at
One Bankers Trust Plaza, New York, New York 10006 on the Revolving Loan Maturity
Date (as defined in the Agreement referred to below) the principal sum of
_______________ DOLLARS ($______________) or, if less, the then unpaid principal
amount of all Revolving Loans (as defined in the Agreement) made by the Bank
pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid
principal amount hereof in like money at said office from the date hereof until
paid at the rates and at the times provided in Section 1.08 of the Agreement.
This Note is one of the Revolving Notes referred to in the
Credit Agreement, dated as of February 20, 1998, among Universal Compression
Holdings, Inc., the Borrower, the lenders from time to time party thereto
(including the Bank) and Bankers Trust Company, as Agent (as from time to time
in effect, the "Agreement"), and is entitled to the benefits thereof and the
other Credit Documents (as defined in the Agreement). This Note is secured by
the Security Documents (as defined in the Agreement). As provided in the
Agreement, this Note is subject to voluntary prepayment and mandatory repayment
prior to the Revolving Loan Maturity Date, in whole or in part.
In case an Event of Default (as defined in the Agreement)
shall occur and be continuing, the principal of and accrued interest on this
Note may be declared to be due and payable in the manner and with the effect
provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or
notice of any kind in connection with this Note.
<PAGE>
EXHIBIT A
Page 4
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
[NAME OF BORROWER]
By
---------------------------
Title:
<PAGE>
EXHIBIT B-3
FORM OF SWINGLINE NOTE
$10,000,000 New York, New York
February 20, 1998
FOR VALUE RECEIVED, [NAME OF BORROWER], a [ ] corporation
(the "Borrower"), hereby promises to pay to the order of BANKERS TRUST COMPANY
(the "Bank"), in lawful money of the United States of America in immediately
available funds, at the office of Bankers Trust Company (the "Agent") located at
One Bankers Trust Plaza, New York, New York 10006 on the Swingline Expiry Date
(as defined in the Agreement referred to below) the principal sum of TEN MILLION
DOLLARS ($10,000,000) or, if less, the then unpaid amount of all Swingline Loans
(as defined in the Agreement) made by the Bank pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid
principal amount hereof in like money at said office from the date hereof until
paid at the rates and at the times provided in Section 1.08 of the Agreement.
This Note is the Swingline Note referred to in the Credit
Agreement, dated as of February 20, 1998, among Universal Compression Holdings,
Inc., the Borrower, the lenders from time to time party thereto (including the
Bank) and Bankers Trust Company, as Agent (as from time to time in effect, the
"Agreement"), and is entitled to the benefits thereof and the other Credit
Documents (as defined in the Agreement) . This Note is secured by the Security
Documents (as defined in the Agreement). As provided in the Agreement, this Note
is subject to voluntary prepayment and mandatory repayment prior to the
Swingline Expiry Date, in whole or in part.
In case an Event of Default (as defined in the Agreement)
shall occur and be continuing, the principal of and accrued interest on this
Note may be declared to be due and payable in the manner and with the effect
provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or
notice of any kind in connection with this Note.
<PAGE>
EXHIBIT B-3
Page 6
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
[NAME OF BORROWER]
By
---------------------------------
Title:
<PAGE>
SECURITY AGREEMENT
among
UNIVERSAL COMPRESSION HOLDINGS, INC.,
TW ACQUISITION CORPORATION,
CERTAIN OF ITS SUBSIDIARIES
and
BANKERS TRUST COMPANY,
as Collateral Agent
Dated as of February 20, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I SECURITY INTERESTS ............................................. 2
1.1. Grant of Security Interests .................................... 2
1.2. Power of Attorney .............................................. 2
ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS ............. 3
2.1. Necessary Filings .............................................. 3
2.2. No Liens ....................................................... 3
2.3. Other Financing Statements ..................................... 3
2.4. Chief Executive Office; Records ................................ 3
2.5. Location of Inventory and Equipment ............................ 4
2.6. Recourse ....................................................... 4
2.7. Trade Names; Change of Name .................................... 4
ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES;
CONTRACT RIGHTS; INSTRUMENTS ......................................... 5
3.1. Additional Representations and Warranties ...................... 5
3.2. Maintenance of Records ......................................... 5
3.3. Direction to Account Debtors; Contracting Parties;
etc ............................................................ 6
3.4. Modification of Terms; etc ..................................... 6
3.5. Collection ..................................................... 6
3.6. Instruments .................................................... 6
3.7. Further Actions ................................................ 7
ARTICLE IV SPECIAL PROVISIONS CONCERNING MARKS ........................... 7
4.1. Additional Representations and Warranties ...................... 7
4.2. Licenses and Assignments ....................................... 7
4.3. Infringements .................................................. 7
4.4. Preservation of Marks .......................................... 7
4.5. Maintenance of Registration .................................... 8
4.6. Future Registered Marks ........................................ 8
4.7. Remedies ....................................................... 8
ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS AND
COPYRIGHTS ........................................................... 8
5.1. Additional Representations and Warranties ...................... 9
5.2. Licenses and Assignments ....................................... 9
5.3. Infringements .................................................. 9
5.4. Maintenance of Patent .......................................... 9
5.5. Prosecution of Patent Application .............................. 9
5.6. Other Patents and Copyrights ................................... 10
<PAGE>
Page
----
5.7. Remedies ....................................................... 10
ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL .......................... 10
6.1. Protection of Collateral Agent's Security ...................... 10
6.2. Warehouse Receipts Non-negotiable .............................. 10
6.3. Further Actions ................................................ 10
6.4. Financing Statements ........................................... 11
ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT ................. 11
7.1. Remedies; Obtaining the Collateral Upon Default ................ 11
7.2. Remedies; Disposition of the Collateral ........................ 12
7.3. Waiver of Claims ............................................... 13
7.4. Application of Proceeds ........................................ 13
7.5. Remedies Cumulative ............................................ 16
7.6. Discontinuance of Proceedings .................................. 16
ARTICLE VIII INDEMNITY ................................................... 16
8.1. Indemnity ...................................................... 16
8.2. Indemnity Obligations Secured by Collateral;
Survival ....................................................... 17
ARTICLE IX DEFINITIONS ................................................... 18
ARTICLE X THE COLLATERAL AGENT ........................................... 22
10.1. Appointment ................................................... 22
10.2. Nature of Duties .............................................. 22
10.3. Lack of Reliance on the Collateral Agent ...................... 23
10.4. Certain Rights of the Collateral Agent ........................ 24
10.5. Reliance ...................................................... 24
10.6. Indemnification ............................................... 24
10.7. The Collateral Agent in its Individual Capacity ............... 25
10.8. Holders ....................................................... 25
10.9. Resignation by the Collateral Agent ........................... 25
10.10. Fees and Expenses of Collateral Agent ......................... 26
ARTICLE XI MISCELLANEOUS ................................................. 26
11.1. Notices ....................................................... 26
11.2. Waiver; Amendment ............................................. 27
11.3. Obligations Absolute .......................................... 27
11.4. Successors and Assigns ........................................ 27
11.5. Headings Descriptive .......................................... 27
11.6. Severability .................................................. 27
11.7. GOVERNING LAW ................................................. 27
11.8. Assignor's Duties ............................................. 28
11.9. Termination; Release .......................................... 28
(ii)
<PAGE>
Page
----
11.10. Counterparts .................................................. 29
11.11. Additional Assignors ......................................... 29
ANNEX A Schedule of Chief Executive Offices/Record Locations
ANNEX B Schedule of Inventory and Equiment Locations
ANNEX C Schedule of Trade, Fictitious and Other Names
ANNEX D Schedule of Marks
ANNEX E Schedule of License Agreements and Assignments
ANNEX F Schedule of Patents and Applications
ANNEX G Schedule of Copyrights and Applications
ANNEX H Form of Assignment of Security Interest in United
States Trademarks and Patents
ANNEX I Form of Assignment of Security Interest in United
States Copyrights
(iii)
<PAGE>
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of February 20, 1998, between each of the
undersigned assignors (each an "Assignor" and together with any other entity
that becomes an assignor hereunder pursuant to Section 11.11 hereof, the
"Assignors") in favor of BANKERS TRUST COMPANY, as Collateral Agent (the
"Collateral Agent") for the benefit of the Secured Creditors (as defined below).
Except as otherwise defined herein, terms used herein and defined in the Credit
Agreement shall be used herein as so defined.
W I T N E S S E T H :
WHEREAS, Universal Compression Holdings, Inc. ("Holdings"), TW
Acquisition Corporation (the "Borrower", which term shall mean Universal
Compression, Inc. from and after the consummation of the Merger), the lenders
from time to time party thereto (the "Banks"), and Bankers Trust Company, as
Agent (together with any successor agent, the "Agent"), have entered into a
Credit Agreement, dated as of February 20, 1998 (as amended, modified or
supplemented from time to time, the "Credit Agreement"), providing for the
making of Loans to, and the issuance of Letters of Credit for the account of,
the Borrower as contemplated therein (the Banks, the Agent and the Pledgee are
herein called the "Bank Creditors");
WHEREAS, the Borrower may at any time and from time to time enter into
one or more Interest Rate Protection Agreements or Other Hedging Agreements with
one or more Banks or any affiliate thereof (each such Bank or affiliate, even if
the respective Bank subsequently ceases to be a Bank under the Credit Agreement
for any reason, together with such Bank's or affiliate's successors and assigns,
if any, collectively, the "Other Creditors," and together with the Bank
Creditors, the "Secured Creditors");
WHEREAS, the Borrower may, with the written consent of the Collateral
Agent, at any time and from time to time enter into, or guarantee obligations of
its Subsidiaries under, one or more Interest Rate Protection Agreements or Other
Hedging Agreements with one or more Other Creditors;
WHEREAS, pursuant to the Holdings Guaranty, Holdings has guaranteed to
the Secured Creditors the payment when due of all of the Guaranteed Obligations
as described therein;
WHEREAS, pursuant to, and after the execution and delivery of, the
Subsidiaries Guaranty, each Subsidiary Guarantor has jointly and severally
guaranteed to the Secured Creditors the payment when due of all Guaranteed
Obligations as described therein;
WHEREAS, it is a condition precedent to the making of Loans to, and
the issuance of Letters of Credit for the account of, the Borrower under the
Credit Agreement that each Assignor shall have created and delivered to the
Collateral Agent this Agreement; and
WHEREAS, each Assignor will obtain benefits from the incurrence of
Loans to, and the issuance of Letters of Credit for the account of, the Borrower
under the Credit
<PAGE>
Agreement and the entering into by the Borrower of Interest Rate Protection
Agreements or Other Hedging Agreements and, accordingly, each Assignor desires
to enter into this Agreement in order to satisfy the condition described in the
preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to each
Assignor, the receipt and sufficiency of which are hereby acknowledged, each
Assignor hereby makes the following representations and warranties to the
Collateral Agent for the benefit of the Secured Creditors and hereby covenants
and agrees with the Collateral Agent for the benefit of the Secured Creditors as
follows:
ARTICLE I
SECURITY INTERESTS
1.1. Grant of Security Interests. (a) As security for the prompt and
complete payment and performance when due of all of the Obligations, each
Assignor does hereby sell, assign and transfer unto the Collateral Agent, and
does hereby grant to the Collateral Agent for the benefit of the Secured
Creditors, a continuing security interest of first priority (subject to
Permitted Liens) in, all of the right, title and interest of the Assignor in, to
and under all of the following, whether now existing or hereafter from time to
time acquired: (i) each and every Receivable, (ii) all Contracts, together with
all Contract Rights arising thereunder, (iii) all Inventory, (iv) the Cash
Collateral Account and all monies, securities and instruments deposited or
required to be deposited in such Cash Collateral Account, (v) all Equipment,
(vi) all Marks, together with the registrations and right to all renewals
thereof, and the goodwill of the business of the Assignor symbolized by the
Marks, (vii) all Patents and Copyrights, and all reissues, renewals or
extensions thereof, (viii) all Intellectual Property Licensee Rights, (ix) all
computer programs of such Assignor and all intellectual property rights therein
and all other proprietary information of such Assignor, including, but not
limited to, Trade Secrets, (x) all other Goods, General Intangibles, Chattel
Paper, Documents and Instruments (other than the Pledged Securities), and (xi)
all Proceeds and products of any and all of the foregoing (all of the above,
collectively, the "Collateral").
(b) The security interests of the Collateral Agent under this
Agreement extend to all Collateral of the kind which is the subject of this
Agreement which the Assignor may acquire at any time during the continuation of
this Agreement.
1.2. Power of Attorney. Each Assignor hereby constitutes and appoints
the Collateral Agent its true and lawful attorney, irrevocably, with full power
after the occurrence of and during the continuance of an Event of Default (in
the name of the Assignor or otherwise), in the Collateral Agent's discretion, to
take any action and to execute any instrument which the Collateral Agent may
reasonably deem necessary or advisable to accomplish the purposes of this
Agreement, which appointment as attorney is coupled with an interest.
-2-
<PAGE>
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and delivery
of this Agreement, as follows:
2.1. Necessary Filings. All filings, registrations and recordings
necessary to create, preserve, protect and perfect the security interest granted
by such Assignor to the Collateral Agent hereby in respect of the Collateral
located in the states of Texas, New Mexico, Oklahoma, Louisiana and Delaware
(the "Filing States"), other than Equipment leased by the Assignors to third
parties in the ordinary course of business and located in states other than in
the Filing States, have been or shall have been accomplished and the security
interest granted to the Collateral Agent pursuant to this Agreement in and to
such Collateral constitutes or shall constitute a perfected security interest
therein prior to the rights of all other Persons therein and subject to no other
Liens (other than Permitted Liens ) and is or shall be entitled to all the
rights, priorities and benefits afforded by the Uniform Commercial Code or other
relevant law as enacted in any relevant jurisdiction to perfected security
interests.
2.2. No Liens. Each Assignor is, and as to Collateral acquired by it
from time to time after the date hereof the Assignor will be, the owner of all
Collateral free from any Lien, security interest, encumbrance or other right,
title or interest of any Person (other than Liens created hereby or Permitted
Liens), and the Assignor shall defend the Collateral against all claims and
demands (other than immaterial claims and demands) of all Persons at any time
claiming the same or any interest therein adverse to the Collateral Agent.
2.3. Other Financing Statements. As of the date hereof, there is no
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) on file or of record in any relevant jurisdiction
covering or purporting to cover any interest of any kind in the Collateral
(other than financing statements filed in respect of Permitted Liens), and so
long as the Termination Date has not occurred, each Assignor will not execute or
authorize to be filed in any public office any financing statement (or similar
statement or instrument of registration under the law of any jurisdiction) or
statements relating to the Collateral, except financing statements filed or to
be filed in respect of and covering the security interests granted hereby by
such Assignor or in connection with Permitted Liens.
2.4. Chief Executive Office; Records. The chief executive office of
such Assignor is located at the address set forth on Annex A for such Assignor.
Such Assignor will not move its chief executive office except to such new
location as such Assignor may establish in accordance with the last sentence of
this Section 2.4. The originals of all documents evidencing all Receivables and
Contract Rights and Trade Secrets of the Assignor and the only original books of
account and records of such Assignor relating thereto are, and will continue to
be, kept at such chief executive office, at such other locations shown on Annex
A hereto or at such new locations as the Assignor may establish in accordance
with the last sentence of this Section 2.4. All Receivables and Contract Rights
of such Assignor are, and will continue to be, maintained at, and controlled and
directed (including, without limitation, for general accounting purposes) from,
the
-3-
<PAGE>
office locations described above. No Assignor shall establish new locations for
such offices until (i) it shall have given to the Collateral Agent not less than
30 days' prior written notice of its intention so to do, clearly describing such
new location and providing such other information in connection therewith as the
Collateral Agent may reasonably request, (ii) with respect to such new location,
it shall have taken all necessary action to maintain the security interest of
the Collateral Agent in the Collateral intended to be granted hereby at all
times fully perfected and in full force and effect and (iii) at the request of
the Collateral Agent, it shall have furnished an opinion of counsel acceptable
to the Collateral Agent to the effect that all financing or continuation
statements and amendments or supplements thereto have been filed in the
appropriate filing office or offices, and all other necessary actions
(including, without limitation, the payment of all filing fees and taxes, if
any, payable in connection with such filings) have been taken, in order to
perfect (and maintain the perfection and priority of) the security interest
granted hereby.
2.5. Location of Inventory and Equipment. All Inventory and Equipment
held on the date hereof by the Assignor is located at one of the locations shown
on Annex B hereto. The Assignor agrees that all Inventory and all Equipment now
held or subsequently acquired by it shall be kept at (or shall be in transport
to) any one of the locations shown on Annex B hereto, or such new location as
the Assignor may establish in accordance with the last sentence of this Section
2.5. Any Assignor may establish a new location for Inventory and Equipment only
if (i) it shall have given to the Collateral Agent not less than 30 days' prior
written notice of its intention so to do, clearly describing such new location
and providing such other information in connection therewith as the Collateral
Agent may reasonably request, (ii) with respect to such new location, as
promptly as practicable and in no event later than 30 days after the
establishment thereof, it shall have taken all necessary action to maintain the
security interest of the Collateral Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect and
(iii) at the request of the Collateral Agent, it shall have furnished an opinion
of counsel acceptable to the Collateral Agent to the effect that all financing
or continuation statements and amendments or supplements thereto have been filed
in the appropriate filing office or offices, and all other necessary actions
(including, without limitation, the payment of all filing fees and taxes, if
any, payable in connection with such filings) have been taken, in order to
perfect (and maintain the perfection and priority of) the security interest
granted hereby.
2.6. Recourse. This Agreement is made with full recourse to each
Assignor and pursuant to and upon all the warranties, representations, covenants
and agreements on the part of such Assignor contained herein, in the other
Credit Documents, in the Interest Rate Protection Agreements or Other Hedging
Agreements (collectively, the "Financing Documents") and otherwise in writing in
connection herewith or therewith.
2.7. Trade Names; Change of Name. Each Assignor does not have or
operate in any jurisdiction under, or in the preceding 12 months has not had or
has not operated in any jurisdiction under, any trade names, fictitious names or
other names (including, without limitation, any names of divisions or
-4-
<PAGE>
operations) except its legal name and such other trade, fictitious or other
names as are listed on Annex C hereto. No Assignor shall change its legal name
or assume or operate in any jurisdiction under any trade, fictitious or other
name except those names listed on Annex C hereto and new names (including,
without limitation, any names of divisions or operations) established in
accordance with the last sentence of this Section 2.7. No Assignor shall assume
or operate in any jurisdiction under any new trade, fictitious or other name
until (i) it shall have given to the Collateral Agent not less than 30 days'
prior written notice of its intention so to do, clearly describing such new name
and the jurisdictions in which such new name shall be used and providing such
other information in connection therewith as the Collateral Agent may reasonably
request, (ii) with respect to such new name, it shall have taken all necessary
action to maintain the security interest of the Collateral Agent in the
Collateral intended to be granted hereby at all times fully perfected and in
full force and effect and (iii) at the request of the Collateral Agent, it shall
have furnished an opinion of counsel acceptable to the Collateral Agent to the
effect that all financing or continuation statements and amendments or
supplements thereto have been filed in the appropriate filing office or offices,
and all other necessary actions (including, without limitation, the payment of
all filing fees and taxes, if any, payable in connection with such filings) have
been taken, in order to perfect (and maintain the perfection and priority of)
the security interest granted hereby.
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
3.1. Additional Representations and Warranties. As of the time when
each of its Receivables arises, each Assignor shall be deemed to have
represented and warranted that such Receivable, and all records, papers and
documents relating thereto (if any) are genuine and in all respects what they
purport to be, and that all papers and documents (if any) relating thereto (i)
will represent the genuine, legal and valid obligation of the account debtor
evidencing indebtedness unpaid and owed by the respective account debtor arising
out of the performance of labor or services or the sale or lease and delivery of
the merchandise listed therein, or both, (ii) will be the only original writings
evidencing and embodying such obligation of the account debtor named therein
(other than copies created for general accounting purposes) and (iii) will
evidence true and valid obligations.
3.2. Maintenance of Records. Each Assignor will keep and maintain at
its own cost and expense satisfactory and complete records of its Receivables
and Contracts, including, but not limited to, the originals of all documentation
(including each Contract) with respect thereto, records of all payments
received, all credits granted thereon, all merchandise returned and all other
dealings therewith, and each Assignor will make the same available on such
Assignor's premises to the Collateral Agent for inspection, at such Assignor's
own cost and expense, at any and all reasonable times upon two Business Days'
prior notice and otherwise in accordance with Section 8.02 of the Credit
Agreement. Upon the occurrence and during the continuance of an Event of Default
and upon the request of the Collateral Agent, each Assignor shall, at its own
cost and expense, deliver all tangible evidence of its Receivables and Contract
Rights (including, without limitation, all documents evidencing the Receivables
and all Contracts) and such books and records to the Collateral Agent or to its
representatives (copies of which evidence and books and records may be retained
by the Assignor) . Upon the occurrence and during the continuance of an Event of
Default, and if the Collateral Agent so directs, such Assignor shall legend, in
form
-5-
<PAGE>
and manner reasonably satisfactory to the Collateral Agent, the Receivables and
the Contracts, as well as books, records and documents of such Assignor
evidencing or pertaining to such Receivables and Contracts with an appropriate
reference to the fact that such Receivables and Contracts have been assigned to
the Collateral Agent and that the Collateral Agent has a security interest
therein.
3.3. Direction to Account Debtors; Contracting Parties; etc. Upon the
occurrence and during the continuance of an Event of Default, and if the
Collateral Agent so directs any Assignor, each Assignor agrees (x) to cause all
payments on account of the Receivables and Contracts to be made directly to the
Cash Collateral Account, (y) that the Collateral Agent may, at its option,
directly notify the obligors with respect to any Receivables and/or under any
Contracts to make payments with respect thereto as provided in the preceding
clause (x) and (z) that the Collateral Agent may enforce collection of any such
Receivables and Contracts and may adjust, settle or compromise the amount of
payment thereof, in the same manner and to the same extent that such Assignor
might have done. Without notice to or assent by any Assignor, the Collateral
Agent may apply any or all amounts then in, or thereafter deposited in, the Cash
Collateral Account in the manner provided in Section 7.4 of this Agreement. The
costs and expenses (including reasonable attorneys' fees) of collection, whether
incurred by any Assignor or the Collateral Agent, shall be borne by the relevant
Assignor.
3.4. Modification of Terms; etc. No Assignor shall rescind or cancel
any indebtedness evidenced by any Receivable or under any Contract, or modify
any term relating to such indebtedness or make any adjustment with respect
thereto, or extend or renew the same, or compromise or settle any material
dispute, claim, suit or legal proceeding relating thereto, or sell any
Receivable or Contract, or interest therein, without the prior written consent
of the Collateral Agent, except as permitted by Section 3.5. Each Assignor will
duly fulfill all obligations on its part to be fulfilled under or in connection
with the Receivables and Contracts and, except as otherwise expressly permitted
herein, will do nothing to impair the rights of the Collateral Agent in the
Receivables or Contracts.
3.5. Collection. Each Assignor shall endeavor to cause to be collected
from the account debtor named in each of its Receivables or obligor under any
Contract, as and when due (including, without limitation, amounts which are
delinquent, such amounts to be collected in accordance with generally accepted
lawful collection procedures) any and all amounts owing under or on account of
such Receivable or Contract, and apply forthwith upon receipt thereof all such
amounts as are so collected to the outstanding balance of such Receivable or
under such Contract, except that, prior to the occurrence of an Event of
Default, any Assignor may allow in the ordinary course of business as
adjustments to amounts owing under its Receivables and Contracts (i) an
extension or renewal of the time or times of payment, or settlement for less
than the total unpaid balance, which such Assignor finds appropriate in
accordance with sound business judgment and (ii) a refund or credit due as a
result of returned or damaged merchandise or improperly performed services. The
costs and expenses (including, without limitation, reasonable attorneys' fees)
of collection, whether incurred by an Assignor or the Collateral Agent, shall be
borne by the relevant Assignor.
-6-
<PAGE>
3.6. Instruments. If any Assignor owns or acquires any Instrument
constituting Collateral, such Assignor will within ten days notify the
Collateral Agent thereof, and upon the occurrence and during the continuance of
an Event of Default and if requested by the Collateral Agent will promptly
deliver such Instrument to the Collateral Agent appropriately endorsed to the
order of the Collateral Agent as further security hereunder.
3.7. Further Actions. Each Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to its Receivables, Contracts, Instruments and other property or
rights covered by the security interest hereby granted, as the Collateral Agent
may reasonably require.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING MARKS
4.1. Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful exclusive owner of the
Marks listed in Annex D hereto and that said listed Marks include all the United
States federal registrations or applications registered in the United States
Patent and Trademark Office. The Assignor represents and warrants that it owns
or is licensed to use or is not prohibited from using all Marks that it uses.
Each Assignor further warrants that it is aware of no third party claim that any
aspect of such Assignor's present or contemplated business operations infringes
or will infringe any Mark. Each Assignor represents and warrants that it is the
owner of record of all United States registrations and applications listed in
Annex D hereto and that said registrations are valid, subsisting, have not been
canceled and that such Assignor is not aware of any third-party claim that any
of said registrations is invalid or unenforceable. Each Assignor hereby grants
to the Collateral Agent an absolute power of attorney to sign, upon the
occurrence and during the continuance of an Event of Default, any document which
may be required by the United States Patent and Trademark Office in order to
effect an absolute assignment of all right, title and interest in each Mark and
associated goodwill, and record the same.
4.2. Licenses and Assignments. Other than the license agreements
listed on Annex E hereto and any extensions or renewals thereof, each Assignor
hereby agrees not to divest itself of any right under any Mark absent prior
written approval of the Collateral Agent.
4.3. Infringements. Each Assignor agrees, promptly upon learning
thereof, to notify the Collateral Agent in writing of the name and address of,
and to furnish such pertinent information that may be available with respect to,
any party who such Assignor believes is infringing or otherwise violating any of
such Assignor's rights in and to any Mark, or with respect to any party claiming
that such Assignor's use of any Mark violates in any material respect any
property right of that party. Each Assignor further agrees, unless otherwise
agreed by the Collateral Agent, diligently to prosecute any Person infringing
any Mark.
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4.4. Preservation of Marks. Each Assignor agrees to use its Marks in
interstate commerce during the time in which this Agreement is in effect,
sufficiently to preserve such Marks as trademarks or service marks registered
under the laws of the United States.
4.5. Maintenance of Registration. Each Assignor shall, at its own
expense, diligently process all documents required by the Trademark Act of 1946,
15 U.S.C. SS 1051 et seq. to maintain trademark registration, including but not
limited to affidavits of use and applications for renewals of registration in
the United States Patent and Trademark Office for all of its registered Marks
pursuant to 15 U.S.C. 1058(a), 1059 and 1065, and shall pay all fees and
disbursements in connection therewith and shall not abandon any such filing of
affidavit of use or any such application of renewal prior to the exhaustion of
all administrative and judicial remedies without prior written consent of the
Collateral Agent; provided, that to the extent permitted by the Credit
Agreement, such Assignor shall not be obligated to maintain any Mark in the
event that such Assignor determines, in its reasonable business judgment, that
the maintenance of such Mark is no longer necessary or desirable in the conduct
of its business. Each Assignor agrees to notify the Collateral Agent three (3)
months prior to the date on which the affidavits of use or the applications for
renewal registration are due with respect to any registered Mark that the
affidavits of use or the renewal is being processed or being abandoned, as the
case may be.
4.6. Future Registered Marks. If any Mark registration is issued
hereafter to any Assignor as a result of any application now or hereafter
pending before the United States Patent and Trademark Office, within thirty (30)
days of receipt of such certificate, such Assignor shall deliver a copy of such
certificate, and a grant of security in such mark to the Collateral Agent,
confirming the grant thereof hereunder, the form of such confirmatory grant to
be satisfactory to the Collateral Agent.
4.7. Remedies. If an Event of Default shall occur and be continuing,
the Collateral Agent may, by written notice to the relevant Assignor, take any
or all of the following actions: (i) declare the entire right, title and
interest of such Assignor in and to each of the Marks and the goodwill of the
business associated therewith, together with all trademark rights and rights of
protection to the same, vested, in which event such rights, title and interest
shall immediately vest, in the Collateral Agent for the benefit of the Secured
Creditors, in which case the Collateral Agent shall be entitled to exercise the
power of attorney referred to in Section 4.1 hereof to execute, cause to be
acknowledged and notarized and record said absolute assignment with the
applicable agency; (ii) take and use or sell the Marks and the goodwill of such
Assignor's business symbolized by the Marks and the right to carry on the
business and use the assets of such Assignor in connection with which the Marks
have been used; and (iii) direct such Assignor to refrain, in which event such
Assignor shall refrain, from using the Marks in any manner whatsoever, directly
or indirectly, and, if requested by the Collateral Agent, change such Assignor's
corporate name to eliminate therefrom any use of any Mark and execute such other
and further documents that the Collateral Agent may request to further confirm
this and to transfer ownership of the Marks and registrations and any pending
trademark application in the United States Patent and Trademark Office or any
equivalent government agency or office in any foreign jurisdiction to the
Collateral Agent.
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ARTICLE V
SPECIAL PROVISIONS CONCERNING
PATENTS AND COPYRIGHTS
5.1. Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful exclusive owner of all
rights in the Patents listed in Annex F hereto and in the Copyrights listed in
Annex G hereto, that said Patents include all the United States patents and
applications for United States patents that such Assignor now owns and that said
Copyrights constitute all the United States copyrights registered with the
United States Copyright Office and applications for United States copyrights
that such Assignor now owns. Each Assignor represents and warrants that it owns
or is licensed to practice under all Patents and Copyrights that it now uses or
practices under. Each Assignor further warrants that it is aware of no third
party claim that any aspect of such Assignor's present or contemplated business
operations infringes or will infringe any patent or any copyright. Each Assignor
hereby grants to the Collateral Agent an absolute power of attorney to sign,
upon the occurrence and during the continuance of any Event of Default, any
document which may be required by the United States Patent and Trademark Office
or the United States Copyright Office in order to effect an absolute assignment
of all right, title and interest in each Patent and Copyright, and record the
same.
5.2. Licenses and Assignments. Other than the license agreements
listed on Annex E hereto and any extensions or renewals thereof, each Assignor
hereby agrees not to divest itself of any right under any Patent or Copyright
absent prior written approval of the Collateral Agent.
5.3. Infringements. Each Assignor agrees, promptly upon learning
thereof, to furnish the Collateral Agent in writing with all pertinent
information available to such Assignor with respect to any infringement or other
violation of such Assignor's rights in any Patent or Copyright, or with respect
to any claim that practice of any Patent or use of any Copyright violates any
property right of a third party. Each Assignor further agrees, absent direction
of the Collateral Agent to the contrary, diligently to prosecute any Person
infringing any Patent or Copyright.
5.4. Maintenance of Patents. At its own expense, each Assignor shall
take timely payment of all post-issuance fees required pursuant to 35 U.S.C. 41
to maintain in force rights under each Patent; provided, that to the extent
permitted by the Credit Agreement, such Assignor shall not be obligated to
maintain any Patent in the event that such Assignor determines, in its
reasonable business judgment, that the maintenance of such Patent is no longer
necessary or desirable in the conduct of its business. Each Assignor agrees to
notify the Collateral Agent three (3) months prior to the date on which the
post-issuance fees are due with respect to any Patent that the post-issuance
fees are being paid or that the Patent is being abandoned, as the case may be.
5.5. Prosecution of Patent Application. At its own expense, each
Assignor shall diligently prosecute all applications for Patents listed in Annex
F hereto and shall not abandon any such application prior to exhaustion of all
administrative and judicial remedies, absent written consent of the Collateral
Agent; provided, that to the extent permitted by the Credit Agreement,
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such Assignor shall not be obligated to prosecute any Patent in the event that
such Assignor determines, in its reasonable business judgment, that the
prosecution of such Patent is no longer necessary or desirable in the conduct of
its business.
5.6. Other Patents and Copyrights. Within 30 days of acquisition of a
Patent or Copyright, or of filing of an application for a Patent or Copyright,
the relevant Assignor shall deliver to the Collateral Agent a copy of said
Patent or Copyright or such application, as the case may be, with a grant of
security as to such Patent or Copyright, as the case may be, confirming the
grant thereof hereunder, the form of such confirmatory grant to be satisfactory
to the Collateral Agent.
5.7. Remedies. If an Event of Default shall occur and be continuing,
the Collateral Agent may by written notice to the relevant Assignor, take any or
all of the following actions: (i) declare the entire right, title, and interest
of such Assignor in each of the Patents and Copyrights vested, in which event
such right, title, and interest shall immediately vest in the Collateral Agent
for the benefit of the Secured Creditors, in which case the Collateral Agent
shall be entitled to exercise the power of attorney referred to in Section 5.1
hereof to execute, cause to be acknowledged and notarized and record said
absolute assignment with the applicable agency; (ii) take and practice or sell
the Patents and Copyrights; and (iii) direct such Assignor to refrain, in which
event such Assignor shall refrain, from practicing the Patents and Copyrights
directly or indirectly, and such Assignor shall execute such other and further
documents as the Collateral Agent may request further to confirm this and to
transfer ownership of the Patents and Copyrights to the Collateral Agent for the
benefit of the Secured Creditors.
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL
6.1. Protection of Collateral Agent's Security. Except as otherwise
expressly permitted herein, each Assignor will do nothing to impair the rights
of the Collateral Agent in the Collateral. Each Assignor will at all times keep
its Inventory and Equipment insured in favor of the Collateral Agent, at such
Assignor's own expense to the extent and in the manner provided in Section 8.03
of the Credit Agreement. Prior to the exercise of any of the remedies provided
for herein, all insurance proceeds shall be applied in the manner and to the
extent required by the Credit Agreement, and at any time thereafter, such
insurance proceeds shall be applied in accordance with Section 7.4 hereof. Each
Assignor assumes all liability and responsibility in connection with the
Collateral acquired by it and the liability of such Assignor to pay the
Obligations shall in no way be affected or diminished by reason of the fact that
such Collateral may be lost, destroyed, stolen, damaged or for any reason
whatsoever unavailable to such Assignor.
6.2. Warehouse Receipts Non-negotiable. Each Assignor agrees that if
any warehouse receipt or receipt in the nature of a warehouse receipt is issued
with respect to any of its Inventory, such warehouse receipt or receipt in the
nature thereof shall not be "negotiable" (as such term is used in Section 7-104
of the Uniform Commercial Code as in effect in any relevant jurisdiction or
under other relevant law).
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6.3. Further Actions. Each Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Collateral Agent
deems reasonably appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral.
6.4. Financing Statements. Each Assignor agrees to execute and deliver
to the Collateral Agent such financing statements, in form acceptable to the
Collateral Agent, as the Collateral Agent may from time to time request or as
are necessary or desirable in the opinion of the Collateral Agent to establish
and maintain a valid, enforceable, first priority perfected security interest in
the Collateral as provided herein and the other rights and security contemplated
hereby all in accordance with the Uniform Commercial Code as enacted in any and
all relevant jurisdictions or any other relevant law. Each Assignor will pay any
applicable filing fees, recordation taxes and related expenses. Each Assignor
authorizes the Collateral Agent to file any such financing statements without
the signature of such Assignor where permitted by law.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
7.1. Remedies; Obtaining the Collateral Upon Default. Each Assignor
agrees that, if any Event of Default shall have occurred and be continuing, then
and in every such case, subject to any mandatory requirements of applicable law
then in effect, the Collateral Agent, in addition to any rights now or hereafter
existing under applicable law, shall have all rights as a secured creditor under
the Uniform Commercial Code in all relevant jurisdictions and may also:
(a) personally, or by agents or attorneys, immediately retake
possession of the Collateral or any part thereof, from such Assignor or any
other Person who then has possession of any part thereof with or without
notice or process of law, and for that purpose may enter upon such
Assignor's premises where any of the Collateral is located and remove the
same and use in connection with such removal any and all services,
supplies, aids and other facilities of such Assignor; and
(b) instruct the obligor or obligors on any agreement, instrument or
other obligation (including, without limitation, the Receivables and the
Contracts) constituting the Collateral to make any payment required by the
terms of such agreement, instrument or other obligation directly to the
Collateral Agent and may exercise any and all remedies of such Assignor in
respect of such Collateral; and
(c) withdraw all monies, securities and instruments in the Cash
Collateral Account for application to the Obligations in accordance with
Section 7.4 hereof; and
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(d) sell, assign or otherwise liquidate, or direct the relevant
Assignor to sell, assign or otherwise liquidate, any or all of the
Collateral or any part thereof, and take possession of the proceeds of any
such sale or liquidation; and
(e) take possession of the Collateral or any part thereof, by
directing the relevant Assignor in writing to deliver the same to the
Collateral Agent at any place or places reasonably designated by the
Collateral Agent, in which event such Assignor shall at its own expense:
(i) forthwith cause the same to be moved to the place or places so
designated by the Collateral Agent and there delivered to the
Collateral Agent, and
(ii) store and keep any Collateral so delivered to the Collateral
Agent at such place or places pending further action by the Collateral
Agent as provided in Section 7.2 hereof, and
(iii) while the Collateral shall be so stored and kept, provide such
guards and maintenance services as shall be necessary to protect the
same and to preserve and maintain them in good condition; and
(f) license or sublicense, whether on an exclusive or nonexclusive
basis, any Marks, Patents or Copyrights included in the Collateral for such
term and on such conditions and in such manner as the Collateral Agent
shall in its sole judgment determine; it being understood that each
Assignor's obligation so to deliver the Collateral is of the essence of
this Agreement and that, accordingly, upon application to a court of equity
having jurisdiction, the Collateral Agent shall be entitled to a decree
requiring specific performance by such Assignor of said obligation.
7.2. Remedies; Disposition of the Collateral. Any Collateral
repossessed by the Collateral Agent under or pursuant to Section 7.1 hereof and
any other Collateral whether or not so repossessed by the Collateral Agent, may
be sold, assigned, leased or otherwise disposed of under one or more contracts
or as an entirety, and without the necessity of gathering at the place of sale
the property to be sold, and in general in such manner, at such time or times,
at such place or places and on such terms as the Collateral Agent may, in
compliance with any mandatory requirements of applicable law, determine to be
commercially reasonable. Any of the Collateral may be sold, leased or otherwise
disposed of, in the condition in which the same existed when taken by the
Collateral Agent or after any overhaul or repair which the Collateral Agent
shall determine to be commercially reasonable. Any such disposition which shall
be a private sale or other private proceedings permitted by such requirements
shall be made upon not less than 10 days' written notice to the relevant
Assignor specifying the time at which such disposition is to be made and the
intended sale price or other consideration therefor, and shall be subject, for
the 10 days after the giving of such notice, to the right of such Assignor or
any nominee of such Assignor to acquire the Collateral involved at a price or
for such other consideration at least equal to the intended sale price or other
consideration so specified. Any such disposition which shall be a public sale
permitted by such requirements shall be made upon not less than 10 days' written
notice to the relevant Assignor specifying the time and place of such sale and,
in the absence of
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applicable requirements of law, shall be by public auction (which may, at the
Collateral Agent's option, be subject to reserve), after publication of notice
of such auction not less than 10 days prior thereto in two newspapers in general
circulation in the City of New York. To the extent permitted by any such
requirement of law, the Collateral Agent and the Secured Creditors may bid for
and become the purchaser of the Collateral or any item thereof, offered for sale
in accordance with this Section without accountability to the relevant Assignor.
If, under mandatory requirements of applicable law, the Collateral Agent shall
be required to make disposition of the Collateral within a period of time which
does not permit the giving of notice to the relevant Assignor as herein above
specified, the Collateral Agent need give such Assignor only such notice of
disposition as shall be reasonably practicable in view of such mandatory
requirements of applicable law. Each Assignor agrees to do or cause to be done
all such other acts and things as may be reasonably necessary to make such sale
or sales of all or any portion of the Collateral valid and binding and in
compliance with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or
governmental instrumentalities, domestic or foreign, having jurisdiction over
any such sale or sales, all at such Assignor's expense.
7.3. Waiver of Claims. Except as otherwise provided in this Agreement,
EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE
AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION
OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING,
WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT
REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH ASSIGNOR WOULD OTHERWISE HAVE
UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and
each Assignor hereby further waives, to the extent permitted by law:
(a) all damages occasioned by such taking of possession except any
damages which are the direct result of the Collateral Agent's gross
negligence or willful misconduct;
(b) all other requirements as to the time, place and terms of sale or
other requirements with respect to the enforcement of the Collateral
Agent's rights hereunder; and
(c) all rights of redemption, appraisement, valuation, stay, extension
or moratorium now or hereafter in force under any applicable law in order
to prevent or delay the enforcement of this Agreement or the absolute sale
of the Collateral or any portion thereof, and such Assignor, for itself and
all who may claim under it, insofar as it or they now or hereafter lawfully
may, hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other
realization upon, any Collateral shall operate to divest all right, title,
interest, claim and demand, either at law or in equity, of such Assignor therein
and thereto, and shall be a perpetual bar both at law and in equity against such
Assignor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under the Assignor.
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7.4. Application of Proceeds. (a) All moneys collected by the
Collateral Agent (or, to the extent the Pledge Agreement or any Additional
Security Document to which any Assignor is a party requires proceeds of
Collateral under such agreement to be applied in accordance with the provisions
of this Agreement, the Pledgee or the secured party under such other agreement)
upon any sale or other disposition of the Collateral, together with all other
moneys received by the Collateral Agent hereunder, shall be applied as follows:
(i) first, to the payment of all amounts owing the Collateral Agent of
the type described in clauses (iii) and (iv) of the definition of
"Obligations";
(ii) second, to the extent proceeds remain after the application pursuant
to the preceding clause (i) an amount equal to the outstanding Primary
Obligations shall be paid to the Secured Creditors as provided in Section
7.4(e) hereof, with each Secured Creditor receiving an amount equal to such
outstanding Primary Obligations or, if the proceeds are insufficient to pay
in full all such Primary Obligations, its Pro Rata Share of the amount
remaining to be distributed;
(iii) third, to the extent proceeds remain after the application pursuant
to the preceding clauses (i) and (ii), an amount equal to the outstanding
Secondary Obligations shall be paid to the Secured Creditors as provided in
Section 7.4(e) hereof, with each Secured Creditor receiving an amount equal
to its outstanding Secondary Obligations or, if the proceeds are
insufficient to pay in full all such Secondary Obligations, its Pro Rata
Share of the amount remaining to be distributed; and
(iv) fourth, to the extent proceeds remain after the application pursuant
to the preceding clauses (i) through (iii) inclusive, and following the
termination of this Agreement pursuant to Section 11.9(a) hereof, to the
relevant Assignor or to whomever may be lawfully entitled to receive such
surplus.
(b) For purposes of this Agreement (x) "Pro Rata Share" shall mean,
when calculating a Secured Creditor's portion of any distribution or amount,
that amount (expressed as a percentage) equal to a fraction the numerator of
which is the then unpaid amount of such Secured Creditor's Primary Obligations
or Secondary Obligations, as the case may be, and the denominator of which is
the then outstanding amount of all Primary Obligations or Secondary Obligations,
as the case may be, (y) "Primary Obligations" shall mean (i) in the case of the
Credit Agreement Obligations, all principal of, and interest on, all Loans, all
Unpaid Drawings theretofore made (together with all interest accrued thereon),
and the aggregate Stated Amounts of all Letters of Credit issued (or deemed
issued) under the Credit Agreement, and all Fees and (ii) in the case of the
Other Obligations, all amounts due under the Interest Rate Protection Agreements
or Other Hedging Agreements (other than indemnities, fees (including, without
limitation, attorneys' fees) and similar obligations and liabilities) and (z)
"Secondary Obligations" shall mean all Obligations other than Primary
Obligations.
(c) When payments to Secured Creditors are based upon their respective
Pro Rata Shares, the amounts received by such Secured Creditors hereunder shall
be applied (for purposes of making determinations under this Section 7.4 only)
(i) first, to their Primary Obligations and (ii)
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second, to their Secondary Obligations. If any payment to any Secured Creditor
of its Pro Rata Share of any distribution would result in overpayment to such
Secured Creditor, such excess amount shall instead be distributed in respect of
the unpaid Primary Obligations or Secondary Obligations, as the case may be, of
the other Secured Creditors, with each Secured Creditor whose Primary
Obligations or Secondary Obligations, as the case may be, have not been paid in
full to receive an amount equal to such excess amount multiplied by a fraction
the numerator of which is the unpaid Primary Obligations or Secondary
Obligations, as the case may be, of such Secured Creditor and the denominator of
which is the unpaid Primary Obligations or Secondary Obligations, as the case
may be, of all Secured Creditors entitled to such distribution.
(d) Each of the Secured Creditors agrees and acknowledges that if the
Bank Creditors are to receive a distribution on account of undrawn amounts with
respect to Letters of Credit issued (or deemed issued) under the Credit
Agreement (which shall only occur after all outstanding Loans and Unpaid
Drawings with respect to such Letters of Credit have been paid in full), such
amounts shall be paid to the Agent under the Credit Agreement and held by it,
for the equal and ratable benefit of the Bank Creditors, as cash security for
the repayment of Obligations owing to the Bank Creditors as such. If any amounts
are held as cash security pursuant to the immediately preceding sentence, then
upon the termination of all outstanding Letters of Credit, and after the
application of all such cash security to the repayment of all Obligations owing
to the Bank Creditors after giving effect to the termination of all such Letters
of Credit, if there remains any excess cash, such excess cash shall be returned
by the Agent to the Collateral Agent for distribution in accordance with Section
7.4(a) hereof.
(e) Except as set forth in Section 7.4(d) hereof, all payments
required to be made hereunder shall be made (x) if to the Bank Creditors, to the
Agent under the Credit Agreement for the account of the Bank Creditors, and (y)
if to the Other Creditors, to the trustee, paying agent or other similar
representative (each a "Representative") for the Other Creditors or, in the
absence of such a Representative, directly to the Other Creditors.
(f) For purposes of applying payments received in accordance with this
Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the Agent
under the Credit Agreement and (ii) the Representative for the Other Creditors
or, in the absence of such a Representative, upon the Other Creditors for a
determination (which the Agent, each Representative for any Secured Creditors
and the Secured Creditors agree (or shall agree) to provide upon request of the
Collateral Agent) of the outstanding Primary Obligations and Secondary
Obligations owed to the Bank Creditors or the Other Creditors, as the case may
be. Unless it has actual knowledge (including by way of written notice from a
Bank Creditor or an Other Creditor) to the contrary, the Agent and each
Representative, in furnishing information pursuant to the preceding sentence,
and the Collateral Agent, in acting hereunder, shall be entitled to assume that
no Secondary Obligations are outstanding. Unless it has actual knowledge
(including by way of written notice from an Other Creditor) to the contrary, the
Collateral Agent, in acting hereunder, shall be entitled to assume that no
Interest Rate Protection Agreements or Other Hedging Agreements are in
existence.
(g) It is understood and agreed that the Assignors shall remain liable
to the extent of any deficiency between the amount of the proceeds of the
Collateral hereunder and the
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aggregate amount of the sums referred to in clauses (i) through (iii),
inclusive, of Section 7.4(a) hereof.
7.5. Remedies Cumulative. Each and every right, power and remedy
hereby specifically given to the Collateral Agent shall be in addition to every
other right, power and remedy specifically given under this Agreement, the other
Financing Documents or now or hereafter existing at law or in equity, or by
statute and each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time or simultaneously
and as often and in such order as may be deemed expedient by the Collateral
Agent. All such rights, powers and remedies shall be cumulative and the exercise
or the beginning of exercise of one shall not be deemed a waiver of the right to
exercise of any other or others. No delay or omission of the Collateral Agent in
the exercise of any such right, power or remedy, renewal or extension of any of
the Obligations and no course of dealing between any Assignor and the Collateral
Agent or any holder of any of the Obligations shall impair any such right, power
or remedy or shall be construed to be a waiver of any Default or Event of
Default or an acquiescence therein. No notice to or demand on any Assignor in
any case shall entitle it to any other or further notice or demand in similar or
other circumstances or constitute a waiver of any of the rights of the
Collateral Agent to any other or further action in any circumstances without
notice or demand. In the event that the Collateral Agent shall bring any suit to
enforce any of its rights hereunder and shall be entitled to judgment, then in
such suit the Collateral Agent may recover reasonable expenses, including
attorneys' fees, and the amounts thereof shall be included in such judgment.
7.6. Discontinuance of Proceedings. In case the Collateral Agent shall
have instituted any proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to the Collateral Agent, then and in every such case the relevant
Assignor, the Collateral Agent and each holder of any of the obligations shall
be restored to their former positions and rights hereunder with respect to the
Collateral subject to the security interest created under this Agreement, and
all rights, remedies and powers of the Collateral Agent shall continue as if no
such proceeding had been instituted.
ARTICLE VIII
INDEMNITY
8.1. Indemnity. (a) Each Assignor agrees to indemnify, reimburse and
hold the Collateral Agent, each Secured Creditor and their respective
successors, assigns, employees, agents and servants (hereinafter in this Section
8.1 referred to individually as "Indemnitee," and collectively as "Indemnity")
harmless from any and all liabilities, obligations, damages, injuries,
penalties, claims, demands, actions, suits, judgments and any and all costs,
expenses or disbursements (including reasonable attorneys' fees and expenses)
(for the purposes of this Section 8.1 the foregoing are collectively called
"expenses") of whatsoever kind and nature imposed on, asserted against or
incurred by any of the Indemnity in any way relating to or arising out of this
Agreement, any other Financing Document or any other document executed in
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connection herewith and therewith or in any other way connected with the
administration of the transactions contemplated hereby and thereby or the
enforcement of any of the terms of, or the preservation of any rights under any
thereof, or in any way relating to or arising out of the manufacture, ownership,
ordering, purchase, delivery, control, acceptance, lease, financing, possession,
operation, condition, sale, return or other disposition, or use of the
Collateral (including, without limitation, latent or other defects, whether or
not discoverable), any contract claim or, to the maximum extent permitted under
applicable law, the violation of the laws of any country, state or other
governmental body or unit, or any tort (including, without limitation, claims
arising or imposed under the doctrine of strict liability, or for or on account
of injury to or the death of any Person (including any Indemnitee), or property
damage); provided that no Indemnitee shall be indemnified pursuant to this
Section 8.l (a) for expenses to the extent caused by the gross negligence or
willful misconduct of any Indemnitee. Each Assignor agrees that upon written
notice by any Indemnitee of the assertion of such an expense, such Assignor
shall assume full responsibility for the defense thereof. Each Indemnitee agrees
to use its best efforts to promptly notify the relevant Assignor of any such
assertion of which such Indemnitee has knowledge.
(b) Without limiting the application of Section 8.1(a) hereof, each
Assignor agrees to pay, or reimburse the Collateral Agent for any and all fees,
costs and expenses of whatever kind or nature incurred in connection with the
creation, preservation or protection of the Collateral Agent's Liens on, and
security interest in, the Collateral, including, without limitation, all fees
and taxes in connection with the recording or filing of instruments and
documents in public offices, payment or discharge of any taxes or Liens upon or
in respect of the Collateral, premiums for insurance with respect to the
Collateral and all other fees, costs and expenses in connection with protecting,
maintaining or preserving the Collateral and the Collateral Agent's interest
therein, whether through judicial proceedings or otherwise, or in defending or
prosecuting any actions, suits or proceedings arising out of or relating to the
Collateral.
(c) Without limiting the application of Section 8.1(a) or (b) hereof,
each Assignor agrees to pay, indemnify and hold each Indemnitee harmless from
and against any loss, costs, damages and expenses which such Indemnitee may
suffer, expend or incur in consequence of or growing out of any
misrepresentation by such Assignor in this Agreement, any other Financing
Document or in any writing contemplated by or made or delivered pursuant to or
in connection with this Agreement or any other Financing Document.
(d) If and to the extent that the obligations of any Assignor under
this Section 8.1 are unenforceable for any reason, such Assignor hereby agrees
to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
8.2. Indemnity Obligations Secured by Collateral; Survival. Any
amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of each Assignor contained in this Article VIII shall
continue in full force and effect notwithstanding the full payment of all the
Notes issued under the Credit Agreement, the termination of all Interest Rate
Protection Agreements or Other Hedging Agreements and the payment of all other
Obligations and notwithstanding the discharge thereof.
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ARTICLE IX
DEFINITIONS
The following terms shall have the meanings herein specified. Such
definitions shall be equally applicable to the singular and plural forms of the
terms defined.
"Agent" shall have the meaning provided in the first WHEREAS clause of
this Agreement.
"Agreement" shall mean this Security Agreement as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
"Assignor" shall have the meaning provided in the first paragraph of
this Agreement.
"Bank Creditor" shall have the meaning provided in the first WHEREAS
clause of this Agreement.
"Banks" shall have the meaning provided in the first WHEREAS clause of
this Agreement.
"Borrower" shall have the meaning provided in the first WHEREAS clause
of this Agreement.
"Cash Collateral Account" shall mean a non-interest bearing cash
collateral account maintained with the Collateral Agent for the benefit of the
Secured Creditors.
"Chattel Paper" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Class" shall have the meaning provided in section 11.2.
"Collateral" shall have the meaning provided in Section 1.1(a) of this
Agreement.
"Collateral Agent" shall have the meaning provided in the first
paragraph of this Agreement.
"Contract Rights" shall mean all rights of any Assignor (including,
without limitation, all rights to payment) under each Contract.
"Contracts" shall mean all contracts between any Assignor and one or
more additional parties (including, without limitation, each partnership
agreement to which any Assignor is a party and any Interest Rate Protection
Agreement or Other Hedging Agreement, but excluding licenses and contracts to
the extent that the terms thereof prohibit the assignment of, or granting of a
security interest in, such licenses or contracts.
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"Copyrights" shall mean any copyright owned by any Assignor, including
any registrations of any copy now or hereafter registered with the United States
Copyright office or any foreign equivalent office, as well as any application
for a copyright registration now or hereafter made with the United States
Copyright Office or any foreign equivalent office by any Assignor.
"Credit Agreement" shall have the meaning provided in the first
WHEREAS clause of this Agreement.
"Credit Agreement Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.
"Default" shall mean any event which, with notice or lapse of time, or
both, would constitute an Event of Default.
"Documents" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the State of New York.
"Equipment" shall mean any "equipment," as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all machinery, equipment, furnishings, movable
trade fixtures and vehicles now or hereafter owned by any Assignor 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.
"Event of Default" shall mean any Event of Default under, and as
defined in, the Credit Agreement and shall in any event, without limitation,
include any payment default on any of the Obligations after the expiration of
any applicable grace period.
"Financing Documents" shall have the meaning provided in Section 2.6
of this Agreement.
"General Intangibles" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York and
shall in any event include all of any Assignor's claims, rights, powers,
privileges, authority, options, security interests, liens and remedies under any
partnership agreement to which such Assignor is a party or with respect to any
partnership of which such Assignor is a partner.
"Goods" shall have the meaning provided in the Uniform Commercial Code
as in effect on the date hereof in the State of New York.
"Indemnitee" shall have the meaning provided in Section 8.1 of this
Agreement.
"Instrument" shall have the meaning provided in Article 9 of the
Uniform Commercial Code as in effect on the date hereof in the State of New
York.
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"Intellectual Property Licensee Rights" shall mean any rights of a
licensee to use any Mark, Copyright or Patent.
"Inventory" shall mean merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located, together
with all goods, supplies, incidentals, packaging materials, labels, materials
and any other items used or usable in manufacturing, processing, packaging or
shipping same; in all stages of production -- from raw materials through
work-in-process to finished goods -- and all products and proceeds of whatever
sort and wherever located and any portion thereof which may be returned,
rejected, reclaimed or repossessed by the Collateral Agent from any Assignor's
customers, and shall specifically include all "inventory" as such term is
defined in the Uniform Commercial Code as in effect on the date hereof in the
State of New York, now or hereafter owned by any Assignor.
"Marks" shall mean any trademarks and service marks now held or
hereafter acquired by any Assignor, which are registered in the United States
Patent and Trademark Office or in any similar office or agency of the United
States or any state thereof or any political subdivision thereof and any
application for such trademarks and service marks, as well as any unregistered
marks used by any Assignor in the United States and trade dress including logos,
designs, trade names, company names, business names, fictitious business names
and other business identifiers in connection with which any of these registered
or unregistered marks are used in the United States.
"Obligations" shall mean (i) (x) the principal of and interest on the
Notes issued, and Loans made, under the Credit Agreement, and all reimbursement
obligations and Unpaid Drawings with respect to the Letters of Credit under the
Credit Agreement and (y) all other obligations and indebtedness (including,
without limitation, indemnities, Fees and interest thereon) of each Assignor to
the Bank Creditors now existing or hereafter incurred under, arising out of, or
in connection with the Credit Agreement and the other Credit Documents and the
due performance and compliance by such Assignor with all of the terms,
conditions and agreements contained in the Credit Agreement and the other Credit
Documents (all such principal, interest, obligations and liabilities being
herein collectively called the "Credit Agreement Obligations"); (ii) all
obligations and liabilities owing by such Assignor to the Other Creditors under,
or with respect to, any Interest Rate Protection Agreement or Other Hedging
Agreement, whether such Interest Rate Protection Agreement or Other Hedging
Agreement is now in existence or hereafter arising, and the due performance and
compliance by such Assignor with all of the terms, conditions and agreements
contained therein (all such obligations and liabilities described in this clause
(ii) being herein collectively called the "Other Obligations"); (iii) any and
all sums advanced by the Collateral Agent in order to preserve the Collateral or
preserve its security interest in the Collateral; (iv) in the event of any
proceeding for the collection or enforcement of any indebtedness, obligations,
or liabilities of such Assignor referred to in clauses (i) and (ii), after an
Event of Default shall have occurred and be continuing, the reasonable expenses
of re-taking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Collateral, or of any exercise by the
Collateral Agent of its rights hereunder, together with reasonable attorneys'
fees and court costs; and (v) all amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement under Section 8.1 of this
Agreement.
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"Other Creditors" shall have the meaning provided in the second
WHEREAS clause of this Agreement.
"Other Obligations" shall have the meaning provided in the definition
of "Obligations" in this Article IX.
"Patents" shall mean any patent to which any Assignor now or hereafter
has title and any divisions or continuations thereof, as well as any application
for patent now or hereafter made by any Assignor.
"Primary Obligations" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Pro Rata Share" shall have the meaning provided in Section 7.4(b) of
this Agreement.
"Proceeds" shall have the meaning provided in the Uniform Commercial
Code as in effect in the State of New York on the date hereof or under other
relevant law and, in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Collateral Agent or any Assignor 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 any Assignor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any person acting under
color of governmental authority) and (iii) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.
"Receivables" shall mean any "account" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all of such Assignor's rights to payment for goods
sold or leased or services performed by such Assignor, whether now in existence
or arising from time to time hereafter, including, without limitation, rights
evidenced by an account, note, contract, security agreement, chattel paper, or
other evidence of indebtedness or security, together with (i) all security
pledged, assigned, hypothecated or granted to or held by such Assignor to secure
the foregoing, (ii) all of any Assignor's right, title and interest in and to
any goods, the sale of which gave rise thereto, (iii) all guarantees,
endorsements and indemnifications on, or of, any of the foregoing, (iv) all
powers of attorney for the execution of any evidence of indebtedness or security
or other writing in connection therewith, (v) all books, records, ledger cards,
and invoices relating thereto, (vi) all evidences of the filing of financing
statements and other statements and the registration of other instruments in
connection therewith and amendments thereto, notices to other creditors or
secured parties, and certificates from filing or other registration officers,
(vii) all credit information, reports and memoranda relating thereto, and (viii)
all other writings related in any way to the foregoing.
"Representative" shall have the meaning provided in Section 7.4 of
this Agreement.
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"Required Secured Creditors" shall mean (i) the Required Banks (or, to
the extent required by Section 13.12 of the Credit Agreement, all of the Banks)
under the Credit Agreement so long as any Credit Agreement Obligations remain
outstanding and (ii) in any situation not covered by preceding clause (i), the
holders of a majority of the outstanding principal amount of the Other
Obligations.
"Requisite Creditors" shall have the meaning provided in Section 11.2
of this Agreement.
"Secondary Obligations" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Secured Creditors" shall have the meaning provided in the second
WHEREAS clause of this Agreement.
"Termination Date" shall have the meaning provided in Section 11.9 of
this Agreement.
"Trade Secrets" shall mean all trade secrets and proprietary
information necessary to operate the business of any Assignor.
ARTICLE X
THE COLLATERAL AGENT
10.1. Appointment. The Secured Creditors, by their acceptance of the
benefits of this Agreement hereby irrevocably designate Bankers Trust Company,
as Collateral Agent, to act as specified herein. Each Secured Creditor hereby
irrevocably authorizes, and each holder of any Note by the acceptance of such
Note and by the acceptance of the benefits of this Agreement shall be deemed
irrevocably to authorize, the Collateral Agent to take such action on its behalf
under the provisions of this Agreement and any other instruments and agreements
referred to herein and to exercise such powers and to perform such duties
hereunder as are specifically delegated to or required of the Collateral Agent
by the terms hereof and such other powers as are reasonably incidental thereto.
The Collateral Agent may perform any of its duties hereunder or thereunder by or
through its authorized agents or employees.
10.2. Nature of Duties. (a) The Collateral Agent shall have no duties
or responsibilities except those expressly set forth in this Agreement. The
duties of the Collateral Agent shall be mechanical and administrative in nature;
the Collateral Agent shall not have by reason of this Agreement or any other
Financing Document a fiduciary relationship in respect of any Secured Creditor;
and nothing in this Agreement or any other Financing Document, expressed or
implied, is intended to or shall be so construed as to impose upon the
Collateral Agent any obligations in respect of this Agreement except as
expressly set forth herein.
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(b) The Collateral Agent shall not be responsible for insuring the
Collateral or for the payment of taxes, charges or assessments or discharging of
Liens upon the Collateral or otherwise as to the maintenance of the Collateral.
(c) The Collateral Agent shall not be required to ascertain or inquire
as to the performance by any Assignor of any of the covenants or agreements
contained in this Agreement or any other Financing Document.
(d) The Collateral Agent shall be under no obligation or duty to take
any action under this Agreement or any other Credit Document if taking such
action (i) would subject the Collateral Agent to a tax in any jurisdiction where
it is not then subject to a tax or (ii) would require the Collateral Agent to
qualify to do business in any jurisdiction where it is not then so qualified,
unless the Collateral Agent receives security or indemnity satisfactory to it
against such tax (or equivalent liability), or any liability resulting from such
qualification, in each case as results from the taking of such action under this
Agreement or any other Credit Document or (iii) would subject the Collateral
Agent to in personam jurisdiction in any locations where it is not then so
subject.
(e) Notwithstanding any other provision of this Agreement, neither the
Collateral Agent nor any of its officers, directors, employees, affiliates or
agents shall, in its individual capacity, be personally liable for any action
taken or omitted to be taken by it in accordance with this Agreement except for
its own gross negligence or willful misconduct.
10.3. Lack of Reliance on the Collateral Agent. Independently and
without reliance upon the Collateral Agent, each Secured Creditor, to the extent
it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of any Assignor
and its Subsidiaries in connection with the making and the continuance of the
Obligations and the taking or not taking of any action in connection therewith,
and (ii) its own appraisal of the creditworthiness of any Assignor and its
Subsidiaries, and the Collateral Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Secured Creditor with
any credit or other information with respect thereto, whether coming into its
possession before the extension of any Obligations or the purchase of any Notes
or at any time or times thereafter. The Collateral Agent shall not be
responsible in any manner whatsoever to any Secured Creditor for the correctness
of any recitals, statements, information, representations or warranties herein
or in any document, certificate or other writing delivered in connection
herewith or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of this
Agreement or the security interests granted hereunder or the financial condition
of any Assignor or any Subsidiary of any Assignor or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement, or the financial condition of any
Assignor or any Subsidiary of any Assignor, or the existence or possible
existence of any Default or Event of Default. The Collateral Agent makes no
representations as to the value or condition of the Collateral or any part
thereof, or as to the title of any Assignor thereto or as to the security
afforded by this Agreement.
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10.4. Certain Rights of the Collateral Agent. (a) No Secured Creditor
shall have the right to cause the Collateral Agent to take any action with
respect to the Collateral, with only the Required Secured Creditors having the
right to direct the Collateral Agent to take any such action. If the Collateral
Agent shall request instructions from the Required Secured Creditors, with
respect to any act or action (including failure to act) in connection with this
Agreement, the Collateral Agent shall be entitled to refrain from such act or
taking such action unless and until it shall have received instructions from the
Required Secured Creditors and to the extent requested, appropriate
indemnification in respect of actions to be taken, and the Collateral Agent
shall not incur liability to any Person by reason of so refraining. Without
limiting the foregoing, no Secured Creditor shall have any right of action
whatsoever against the Collateral Agent as a result of the Collateral Agent
acting or refraining from acting hereunder in accordance with the instructions
of the Required Secured Creditors.
(b) The Collateral Agent shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement at the request or
direction of any of the Secured Creditors, unless such Secured Creditors shall
have offered to the Collateral Agent reasonable security or indemnity against
the costs, expenses and liabilities that might be incurred by it in compliance
with such request or direction.
10.5. Reliance. The Collateral Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
the proper Person or entity, and, with respect to all legal matters pertaining
to this Agreement and the other Security Documents and its duties thereunder and
hereunder, upon advice of counsel selected by it.
10.6. Indemnification. To the extent the Collateral Agent is not
reimbursed and indemnified by any Assignor under this Agreement, the Secured
Creditors will reimburse and indemnify the Collateral Agent, in proportion to
their respective outstanding principal amounts (including, for this purpose, the
Stated Amount of outstanding Letters of Credit and any unreimbursed drawings in
respect of Letters of Credit, as well as any unpaid Primary Obligations in
respect of Interest Rate Protection Agreements or other Hedging Agreements, as
outstanding principal) of Obligations, for and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Collateral Agent in performing its
duties hereunder, or in any way relating to or arising out of its actions as
Collateral Agent in respect of this Agreement except for those resulting solely
from the Collateral Agent's own gross negligence or willful misconduct. The
indemnities set forth in this Article X shall survive the repayment of all
Obligations, with the respective indemnification at such time to be based upon
the outstanding principal amounts (determined as described above) of Obligations
at the time of the respective occurrence upon which the claim against the
Collateral Agent is based or, if same is not reasonably determinable, based upon
the outstanding principal amounts (determined as described above) of Obligations
as in effect immediately prior to the termination of this Agreement. The
indemnities set forth in this Article X are in addition to any indemnities
provided by the Banks to the Collateral Agent pursuant to the Credit Agreement,
with the effect being that the Banks shall be responsible for indemnifying the
Collateral Agent to the extent the
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Collateral Agent does not receive payments pursuant to this Section 10.6 from
the Secured Creditors (although in such event, and upon the payment in full of
all such amounts owing to the Collateral Agent, the respective Banks who paid
same shall be subrogated to the rights of the Collateral Agent to receive
payment from the Secured Creditors).
10.7. The Collateral Agent in its Individual Capacity. With respect to
its obligations as a lender under the Credit Agreement and any other Credit
Documents to which the Collateral Agent is a party, and to act as agent under
one or more of such Credit Documents, the Collateral Agent shall have the rights
and powers specified therein and herein for a "Bank", or an "Agent", as the case
may be, and may exercise the same rights and powers as though it were not
performing the duties specified herein; and the terms "Banks," "Required Banks,"
"holders of Notes," or any similar terms shall, unless the context clearly
otherwise indicates, include the Collateral Agent in its individual capacity.
The Collateral Agent may accept deposits from, lend money to, and generally
engage in any kind of banking, trust or other business with any Assignor or any
Affiliate or Subsidiary of any Assignor as if it were not performing the duties
specified herein or in the other Credit Documents, and may accept fees and other
consideration from any Assignor for services in connection with the Credit
Agreement, the other Credit Documents and otherwise without having to account
for the same to the Secured Creditors.
10.8. Holders. The Collateral Agent may deem and treat the payee of
any Note as the owner thereof for all purposes hereof unless and until written
notice of the assignment, transfer or endorsement thereof, as the case may be,
shall have been filed with the Collateral Agent. Any request, authority or
consent of any person or entity who, at the time of making such request or
giving such authority or consent, is the holder of any Note, shall be final and
conclusive and binding on any subsequent holder, transferee, assignee or
endorsee, as the case may be, of such Note or of any Note or Notes issued in
exchange therefor.
10.9. Resignation by the Collateral Agent. (a) The Collateral Agent
may resign from the performance of all of its functions and duties under this
Agreement at any time by giving 15 Business Days' prior or written notice to the
Assignors and the Banks. Such resignation shall take effect upon the appointment
of a successor Collateral Agent pursuant to clause (b) or (c) below.
(b) If a successor Collateral Agent shall not have been appointed
within said 15 Business Day period by the Required Secured Creditors, the
Collateral Agent, with the consent of each Assignor, which consent shall not be
unreasonably withheld, shall then appoint a successor Collateral Agent who shall
serve as Collateral Agent hereunder or thereunder until such time, if any, as
the Required Secured Creditors appoint a successor Collateral Agent as provided
above.
(c) If no successor Collateral Agent has been appointed pursuant to
clause (b) above by the 15th Business Day after the date of such notice of
resignation was given by the Collateral Agent, as a result of a failure by such
Assignor to consent to the appointment of such a successor Collateral Agent, the
Required Secured Creditors shall then appoint a successor Collateral Agent who
shall serve as Collateral Agent hereunder or thereunder until such time, if any,
as the Required Secured Creditors appoint a successor Collateral Agent as
provided above.
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10.10. Fees and Expenses of Collateral Agent. (a) Each Assignor (by
its execution and delivery hereof) hereby agrees that it shall pay to Bankers
Trust Company as the initial Collateral Agent, such fees as have been separately
agreed to in writing with Bankers Trust Company for acting as Agent and as
Collateral Agent hereunder. In the event a successor Collateral Agent is at any
time appointed pursuant to the preceding Section 10.9, each Assignor hereby
agrees to pay such successor Collateral Agent such fees for acting as such as
would customarily be charged by such Collateral Agent for acting in such
capacity in similar situations. Absent manifest error, the determination by a
successor Collateral Agent of the fees owing to it shall be conclusive and
binding upon such Assignor.
(b) In addition, each Assignor agrees to pay all reasonable
out-of-pocket costs and expenses of the Collateral Agent in connection with this
Agreement and any actions taken by the Collateral Agent hereunder, and agrees to
pay all costs and expenses of the Collateral Agent in connection with the
enforcement of this Agreement and the documents and instruments referred to
herein (including, without limitation, reasonable fees and disbursements of
counsel for the Collateral Agent).
ARTICLE XI
MISCELLANEOUS
11.1. Notices. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed as follows:
(a) if to any Assignor, at the address set forth opposite such
Assignor's signature:
(b) if to the Collateral Agent:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Marcus Tarkington
(c) if to any Bank Creditor, either (x) to the Agent, at the address
of the Agent specified in the Credit Agreement or (y) at such address as
such Bank Creditor shall have specified in the Credit Agreement;
(d) if to any Other Creditor, either (x) to the Representative for the
Other Creditors, at such address as such Representative may have provided
to the Assignor and the Collateral Agent from time to time, or (y) directly
to the Other Creditors at such address as the Other Creditors shall have
specified in writing to the Assignor and the Collateral Agent; or at such
other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
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11.2. Waiver; Amendment. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Assignor and the Collateral Agent (with
the written consent of the Required Secured Creditors); provided, however, that
any change, waiver, modification or variance affecting the rights and benefits
of a single Class of Secured Creditors (and not all Secured Creditors in a like
or similar manner) shall require the written consent of the Requisite Creditors
of such affected Class. For the purpose of this Agreement, the term "Class"
shall mean each class of Secured Creditors, i.e., whether (y) the Bank Creditors
as holders of the Credit Agreement Obligations or (z) the Other Creditors as the
holders of the Other Obligations; and the term "Requisite Creditors" of any
Class shall mean each of (x) with respect to the Credit Agreement Obligations,
the Required Banks and (y) with respect to the Other Obligations, the holders of
at least a majority of all obligations outstanding from time to time under the
Interest Rate Protection Agreements or Other Hedging Agreements.
11.3. Obligations Absolute. The obligations of each Assignor hereunder
shall remain in full force and effect without regard to, and shall not be
impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of such Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement or any other Financing Document
except as specifically set forth in a waiver granted pursuant to Section 11.2
hereof; or (c) any amendment to or modification of any Financing Document or any
security for any of the Obligations; whether or not such Assignor shall have
notice or knowledge of any of the foregoing.
11.4. Successors and Assigns. This Agreement shall be binding upon
each Assignor and its successors and assigns and shall inure to the benefit of
the Collateral Agent and each Secured Creditor and their respective successors
and assigns, provided that such Assignor may not transfer or assign any or all
of its rights or obligations hereunder without the written con sent of the
Required Secured Creditors. All agreements, statements, representations and
warranties made by each Assignor herein or in any certificate or other
instrument delivered by such Assignor or on its behalf under this Agreement
shall be considered to have been relied upon by the Secured Creditors and shall
survive the execution and delivery of this Agreement or the other Financing
Documents regardless of any investigation made by the Secured Creditors or on
their behalf.
11.5. Headings Descriptive. The headings of the several sections of
this Agreement are inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Agreement.
11.6. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE CONSTRUED IN
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ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
11.8. Assignor's Duties. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that each Assignor shall remain
liable to perform all of the obligations, if any, assumed by it with respect to
the Collateral and the Collateral Agent shall not have any obligations or
liabilities with respect to any Collateral by reason of or arising out of this
Agreement, nor shall the Collateral Agent be required or obligated in any manner
to perform or fulfill any of the obligations of any Assignor under or with
respect to any Collateral except to the extent directly resulting from the
Collateral Agent's gross negligence or willful misconduct.
11.9. Termination; Release. (a) After the Termination Date, this
Agreement shall terminate and the Collateral Agent, at the request and expense
of the respective Assignor, will execute and deliver to such Assignor a proper
instrument or instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to such Assignor (without
recourse and without any representation or warranty) such of the Collateral of
such Assignor as may be in the possession of the Collateral Agent and as has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement. As used in this Agreement, "Termination Date" shall mean the date
upon which the Total Commitments and all Interest Rate Protection Agreements or
Other Hedging Agreements have been terminated, no Note under the Credit
Agreement is outstanding (and all Loans have been repaid in full), all Letters
of Credit have been terminated and all Obligations then owing have been paid in
full.
(b) In the event that any part of the Collateral is sold in connection
with a sale permitted by Section 9.02 of the Credit Agreement or otherwise
released at the direction of the Required Banks (or all Banks if required by
Section 13.12(a)(ii) of the Credit Agreement) and the proceeds of such sale or
sales or from such release are applied in accordance with the provisions of
Section 4.02 of the Credit Agreement, to the extent required to be so applied,
such Collateral will be sold free and clear of the Liens created by this
Agreement and the Collateral Agent, at the request and expense of each Assignor,
will duly assign, transfer and deliver to such Assignor (without recourse and
without any representation or warranty) such of the Collateral as is then being
(or has been) so sold or released and as may be in the possession of the
Collateral Agent and has not theretofore been released pursuant to this
Agreement.
(c) In the event that, prior to the Termination Date, the Borrower
enters into a replacement working capital facility as permitted under Section
9.04(xiv) of the Credit Agreement and such replacement working capital facility
is to be secured by a first priority perfected lien on all Inventory and
Receivables owned by Holdings and its Subsidiaries, the Collateral Agent shall,
at the request and expense of the Assignors, execute and deliver to the
Assignors a proper instrument or instruments releasing all inventory and
receivables owned by Holdings and its Subsidiaries from the security interest
granted pursuant to this Agreement.
(d) At any time that an Assignor desires that the Collateral Agent
take any action to acknowledge or give effect to any release of Collateral
pursuant to the foregoing Section 11.9 (a), (b) or (c), it shall deliver to the
Collateral Agent a certificate signed by its senior officer
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stating that the release of the respective Collateral is permitted pursuant to
Section 11.9(a), (b) or (c). If requested by the Collateral Agent (although the
Collateral Agent shall have no obligation to make any such request), each
Assignor shall furnish appropriate legal opinions (from counsel acceptable to
the Collateral Agent) to the effect set forth in the immediately preceding
sentence. The Collateral Agent shall have no liability whatsoever to any Secured
Creditor as the result of any release of Collateral by it as permitted by this
Section 11.9.
(e) The Collateral Agent shall have no liability whatsoever to any
Secured Creditor as a result of any release of Collateral by it in accordance
with this Section 11.9.
11.10. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with each Assignor and the
Collateral Agent.
11.11. Additional Assignors. It is understood and agreed that any
subsidiary of Holdings that is required to execute a counterpart of this
Agreement after the date hereof pursuant tot he Credit Agreement shall
automatically become an Assignor hereunder by executing a counterpart hereof and
delivering the same to the Collateral Agent.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date first
above written.
ADDRESSES
4440 Brittmoore Road UNIVERSAL COMPRESSION HOLDINGS, INC.
Houston, Texas
Attn: President
By
--------------------------------------
Title:
UNIVERSAL COMPRESSION, INC.
By
--------------------------------------
Title:
130 Liberty Street BANKERS TRUST COMPANY,
New York, New York 10006 as Collateral Agent
Attention: Marcus Tarkington
By
--------------------------------------
Title:
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PLEDGE AGREEMENT
PLEDGE AGREEMENT (as amended, modified or supplemented from time to
time, this "Agreement"), dated as of February 20, 1998, made by each of the
undersigned pledgors (each a "Pledgor" and, together with any other entity that
becomes a pledgor hereunder pursuant to Section 24 hereof, the "Pledgors") to
BANKERS TRUST COMPANY, as Collateral Agent (the "Pledgee"), for the benefit of
the Secured Creditors (as defined below). Except as otherwise defined herein,
capitalized terms used herein and defined in the Credit Agreement (as defined
below) shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, Universal Compression Holdings, Inc. ("Holdings"), TW
Acquisition Corporation (the "Borrower", which term shall mean Universal
Compression, Inc. from and after the consummation of the Merger), the lenders
from time to time party thereto (the "Banks"), and Bankers Trust Company, as
Agent (together with any successor agent, the "Agent"), have entered into a
Credit Agreement, dated as of February 20, 1998 (as amended, modified or
supplemented from time to time, the "Credit Agreement"), providing for the
making of Loans to, and the issuance of Letters of Credit for the account of,
the Borrower as contemplated therein (the Banks, the Agent and the Pledgee are
herein called the "Bank Creditors");
WHEREAS, the Borrower may at any time and from time to time enter into
one or more Interest Rate Protection Agreements or Other Hedging Agreements with
one or more Banks or any affiliate thereof (each such Bank or affiliate, even if
the respective Bank subsequently ceases to be a Bank under the Credit Agreement
for any reason, together with such Bank's or affiliate's successors and assigns,
if any, collectively, the "Other Creditors," and together with the Bank
Creditors, the "Secured Creditors");
WHEREAS, pursuant to, and after the execution and delivery of, the
Subsidiaries Guaranty, each Subsidiary Guarantor has jointly and severally
guarantied to the Secured Creditors the payment when due of all Guaranteed
Obligations as described therein;
WHEREAS, pursuant to the Holdings Guaranty, Holdings has guarantied to
the Secured Creditors the payment when due of all of the Guaranteed Obligations
as described therein;
WHEREAS, it is a condition to the making of Loans to, and the issuance
of Letters of Credit for the account of, the Borrower under the Credit Agreement
that each Pledgor shall have executed and delivered to the Pledgee this
Agreement; and
WHEREAS, each Pledgor desires to enter into this Agreement in order to
satisfy the condition described in the preceding paragraph;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Pledgor, the receipt and sufficiency of which are hereby
acknowledged, each Pledgor hereby makes the following representations and
warranties to the Pledgee for the benefit of the Secured Creditors and hereby
covenants and agrees with the Pledgee for the benefit of the Secured Creditors
as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor
for the benefit of the Secured Creditors tosecure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and indebtedness
(including, without limitation, indemnities, Fees and interest thereon) of
such Pledgor to the Bank Creditors, whether now existing or hereafter
incurred under, arising out of, or in connection with the Credit Documents
to which such Pledgor is a party (including, in the case of each Guarantor,
all such obligations and indebtedness of such Guarantor under its Guaranty)
and the due performance and compliance by such Pledgor with all of the
terms, conditions and agreements contained in the Credit Documents (all
such obligations and liabilities under this clause (i), except to the
extent consisting of obligations or indebtedness with respect to Interest
Rate Protection Agreements or Other Hedging Agreements, being herein
collectively called the "Credit Document Obligations");
(ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
owing by such Pledgor to the Other Creditors under, or with respect to
(including by reason of such Pledgor's Guaranty), any Interest Rate
Protection Agreement or Other Hedging Agreement, whether such Interest Rate
Protection Agreement or Other Hedging Agreement is now in existence or
hereafter arising, and the due performance and compliance by such Pledgor
with all of the terms, conditions and agreements contained therein (all
such obligations and liabilities described in this clause (ii) being herein
collectively called the "Other Obligations");
(iii) any and all sums advanced by the Pledgee in accordance herewith in
order to preserve the Collateral (as hereinafter defined) or preserve its
security interest in the Collateral;
(iv) in the event of any proceeding for the collection or enforcement of
any indebtedness, obligations or liabilities of such Pledgor referred to in
clauses (i), (ii) and (iii) above, after an Event of Default or any payment
default by the Borrower under any Interest Rate Protection Agreement or
Other Hedging Agreement shall have occurred and be continuing, the
reasonable expenses of retaking, holding, preparing for sale or lease,
selling or otherwise disposing of or realizing on the Collateral in
accordance herewith, or of any exercise by the Pledgee of its rights
hereunder, together with reasonable attorneys' fees and court costs; and
(v) all amounts paid by any Secured Creditor as to which such Secured
Creditor has the right to reimbursement under Section 11 of this Agreement;
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all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (v) of this Section 1 being herein collectively called the
"Obligations," it being acknowledged and agreed that the "Obligations" shall
include extensions of credit of the types described above, whether outstanding
on the date of this Agreement or extended from time to time after the date of
this Agreement.
2. DEFINITION OF STOCK, NOTES, SECURITIES, PARTNERSHIP INTERESTS, ETC.
(a) As used herein, (i) the term "Stock" shall mean (x) with respect to
corporations incorporated under the laws of the United States or any state or
territory thereof (each, a "Domestic Corporation"), all of the issued and
outstanding shares of capital stock, and all warrants and options to purchase
any such capital stock, of any Domestic Corporation at any time owned by any
Pledgor and (y) with respect to corporations not Domestic Corporations (each, a
"Foreign Corporation"), all of the issued and outstanding shares of capital
stock, and all warrants and options to purchase any such capital stock, of any
Foreign Corporation at any time owned by any Pledgor, provided that, except as
provided in the last sentence of this Section 2, such Pledgor shall not be
required to pledge hereunder more than 65% of the total combined voting power of
all classes of capital stock of any Foreign Corporation entitled to vote, (ii)
the term "Notes" shall mean all Intercompany Notes and all other promissory
notes or other evidences of indebtedness from time to time issued to, or held
by, any Pledgor, provided that, except as provided in the last sentence of this
Section 2, such Pledgor shall not be required to pledge hereunder any promissory
notes (including Intercompany Notes) issued to such Pledgor by any Subsidiary of
such Pledgor which is a Foreign Corporation and (iii) the term "Securities"
shall mean all of the Stock and Notes. Each Pledgor represents and warrants,
that on the date hereof, (A) the Stock held by such Pledgor consists of the
number and type of shares of the stock of the corporations as described in Annex
A hereto for such Pledgor, (B) such Stock constitutes that percentage of the
issued and outstanding capital stock of the issuing corporation as is set forth
in Annex A hereto, (C) the Notes held by such Pledgor consist of the promissory
notes described in Annex B hereto for such Pledgor, (D) such Pledgor is the
holder of record and sole beneficial owner of the Stock and the Notes held by
such Pledgor and (E) on the date hereof, such Pledgor owns no other Securities.
In the circumstances and to the extent provided in Section 8.12 of the Credit
Agreement, the 65% limitation set forth in the proviso of clause (i)(y) and the
limitation in the proviso of clause (ii) in each case of the first sentence of
this Section 2 and in Section 3.2 hereof shall no longer be applicable and such
Pledgor shall duly pledge and deliver to the Pledgee such of the Securities not
theretofore required to be pledged hereunder.
(b) As used herein, the term "Partnership Interest" shall mean the
entire partnership interests (whether general and/or limited partnership
interests) at any time owned by each Pledgor in any Person (each a "Pledged
Partnership"). Each Pledgor represents and warrants that, on the date hereof,
(A) the Partnership Interests held by such Pledgor constitutes that percentage
of the entire partnership interest of the respective Pledged Partnership as is
set forth on Annex C hereto for such Pledgor and (B) such Pledgor owns no other
Partnership Interests.
(c) All Stock at any time pledged or required to be pledged hereunder
is hereinafter called the "Pledged Stock;" all Notes at any time pledged or
required to be pledged hereunder are hereinafter called the "Pledged Notes;" all
Pledged Stock and Pledged Notes
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together are called the "Pledged Securities;" all Partnership Interests at any
time pledged or required to be pledged hereunder are hereinafter called the
"Pledged Partnership Interests", and the Pledged Securities and the Pledged
Partnership Interests, together with all proceeds thereof, including any
securities and moneys received and at the time held by the Pledgee hereunder,
are hereinafter called the "Collateral."
3. PLEDGE OF SECURITIES, ETC.
3.1. Pledge. (a) To secure the Obligations of such Pledgor and for the
purposes set forth in Section 1 hereof, each Pledgor hereby (i) grants to the
Pledgee a security interest in all of the Collateral owned by such Pledgor, (ii)
pledges and deposits as security with the Pledgee, the Securities owned by such
Pledgor on the date hereof, and delivers to the Pledgee certificates or
instruments therefor, duly endorsed in blank by such Pledgor in the case of
Notes and accompanied by undated stock powers duly executed in blank by such
Pledgor (and accompanied by any transfer tax stamps required in connection with
the pledge of such Securities) in the case of Stock, or such other instruments
of transfer as are reasonably acceptable to the Pledgee, (iii) assigns,
transfers, hypothecates, mortgages, charges and sets over to the Pledgee all of
such Pledgor's right, title and interest in and to such Securities (and in and
to the certificates or instruments evidencing such Securities), to be held by
the Pledgee upon the terms and conditions set forth in this Agreement and (iv)
transfers and assigns to the Pledgee such Pledgor's Partnership Interests (and
delivers any certificates or instruments evidencing such partnership interests,
duly endorsed in blank) and all of such Pledgor's right, title and interest in
each Pledged Partnership including, without limitation:
(i) all of the capital thereof and its interest in all profits, losses,
Partnership Assets (as defined below) and other distributions to which such
Pledgor shall at any time be entitled in respect of any such Collateral;
(ii) all other payments due or to become due to such Pledgor in respect
of any such Collateral, whether under any partnership agreement or
otherwise, whether as contractual obligations, damages, insurance proceeds
or otherwise;
(iii) all of its claims, rights, powers, privileges, authority, options,
security interest, liens and remedies, if any, under any partnership or
other agreement or at law or otherwise in respect of any such Collateral;
(iv) all present and future claims, if any, of such Pledgor against any
Pledged Partnership for moneys loaned or advanced, for services rendered or
otherwise;
(v) all of such Pledgor's rights under any partnership agreement or at
law to exercise and enforce every right, power, remedy, authority, option
and privilege of such Pledgor relating to any Partnership Interest,
including any power, if any, to terminate, cancel or modify any general or
limited partnership agreement, to execute any instruments and to take any
and all other action on behalf of and in the name of such Pledgor in
respect of such Partnership Interest and any Pledged Partnership, to make
determinations, to exercise any election (including, but not limited to,
election of remedies) or option or to
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give or receive any notice, consent, amendment, waiver or approval,
together with full power and authority to demand, receive, enforce,
collect, or receipt for any of the foregoing or for any Partnership Asset,
to enforce or execute any checks, or other instruments or orders, to file
any claims and to take any action in connection with any of the foregoing;
(vi) all other property hereafter delivered in substitution for or in
addition to any of the foregoing, all certificates and instruments
representing or evidencing such other property and all cash, securities,
interest, dividends, distributions, rights and other property at any time
and from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all thereof; and
(vii) to the extent not otherwise included, all proceeds of any or all of
the foregoing.
(b) As used herein, the term "Partnership Assets" shall mean all
assets, whether tangible or intangible and whether real, personal or mixed
(including, without limitation, all partnership capital and interests in other
partnerships), at any time owned by any Pledged Partnership or represented by
any Partnership Interest.
3.2. Subsequently Acquired Securities and/or Partnership Interests.
(a) If any Pledgor shall acquire (by purchase, stock dividend or otherwise) any
additional Securities at any time or from time to time after the date hereof,
such Pledgor will promptly thereafter deposit such Securities (or certificates
or instruments representing such Securities) as security with the Pledgee and
deliver to the Pledgee certificates or instruments therefor, duly endorsed in
blank in the case of such Notes, and accompanied by undated stock powers duly
executed in blank by such Pledgor (and accompanied by any transfer tax stamps
required in connection with the pledge of such Securities) in the case of such
Stock, or such other instruments of transfer as are reasonably acceptable to the
Pledgee, and will promptly thereafter deliver to the Pledgee a certificate or
letter executed by a principal executive officer of such Pledgor describing such
Securities and certifying that the same has been duly pledged with the Pledgee
hereunder. Subject to the last sentence of Section 2 hereof, no Pledgor shall be
required at any time to pledge hereunder (x) any Stock which is more than 65% of
the total combined voting power of all classes of capital stock of any Foreign
Corporation entitled to vote or (y) any promissory notes (including Intercompany
Notes) issued to such Pledgor by any Subsidiary of such Pledgor which is a
Foreign Corporation.
(b) If any Pledgor shall acquire (by purchase, distribution or
otherwise) any additional Partnership Interest at any time or from time to time
after the date hereof, and, to the extent such Partnership Interest is
certificated, such Pledgor shall forthwith deliver to the Pledgee certificates
therefor, accompanied by such instruments of transfer as are acceptable to the
Pledgee, and shall promptly thereafter deliver to the Pledgee a certificate or
letter executed by a principal executive officer of such Pledgor describing such
Partnership Interest and certifying that the same has been duly pledged with the
Pledgee hereunder.
3.3. Uncertificated Securities and Partnership Interests.
Notwithstanding anything to the contrary contained in Sections 3.1 and 3.2
hereof, if any Securities (whether now owned or hereafter acquired) or
Partnership Interests are uncertificated securities, the relevant Pledgor shall
promptly notify the Pledgee thereof, and shall promptly take all actions
required to perfect the
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security interest of the Pledgee under applicable law (including, in any event,
under the applicable provisions of the New York Uniform Commercial Code). Each
Pledgor further agrees to take such actions as the Pledgee deems necessary or
reasonably desirable to effect the foregoing and to permit the Pledgee to
exercise any of its rights and remedies hereunder, and agrees to provide an
opinion of counsel reasonably satisfactory to the Pledgee with respect to any
such pledge of uncertificated Securities promptly upon the reasonable request of
the Pledgee.
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. If and to the extent
necessary to enable the Pledgee to perfect its security interest in any of the
Collateral or to exercise any of its remedies hereunder, the Pledgee shall have
the right, upon written notice to the Borrower (provided that no such notice
shall be required to the extent that same may not be permitted to be given under
applicable law), to appoint one or more sub-agents for the purpose of retaining
physical possession of the Pledged Securities or Pledged Partnership Interests,
which may be held (in the discretion of the Pledgee) in the name of the relevant
Pledgor, endorsed or assigned in blank or in favor of the Pledgee or any nominee
or nominees of the Pledgee or a sub-agent appointed by the Pledgee.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until there
shall have occurred and be continuing an Event of Default, each Pledgor shall be
entitled to exercise any and all (i) voting and other consensual rights
pertaining to the Pledged Securities owned by it, and to give consents, waivers
or ratifications in respect thereof, and (ii) voting, consent, administration,
management and other rights and remedies under any partnership agreement or
otherwise with respect to the Pledged Partnership Interests of such Pledgor;
provided, that, in each case, no vote shall be cast or any consent, waiver or
ratification given or any action taken or omitted to be taken which would
violate or be inconsistent with any of the terms of this Agreement, the Credit
Agreement, any other Credit Document or any Interest Rate Protection Agreement
or Other Hedging Agreement (collectively, the "Secured Debt Agreements"), or
which would have the effect of impairing the value of the Collateral or any part
thereof or the position or interests of the Pledgee or any other Secured
Creditor in the Collateral. All such rights of each Pledgor to vote and to give
consents, waivers and ratifications shall cease in case an Event of Default has
occurred and is continuing, and Section 7 hereof shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until there shall
have occurred and be continuing an Event of Default, (i) all cash dividends and
distributions payable in respect of the Pledged Stock and all payments in
respect of the Pledged Notes shall be paid to the respective Pledgor and (ii)
all cash distributions payable in respect of the Pledged Partnership Interests
shall be paid to the respective Pledgor. The Pledgee shall be entitled to
receive directly, and to retain as part of the Collateral:
(i) all other or additional stock or other securities or partnership
interests (other than cash) paid or distributed by way of dividend,
distribution or otherwise in respect of the Collateral;
(ii) all other or additional stock or other securities or partnership
interests paid or distributed in respect of the Collateral by way of
merger, consolidation, conveyance of
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assets, liquidation, exchange of stock, stock-split, spin-off, split-up,
reclassification, combination of shares or similar rearrangement; and
(iii) all other property (other than cash) paid or distributed by way of
dividend or distribution in respect of the Collateral.
Nothing contained in this Section 6 shall limit or restrict in any way the
Pledgee's right to receive proceeds of the Collateral in any form in accordance
with Section 3 of this Agreement. All dividends, distributions or other payments
which are received by any Pledgor contrary to the provisions of this Section 6
and Section 7 hereof shall be received in trust for the benefit of the Pledgee,
shall be segregated from other property or funds of such Pledgor and shall be
forthwith paid over to the Pledgee as Collateral in the same form as so received
(with any necessary endorsement).
7. REMEDIES IN CASE OF DEFAULT OR EVENT OF DEFAULT. If there shall
have occurred and be continuing an Event of Default, then and in every such
case, the Pledgee shall be entitled to exercise all of the rights, powers and
remedies (whether vested in it by this Agreement, any other Secured Debt
Agreement or by law) for the protection and enforcement of its rights in respect
of the Collateral, and the Pledgee shall be entitled to exercise all the rights
and remedies of a secured party under the Uniform Commercial Code and also shall
be entitled, without limitation, to exercise the following rights:
(a) to receive all amounts payable in respect of the Collateral
otherwise payable under Section 6 hereof to the respective Pledgor;
(b) to transfer all or any part of the Collateral into the Pledgee's
name or the name of its nominee or nominees;
(c) to accelerate any Pledged Note which may be accelerated in
accordance with its terms, and take any other lawful action to collect upon
any Pledged Note (including, without limitation, to make any demand for
payment thereon);
(d) to vote all or any part of the Pledged Stock or Pledged
Partnership Interests (whether or not transferred into the name of the
Pledgee) and give all consents, waivers and ratifications in respect of the
Collateral and otherwise act with respect thereto as though it were the
outright owner thereof (each Pledgor hereby irrevocably constituting and
appointing the Pledgee the proxy and attorney-in-fact of such Pledgor, with
full power of substitution to do so); and
(e) at any time and from time to time to sell, assign and deliver, or
grant options to purchase, all or any part of the Collateral, or any
interest therein, at any public or private sale, without demand of
performance, advertisement or notice of intention to sell or of the time or
place of sale or adjournment thereof or to redeem or otherwise (all of
which are hereby waived by each Pledgor), for cash, on credit or for other
property, for immediate or future delivery without any assumption of credit
risk, and for such price or prices and on such terms as the Pledgee in its
absolute discretion may determine, provided
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that at least 10 days' written notice of the time and place of any such
sale shall be given to the respective Pledgor. The Pledgee shall not be
obligated to make any such sale of Collateral regardless of whether any
such notice of sale has theretofore been given. Each Pledgor hereby waives
and releases to the fullest extent permitted by law any right or equity of
redemption with respect to the Collateral, whether before or after sale
hereunder, and all rights, if any, of marshalling the Collateral and any
other security for the Obligations or otherwise. At any such sale, unless
prohibited by applicable law, the Pledgee on behalf of the Secured
Creditors may bid for and purchase all or any part of the Collateral so
sold free from any such right or equity of redemption. Neither the Pledgee
nor any other Secured Creditor shall be liable for failure to collect or
realize upon any or all of the Collateral or for any delay in so doing nor
shall any of them be under any obligation to take any action whatsoever
with regard thereto.
8. REMEDIES, ETC., CUMULATIVE. Each and every right, power and remedy
of the Pledgee provided for in this Agreement or in any other Secured Debt
Agreement, or now or hereafter existing at law or in equity or by statute shall
be cumulative and concurrent and shall be in addition to every other such right,
power or remedy. The exercise or beginning of the exercise by the Pledgee or any
other Secured Creditor of any one or more of the rights, powers or remedies
provided for in this Agreement or in any other Secured Debt Agreement or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the Pledgee or any other Secured
Creditor of all such other rights, powers or remedies, and no failure or delay
on the part of the Pledgee or any other Secured Creditor to exercise any such
right, power or remedy shall operate as a waiver thereof. No notice to or demand
on any Pledgor in any case shall entitle it to any other or further notice or
demand in similar or other circumstances or constitute a waiver of any of the
rights of the Pledgee or any other Secured Creditor to any other or further
action in any circumstances without notice or demand. The Secured Creditors
agree that this Agreement may be enforced only by the action of the Pledgee, in
each case acting upon the instructions of the Required Secured Creditors (as
defined in the Security Agreement) and that no other Secured Creditor shall have
any right individually to seek to enforce or to enforce this Agreement or to
realize upon the security to be granted hereby, it being understood and agreed
that such rights and remedies may be exercised by the Pledgee or the holders of
at least a majority of the outstanding Other Obligations, as the case may be,
for the benefit of the Secured Creditors upon the terms of this Agreement.
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee
upon any sale or other disposition of the Collateral pursuant to the terms of
this Agreement, together with all other moneys received by the Pledgee
hereunder, shall be applied in the manner provided in Section 7.4 of the
Security Agreement.
(b) It is understood and agreed that the Pledgors shall remain jointly
and severally liable to the extent of any deficiency between the amount of the
proceeds of the Collateral hereunder and the aggregate amount of the
Obligations.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient
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<PAGE>
discharge to the purchaser or purchasers of the Collateral so sold, and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Pledgee or such officer or be
answerable in any way for the misapplication or nonapplication thereof.
11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to
indemnify and hold harmless the Pledgee in such capacity and each other Secured
Creditor and their respective successors, assigns, employees, agents and
servants (individually an "Indemnitee," and collectively the "Indemnitees") from
and against any and all claims, demands, losses, judgments and liabilities
(including liabilities for penalties) of whatsoever kind or nature, and (ii) to
reimburse each Indemnitee for all costs and expenses, including reasonable
attorneys' fees, in each case growing out of or resulting from this Agreement or
the exercise by any Indemnitee of any right or remedy granted to it hereunder or
under any other Secured Debt Agreement (but excluding any claims, demands,
losses, judgments and liabilities or expenses to the extent incurred by reason
of gross negligence or willful misconduct of any Indemnitee). In no event shall
the Pledgee be liable, in the absence of gross negligence or willful misconduct
on its part, for any matter or thing in connection with this Agreement other
than to account for monies actually received by it in accordance with the terms
hereof. If and to the extent that the obligations of any Pledgor under this
Section 11 are unenforceable for any reason, such Pledgor hereby agrees to make
the maximum contribution to the payment and satisfaction of such obligations
which is permissible under applicable law.
12. PLEDGEE NOT BOUND. (a) Nothing herein shall be construed to make
the Pledgee or any other Secured Creditor liable as a general partner or limited
partner of any Pledged Partnership and the Pledgee or any other Secured Creditor
by virtue of this Agreement or otherwise (except as referred to in the following
sentence) shall not have any of the duties, obligations or liabilities of a
general partner or limited partner of any Pledged Partnership. The parties
hereto expressly agree that, unless the Pledgee shall become the absolute owner
of a Pledged Partnership Interest pursuant hereto, this Agreement shall not be
construed as creating a partnership or joint venture among the Pledgee, any
other Secured Creditor and/or any Pledgor.
(b) Except as provided in the last sentence of paragraph (a) of this
Section, the Pledgee, by accepting this Agreement, did not intend to become a
general partner or limited partner of any Pledged Partnership or otherwise be
deemed to be a co-venturer with respect to any Pledgor or any Pledged
Partnership either before or after an Event of Default shall have occurred. The
Pledgee shall have only those powers set forth herein and shall assume none of
the duties, obligations or liabilities of a general partner or limited partner
of any Pledged Partnership or of any Pledgor.
(c) The Pledgee shall not be obligated to perform or discharge any
obligation of any Pledgor as a result of the collateral assignment hereby
effected.
(d) The acceptance by the Pledgee of this Agreement, with all the
rights, powers, privileges and authority so created, shall not at any time or in
any event obligate the Pledgee to appear in or defend any action or proceeding
relating to the Collateral to which it is not a party,
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<PAGE>
or to take any action hereunder or thereunder, or to expend any money or incur
any expenses or perform or discharge any obligation, duty or liability under the
Collateral.
13. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) Each Pledgor agrees
that it will join with the Pledgee in executing and, at such Pledgor's own
expense, file and refile under the Uniform Commercial Code or other applicable
law such financing statements, continuation statements and other documents in
such offices as the Pledgee may deem necessary and wherever required by law in
order to perfect and preserve the Pledgee's security interest in the Collateral
and hereby authorizes the Pledgee to file financing statements and amendments
thereto relative to all or any part of the Collateral without the signature of
such Pledgor where permitted by law, and agrees to do such further acts and
things and to execute and deliver to the Pledgee such additional conveyances,
assignments, agreements and instruments as the Pledgee may reasonably require or
deem necessary to carry into effect the purposes of this Agreement or to further
assure and confirm unto the Pledgee its rights, powers and remedies hereunder.
(b) Each Pledgor hereby appoints the Pledgee such Pledgor's
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor or otherwise, to act from time to time solely after
the occurrence and during the continuance of an Event of Default in the
Pledgee's reasonable discretion to take any action and to execute any instrument
which the Pledgee may deem necessary or advisable to accomplish the purposes of
this Agreement.
14. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with
this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed by each Secured Creditor that
by accepting the benefits of this Agreement each such Secured Creditor
acknowledges and agrees that the obligations of the Pledgee as holder of the
Collateral and interests therein and with respect to the disposition thereof,
and otherwise under this Agreement, are only those expressly set forth in this
Agreement. The Pledgee shall act hereunder on the terms and conditions set forth
herein and in Section 12 of the Credit Agreement.
15. TRANSFER BY THE PLEDGORS. No Pledgor will sell or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein (except as may be
permitted in accordance with the terms of the Credit Agreement).
16. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGORS. Each
Pledgor represents, warrants and covenants that (i) it is the legal, record and
beneficial owner of all Pledged Securities and Pledged Partnership Interests
pledged by it hereunder, subject to no Lien (except the Lien created by this
Agreement and any Permitted Liens); (ii) it has full power, authority and legal
right to pledge all the Pledged Securities and Pledged Partnership Interests
pledged by it pursuant to this Agreement; (iii) this Agreement has been duly
authorized, executed and delivered by such Pledgor and constitutes a legal,
valid and binding obligation of such Pledgor enforceable in accordance with its
terms except to the extent that the enforceability hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law); (iv) except
as have been
-10
<PAGE>
otained by the Pledgors as of the date hereof, no consent of any other
party (including, without limitation, any stockholder, partner or creditor
of such Pledgor or any of its Subsidiaries or any Pledged Partnership) and no
consent, license, permit, approval or authorization of, exemption by, notice or
report to, or registration, filing or declaration with, any governmental
authority is required to be obtained by such Pledgor in connection with the
execution, delivery or performance of this Agreement, the validity or
enforceability of this Agreement, the perfection or enforceability of the
Pledgee's security interest in the Collateral or, except for compliance with or
as may be required by applicable securities laws, the exercise by the Pledgee of
any of its rights or remedies provided herein; (v) the execution, delivery and
performance of this Agreement by such Pledgor will not violate any provision of
any applicable law or regulation or of any order, judgment, writ, award or
decree of any court, arbitrator or governmental authority, domestic or foreign,
applicable to such Pledgor, or of the certificate of incorporation or by-laws
(or equivalent organizational documents) of such Pledgor or of any securities
issued by such Pledgor or any of its Subsidiaries, or of any mortgage,
indenture, lease, deed of trust, loan agreement, credit agreement or other
material contract, agreement or instrument or undertaking to which such Pledgor
or any of its Subsidiaries is a party or which purports to be binding upon such
Pledgor or any of its Subsidiaries or upon any of their respective assets and
will not result in the creation or imposition of (or the obligation to create or
impose) any lien or encumbrance on any of the assets of such Pledgor or any of
its Subsidiaries except as contemplated by this Agreement; (vi) all the shares
of Stock have been duly and validly issued, are fully paid and non-assessable
and are subject to no options to purchase or similar rights; (vii) each of the
Intercompany Notes constituting Pledged Notes constitutes, or when executed by
the obligor thereof will constitute, the legal, valid and binding obligation of
such obligor, enforceable in accordance with its terms except to the extent that
the enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally affecting creditors'
rights and by equitable principles (regardless of whether enforcement is sought
in equity or at law); (viii) the pledge, assignment and delivery to the Pledgee
of the Securities (other than uncertificated securities) pursuant to this
Agreement creates a valid and perfected first priority Lien in the Securities,
and the proceeds thereof, subject to no other Lien or to any agreement
purporting to grant to any third party a Lien on the Securities; (ix) each such
Pledged Partnership Interest has been validly acquired and is fully paid for (to
the extent applicable) and is duly and validly pledged hereunder; (x) each
general or limited partnership agreement delivered to the Pledgee is an original
signed counterpart (or a copy thereof) of the complete and entire such
partnership agreement in effect on the date hereof; (xi) each partnership
agreement is the legal, valid and binding obligation of each Pledgor,
enforceable in accordance with its terms except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally affecting creditors'
rights and by equitable principles (regardless of whether enforcement is sought
in equity or at law); (xii) no Pledgor is in default in the payment of any
portion of any mandatory capital contribution, if any, required to be made under
any general or limited partnership agreement to which such Pledgor is a party,
and no Pledgor is in violation of any other material provisions of any
partnership agreement to which such Pledgor is a party, or otherwise in default
or violation thereunder; (xiii) no Pledged Partnership Interest is, to the
knowledge of such Pledgor (but only in the case of a partnership which is not a
Subsidiary of such Pledgor), subject to any defense, offset or counterclaim, nor
have any of the foregoing been asserted or alleged against such Pledgor by any
-11-
<PAGE>
Person with respect thereto; (xiv) the pledge and assignment of the Pledged
Partnership Interests pursuant to this Agreement, together with the relevant
filings or recordings under the UCC (which filings and recordings have been or
will be made), creates a valid, perfected and continuing first priority security
interest in such Partnership Interests and the proceeds thereof, subject to no
prior lien or encumbrance or to any agreement purporting to grant to any third
party a lien or encumbrance on such Partnership Interests; (xv) there are no
currently effective financing statements under the UCC covering any property
which is now or hereafter may be included in the Collateral and such Pledgor
will not, without the prior written consent of the Pledgee, execute and, until
the Termination Date (as hereinafter defined), there will not ever be on file in
any public office any enforceable financing statement or statements covering any
or all of the Collateral, except financing statements filed or to be filed in
favor of the Pledgee as secured party; (xvi) each Pledgor shall give the Pledgee
prompt notice of any written claim it receives relating to the Collateral;
(xvii) each Pledgor shall deliver to the Pledgee a copy of each other demand,
notice or document received by it which may adversely affect the Pledgee's
interest in the Collateral promptly upon, but in any event within 10 days after,
such Pledgor's receipt thereof; (xviii) a notice in the form set forth in Annex
D attached hereto and by this reference made a part hereof (such notice the
"Partnership Notice"), appropriately completed, notifying each Pledged
Partnership of the existence of this Agreement and a certified copy of this
Agreement have been delivered by each Pledgor to the relevant Pledged
Partnership, and each such Pledgor has received and delivered to the Collateral
Agent an acknowledgment in the form set forth in Annex E attached hereto (such
acknowledgement, the "Partnership Acknowledgement"), duly executed by the
relevant Pledged Partnership; and (xix) the chief executive office of such
Pledgor is set forth on Annex F hereto or such other office as such Pledgor may
establish in accordance with the terms of the Security Agreement. Each Pledgor
covenants and agrees that it will defend the Pledgee's right, title and security
interest in and to the Collateral against the claims and demands of all persons
whomsoever; and such Pledgor covenants and agrees that it will have like title
to and right to pledge any other property at any time hereafter pledged to the
Pledgee as Collateral hereunder and will likewise defend the right thereto and
security interest therein of the Pledgee and the other Secured Creditors.
17. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (i) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from any Secured Debt Agreement or any other instrument or agreement referred to
therein, or any assignment or transfer of any thereof; (ii) any waiver, consent,
extension, indulgence or other action or inaction under or in respect of any
such agreement or instrument including, without limitation, this Agreement;
(iii) any furnishing of any additional security to the Pledgee or its assignee
or any acceptance thereof or any release of any security by the Pledgee or its
assignee; (iv) any limitation on any party's liability or obligations under any
such instrument or agreement or any invalidity or unenforceability, in whole or
in part, of any such instrument or agreement or any term thereof; or (v) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to any Pledgor or any Subsidiary
of any Pledgor, or any action taken with respect to this Agreement by any
trustee or receiver, or by any court, in
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<PAGE>
any such proceeding, whether or not such Pledgor shall have notice or knowledge
of any of the foregoing.
18. REGISTRATION, ETC. (a) If there shall have occurred and be
continuing an Event of Default then, and in every such case, upon receipt by any
Pledgor from the Pledgee of a written request or requests that such Pledgor
cause any registration, qualification or compliance under any Federal or state
securities law or laws to be effected with respect to all or any part of the
Pledged Stock, such Pledgor as soon as practicable and at its expense will cause
such registration to be effected (and be kept effective) and will cause such
qualification and compliance to be declared effected (and be kept effective) as
may be so requested and as would permit or facilitate the sale and distribution
of such Pledged Stock, including, without limitation, registration under the
Securities Act of 1933, as then in effect (or any similar statute then in
effect), appropriate qualifications under applicable blue sky or other state
securities laws and appropriate compliance with any other government
requirements, provided, that the Pledgee shall furnish to such Pledgor such
information regarding the Pledgee as such Pledgor may reasonably request in
writing and as shall be required in connection with any such registration,
qualification or compliance. Such Pledgor will cause the Pledgee to be kept
advised in writing as to the progress of each such registration, qualification
or compliance and as to the completion thereof, will furnish to the Pledgee such
number of prospectuses, offering circulars or other documents incident thereto
as the Pledgee from time to time may reasonably request, and will indemnify the
Pledgee, each other Secured Creditor and all others participating in the
distribution of such Pledged Stock against all claims, losses, damages and
liabilities caused by any untrue statement (or alleged untrue statement) of a
material fact contained therein (or in any related registration statement,
notification or the like) or by any omission (or alleged omission) to state
therein (or in any related registration statement, notification or the like) a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same may have been caused by an
untrue statement or omission based upon information furnished in writing to such
Pledgor by the Pledgee or such other Secured Creditor expressly for use therein.
(b) If at any time when the Pledgee shall determine to exercise its
right to sell all or any part of the Pledged Securities or Pledged Partnership
Interests pursuant to Section 7 hereof, and such Pledged Securities or Pledged
Partnership Interests or the part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under the Securities Act of 1933, as then
in effect, the Pledgee may, in its sole and absolute discretion but subject to
applicable law, sell such Pledged Securities or Pledged Partnership Interests,
as the case may be, or part thereof by private sale in such manner and under
such circumstances as the Pledgee may deem necessary or advisable in order that
such sale may legally be effected without such registration. Without limiting
the generality of the foregoing, in any such event the Pledgee, in its sole and
absolute discretion (i) may proceed to make such private sale notwithstanding
that a registration statement for the purpose of registering such Pledged
Securities or Pledged Partnership Interests or part thereof shall have been
filed under such Securities Act, (ii) may approach and negotiate with a single
possible purchaser to effect such sale, and (iii) may restrict such sale to a
purchaser who will represent and agree that such purchaser is purchasing for its
own account, for investment, and not with a view to the distribution or sale of
such Pledged Securities or Pledged Partnership Interests or part thereof. In the
event of any such sale, the Pledgee shall incur no responsibility or liability
for selling all or any part of the Pledged Securities or Pledged Partnership
Interests in
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<PAGE>
accordance with Section 18 at a price which the Pledgee, in its sole and
absolute discretion, in good faith deems reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price
might be realized if the sale were deferred until after registration as
aforesaid.
19. TERMINATION; RELEASE. (a) After the Termination Date (as defined
below), this Agreement and the security interest created hereby shall terminate
(provided that all indemnities set forth herein including, without limitation,
in Section 11 hereof shall survive any such termination), and the Pledgee, at
the request and expense of any Pledgor, will execute and deliver to such Pledgor
a proper instrument or instruments acknowledging the satisfaction and
termination of this Agreement, and will duly assign, transfer and deliver to
such Pledgor (without recourse and without any representation or warranty) such
of the Collateral as has not theretofore been sold or otherwise applied or
released pursuant to this Agreement, together with any moneys at the time held
by the Pledgee or any of its sub-agents hereunder. As used in this Agreement,
"Termination Date" shall mean the date upon which the Total Commitment and all
Interest Rate Protection Agreements or Other Hedging Agreements have been
terminated, no Note under the Credit Agreement is outstanding (and all Loans
have been repaid in full), all Letters of Credit have been terminated and all
Obligations then owing have been paid in full.
(b) In the event that any part of the Collateral is sold in connection
with a sale permitted by Section 9.02 of the Credit Agreement (other than a sale
to any Pledgor or any Subsidiary thereof) or is otherwise released at the
direction of the Required Secured Creditors and the proceeds of such sale or
sales or from such release are applied in accordance with the provisions of the
Credit Agreement, to the extent required to be so applied, the Pledgee, at the
request and expense of any Pledgor, will duly assign, transfer and deliver to
such Pledgor (without recourse and without any representation or warranty) such
of the Collateral (and releases therefor) as is then being (or has been) so sold
or released and has not theretofore been released pursuant to this Agreement.
(c) At any time that a Pledgor desires that the Pledgee assign,
transfer and deliver Collateral (and releases therefor) as provided in Section
19(a) or (b) hereof, it shall deliver to the Pledgee a certificate signed by a
principal executive officer of such Pledgor stating that the release of the
respective Collateral is permitted pursuant to such Section 19(a) or (b).
(d) The Pledgee shall have no liability whatsoever to any other
Secured Creditor as the result of any release of Collateral by it in accordance
with this Section 19.
20. NOTICES, ETC. All such notices and communications hereunder shall
be sent or delivered by mail, telegraph, telex, telecopy, cable or overnight
courier service and all such notices and communications shall, when mailed,
telegraphed, telexed, telecopied, or cabled or sent by overnight courier, be
effective when delivered to the telegraph company, cable company or over night
courier, as the case may be, or sent by telex or telecopier and when mailed
shall be effective three Business Days following deposit in the mail with proper
postage, except that notices and communications to the Pledgee shall not be
effective until received by the Pledgee. All notices and other communications
shall be in writing and addressed as follows:
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<PAGE>
(a) if to any Pledgor, at the address set forth
opposite such Pledgor's signature below;
(b) if to the Pledgee, at:
Bankers Trust Company
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Attention: Marcus Tarkington
Telephone No.: (212) 250-7684
Telecopier No.: (212) 250-2923
(c) if to any Bank Creditor, either (x) to the Agent, at the address
of the Agent specified in the Credit Agreement or (y) at such address as
such Bank Creditor shall have specified in the Credit Agreement;
(d) if to any Other Creditor at such address as such Other Creditor
shall have specified in writing to the Pledgors and the Pledgee;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
21. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Pledgor directly affected thereby and the
Pledgee (with the written consent of the Required Secured Creditors; provided,
that any change, waiver, modification or variance affecting the rights and
benefits of a single Class (as defined below) of Secured Creditors (and not all
Secured Creditors in a like or similar manner) shall also require the written
consent of the Requisite Creditors (as defined below) of such affected Class.
For the purpose of this Agreement, the term "Class" shall mean each class of
Secured Creditors, i.e., whether (i) the Bank Creditors as holders of the Credit
Document Obligations or (ii) the Other Creditors as the holders of the Other
Obligations. For the purpose of this Agreement, the term "Requisite Creditors"
of any Class shall mean each of (i) with respect to the Credit Document
Obligations, the Required Banks and (ii) with respect to the Other Obligations,
the holders of at least a majority of all obligations outstanding from time to
time under the Interest Rate Protection Agreements or Other Hedging Agreements.
Each Pledgor may assume that any waiver or amendment executed and delivered by
the Pledgee has been approved by the Required Secured Creditors as provided in
this Section 21.
22. MISCELLANEOUS. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns and shall inure to the
benefit of and be enforceable by each of the parties hereto and its successors
and assigns, provided that no Pledger may assign any of its rights or
obligations under this Agreement without the prior consent of the Collateral
Agent. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE INTERNAL LAW OF THE STATE
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<PAGE>
OF NEW YORK. The headings in this Agreement are for purposes of reference only
and shall not limit or define the meaning hereof. This Agreement may be executed
in any number of counterparts, each of which shall be an original, but all of
which shall constitute one instrument. In the event that any provision of this
Agreement shall prove to be invalid or unenforceable, such provision shall be
deemed to be severable from the other provi sions of this Agreement which shall
remain binding on all parties hereto.
23. RECOURSE. This Agreement is made with full recourse to the
Pledgors and pursuant to and upon all the representations, warranties, covenants
and agreements on the part of the Pledgors contained herein and in the other
Secured Debt Agreements and otherwise in writing in connection herewith or
therewith.
24. ADDITIONAL PLEDGORS. It is understood and agreed that any
Subsidiary of Holdings that is required to execute a counterpart of this
Agreement after the date hereof pursuant to the Credit Agreement shall
automatically become a Pledgor hereunder by executing a counterpart hereof and
delivering the same to the Pledgee.
25. MISCELLANEOUS. Notwithstanding anything to the contrary contained
herein or in the Credit Agreement, each Pledgor hereby covenants and agrees that
with respect to any Pledged Partnership Interest pledged by it hereunder, such
Pledgor will deliver to the respective Pledged Partnerships (with copies to the
Pledgee) a Partnership Notice (appropriately completed) and such Pledgor will
deliver to the Pledgee a Partnership Acknowledgement signed by the respective
Pledged Partnerships, in each case within 15 days following the date any such
Pledged Partnership Interests are pledged hereunder.
* * * *
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<PAGE>
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected officers duly authorized as of
the date first above written.
Address:
4440 Brittmoore Road UNIVERSAL COMPRESSION HOLDINGS, INC.,
Houston, Texas 77241 as a Pledgor
Attn: President
Tel.: (713) 466-4103
Fax: (713) 466-6574 By ---------------------------------
Title:
150 East 58th Street TW ACQUISITION CORPORATION,
New York, New York 10155 as a Pledgor
Attn: Ernie Danner
Tel.: (713) 963-3300
Fax: (713) 963-3525 By ----------------------------------
Title:
Accepted and Agreed to:
BANKERS TRUST COMPANY,
as Pledgee, Collateral Agent
By ------------------------------
Title:
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<PAGE>
ANNEX A
to
PLEDGE AGREEMENT
LIST OF STOCK
--------------
I. Universal Compression Holdings, Inc.
Percentage of
Name of Outstanding
Issuing Certificate Type of Number of Shares of
Corporation Number Shares Shares Capital Stock
II. TW Acquisition Corporation
Percentage of
Name of Outstanding
Issuing Certificate Type of Number of Shares of
Corporation Number Shares Shares Capital Stock
<PAGE>
ANNEX B
to
PLEDGE AGREEMENT
LIST OF NOTES
I. Universal Compression Holdings, Inc.
Obligor Principal Amount if any) Maturity Date (if any)
None.
II. TW Acquisition Corporation
Obligor Principal Amount if any) Maturity Date (if any)
None.
<PAGE>
ANNEX C
to
PLEDGE AGREEMENT
PARTNERSHIP INTERESTS
I. Universal Compression Holdings, Inc.
None.
II. TW Acquisition Corporation
None.
<PAGE>
ANNEX D
to
PLEDGE AGREEMENT
FORM OF PARTNERSHIP NOTICE
[Letterhead of Pledgor]
-------- --, ----
TO: [Name of Pledged Partnership]
Notice is hereby given that pursuant to a Pledge Agreement (a true and
correct copy of which is attached hereto), dated as of February __, 1998 (as
amended, modified or supple mented from time to time in accordance with the
terms thereof, the "Pledge Agreement"), among [NAME OF PLEDGOR] (the "Pledgor"),
the other pledgors from time to time party thereto and Bankers Trust Company
(the "Pledgee"), as Collateral Agent on behalf of the Secured Creditors
described therein, the Pledgor has pledged and assigned to the Pledgee for the
benefit of the Secured Creditors, and granted to the Pledgee for the benefit of
the Secured Creditors, a continuing security interest in, all right, title and
interest of the Pledgor, whether now existing or hereafter arising or acquired,
as a [limited] [general] partner in [NAME OF PLEDGED PARTNERSHIP] (the
"Partnership"), and in, to and under the [TITLE OF APPLICABLE PARTNERSHIP
AGREEMENT] (the "Partnership Agreement"), including, without limitation:
(i) the Pledgor's interest in all of the capital of the Partnership and
the Pledgor's interest in all profits, losses, Partnership Assets (as
defined in the Pledge Agreement) and other distributions to which the
Pledgor shall at any time be entitled in respect of such partnership
interest;
(ii) all other payments due or to become due to the Pledgor in respect of
such partnership interest, whether under the Partnership Agreement or
otherwise, whether as contractual obligations, damages, insurance proceeds
or otherwise;
(iii) all of the Pledgor's claims, rights, powers, privileges, authority,
options, security interest, liens and remedies, if any, under the
Partnership Agreement or at law or otherwise in respect of such partnership
interest;
(iv) all present and future claims, if any, of the Pledgor against the
Partnership for moneys loaned or advanced, for services rendered or
otherwise;
(v) all of the Pledgor's rights under the Partnership Agreement or at
law to exercise and enforce every right, power, remedy, authority, option
and privilege of the Pledgor relating to the partnership interest,
including any power to terminate, cancel or modify the Partnership
Agreement, to execute any instruments and to take any and all
<PAGE>
other action on behalf of and in the name of the Pledgor in respect of the
Partnership Interest and the Partnership, to make determinations, to
exercise any election (including, but not limited, election of remedies) or
option or to give or receive any notice, consent, amendment, waiver or
approval, together with full power and authority to demand, receive,
enforce, collect or receipt for any of the foregoing or for any Partnership
Asset, to enforce or execute any checks, or other instruments or orders, to
file any claims and to take any action in connection with any of the
foregoing;
(vi) all other property hereafter delivered to the Pledgor in
substitution for or in addition to any of the foregoing, all certificates
and instruments representing or evidencing such other property and all
cash, securities, interest, dividends, distributions, rights and other
property at any time and from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all thereof;
and
(vii) to the extent not otherwise included, all proceeds of any or all of
the foregoing.
Pursuant to the Pledge Agreement, the Partnership is hereby authorized
and directed to register the Pledgor's pledge to the Pledgee on behalf of the
Secured Creditors of the interest of the Pledgor on the Partnership's books.
The Pledgor hereby irrevocably agrees and authorizes and directs the
Partnership after such time as the Partnership receives a notice from the
Pledgee of an Event of Default, and until such time as such Event of Default has
been cured or waived, that instructions originated by the Pledgee on behalf of
the Secured Creditors with respect to the Pledgor's claims, rights, interests,
powers, remedies, authorities, options and privileges set forth above shall,
unless written notice to the contrary is given by the Pledgee to the
Partnership, be complied with by the Partnership, without further consent by the
Pledgor.
The Pledgor hereby requests the Partnership to indicate the
Partnership's acceptance of this Notice and consent to and confirmation of its
terms and provisions by signing a copy hereof where indicated on the attached
page and returning the same to the Pledgee on behalf of the Secured Creditors.
[NAME OF PLEDGOR]
By
--------------------------
Name:
Title:
<PAGE>
ANNEX E
to
PLEDGE AGREEMENT
FORM OF ACKNOWLEDGMENT
[NAME OF PLEDGED PARTNERSHIP] (the "Partnership") hereby acknowledges
receipt of a copy of the assignment by [NAME OF PLEDGOR] ("Pledgor") of its
interest under the [TITLE OF APPLICABLE PARTNERSHIP AGREEMENT] (the "Partnership
Agreement") pursuant to the terms of the Pledge Agreement, dated as of February
__, 1998 (as amended, modified or supplemented from time to time in accordance
with the terms thereof, the "Pledge Agreement"), among the Pledgor, the other
pledgors from time to time party thereto and Bankers Trust Company (the
"Pledgee"), as Collateral Agent on behalf of the Secured Creditors described
therein. The undersigned hereby further confirms the registration of the
Pledgor's pledge of its interest to the Pledgee on behalf of the Secured
Creditors on the Partnership's books.
The Partnership hereby irrevocably agrees to comply with the
instructions originated by the Pledgee, on behalf of the Secured Creditors, of
the type and at the times referred to in the penultimate paragraph of the
Partnership Notice dated ___________ __, ____ signed by the Pledgor, without
further consent by the Pledgor. The undersigned further hereby irrevocably
agrees, except upon the prior written consent of the Pledgee, not to honor any
such instructions given by any other person or entity.
Dated:
----------- --, ----
[NAME OF PLEDGED PARTNERSHIP]
By
-------------------------------------
Name:
Title:
<PAGE>
ANNEX F
to
PLEDGE AGREEMENT
OFFICE LOCATIONS
I. Universal Compression Holdings, Inc.
4400 Brittmoore Road
Houston, Texas 77241
II. TW Acquisition Corporation
150 East 58th Street
New York, new York 10155
<PAGE>
ACKNOWLEDGMENT AND JOINDER AGREEMENT
------------------------------------
ACKNOWLEDGMENT AND JOINDER AGREEMENT (this "Agreement"), dated
as of February 20, 1998, made by UNIVERSAL COMPRESSION, INC., a Delaware
corporation in favor of BANKERS TRUST COMPANY, as Agent for the Banks party to
the Credit Agreement referred to below (the "Agent"). Unless otherwise defined
herein, all capitalized terms used herein and defined in the Credit Agreement
are used herein as so defined.
W I T N E S S E T H :
WHEREAS, Universal Compression Holdings, Inc., TW Acquisition
Corporation ("Acquisition Corp."), the lenders from time to time party thereto
(the "Banks"), and the Agent have entered into a Credit Agreement, dated as of
February 20, 1998 (as amended, modified or supplemented from time to time, the
"Credit Agreement"), providing for the making of Loans to, and the issuance of
Letters of Credit for the account of, Acquisition Corp. as contemplated therein;
WHEREAS, on the Initial Borrowing Date, Acquisition Corp.
merged with and into Tidewater Compression Services Inc. ("TCSI"), with TCSI
being the surviving corporation of such merger (the "Merger");
WHEREAS, immediately following the Merger, TCSI changed its
name to "Universal Compression Inc." ("Universal"); and
WHEREAS, Universal desires to acknowledge that, upon the
consummation of the Merger, Universal (formerly known as TCSI) has by operation
of law assumed all rights, obligations, duties and liabilities of Acquisition
Corp. under the Credit Agreement and the other Credit Documents to which
Acquisition Corp. is a party and that Universal is a party to, and shall comply
with and be bound by, all of the terms and provisions of the Credit Agreement
and the other Credit Documents as the Borrower thereunder;
NOW, THEREFORE, it is agreed:
1. Universal hereby acknowledges and agrees that it (i) has
assumed all rights, obligations, duties and liabilities of Acquisition Corp.
under the Credit Agreement and the other Credit Documents to which Acquisition
Corp. is a party and (ii) shall be the "Borrower" for all purposes under (and
shall be a party to) the Credit Agreement and the other Credit Documents and all
references in the Credit Agreement and the other Credit Documents to the
"Borrower" shall be deemed to be references to Universal.
2. To induce the Agent to enter into this Agreement, Universal
hereby represents, warrants and agrees on and after the date hereof, Universal
will fully and faithfully perform all obligations (including payment obligations
and compliance with
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<PAGE>
all covenants) of the "Borrower" under the Credit Agreement, the Notes delivered
pursuant thereto and the other Credit Documents executed and delivered by the
Borrower.
3. This Agreement shall become effective as of the date first
above written, when each of the parties hereto shall have executed a copy hereof
and shall have delivered the same to the Agent.
4. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall constitute one and the same instrument. A complete set of counterparts
shall be lodged with Universal and the Agent.
5. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
UNIVERSAL COMPRESSION, INC.
By
-----------------------------
Name:
Title:
BANKERS TRUST COMPANY,
as Agent
By
-----------------------------
Name:
Title:
<PAGE>
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
Dated as of December 18, 1997
By and Between
TIDEWATER INC.
and
TW ACQUISITION CORPORATION
- --------------------------------------------------------------------------------
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of December 18,
1997, by and between Tidewater Inc., a Delaware corporation (the "Seller"), and
TW Acquisition Corporation, a Delaware corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Seller owns 4,910 shares (the "Shares") of common stock,
$10.00 par value per share ("Common Stock"), of Tidewater Compression Service,
Inc., a Texas corporation ("Compression"), which constitutes all of the issued
and outstanding capital stock of Compression;
WHEREAS, subject to the terms and conditions set forth herein, the
Buyer wishes to purchase, and the Seller wishes to sell, the Shares;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements herein contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, each of the following terms
shall have the meanings set forth below:
An "Affiliate" means, with respect to any Person, any other Person
that, directly or indirectly, through one or more intermediaries, controls, has
the right to control (in fact or by agreement), is controlled by, or is under
common control with, such Person.
"Adjustment Agreement" shall mean the Purchase Price Adjustment
Agreement substantially in the form of Exhibit A hereto, to be executed by and
between Buyer and Seller at the Closing.
"Benefit Arrangement" shall mean any employment, severance or similar
contract, or any other contract, plan, policy or arrangement providing for
compensation, bonus, profit-sharing, stock option or other stock related rights
or other forms of incentive or deferred compensation, insurance coverage
(including any self-insured arrangement), health or medical benefits, disability
benefits, and post-employment and retirement benefits, other than Employee
Plans.
The "Closing" means the closing of the Stock Sale.
The "Closing Date" means the date upon which the Closing occurs.
The "Closing Date Working Capital" means the Working Capital of
Compression as of the Closing.
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<PAGE>
The "Closing Date Working Capital Statement" has the meaning ascribed
in Section 2.4(a).
The "Closing Payment" means the payment made by Buyer to Seller at
Closing, consisting of (i) a cash payment in the amount of $360 million plus or
minus the amount by which the Estimated Working Capital, respectively, exceeds
or is less than $26.0 million and (ii) delivery of the Adjustment Agreement.
The "Code" means the Internal Revenue Code of 1986, as amended.
"Compression Financial Statements" means the audited balance sheets,
and related audited statements of earnings and cash flows, as of and for the
years ended March 31, 1995, 1996 and 1997, together with the unaudited balance
sheet and the related unaudited statements of earnings and cash flows as of and
for the six-month period ended September 30, 1997, all of which are attached
hereto as Exhibit B.
The "Compression Latest Balance Sheet" means the balance sheet of
Compression as of September 30, 1997 that is included among the Compression
Financial Statements.
"Confidentiality Agreement" means that certain Confidentiality
Agreement dated September 3, 1997 by and between Buyer and Seller.
"Current Assets" means any and all assets of Compression that are
categorized as such on the September 30 Net Asset Statement, including cash on
hand and securities representing cash, bank balances, accounts receivable,
inventory (in the case of inventory and receivables, net of reserves), and
short-term pre-paid expenses.
"Current Liabilities" means any liability of Compression, other than
Intercompany Indebtedness (which will be eliminated at Closing in accordance
with Section 2.3 hereof).
"Employee Plan" means (a) a plan or arrangement as defined in Section
3(3) of ERISA that (i) is maintained, administered or contributed to by
Compression, Seller or any ERISA Affiliate (ii) covers any employee or former
employee of Compression, the Seller or any ERISA Affiliate, and (b) a plan or
arrangement as defined in Section 3(37) and Section 4001(a)(3) of ERISA that
covers, or covered at any time during the five year period prior to the Closing
Date, any employee or former employee of Compression, Seller or any ERISA
Affiliate.
"Environmental Claim" refers to any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter or written communication from any
governmental agency, department, bureau, office or other authority, or any third
party involving violations of Environmental Laws or Releases of Hazardous
Materials from (i) any assets, properties or businesses of Compression or a
predecessor-in-interest; (ii) adjoining properties or businesses onto
Compression's properties or (iii) onto any facilities which received Hazardous
Materials generated by Compression or a predecessor-in-interest.
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<PAGE>
"Environmental Laws" mean the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") 42 USC 9601 et seq., as amended; the
Resource Conservation and Recovery Act ("RCRA"), 42 USC 6901, et seq., as
amended; the Clean Air Act ("CAA"), 42 USC 7401, et seq., as amended; the Clean
Water Act ("CWA") 33 USC 1251, et seq., as amended; the Occupational Safety and
Health Act ("OSHA"), 20 USC 655, et seq., as amended; and any other federal,
state, local or municipal laws, statutes, regulations, rules, or ordinances
imposing liability or establishing standards of conduct for the protection of
the environment, human health and safety.
"Environmental Liabilities" mean any monetary obligations, losses,
liabilities (including strict liability), damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable out-of-pocket fees, disbursements and expenses of counsel,
out-of-pocket expert and consulting fees and out-of-pocket costs for
environmental site assessments, remedial investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any
Environmental Claim filed by any governmental authority or any third party which
relate to any violations of Environmental Laws, Remedial Actions, Releases or
threatened Releases from or onto (i) any property owned or leased by Compression
or (ii) any facility which received Hazardous Materials generated by
Compression.
"Equipment Sales Proceeds" means the proceeds (in whatever form,
including without limitation, cash or receivables) from any sales of Compression
equipment on or after January 1, 1998.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any Person within the "controlled group" of
corporations with respect to Compression or Seller, as defined in Section 414(b)
of the Code and the regulations promulgated thereunder, and all trades or
businesses that are under "common control" with respect to Compression or
Seller, as defined in Section 414(c) of the Code and the regulations promulgated
thereunder.
"Estimated Working Capital Statement" means the statement prepared by
Seller and delivered to Buyer pursuant to and in accordance with Sections 2.4
and 2.5 of this Agreement.
"Estimated Working Capital" means the estimate of the Working Capital
of Compression that is set forth in the Estimated Working Capital Statement, it
being understood that the Net Assets of Compression included within Estimated
Working Capital will be stated as of the last day of the calendar month
immediately preceding the Closing Date (or, if the Closing is held before the
tenth day of a month, as of the last day of the second preceding month),
adjusted for any subsequent extraordinary items, and that the estimate of
Equipment Sales Proceeds and expenditures for New Compression Equipment that is
set forth in the Estimated Working Capital Statement shall be as of a date
within eight days of the Closing Date.
"Final Adjustment" means the adjustment provided for in Section 2.4(b).
"GAAP" means generally accepted accounting principles, consistently
applied.
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<PAGE>
"Hazardous Materials" means (a) any element, compound, or chemical that
is defined, listed or otherwise classified as a contaminant, pollutant, toxic
pollutant, toxic or hazardous substance, extremely hazardous substance or
chemical, hazardous waste, medical waste, biohazardous or infectious waste,
special waste, or solid waste under Environmental Laws; (b) petroleum,
petroleum-based or petroleum-derived products; (c) polychlorinated biphenyls;
(d) any substance exhibiting a hazardous waste characteristic including but not
limited to corrosivity, ignitability, toxicity or reactivity as well as any
radioactive or explosive materials; and (e) any raw materials, building
components, excluding lead-based paint but including regulated
asbestos-containing materials and manufactured products containing Hazardous
Materials.
"Indebtedness" means all obligations of Compression (whether for
principal, interest, premium, fees or otherwise) for or arising under (i) all
indebtedness for borrowed money (including all notes payable and all obligations
evidenced by bonds, debentures, notes or other similar instruments but excluding
Intercompany Indebtedness), (ii) unpaid reimbursement obligations arising in
connection with guaranties, or (iii) any lease obligation that would be required
to be capitalized in accordance with GAAP.
"Intercompany Indebtedness" means (i) the entire net Indebtedness owed
or owing as of the Closing Date by Compression to Seller or any subsidiary of
Seller, (ii) any tax liability of Compression that is required to be paid by
Seller pursuant to Section 9.7, or (iii) any other liability, obligation or
commitment of Compression to Seller or any subsidiary of Seller as of the
Closing Date.
"Knowledge of Seller" means actual knowledge of (i) an executive
officer of Seller or Compression or a director of Compression, or (ii) those
persons identified on Schedule 1.1 hereto.
A "Lien" means, with respect to the Shares or any asset of Compression,
any title defect, lien, mortgage, easement, pledge, charge, transfer
restriction, right of first refusal, preemptive right, option, claim, security
interest, right of others or other encumbrance of any nature whatsoever, other
than restrictions imposed by federal or state securities laws.
A "Material Adverse Effect" means a material adverse effect on the
business, operations, results of operations, or financial condition of
Compression, or any adverse effect or material limitation on the ability of the
Seller to consummate the Stock Sale.
"Net Assets" means the amount, if any, by which Compression's Current
Assets exceeds its Current Liabilities.
"New Compression Equipment" shall mean any air or gas compressors that
are acquired by Compression for rental purposes on or after January 1, 1998.
"Offering Memorandum" means the Offering Memorandum of Compression
dated September 1997.
"Permits" shall have the meaning specified in Section 4.15.
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<PAGE>
A "Permitted Lien" means (i) Liens consisting of zoning or planning
restrictions, easements, permits and other restrictions or limitations on the
use of real property that in the aggregate do not materially detract from the
value or interfere with the use of such real property or materially impair the
marketability thereof, (ii) Liens for current taxes or assessments on property
that are accrued but not yet payable, as long as adequate reserves for the
payment of such taxes have been accrued, and (iii) mechanic's, materialman's and
other liens for goods and services incorporated into or provided with respect to
the property encumbered thereby arising by operation of law in the ordinary
course of business, provided that the obligations secured by such Liens (A) are
not more than 30 days past due, (B) are fully reflected in the Compression
Latest Balance Sheet and (C) do not materially interfere with the use or
enjoyment of any of Compression's properties or assets and do not materially
impair the marketability thereof.
"Person" means any natural person, corporation, partnership, limited
liability company, trust and any other entity or organization of any kind,
including governmental or political subdivisions or agencies or
instrumentalities thereof.
"Purchase Price" means the Closing Payment plus or minus any amount
paid by Buyer to Seller, or Seller to Buyer, pursuant to Section 2.4(b).
"Release" means any spill, leak, emission, discharge, pump, empty,
injection, escape, leaching, migration, dumping or disposal of Hazardous
Materials (including the abandonment or discarding of barrels, containers or
other closed receptacles containing Hazardous Materials) into the environment.
"Remedial Action" means all actions taken to (i) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate or in any other way address
Hazardous Materials in the indoor or outdoor environment, (ii) prevent or
minimize a Release or threatened Release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (iii) perform post-remedial operation and
maintenance activities, or (iv) any other actions authorized by 42 U.S.C.
ss.9601.
"Returns" means all returns, declarations, reports, statements and
other documents required to be filed in respect of Taxes, and the term "Return"
means any one of the foregoing.
"Seller's Group" means, individually and collectively, Seller,
Compression or any other Person as to which Compression is liable for Taxes
incurred by such Person either as a transferee, pursuant to U.S. Treasury
Regulations Section 1.1502-6, or pursuant to any other provision of federal,
state, local or foreign law or regulation or otherwise.
The "September 30 Net Asset Statement" means the statement attached
hereto as Schedule 1.2.
The "Stock Sale" means the sale of the Shares by the Seller to the
Buyer in accordance with this Agreement.
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<PAGE>
"Taxes" means all federal, state, local, foreign or other net income,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
property, withholding or other taxes, fees, assessments or charges of any kind
whatever, together with any interest and any penalties, additions to tax or
additional amounts with respect thereto, and the term "Tax" means any one of the
foregoing.
"Transition Services Agreement" means the Agreement between Seller and
Buyer that is required to be delivered at Closing pursuant to Section 7.1(d)
hereof.
"Working Capital" means the Net Assets of Compression plus capital
expenditures for New Compression Equipment (which shall include accruals and
payables for such capital expenditures to the extent such accruals and payables
are reflected in Net Assets, but shall not include cash payments for amounts
accrued or payable prior to January 1, 1998) by Compression on or after January
1, 1998 through the Closing Date and minus any Equipment Sales Proceeds on or
after January 1, 1998 through the Closing Date.
SECTION 2. PURCHASE AND SALE OF SHARES; CONDITION OF ASSETS
2.1 Purchase and Sale; Purchase Price. Subject to the terms and
conditions hereof, at the Closing the Seller will sell to the Buyer, and the
Buyer will purchase from the Seller, the Shares, free and clear of all Liens. In
consideration of its purchase of the Shares, Buyer shall pay to Seller the
Purchase Price in the manner provided in the remainder of this Section.
2.2 Capital Contribution. At the Closing, Seller will make a capital
contribution to Compression in an amount equal to the Intercompany Indebtedness
at the time of contribution thereby negating the Intercompany Indebtedness and,
to the extent that any item of Intercompany Indebtedness is not Indebtedness,
shall forgive such item of Intercompany Indebtedness, provided however that any
contractual obligation between Seller or a Seller Affiliate and Compression
relating to the support of foreign operations in Venezuela shall not be canceled
and appropriate arrangements with respect thereto shall be provided in the
Transition Services Agreement.
2.3 Closing Payment. At the Closing, Buyer shall pay or deliver to
Seller the Closing Payment. To facilitate the calculation of the Closing
Payment, Seller shall deliver to Buyer not less than three days in advance of
the Closing Date the Estimated Working Capital Statement, which statement shall
reflect the Estimated Working Capital.
2.4 Final Adjustment.
(a) As soon as practicable, but in no event later than 60 days
following the Closing Date, Seller shall determine Compression's Closing Date
Working Capital and Buyer shall afford Seller, or its representatives reasonable
access to the books, records and personnel of Compression for the purpose of
making such determination. Within such 60-day period, Seller shall deliver to
Buyer a written statement (the "Closing Date Working Capital Statement") setting
forth its determination of the Closing Date Working Capital. If Buyer
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<PAGE>
objects to the Closing Date Working Capital Statement, such objection shall be
made in writing and delivered to Seller within 15 days following Buyer's receipt
of the Closing Date Working Capital Statement, failing which such statement
shall be deemed to have been accepted by Buyer. Seller and Buyer shall promptly
meet and in good faith attempt to resolve any objections raised by Buyer. Any
objections that are not resolved between Seller and Buyer within 15 days
following Seller's receipt of Buyer's statement of objections shall be submitted
to binding arbitration to be conducted by a representative of Ernst & Young LLP,
which shall represent Seller, a representative of Deloitte & Touche, LLP which
shall represent Buyer, and another nationally recognized accounting firm (other
than KPMG Peat Marwick) mutually acceptable to Buyer and Seller and selected
within 30 days of the date of the submission of the statement of objections. The
fees of each accounting firm representative shall be paid by the party that it
represents, and responsibility for payment of the fees of the third party
accounting firm shall be divided equally between Buyer and Seller. Such
arbitrating body shall make its determination within 90 days of the date the
objections are first submitted for arbitration, and such determination shall be
final, non-appealable and binding upon the parties.
(b) If the Closing Date Working Capital determined pursuant to
Section 2.4(a) exceeds the Estimated Working Capital, then Buyer shall, within
five business days of the earlier of the date that Buyer accepts the Closing
Date Working Capital Statement or any disputes with respect to the Closing Date
Working Capital Statement have otherwise been resolved (the "Acceptance Date"),
pay Seller in cash the amount of such excess. If the Closing Date Working
Capital determined pursuant to Section 2.4(a) is less than the Estimated Working
Capital, Seller shall, within five business days of the Acceptance Date, pay
Buyer in cash the amount of such deficiency. Interest shall accrue and be due
with respect to any payments due by one party to the other hereunder at the rate
of 7% per annum beginning on the 91st day following the Closing Date, and any
such payments (including any interest accrued therein) shall be made by bank
wire transfer of immediately available funds to an account specified in writing
by payee to payor.
2.5 Basis of Preparation of Working Capital Statements. Seller agrees
that in preparing the Estimated Working Capital Statement and Closing Date
Working Capital Statement, it shall determine the Current Assets and Current
Liabilities of Compression as of the applicable date on a basis consistent with
GAAP and applying the same accounting policies and principles as were used in
preparing the September 30 Net Asset Statement, and shall accrue expenses
through the date that Net Assets are calculated in such statement as if such
date were at the end of an accounting period. Such statements shall be
accompanied by a certificate of the Chief Financial Officer of Seller to the
foregoing effect.
2.6 Condition of Assets: Intended Use. (a) Except for the
representations and warranties given in Section 4 hereof, no representation or
warranty, express or implied, has been made by or on behalf of Seller with
respect to the present condition of the assets and properties or the present or
future suitability thereof for any intended use by Buyer, and Buyer hereby
acknowledges that such assets and properties are otherwise being conveyed "as
is" and "where is."
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<PAGE>
(b) Except for any representations and warranties given in Section
4 hereof, Seller makes no warranty, express or implied, regarding the commercial
suitability of Compression's assets and properties for Buyer's intended use.
2.7 Certain Reserves and Liabilities. Buyer acknowledges that Seller
has established certain balance sheet reserves (the "Established Reserves") for
potential liabilities that may be incurred with respect to Compression employees
under (i) Seller's medical and dental program for employees, (ii) Seller's
retiree medical and life insurance programs, (iii) retiree pension benefits, and
(iv) worker's compensation programs. Buyer further acknowledges that the
Compression Financial Statements, to be delivered by Seller to Buyer, will not
include the Established Reserves. Buyer agrees that Seller has no obligation to
transfer the Established Reserves to Compression and that, following the
Closing, Seller will have no continuing liability or obligation to Compression
employees under such plans or programs except to the extent that an obligation
or liability arises under such plans and relates to any event or occurrence
prior to the Closing or an entitlement or right of an employee to participate in
such plan or program vested prior to the Closing. Seller agrees that Compression
has no obligation or commitment and that neither Compression nor Buyer will have
any obligation or commitment to any Compression employee or retiree under any
such plan or program or under any plan or program providing benefits relating to
comparable matters, save as provided in Section 10.3(c) hereof. Buyer agrees
that Seller shall have no obligation or commitment to any Compression employee
with respect to any Employee Plan or Benefit Arrangement adopted by Compression
or Buyer on or after the Closing Date.
2.8 Certain Other Liabilities. Seller agrees to assume, effective as of
the Closing Date, any liability of Compression that (i) is related to any
silicosis claim that has been filed by any third party, including without
limitation, any former or current employee of Compression as of the date of this
Agreement, or (ii) without being limited by clause (i), results from any act,
condition or occurrence that occurs prior to the Closing Date to the extent that
such liability (such liability to include, without limitation, any liability for
silicosis-based claims) is covered by one of Seller's occurrence-based insurance
policies and Seller agrees to absorb any self insurance or retention amounts in
connection with such liability. Seller warrants that all insurance policies
listed on Schedule 2.8 attached hereto are occurrence-based insurance policies
as of the date hereof. All information listed on Schedule 2.8 is complete and
accurate in all material respects.
SECTION 3. THE CLOSING
3.1 Closing. The closing of the transactions contemplated hereby shall
take place at the offices of Schulte Roth & Zabel, LLP, 900 Third Avenue, New
York, New York, 10022, commencing at 10:00 a.m. local time on or before March 6,
1998, provided all of the conditions set forth in Section 7 have been satisfied
or waived by the party entitled to grant such waiver, or at or on any other
mutually agreeable place, time or date, or if no date has been agreed to, on any
date specified by one party to the other upon five days' notice following
satisfaction of the latest to occur of the conditions set forth in Section 7.1;
provided that the other conditions set forth in Section 7 shall have been
satisfied or waived by the party entitled to grant such waiver.
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<PAGE>
3.2 Deliveries at Closing. If all conditions set forth in Section 7 are
satisfied or waived by each party entitled to grant such waiver, at the Closing
(i) the Buyer shall make the cash portion of the Closing Payment contemplated by
Section 2.3 by bank wire transfer of immediately available funds to an account
specified in writing by Seller to Buyer not less than two business days prior to
the Closing Date and shall deliver the Adjustment Agreement to Seller, (ii) the
Seller shall deliver or cause to be delivered to the Buyer certificates
evidencing the Shares, which certificates shall be properly endorsed for
transfer or accompanied by duly executed stock powers, in either case executed
in blank or in favor of the Buyer or its nominee as the Buyer may have directed
prior to the Closing Date, (iii) the Buyer and Seller shall each provide to the
other such proof or indication of satisfaction of the conditions set forth in
Section 7 as the parties whose obligations are conditioned upon such
satisfaction may reasonably request, and (iv) the Buyer and Seller shall each
provide to the other the certificates, opinions, agreements and resignations
required by Section 7 and take such other action as is required to consummate
the Stock Sale.
SECTION 4. REPRESENTATIONS OF THE SELLER
The Seller represents and warrants to the Buyer as follows:
4.1 Corporate Organization. (a) The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the full corporate power and authority to enter into this
Agreement and to perform its obligations hereunder.
(b) Compression is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas. Compression has full
corporate power and authority to own its properties and assets and to carry on
its business as it is now being conducted. Compression is duly qualified or
licensed to do business as a foreign corporation in good standing in the
jurisdictions in which the ownership of its property or the conduct of its
business requires such qualification, except those jurisdictions, if any, in
which the failure to be so qualified would not have a Material Adverse Effect.
4.2 Capital Stock. Compression has an authorized capitalization
consisting of 5,000 shares of Common Stock, of which the Shares are the only
issued and outstanding shares of Common Stock. All such outstanding Shares have
been duly authorized and validly issued and are fully paid and nonassessable. No
shares of Common Stock are held in Compression's treasury. There are no
outstanding options, warrants, rights, calls, commitments, conversion rights,
rights of exchange, plans or agreements of any character, whether absolute or
contingent, providing for the purchase, issuance or sale of any shares of the
capital stock of Compression other than as contemplated by this Agreement.
4.3 Ownership of Stock. (a) The Seller is the lawful, beneficial and
record owner of the Shares, all of which are owned by Seller free and clear of
any Liens, and upon Closing Buyer will acquire good and valid title to the
Shares free and clear of Liens.
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(b) Compression has no subsidiaries and does not own or have the
right or obligation to acquire, directly or indirectly, any capital stock or
other equity or proprietary interest in any Person.
4.4 Authorization; Enforceability. The Board of Directors of the Seller
has duly approved and authorized the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, and no other
corporate proceedings on the part of the Seller are necessary to approve and
authorize the execution and delivery of this Agreement by the Seller and the
consummation by the Seller of the transactions contemplated hereby. This
Agreement constitutes a legal, valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, except that the
enforcement hereof may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law).
4.5 No Approvals or Conflicts. Neither the execution, delivery or
performance by the Seller of this Agreement nor the consummation by the Seller
of the Stock Sale or the other transactions contemplated by this Agreement will
(a) violate, conflict with or result in the breach of any provision of the
certificate of incorporation or by-laws of the Seller or Compression, (b)
violate, conflict with or result in a breach of any provision of, or constitute
a default under, or result in the termination or cancellation of, or accelerate
the performance required by, or result in the creation of any Lien upon any of
the properties of Compression or upon the Seller's interest in the Shares under,
any note, bond, mortgage, indenture, license, lease, contract, agreement or
other instrument or commitment or obligation to which the Seller or Compression
or any of their properties may be bound or affected, (c) violate any order,
writ, injunction, decree, judgment, ruling, law, rule or regulation of any court
or governmental authority, domestic or foreign, applicable to the Seller or
Compression or any of their respective properties, or (d) except for any
required filings under the HSR Act (as provided in Section 6.1(b)) or those that
have already been obtained, require any consent, approval or authorization of,
or notice to, or declaration, filing or registration with, any governmental or
regulatory authority in connection with the execution, delivery and performance
of this Agreement by the Seller.
4.6 Properties and Equipment. Compression has good, valid and
marketable title to all of its properties and assets, including all the
properties and assets reflected in the Compression Latest Balance Sheet, in each
case subject to no Liens other than Permitted Liens and except for any
dispositions permitted pursuant to the terms hereof, on the Closing Date will
have such title with respect to all of its properties and assets. Compression
owns or has valid leasehold interests in all properties and assets necessary for
the continued conduct of its business in the ordinary course consistent with
past practices. All properties or assets used by Compression that are held under
lease are held under valid and enforceable leases subject only to exceptions
that are not likely to have a Material Adverse Effect and do not interfere with
the use by Compression of such assets.
4.7 Material Contracts. (a) Except as set forth in Schedule 4.7,
Compression is neither a party to, nor is it or its assets bound by or subject
to, (i) any collective bargaining agreement or any other agreement relating to
the employment of any person by Compression,
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(ii) any agreement, indenture or other instrument that contains restrictions
with respect to the payment of dividends or any other distribution in respect of
its capital stock, (iii) any agreement, contract or commitment relating to
capital expenditures of an amount or value in excess of $50,000, (iv) any
contract for the provision of supplies to Compression in excess of $50,000, (v)
any loan or advance to, or investment in, any other Person or any agreement,
contract or commitment relating to the making of any such loan, advance or
investment of an amount or value in excess of $50,000, except for intercompany
loans to Seller, (vi) any guarantee, surety or other contingent liability in
respect of any indebtedness, liability or obligation of any other Person, (vii)
any agreement that in any way restricts or purports to restrict the business
activity of Compression or limits Compression's ability to engage in any line of
business or compete with any Person, (viii) any line of credit, whether drawn
upon or not, or any loan agreement obligating it to repay to any creditor,
whether secured or unsecured, (ix) any tax indemnity, tax sharing, tax payment
or tax allocation agreement, (x) any lease, except for leases of compressor
equipment in the ordinary course of business, or sublease, whether Compression
is lessor or lessee, involving annual payments in excess of $50,000, (xi) any
sales agency, distributorship or marketing and distribution agreements, other
than those that can be terminated without penalty upon 60 days or less notice,
(xii) any agreement that was not entered into in the ordinary course of
Compression's business and that involves annual payments in excess of $50,000,
(xiii) except as disclosed on Schedule 10.3(d) hereto, any agreement, plan
document, trust agreement, insurance contract or contract for services regarding
or with respect to any employee benefit plan, as defined in Section 3(3) of
ERISA, including any agreement, commitment, understanding or other arrangement
to deliver severance payments to any current or former employee of Compression,
(xiv) any employment, management, service, consulting or other similar contract,
including without limitation any such oral or written agreement between Seller
and Compression or between Compression and any affiliate of Seller or
Compression, (xv) any agreement that is or contains a power of attorney by or in
favor of Compression, except those made in the ordinary course of business.
(b) Except for the Intercompany Indebtedness or as set forth in
Schedule 4.7, the Seller is not a party to (i) any loan or advance to or from
Compression or any agreement or commitment relating to the making of any such
loan or advance or (ii) any guarantee or other contingent liability in respect
of any Indebtedness of Compression.
(c) Neither the Seller nor Compression nor any Affiliate has
entered into any agreement (other than this Agreement) or commitment, whether
absolute or contingent, obligating it to sell or otherwise dispose of any
substantial part of Compression's stock or assets to, or to enter into a
business combination with, any other Person.
(d) Each contract or agreement set forth in Schedule 4.7 (or
required to be set forth in Schedule 4.7) is in full force and effect and is
enforceable by Compression, and there exists no breach, default or event of
default or event, occurrence, condition or act (including the Stock Sale) which,
with the giving of notice, the lapse of time or the occurrence of any other
event or condition, would become a breach, default or event of default
thereunder, except for any such breach, default or event of default that is not
likely to have a Material Adverse Effect.
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4.8 Litigation and Claims. (a) Except as set forth in Schedule 4.8,
there is no action, suit, investigation or proceeding at law or in equity, any
arbitration or any administrative or other proceeding by or before any court,
governmental instrumentality or agency, pending or, to the knowledge of the
Seller, threatened or contemplated in writing against or affecting Compression,
or any of its properties or rights, that is likely to have a Material Adverse
Effect. Compression is not currently subject to any judgment, order or decree
entered in any lawsuit or proceeding.
(b) Except as set forth in Schedule 4.8, there have been no
warranty claims made against Compression, or claims arising under any continuing
guarantee or indemnity issued by Compression in excess of $20,000 and no such
claims are currently pending or, to the Seller's knowledge, threatened.
4.9 Accounts Receivable. Set forth on Schedule 4.9 is a list and
description (including an aging report) as of September 30, 1997, of all
outstanding notes, drafts and accounts receivable, including without limitation,
accrued but unbilled receivables (which accrued but unbilled receivables are
identified by customer), of Compression. All receivables including accrued but
unbilled receivables that are outstanding as of the Closing Date will be valid
obligations of the persons obligated to pay such accounts receivable and will be
subject to no material counterclaim or set-off, and, subject only to
consistently recorded reserves for bad debts as reflected in the Closing Date
Net Assets Statement, all such receivables will be good and collectible in the
ordinary course of business, except (a) for accrued but unbilled receivables,
which will be collectible within 90 days from the date billed and (b) as
otherwise disclosed on Schedule 4.9. The representations and warranties
contained in this Section 4.9 shall terminate on the date that such Uncollected
Receivables (as defined in Section 10.4(b)) are repurchased by the Seller
pursuant to Section 10.4. There are no receivables outstanding as of the date
hereof for which Seller has failed on a timely basis to provide to the account
debtors therein the services or products contracted for, except for any such
receivables as to which a bad debt reserve has been established.
4.10 Employment Relations. There (a) is no unfair labor practice
complaint against Compression pending before the National Labor Relations Board,
(b) is no labor strike, slowdown or stoppage pending or, to the Seller's
knowledge, threatened against or involving the employees of Compression, (c) is
no labor union that claims to represent the employees of Compression, (d) is no
collective bargaining agreement currently being negotiated by Compression with
respect to its employees, (e) is pending no labor or labor related grievance
that is likely to be material and no arbitration proceeding arising out of or
under any collective bargaining agreement of Compression and no claim therefor
has been asserted, and (f) has not been any material labor difficulty
experienced by Compression during the past three years.
4.11 Employee Benefit Plans. Compression has no Employee Plans or
Benefit Arrangements other than through its participation, and the participation
of its employees in the Employee Plans and Benefit Arrangements of Seller and
other than the Severance Policy adopted by the Board of Directors of Compression
on November 19, 1997. To the extent that employees of Compression participate
in, or are entitled to participate in, or benefit from, or participated in or
were entitled to participate in or benefited from, any Benefit Arrangement or an
Employee Plan, Buyer will not incur any liability, or other obligation to, or
with respect
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to, such Benefit Arrangement or Employee Plan, including any fine, tax or
penalty imposed by any federal, state or local government or governmental agency
or government-owned corporation, now or at any time in the future, except for
any severance benefits payable to Compression's employees in accordance with
Section 10.3(c) and the provisions of Schedule 10.3(c) hereto. None of the
assets of Compression is subject to any lien in favor of or asserted by the
Internal Revenue Service, the Pension Benefit Guaranty Corporation, the
Department of Labor or any other governmental authority, agency, department or
government-owned corporation. All group health plans of the Seller that are
subject to Sections 601, et seq. of ERISA or analogous state law and that cover
employees of Compression have at all times fully complied with the requirements
of such statutes, including without limitation the notification and continuation
of coverage of requirements thereof.
4.12 Interests in Clients and Suppliers. Neither Compression or the
Seller, nor any officer or director (or, to the Knowledge of Seller, any member
of the immediate family of a director or officer of Seller or Compression)
thereof, possesses, directly or indirectly, any financial interest in, or is a
director, officer or employee of, any Person that is a supplier, distributor,
customer, lessor, lessee or competitor of Compression. Ownership of less than 5%
of any class of securities of a company that has registered at least one class
of its securities under the Securities Exchange Act of 1934 shall not be deemed
a financial interest for purposes of this section.
4.13 Environmental Matters. (a) Compression possesses all necessary
Permits and authorizations that are required under Environmental Laws to operate
the facilities, assets and business of Compression. Except as disclosed on
Schedule 4.13 or in a Report referred to in Section 4.13(e), to the Knowledge of
Seller, the operations of Compression are in compliance with all Environmental
Laws, or such Permits or authorizations, including but not limited to all laws
and regulations imposing record-keeping, maintenance, testing, storage,
transportation, use, generation, collection, treatment, recovery, removal,
discharge, disposal, inspection, registration, notification and reporting
requirements with respect to Hazardous Materials. To the knowledge of Seller,
there are no pending penalties or announced changes in the manner that a
governmental or regulatory authority enforces the air emission requirements in
Environmental Laws that would have a Material Adverse Effect on Compression's
air emission compliance program.
(b) No Environmental Claims have been asserted within the past five
years against Seller, Compression or, to the Seller's knowledge and except as
included in the Environmental Reports on Schedule 4.13, a
predecessor-in-interest of Compression, regarding (i) the operations of
Compression or any predecessor-in-interest, (ii) Compression's assets, or (iii)
any properties now or previously owned or leased by Compression. To the
Knowledge of Seller, there are no threatened or pending Environmental Claims
against Seller, Compression or a predecessor-in-interest of Compression which
are reasonably likely to result in Environmental Liabilities regarding (i) the
operations of Compression, (ii) Compression's assets, or (iii) any properties
now or previously owned or leased by Compression. Seller has no knowledge of any
Environmental Claims that have been asserted against any facilities that may
have received Hazardous Materials generated by Compression or any
predecessor-in-interest that is reasonably likely to result in an Environmental
Liability.
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(c) Except as disclosed on Schedule 4.13 or in an Environmental
Report referred to in Section 4.13(e), to the Knowledge of Seller, there are no
Hazardous Materials used, disposed of, discharged or stored by Compression, and
any Hazardous Materials disclosed on Schedule 4.13 as used, disposed of,
discharged or stored are and have been so used, disposed of, discharged or
stored in compliance with Environmental Laws. To the Knowledge of Seller, there
has been no Release (i) at any of the properties now or previously owned,
operated or leased by Compression, or except as included in the Environmental
Reports on Schedule 4.13, any predecessor-in-interest of Compression, (ii) from
any assets owned, leased or operated by Compression except as included in the
Environmental Reports on Schedule 4.13, any predecessor-in-interest of
Compression violating Environmental Laws or requiring Remedial Action, or (iii)
at any disposal, storage or treatment facility which received Hazardous
Materials generated by Compression or any predecessor-in-interest which is
reasonably likely to result in Environmental Liabilities.
(d) There are no disposal sites for Hazardous Materials located on
the real estate owned, leased or operated by Compression or any
predecessor-in-interest.
(e) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses (collectively, "Environmental Reports")
conducted by, or which are in the possession or control of, Compression or the
Seller in relation to any premises owned, operated or leased by Compression,
except for those Environmental Reports which have been made available to the
Buyer prior to the date hereof, which Environmental Reports are listed on
Schedule 4.13. Seller shall have no liability under Section 8.1(a)(i) with
respect to any matter fairly disclosed in an Environmental Report. Seller
represents that it has provided Buyer with complete copies of any Environmental
Reports referenced herein.
4.14 Compliance with Laws. (a) Compression is in material compliance
with, and is not in default or violation in any respect under, and has not
conducted its operations in material violation in any respect of, any law, rule,
regulation, decree or order applicable to it.
(b) Except as provided in Schedule 4.14, at no time during the last
five years has Compression been notified in writing that it was the subject of
any foreign, federal, state or local criminal investigation. Except as provided
in Schedule 4.14, at no time in the last five years has Compression been
notified in writing by any foreign, federal, state or local governmental
authority of any violation of any law, regulation, ordinance, rule or order
(including those described in other subsections of this Section 4).
4.15 Licenses and Permits. Compression possesses such federal, state,
local and foreign governmental licenses, permits and other authorizations
necessary for the continued conduct of its business in the ordinary course,
consistent with past practices, without material interruption, (collectively
"Permits"), and such Permits are in full force and effect and have been and are
being fully complied with by Compression in all material respects. None of the
governmental agencies or instrumentalities that have issued the Permits has
notified Compression in writing of its intent to modify, revoke, terminate or
fail to renew any such Permit, and, to the Knowledge of Seller, no such action
has been threatened. No Permit shall be modified, revoked or shall lapse as a
result of the Stock Sale.
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4.16 Absence of Certain Changes. Except as set forth in Schedule 4.16
or as expressly provided for elsewhere herein, Compression has not, since the
date of the Compression Latest Balance Sheet: (a) incurred any Indebtedness
except Intercompany Indebtedness, (b) permitted any of its assets to be
subjected to any Lien, other than a Permitted Lien, (c) sold, transferred or
otherwise disposed of any assets, other than (i) sales of equipment on or after
the Compression Latest Balance Sheet Date and prior to December 31, 1997 that
are in the ordinary course of business and (ii) sales of Compression equipment
pursuant to the exercise (in accordance with their terms) of purchase options
under existing leases of Compression equipment, and except for sales or
trade-ins of vehicles in the ordinary course of business, (d) merged or
consolidated with any other entity, (e) made any material capital expenditure or
commitment therefor except in the ordinary course of business, (f) declared, set
aside, increased or paid any dividend or declared or made any distribution on
any shares of its capital stock, or redeemed, reclassified, purchased or
otherwise acquired any shares of its capital stock or authorized or issued any
shares of its capital stock or any option, warrant or other right to purchase or
acquire any such shares, (g) made any loan to any Person other than intercompany
loans that are included within Intercompany Indebtedness, (h) written off as
uncollectible any notes or accounts receivable, except for write-offs in the
ordinary course of business charged to applicable reserves, (i) waived any
rights or settled any claims, except for such waivers or settlements granted or
entered into in the ordinary course of business, (j) granted any increase in the
rate of wages, salaries or other compensation or benefits to any of its
employees, other than increases or payments in the ordinary course of its
business consistent with past practice, (k) made any change in any method of
accounting practice, (l) amended its certificate of incorporation or by-laws,
(m) suffered or incurred any damage, destruction, fire, explosion, accident,
flood, or other casualty loss or act of God (whether or not covered by
insurance) that has had a Material Adverse Effect, (n) amended or terminated, or
suffered any amendment or termination of, any Permit, contract, lease, license,
purchase order or similar commitment or right that is likely to have a Material
Adverse Effect, (o) amended or modified in any respect any Benefit Arrangement
or Employee Plan, (p) suffered any labor disturbances that is likely to have a
Material Adverse Effect, (q) otherwise failed to operate its business in the
ordinary course consistent with past practices so as to preserve its business
organization intact and to preserve the goodwill of its customers, suppliers,
employees and others with whom it has business relations, or (r) agreed to do
any of the foregoing.
4.17 Customers and Suppliers. Schedule 4.17 sets forth a list of the 25
largest suppliers of products and services to, and the 25 largest customers of
products and services of, Compression for the fiscal year ended March 31, 1997.
Other than as set forth on Schedule 4.17, since March 31, 1997, there has not
been any termination, cancellation or material limitation, modification or
change in the business relationship of Compression with any such customer or
supplier and Compression and the Seller are unaware of any threatened loss of
any such customer or supplier.
4.18 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Seller or Compression is, or will be, entitled to any
commission or broker's or finder's fees from any parties hereto, or any
Affiliate of the parties hereto, in connection with the Stock Sale, other than
fees to Merrill Lynch & Co. and Simmons & Company, International, the payment of
which shall be Seller's sole responsibility.
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4.19 Warranties. Compression only provides product warranties with
respect to equipment and products sold primarily through its Tide Air & Gas
division that supplement warranties from manufacturers of individual components
of such products which are passed on to customers. With respect to its rental of
compression equipment, Compression's only service warranties are occasional
service warranties that relate to run time performance as is standard in the
industry. Fulfillment of such warranties is related to, and dependent upon,
service provided by Compression. There is no material outstanding liability or
claim or, to Seller's knowledge, threatened claim, relating to such warranties.
4.20 Asset Condition. Subject to those items disclosed on Schedule
4.20, the plant, equipment and machinery of Compression, taken as a whole, are
of an industry standard (including operating condition and state of repair) as
would be expected of a prudent operator in the compression business (usual wear
and tear excepted). During the past two years, there has not been any material
interruption in the operations of Compression due to inadequate maintenance.
4.21 Inventory. The inventory of Compression as set forth on the
Compression Latest Balance Sheet was, and the inventory of the Compression is,
in usable or salable condition in the ordinary course of business at the amounts
carried on the Compression Latest Balance Sheet, net of any obsolescence
reserve, other than items not material to the inventory taken as a whole. The
materials and supplies included in such inventory are of at least the standard
quality for such items in the gas compression industry and are not in excess of
the normal purchasing patterns of Compression. Seller has no knowledge that (i)
any material adverse condition affects the supply of materials available to
Compression, or (ii) that the costs associated with work-in-process exceed the
salable value of such work-in-process. The amounts of the inventories reflected
on the Compression Latest Balance Sheet and on the books and records of Seller
and/or Compression have been determined in accordance with GAAP applied on a
consistent basis.
4.22 Intellectual Property. Schedule 4.22 hereto sets forth all
patents, trademarks, service marks, trade names, copyrights, franchises, all
applications for any of the foregoing, and all permits, grants and licenses or
other rights running to or from Compression relating to any of the foregoing
which are used in or useful to the business of Compression. The rights of
Compression in all property set forth on Schedule 4.22 hereto are free and clear
of any Liens other than Permitted Liens. Seller has no notice of any adversely
held patent, trademark, service mark, trade name, copyright or franchise of any
other person or notice of any claim of any other person relating to any of the
property set forth on Schedule 4.22 hereto, and Seller has no knowledge of any
basis for any such charge or claim.
4.23 Compression Financial Statements; Absence of Undisclosed
Liabilities. The Compression Financial Statements have been prepared in
accordance with GAAP applied on a basis consistent with prior periods and
present fairly the financial condition, results of operations and cash flows as
at the respective dates hereof and for the periods referred to therein. The
unaudited interim financial statements included within the Compression Financial
Statements reflect all adjustments which are necessary for a fair statement of
the results for the interim periods presented therein. Except as disclosed in
Schedule 4.23, Compression does not have, nor are any of its assets subject to,
any liability, commitment, indebtedness or obligation
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(of any kind whatsoever, whether absolute, accrued, contingent, known, unknown,
matured or unmatured) ("Undisclosed Liabilities") except for Undisclosed
Liabilities that (i) are disclosed or required to be disclosed or are expressly
exempted from disclosure by another representation contained in this Section 4,
(ii) are contained or disclosed in the Compression Financial Statements, (iii)
arise under the economic terms and general provisions of any contract or
arrangement of Compression or (iv) could not be reasonably expected to have a
material impact on, or result in a material liability to, Compression.
4.24 Projections. To the Knowledge of Seller, the financial projections
attached hereto as Exhibit C have been prepared in good faith based upon
reasonable assumptions (it being understood that the projections are subject to
significant uncertainties and contingencies, many of which are beyond Seller's
control, and that no assurance can be given that such projections will be
realized).
4.25 Taxes. Except as set forth in Schedule 4.25, (i) each of Seller,
Compression and Seller's Group has filed all material federal, state, local and
foreign Returns and has paid all Taxes due with respect to the periods covered
by such Returns, (ii) Compression has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency, (iii) no material Tax liens have been filed and no
material claims are being asserted with respect to any Taxes of Compression,
(iv) Compression has complied in all material aspects with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes and has
withheld all amounts required by law to be withheld from the wages or salaries
of employees and independent contractors and is not liable for any Taxes for
failure to comply with such laws, rules, and regulations, (v) Compression is not
required to include in income any adjustment pursuant to Section 481(a) of the
Code by reason of a change in accounting method initiated by Seller and Seller
does not have any knowledge that the Internal Revenue Service has proposed any
such adjustment or change in accounting method, except that this representation
shall not be deemed to cover any change of accounting method undertaken by
Seller at the request of Buyer, (vi) the acquisition of the stock of Compression
will not be a factor causing any payments to be made by Compression to be
nondeductible (in whole or in part) pursuant to Section 280G of the Code, (vii)
no consent or election under Section 341 of the Code has been made for or with
respect to Compression, and (viii) no property of Compression is "tax exempt use
property" within the meaning of Section 168(h) of the Code, and Compression is
not a party to any lease made pursuant to Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended.
4.26 No Other Representations. Seller shall not be deemed to have made
to Buyer any representation or warranty other than as expressly made by Seller
in this Section 4. Without limiting the generality of the foregoing, and
notwithstanding any otherwise express representations and warranties made by
Seller in this Section 4, Seller makes no representation or warranty to Buyer
with respect to:
(a) any projections, estimates or budgets heretofore delivered to
or made available to Buyer of future revenues, expenses or expenditures or
future results of operations of Compression (except for such representations as
are given in Section 4.24); or
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(b) except as expressly covered by a representation and warranty
contained in this Section 4 hereof, any description of the business or
operations of Compression or any other information or documents (financial or
otherwise) made available to Buyer or its counsel, accountants or advisers with
respect to Compression.
SECTION 5. REPRESENTATIONS OF THE BUYER
The Buyer represents and warrants to the Seller that:
5.1 Corporate Organization. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the full corporate power and authority to enter into this Agreement and
to perform its obligations hereunder.
5.2 Authorization; Enforceability. The Board of Directors of the Buyer
has duly approved and authorized the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, and no other
corporate proceedings on the part of the Buyer are necessary to approve and
authorize the execution and delivery of this Agreement by the Buyer and the
consummation by the Buyer of the transactions contemplated hereby. This
Agreement constitutes a legal, valid and binding obligation of the Buyer,
enforceable against the Buyer in accordance with its terms, except that the
enforcement hereof may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law).
5.3 No Approvals or Conflicts. Neither the execution and delivery by
the Buyer of this Agreement nor the consummation by the Buyer of the Stock Sale
will (a) violate, conflict with or result in the breach of any provision of the
certificate of incorporation or by-laws of the Buyer, (b) violate, conflict with
or result in a breach of any provision of, or constitute a default under, or
result in the termination or cancellation of, or accelerate the performance
required by, or result in the creation of any Lien upon any of the properties of
the Buyer under, any note, bond, mortgage, indenture, license, lease, contract,
agreement or other instrument or commitment or obligation to which the Buyer or
any of its properties may be bound or affected, (c) violate any order, writ,
injunction, decree, judgment, ruling, law, rule or regulation of any court or
governmental authority, domestic or foreign, applicable to the Buyer or its
properties, or (d) except for any required filings under the HSR Act (as
provided in Section 6.1(b)) or those that have already been obtained, require
any consent, approval or authorization of, or notice to, or declaration, filing
or registration with, any governmental or regulatory authority in connection
with the execution, delivery and performance of this Agreement by the Buyer
other than those that, in the case of clauses (b), (c) and (d) above, are not
likely to have a Material Adverse Effect.
5.4 Purchase for Investment. Buyer represents and warrants that it will
acquire the Shares for investment and not with a view to, or for resale in
connection with, the distribution or other disposition thereof in violation of
the Securities Act of 1933, as amended. Buyer agrees that it will not, directly
or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose
of any of the Shares (or solicit offers to buy, purchase, or otherwise acquire
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or take a pledge of any of the Shares), except in compliance with the Securities
Act, the rules and regulations promulgated thereunder and applicable state
securities laws.
5.5 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Buyer is, or will be, entitled to any commission or broker's or
finder's fees from the any parties hereto, or any Affiliate of the parties
hereto, in connection with the Stock Sale.
5.6 Proceedings. There is no action, suit or proceeding at law or in
equity, any arbitration or any administrative or other proceeding by or before
any governmental instrumentality or agency, pending or, to the knowledge of the
Buyer, threatened against or affecting the Buyer that could have a material
adverse effect on the ability of the Buyer to consummate the Stock Sale.
5.7 Investigation. (a) Buyer acknowledges that (i) it has had the
opportunity to visit with the Seller and Compression and meet with their
respective officers and other representatives to discuss the business and the
assets, liabilities, financial condition, cash flow and operations of
Compression; and (ii) it has made its own independent examination,
investigation, analysis and evaluation of Compression, including Buyer's own
estimate of the value of Compression's business.
5.8 Castle Harlan III's Capacity to Fund Equity. Castle Harlan Partners
III, L.P. has and will have the ability to fund the equity of Buyer required
under the terms of the Commitment Letters (defined in Section 5.9) under the
terms of its partnership agreement.
5.9 Buyer's Financing Commitments. Buyer has obtained from Bankers
Trust Company binding and executed firm commitment letters (the "Commitment
Letters") dated the date hereof agreeing to facilitate the Stock Sale by
providing senior bank financing in an amount up to $210 million and, if
necessary, bridge financing in the aggregate principal amount of up to $100
million, copies of which letters have been provided to Seller.
SECTION 6. PRE-CLOSING COVENANTS
From the date hereof through the Closing Date, the parties covenant and
agree as follows:
6.1 Cooperation and Best Efforts; HSR Filing. (a) Each party will
cooperate with the other and use its best efforts to (i) procure all necessary
and appropriate consents and approvals, (ii) complete and file all necessary and
appropriate applications, notifications, filings and certifications, (iii)
satisfy all requirements prescribed by law for, and all conditions set forth in
this Agreement to, the consummation of the Stock Sale, (iv) effect the Stock
Sale at the earliest practicable date, and (v) before and after Closing,
cooperate with Compression to the extent necessary to conform the presentation
of the Compression Financial Information to the rules and regulations of the
U.S. Securities and Exchange Commission.
(b) Without limiting the generality of the foregoing; within ten
business days after the execution of this Agreement, Buyer and Seller shall each
file or cause to be filed any notification and report forms and related
materials that it or its Affiliates may be required
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to file with the Federal Trade Commission and the Antitrust Division of the
United States Department of Justice required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act").
6.2 Press Releases. Buyer will cooperate with the Seller in the
preparation of any press releases announcing the execution of this Agreement or
the consummation of the Stock Sale. Buyer, without the prior consent of Seller,
will not issue any press release or other written or oral statement for general
circulation relating to the transactions contemplated hereby. Seller agrees that
it will consult with Buyer prior to the issuance of any press release or other
written or oral statement for general circulation relating to the transactions
described hereby, except to the extent such consultation is not feasible for the
Seller to discharge its legal obligations.
6.3 Review of Compression; Availability of Management. (a) Prior to the
Closing Date, the Seller will afford the Buyer and its representatives, during
regular business hours and upon reasonable notice, such access to the
properties, personnel and books and records of Compression as the Buyer may
reasonably request in connection with the Stock Sale including the financing
thereof, in accordance with the terms of the Confidentiality Agreement, in
particular Section 7 thereof. To the extent the obligations hereunder would not
require the interruption of existing services, the unreasonable devotion of
managerial resources or attention, or materially interfere with customer
relations, Compression shall fully cooperate in locating and affording access to
all such properties, assets, books and records for the Buyer, and shall make
such properties and assets available for such inspection by Buyer. An employee
or representative of Compression shall be entitled to be present at any or all
inspections of Compression's properties, assets and records by Buyer or Buyer's
representatives.
(b) Seller will use commercially reasonable efforts to cause the
officers of Compression (and any other person holding a managerial position with
Compression) to, at the request of Buyer, aid Buyer or Buyer's representatives
in the marketing of securities to be issued by Buyer or Compression including,
without limitation, participation by such employees in "road shows" or other
similar events.
6.4 Conduct of Business of Compression Prior to the Closing Date. The
Seller shall cause Compression to conduct its operations in the ordinary and
usual course of business and preserve intact its business organizations,
maintain satisfactory relationships with suppliers, distributors, customers and
others having business relationships with it. Without the prior written consent
of the Buyer, the Seller shall not commit or omit to do any act, and shall cause
Compression not to commit or omit to do any act, that (i) would cause a breach
of any agreement, commitment or covenant of the Seller contained in this
Agreement in any material respect, (ii) would cause the representations and
warranties contained in Section 4 to become untrue in any material respect, or
(iii) would result in the sale or other disposition of Compression equipment,
other than sales of equipment pursuant to the exercise (in accordance with their
terms) of purchase options under existing leases of Compression equipment and
except for sales or trade-ins of vehicles in the ordinary course of business.
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6.5 Notification of Changes. (a) Each of the Seller and the Buyer shall
promptly notify the other of any event that causes any representation or
warranty given by either of them, respectively, in Sections 4 and 5 to become
untrue.
(b) The Seller shall have the right until the Closing to supplement
or amend any of the Schedules described in Section 4 with respect to any matter
arising or discovered after the date of this Agreement which, if existing or
known on the date of this Agreement, would have been required to be set forth or
described in such Schedules. For all purposes of this Agreement, including for
purposes of determining whether the conditions set forth in Section 7 have been
fulfilled, the Schedules shall be deemed to include only that information
contained therein on the date of this Agreement and shall be deemed to exclude
all information contained in any supplement or amendment thereto, except to the
extent that they reflect an event or condition that would be beneficial to the
Buyer; provided, however, that if the Closing shall occur, then all matters
disclosed pursuant to any such supplement or amendment shall be deemed included
in the Schedules at Closing (without necessity of a written waiver or other
action on the part of any party) and to modify the applicable representations
and warranties for all purposes.
6.6 Confidentiality Agreement. The Confidentiality Agreement shall
remain in full force and effect until the earlier of (i) the Closing Date or
(ii) two years after the termination of this Agreement under Section 11.
6.7 Continued Effectiveness of Section 4.16. From the date hereof
through the Closing, Seller shall not, and shall cause Compression not to,
without the prior written consent of Buyer, undertake any actions specified in
Section 4.16.
6.8 Environmental Audit. (a) During the period from the date of this
Agreement through and including February 17, 1998 (the "Assessment Period"), the
Buyer shall have the right to make, or cause to be made, an environmental
assessment of the operations and physical premises of Compression by the
environmental firm of Malcolm Pirnie, or another environmental firm selected by
Buyer and reasonably acceptable to Seller, and during the Assessment Period,
Buyer and its agents may (and Seller agrees to cooperate reasonably with Buyer
in this regard) enter and inspect the physical premises and conduct such Phase I
or Phase II assessments, tests, examinations, investigations and studies as may
be necessary or appropriate in Buyer's judgement to evaluate the environmental
condition of Compression's operations and properties now or previously leased
(the "Environmental Audit"). Prior to the Closing Date (or, in the event there
is no Closing, in perpetuity), Buyer shall keep any data or information acquired
through, or any reports or studies derived from, such Environmental Audit
strictly confidential and shall not disclose such data, information, reports or
studies to any third party except potential lenders, potential equity investors
and their respective advisors without the prior written approval of Seller.
Buyer shall perform such Environmental Audit at its sole cost and expense.
(b) Seller's agreement to grant Buyer access to the physical
premises pursuant to this Section 6.8 is subject to the following conditions:
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(i) Buyer agrees to indemnify and hold harmless Seller, its
directors, officers, employees and agents from any claims or liabilities for the
injury or death of persons or damage to property, except that damage to property
that is reasonable and customary in performing Phase II assessments, arising
from the exercise of rights granted to Buyer pursuant to this Section 6.8. Buyer
shall indemnify and hold harmless Seller and its directors, officers, employees
and agents from and against any and all loss, cost, damage, expense, or
liability, including attorneys' fees, arising out of (A) any and all statutory
liens or other encumbrances for labor or materials furnished in connection with
such environmental audits as Buyer may conduct with respect to the physical
premises and (B) any injury to or death of persons or damage to property, except
for damage to property that is reasonable and customary in performing Phase II
assessments, as a result of such Environmental Audit (except where any such
injury or damage is caused solely by the gross negligence or willful misconduct
of Seller, its directors, officers, employees or agents). The indemnification
set forth in this Section 6.8 shall survive until the fifth anniversary of the
Closing Date.
(ii) Seller shall be provided with a certificate of insurance
or other appropriate evidence to the effect that the engineering firm retained
to conduct the procedures outlined by this Section 6 maintains adequate
liability and property damage insurance with respect to the exercise by Buyer
and its agents of the rights granted in this Section 6.8. Prior to any exercise
of the rights granted hereby, Buyer shall furnish, or shall cause to be
furnished to Seller a certificate of insurance evidencing the existence of the
insurance required hereunder, which certificate shall disclose the policy limits
of such insurance.
(c) The written reports of Buyer's environmental engineer with
respect to the Environmental Audit shall be made available to Seller as soon as
is practicable and, in no event later than the end of the Assessment Period. If
any condition is discovered which in the opinion of Buyer's environmental
engineer reveals (i) a Release or threatened Release, (ii) any condition giving
rise to a Remedial Action, (iii) actual or potential Environmental Claims, or
(iv) an instance of threatened or actual non-compliance with any Environmental
Law, including the presence of any Hazardous Materials, ("Environmental
Condition"), Buyer shall so advise Seller in writing ("Remediation Notice")
within five days following completion of the Environmental Audit, which shall
include the estimate of its environmental engineer of the reasonably anticipated
cost to remediate such Environmental Conditions ("Estimated Remediation Cost").
(d) If the Estimated Remediation Cost is estimated to exceed $20
million, Seller shall have the exclusive right to terminate this Agreement
within five days of its receipt of the Remediation Notice, following which
neither Buyer nor Seller shall have any further obligation or liability of any
kind under this Agreement or with respect hereto other than as provided in
Section 11.2 hereof. In the event of any such termination by Seller, Seller
agrees to pay up to $1 million of Buyer's expenses upon receipt of reasonable
documentation thereof.
(e) The cost of any remediation undertaken or caused to be
undertaken by Buyer or which Buyer becomes obligated to pay for, in each case to
the extent identified as part of the Estimated Remediation Cost shall be paid as
follows (the aggregate amount of such costs shall be referred to herein as the
"Actual Remediation Costs"):
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(i) Seller shall pay 75% and Buyer shall pay 25% of the first
$4 million of Actual Remediation Costs;
(ii) Seller shall pay 83.33% and Buyer shall pay 16.67% of the
next $6 million of Actual Remediation Costs; and
(iii) Seller shall pay 100% of the amount by which the Actual
Remediation Costs exceed $10 million, but only to the extent the Actual
Remediation Costs do not exceed the Estimated Remediation Cost. Buyer shall pay
and be solely responsible for any Actual Remediation Costs that exceed the
Estimated Remediation Cost, except to the extent of a breach of Seller's
representations and warranties hereunder.
The environmental engineer that will conduct such remediation shall
be Malcolm Pirnie, or another environmental firm selected by Buyer and
reasonably acceptable to Seller.
(f) If, following its receipt of the report(s) from the
environmental engineer (which in no event shall be later than the last day of
the Assessment Period), Buyer concludes that there is a substantial possibility
of (i) significant financial liability to Compression or Buyer to third parties
or (ii) the imposition of significant fines, penalties or economic sanctions by
any governmental authority because of the Environmental Condition of
Compression's assets or properties, then Buyer shall have the right, within five
days of its receipt of such reports, to terminate this Agreement by notice to
the Seller.
(g) Notwithstanding the provisions of Section 8 or any other
provision of this Agreement, if Buyer and Seller consummate the Stock Sale, then
Seller shall have no liability with respect to any condition or state of facts
identified in the Remediation Notice as requiring remediation except as set
forth in Section 6.8(e).
6.9 Purchase of Compression Equipment; Repair and Maintenance of
Existing Compression Equipment. (a) Seller agrees that it shall not cancel any
orders for compression equipment that have heretofore been placed by
Compression. Seller further agrees that, upon one or more written requests made
by Buyer after the execution of this Agreement, it shall promptly place orders
for New Compression Equipment provided however that the maximum dollar amount of
any equipment so ordered shall not exceed $9.0 million.
(b) On and after the date hereof and through the Closing Date,
Seller agrees to continue to repair, maintain and overhaul Compression equipment
in the ordinary course of business consistent with prior practice.
6.10 Employees. Without the prior consent of Buyer, Seller agrees that
prior to the Closing Date it shall neither cause or permit Compression to
implement any changes in its current employment practices or practices nor
terminate the employment of any employee of Compression.
6.11 Covenant on Bonus and Other Incentive Payments. Seller agrees
that no later than the third day following the Closing Date, it shall pay or
provide funds to Compression for
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it to pay any and all amounts due officers and employees of Compression for the
current fiscal year in accordance with the terms of all bonus and incentive
programs adopted by either Seller or Compression for the benefit of such
Compression officers and employees. If Seller provides funds to Compression for
it to pay such amounts, Seller shall indemnify and hold harmless Compression and
Buyer from and against all costs including without limitation taxes and
liabilities arising out of such payment and the obligations related thereto. To
the extent that Compression is to make such payments after the Closing, the
obligation to make such payments will be included in Current Liabilities.
SECTION 7. CONDITIONS TO CLOSING
7.1 Conditions Applicable to All Parties. The obligations of each of
the parties hereto to consummate the Stock Sale are subject to the satisfaction
(or the waiver by the Buyer and the Seller) of the following conditions at or
prior to the Closing:
(a) Restraining Action. No judgment, order or decree shall have
been issued or rendered by any court or other governmental body to restrain or
prohibit the Stock Sale.
(b) Statutory Requirements and Regulatory Approval. All statutory
requirements for the valid consummation of the Stock Sale shall have been
fulfilled and all appropriate orders, consents and approvals from all regulatory
agencies and other governmental authorities whose order, consent or approval is
required by law for the consummation of the Stock Sale shall have been received.
(c) HSR Act Proceedings. Any applicable waiting period under the
HSR Act shall have expired or been earlier terminated.
7.2 Additional Conditions Applicable to the Buyer's Obligations. The
obligations of the Buyer to consummate the Stock Sale are also subject to the
satisfaction (or waiver by the Buyer) of the following conditions at or prior to
the Closing:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Seller contained in Section 4 that are qualified as to
materiality shall be true and correct and such representations and warranties
that are not so qualified shall be true and correct in all material respects on
the Closing Date and the Seller shall have performed in all material respects
all covenants required by this Agreement to be performed by it at or prior to
the Closing. The Seller shall have delivered to the Buyer on the Closing Date a
certificate, dated the Closing Date and duly executed by the Seller, certifying
to the fulfillment of the conditions set forth in this paragraph.
(b) Capital Contribution. Seller shall have made the capital
contribution to Compression that is contemplated by Section 2.2.
(c) Transition Services Agreement. The parties shall have entered
into a Transition Services Agreement in substantially the form attached as
Exhibit D.
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(d) Opinion of Counsel to Seller. Buyer shall have received the
favorable opinions of Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P., and the General Counsel to Seller, respectively, dated the date of
Closing, addressed to Buyer, in the form of Exhibit E hereto.
(e) Financing Condition. Buyer shall have obtained funds
contemplated by its Commitment Letters, dated the date hereof, with Bankers
Trust in accordance with the terms of such Commitment Letters or such substitute
financing in the same amount as is reasonably acceptable to Buyer.
(f) Computer Software; Assignment of Rights. Seller shall have
delivered a (i) bill of sale to Buyer conveying to Compression, to the extent
the transfer thereof is not prohibited by any licensing restriction, any program
software, system software or database that is used by Compression as part of its
management information system, but specifically excluding any and all computer
hardware owned by Seller that is not residing on the physical premises or under
the control and possession of Compression or its employees, and (ii) an
assignment to Buyer of Seller's rights and benefits under (A) the
confidentiality agreements entered into in connection with Seller's efforts to
sell Compression and (B) any non-competition agreement or covenant restricting
any Person from engaging in conduct relating to Compression or its business.
Schedule 7.2(f) is a list of Seller's software licensing arrangements for
Compression that Seller, after due inquiry, has knowledge are subject to
transfer restrictions.
7.3 Additional Conditions Applicable to the Seller's Obligations. The
Seller's obligations to consummate the Stock Sale are also subject to the
satisfaction (or the waiver by the Seller) of the following conditions at or
prior to the Closing:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Buyer contained in Section 5 that are
qualified as to materiality shall be true and correct and such representations
and warranties that are not so qualified shall be true and correct in all
material respects on the Closing Date and the Buyer shall have performed in all
material respects all covenants required by this Agreement to be performed by it
at or prior to the Closing. The Buyer shall have delivered to the Seller on the
Closing Date a certificate, dated the Closing Date and duly executed by the
Buyer, certifying to the fulfillment of the conditions set forth in this
paragraph.
(b) Seller Guarantees. Buyer shall have either (i) caused Seller
to be relieved of all obligations as guarantor on any outstanding letters of
credit issued on behalf of Compression, or (ii) provided Seller with stand-by
letters of credit in the aggregate amount of such outstanding Compression
letters of credit.
SECTION 8. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS
8.1 Indemnification. (a) After the Closing Date, subject to the terms
and conditions of this Section 8, including the limits on indemnity set forth in
Section 8.4, and further subject to the provisions of Section 9 regarding taxes,
which indemnification obligation shall be independent of this Section, the
Seller shall indemnify and hold harmless the Buyer
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and its Affiliates, including Compression, and their respective officers,
directors, employees, agents and representatives (the "Buyer Indemnitees") from,
and will pay to the Buyer Indemnitees the amount (net of any proceeds received
by the Buyer Indemnitee from any form of insurance, indemnity by prior owner or
other source of reimbursement, or other actual, quantified and directly related
offsets or benefits, including quantifiable and tax benefits in the year
incurred (but giving effect to any tax detriment from receipt of indemnification
proceeds), obtained) of, any loss, liability, judgment, damage, cost or expense
(including interest, penalties, and the reasonable fees, disbursements and
expenses of attorneys, accountants and other professional advisors)
(collectively, "Losses") arising from or in connection with (i) any breach of
any representation or warranty of the Seller contained in Section 4, or (ii) a
breach of any agreement or covenant contained herein that by its terms is to be
performed by the Seller after the Closing Date.
(b) After the Closing Date, subject to the terms and conditions of
this Section 8, including the limits on indemnity set forth in Section 8.4, the
Buyer shall indemnify and hold harmless the Seller and its Affiliates and their
respective officers, directors and representatives (the "Seller Indemnitees")
from, and will pay to the Seller Indemnitees the amount (net of any proceeds
received by the Seller Indemnitee from any form of insurance, indemnity by prior
owner or other source of reimbursement, or other actual, quantified and directly
related offsets or benefits, including quantifiable and tax benefits in the year
incurred (but giving effect to any tax detriment from receipt of indemnification
proceeds) obtained) of, any Losses arising from or in connection with (i) any
breach of any representation or warranty of the Buyer contained in Section 5 or
(ii) a breach of any agreement or covenant contained herein that by its terms is
to be performed by the Buyer after the Closing Date.
8.2 Notice and Defense of Claims. (a) A Person seeking indemnification
under this Section 8 (the "Indemnified Person") shall give prompt written notice
to the indemnifying person or persons, or successors thereto (the "Indemnifying
Person"), of any matter with respect to which the Indemnified Person seeks to be
indemnified (the "Indemnity Claim"). Such notice shall state the nature of the
Indemnity Claim and, if known, the amount of the Loss. If the Indemnity Claim
arises from a claim of a third party, the Indemnified Person shall give such
notice within a reasonable time after the Indemnified Person has actual notice
of such claim, and in the event that a suit or other proceeding is commenced,
within 20 days after receipt of written notice by the Indemnified Person
thereof. Notwithstanding anything in this paragraph to the contrary, the failure
of an Indemnified Person to give timely notice of an Indemnity Claim shall not
bar such Indemnity Claim except and to the extent that the failure to give
timely notice has impaired materially the ability of the Indemnifying Person to
defend the Indemnity Claim.
(b) If the Indemnity Claim arises from the claim or demand of a
third party, the Indemnifying Person shall assume its defense, including the
hiring of counsel and the payment of all fees and expenses. The Indemnified
Person shall have the right to employ separate counsel and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the Indemnified Person unless both the Indemnified Person and the
Indemnifying Person are named as parties and the Indemnified Person shall in
good faith determine that representation by the same counsel is inappropriate.
In the event that the Indemnifying Person, within 30 days after notice of any
such action or claim, fails to assume
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the defense thereof, the Indemnified Person shall have the right to undertake
the defense, compromise or settlement of such action, claim or proceeding for
the account of the Indemnifying Person, subject to the right of the Indemnifying
Person to assume the defense of such action, claim or proceeding at any time
prior to the settlement, compromise or final determination thereof. Anything in
this Section 8 to the contrary notwithstanding, the Indemnifying Person shall
not, without the Indemnified Person's prior consent, settle or compromise any
action or claim or consent to the entry of any judgment with respect to any
action, claim or proceeding for anything other than money damages paid by the
Indemnifying Person. The Indemnifying Person may, without the Indemnified
Person's prior consent, settle or compromise any such action, claim or
proceeding or consent to entry of any judgment with respect to any such action
or claim that requires solely the payment of money damages by the Indemnifying
Person and that includes as an unconditional term thereof the release by the
claimant or the plaintiff of the Indemnified Person from all liability in
respect of such action, claim or proceeding.
(c) If the Indemnity Claim does not arise from the claim or demand
of a third party, the Indemnifying Person shall have 30 days after receipt of
written notice of such Indemnity Claim to object to such claim by giving written
notice to the Indemnified Person specifying the reasons for such objection or
objections. If the Indemnifying Person has not so objected to the Indemnity
Claim as of the close of business on such thirtieth day, the total amount of the
Indemnity Claim shall thereupon become chargeable to and payable by the
Indemnifying Person in accordance with the terms and conditions of this section.
If the Indemnifying Person objects to the Indemnity Claim and the parties are
unable to settle any such dispute, the parties shall have all rights and
remedies at law or in equity, and either the Indemnifying Person or the
Indemnified Person may commence an action or proceeding to resolve such dispute
and determine any amounts due hereunder from the Indemnifying Person.
8.3 Survival of Representations and Warranties. The right to
indemnification under Section 8.1 for any breach of the representations and
warranties made by each party herein shall survive until the date that is the
18-month anniversary date of the Closing Date, except that the representations
set forth in Section 4.13 shall survive until the fifth anniversary of the
Closing Date, and the representations set forth in Sections 4.2, 4.3, 4.11,
(and, to the extent any representations or warranties are given by Seller in
Section 2.7 and Section 2.8), shall survive indefinitely.
8.4 Limitations. Notwithstanding anything to the contrary in this
Agreement:
(a) Neither the Seller, on the one hand, nor the Buyer, on the
other hand, shall have any obligation to make indemnification payments with
respect to Indemnity Claims arising under Sections 8.1(a)(i) or 8.1(b)(i) until
the aggregate of all claims against it hereunder exceeds $2.0 million, and then
only to the extent the aggregate of such claims exceeds $1.0 million.
(b) Subject to paragraph (e), neither the Seller, on the one hand,
nor the Buyer, on the other hand, shall have any liability with respect to
Indemnity Claims arising under Sections 8.1(a)(i) or 8.1(b)(i) in excess of $100
million in the aggregate for all such Indemnity Claims.
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(c) In no event shall any recovery under this Agreement include the
loss of anticipated profits, loss of managerial time, or lost opportunity.
(d) In the absence of common law fraud, this Section 8 shall serve
as the sole and exclusive remedy of the Buyer Indemnitees and the Seller
Indemnitees for Losses and for any other claims (other than those arising under
Section 6.8 and Section 10) in any way relating to this Agreement to the
exclusion of all other statutory or common law remedies (including rights under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended), whether based on contract, tort, strict liability or
otherwise.
SECTION 9. TAX MATTERS
9.1 Tax Sharing Agreements. Any Tax sharing agreement between
Compression and any other Person will be terminated as of the Closing Date and
will have no further effect for any taxable year (whether the current year, a
future year, or a past year) and Compression will not have any obligation or
liability with respect to any such agreement after the Closing Date.
9.2 Preparation of Returns and Payment of Taxes. The Seller and
Compression shall prepare and timely file (taking into account the extension of
any due date) all Returns and amendments thereto required to be filed by them
and the Seller's Group on or before the Closing Date. The Seller, Compression,
and each member of the Seller's Group shall pay and discharge all Taxes upon or
against it or any of its properties or assets before such Taxes shall become
delinquent and before penalties accrue thereon, except to the extent and as long
as: (a) such Taxes are being contested in good faith and by appropriate
proceedings pursued diligently and in such a manner as not to cause any material
adverse effect upon the business, operations, results of operation, assets or
financial condition of Compression or any member of the Seller's Group; and (b)
Compression shall have set aside on its books reserves (segregated to the extent
required by sound accounting practice) in the amount of the demanded principal
imposition (together with interest and penalties relating thereto, if any).
9.3 Taxes and Returns for Periods Through the Closing Date. The Seller
will include, or cause to be included, the income of Compression on the Seller's
Group's consolidated federal and any consolidated, unitary or combined state and
local income Tax Returns for all periods through the Closing Date, the Seller
will file timely or cause to be filed timely such Returns and the Seller will
pay or cause to be paid any taxes attributable to such income, provided however
that to the extent that a liability for such taxes has been accrued and included
in Net Assets, then Seller shall have no obligation to make such tax payment.
Except as provided in Section 9.4, Seller also will timely prepare and file, or
cause to be prepared and filed, all other income Tax Returns of Compression for
all periods that end on or before the Closing Date and will pay or cause to be
paid all Taxes related thereto, provided however that to the extent that a
liability for such taxes has been accrued and included in Closing Date Net
Assets, then Seller shall have no obligation to make such tax payment.
Compression will furnish Tax information in its possession and reasonably
requested by Seller for inclusion in such Tax Returns for the Seller's Group for
the period ending on the Closing Date. The Seller will not take, or cause to be
taken, any position on such returns that relate to Compression that
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would adversely affect Compression after the Closing Date, unless such position
would be reasonable in the case of a Person that owned Compression both before
and after the Closing Date and the Seller indemnifies Compression for any Tax
payable by Compression for the period after the Closing Date as a result of such
settlement. The income of Compression will be apportioned to the period up to
and including the Closing Date and to the period after the Closing Date by
closing the books of Compression as of the end of the Closing Date. The Buyer
and the Seller agree that, if Compression is permitted under any applicable
state or local income tax law to treat the Closing Date as the last day of a
taxable period, the Buyer, the Seller and Compression shall treat the Closing
Date as the last day of such taxable period.
9.4 Taxes and Returns for Transactions That Occur After the Closing
Date. The Buyer shall be responsible for all Taxes of Compression for taxable
periods after the Closing Date. The Buyer shall be responsible for any Taxes
that result from, any action or election made by the Buyer or Compression at the
direction of the Buyer on or after the Closing Date. If such an action or an
election results in an increase in the Seller's liability for Taxes under this
Agreement, the Buyer shall pay to the Seller an amount equal to the increase in
such Taxes. Notwithstanding the preceding two sentences, Buyer shall not be
responsible for, and shall not pay, any Taxes that result from, any increase in
Seller's liability for Taxes (i) imposed as a result of any election permitted
by Section 9.9 hereof or (ii) any election to forego any carryback period
permitted with respect to net operating losses or other Tax items attributable
to periods after the Closing Date.
9.5 Tax and Returns for Periods Commencing Before the Closing Date and
Ending After the Closing Date. The Buyer shall prepare or cause to be prepared
and file or cause to be filed any Tax Return of Compression for taxable periods
that begin before the Closing Date and end after the Closing Date. At least
fifteen (15) business days before the filing of any such Tax Returns with
respect to income Taxes, the Buyer shall submit copies of such Returns to the
Seller for the Seller's approval, which approval shall not be unreasonably
withheld. The Seller shall pay to the Buyer within fifteen (15) days after the
date on which Taxes are paid by the Buyer with respect to such periods an amount
equal to the excess of (i) the portion of such Taxes which relates to the
portion of such taxable period ending on the Closing Date (the "Pre-Closing
Period") over (ii) the amount of any Taxes (including estimated Tax payments)
paid by the Seller prior to the Closing Date with respect to such taxable
periods, provided however that to the extent that a liability for such taxes has
been accrued and included in Closing Date Net Assets, then Seller shall have no
obligation to make such tax payment. In the event that the amount described in
(ii) of the immediately preceding sentence exceeds the amount described in (i)
of same sentence, the Buyer shall pay the excess to the Seller within fifteen
(15) days after the date on which such Taxes are paid by the Buyer with respect
to such periods. For purposes of this Section, in the case of any Taxes that are
imposed on a periodic basis and are payable for a taxable period that includes
(but does not end on) the Closing Date, the portion of such Taxes which relates
to the Pre-Closing Period shall (i) in the case of any personal property and
real property Taxes, be deemed to be the amount of such Tax for the entire
taxable period multiplied by a fraction, the numerator of which is the number of
days in the Pre-Closing Period and the denominator of which is the number of
days in the entire taxable period, and (ii) in the case of all other Taxes, be
determined based on the actual operations of Compression through the Closing
Date.
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9.6 Audits. The Seller will allow, or cause to be allowed, Compression
or its representatives to participate at Compression's own expense in any audits
of the consolidated federal and consolidated, unitary or combined, income tax
Returns of the Seller and the Seller's Group to the extent that such audits
relate to Compression. The Seller will not settle, or cause to be settled, any
such audit in a manner that would adversely affect Compression after the Closing
Date unless (i) such settlement would be reasonable in the case of a Person that
owned Compression both before and after the Closing Date and the Seller
indemnifies Compression for any additional Tax payable by Compression for the
period after the Closing Date as a result of such settlement or (ii) the Seller
obtains the prior written consent of the Buyer, which consent shall not
unreasonably be withheld.
9.7 Indemnification for Taxes. (a) From and after the Closing Date, the
Seller shall protect, defend, indemnify and hold harmless the Buyer and
Compression from any and all Taxes (including any obligation to contribute to
the payment of any Taxes determined on a consolidated, combined or unitary basis
with respect to a Seller's Group of corporations that includes or included
Compression) which are (i) imposed on the Seller or any member (other than
Compression) of the consolidated, unitary or combined Seller's Group which
includes or included Compression or (ii) imposed on Compression in respect of
its income, business, property or operations or for which Compression may
otherwise be liable (A) for any taxable period ending on or before the Closing
Date (except for those periods described in Section 9.4) and for any Pre-Closing
Period (as defined and determined in Section 9.5), provided however that to the
extent that a liability for such taxes has been accrued and included in Closing
Date Net Assets, then Seller shall have no obligation to make such tax payment,
(B) resulting by reason of the several liability of Compression pursuant to
Treasury Regulations section 1.1502- 6 or any analogous state, local or foreign
law or regulation or by reason of Compression having been a member of any
consolidated, combined or unitary Seller's Group on or prior to the closing
Date, or (C) resulting from Compression ceasing to be a member of the affiliated
Seller's Group (within the meaning Section 1504(a) of the Code) that includes
the Seller.
(b) In the case of any audit, examination or other proceeding
("Proceeding") with respect to Taxes for which the Seller is or may be liable
pursuant to this Agreement, the Buyer shall promptly inform the Seller, and
shall afford the Seller, at the Seller's expense, the opportunity to control the
conduct of such Proceedings, provided that the Buyer shall retain the right to
control all proceedings for all periods that end after the Closing Date. The
Buyer shall execute or cause to be executed powers of attorney or other
documents necessary to enable the Seller to take all actions desired by the
Seller with respect to such Proceeding to the extent such Proceeding may affect
the amount of Taxes for which the Seller is liable pursuant to this Agreement.
The Seller shall have the right to control any such Proceedings, and, if there
is substantial authority therefor, to initiate any claim for refund, file any
amended Return or take any other action which it deems appropriate with respect
to such Taxes. Notwithstanding the foregoing, the Seller shall not agree to any
settlement concerning Taxes for any taxable period ending on or before the
Closing Date which may result in a material increase in Taxes for any taxable
period ending after the Closing Date without the prior written consent of the
Buyer. By written notice to the Seller, the Buyer shall have the right to
instruct the Seller to forego Proceedings with respect to one or more items for
which the Seller may be liable to indemnify the Buyer. Such notice shall
constitute a waiver of the right of the Buyer to indemnification
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for any Taxes arising out of such item for the period or periods involved, but
shall not otherwise waive any rights of the Buyer under this Section.
(c) If the Buyer receives, or is entitled to receive, any refund of
Taxes (either by actual receipt or by application against future Taxes of
Compression), then the Buyer shall pay to the Seller the portion of such refund
that (i) relates to the Pre-Closing Period of any taxable period that begins
before and ends after the Closing Date (as defined and determined pursuant to
Section 9.5) or (ii) relates to any taxable period that ends prior to or on the
Closing Date, provided however that to the extent an anticipated refund has been
included in Net Assets, then Buyer shall not be required to pay over such refund
to Seller. Any payment described in this Section 9.7(c) shall be made by the
Buyer to the Seller within thirty (30) days of the date on which the Buyer
receives the refund of Taxes.
9.8 Cooperation on Tax Matters. The Buyer and the Seller and
Compression shall cooperate fully, and to the extent reasonably requested by the
other party, in connection with the filing of Returns pursuant to this Section
and in connection with any audit, litigation or other Proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the other party's
request) the provision, of records and information which are reasonably relevant
to any such Return, audit, litigation or other Proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Buyer and the Seller agree
to retain all books and records with respect to Tax matters pertinent to
Compression relating to any taxable period beginning before the Closing Date
until the expiration of the applicable statute of limitation (and to the extent
notified by the Buyer or the Seller, any extensions thereof) of the respective
taxable periods and to abide by all record retention agreements entered into
with any taxing authority.
9.9 338(h)(10) Election. If requested by the Buyer, Buyer and Seller
shall join in an election to have the provisions of Code Section 338(h)(10) and
similar provisions of state law (the "Election") apply to the acquisition of
Compression. Buyer shall be responsible for the preparation and filing of the
Election. The allocation of the purchase price among the assets of Compression
shall be made in accordance with Code Section 338 and any comparable provisions
of state, local or foreign law, as appropriate. Seller shall, unless it would be
unreasonable to do so, accept Buyer's determination of such purchase price
allocations and shall report, act and file in all respects and for all purposes
consistent with such determination of Buyer. Seller shall execute and deliver to
Buyer such documents or forms (including Section 338 Forms, as defined below) as
Buyer shall request or as are required by applicable law for an effective
Election. "Section 338 Forms" shall mean all returns, documents, statements, and
other forms that are required to be submitted to any federal, state, county or
other local taxing authority in connection with the Election.
9.10 Transfer Taxes. Seller shall pay and hold Buyer and Compression
harmless from and against any sales, use or transfer tax assessed with respect
to the assets of Compression as a result of the elections made pursuant to
Section 9.9.
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9.11 Survival. The indemnities set forth in this Section 9 shall
survive the Closing Date and shall terminate on the date that is 30 days after
the expiration of the applicable statute of limitations.
SECTION 10. OTHER POST-CLOSING COVENANTS
After the Closing Date, the parties covenant and agree as follows:
10.1 Record Retention. The Buyer agrees that, for a period of five
years following the Closing, it shall not, and shall cause Compression not to,
destroy, discard, deface or otherwise alter any of the books, records or other
data of Compression in its possession covering or prepared during the period
ending on the Closing Date, without furnishing prior notice to the Seller and a
reasonable opportunity for the Seller, at its cost, to take custody of such
books, records or other data.
10.2 Further Assurances. The parties hereto agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, (c) cause to be delivered to the Buyer any
payments received by Seller or an Affiliate that arises from the business of
Compression and (d) to do such other acts and things, all as the other party
hereto may at any time reasonably request for the purpose of carrying out the
intent of this Agreement including, without limitation, financing of the Stock
Sale.
10.3 Covenants Concerning Benefit Plans.
(a) Participation in Seller's Plans. (i) Effective as of the
Closing Date, Compression shall cease to be a participating employer in all
Seller's Employee Plans or Benefit Arrangements and the Seller shall take all
such action as is necessary to effect such cessation of participation.
(ii) Effective as of the Closing Date, the accrual of benefits
of employees of Compression under the Tidewater Retirement Plan and the New
Pension Plan for Employees of Tidewater Inc. shall cease.
(iii) Effective as of the Closing Date, active participation of
employees of Compression in the Tidewater 401(k) Savings Plan ("Seller's Savings
Plan") and Seller's obligation to make contributions to Seller's Savings Plan
with respect to such employees shall cease. Notwithstanding the preceding
sentence, the Seller shall be responsible for making all matching contributions
that relate to employee contributions made to the Seller's Savings Plan prior to
Closing and shall insure that all benefit payments due under the terms of the
plan with respect to employees or former employees of Compression shall be made
on or after the Closing Date in accordance with the terms of such Plan.
(iv) Effective as of the Closing Date, Compression's employees
shall cease to participate in the Seller's Amended and Restated Employees'
Supplemental Savings Plan and Amended and Restated Supplemental Executive
Retirement Plan.
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(v) Effective as of the Closing Date, Compression's employees shall
cease to participate in the Seller's non-pension benefit arrangements (the
"Welfare Benefit Plans"). The Seller shall retain responsibility under the
Welfare Benefit Plans for all cost of coverage and all amounts payable by reason
of claims incurred by Compression's employees prior to the Closing Date
including claims which are not submitted until after the Closing Date. A claim
shall be deemed to have been incurred on the date of the occurrence of (i) death
or dismemberment in the case of claims under life insurance and accidental death
and dismemberment benefits, (ii) the date of the initial disability in the case
of claims under disability benefits, or (iii) the date on which the charge or
expense giving rise to such claim is incurred in the case of all other claims.
For purposes of Section 10.3(a)(v)(iii), a claim shall be deemed to have been
incurred on the date that the first charge or expense in a course of treatment
giving rise to such claim has been incurred.
(vi) As soon as practicable after the Closing Date, at the
option of the Buyer, the Seller shall cause to be transferred all vested and
non-vested assets of Tidewater Savings Plan that are held for or attributable to
the account balances of the employees of Compression to a plan and trust newly
established by the Buyer as is necessary for the purpose of holding such assets,
which plan shall credit such employees with service as recognized under the
Tidewater Savings Plan for purposes of eligibility and vesting and further such
plan shall maintain the protected benefits provided in the Tidewater Savings
Plan to the extent required by Code section 411(d)(6), and shall also arrange
for the transfer, onto the books and records of such newly established trust, of
the balances and other information pertaining to all participant loans with
respect to such employees.
(vii) The Seller shall remain responsible for all record keeping
and welfare benefits with respect to any Compression employees or former
employees who are, as of the Closing Date: (i) on COBRA continuation coverage or
(ii) on long term disability leave and covered under Seller's welfare benefit
plans.
(b) Post-Closing Benefits. Except as may otherwise be provided in
the Transition Services Agreement, following consummation of the Stock Sale, the
Buyer shall cause all employees of Compression to be eligible to participate in
an "employee welfare benefit plan" and "employee pension benefit plan" (within
the meaning of Section 3(1) and Section 3(2) of ERISA, respectively) of the
Buyer or subsidiary or affiliate of the Buyer, or such other benefit plan, fund
or program that the Buyer may wish to establish for such employees on or after
the Closing Date, provided that nothing herein shall prevent the Buyer from
terminating the employment of any such employee or modifying or terminating such
plans from time to time. For purposes of any length of service requirements,
waiting periods, vesting periods or differential benefits based on length of
service in any such plan for which such an employee may be eligible after
Closing, the Buyer shall ensure that service by such employee with Compression
prior to the Closing shall be deemed to be service with the Buyer, shall waive
any waiting period for participation or coverage in any welfare benefit plans or
policies and, to the extent such employee was a participant in Seller's medical
benefits plan and such condition was covered under such plan, shall waive any
pre-existing medical condition provision of such plan or policy.
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(c) Severance Policy. Buyer shall honor and not revoke all terms
of the severance policy for Compression's employees that was adopted by the
Board of Directors of Compression on November 19, 1997, as set forth on Schedule
10.3(c).
(d) Indemnification for Seller Benefit Plans. In addition to its
obligations under Section 8, From and after the Closing Date, Seller shall
indemnify and hold harmless Buyer and Compression from any and all liabilities
that either Buyer or Compression incurs or that arises with respect to Seller's
Employee Plans or Benefit Arrangements.
10.4 Collection and Repurchase of Accounts Receivable.
(a) Collection of Compression's Accounts Receivable. On the
Closing Date, Seller shall deliver to Buyer the most recent listings available
of invoices and the unpaid amount of each, unbilled receivable amounts by
customer (showing the contract, type of charge and period covered), the invoices
and amounts which comprise unearned revenue, and other items making up the total
accounts receivable of Compression's business (the "Closing Date Receivables").
During the ninety (90) day period following the Closing or until 30 days after
the expiration of the payment period for receivables with payment terms in
excess of ninety (90) days (the "Collection Period") and subject to the
provisions of Section 10.4(c) hereof, Buyer shall use its commercially
reasonable efforts (but in no event shall Buyer be obligated to file or perfect
any liens or file or prosecute any suit as part of its collection effort) to
collect all invoice amounts, notes and drafts receivable, and unbilled
receivable amounts and other receivable items in respect of Compression's
business (subject to the provisions of 10.4(b) regarding Contested Receivables
(as defined below)) as of the Closing Date which are included in Closing Date
Receivables (subject to the requirements of Section 10.4(c), such efforts to be
commercially reasonable if Buyer has pursued the collection of such receivables
with the same degree of diligence as it pursues its other receivables in the
ordinary course of Buyer's business). Buyer shall prepare and send invoices to
the customers relating to the unbilled receivables as soon as practicable after
the Closing. Any payments received by Buyer from any person who is the account
debtor on any of the Closing Date Receivables (a "Customer") shall be applied as
provided in Section 10.4(d). Seller shall promptly remit to Buyer any payments
which it may receive in respect of any of the Closing Date Receivables. Seller
grants to Buyer the authority, coupled with an interest, to receive, endorse,
cash, deposit, and receipt for any checks, drafts, documents and instruments
evidencing Closing Date Receivables which are in the name of Seller or
Compression. Buyer shall make and keep detailed records of amounts collected in
respect of the Closing Date Receivables until such time as any Uncollectible
Receivables are assigned to Seller pursuant to paragraph (b) below, and shall
make such records available for review by Seller when a statement of Uncollected
Receivables is delivered to Seller.
(b) Repurchase of Accounts Receivable. Within 10 days following
the expiration of the Collection Period, Buyer shall deliver to Seller one or
more statements setting forth a list of Closing Date Receivables (which has
clearly identified thereon the names of the customers, invoice numbers and
uncollected amounts by invoice, together with copies of all invoices and, if
required, supporting documentation) that were not collected during the
Collection Period and the total of such uncollected amounts. Such statement
shall not include the amount of any balances owed on notes or accounts
receivable that have been paid down
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in accordance with their terms but the statement shall reflect as a deduction
from total uncollected amounts shown thereon (i) the total amount of any credit
balances included in the Closing Date Receivables not applied against invoices
for the same customer included in the Closing Date Receivables and (ii) the
amount of the reserve for bad debts determined as of the Closing Date. The net
amount set forth on the statement remaining, after giving effect to the
exclusions, if any, and deductions set forth in the preceding sentence, shall be
the net amount of receivables to be repurchased by the Seller (the "Uncollected
Receivables"); provided that, with respect to those Closing Date Receivables
that Buyer made a good faith effort to collect but were not collected because
Buyer reasonably concluded that the customer may have a bona fide claim with
respect thereto (the "Contested Receivables"), Buyer shall have the option to
sell such Closing Date Receivable to Seller for 75% of the amount thereof,
provided that Seller shall immediately cancel and not at any time make any
efforts to collect such Closing Date Receivable. Within ten (10) business days
following Seller's receipt of such statement, Seller shall pay to Buyer, by wire
transfer of immediately available funds, to the account specified in writing by
Buyer to Seller, the amount of the Uncollected Receivables. Upon receipt of such
payment, Buyer shall assign to Seller, without recourse to the Buyer and subject
to the second previous sentence, the claims included in the Uncollected
Receivables, including any lien or other rights related thereto.
(c) Collection Cooperation. Buyer shall keep Seller's credit
personnel reasonably informed with respect to Buyer's efforts to collect the
Closing Date Receivables during the Collection Period. Seller shall make
available their credit personnel to work with Buyer during the Collection Period
to assist in resolving any disputes or questions concerning the Closing Date
Receivables.
(d) Allocation of Payments Received After Closing. Notwithstanding
any contrary directions received from a customer, any payments received by
Seller or the Buyer after the Closing Date from a customer that owed money to
Compression for Closing Date Receivables shall (i) be applied to the Closing
Date Receivables owed by such customer bearing the earliest invoice date first
(excluding Contested Receivables) and (ii) be promptly paid to Seller or the
Buyer whichever of them then owns such Closing Date Receivable (as provided in
this Section 10.4) until such Closing Date Receivable is satisfied in full;
provided, however, that if such customer has a bona fide claim with respect to
such Closing Date Receivable that it does not owe the full amount thereof
because of an act or failure to act on the part of Seller prior to the Closing
Date, then, to the extent of the amount of such claim, Buyer need not pay over
to Seller any such payment Buyer receives from such customer after the Closing
Date as payment for services provided by Buyer to such customer. Any funds to be
paid over to Seller or Buyer pursuant to this Section 10.4(d) shall be paid in
the same manner as specified in Section 10.4(b). Seller and Buyer shall provide
each other with complete information concerning such payments in the same manner
as provided hereinabove in this Section 4.9.
(e) Remedy for Uncollected Receivables. The provisions of Section
8 notwithstanding, Seller's indemnity obligation for such Uncollected
Receivables shall be satisfied by making the payment provided for in Section
10.4(b) above, and no other remedy shall be available with respect to such
Uncollected Receivables or the representations set forth in Section 4.9.
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10.5 WARN Act Notice. Buyer shall be solely responsible for providing
any notice required under the Worker Adjustment and Retraining Notification Act
(the "WARN Act") by virtue of any actions taken by Buyer following the Closing,
and shall indemnify and hold Seller harmless from any liability arising from any
failure of the Buyer to fully comply with the requirements of such Act. Seller
shall be solely responsible for complying with any applicable provisions of the
WARN Act with respect to any actions taken by it prior to Closing and shall
indemnify and hold Buyer harmless from any liability arising from the failure of
Seller to comply with this covenant.
10.6 Use of Tidewater Name. Seller shall convey to Buyer at the
Closing, the names, trade names and trademarks set forth on Schedule 10.6. Buyer
shall use its reasonable best efforts (a) to remove the Tidewater name and any
associated trade or service marks from all assets of Compression within 90 days
of the Closing Date and (b) to take all other steps reasonably necessary to
avoid any public use of the Tidewater name in connection with the operation of
Compression's business following the Closing, including the removal of the
Tidewater name from the corporate name of Compression as soon as practicable but
in no event later than 30 days after the Closing Date. It is understood that
Buyer may refer to the name Tidewater Compression Service Inc. in any securities
offerings and securities law filings that it or an affiliate undertakes,
provided that neither Tidewater Compression Service, Inc. nor Tidewater is
identified as the name of the issuer of such securities, and that Buyer shall
indemnify Seller against any and all liabilities, damages or costs (including
reasonable counsel fees) incurred by Seller by virtue of the use of the name
Tidewater Compression in such offering.
10.7 Non-Competition; Non-Solicitation. (a) For a period of five years
after the Closing Date, neither Seller nor any of its Affiliates shall engage,
directly or indirectly in any capacity, whether as promotor, investor, owner,
officer, director, employee, partner, lessee, lender, agent, consultant or
otherwise in any business that engages in the business of renting and selling
air and natural gas compressors in any place in the world, provided however that
this covenant shall not preclude Seller or its Affiliates from indirectly
engaging in such activities by reason of its acquisition of an enterprise that
has less than 10% of its revenues derived from the business of selling or
renting air and natural gas compressors.
(b) For a period of five years after the Closing Date, neither
Seller nor any of its Affiliates shall directly or indirectly (i) employ or seek
to employ any person who is as of the Closing Date, or was at any time within
the six-month period preceding such date, an employee of Compression or any of
its subsidiaries or otherwise solicit, encourage, cause or induce any such
employee of Compression or any of its subsidiaries to terminate such employee's
employment with Compression or such subsidiary for the employment of another
company (including for this purpose the contracting with any person who was an
independent contractor of Compression during such period). Notwithstanding the
foregoing, the provisions of this Section 10.7(b) shall not preclude Seller from
offering employment to the person set forth on Schedule 10.7.
Seller acknowledges that Buyer will be irrevocably damaged if
such covenants are not specifically enforced. Accordingly, Seller agrees that,
in addition to any other relief to which Buyer may be entitled, Buyer will be
entitled to seek and obtain injunctive
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relief (without the requirement of any bond) from a court of competent
jurisdiction for the purposes of restraining Seller or any of its Affiliates
from any actual or threatened breach of such covenants.
SECTION 11. TERMINATION
11.1 Termination. This Agreement may, by notice given at or prior to the
Closing, be terminated:
(a) By the mutual written consent of the Seller and the Buyer.
(b) By the Buyer or Seller if there has been a material breach by
the other of any covenant contained in this Agreement that is not or cannot be
cured within 45 days after written notice of such breach is given to the party
committing such breach, provided that the right to effect such cure shall not
extend beyond the date set forth in subparagraph (c) below.
(c) By the Buyer or Seller if (i) any condition to Closing required
by Section 7 has not been met or waived by each party entitled to grant such
waiver by March 6, 1998, (ii) any such condition cannot be met by such date and
has not been waived by each party in whose favor such condition runs or (iii)
the Stock Sale has not occurred by such date; provided, however, that the right
to terminate this Agreement pursuant to this paragraph shall not be available to
a party if its failure to fulfill or perform any obligation under this Agreement
has been a substantial cause of, or has substantially resulted in, the failure
of the Closing to occur or be capable of occurring on or before such date.
(d) By the Buyer no later than January 30, 1998 if as a result of
its "Pre- Closing Review," the Buyer reasonably concludes that the assets,
businesses or operations of Compression, taken as a whole, are materially and
adversely different than the description of such assets, business and operations
set forth in the Offering Memorandum, provided, however, that Buyer shall be
deemed to have accepted any matter disclosed in the Disclosure Schedule attached
to this Agreement, and further provided that any matter covered under Tab VI
(Projections) of the Offering Memorandum shall not be considered to be a
description of the assets, business and operations of Compression. As used
herein, the term "Pre-Closing Review" shall mean the Buyer's physical inspection
of the assets, properties and operations of Compression.
(e) By Seller under the circumstances set forth in Section 6.8(d).
(f) By Buyer under the circumstances set forth in Section 6.8(f).
11.2 Effect of Termination; Survival. Upon termination of this
Agreement pursuant to this Section 11, this Agreement shall be void and there
shall be no liability by reason of this Agreement, or the termination thereof,
on the part of any party or their respective directors, officers, employees,
agents or shareholders except for any liability of a party hereto arising out of
a material breach of its representations and warranties contained herein or
arising out of a material breach of any covenant in this Agreement prior to the
date of termination or
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any covenant that survives pursuant to the following sentence. The following
provisions shall survive any termination of this Agreement: Sections 6.6, 6.8
and Section 12.
SECTION 12. MISCELLANEOUS
12.1 Notices. Any notice, communication, request, reply, consent, advice
or disclosure notice ("notice") required or permitted to be given or made by any
party to the other in connection with this Agreement must be in writing and may
be given or served by depositing such notice in the United States mail, postage
prepaid and registered or certified with return receipt requested, or by hand
delivering such notice, or by sending such notice by a national commercial
courier service for next business day delivery, in each case properly addressed
as provided below. Notice deposited in the mail in the manner described above
shall be effective 72 hours after such deposit, notice hand delivered in person
or delivered by commercial courier shall be effective at the time of delivery
and notice given by facsimile shall be effective when such facsimile is
transmitted to the facsimile number specified in this Section 12.1 and
confirmation of transmission is received by the giver of such notice (provided
that a confirmation copy is sent no later than the next Business Day by
documented overnight delivery service). For purposes of notice, the addresses of
the parties shall, until changed as hereinafter provided, be as follows:
If to the Seller:
Tidewater Inc.
Tidewater Place
1440 Canal Street, Suite 2100
New Orleans, Louisiana 70112-2780
Attention: Ken C. Tamblyn
Facsimile No: 504-566-4580
With copy to: Cliffe F. Laborde
and to:
Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P.
201 St. Charles Avenue, 51st Floor
New Orleans, Louisiana 70170-5100
Attention: Curtis R. Hearn
Facsimile No: 504-582-8012
If to the Buyer:
TW Acquisition Corporation
c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
Attention: President
Facsimile No: 212-207-8042
-38-
<PAGE>
With copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10222
Attention: Andre Weiss, Esq.
Facsimile No: 212-593-5955
and a copy to:
Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal, Managing Director
or such substituted persons or addresses of which any of the parties may give
notice to the other in writing.
12.2 Waiver. The failure by any party to enforce any of its rights
hereunder shall not be deemed to be a waiver of such rights, unless such waiver
is an express written waiver which has been signed by the waiving party. Waiver
of any one breach shall not be deemed to be a waiver of any other breach of the
same or any other provision hereof.
12.3 Expenses. Regardless of whether the transactions contemplated by
this Agreement are consummated, all expenses, including fees for legal,
accounting, investment banking, financial and other advisory services, incurred
in connection with this Agreement and the transactions contemplated hereby shall
be borne by the party hereto incurring them, except as provided on Schedule
12.3; provided that the Buyer shall bear all stock transfer taxes, recording
charges and filing fees, if any, that may be imposed in connection with the
transfer of the Shares from the Seller to the Buyer.
12.4 Interpretation. (a) The table of contents and section headings
contained herein are inserted for convenience only and shall not affect in any
way the meaning or interpretation of this Agreement. Each of the parties has
participated substantially in the negotiation and drafting of this Agreement and
each party hereby disclaims any defense or assertion in any litigation or
arbitration that any ambiguity herein should be construed against the draftsman.
(b) References to "Sections" or "Schedules" shall be to
Sections of or Schedules to this Agreement unless otherwise specifically
provided.
(c) Wherever the words "include", "includes", and "including"
are used herein, such words shall be deemed to be followed by the words "without
limitation."
12.5 Integrated Agreement. This Agreement (along with the Exhibits and
Schedules referenced herein), the Confidentiality Agreement, the Transition
Services Agreement, and the Adjustment Agreement constitute the entire
understanding and agreement among the parties hereto with respect to the subject
matter hereof, and there are no agreements, covenants or
-39-
<PAGE>
understandings, among the parties other than those set forth herein or therein,
all prior agreements and understandings being superseded hereby. Except and as
to the extent set forth in Sections 4 and 5, any schedule hereto or any
certificate delivered pursuant to Section 7, neither party makes any
representations or warranties whatsoever, and disclaims all liability and
responsibility for any representation or warranty made or communicated orally or
in writing to the other party (including any information, opinion or advice that
may have been provided to the other party by any officer, director or employee
of such party, such party's counsel or accountants, or any other agent,
consultant or representative of such party, none of which has been relied upon
by the other party). Without limiting the generality of the foregoing, this
Agreement shall not be governed by the warranties provided by Article 2 of the
Uniform Commercial Code or any similar laws adopted in any jurisdiction.
12.6 Choice of Law. The validity of this Agreement, the construction of
its terms and the determination of the rights and duties of the parties hereto
in accordance therewith shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts made and to be
performed wholly within such State. Each of Buyer and Seller consents to the
exclusive jurisdiction of the state courts of and federal courts located in the
City of Wilmington in the State of Delaware for the enforcement of the
obligations evidenced by this Agreement and any dispute arising out of this
Agreement, and expressly waives any defense based upon venue or forum non
conveniens.
12.7 Parties in Interest. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
no party hereto may assign its rights or obligations hereunder without the prior
written consent of the other party, except that the Buyer may assign its rights
to a wholly-owned subsidiary hereunder as long as Buyer is not relieved of its
obligations hereunder. Nothing in this Agreement is intended or shall be
construed to confer upon or to give any person other than the parties hereto any
rights or remedies under or by reason of this Agreement.
12.8 Amendment. Unless otherwise provided herein, this Agreement may be
amended only by an agreement in writing signed by each party hereto.
12.9 Counterparts. This Agreement may be executed by the parties in one
or more counterparts, all of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
-40-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, all as of the day and year first above written.
TIDEWATER INC.
By: /s/ Ken C. Tamblyn
-----------------------------------------
Ken C. Tamblyn
Executive Vice President and
Chief Financial Officer
TW ACQUISITION CORPORATION
By: /s/ Jeffrey M. Siegal
-----------------------------------------
Name: Jeffrey M. Siegal
Title: President
-41-
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.....................................................-1-
SECTION 2. PURCHASE AND SALE OF SHARES; CONDITION OF ASSETS................-6-
2.1 Purchase and Sale; Purchase Price...............................-6-
2.2 Capital Contribution............................................-6-
2.3 Closing Payment.................................................-6-
2.4 Final Adjustment................................................-6-
2.5 Basis of Preparation of Working Capital Statements..............-7-
2.6 Condition of Assets: Intended Use...............................-7-
2.7 Certain Reserves and Liabilities................................-8-
2.8 Certain Other Liabilities.......................................-8-
SECTION 3. THE CLOSING.....................................................-8-
3.1 Closing.........................................................-8-
3.2 Deliveries at Closing...........................................-8-
SECTION 4. REPRESENTATIONS OF THE SELLER...................................-9-
4.1 Corporate Organization..........................................-9-
4.2 Capital Stock...................................................-9-
4.3 Ownership of Stock..............................................-9-
4.4 Authorization; Enforceability...................................-9-
4.5 No Approvals or Conflicts......................................-10-
4.6 Properties and Equipment.......................................-10-
4.7 Material Contracts.............................................-10-
4.8 Litigation and Claims..........................................-11-
4.9 Accounts Receivable............................................-12-
4.10 Employment Relations...........................................-12-
4.11 Employee Benefit Plans.........................................-12-
4.12 Interests in Clients and Suppliers.............................-13-
4.13 Environmental Matters..........................................-13-
4.14 Compliance with Laws...........................................-14-
4.15 Licenses and Permits...........................................-14-
4.16 Absence of Certain Changes.....................................-14-
4.17 Customers and Suppliers........................................-15-
4.18 Broker's or Finder's Fees......................................-15-
4.19 Warranties.....................................................-15-
4.20 Asset Condition................................................-16-
4.21 Inventory......................................................-16-
4.22 Intellectual Property..........................................-16-
4.23 Compression Financial Statements; Absence of Undisclosed
Liabilities..................................................-16-
4.24 Projections....................................................-17-
4.25 Taxes..........................................................-17-
4.26 No Other Representations.......................................-17-
<PAGE>
Page
SECTION 5. REPRESENTATIONS OF THE BUYER...................................-17-
5.1 Corporate Organization.........................................-18-
5.2 Authorization; Enforceability..................................-18-
5.3 No Approvals or Conflicts......................................-18-
5.4 Purchase for Investment........................................-18-
5.5 Broker's or Finder's Fees......................................-18-
5.6 Proceedings....................................................-18-
5.7 Investigation..................................................-19-
5.8 Castle Harlan III's Capacity to Fund Equity....................-19-
5.9 Buyer's Financing Commitments..................................-19-
SECTION 6. PRE-CLOSING COVENANTS..........................................-19-
6.1 Cooperation and Best Efforts; HSR Filing.......................-19-
6.2 Press Releases.................................................-19-
6.3 Review of Compression; Availability of Management..............-20-
6.4 Conduct of Business of Compression Prior to the Closing Date...-20-
6.5 Notification of Changes........................................-20-
6.6 Confidentiality Agreement......................................-21-
6.7 Continued Effectiveness of Section 4.16........................-21-
6.8 Environmental Audit............................................-21-
6.9 Purchase of Compression Equipment; Repair and Maintenance of
Existing Compression Equipment.................................-23-
6.10 Employees......................................................-23-
6.11 Covenant on Bonus and Other Incentive Payments.................-23-
SECTION 7. CONDITIONS TO CLOSING..........................................-24-
7.1 Conditions Applicable to All Parties...........................-24-
7.2 Additional Conditions Applicable to the Buyer's Obligations....-24-
7.3 Additional Conditions Applicable to the Seller's Obligations...-25-
SECTION 8. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS...................-25-
8.1 Indemnification................................................-25-
8.2 Notice and Defense of Claims...................................-26-
8.3 Survival of Representations and Warranties.....................-27-
8.4 Limitations....................................................-27-
SECTION 9. TAX MATTERS....................................................-28-
9.1 Tax Sharing Agreements.........................................-28-
9.2 Preparation of Returns and Payment of Taxes....................-28-
9.3 Taxes and Returns for Periods Through the Closing Date.........-28-
9.4 Taxes and Returns for Transactions That Occur After the Closing
Date...........................................................-29-
9.5 Tax and Returns for Periods Commencing Before the Closing Date
and Ending After the Closing Date..............................-29-
9.6 Audits.........................................................-29-
9.7 Indemnification for Taxes......................................-30-
-ii-
<PAGE>
Page
9.8 Cooperation on Tax Matters......................................-31-
9.9 338(h)(10) Election.............................................-31-
9.10 Transfer Taxes..................................................-31-
9.11 Survival........................................................-31-
SECTION 10. OTHER POST-CLOSING COVENANTS....................................-31-
10.1 Record Retention................................................-31-
10.2 Further Assurances..............................................-32-
10.3 Covenants Concerning Benefit Plans..............................-32-
10.4 Collection and Repurchase of Accounts Receivable................-33-
10.5 WARN Act Notice.................................................-35-
10.6 Use of Tidewater Name...........................................-35-
10.7 Non-Competition; Non-Solicitation...............................-36-
SECTION 11. TERMINATION.....................................................-36-
11.1 Termination.....................................................-36-
11.2 Effect of Termination; Survival.................................-37-
SECTION 12. MISCELLANEOUS...................................................-37-
12.1 Notices.........................................................-37-
12.2 Waiver..........................................................-39-
12.3 Expenses........................................................-39-
12.4 Interpretation..................................................-39-
12.5 Integrated Agreement............................................-39-
12.6 Choice of Law...................................................-40-
12.7 Parties in Interest.............................................-40-
12.8 Amendment.......................................................-40-
12.9 Counterparts....................................................-40-
-iii-
<PAGE>
EXHIBITS
Exhibit A - Form of Purchase Price Adjustment Agreement
Exhibit B - Compression Financial Statements
Exhibit C - Financial Projections
Exhibit D - Form of Transition Services Agreement
Exhibit E - Form of Legal Opinion of Jones, Walker, Waechter,
Poitevent, Carrere & Denegre, L.L.P.
SCHEDULES
-iv-
<PAGE>
PURCHASE PRICE ADJUSTMENT AGREEMENT
This Purchase Price Adjustment Agreement ("Agreement") is made as of the 20th
day of February, 1998 by and between Tidewater Inc., a Delaware corporation
("Seller"), and TW Acquisition Corporation ("Buyer") and Universal Compression
Holdings, Inc. ("Parent"). Capitalized terms included and not otherwise defined
herein shall have the meanings ascribed in the Purchase Agreement described
below.
WITNESSETH
WHEREAS, the parties hereto have entered into a Stock Purchase
Agreement dated as of December 18, 1997 (the "Purchase Agreement"), pursuant to
which Buyer has agreed to purchase from Seller and Seller has agreed to sell to
Buyer all of the issued and outstanding shares of capital stock of Tidewater
Compression Service, Inc., a Texas corporation ("Compression");
WHEREAS, under the terms of the Purchase Agreement, Buyer has
agreed to make an additional payment under certain circumstances that are
described herein; and
WHEREAS, Parent owns 100% of the outstanding capital stock of
Buyer and desires to enter into this Agreement for the purposes stated herein;
NOW, THEREFORE, in consideration of the foregoing premises and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby mutually acknowledged, the parties hereto hereby agree as follows:
1. Liquidity Event.
(a) Upon the occurrence of any Liquidity Event (defined
below) and the satisfaction of the requirements set forth in Section 2(a), Buyer
and Parent jointly and severally agree to make an additional payment (the
"Additional Payment") to Seller in the amount required, if any, under Section
2(a) below; provided, however, that such Additional Payment shall be made to
Seller in the same form of consideration as received by CHP III as a result of
such Liquidity Event; and provided, further, that, in the event that the
Liquidity Event is effectuated by a distribution of the Common Stock of
Compression, Buyer or Parent to the general partner of CHP III, Seller shall
receive its Additional Payment in the form of such Common Stock. To the extent
that the Common Stock so distributed is required to be registered under federal
or state securities laws, the Common Stock issued to Seller shall be registered
on terms and conditions comparable to those under which CHP III's Common Stock
is registered. Any Additional Payment, other than in the form of cash, shall be
based upon the Fair Market Value thereof.
(b) A "Liquidity Event" shall mean any one or more of the
following: (i) any public or private sale (including any series of related
sales) of the Common Stock of Buyer, Compression or Parent by any of the CHP III
Parties; (ii) the sale of all or substantially all of the assets of Buyer,
Compression or Parent; (iii) the merger or consolidation of Buyer,
<PAGE>
Compression or Parent into or with any other entity or entities; (iv) any
recapitalization of Compression that has the direct or indirect effect of
changing the par value of its capital stock, its stated capital or capital
surplus; or (v) any similar transaction involving Parent, Buyer or Compression;
provided, however, that if any Liquidity Event involves the receipt by CHP III
Parties of restricted securities or securities of a class that is not publicly
traded (other than a transfer of the type described in the second proviso of
Section 1(a)), such Liquidity Event will be deferred until such securities
become freely transferable and such class becomes publicly traded or such
securities are otherwise exchanged for freely transferable securities of a class
of publicly-traded securities or for cash.
2. Purchase Price Adjustment. (a) The "Accreted Initial
Investment Amount" shall be equal to the amount of the Initial Investment
through June 30, 1998. The "Increment" shall initially be equal to 6.25%
multiplied by the Initial Investment. On July 1, 1998, and on the first day of
each subsequent calendar quarter, the Accreted Initial Investment Amount shall
be increased by the Increment. Upon any Liquidity Event, the Accreted Initial
Investment Amount shall be reduced (but not below zero) by the amount of Initial
Investment Allocable Proceeds, and the Increment for each future quarterly
period (until further Liquidity Events) shall be equal to the resultant Accreted
Initial Investment Amount multiplied by 6.25%.
(b) If, upon any Liquidity Event, the Initial Investment
Allocable Proceeds exceeds the Accreted Initial Investment Amount, the
"Additional Payment" shall be equal to 10% of such excess. By way of
explanation, for any Liquidity Event that occurs after the Accreted Initial
Investment Amount has been reduced to zero, the Additional Payment to Buyer
shall equal 10% of Proceeds from such Liquidity Event.
(c) Seller shall receive the Additional Payment required
hereunder no later than five business days after the date that such Liquidity
Event is consummated or completed.
3. As used in this Agreement, the terms:
"Fair Market Value" shall mean (i) with respect to publicly
traded securities, the average of the closing sales prices of such securities
during the ten trading days ending on the last trading day before completion of
the Liquidity Event, and (ii) with respect to any other non-cash consideration,
the value of such consideration as determined by mutual agreement of the Buyer
and Seller or, if they are unable to agree, by binding arbitration conducted by
three financial advisors, with Buyer and Seller each selecting one financial
advisor within 15 days of the date that one party notifies the other that it
desires to seek arbitration of the dispute, and the two financial advisors so
selected to mutually select the third financial advisor within 15 days
thereafter. Any Fair Market Value determination made by such financial advisors
shall be rendered within 60 days of the selection of the last financial advisor
selected and shall be final, binding and non-appealable by the parties.
"Initial Investment" is $81.0 million.
-2-
<PAGE>
"Initial Investment Allocable Proceeds" is equal to the
product of (i) Proceeds and (ii) a fraction equal to the Initial Investment over
the Total Investment.
"Investment" is the amount of equity (whether common or
preferred) invested by CHP III Parties in Parent.
"Proceeds" is the amount recognized by the CHP III Parties in
a Liquidity Event equal to the sum of the cash and the Fair Market Value of any
non-cash consideration paid to the CHP III Parties with respect to such
Liquidity Event in respect of any Investments; provided that in the event the
Liquidity Event is effectuated by a distribution of Common Stock to the general
partner of CHP III, Proceeds shall be equal to the Fair Market Value of such
distribution; provided however that Proceeds determined with respect to any
Liquidity Event shall be determined without duplication for any Proceeds
recognized for any other Liquidity Event. As an example, if publicly traded
preferred stock with a $40.0 million value is received in exchange for shares of
Series A Preferred Stock, $40.0 million of Proceeds will be recognized. If,
thereafter, such publicly traded preferred stock is sold for $60.0 million, the
resulting Proceeds will be $20.0 million.
"Total Investment" is the sum of the Initial Investment and
all subsequent Investments by CHP III Parties in Parent.
"CHP III Parties" shall mean the purchasers of the equity of
Parent on the closing of the acquisition contemplated by the Purchase Agreement;
provided that officers and employees of Parent or its subsidiaries shall not
constitute CHP III Parties.
3. Notice of Liquidity Event. If Parent, Buyer or Compression
proposes to engage in any action that would constitute a Liquidity Event, Parent
or Buyer shall give Seller notice thereof at least five days prior to the
contemplated effective date of the Liquidity Event.
4. Notices. Any notice or communication received hereunder
must be in writing and may be given or served by depositing such notice in the
United States mail, postage prepaid and registered or certified with return
receipt requested, or by hand delivering such notice, or by sending such notice
by a national commercial courier service for next business day delivery, in each
case properly addressed as provided below. Notice deposited in the mail in the
manner described above shall be effective 72 hours after such deposit, notice
hand delivered in person or delivered by commercial courier shall be effective
at the time of delivery and notice given by facsimile shall be effective when
such facsimile is transmitted to the facsimile number specified in this Section
4 and confirmation of transmission is received by the giver of such notice
(provided that a confirmation copy is sent no later than the next business day
by documented overnight delivery service). For purposes of notice, the addresses
of the parties shall, until changed as hereinafter provided, be as follows:
If to the Seller:
Tidewater Inc.
-3-
<PAGE>
Tidewater Place
1440 Canal Street, Suite 2100
New Orleans, Louisiana 70112-2780
Attention: Ken C. Tamblyn
Facsimile No: 504-566-4580
With copy to: Cliffe F. Laborde
and to:
Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P.
201 St. Charles Avenue, 51st Floor
New Orleans, Louisiana 70170-5100
Attention: Curtis R. Hearn
Facsimile No: 504-582-8012
If to the Buyer or Parent:
TW Acquisition Corporation
c/o Castle Harlan Partners III, L.P.
150 East 58th Street
New York, NY 10155
Attention: President
Facsimile No: 212-207-8042
With copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attention: Andre Weiss
Facsimile No: 212-593-5055
And a copy to:
Castle Harlan, Inc.
150 East 51st Street
New York, New York 10155
Attention: Jeffrey M. Siegal, Managing Director
Facsimile No: 212-207-8042
or such substituted persons or addresses of which any of the parties may give
notice to the other in writing.
5. Miscellaneous.
-4-
<PAGE>
(a) Waiver. The failure by any party to enforce any of its
rights hereunder shall not be deemed to be a waiver of such rights, unless such
waiver is an express written waiver which has been signed by the waiving party.
Waiver of any one breach shall not be deemed to be a waiver of any other breach
of the same or any other provision hereof.
(b) Choice of Law. The validity of this Agreement, the
construction of its terms and the determination of the rights and duties of the
parties hereto in accordance therewith shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed wholly within such State. Each of Buyer, Parent and Seller
consents to the exclusive jurisdiction of the state courts of and federal courts
located in the City of Wilmington in State of Delaware for the enforcement of
the obligations evidenced by this Agreement and any dispute arising out of this
Agreement, and expressly waives any defense based upon venue or forum non
conveniens.
(c) Parties in Interest. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and no party hereto may assign its rights or obligations hereunder without the
prior written consent of the other party, other than the right of Seller to
assign its rights and obligations hereunder to a direct or indirect subsidiary
of which it owns and continues hereafter to own more than 50% of the voting
securities thereof. Nothing in this Agreement is intended or shall be construed
to confer upon or to give any person other than the parties hereto any rights or
remedies under or by reason of this Agreement.
(d) Amendment. Unless otherwise provided herein, this
Agreement may be amended only by an agreement in writing signed by each party
hereto.
(e) Counterparts. This Agreement may be executed by the
parties in one or more counterparts, all of which shall be deemed an original,
but all of which taken together shall constitute one and the same instrument.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, all as of the day and year first above written.
TIDEWATER INC.
/s/ Ken C. Tamblyn
By: -------------------------------------
Ken C. Tamblyn
Executive Vice President and
Chief Financial Officer
TW ACQUISITION CORPORATION
/s/ Ernie Danner
By: -------------------------------------
Name: Ernie Danner
Title: Chief Financial Officer
UNIVERSAL COMPRESSION
HOLDINGS, INC.
/s/ Ernie Danner
By: -------------------------------------
Name: Ernie Danner
Title: Chief Financial Officer
-6-
<PAGE>
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT (this "Agreement"), dated as of
February 20, 1998, is by and between Tidewater Inc., a Delaware corporation
("Seller") and TW Acquisition Corporation, a Delaware corporation ("Buyer").
W I T N E S S E T H :
WHEREAS, as of the date hereof, pursuant to the terms of a Stock
Purchase Agreement dated as of December 18, 1997 by and between the parties
hereto, as amended, Buyer purchased on February 20, 1998 (the "Closing Date")
all of the issued and outstanding stock of Tidewater Compression Service, Inc.
("Compression"), a wholly-owned subsidiary of Seller;
WHEREAS, Seller has provided to Compression those services described in
Section 2 hereof (collectively, the "Services") and Buyer desires that Seller
continue to provide such Services on a temporary basis as requested;
WHEREAS, Seller is willing to provide such Services to Buyer upon the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Rights and Duties of Seller.
(a) Upon the terms and subject to the conditions set forth herein,
Seller agrees from and after the date hereof (the "Effective Date") and for the
Term (as defined below) of this Agreement to provide the Services to Buyer.
(b) Seller and Buyer acknowledge and agree that the nature, scope and
quality of the Services shall be as set forth in this Agreement and as has been
provided by Seller or its affiliates to Compression prior to the Closing Date.
Seller agrees that all Services provided pursuant to this Agreement shall be
performed in a professional, diligent and timely manner on the same basis and
with comparable quality and diligence as was provided to Compression prior to
the Closing Date (the "Pre-Closing Services"). Seller acknowledges that it is
familiar with the requirements of Compression as they relate to the Services and
that its performance under this Agreement shall not result in any material
disruption of or change in such operations, except to the extent that the
Pre-Closing Services created such disruptions.
(c) Buyer acknowledges and agrees that Seller may, at its election,
cause one or more of its subsidiaries or third party contractors to perform the
Services. Seller agrees to make available such full or part-time employees or
third party
<PAGE>
contractors as will be necessary to fulfill its obligations hereunder, and
Seller agrees to pay all fees in connection with such third party contractors.
(d) Seller agrees that during the Term, it shall cause its subsidiary
doing business in Venezuela to continue to cooperate with Compression with
respect to conducting operations in Venezuela, in particular serving as the
contract party with respect to contracts on behalf of Compression and its
Venezuelan customers and agreeing to enter into new contracts and commitments on
behalf of Compression for existing or new Venezuelan customers, provided that
Compression shall be responsible for any net incremental costs and expenses
incurred by the Venezuelan company in connection with such services.
(e) Seller agrees to consult with Compression (including providing
access to Seller personnel for inquiry purposes) to Compression with respect to
the efforts by Compression to convert its software programs and operating
systems to address "Year 2000" issues.
(f) Seller agrees for a period of up to three months to provide all
necessary support and services with respect to, and to continue coverage under,
all non-U.S. benefit plans under which any employees of Compression or its
subsidiaries participate in as of the Closing Date.
Section 2. Description of Services.
Seller shall provide the following Services during the Term at the
following monthly fees:
FEES:
(1) Computer Data Processing Services................... $7,500.00
(2) Administrative Services, including:
(i) human resources and employee benefit
administration services and payroll
administration............................. $5,000.00
(ii) legal defense administration services,
contract administration services,
insurance claims administration services,
and foreign license support with respect
to Compression's operations in Venezuela.... $5,000.00
Section 3. Administration of Services.
(a) At the direction of Compression, Seller is authorized to
perform each of the Services detailed in Section 2 which are
of a customary, recurring, ordinary course or routine nature
(including the expenditure of funds for the purchase of goods
or services). Without the requirement
-2-
<PAGE>
of specific approval of Buyer with respect to individual
tasks, Seller shall not engage in other types of services or
in any Services which are of an extraordinary nature without
obtaining the prior approval of the appropriate officer of
Buyer.
(b) Buyer acknowledges and agrees that the Services shall be
provided only with respect to the business of Compression.
(c) Buyer represents and warrants that the Services will not be
used in violation of any applicable federal, state or local
law or any rules or regulations promulgated thereunder.
(d) Buyer agrees to provide the appropriate department within
Seller with all data, records, files, statements,
invoices, billings and other information (collectively,
"Information") reasonably requested by Seller that is
necessary or advisable to allow Seller to perform the
Services contemplated by this Agreement. It is
understood that all such Information which has been
prepared by or on behalf of Buyer or has been prepared by
or on behalf of Seller in connection with its Services
hereunder shall become and at all times remain the
property of Buyer. In addition, Buyer agrees to provide
the appropriate department heads within Seller reasonable
access, from time to time, to such of its officers as may
be necessary or advisable in order to assist Seller in
performing the Services.
(e) Buyer or its designated representative shall have
reasonable access to all Information generated by or in
the custody of Seller relating to the Services provided
pursuant to this Agreement. In addition, Seller agrees
to provide reasonable access, from time to time, to the
appropriate officers of Buyer as may be necessary or
advisable to assist Buyer in monitoring, verifying, or
reviewing the performance by Seller of the Services.
(f) Each party shall (i) maintain confidential and secret all
confidential information that may be disclosed by the
other party in connection with the provision of the
Services hereunder, (ii) restrict disclosure and use of
such confidential information to those of its employees
who have a need to know such information in order to
comply with its obligations hereunder and (iii) employ
the same standards of care with respect to such
confidential information as it uses to protect its own
confidential information. Such information may not be
used by Seller or any of its affiliates for any purpose
other than with respect to providing Services hereunder.
The obligations of this Section 3(f) shall survive the
expiration and termination of this Agreement for a period
of 5 years.
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Section 4. Compensation.
(a) Seller shall be compensated for the performance of the
Services as follows:
(i) Buyer shall reimburse Seller for the actual cost of
any goods or third party services purchased, leased
or otherwise procured by Seller for the direct
benefit of Compression permitted to be undertaken by
third parties in accordance with this Agreement
("Direct Costs"); and
(ii) Buyer shall pay to Seller per month a fee equal to
the aggregate per Service fee described in Section 2,
which fee shall not be prorated for any partial month
for which Services are provided during the Term.
(b) Seller will invoice Buyer by the 15th day of each month for the
Services provided during the preceding month. All amounts shown on each invoice
shall be due and payable on the last day of the month of such invoice.
(c) In the event of a dispute as to the propriety of invoiced amounts,
Buyer shall pay all undisputed amounts but shall be entitled to withhold payment
of any amount in dispute and shall promptly notify Seller in writing of the
basis of the dispute and the amount disputed. Seller shall provide Buyer with
the records and supporting data with respect to the disputed amounts and the
parties agree to attempt in good faith to resolve any such dispute failing
which, the dispute shall be submitted to an independent accounting firm, which
shall have the sole and exclusive authority to arbitrate the dispute, and whose
decision shall be conclusive and binding upon the parties.
(d) Any amounts owed by either party hereunder to the other party that
remain unpaid on the due date therefor shall bear interest at a rate equal to
the lesser of (i) 1% above such party's actual cost of funds or (ii) the highest
rate permitted by applicable law.
Section 5. Term of Agreement; Termination.
This Agreement shall commence on the Effective Date and shall continue
for a period of 180 days from such date (the "Term") unless earlier terminated
by either party by giving 10 days prior written notice. Buyer may terminate the
provision of any Service described in Section 2 and thereby relieve itself of
any obligation to pay the related fee by giving 5 days prior written notice to
Seller; provided that Buyer shall pay to Seller the entire monthly fee related
to such terminated Service due to Seller for the month in which such Service is
terminated, and that such Service may not be requested by Buyer following
termination thereof.
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Section 6. Limitation of Liability.
(a) Neither Seller nor Buyer shall be liable for any loss or damage or
any nonperformance, partial or whole, under this Agreement, caused by any
strike, labor troubles, riot, act of a public enemy, insurrection, act of God,
or any law, rule or regulation promulgated by any governmental body or agency.
(b) Buyer shall reimburse, indemnify and hold harmless Seller and its
successors, assigns, affiliates, directors, officers, employees and agents from
and against any and all judgments, losses, damages, liabilities, demands,
actions, suits, taxes, charges, costs, claims, expenses and disbursements
(including legal fees and expenses) of any kind and nature whatsoever that may
at any time be imposed on, incurred by or asserted against Seller (including any
claims against Seller for indemnification by any such person) or any such person
(whether or not indemnified by Seller or any other person) in connection with
any suit or proceeding, whether judicial or administrative, relating to or
arising out of any acts or omissions performed or omitted by Seller or any such
person in connection with or arising out of the performance of the Services
unless such act or omission by Seller or such person constituted bad faith,
willful misfeasance, gross negligence, recklessness or a willful, material
breach of this Agreement.
Section 7. Relationship of Parties.
Nothing contained in this Agreement (a) shall constitute Seller and
Buyer as members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (b) shall be construed to
impose any liability as such on either of them, (c) shall be deemed to confer on
either of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the other, except as described herein, or
(d) shall be deemed to, or in fact, create any benefit for, or impose any
obligation on the parties in favor of, any person not party to this Agreement.
Seller shall at all times during the term hereof act as an independent
contractor, and none of Seller's employees, subcontractors, agents or
representatives shall be considered employees of Buyer as a result of this
Agreement.
Section 8. Miscellaneous.
(a) This Agreement constitutes the entire agreement between the parties
hereto with respect to the matters set forth in this Agreement. This Agreement
shall not be amended, modified or supplemented except by an instrument in
writing executed by each of the parties hereto.
(b) Each of the parties hereto shall use its best efforts to take or
cause to be taken, to the extent necessary, all actions necessary, proper or
advisable to consummate the transactions contemplated by this Agreement.
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(c) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery, certified or registered mail, return
receipt requested or telecopy transmission with confirmation of receipt to the
address of each of the parties set forth opposite the signature of such party on
the signature page hereof. All notices and communications shall be deemed given
upon receipt thereof.
(d) This agreement shall be governed by and construed in accordance
with the internal laws of the State of New York. Each party hereto consents to
the exclusive jurisdiction of the state courts of and federal courts located in
the city of Wilmington in State of Delaware for the enforcement of the
obligations evidenced by this Agreement and any dispute arising out of this
Agreement, and expressly waives any defense based upon venue of forum non
conveniens.
(e) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(f) The section headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(g) In the event that any provision of this Agreement shall be
determined to be invalid or unenforceable, in whole or in part, it is the
parties intention that such determination shall not be held to affect the
validity or enforceability of any other provision of this Agreement, which
provisions shall otherwise remain in full force and effect.
(h) This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns. This Agreement
shall not be assignable by any party hereto without the prior written consent of
the other party.
* * * * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
Address for Notices: TIDEWATER INC.
Tidewater Place By: /s/ Ken C. Tamblyn
1440 Canal Street, Suite 2100 -------------------------
New Orleans, Louisiana 70112 Ken C. Tamblyn
Executive Vice President
and
Chief Financial Officer
Address for Notices: TW ACQUISITION CORPORATION
c/o Castle Harlan, Inc. By: /s/ Ernie Danner
190 East 58th Street -------------------------
New York, New York 10155 Ernie Danner
Chief Financial Officer
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<PAGE>
EMPLOYMENT AGREEMENT
DATED AS OF
February 20, 1998
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") dated as of February 20, 1998
between Universal Compression, Inc., a Texas corporation (the "Company"),
Universal Compression Holdings, Inc., a Delaware corporation ("Holdings") and
Stephen A. Snider (the "Executive").
WHEREAS, Tidewater, Inc. ("Tidewater") has agreed to sell
Tidewater Compression Service, Inc. ("TCS") to TW Acquisition Corporation ("TW")
pursuant to the Stock Purchase Agreement, dated as of December 18, 1997, between
TW and Tidewater (the "Stock Purchase Agreement");
WHEREAS, TW is a direct wholly-owned subsidiary of Holdings;
WHEREAS, immediately after the consummation of such sale (the
"Closing"), TW will be merged into TCS and TCS will change its name to Universal
Compression, Inc.;
WHEREAS, the parties wish to terminate all prior employment
agreements upon the effective date of this Agreement; and
WHEREAS, the parties wish to establish the terms of Executive's
future employment with the Company.
Accordingly, the parties agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company shall employ
the Executive effective upon the date of the Closing (the "Closing Date"), for
itself and its affiliates, to render exclusive and full-time services to the
Company. The Executive will serve in the
<PAGE>
capacity of President - Chief Executive Officer of the Company. The Executive
will perform such duties as are imposed on the holder of that office by the
By-laws of the Company and such other duties as are customarily performed by one
holding such positions in the same or similar businesses or enterprises as those
of the Company. The Executive will perform such other duties as may be assigned
to him from time to time by the Company's Board of Directors. The Executive will
devote all his full working-time and attention to the performance of such duties
and to the promotion of the business and interests of the Company. This
provision, however, will not prevent the Executive from investing his funds or
assets in any form or manner, or from acting as a member of the board of
directors of any companies, businesses, or charitable organizations, so long as
such investments or companies do not compete with the Company and Holdings.
1.2 Acceptance of Employment by the Executive. The
Executive accepts such employment and shall render the services described above.
If requested, the Executive agrees, in addition, to render, without additional
compensation, the services described above in the capacity of President - Chief
Executive Officer of Holdings.
2. Duration of Employment.
This Agreement and the employment relationship hereunder
will continue in effect for three (3) years from the Closing Date through the
third anniversary date thereof. It may be extended by mutual, written agreement
at any time. Notwithstanding the foregoing, in the event that a "Change in
Control" (as herein defined) occurs during the original or any extended term of
this Agreement, this Agreement shall automatically be extended to a date which
is the second anniversary of such Change in Control. In addition, the provisions
of Section 7 relating to a Change in Control will, notwithstanding the
expiration of this Agreement, continue
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until the Board of Directors terminates said provision. In the event of the
Executive's termination of employment during the term of this Agreement, the
Company's obligation to continue to pay all base salary, bonus and other
benefits then accrued shall terminate except as may be provided for in Sections
6.1, 6.2, 6.3, 6.4, and 7 of this Agreement.
3. Compensation by the Company.
3.1 Base Salary. As compensation for all services rendered
pursuant to this Agreement, the Company will pay to the Executive an annual base
salary ("Base Salary") of ONE HUNDRED SEVENTY THOUSAND DOLLARS ($170,000),
payable in equal semi-monthly installments of $7083.33. The Board of Directors
in its sole discretion may increase but not reduce the Base Salary. The Board of
Directors of the Company will review Executive's Base Salary within six months
after the effective date hereof.
3.2. Bonuses. The Executive shall be entitled to receive
from the Company an annual cash bonus on or before 60 days after the end of each
of the Company's fiscal years (including partial years on a pro-rata basis) in a
target amount equal to 70% of Base Salary based upon awards or formulas
determined by the Compensation Committee of the Board of Directors of the
Company (the "Compensation Committee") (in the case of 1998, within 90 days of
the Closing Date). Such award or formula shall be based upon the Company's
results in relation to budget.
3.3 Grant of Stock Option. (a) The Executive is hereby
granted an option that will expire on the tenth anniversary date of the date
hereof pursuant to the Stock Option Agreement attached as Exhibit A hereto to
purchase from Holdings 6,619 shares of Holdings Common Stock at an exercise
price of $50 per share.
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(b) The Company and Holdings have adopted an Incentive
Stock Option Plan which provides for the grant of stock options which are
"qualified" or "Incentive Stock Options" under Section 422 of the Code as well
as options that are not so qualified. The Option as is granted to the Executive
under Section 3.3(a) shall become exercisable to the maximum extent permissible
under such Plan, such option shall be deemed an Incentive Stock Option and the
balance, if any, of such option shall be deemed a Non-Qualified Stock Option, in
each case, under such Plan.
3.4 Participation in Employee Benefit Plans. The Executive
shall be permitted, during the term of this Agreement, if and to the extent
eligible, to participate in any group life, hospitalization or disability
insurance plan, health program, pension plan or similar benefit plan of the
Company, which may be available to other executives of the Company generally, on
the same terms as such other executives. Such plan shall be put into place by
the Compensation Committee no later than 90 days after the Closing Date.
Executive shall be entitled to paid vacation and all customary holidays each
year during the term of this Agreement in accordance with the Company's policies
as the same may be established from time to time. Promptly following the
execution of this Agreement, the Company shall establish a nonqualified
Supplemental Savings Plan which provides benefits that the Executive would have
otherwise accrued under Tidewater's Supplemental Savings Plan but for the
limitations imposed under Section 415 of the Internal Revenue Code of 1986, as
amended (the "Code").
3.5 Profit Sharing Plan. During the term of this
Agreement, Executive shall not participate in the Company's nonqualified cash
profit sharing plan applicable to employees generally.
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3.6 Club Membership. During the term of this Agreement,
the Company shall pay or reimburse the Executive for the initiation fee and
membership dues of a private club selected by the Executive upon presentation of
statements or vouchers or such other supporting information as may be required.
4. [INTENTIONALLY OMITTED]
5. Registration Rights.
In consideration, in part, for Executive's agreement
hereunder to be employed by the Company and Holdings, Holdings is granting
Executive certain rights to register his shares of Common Stock pursuant to a
Registration Rights Agreement with the Executive being entered into concurrently
herewith.
6. Termination.
6.1 Termination Upon Death. If the Executive dies during
the term hereof, the Executive's legal representatives shall be entitled to
receive the Executive's base salary and accrued bonus for the period ending on
the last day of the month in which the death of the Executive occurs. In the
event of the Executive's death during the term of this Agreement, the Company
shall purchase from the Executive's estate or legal representatives any and all
shares of Holdings stock which the Executive owned and for each share of
Holdings stock subject to an unexercised option shall pay an amount equal to the
excess of the per share amount determined pursuant to the next sentence over the
exercise price for such option. The Company shall purchase said stock within 60
days after the death of the Executive at a price based upon a formula to be
agreed upon within 90 days of the Closing Date. Notwithstanding the foregoing,
the Company's obligation to purchase and/or pay shall be suspended for any
period that the Company or Holdings is precluded by any credit agreement or
similar facility to which either of
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them is a party from making such purchase or payment. Such amount shall accrue
interest until paid at the rate of 6% per annum. The Company agrees that it will
maintain insurance on the life of the Executive in an amount reasonably
determined by the Company to be sufficient to avoid the suspension described in
the preceding sentence.
6.2 Termination Upon Disability. If during the term of
this Agreement the Executive meets the requirements for physical or mental
disability under the Company's long-term disability plan and is eligible to
receive benefits thereunder, the Company may at any time prior to the
Executive's recovery but after the last day of the sixth consecutive month of
such disability, by written notice to the Executive, terminate the Executive's
employment hereunder. In the event that the Executive's employment is terminated
due to disability, the Company will offer to loan to the Executive an amount
equal to the amount necessary to exercise all unexercised options held by the
Executive, with interest accruing monthly at a rate equal to the prime rate, as
published in the Wall Street Journal on the date the loan is made, plus 1%, and
providing for a single payment of principal and interest at a date three years
from the date of the loan.
Additionally, in such event, Executive (or his legal
representatives) shall be entitled to receive the Executive's Base Salary and
accrued bonus for the period ending on the date such termination occurred.
Nothing in this Section 6.2 shall be deemed to in any way affect the Executive's
right to participate in any disability plan maintained by the Company and for
which the Executive is otherwise eligible.
6.3 Termination for Cause. The Executive's employment
hereunder may be terminated by the Company for "Cause" (as herein defined) upon
at least thirty (30) days' prior written notice to the Executive. Termination
for Cause shall mean termination by reason of
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(a) the willful and continued failure by Executive to substantially perform his
duties with the Company (other than any such failure resulting from his
incapacity due to physical or mental illness), after a written demand for
substantial performance is delivered to the Executive by the Board of Directors,
which demand specifically identifies the manner in which the Executive is
believed not to have substantially performed his duties, (b) the Executive's
willful engagement in conduct which is or is likely to become demonstrably and
materially injurious to the Company, monetarily or otherwise, or (c) the
Executive's breach of Section 10.12 hereof. For purposes of this Section, no
act, or failure to act, on the part of the Executive shall be deemed "willful"
unless done, or omitted to be done, by the Executive not in good faith and
without reasonable belief that his action or omission was in the best interests
of the Company. Notwithstanding the foregoing, the Executive shall not be deemed
to have been terminated for Cause unless and until there has been delivered to
him a copy of a resolution duly adopted by the affirmative vote of not less than
a majority of the entire membership of the Board of Directors at a meeting of
the Board of Directors called and held for such purpose (after reasonable notice
to the Executive and an opportunity for the Executive, together with his
counsel, to be heard before the Board of Directors), finding that in the good
faith opinion of the Board of Directors the Executive was guilty of conduct of
the type set forth above in this Section and specifying the particulars thereof
in detail.
Upon termination for Cause hereunder the Executive shall
be entitled to receive the Executive's Base Salary through the date of
termination.
6.4 Voluntary Termination. The Executive may upon at least
sixty (60) days' prior written notice to the Company terminate employment
hereunder. Upon a
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<PAGE>
voluntary termination the Executive shall be entitled to receive the Executive's
Base Salary through the date of termination.
7. Severance.
(a) If, prior to the expiration of this Agreement, the
Company breaches this Agreement by terminating the Executive's employment for
any reason other than Cause (a "Breach"), or during the two year period next
following a "Change in Control" (as herein defined) the Executive's employment
with the Company is terminated for reasons other than death, disability or Cause
("Termination Upon Change in Control"), in lieu of additional salary payments to
the Executive for periods subsequent to the date of such termination, the
Company shall pay a lump sum severance payment (together with the payments
provided in paragraph (c) below, the "Severance Payments") to the Executive at
the time of termination. Such payment shall be an amount equal to the number of
years, including fractional years, remaining until this Agreement would expire
but for such termination (in any event however, the period shall be not less
than two years nor more than the number of years, including the fractional
years, from the date of such termination until the Executive's attainment of age
65) multiplied by the sum of (A) the Executive's Base Salary rate as in effect
as of the date of termination and (B) the average of the bonus amounts awarded
or due to the Executive pursuant to Section 3.2 of this Agreement. Payment of
Severance Payments provided under this Section 7 in the event of a termination
which constitutes a Breach by the Company will not prohibit Executive from
seeking enforcement of the remaining provisions of this Agreement or other
remedies for breach of this Agreement.
(b) In determining the amount of payments due under any
incentive plan or other bonus plan in effect for the year in which the Executive
is terminated as a result of a
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<PAGE>
Breach or Termination Upon Change in Control, the Company shall pay the
Executive at the time of termination a pro-rata portion of all contingent awards
granted under such plans for all uncompleted periods, assuming for this purpose
that the amount of each award that would have been paid upon the completion of
such period would at least equal the pro rata amount of the greater of the
target or maximum bonus, if any, provided for in such plan.
(c) The Company shall pay the Executive all reasonable
legal fees and expenses incurred by the Executive as a result of such
termination (including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement), unless the decision-maker in
any proceeding, contest or dispute arising hereunder makes a formal finding that
the Executive did not have a reasonable basis for instituting such proceeding,
contest or dispute, in which event the Executive shall pay to the Company its
reasonable legal fees and expenses incurred in the defense of such proceeding,
contest or dispute.
(d) For the length of the period for which severance
benefits are provided after any termination pursuant to this Section 7, the
Company shall arrange to provide the Executive with life, disability, accident
and group health insurance benefits substantially similar to those which the
Executive was receiving immediately prior to the notice of termination. Benefits
otherwise receivable by the Executive pursuant to this paragraph (d) shall be
reduced to the extent comparable benefits are actually received by the Executive
during the period following the Executive's termination, and any such benefits
actually received by the Executive shall be reported to the Company.
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(e) Nothing contained in this Section 7 shall prevent the
Executive from receiving any and all benefits payable under any severance
benefit plan or program maintained by the Company to which the Executive is
entitled.
8. Definition of Change in Control.
For purposes of this Agreement a "Change in Control" shall
be deemed to have occurred upon the first to occur of the following events:
(a) any "person," as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than (i) the Company, or (ii) any corporation owned, directly or
indirectly, by the stockholders of the Company or Holdings in substantially the
same proportions as their ownership of stock of the Company or Holdings, or
(iii) Castle Harlan, Inc. or its affiliates), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company or Holdings representing more than 50%
of the combined voting power of the Company's or Holdings' then outstanding
securities; or
(b) during any period of two consecutive years (not
including any period prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the Company's or Holdings' Board of
Directors, and any new director (other than a director designated by a person
who has entered into an agreement with the Company or Holdings to effect the
transaction described in clause (a) of this Section) whose election by the
Company's or Holdings' Board of Directors or nomination for election by the
Company's or Holdings' stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or
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<PAGE>
nomination for election was previously so approved, cease for any reason to
constitute at least a majority thereof.
9. Restrictions and Obligations of the Executive.
(a) Consideration for Restrictions and Covenants. The
parties hereto acknowledge and agree that the principal consideration for the
agreement to make the payments provided in this Agreement by the Company to
Executive and the grant to the Executive options to purchase common stock of the
Company ("Common Stock") is the Executive's compliance with the undertakings set
forth in this Section 9. Specifically, the Executive agrees to comply with the
provisions of this Section 9 irrespective of whether the Executive is entitled
to receive any such payments.
(b) Confidentiality. The confidential and proprietary
information and, in any material respect, trade secrets of the Company are among
its most valuable assets, including but not limited to, its customer and vendor
lists, database, engineering, computer programs, frameworks, models, its
marketing programs, its sales, financial, marketing, training and technical
information, and any other information, whether communicated orally,
electronically, in writing or in other tangible forms concerning how the Company
creates, develops, acquires or maintains its products and marketing plans,
targets its potential customers and operates its retail and other businesses.
The Company invested, and continues to invest, considerable amounts of time and
money in its process, technology, know-how, obtaining and developing the
goodwill of its customers, its other external relationships, its data systems
and data bases, and all the information described above (hereinafter
collectively referred to as "Confidential Information"), and any
misappropriation or unauthorized disclosure of Confidential Information in any
form would irreparably harm the Company. The Executive shall
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hold in a fiduciary capacity for the benefit of the Company all Confidential
Information relating to the Company and its business, which shall have been
obtained by the Executive during the Executive's employment by the Company and
which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company or as may otherwise
be required by law or legal process, communicate, divulge or use any such
information, knowledge or data to anyone other than the Company and those
designated by it.
(c) Non-Solicitation or Hire. During the stated term of
this Agreement (as set forth in Section 2) (the "Employment Period") and for a
two-year period following the termination of the Executive's employment for any
reason, the Executive shall not, directly or indirectly (i) employ or seek to
employ any person who is at the date of termination, or was at any time within
the six-month period preceding the date of termination, an officer, general
manager or director or equivalent or more senior level employee of the Company
or any of its subsidiaries or otherwise solicit, encourage, cause or induce any
such employee of the Company or any of its subsidiaries to terminate such
employee's employment with the Company or such subsidiary for the employment of
another company (including for this purpose the contracting with any person who
was an independent contractor (excluding consultant) of the Company during such
period) or (ii) take any action that would interfere with the relationship of
the Company or its subsidiaries with their suppliers or customers without, in
either case, the prior written consent of the Company's Board of Directors, or
engage in any other action or business that would have a material adverse effect
on the Company.
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(d) Non-Competition. (i) During the Employment Period and
for a four-year period (the "Restriction Period") following the termination of
the Executive's employment for any reason other than a termination by the
Company without Cause, the Executive shall not, directly or indirectly:
(x) engage in any managerial, administrative,
advisory, consulting, operational or sales activities in a Restricted Business
anywhere in the Restricted Area, including, without limitation, as a director or
partner of such Restricted Business, or
(y) organize, establish, operate, own, manage,
control or have a direct or indirect investment or ownership interest in a
Restricted Business or in any corporation, partnership (limited or general),
limited liability company enterprise or other business entity that engages in a
Restricted Business anywhere in the Restricted Area; and
(ii) Nothing contained in this Section 9 shall
prohibit or otherwise restrict the Executive from acquiring or owning, directly
or indirectly, for passive investment purposes not intended to circumvent this
Agreement, securities of any entity engaged, directly or indirectly, in a
Restricted Business if either (i) such entity is a public entity and the
Executive (A) is not a controlling Person of, or a member of a group that
controls, such entity and (B) owns, directly or indirectly, no more than 3% of
any class of equity securities of such entity or (ii) such entity is not a
public entity and the Executive (A) is not a controlling Person of, or a member
of a group that controls, such entity and (B) does not own, directly or
indirectly, more than 1% of any class of equity securities of such entity.
(e) Definitions. For purposes of this Section 9:
(i) "Restricted Business" means the business of
designing, manufacturing, servicing, operating, marketing, assembling, renting
or leasing of air or gas
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compressors or devices using comparable technologies or other business in which
Holdings or its subsidiaries may be engaged during the term of Executive's
employment with the Company. To the extent that any entity is primarily engaged
in a business other than a Restricted Business, the term "Restricted Business"
shall mean the operations, division, segment or subsidiary of such entity that
is engaged in any Restricted Business.
(ii) "Restricted Area" means any country in which
Holdings or its subsidiaries engages in any Restricted Business at any time
during the term of Executive's employment with the Company.
10. Other Provisions.
10.1. Mitigation. Except as provided in Section 7(d)
hereof, the Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for in Section 7 be
reduced by any compensation earned by the Executive as the result of employment
by another employer, by retirement benefits, by offset against any amount
claimed to be owed by the Executive to the Company, or otherwise.
10.2. Notices. Any notice or other communication required
or which may be given hereunder shall be in writing and shall be delivered
personally, telegraphed, telexed, sent by facsimile transmission or sent by
certified, registered or express mail, postage prepaid, and shall be deemed
given when so delivered personally, telegraphed, telexed, or sent by
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<PAGE>
facsimile transmission or, if mailed, four days after the date of mailing, as
follows:
(a) If the Company, to:
4430 Brittmoore
Houston, Texas 77041
Attention: Board of Directors
With copies to:
Castle Harlan, Inc.
150 E. 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Andre Weiss, Esq.
(b) If the Executive, to his home address set forth in the
records of the Company.
10.3 Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect thereto.
10.4 Waiver and Amendments. This Agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any
right, power or privilege hereunder, nor any single or partial exercise of any
right, power or
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<PAGE>
privilege hereunder, preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.
10.5 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of Delaware.
10.6 Assignability. This Agreement, and the Executive's
rights and obligations hereunder, may not be assigned by the Executive. The
Company may assign this Agreement and its rights, together with its obligations,
to any other entity which will substantially carry on the business of the
Company.
10.7 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart.
10.8 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein.
10.9 Remedies; Specific Performance. The parties hereto
hereby acknowledge that the provisions of Section 9 are reasonable and necessary
for the protection of the Company. In addition, the Executive further
acknowledges that the Company will be irrevocably damaged if such covenants are
not specifically enforced. Accordingly, the Executive agrees that, in addition
to any other relief to which the Company may be entitled, the Company will be
entitled to seek and obtain injunctive relief (without the requirement of any
bond) from a court of competent jurisdiction for the purposes of restraining the
Executive from any actual or threatened breach of such covenants. In addition,
without limiting the Company's remedies for any breach of any restriction on the
Executive set forth in Section 9, except as required by law, the
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Executive shall not be entitled to any payments set forth in Section 6 hereof if
the Executive breaches any of the covenants applicable to the Executive
contained in Section 9, the Executive will immediately return to the Company any
such payments previously received under Section 7 upon such a breach, and, in
the event of such breach, the Company will have no obligation to pay any of the
amounts that remain payable by the Company under Section 6.
10.10 Severability. If any term, provision, covenant or
restriction of this Agreement, or any part thereof, is held by a court of
competent jurisdiction of any foreign, federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority to be invalid, void, unenforceable or against public policy for any
reason, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected or impaired or invalidated. The Executive acknowledges that the
restrictive covenants contained in Section 9 are a condition of this Agreement
and are reasonable and valid in geographical and temporal scope and in all other
respects.
10.11 Judicial Modification. If any court or arbitrator
determines that any of the covenants in Section 9, or any part of any of them,
is invalid or unenforceable, the remainder of such covenants and parts thereof
shall not thereby be affected and shall be given full effect, without regard to
the invalid portion. If any court or arbitrator determines that any of such
covenants, or any part thereof, is invalid or unenforceable because of the
geographic or temporal scope of such provision, such court or arbitrator shall
reduce such scope to the minimum extent necessary to make such covenants valid
and enforceable.
10.12 Management Subscription Agreement. The Executive
hereby agrees that, as further consideration for receipt of the opportunity
offered by this Agreement, he will
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purchase the number of shares of Series A Preferred Stock and Common Stock of
Holdings as set forth in the Management Subscription Agreement dated as of the
date hereof.
11. Arbitration.
Any controversy or claim arising out of or in connection
with this Agreement (other than pursuant to Section 9) shall be settled by
arbitration in accordance with the rules then obtaining of the American
Arbitration Association. Such controversies shall be submitted to three
arbitrators, one arbitrator being selected by the Company, one arbitrator being
selected by the Executive, and the third being selected by the two so selected
by the Company and the Executive or, if they cannot agree upon a third, by the
American Arbitration Association. In the event that either the Company or the
Executive, within one month after any notification of any demand for arbitration
hereunder, shall not have selected its arbitrator and given notice thereof by
registered or certified mail to the other, such arbitrator shall be selected by
the American Arbitration Association. Confirmation of any award in any such
arbitration may be held in any court having jurisdiction of the person against
whom such award is rendered. Regardless of the circumstances giving rise to the
need for arbitration, until such arbitration shall be finally determined and
ended, the Base Salary of the Executive pursuant to Section 3.1, subject to the
provisions of Sections 6 and 7, shall be paid monthly until the expiration of
the term of this Agreement. If the results of such arbitration are more
favorable to the position taken by the Executive than that taken by the Company,
in the opinion of the arbitrators, then all costs and expenses incurred by the
Executive in connection with such arbitration shall be paid by the Company. In
the event that the arbitrators make a formal finding that the Executive did not
have a reasonable basis for instituting the proceeding, contest or dispute
giving rise to such arbitration,
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the Executive shall pay to the Company its reasonable legal fees and expenses
incurred in the defense of the proceeding, contest or dispute giving rise to
such arbitration.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have executed this Agreement as of the day and year first above
mentioned.
EXECUTIVE
/s/ Stephen A. Snider
___________________________________
Stephen A. Snider
UNIVERSAL COMPRESSION, INC.
By: /s/ Ernie Danner
______________________________
Title:
___________________________
UNIVERSAL COMPRESSION
HOLDINGS, INC.
By: /s/ Ernie Danner
______________________________
Title: ___________________________
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<PAGE>
EMPLOYMENT AGREEMENT
DATED AS OF
February 20, 1998
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") dated as of February, 20 1998
between Universal Compression, Inc., a Texas corporation (the "Company"),
Universal Compression Holdings, Inc., a Delaware corporation ("Holdings") and
Ernie Danner (the "Executive").
WHEREAS, Tidewater, Inc. ("Tidewater") has agreed to sell
Tidewater Compression Service, Inc. ("TCS") to TW Acquisition Corporation ("TW")
pursuant to a Stock Purchase Agreement, dated as of December 18, 1997, between
TW and Tidewater (the "Stock Purchase Agreement");
WHEREAS, TW is a direct wholly-owned subsidiary of Holdings;
WHEREAS, immediately after the consummation of such sale (the
"Closing"), TW will be merged into TCS and TCS will change its name to Universal
Compression, Inc.;
WHEREAS, the Executive has provided financial and advisory
services to the Company;
WHEREAS, the parties wish to terminate all prior employment
agreements upon the effective date of this Agreement; and
WHEREAS, the parties wish to establish the terms of Executive's
future employment with the Company.
<PAGE>
Accordingly, the parties agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company shall employ
the Executive effective upon the date of the Closing (the "Closing Date"), for
itself and its affiliates, to render exclusive and full-time services to the
Company. The Executive will serve in the capacity of Executive Vice President -
Chief Financial Officer of the Company. The Executive will perform such duties
as are imposed on the holder of that office by the By-laws of the Company and
such other duties as are customarily performed by one holding such positions in
the same or similar businesses or enterprises as those of the Company. The
Executive will perform such other duties as may be assigned to him from time to
time by the Company's President. The Executive will devote all his full
working-time and attention to the performance of such duties and to the
promotion of the business and interests of the Company. This provision, however,
will not prevent the Executive from investing his funds or assets in any form or
manner, or from acting as a member of the board of directors of any companies,
businesses, or charitable organizations, so long as such investments or
companies do not compete with the Company and Holdings.
1.2 Acceptance of Employment by the Executive. The
Executive accepts such employment and shall render the services described above.
If requested, the Executive agrees, in addition, to render, without additional
compensation, the services described above in the capacity of Executive Vice
President - Chief Financial Officer of Holdings.
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2. Duration of Employment.
This Agreement and the employment relationship hereunder
will continue in effect for three (3) years from the Closing Date through the
third anniversary date thereof. It may be extended by mutual, written agreement
at any time. Notwithstanding the foregoing, in the event that a "Change in
Control" (as herein defined) occurs during the original or any extended term of
this Agreement, this Agreement shall automatically be extended to a date which
is the second anniversary of such Change in Control. In addition, the provisions
of Section 9 relating to a Change in Control will, notwithstanding the
expiration of this Agreement, continue until the Board of Directors terminates
said provision. In the event of the Executive's termination of employment during
the term of this Agreement, the Company's obligation to continue to pay all base
salary, bonus and other benefits then accrued shall terminate except as may be
provided for in Sections 6.1, 6.2, 6.3, 6.4, and 7 of this Agreement .
3. Compensation by the Company.
3.1 Base Salary. As compensation for all services rendered
pursuant to this Agreement after the Closing Date, the Company will pay to the
Executive an annual base salary ("Base Salary") of ONE HUNDRED THIRTY-FIVE
THOUSAND DOLLARS ($135,000), payable in equal semi-monthly installments of
$5,625. The Board of Directors in its sole discretion may increase but not
reduce the Base Salary. The Board of Directors of the Company will review
Executive's Base Salary within six months after the effective date hereof.
3.2. Annual Bonuses. The Executive shall be entitled to
receive from the Company an annual cash bonus on or before 60 days after the end
of each of the Company's fiscal years (including partial years on a pro-rata
basis) in a target amount equal to 60% of Base Salary based upon awards or
formulas determined by the Compensation Committee of the Board
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<PAGE>
of Directors of the Company (the "Compensation Committee") (in the case of 1998,
within 90 days of the Closing Date). Such award or formula shall be based upon
the Company's results in relation to budget.
3.3 Closing Bonus. For services rendered to date, Holdings
will pay to the Executive a bonus upon Closing (the "Closing Bonus") of (i)
$100,000 in cash, (ii) 4,000 shares of Holdings Series A Preferred Stock and
(iii) 1000 shares of Holdings Common Stock.
3.4 Grant of Stock Option. (a) The Executive is hereby
granted an option that will expire on the tenth anniversary date of the date
hereof pursuant to the Stock Option Agreement attached as Exhibit A hereto to
purchase from Holdings 4,780 shares of Holdings Common Stock at an exercise
price of $50 per share.
(b) The Company and Holdings have adopted an Incentive
Stock Option Plan which provides for the grant of stock options which are
"qualified" or "Incentive Stock Options" under Section 422 of the Code as well
as options that are not so qualified. The Option as is granted to the Executive
under Section 3.4(a) shall become exercisable to the maximum extent permissible
under such Plan, such option shall be deemed an Incentive Stock Option and the
balance, if any, of such option shall be deemed a Non-Qualified Stock Option, in
each case, under such Plan.
3.5 Participation in Employee Benefit Plans. The Executive
shall be permitted, during the term of this Agreement, if and to the extent
eligible, to participate in any group life, hospitalization or disability
insurance plan, health program, pension plan or similar benefit plan of the
Company, which may be available to other executives of the Company generally, on
the same terms as such other executives. Such plan shall be put into place by
the Compensation Committee no later than 90 days after the Closing Date.
Executive shall be
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entitled to four weeks of paid vacation and all customary holidays each year
during the term of this Agreement in accordance with the Company's policies as
the same may be established from time to time. Promptly following the execution
of this Agreement, the Company shall establish a nonqualified Supplemental
Savings Plan which provides benefits that the Executive would have otherwise
accrued under Tidewater's Supplemental Savings Plan but for the limitations
imposed under Section 415 of the Internal Revenue Code of 1986, as amended (the
"Code").
3.6 Profit Sharing Plan. During the term of this
Agreement, Executive shall not participate in the Company's nonqualified cash
profit sharing plan applicable to employees generally.
3.7 Club Membership. During the term of this Agreement,
the Company shall pay or reimburse the Executive for the initiation fee and
membership dues of a private club selected by the Executive upon presentation of
statements or vouchers or such other supporting information as may be required.
4. [INTENTIONALLY OMITTED]
5. Registration Rights.
In consideration, in part, for Executive's agreement
hereunder to be employed by the Company and Holdings, Holdings is granting
Executive certain rights to register his shares of Common Stock pursuant to a
Registration Rights Agreement with the Executive being entered into concurrently
herewith.
6. Termination.
6.1 Termination Upon Death. If the Executive dies during
the term hereof, the Executive's legal representatives shall be entitled to
receive the Executive's base salary and accrued bonus for the period ending on
the last day of the month in which the death of
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the Executive occurs. In the event of the Executive's death during the term of
this Agreement, the Company shall purchase from the Executive's estate or legal
representatives any and all shares of Holdings stock which the Executive owned
and for each share of Holdings stock subject to an unexercised option shall pay
an amount equal to the excess of the per share amount determined pursuant to the
next sentence over the exercise price for such option. The Company shall
purchase said stock within 60 days after the death of the Executive at a price
based upon a formula to be agreed upon within 90 days of the Closing Date.
Notwithstanding the foregoing, the Company's obligation to purchase and/or pay
shall be suspended for any period that the Company or Holdings is precluded by
any credit agreement or similar facility to which either of them is a party from
making such purchase or payment. Such amount shall accrue interest until paid at
the rate of 6% per annum. The Company agrees that it will maintain insurance on
the life of the Executive in an amount reasonably determined by the Company to
be sufficient to avoid the suspension described in the preceding sentence.
6.2 Termination Upon Disability. If during the term of
this Agreement the Executive meets the requirements for physical or mental
disability under the Company's long-term disability plan and is eligible to
receive benefits thereunder, the Company may at any time prior to the
Executive's recovery but after the last day of the sixth consecutive month of
such disability, by written notice to the Executive, terminate the Executive's
employment hereunder. In the event that the Executive's employment is terminated
due to disability, the Company will offer to loan to the Executive an amount
equal to the amount necessary to exercise all unexercised options held by the
Executive, with interest accruing monthly at a rate equal to the prime rate, as
published in the Wall Street Journal on the date the loan is made, plus 1%, and
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providing for a single payment of principal and interest at a date three years
from the date of the loan.
Additionally, in such event, Executive (or his legal
representatives) shall be entitled to receive the Executive's Base Salary and
accrued bonus for the period ending on the date such termination occurred.
Nothing in this Section 6.2 shall be deemed to in any way affect the Executive's
right to participate in any disability plan maintained by the Company and for
which the Executive is otherwise eligible.
6.3 Termination for Cause. The Executive's employment
hereunder may be terminated by the Company for "Cause" (as herein defined) upon
at least thirty (30) days' prior written notice to the Executive. Termination
for Cause shall mean termination by reason of (a) the willful and continued
failure by Executive to substantially perform his duties with the Company (other
than any such failure resulting from his incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to the
Executive by the Board of Directors, which demand specifically identifies the
manner in which the Executive is believed not to have substantially performed
his duties, or (b) the Executive's willful engagement in conduct which is or is
likely to become demonstrably and materially injurious to the Company,
monetarily or otherwise. For purposes of this Section, no act, or failure to
act, on the part of the Executive shall be deemed "willful" unless done, or
omitted to be done, by the Executive not in good faith and without reasonable
belief that his action or omission was in the best interests of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there has been delivered to him a copy of
a resolution duly adopted by the affirmative vote of not less than a majority of
the entire membership of the Board of Directors at a meeting of the Board of
Directors called and held for
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<PAGE>
such purpose (after reasonable notice to the Executive and an opportunity for
the Executive, together with his counsel, to be heard before the Board of
Directors), finding that in the good faith opinion of the Board of Directors the
Executive was guilty of conduct of the type set forth above in this Section and
specifying the particulars thereof in detail.
Upon termination for Cause hereunder the Executive shall
be entitled to receive the Executive's Base Salary through the date of
termination.
6.4 Voluntary Termination. The Executive may upon at least
sixty (60) days' prior written notice to the Company terminate employment
hereunder. Upon a voluntary termination the Executive shall be entitled to
receive the Executive's Base Salary through the date of termination.
7. Severance.
(a) If, prior to the expiration of this Agreement, the
Company breaches this Agreement by terminating the Executive's employment for
any reason other than Cause (a "Breach"), or during the two year period next
following a "Change in Control" (as herein defined) the Executive's employment
with the Company is terminated for reasons other than death, disability or Cause
("Termination Upon Change in Control"), in lieu of additional salary payments to
the Executive for periods subsequent to the date of such termination, the
Company shall pay a lump sum severance payment (together with the payments
provided in paragraph (c) below, the "Severance Payments") to the Executive at
the time of termination. Such payment shall be an amount equal to the number of
years, including fractional years, remaining until this Agreement would expire
but for such termination (in any event however, the period shall be not less
than two years nor more than the number of years, including the fractional
years, from the date of such termination until the Executive's attainment of age
65) multiplied by the sum of
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(A) the Executive's Base Salary rate as in effect as of the date of termination
and (B) the average of the bonus amounts awarded or due to the Executive
pursuant to Section 3.2 of this Agreement. Payment of Severance Payments
provided under this Section 7 in the event of a termination which constitutes a
Breach by the Company will not prohibit Executive from seeking enforcement of
the remaining provisions of this Agreement or other remedies for breach of this
Agreement.
(b) In determining the amount of payments due under any
incentive plan or other bonus plan in effect for the year in which the Executive
is terminated as a result of a Breach or Termination Upon Change in Control, the
Company shall pay the Executive at the time of termination a pro-rata portion of
all contingent awards granted under such plans for all uncompleted periods,
assuming for this purpose that the amount of each award that would have been
paid upon the completion of such period would at least equal the pro rata amount
of the greater of the target or maximum bonus, if any, provided for in such
plan.
(c) The Company shall pay the Executive all reasonable
legal fees and expenses incurred by the Executive as a result of such
termination (including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement), unless the decision-maker in
any proceeding, contest or dispute arising hereunder makes a formal finding that
the Executive did not have a reasonable basis for instituting such proceeding,
contest or dispute, in which event the Executive shall pay to the Company its
reasonable legal fees and expenses incurred in the defense of such proceeding,
contest or dispute.
(d) For the length of the period for which severance
benefits are provided after any termination pursuant to this Section 7, the
Company shall arrange to provide
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<PAGE>
the Executive with life, disability, accident and group health insurance
benefits substantially similar to those which the Executive was receiving
immediately prior to the notice of termination. Benefits otherwise receivable by
the Executive pursuant to this paragraph (d) shall be reduced to the extent
comparable benefits are actually received by the Executive during the period
following the Executive's termination, and any such benefits actually received
by the Executive shall be reported to the Company.
(e) Nothing contained in this Section 7 shall prevent the
Executive from receiving any and all benefits payable under any severance
benefit plan or program maintained by the Company to which the Executive is
entitled.
8. Definition of Change in Control.
For purposes of this Agreement a "Change in Control" shall
be deemed to have occurred upon the first to occur of the following events:
(a) any "person," as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than (i) the Company, or (ii) any corporation owned, directly or
indirectly, by the stockholders of the Company or Holdings in substantially the
same proportions as their ownership of stock of the Company or Holdings, or
(iii) Castle Harlan, Inc. or its affiliates), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company or Holdings representing more than 50%
of the combined voting power of the Company's or Holdings' then outstanding
securities; or
(b) during any period of two consecutive years (not
including any period prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the Company's or Holdings' Board of
Directors, and any new director (other than a
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director designated by a person who has entered into an agreement with the
Company or Holdings to effect the transaction described in clause (a) of this
Section) whose election by the Company's or Holdings' Board of Directors or
nomination for election by the Company's or Holdings' stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority thereof.
9. Restrictions and Obligations of the Executive.
(a) Consideration for Restrictions and Covenants. The
parties hereto acknowledge and agree that the principal consideration for the
agreement to make the payments provided in this Agreement by the Company to
Executive and the grant to the Executive options to purchase common stock of the
Company ("Common Stock") is the Executive's compliance with the undertakings set
forth in this Section 9. Specifically, the Executive agrees to comply with the
provisions of this Section 9 irrespective of whether the Executive is entitled
to receive any such payments.
(b) Confidentiality. The confidential and proprietary
information and, in any material respect, trade secrets of the Company are among
its most valuable assets, including but not limited to, its customer and vendor
lists, database, engineering, computer programs, frameworks, models, its
marketing programs, its sales, financial, marketing, training and technical
information, and any other information, whether communicated orally,
electronically, in writing or in other tangible forms concerning how the Company
creates, develops, acquires or maintains its products and marketing plans,
targets its potential customers and operates its retail and other businesses.
The Company invested, and continues to invest,
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considerable amounts of time and money in its process, technology, know-how,
obtaining and developing the goodwill of its customers, its other external
relationships, its data systems and data bases, and all the information
described above (hereinafter collectively referred to as "Confidential
Information"), and any misappropriation or unauthorized disclosure of
Confidential Information in any form would irreparably harm the Company. The
Executive shall hold in a fiduciary capacity for the benefit of the Company all
Confidential Information relating to the Company and its business, which shall
have been obtained by the Executive during the Executive's employment by the
Company and which shall not be or become public knowledge (other than by acts by
the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate, divulge or use
any such information, knowledge or data to anyone other than the Company and
those designated by it.
(c) Non-Solicitation or Hire. During the stated term of
this Agreement (as set forth in Section 2) (the "Employment Period") and for a
two-year period following the termination of the Executive's employment for any
reason, the Executive shall not, directly or indirectly (i) employ or seek to
employ any person who is at the date of termination, or was at any time within
the six-month period preceding the date of termination, an officer, general
manager or director or equivalent or more senior level employee of the Company
or any of its subsidiaries or otherwise solicit, encourage, cause or induce any
such employee of the Company or any of its subsidiaries to terminate such
employee's employment with the Company or such subsidiary for the employment of
another company (including for this purpose the contracting with any person who
was an independent contractor (excluding consultant) of the Company
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during such period) or (ii) take any action that would interfere with the
relationship of the Company or its subsidiaries with their suppliers or
customers without, in either case, the prior written consent of the Company's
Board of Directors, or engage in any other action or business that would have a
material adverse effect on the Company.
(d) Non-Competition. (i) During the Employment Period and
for a five-year period (the "Restriction Period") following the termination of
the Executive's employment for any reason other than a termination by the
Company without Cause, the Executive shall not, directly or indirectly:
(x) engage in any managerial, administrative,
advisory, consulting, operational or sales activities in a Restricted Business
anywhere in the Restricted Area, including, without limitation, as a director or
partner of such Restricted Business, or
(y) organize, establish, operate, own, manage,
control or have a direct or indirect investment or ownership interest in a
Restricted Business or in any corporation, partnership (limited or general),
limited liability company enterprise or other business entity that engages in a
Restricted Business anywhere in the Restricted Area; and
(ii) Nothing contained in this Section 9 shall
prohibit or otherwise restrict the Executive from acquiring or owning, directly
or indirectly, for passive investment purposes not intended to circumvent this
Agreement, securities of any entity engaged, directly or indirectly, in a
Restricted Business if either (i) such entity is a public entity and the
Executive (A) is not a controlling Person of, or a member of a group that
controls, such entity and (B) owns, directly or indirectly, no more than 3% of
any class of equity securities of such entity or (ii) such entity is not a
public entity and the Executive (A) is not a controlling Person of,
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or a member of a group that controls, such entity and (B) does not own, directly
or indirectly, more than 1% of any class of equity securities of such entity.
(e) Definitions. For purposes of this Section 9:
(i) "Restricted Business" means the business of
designing, manufacturing, servicing, operating, marketing, assembling, renting
or leasing of air or gas compressors or devices using comparable technologies or
other business in which Holdings or its subsidiaries may be engaged during the
term of Executive's employment with the Company. To the extent that any entity
is primarily engaged in a business other than a Restricted Business, the term
"Restricted Business" shall mean the operations, division, segment or subsidiary
of such entity that is engaged in any Restricted Business.
(ii) "Restricted Area" means any country in which
Holdings or its subsidiaries engages in any Restricted Business at any time
during the term of Executive's employment with the Company.
10. Other Provisions.
10.1. Mitigation. Except as provided in Section 7(d)
hereof, the Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for in Section 7 be
reduced by any compensation earned by the Executive as the result of employment
by another employer, by retirement benefits, by offset against any amount
claimed to be owed by the Executive to the Company, or otherwise.
10.2. Notices. Any notice or other communication required
or which may be given hereunder shall be in writing and shall be delivered
personally, telegraphed, telexed, sent by facsimile transmission or sent by
certified, registered or express mail, postage
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prepaid, and shall be deemed given when so delivered personally, telegraphed,
telexed, or sent by facsimile transmission or, if mailed, four days after the
date of mailing, as follows:
(a) If the Company, to:
4430 Brittmoore
Houston, Texas 77041
Attention: Board of Directors
With copies to:
Castle Harlan, Inc.
150 E. 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Andre Weiss, Esq.
(b) If Holdings or CHI, to
Castle Harlan, Inc.
150 E. 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
With copies to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Andre Weiss, Esq.
(c) If the Executive, to his home address set forth in the
records of the Company.
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10.3 Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect thereto.
10.4 Waiver and Amendments. This Agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any
right, power or privilege hereunder, nor any single or partial exercise of any
right, power or privilege hereunder, preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.
10.5 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of Delaware.
10.6 Assignability. This Agreement, and the Executive's
rights and obligations hereunder, may not be assigned by the Executive. The
Company may assign this Agreement and its rights, together with its obligations,
to any other entity which will substantially carry on the business of the
Company.
10.7 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
10.8 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein.
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10.9 Remedies; Specific Performance. The parties hereto
hereby acknowledge that the provisions of Section 9 are reasonable and necessary
for the protection of the Company. In addition, the Executive further
acknowledges that the Company will be irrevocably damaged if such covenants are
not specifically enforced. Accordingly, the Executive agrees that, in addition
to any other relief to which the Company may be entitled, the Company will be
entitled to seek and obtain injunctive relief (without the requirement of any
bond) from a court of competent jurisdiction for the purposes of restraining the
Executive from any actual or threatened breach of such covenants. In addition,
without limiting the Company's remedies for any breach of any restriction on the
Executive set forth in Section 9, except as required by law, the Executive shall
not be entitled to any payments set forth in Section 7 hereof if the Executive
breaches any of the covenants applicable to the Executive contained in Section
9, the Executive will immediately return to the Company any such payments
previously received under Section 7 upon such a breach, and, in the event of
such breach, the Company will have no obligation to pay any of the amounts that
remain payable by the Company under Section 6.
10.10 Severability. If any term, provision, covenant or
restriction of this Agreement, or any part thereof, is held by a court of
competent jurisdiction or any foreign federal, state, county or local government
or any other governmental, regulatory or administrative agency or authority to
be invalid, void, unenforceable or against public policy for any reason, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. The Executive acknowledges that the restrictive covenants
contained in Section 9 are a condition of this Agreement and are reasonable and
valid in geographical and temporal scope and in all other respects.
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10.11 Judicial Modification. If any court or arbitrator
determines that any of the covenants in Section 9, or any part of any of them,
is invalid or unenforceable, the remainder of such covenants and parts thereof
shall not thereby be affected and shall be given full effect, without regard to
the invalid portion. If any court or arbitrator determines that any of such
covenants, or any part thereof, is invalid or unenforceable because of the
geographic or temporal scope of such provision, such court or arbitrator shall
reduce such scope to the minimum extent necessary to make such covenants valid
and enforceable.
11. Arbitration.
Any controversy or claim arising out of or in connection
with this Agreement (other than pursuant to Section 9) shall be settled by
arbitration in accordance with the rules then obtaining of the American
Arbitration Association. Such controversies shall be submitted to three
arbitrators, one arbitrator being selected by the Company, one arbitrator being
selected by the Executive, and the third being selected by the two so selected
by the Company and the Executive or, if they cannot agree upon a third, by the
American Arbitration Association. In the event that either the Company or the
Executive, within one month after any notification of any demand for arbitration
hereunder, shall not have selected its arbitrator and given notice thereof by
registered or certified mail to the other, such arbitrator shall be selected by
the American Arbitration Association. Confirmation of any award in any such
arbitration may be held in any court having jurisdiction of the person against
whom such award is rendered. Regardless of the circumstances giving rise to the
need for arbitration, until such arbitration shall be finally determined and
ended, the Base Salary of the Executive pursuant to Section 3.1, subject to the
provisions of Sections 6 and 7, shall be paid monthly until the expiration of
the term of this Agreement. If the results of such arbitration are more
favorable to the position taken
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by the Executive than that taken by the Company, in the opinion of the
arbitrators, then all costs and expenses incurred by the Executive in connection
with such arbitration shall be paid by the Company. In the event that the
arbitrators make a formal finding that the Executive did not have a reasonable
basis for instituting the proceeding, contest or dispute giving rise to such
arbitration, the Executive shall pay to the Company its reasonable legal fees
and expenses incurred in the defense of the proceeding, contest or dispute
giving rise to such arbitration.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have executed this Agreement as of the day and year first above
mentioned.
EXECUTIVE
/s/ Ernie Danner
___________________________________
Ernie Danner
UNIVERSAL COMPRESSION, INC.
By: /s/ Ernie Danner
______________________________
Title: ___________________________
UNIVERSAL COMPRESSION
HOLDINGS, INC.
By: /s/ Ernie Danner
______________________________
Title: ___________________________
<PAGE>
EMPLOYMENT AGREEMENT
DATED AS OF
February 20, 1998
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") dated as of February 20, 1998
between Universal Compression, Inc., a Texas corporation (the "Company"),
Universal Compression Holdings, Inc., a Delaware corporation ("Holdings") and
Thomas E. Hartford (the "Executive").
WHEREAS, Tidewater, Inc. ("Tidewater") has agreed to sell
Tidewater Compression Service, Inc. ("TCS") to TW Acquisition Corporation ("TW")
pursuant to the Stock Purchase Agreement, dated as of December 19, 1997, between
TW and Tidewater (the "Stock Purchase Agreement");
WHEREAS, TW is a direct wholly-owned subsidiary of Holdings;
WHEREAS, immediately after the consummation of such sale (the
"Closing"), TW will be merged into TCS and TCS will change its name to Universal
Compression, Inc.;
WHEREAS, the parties wish to terminate all prior employment
agreements upon the effective date of this Agreement; and
WHEREAS, the parties wish to establish the terms of Executive's
future employment with the Company.
Accordingly, the parties agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company shall employ
the Executive effective upon the date of the Closing (the "Closing Date"), for
itself and its affiliates, to render exclusive and full-time services to the
Company. The Executive will serve in the
<PAGE>
capacity of Executive Vice President of the Company. The Executive will perform
such duties as are imposed on the holder of that office by the By-laws of the
Company and such other duties as are customarily performed by one holding such
positions in the same or similar businesses or enterprises as those of the
Company. The Executive will perform such other duties as may be assigned to him
from time to time by the Company's President. The Executive will devote all his
full working-time and attention to the performance of such duties and to the
promotion of the business and interests of the Company. This provision, however,
will not prevent the Executive from investing his funds or assets in any form or
manner, or from acting as a member of the board of directors of any companies,
businesses, or charitable organizations, so long as such investments or
companies do not compete with the Company and Holdings.
1.2 Acceptance of Employment by the Executive. The
Executive accepts such employment and shall render the services described above.
If requested, the Executive agrees, in addition, to render, without additional
compensation, the services described above in the capacity of Executive Vice
President of Holdings.
2. Duration of Employment.
This Agreement and the employment relationship hereunder
will continue in effect for three (3) years from the Closing Date through the
third anniversary date thereof. It may be extended by mutual, written agreement
at any time. Notwithstanding the foregoing, in the event that a "Change in
Control" (as herein defined) occurs during the original or any extended term of
this Agreement, this Agreement shall automatically be extended to a date which
is the second anniversary of such Change in Control. In addition, the provisions
of Section 7 relating to a Change in Control will, notwithstanding the
expiration of this Agreement, continue until the Board of Directors terminates
said provision. In the event of the Executive's
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termination of employment during the term of this Agreement, the Company's
obligation to continue to pay all base salary, bonus and other benefits then
accrued shall terminate except as may be provided for in Sections 6.1, 6.2, 6.3,
6.4, and 7 of this Agreement.
3. Compensation by the Company.
3.1 Base Salary. As compensation for all services rendered
pursuant to this Agreement, the Company will pay to the Executive an annual base
salary ("Base Salary") of ONE HUNDRED THIRTY-FIVE THOUSAND DOLLARS ($135,000),
payable in equal semi-monthly installments of $5,625. The Board of Directors in
its sole discretion may increase but not reduce the Base Salary. The Board of
Directors of the Company will review Executive's Base Salary within six months
after the effective date hereof.
3.2 Bonuses. The Executive shall be entitled to receive
from the Company an annual cash bonus on or before 60 days after the end of each
of the Company's fiscal years (including partial years on a pro-rata basis) in a
target amount equal to 60% of Base Salary based upon awards or formulas
determined by the Compensation Committee of the Board of Directors of the
Company (the "Compensation Committee") and the President of the Company (in the
case of 1998, within 90 days of the Closing Date). Such award or formula shall
be based upon the Company's results in relation to budget.
3.3 Grant of Stock Option. (a) The Executive is hereby
granted an option that will expire on the tenth anniversary date of the date
hereof pursuant to the Stock Option Agreement attached as Exhibit A hereto to
purchase from Holdings 4,780 shares of Holdings Common Stock at an exercise
price of $50 per share.
(b) The Company and Holdings have adopted an Incentive
Stock Option Plan which provides for the grant of stock options which are
"qualified" or "Incentive Stock
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Options" under Section 422 of the Code as well as options that are not so
qualified. The Option as is granted to the Executive under Section 3.3(a) shall
become exercisable to the maximum extent permissible under such Plan, such
option shall be deemed an Incentive Stock Option and the balance, if any, of
such option shall be deemed a Non-Qualified Stock Option, in each case, under
such Plan.
3.4 Participation in Employee Benefit Plans. The Executive
shall be permitted, during the term of this Agreement, if and to the extent
eligible, to participate in any group life, hospitalization or disability
insurance plan, health program, pension plan or similar benefit plan of the
Company, which may be available to other executives of the Company generally, on
the same terms as such other executives. Such plan shall be put into place by
the Compensation Committee no later than 90 days after the Closing Date.
Executive shall be entitled to paid vacation and all customary holidays each
year during the term of this Agreement in accordance with the Company's policies
as the same may be established from time to time. Promptly following the
execution of this Agreement, the Company shall establish a nonqualified
Supplemental Savings Plan which provides benefits that the Executive would have
otherwise accrued under Tidewater's Supplemental Savings Plan but for the
limitations imposed under Section 415 of the Internal Revenue Code of 1986, as
amended (the "Code").
3.5 Profit Sharing Plan. During the term of this
Agreement, Executive shall not participate in the Company's nonqualified cash
profit sharing plan applicable to employees generally.
3.6 Club Membership. During the term of this Agreement,
the Company shall pay or reimburse the Executive for the initiation fee and
membership dues of a
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private club selected by the Executive upon presentation of statements or
vouchers or such other supporting information as may be required.
4. [INTENTIONALLY OMITTED]
5. Registration Rights.
In consideration, in part, for Executive's agreement
hereunder to be employed by the Company and Holdings, Holdings is granting
Executive certain rights to register his shares of Common Stock pursuant to a
Registration Rights Agreement with the Executive being entered into concurrently
herewith.
6. Termination.
6.1 Termination Upon Death. If the Executive dies during
the term hereof, the Executive's legal representatives shall be entitled to
receive the Executive's base salary and accrued bonus for the period ending on
the last day of the month in which the death of the Executive occurs. In the
event of the Executive's death during the term of this Agreement, the Company
shall purchase from the Executive's estate or legal representatives any and all
shares of Holdings stock which the Executive owned and for each share of
Holdings stock subject to an unexercised option shall pay an amount equal to the
excess of the per share amount determined pursuant to the next sentence over the
exercise price for such option. The Company shall purchase said stock within 60
days after the death of the Executive at a price based upon a formula to be
agreed upon within 90 days of the Closing Date. Notwithstanding the foregoing,
the Company's obligation to purchase and/or pay shall be suspended for any
period that the Company or Holdings is precluded by any credit agreement or
similar facility to which either of them is a party from making such purchase or
payment. Such amount shall accrue interest until paid at the rate of 6% per
annum. The Company agrees that it will maintain insurance on the life
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of the Executive in an amount reasonably determined by the Company to be
sufficient to avoid the suspension described in the preceding sentence.
6.2 Termination Upon Disability. If during the term of
this Agreement the Executive meets the requirements for physical or mental
disability under the Company's long-term disability plan and is eligible to
receive benefits thereunder, the Company may at any time prior to the
Executive's recovery but after the last day of the sixth consecutive month of
such disability, by written notice to the Executive, terminate the Executive's
employment hereunder. In the event that the Executive's employment is terminated
due to disability, the Company will offer to loan to the Executive an amount
equal to the amount necessary to exercise all unexercised options held by the
Executive, with interest accruing monthly at a rate equal to the prime rate, as
published in the Wall Street Journal on the date the loan is made, plus 1%, and
providing for a single payment of principal and interest at a date three years
from the date of the loan.
Additionally, in such event, Executive (or his legal
representatives) shall be entitled to receive the Executive's Base Salary and
accrued bonus for the period ending on the date such termination occurred.
Nothing in this Section 6.2 shall be deemed to in any way affect the Executive's
right to participate in any disability plan maintained by the Company and for
which the Executive is otherwise eligible.
6.3 Termination for Cause. The Executive's employment
hereunder may be terminated by the Company for "Cause" (as herein defined) upon
at least thirty (30) days' prior written notice to the Executive. Termination
for Cause shall mean termination by reason of (a) the willful and continued
failure by Executive to substantially perform his duties with the Company (other
than any such failure resulting from his incapacity due to physical or mental
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<PAGE>
illness), after a written demand for substantial performance is delivered to the
Executive by the President or Board of Directors, which demand specifically
identifies the manner in which the Executive is believed not to have
substantially performed his duties, (b) the Executive's willful engagement in
conduct which is or is likely to become demonstrably and materially injurious to
the Company, monetarily or otherwise, or (c) the Executive's breach of Section
10.12 hereof. For purposes of this Section, no act, or failure to act, on the
part of the Executive shall be deemed "willful" unless done, or omitted to be
done, by the Executive not in good faith and without reasonable belief that his
action or omission was in the best interests of the Company. Notwithstanding the
foregoing, the Executive shall not be deemed to have been terminated for Cause
unless and until there has been delivered to him a copy of a resolution duly
adopted by the affirmative vote of not less than a majority of the entire
membership of the Board of Directors at a meeting of the Board of Directors
called and held for such purpose (after reasonable notice to the Executive and
an opportunity for the Executive, together with his counsel, to be heard before
the Board of Directors), finding that in the good faith opinion of the Board of
Directors the Executive was guilty of conduct of the type set forth above in
this Section and specifying the particulars thereof in detail.
Upon termination for Cause hereunder the Executive shall
be entitled to receive the Executive's Base Salary through the date of
termination.
6.4 Voluntary Termination. The Executive may upon at least
sixty (60) days' prior written notice to the Company terminate employment
hereunder. Upon a voluntary termination the Executive shall be entitled to
receive the Executive's Base Salary through the date of termination.
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<PAGE>
7. Severance.
(a) If, prior to the expiration of this Agreement, the
Company breaches this Agreement by terminating the Executive's employment for
any reason other than Cause (a "Breach"), or during the two year period next
following a "Change in Control" (as herein defined) the Executive's employment
with the Company is terminated for reasons other than death, disability or Cause
("Termination Upon Change in Control"), in lieu of additional salary payments to
the Executive for periods subsequent to the date of such termination, the
Company shall pay a lump sum severance payment (together with the payments
provided in paragraph (c) below, the "Severance Payments") to the Executive at
the time of termination. Such payment shall be an amount equal to the number of
years, including fractional years, remaining until this Agreement would expire
but for such termination (in any event however, the period shall be not less
than two years nor more than the number of years, including the fractional
years, from the date of such termination until the Executive's attainment of age
65) multiplied by the sum of (A) the Executive's Base Salary rate as in effect
as of the date of termination and (B) the average of the bonus amounts awarded
or due to the Executive pursuant to Section 3.2 of this Agreement. Payment of
Severance Payments provided under this Section 7 in the event of a termination
which constitutes a Breach by the Company will not prohibit Executive from
seeking enforcement of the remaining provisions of this Agreement or other
remedies for breach of this Agreement.
(b) In determining the amount of payments due under any
incentive plan or other bonus plan in effect for the year in which the Executive
is terminated as a result of a Breach or Termination Upon Change in Control, the
Company shall pay the Executive at the time of termination a pro-rata portion of
all contingent awards granted under such plans for all
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uncompleted periods, assuming for this purpose that the amount of each award
that would have been paid upon the completion of such period would at least
equal the pro rata amount of the greater of the target or maximum bonus, if any,
provided for in such plan.
(c) The Company shall pay the Executive all reasonable
legal fees and expenses incurred by the Executive as a result of such
termination (including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement), unless the decision-maker in
any proceeding, contest or dispute arising hereunder makes a formal finding that
the Executive did not have a reasonable basis for instituting such proceeding,
contest or dispute, in which event the Executive shall pay to the Company its
reasonable legal fees and expenses incurred in the defense of such proceeding,
contest or dispute.
(d) For the length of the period for which severance
benefits are provided after any termination pursuant to this Section 7, the
Company shall arrange to provide the Executive with life, disability, accident
and group health insurance benefits substantially similar to those which the
Executive was receiving immediately prior to the notice of termination. Benefits
otherwise receivable by the Executive pursuant to this paragraph (d) shall be
reduced to the extent comparable benefits are actually received by the Executive
during the period following the Executive's termination, and any such benefits
actually received by the Executive shall be reported to the Company.
(e) Nothing contained in this Section 7 shall prevent the
Executive from receiving any and all benefits payable under any severance
benefit plan or program maintained by the Company to which the Executive is
entitled.
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8. Definition of Change in Control.
For purposes of this Agreement a "Change in Control" shall
be deemed to have occurred upon the first to occur of the following events:
(a) any "person," as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than (i) the Company, or (ii) any corporation owned, directly or
indirectly, by the stockholders of the Company or Holdings in substantially the
same proportions as their ownership of stock of the Company or Holdings, or
(iii) Castle Harlan, Inc. or its affiliates), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company or Holdings representing more than 50%
of the combined voting power of the Company's or Holdings' then outstanding
securities; or
(b) during any period of two consecutive years (not
including any period prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the Company's or Holdings' Board of
Directors, and any new director (other than a director designated by a person
who has entered into an agreement with the Company or Holdings to effect the
transaction described in clause (a) of this Section) whose election by the
Company's or Holdings' Board of Directors or nomination for election by the
Company's or Holdings' stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority
thereof.
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9. Restrictions and Obligations of the Executive.
(a) Consideration for Restrictions and Covenants. The
parties hereto acknowledge and agree that the principal consideration for the
agreement to make the payments provided in this Agreement by the Company to
Executive and the grant to the Executive options to purchase common stock of the
Company ("Common Stock") is the Executive's compliance with the undertakings set
forth in this Section 9. Specifically, the Executive agrees to comply with the
provisions of this Section 9 irrespective of whether the Executive is entitled
to receive any such payments.
(b) Confidentiality. The confidential and proprietary
information and, in any material respect, trade secrets of the Company are among
its most valuable assets, including but not limited to, its customer and vendor
lists, database, engineering, computer programs, frameworks, models, its
marketing programs, its sales, financial, marketing, training and technical
information, and any other information, whether communicated orally,
electronically, in writing or in other tangible forms concerning how the Company
creates, develops, acquires or maintains its products and marketing plans,
targets its potential customers and operates its retail and other businesses.
The Company invested, and continues to invest, considerable amounts of time and
money in its process, technology, know-how, obtaining and developing the
goodwill of its customers, its other external relationships, its data systems
and data bases, and all the information described above (hereinafter
collectively referred to as "Confidential Information"), and any
misappropriation or unauthorized disclosure of Confidential Information in any
form would irreparably harm the Company. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all Confidential Information relating
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to the Company and its business, which shall have been obtained by the Executive
during the Executive's employment by the Company and which shall not be or
become public knowledge (other than by acts by the Executive or representatives
of the Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate, divulge or use any such information, knowledge or
data to anyone other than the Company and those designated by it.
(c) Non-Solicitation or Hire. During the stated term of
this Agreement (as set forth in Section 2) (the "Employment Period") and for a
two-year period following the termination of the Executive's employment for any
reason, the Executive shall not, directly or indirectly (i) employ or seek to
employ any person who is at the date of termination, or was at any time within
the six-month period preceding the date of termination, an officer, general
manager or director or equivalent or more senior level employee of the Company
or any of its subsidiaries or otherwise solicit, encourage, cause or induce any
such employee of the Company or any of its subsidiaries to terminate such
employee's employment with the Company or such subsidiary for the employment of
another company (including for this purpose the contracting with any person who
was an independent contractor (excluding consultant) of the Company during such
period) or (ii) take any action that would interfere with the relationship of
the Company or its subsidiaries with their suppliers or customers without, in
either case, the prior written consent of the Company's Board of Directors, or
engage in any other action or business that would have a material adverse effect
on the Company.
(d) Non-Competition. (i) During the Employment Period and
for a four-year period (the "Restriction Period") following the termination of
the Executive's
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employment for any reason other than a termination by the Company without Cause,
the Executive shall not, directly or indirectly:
(x) engage in any managerial, administrative,
advisory, consulting, operational or sales activities in a Restricted Business
anywhere in the Restricted Area, including, without limitation, as a director or
partner of such Restricted Business, or
(y) organize, establish, operate, own, manage,
control or have a direct or indirect investment or ownership interest in a
Restricted Business or in any corporation, partnership (limited or general),
limited liability company enterprise or other business entity that engages in a
Restricted Business anywhere in the Restricted Area; and
(ii) Nothing contained in this Section 9 shall
prohibit or otherwise restrict the Executive from acquiring or owning, directly
or indirectly, for passive investment purposes not intended to circumvent this
Agreement, securities of any entity engaged, directly or indirectly, in a
Restricted Business if either (i) such entity is a public entity and the
Executive (A) is not a controlling Person of, or a member of a group that
controls, such entity and (B) owns, directly or indirectly, no more than 3% of
any class of equity securities of such entity or (ii) such entity is not a
public entity and the Executive (A) is not a controlling Person of, or a member
of a group that controls, such entity and (B) does not own, directly or
indirectly, more than 1% of any class of equity securities of such entity.
(e) Definitions. For purposes of this Section 9:
(i) "Restricted Business" means the business of
designing, manufacturing, servicing, operating, marketing, assembling, renting
or leasing of air or gas compressors or devices using comparable technologies or
other business in which Holdings or its subsidiaries may be engaged during the
term of Executive's employment with the Company. To
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the extent that any entity is primarily engaged in a business other than a
Restricted Business, the term "Restricted Business" shall mean the operations,
division, segment or subsidiary of such entity that is engaged in any Restricted
Business.
(ii) "Restricted Area" means any country in which
Holdings or its subsidiaries engages in any Restricted Business at any time
during the term of Executive's employment with the Company.
10. Other Provisions.
10.1. Mitigation. Except as provided in Section 7(d)
hereof, the Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for in Section 7 be
reduced by any compensation earned by the Executive as the result of employment
by another employer, by retirement benefits, by offset against any amount
claimed to be owed by the Executive to the Company, or otherwise.
10.2. Notices. Any notice or other communication required
or which may be given hereunder shall be in writing and shall be delivered
personally, telegraphed, telexed, sent by facsimile transmission or sent by
certified, registered or express mail, postage prepaid, and shall be deemed
given when so delivered personally, telegraphed, telexed, or sent by
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facsimile transmission or, if mailed, four days after the date of mailing, as
follows:
(a) If the Company, to:
4430 Brittmoore
Houston, Texas 77041
Attention: Board of Directors
With copies to:
Castle Harlan, Inc.
150 E. 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Andre Weiss, Esq.
(b) If the Executive, to his home address set forth in the
records of the Company.
10.3 Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect thereto.
10.4 Waiver and Amendments. This Agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any
right, power or privilege hereunder, nor any single or partial exercise of any
right, power or
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privilege hereunder, preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.
10.5 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of Delaware.
10.6 Assignability. This Agreement, and the Executive's
rights and obligations hereunder, may not be assigned by the Executive. The
Company may assign this Agreement and its rights, together with its obligations,
to any other entity which will substantially carry on the business of the
Company.
10.7 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart.
10.8 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein.
10.9 Remedies; Specific Performance. The parties hereto
hereby acknowledge that the provisions of Section 9 are reasonable and necessary
for the protection of the Company. In addition, the Executive further
acknowledges that the Company will be irrevocably damaged if such covenants are
not specifically enforced. Accordingly, the Executive agrees that, in addition
to any other relief to which the Company may be entitled, the Company will be
entitled to seek and obtain injunctive relief (without the requirement of any
bond) from a court of competent jurisdiction for the purposes of restraining the
Executive from any actual or threatened breach of such covenants. In addition,
without limiting the Company's remedies for any breach of any restriction on the
Executive set forth in Section 9, except as required by law, the
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Executive shall not be entitled to any payments set forth in Section 6 hereof if
the Executive breaches any of the covenants applicable to the Executive
contained in Section 9, the Executive will immediately return to the Company any
such payments previously received under Section 7 upon such a breach, and, in
the event of such breach, the Company will have no obligation to pay any of the
amounts that remain payable by the Company under Section 6.
10.10 Severability. If any term, provision, covenant or
restriction of this Agreement, or any part thereof, is held by a court of
competent jurisdiction of any foreign, federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority to be invalid, void, unenforceable or against public policy for any
reason, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected or impaired or invalidated. The Executive acknowledges that the
restrictive covenants contained in Section 9 are a condition of this Agreement
and are reasonable and valid in geographical and temporal scope and in all other
respects.
10.11 Judicial Modification. If any court or arbitrator
determines that any of the covenants in Section 9, or any part of any of them,
is invalid or unenforceable, the remainder of such covenants and parts thereof
shall not thereby be affected and shall be given full effect, without regard to
the invalid portion. If any court or arbitrator determines that any of such
covenants, or any part thereof, is invalid or unenforceable because of the
geographic or temporal scope of such provision, such court or arbitrator shall
reduce such scope to the minimum extent necessary to make such covenants valid
and enforceable.
10.12 Management Subscription Agreement. The Executive
hereby agrees that, as further consideration for receipt of the opportunity
offered by this Agreement, he will
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purchase the number of shares of Series A Preferred Stock and Common Stock of
Holdings as set forth in the Management Subscription Agreement dated as of the
date hereof.
11. Arbitration.
Any controversy or claim arising out of or in connection
with this Agreement (other than pursuant to Section 9) shall be settled by
arbitration in accordance with the rules then obtaining of the American
Arbitration Association. Such controversies shall be submitted to three
arbitrators, one arbitrator being selected by the Company, one arbitrator being
selected by the Executive, and the third being selected by the two so selected
by the Company and the Executive or, if they cannot agree upon a third, by the
American Arbitration Association. In the event that either the Company or the
Executive, within one month after any notification of any demand for arbitration
hereunder, shall not have selected its arbitrator and given notice thereof by
registered or certified mail to the other, such arbitrator shall be selected by
the American Arbitration Association. Confirmation of any award in any such
arbitration may be held in any court having jurisdiction of the person against
whom such award is rendered. Regardless of the circumstances giving rise to the
need for arbitration, until such arbitration shall be finally determined and
ended, the Base Salary of the Executive pursuant to Section 3.1, subject to the
provisions of Sections 6 and 7, shall be paid monthly until the expiration of
the term of this Agreement. If the results of such arbitration are more
favorable to the position taken by the Executive than that taken by the Company,
in the opinion of the arbitrators, then all costs and expenses incurred by the
Executive in connection with such arbitration shall be paid by the Company. In
the event that the arbitrators make a formal finding that the Executive did not
have a reasonable basis for instituting the proceeding, contest or dispute
giving rise to such arbitration,
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the Executive shall pay to the Company its reasonable legal fees and expenses
incurred in the defense of the proceeding, contest or dispute giving rise to
such arbitration.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have executed this Agreement as of the day and year first above
mentioned.
EXECUTIVE
/s/ Thomas E. Hartford
___________________________________
Thomas E. Hartford
UNIVERSAL COMPRESSION, INC.
By: /s/ Ernie Danner
______________________________
Title: ___________________________
UNIVERSAL COMPRESSION
HOLDINGS, INC.
By: /s/ Ernie Danner
______________________________
Title: ___________________________
<PAGE>
EMPLOYMENT AGREEMENT
DATED AS OF
February 20, 1998
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") dated as of February 20,
1998 between Universal Compression, Inc., a Texas corporation (the "Company"),
Universal Compression Holdings, Inc., a Delaware corporation ("Holdings") and
Newton Schnoor (the "Executive").
WHEREAS, Tidewater, Inc. ("Tidewater") has agreed to sell
Tidewater Compression Service, Inc. ("TCS") to TW Acquisition Corporation ("TW")
pursuant to the Stock Purchase Agreement, dated as of December 18, 1997, between
TW and Tidewater (the "Stock Purchase Agreement");
WHEREAS, TW is a direct wholly-owned subsidiary of Holdings;
WHEREAS, immediately after consummation of such sale (the
"Closing"), TW will be merged into TCS and TCS will change its name to Universal
Compression, Inc.;
WHEREAS, the parties wish to terminate all prior employment
agreements upon the effective date of this Agreement; and
WHEREAS, the parties wish to establish the terms of
Executive's future employment with the Company.
Accordingly, the parties agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company
shall employ the Executive effective upon the date of Closing (the "Closing
Date"), for itself and its affiliates, to render exclusive and full-time
services to the Company. The Executive will serve in the capacity
<PAGE>
of Senior Vice President of the Company. The Executive will perform such duties
as are imposed on the holder of that office by the By-laws of the Company and
such other duties as are customarily performed by one holding such positions in
the same or similar businesses or enterprises as those of the Company. The
Executive will perform such other duties as may be assigned to him from time to
time by the Company's President. The Executive will devote all his full
working-time and attention to the performance of such duties and to the
promotion of the business and interests of the Company. This provision, however,
will not prevent the Executive from investing his funds or assets in any form or
manner, or from acting as a member of the board of directors of any companies,
businesses, or charitable organizations, so long as such investments or
companies do not compete with the Company and Holdings.
1.2 Acceptance of Employment by the Executive.
The Executive accepts such employment and shall render the services described
above. If requested, the Executive agrees, in addition, to render, without
additional compensation, the services described above in the capacity of Senior
Vice President of Holdings.
2. Duration of Employment.
This Agreement and the employment relationship hereunder
will continue in effect for three (3) years from the Closing Date through the
third anniversary date thereof. It may be extended by mutual, written agreement
at any time. Notwithstanding the foregoing, in the event that a "Change in
Control" (as herein defined) occurs during the original or any extended term of
this Agreement, this Agreement shall automatically be extended to a date which
is the second anniversary of such Change in Control. In addition, the provisions
of Section 7 relating to a Change in Control will, notwithstanding the
expiration of this Agreement, continue
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until the Board of Directors terminates said provision. In the event of the
Executive's termination of employment during the term of this Agreement, the
Company's obligation to continue to pay all base salary, bonus and other
benefits then accrued shall terminate except as may be provided for in Sections
6.1, 6.2, 6.3, 6.4, and 7 of this Agreement.
3. Compensation by the Company.
3.1 Base Salary. As compensation for all services
rendered pursuant to this Agreement, the Company will pay to the Executive an
annual base salary ("Base Salary") of NINETY THOUSAND DOLLARS ($90,000), payable
in equal semi-monthly installments of $3,750. The Board of Directors in its sole
discretion may increase but not reduce the Base Salary. The Board of Directors
of the Company will review Executive's Base Salary within six months after the
effective date hereof.
3.2. Bonuses. The Executive shall be entitled
to receive from the Company an annual cash bonus on or before 60 days after the
end of each of the Company's fiscal years (including partial years on a pro-rata
basis) in a target amount equal to 50% of Base Salary based upon awards or
formulas determined by the Compensation Committee of the Board of Directors of
the Company (the "Compensation Committee") and the President of the Company (in
the case of 1998, within 90 days of the Closing Date). Such award or formula
shall be based upon the Company's results in relation to budget.
3.3 Grant of Stock Option. (a) The Executive is
hereby granted an option that will expire on the tenth anniversary date of the
date hereof pursuant to the Stock Option Agreement attached as Exhibit A hereto
to purchase from Holdings 2,206 shares of Holdings Common Stock at an exercise
price of $50 per share.
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(b) The Company and Holdings have adopted an
Incentive Stock Option Plan which provides for the grant of stock options
which are "qualified" or "Incentive Stock Options" under Section 422 of the Code
as well as options that are not so qualified. The Option as is granted to the
Executive under Section 3.3(a) shall become exercisable to the maximum extent
permissible under such Plan, such option shall be deemed an Incentive Stock
Option and the balance, if any, of such option shall be deemed a Non-Qualified
Stock Option, in each case, under such Plan.
3.4 Participation in Employee Benefit Plans. The
Executive shall be permitted, during the term of this Agreement, if and to the
extent eligible, to participate in any group life, hospitalization or disability
insurance plan, health program, pension plan or similar benefit plan of the
Company, which may be available to other executives of the Company generally, on
the same terms as such other executives. Such plan shall be put into place by
the Compensation Committee no later than 90 days after the Closing Date.
Executive shall be entitled to paid vacation and all customary holidays each
year during the term of this Agreement in accordance with the Company's policies
as the same may be established from time to time. Promptly following the
execution of this Agreement, the Company shall establish a nonqualified
Supplemental Savings Plan which provides benefits that the Executive would have
otherwise accrued under Tidewater's Supplemental Savings Plan but for the
limitations imposed under Section 415 of the Internal Revenue Code of 1986, as
amended (the "Code").
3.5 Profit Sharing Plan. During the term of this
Agreement, Executive shall not participate in the Company's nonqualified cash
profit sharing plan applicable to employees generally.
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3.6 Club Membership. During the term of this
Agreement, the Company shall pay or reimburse the Executive for the initiation
fee and membership dues of a private club selected by the Executive upon
presentation of statements or vouchers or such other supporting information as
may be required.
4. [INTENTIONALLY OMITTED]
5. Registration Rights.
In consideration, in part, for Executive's agreement
hereunder to be employed by the Company and Holdings, Holdings is granting
Executive certain rights to register his shares of Common Stock pursuant to a
Registration Rights Agreement with the Executive being entered into concurrently
herewith.
6. Termination.
6.1 Termination Upon Death. If the Executive dies
during the term hereof, the Executive's legal representatives shall be
entitled to receive the Executive's Base Salary and accrued bonus for the period
ending on the last day of the month in which the death of the Executive occurs.
In the event of the Executive's death during the term of this Agreement, the
Company shall purchase from the Executive's estate or legal representatives any
and all shares of Holdings stock which the Executive owned and for each share of
Holdings stock subject to an unexercised option shall pay an amount equal to the
excess of the per share amount determined pursuant to the next sentence over the
exercise price for such option. The Company shall purchase said stock within 60
days after the death of the Executive at a price based upon a formula to be
agreed upon within 90 days of the Closing Date. Notwithstanding the foregoing,
the Company's obligation to purchase and/or pay shall be suspended for any
period that the
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Company or Holdings is precluded by any credit agreement or similar facility to
which either of them is a party from making such purchase or payment. Such
amount shall accrue interest until paid at the rate of 6% per annum. The Company
agrees that it will maintain insurance on the life of the Executive in an amount
reasonably determined by the Company to be sufficient to avoid the suspension
described in the preceding sentence.
6.2 Termination Upon Disability. If during the term of
this Agreement the Executive meets the requirements for physical or mental
disability under the Company's long-term disability plan and is eligible to
receive benefits thereunder, the Company may at any time prior to the
Executive's recovery but after the last day of the sixth consecutive month of
such disability, by written notice to the Executive, terminate the Executive's
employment hereunder. In the event that the Executive's employment is terminated
due to disability, the Company will offer to loan to the Executive an amount
equal to the amount necessary to exercise all unexercised options held by the
Executive, with interest accruing monthly at a rate equal to the prime rate, as
published in the Wall Street Journal on the date the loan is made, plus 1%, and
providing for a single payment of principal and interest at a date three years
from the date of the loan.
Additionally, in such event, Executive (or his legal
representatives) shall be entitled to receive the Executive's Base Salary and
accrued bonus for the period ending on the date such termination occurred.
Nothing in this Section 6.2 shall be deemed to in any way affect the Executive's
right to participate in any disability plan maintained by the Company and for
which the Executive is otherwise eligible.
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6.3 Termination for Cause. The Executive's employment
hereunder may be terminated by the Company for "Cause" (as herein defined) upon
at least thirty (30) days' prior written notice to the Executive. Termination
for Cause shall mean termination by reason of (a) the willful and continued
failure by Executive to substantially perform his duties with the Company (other
than any such failure resulting from his incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to the
Executive by the President or Board of Directors, which demand specifically
identifies the manner in which the Executive is believed not to have
substantially performed his duties, or (b) the Executive's willful engagement in
conduct which is or is likely to become demonstrably and materially injurious to
the Company, monetarily or otherwise. For purposes of this Section, no act, or
failure to act, on the part of the Executive shall be deemed "willful" unless
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that his action or omission was in the best interests of the
Company. Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for Cause unless and until there has been delivered to him
a copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the entire membership of the Board of Directors at a meeting of the
Board of Directors called and held for such purpose (after reasonable notice to
the Executive and an opportunity for the Executive, together with his counsel,
to be heard before the Board of Directors), finding that in the good faith
opinion of the Board of Directors the Executive was guilty of conduct of the
type set forth above in this Section and specifying the particulars thereof in
detail.
Upon termination for Cause hereunder the Executive shall
be entitled to receive the Executive's Base Salary through the date of
termination.
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6.4 Voluntary Termination. The Executive may upon at
least sixty (60) days' prior written notice to the Company terminate employment
hereunder. Upon a voluntary termination the Executive shall be entitled to
receive the Executive's base salary through the date of termination.
7. Severance.
(a) If, prior to the expiration of this Agreement,
the Company breaches this Agreement by terminating the Executive's employment
for any reason other than Cause (a "Breach"), or during the two year period next
following a "Change in Control" (as herein defined) the Executive's employment
with the Company is terminated for reasons other than death, disability or Cause
("Termination Upon Change in Control"), in lieu of additional salary payments to
the Executive for periods subsequent to the date of such termination, the
Company shall pay a lump sum severance payment (together with the payments
provided in paragraph (c) below, the "Severance Payments") to the Executive at
the time of termination. Such payment shall be an amount equal to the number of
years, including fractional years, remaining until this Agreement would expire
but for such termination (in any event however, the period shall be not less
than two years nor more than the number of years, including the fractional
years, from the date of such termination until the Executive's attainment of age
65) multiplied by the sum of (A) the Executive's Base Salary rate as in effect
as of the date of termination and (B) the average of the bonus amounts awarded
or due to the Executive pursuant to Section 3.2 of this Agreement. Payment of
Severance Payments provided under this Section 7 in the event of a termination
which constitutes a Breach by the Company will not prohibit Executive from
seeking
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enforcement of the remaining provisions of this Agreement or other remedies for
breach of this Agreement.
(b) In determining the amount of payments due under
any incentive plan or other bonus plan in effect for the year in which the
Executive is terminated as a result of a Breach or Termination Upon Change in
Control, the Company shall pay the Executive at the time of termination a
pro-rata portion of all contingent awards granted under such plans for all
uncompleted periods, assuming for this purpose that the amount of each award
that would have been paid upon the completion of such period would at least
equal the pro rata amount of the greater of the target or maximum bonus, if any,
provided for in such plan.
(c) The Company shall pay the Executive all
reasonable legal fees and expenses incurred by the Executive as a result of such
termination (including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement), unless the decision-maker in
any proceeding, contest or dispute arising hereunder makes a formal finding that
the Executive did not have a reasonable basis for instituting such proceeding,
contest or dispute, in which event the Executive shall pay to the Company its
reasonable legal fees and expenses incurred in the defense of such proceeding,
contest or dispute.
(d) For the length of the period for which
severance benefits are provided after any termination pursuant to this Section
7, the Company shall arrange to provide the Executive with life, disability,
accident and group health insurance benefits substantially similar to those
which the Executive was receiving immediately prior to the notice of
termination. Benefits otherwise receivable by the Executive pursuant to this
paragraph (d) shall
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be reduced to the extent comparable benefits are actually received by the
Executive during the period following the Executive's termination, and any such
benefits actually received by the Executive shall be reported to the Company.
(e) Nothing contained in this Section 7 shall
prevent the Executive from receiving any and all benefits payable under any
severance benefit plan or program maintained by the Company to which the
Executive is entitled.
8. Definition of Change in Control.
For purposes of this Agreement a "Change in Control"
shall be deemed to have occurred upon the first to occur of the following
events:
(a) any "person," as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than (i) the Company, or (ii) any corporation owned,
directly or indirectly, by the stockholders of the Company or Holdings in
substantially the same proportions as their ownership of stock of the Company or
Holdings, or (iii) Castle Harlan, Inc. or its affiliates), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company or Holdings representing more than
50% of the combined voting power of the Company's or Holdings' then outstanding
securities; or
(b) during any period of two consecutive years
(not including any period prior to the execution of this Agreement), individuals
who at the beginning of such period constitute the Company's or Holdings' Board
of Directors, and any new director (other than a director designated by a person
who has entered into an agreement with the Company or Holdings to effect the
transaction described in clause (a) of this Section) whose election by the
Company's or Holdings' Board of Directors or nomination for election by the
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Company's or Holdings' stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority
thereof.
9. Restrictions and Obligations of the Executive.
(a) Consideration for Restrictions and Covenants.
The parties hereto acknowledge and agree that the principal consideration for
the agreement to make the payments provided in this Agreement by the Company to
Executive and the grant to the Executive options to purchase common stock of the
Company ("Common Stock") is the Executive's compliance with the undertakings set
forth in this Section 9. Specifically, the Executive agrees to comply with the
provisions of this Section 9 irrespective of whether the Executive is entitled
to receive any such payments.
(b) Confidentiality. The confidential and
proprietary information and, in any material respect, trade secrets of the
Company are among its most valuable assets, including but not limited to, its
customer and vendor lists, database, engineering, computer programs, frameworks,
models, its marketing programs, its sales, financial, marketing, training and
technical information, and any other information, whether communicated orally,
electronically, in writing or in other tangible forms concerning how the Company
creates, develops, acquires or maintains its products and marketing plans,
targets its potential customers and operates its retail and other businesses.
The Company invested, and continues to invest, considerable amounts of time and
money in its process, technology, know-how, obtaining and
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developing the goodwill of its customers, its other external relationships, its
data systems and data bases, and all the information described above
(hereinafter collectively referred to as "Confidential Information"), and any
misappropriation or unauthorized disclosure of Confidential Information in any
form would irreparably harm the Company. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all Confidential Information relating to
the Company and its business, which shall have been obtained by the Executive
during the Executive's employment by the Company and which shall not be or
become public knowledge (other than by acts by the Executive or representatives
of the Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate, divulge or use any such information, knowledge or
data to anyone other than the Company and those designated by it.
(c) Non-Solicitation or Hire. During the stated
term of this Agreement (as set forth in Section 2) (the "Employment Period") and
for a two-year period following the termination of the Executive's employment
for any reason, the Executive shall not, directly or indirectly (i) employ or
seek to employ any person who is at the date of termination, or was at any time
within the six-month period preceding the date of termination, an officer,
general manager or director or equivalent or more senior level employee of the
Company or any of its subsidiaries or otherwise solicit, encourage, cause or
induce any such employee of the Company or any of its subsidiaries to terminate
such employee's employment with the Company or such subsidiary for the
employment of another company (including for this purpose the contracting with
any person who was an independent contractor (excluding consultant) of the
Company
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during such period) or (ii) take any action that would interfere with the
relationship of the Company or its subsidiaries with their suppliers or
customers without, in either case, the prior written consent of the Company's
Board of Directors, or engage in any other action or business that would have a
material adverse effect on the Company.
(d) Non-Competition. (i) During the Employment
Period and for a four-year period (the "Restriction Period") following the
termination of the Executive's employment for any reason other than a
termination by the Company without Cause, the Executive shall not, directly or
indirectly:
(x) engage in any managerial,
administrative, advisory, consulting, operational or sales activities in a
Restricted Business anywhere in the Restricted Area, including, without
limitation, as a director or partner of such Restricted Business, or
(y) organize, establish, operate, own,
manage, control or have a direct or indirect investment or ownership interest in
a Restricted Business or in any corporation, partnership (limited or general),
limited liability company enterprise or other business entity that engages in a
Restricted Business anywhere in the Restricted Area; and
(ii) Nothing contained in this Section 9
shall prohibit or otherwise restrict the Executive from acquiring or owning,
directly or indirectly, for passive investment purposes not intended to
circumvent this Agreement, securities of any entity engaged, directly or
indirectly, in a Restricted Business if either (i) such entity is a public
entity and the Executive (A) is not a controlling Person of, or a member of a
group that controls, such entity and (B) owns, directly or indirectly, no more
than 3% of any class of equity securities of such entity or (ii) such entity is
not a public entity and the Executive (A) is not a controlling Person of,
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or a member of a group that controls, such entity and (B) does not own, directly
or indirectly, more than 1% of any class of equity securities of such entity.
(e) Definitions. For purposes of this Section 9:
(i) "Restricted Business" means the
business of designing, manufacturing, servicing, operating, marketing,
assembling, renting or leasing of air or gas compressors or devices using
comparable technologies or other business in which Holdings or its subsidiaries
may be engaged during the term of Executive's employment with the Company. To
the extent that any entity is primarily engaged in a business other than a
Restricted Business, the term "Restricted Business" shall mean the operations,
division, segment or subsidiary of such entity that is engaged in any Restricted
Business.
(ii) "Restricted Area" means any country in
which Holdings or its subsidiaries engages in any Restricted Business at any
time during the term of Executive's employment with the Company.
10. Other Provisions.
10.1. Mitigation. Except as provided in Section
7(d) hereof, the Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for in Section 7 be
reduced by any compensation earned by the Executive as the result of employment
by another employer, by retirement benefits, by offset against any amount
claimed to be owed by the Executive to the Company, or otherwise.
10.2. Notices. Any notice or other communication
required or which may be given hereunder shall be in writing and shall be
delivered personally, telegraphed,
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telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid, and shall be deemed given when so delivered
personally, telegraphed, telexed, or sent by facsimile transmission or, if
mailed, four days after the date of mailing, as follows:
(a) If the Company, to:
4430 Brittmoore
Houston, Texas 77041
Attention: Board of Directors
With copies to:
Castle Harlan, Inc.
150 E. 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Andre Weiss, Esq.
(b) If the Executive, to his home address set
forth in the records of the Company.
10.3 Entire Agreement. This Agreement contains the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements, written or oral, with respect thereto.
10.4 Waiver and Amendments. This Agreement may be
amended, modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any
right, power or
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privilege hereunder, nor any single or partial exercise of any
right, power or privilege hereunder, preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.
10.5 Governing Law. This Agreement shall be
governed and construed in accordance with the laws of Delaware.
10.6 Assignability. This Agreement, and the
Executive's rights and obligations hereunder, may not be assigned by the
Executive. The Company may assign this Agreement and its rights, together with
its obligations, to any other entity which will substantially carry on the
business of the Company.
10.7 Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
10.8 Headings. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein.
10.9 Remedies; Specific Performance. The parties
hereto hereby acknowledge that the provisions of Section 9 are reasonable and
necessary for the protection of the Company. In addition, the Executive further
acknowledges that the Company will be irrevocably damaged if such covenants are
not specifically enforced. Accordingly, the Executive agrees that, in addition
to any other relief to which the Company may be entitled, the Company will be
entitled to seek and obtain injunctive relief (without the requirement of any
bond) from a court of competent jurisdiction for the purposes of restraining the
Executive from any actual or threatened breach of such covenants. In addition,
without limiting the Company's remedies for
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any breach of any restriction on the Executive set forth in Section 9, except as
required by law, the Executive shall not be entitled to any payments set forth
in Section 6 hereof if the Executive breaches any of the covenants applicable to
the Executive contained in Section 9, the Executive will immediately return to
the Company any such payments previously received under Section 7 upon such a
breach, and, in the event of such breach, the Company will have no obligation to
pay any of the amounts that remain payable by the Company under Section 6.
10.10 Severability. If any term, provision,
covenant or restriction of this Agreement, or any part thereof, is held by a
court of competent jurisdiction of any foreign, federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority to be invalid, void, unenforceable or against public policy for any
reason, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected or impaired or invalidated. The Executive acknowledges that the
restrictive covenants contained in Section 9 are a condition of this Agreement
and are reasonable and valid in geographical and temporal scope and in all other
respects.
10.11 Judicial Modification. If any court or
arbitrator determines that any of the covenants in Section 9, or any part of any
of them, is invalid or unenforceable, the remainder of such covenants and parts
thereof shall not thereby be affected and shall be given full effect, without
regard to the invalid portion. If any court or arbitrator determines that any of
such covenants, or any part thereof, is invalid or unenforceable because of the
geographic or temporal scope of such provision, such court or arbitrator shall
reduce such scope to the minimum extent necessary to make such covenants valid
and enforceable.
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<PAGE>
11. Arbitration.
Any controversy or claim arising out of or in connection
with this Agreement (other than pursuant to Section 9) shall be settled by
arbitration in accordance with the rules then obtaining of the American
Arbitration Association. Such controversies shall be submitted to three
arbitrators, one arbitrator being selected by the Company, one arbitrator being
selected by the Executive, and the third being selected by the two so selected
by the Company and the Executive or, if they cannot agree upon a third, by the
American Arbitration Association. In the event that either the Company or the
Executive, within one month after any notification of any demand for arbitration
hereunder, shall not have selected its arbitrator and given notice thereof by
registered or certified mail to the other, such arbitrator shall be selected by
the American Arbitration Association. Confirmation of any award in any such
arbitration may be held in any court having jurisdiction of the person against
whom such award is rendered. Regardless of the circumstances giving rise to the
need for arbitration, until such arbitration shall be finally determined and
ended, the Base Salary of the Executive pursuant to Section 3.1, subject to the
provisions of Sections 6 and 7, shall be paid monthly until the expiration of
the term of this Agreement. If the results of such arbitration are more
favorable to the position taken by the Executive than that taken by the Company,
in the opinion of the arbitrators, then all costs and expenses incurred by the
Executive in connection with such arbitration shall be paid by the Company. In
the event that the arbitrators make a formal finding that the Executive did not
have a reasonable basis for instituting the proceeding, contest or dispute
giving rise to such arbitration, the Executive shall pay to the Company its
reasonable legal fees and expenses incurred in the defense of the proceeding,
contest or dispute giving rise to such arbitration.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have executed this Agreement as of the day and year first
above mentioned.
EXECUTIVE
/s/ Newton Schnoor
---------------------------------------
Newton Schnoor
UNIVERSAL COMPRESSION, INC.
By: /s/ Ernie Danner
------------------------------------
Title:
--------------------------------
UNIVERSAL COMPRESSION
HOLDINGS, INC.
By: /s/ Ernie Danner
------------------------------------
Title:
---------------------------------
<PAGE>
EMPLOYMENT AGREEMENT
DATED AS OF
February 20, 1998
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") dated as of February 20, 1998
between Universal Compression, Inc., a Texas corporation (the "Company"),
Universal Compression Holdings, Inc., a Delaware corporation ("Holdings") and
Robert Ryan (the "Executive").
WHEREAS, Tidewater, Inc. ("Tidewater") has agreed to sell Tidewater
Compression Service, Inc. ("TCS") to TW Acquisition Corporation ("TW") pursuant
to the Stock Purchase Agreement, dated as of December 18, 1997, between TW and
Tidewater (the "Stock Purchase Agreement");
WHEREAS, TW is a direct wholly-owned subsidiary of Holdings;
WHEREAS, immediately after consummation of such sale (the "Closing"),
TW will be merged into TCS and TCS will change its name to Universal
Compression, Inc.;
WHEREAS, the parties wish to terminate all prior employment agreements
upon the effective date of this Agreement; and
WHEREAS, the parties wish to establish the terms of Executive's future
employment with the Company.
Accordingly, the parties agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company shall employ the
Executive effective upon the date of Closing (the "Closing Date"), for itself
and its affiliates, to render exclusive and full-time services to the Company.
The Executive will serve in the capacity
<PAGE>
of Senior Vice President of the Company. The Executive will perform such duties
as are imposed on the holder of that office by the By-laws of the Company and
such other duties as are customarily performed by one holding such positions in
the same or similar businesses or enterprises as those of the Company. The
Executive will perform such other duties as may be assigned to him from time to
time by the Company's President. The Executive will devote all his full
working-time and attention to the performance of such duties and to the
promotion of the business and interests of the Company. This provision, however,
will not prevent the Executive from investing his funds or assets in any form or
manner, or from acting as a member of the board of directors of any companies,
businesses, or charitable organizations, so long as such investments or
companies do not compete with the Company and Holdings.
1.2 Acceptance of Employment by the Executive. The Executive
accepts such employment and shall render the services described above. If
requested, the Executive agrees, in addition, to render, without additional
compensation, the services described above in the capacity of Senior Vice
President of Holdings.
2. Duration of Employment.
This Agreement and the employment relationship hereunder will
continue in effect for three (3) years from the Closing Date through the third
anniversary date thereof. It may be extended by mutual, written agreement at any
time. Notwithstanding the foregoing, in the event that a "Change in Control" (as
herein defined) occurs during the original or any extended term of this
Agreement, this Agreement shall automatically be extended to a date which is the
second anniversary of such Change in Control. In addition, the provisions of
Section 7 relating to a Change in Control will, notwithstanding the expiration
of this Agreement, continue until the Board of Directors terminates said
provision. In the event of the Executive's
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termination of employment during the term of this Agreement, the Company's
obligation to continue to pay all base salary, bonus and other benefits then
accrued shall terminate except as may be provided for in Sections 6.1, 6.2, 6.3,
6.4, and 7 of this Agreement .
3. Compensation by the Company.
3.1 Base Salary. As compensation for all services rendered
pursuant to this Agreement, the Company will pay to the Executive an annual base
salary ("Base Salary") of ONE HUNDRED THOUSAND DOLLARS ($100,000), payable in
equal semi-monthly installments of $4,166.66. The Board of Directors in its sole
discretion may increase but not reduce the Base Salary. The Board of Directors
of the Company will review Executive's Base Salary within six months after the
effective date hereof.
3.2. Bonuses. The Executive shall be entitled to receive from the
Company an annual cash bonus on or before 60 days after the end of each of the
Company's fiscal years (including partial years on a pro-rata basis) in a target
amount equal to 50% of Base Salary based upon awards or formulas determined by
the Compensation Committee of the Board of Directors of the Company (the
"Compensation Committee") and the President of the Company (in the case of 1998,
within 90 days of the Closing Date). Such award or formula shall be based upon
the Company's results in relation to budget.
3.3 Grant of Stock Option. (a) The Executive is hereby
granted an option that will expire on the tenth anniversary date of the date
hereof pursuant to the Stock Option Agreement attached as Exhibit A hereto to
purchase from Holdings 2,206 shares of Holdings Common Stock at an exercise
price of $50 per share.
(b) The Company and Holdings have adopted an Incentive Stock
Option Plan which provides for the grant of stock options which are "qualified"
or "Incentive Stock
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<PAGE>
Options" under Section 422 of the Code as well as options that are not so
qualified. The Option as is granted to the Executive under Section 3.3(a) shall
become exercisable to the maximum extent permissible under such Plan, such
option shall be deemed an Incentive Stock Option and the balance, if any, of
such option shall be deemed a Non-Qualified Stock Option, in each case, under
such Plan.
3.4 Participation in Employee Benefit Plans. The Executive
shall be permitted, during the term of this Agreement, if and to the extent
eligible, to participate in any group life, hospitalization or disability
insurance plan, health program, pension plan or similar benefit plan of the
Company, which may be available to other executives of the Company generally, on
the same terms as such other executives. Such plan shall be put into place by
the Compensation Committee no later than 90 days after the Closing Date.
Executive shall be entitled to paid vacation and all customary holidays each
year during the term of this Agreement in accordance with the Company's policies
as the same may be established from time to time. Promptly following the
execution of this Agreement, the Company shall establish a nonqualified
Supplemental Savings Plan which provides benefits that the Executive would have
otherwise accrued under Tidewater's Supplemental Savings Plan but for the
limitations imposed under Section 415 of the Internal Revenue Code of 1986, as
amended (the "Code").
3.5 Profit Sharing Plan. During the term of this Agreement,
Executive shall not participate in the Company's nonqualified cash profit
sharing plan applicable to employees generally.
3.6 Club Membership. During the term of this Agreement, the
Company shall pay or reimburse the Executive for the initiation fee and
membership dues of a
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<PAGE>
private club selected by the Executive upon presentation of statements or
vouchers or such other supporting information as may be required.
4. [INTENTIONALLY OMITTED]
5. Registration Rights.
In consideration, in part, for Executive's agreement hereunder to
be employed by the Company and Holdings, Holdings is granting Executive certain
rights to register his shares of Common Stock pursuant to a Registration Rights
Agreement with the Executive being entered into concurrently herewith.
6. Termination.
6.1 Termination Upon Death. If the Executive dies during
the term hereof, the Executive's legal representatives shall be entitled to
receive the Executive's base salary and accrued bonus for the period ending on
the last day of the month in which the death of the Executive occurs. In the
event of the Executive's death during the term of this Agreement, the Company
shall purchase from the Executive's estate or legal representatives any and all
shares of Holdings stock which the Executive owned and for each share of
Holdings stock subject to an unexercised option shall pay an amount equal to the
excess of the per share amount determined pursuant to the next sentence over the
exercise price for such option. The Company shall purchase said stock within 60
days after the death of the Executive at a price based upon a formula to be
agreed upon within 90 days of the Closing Date. Notwithstanding the foregoing,
the Company's obligation to purchase and/or pay shall be suspended for any
period that the Company or Holdings is precluded by any credit agreement or
similar facility to which either of them is a party from making such purchase or
payment. Such amount shall accrue interest until paid at the rate of 6% per
annum. The Company agrees that it will maintain insurance on the life
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<PAGE>
of the Executive in an amount reasonably determined by the Company to be
sufficient to avoid the suspension described in the preceding sentence.
6.2 Termination Upon Disability. If during the term of this
Agreement the Executive meets the requirements for physical or mental disability
under the Company's long-term disability plan and is eligible to receive
benefits thereunder, the Company may at any time prior to the Executive's
recovery but after the last day of the sixth consecutive month of such
disability, by written notice to the Executive, terminate the Executive's
employment hereunder. In the event that the Executive's employment is terminated
due to disability, the Company will offer to loan to the Executive an amount
equal to the amount necessary to exercise all unexercised options held by the
Executive, with interest accruing monthly at a rate equal to the prime rate, as
published in the Wall Street Journal on the date the loan is made, plus 1%, and
providing for a single payment of principal and interest at a date three years
from the date of the loan.
Additionally, in such event, Executive (or his legal
representatives) shall be entitled to receive the Executive's Base Salary and
accrued bonus for the period ending on the date such termination occurred.
Nothing in this Section 6.2 shall be deemed to in any way affect the Executive's
right to participate in any disability plan maintained by the Company and for
which the Executive is otherwise eligible.
6.3 Termination for Cause. The Executive's employment hereunder
may be terminated by the Company for "Cause" (as herein defined) upon at least
thirty (30) days' prior written notice to the Executive. Termination for Cause
shall mean termination by reason of (a) the willful and continued failure by
Executive to substantially perform his duties with the Company (other than any
such failure resulting from his incapacity due to physical or mental
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<PAGE>
illness), after a written demand for substantial performance is delivered to the
Executive by the President or Board of Directors, which demand specifically
identifies the manner in which the Executive is believed not to have
substantially performed his duties, or (b) the Executive's willful engagement in
conduct which is or is likely to become demonstrably and materially injurious to
the Company, monetarily or otherwise. For purposes of this Section, no act, or
failure to act, on the part of the Executive shall be deemed "willful" unless
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that his action or omission was in the best interests of the
Company. Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for Cause unless and until there has been delivered to him
a copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the entire membership of the Board of Directors at a meeting of the
Board of Directors called and held for such purpose (after reasonable notice to
the Executive and an opportunity for the Executive, together with his counsel,
to be heard before the Board of Directors), finding that in the good faith
opinion of the Board of Directors the Executive was guilty of conduct of the
type set forth above in this Section and specifying the particulars thereof in
detail.
Upon termination for Cause hereunder the Executive shall be
entitled to receive the Executive's Base Salary through the date of
termination.
6.4 Voluntary Termination. The Executive may upon at least
sixty (60) days' prior written notice to the Company terminate employment
hereunder. Upon a voluntary termination the Executive shall be entitled to
receive the Executive's Base Salary through the date of termination.
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<PAGE>
7. Severance.
(a) If, prior to the expiration of this Agreement, the Company
breaches this Agreement by terminating the Executive's employment for any reason
other than Cause (a "Breach"), or during the two year period next following a
"Change in Control" (as herein defined) the Executive's employment with the
Company is terminated for reasons other than death, disability or Cause
("Termination Upon Change in Control"), in lieu of additional salary payments to
the Executive for periods subsequent to the date of such termination, the
Company shall pay a lump sum severance payment (together with the payments
provided in paragraph (c) below, the "Severance Payments") to the Executive at
the time of termination. Such payment shall be an amount equal to the number of
years, including fractional years, remaining until this Agreement would expire
but for such termination (in any event however, the period shall be not less
than two years nor more than the number of years, including the fractional
years, from the date of such termination until the Executive's attainment of age
65) multiplied by the sum of (A) the Executive's Base Salary rate as in effect
as of the date of termination and (B) the average of the bonus amounts awarded
or due to the Executive pursuant to Section 3.2 of this Agreement. Payment of
Severance Payments provided under this Section 7 in the event of a termination
which constitutes a Breach by the Company will not prohibit Executive from
seeking enforcement of the remaining provisions of this Agreement or other
remedies for breach of this Agreement.
(b) In determining the amount of payments due under any incentive
plan or other bonus plan in effect for the year in which the Executive is
terminated as a result of a Breach or Termination Upon Change in Control, the
Company shall pay the Executive at the time of termination a pro-rata portion of
all contingent awards granted under such plans for all
-8-
<PAGE>
uncompleted periods, assuming for this purpose that the amount of each award
that would have been paid upon the completion of such period would at least
equal the pro rata amount of the greater of the target or maximum bonus, if any,
provided for in such plan.
(c) The Company shall pay the Executive all reasonable legal fees
and expenses incurred by the Executive as a result of such termination
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce any right or
benefit provided by this Agreement), unless the decision-maker in any
proceeding, contest or dispute arising hereunder makes a formal finding that the
Executive did not have a reasonable basis for instituting such proceeding,
contest or dispute, in which event the Executive shall pay to the Company its
reasonable legal fees and expenses incurred in the defense of such proceeding,
contest or dispute.
(d) For the length of the period for which severance benefits are
provided after any termination pursuant to this Section 7, the Company shall
arrange to provide the Executive with life, disability, accident and group
health insurance benefits substantially similar to those which the Executive was
receiving immediately prior to the notice of termination. Benefits otherwise
receivable by the Executive pursuant to this paragraph (d) shall be reduced to
the extent comparable benefits are actually received by the Executive during the
period following the Executive's termination, and any such benefits actually
received by the Executive shall be reported to the Company.
(e) Nothing contained in this Section 7 shall prevent the
Executive from receiving any and all benefits payable under any severance
benefit plan or program maintained by the Company to which the Executive is
entitled.
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<PAGE>
8. Definition of Change in Control.
For purposes of this Agreement a "Change in Control" shall be
deemed to have occurred upon the first to occur of the following events:
(a) any "person," as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other
than (i) the Company, or (ii) any corporation owned, directly or indirectly, by
the stockholders of the Company or Holdings in substantially the same
proportions as their ownership of stock of the Company or Holdings, or (iii)
Castle Harlan, Inc. or its affiliates), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company or Holdings representing more than 50% of the combined
voting power of the Company's or Holdings' then outstanding securities; or
(b) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Company's or Holdings' Board of
Directors, and any new director (other than a director designated by a person
who has entered into an agreement with the Company or Holdings to effect the
transaction described in clause (a) of this Section) whose election by the
Company's or Holdings' Board of Directors or nomination for election by the
Company's or Holdings' stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority
thereof.
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<PAGE>
9. Restrictions and Obligations of the Executive.
(a) Consideration for Restrictions and Covenants. The parties
hereto acknowledge and agree that the principal consideration for the agreement
to make the payments provided in this Agreement by the Company to Executive and
the grant to the Executive options to purchase common stock of the Company
("Common Stock") is the Executive's compliance with the undertakings set forth
in this Section 9. Specifically, the Executive agrees to comply with the
provisions of this Section 9 irrespective of whether the Executive is entitled
to receive any such payments.
(b) Confidentiality. The confidential and proprietary information
and, in any material respect, trade secrets of the Company are among its most
valuable assets, including but not limited to, its customer and vendor lists,
database, engineering, computer programs, frameworks, models, its marketing
programs, its sales, financial, marketing, training and technical information,
and any other information, whether communicated orally, electronically, in
writing or in other tangible forms concerning how the Company creates, develops,
acquires or maintains its products and marketing plans, targets its potential
customers and operates its retail and other businesses. The Company invested,
and continues to invest, considerable amounts of time and money in its process,
technology, know-how, obtaining and developing the goodwill of its customers,
its other external relationships, its data systems and data bases, and all the
information described above (hereinafter collectively referred to as
"Confidential Information"), and any misappropriation or unauthorized disclosure
of Confidential Information in any form would irreparably harm the Company. The
Executive shall hold in a fiduciary capacity for the benefit of the Company all
Confidential Information relating
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<PAGE>
to the Company and its business, which shall have been obtained by the Executive
during the Executive's employment by the Company and which shall not be or
become public knowledge (other than by acts by the Executive or representatives
of the Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate, divulge or use any such information, knowledge or
data to anyone other than the Company and those designated by it.
(c) Non-Solicitation or Hire. During the stated term of this
Agreement (as set forth in Section 2) (the "Employment Period") and for a
two-year period following the termination of the Executive's employment for any
reason, the Executive shall not, directly or indirectly (i) employ or seek to
employ any person who is at the date of termination, or was at any time within
the six-month period preceding the date of termination, an officer, general
manager or director or equivalent or more senior level employee of the Company
or any of its subsidiaries or otherwise solicit, encourage, cause or induce any
such employee of the Company or any of its subsidiaries to terminate such
employee's employment with the Company or such subsidiary for the employment of
another company (including for this purpose the contracting with any person who
was an independent contractor (excluding consultant) of the Company during such
period) or (ii) take any action that would interfere with the relationship of
the Company or its subsidiaries with their suppliers or customers without, in
either case, the prior written consent of the Company's Board of Directors, or
engage in any other action or business that would have a material adverse effect
on the Company.
(d) Non-Competition. (i) During the Employment Period and for a
four-year period (the "Restriction Period") following the termination of the
Executive's
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<PAGE>
employment for any reason other than a termination by the Company without Cause,
the Executive shall not, directly or indirectly:
(x) engage in any managerial, administrative, advisory,
consulting, operational or sales activities in a Restricted Business anywhere in
the Restricted Area, including, without limitation, as a director or partner of
such Restricted Business, or
(y) organize, establish, operate, own, manage, control or have a
direct or indirect investment or ownership interest in a Restricted Business or
in any corporation, partnership (limited or general), limited liability company
enterprise or other business entity that engages in a Restricted Business
anywhere in the Restricted Area; and
(ii) Nothing contained in this Section 9 shall prohibit or
otherwise restrict the Executive from acquiring or owning, directly or
indirectly, for passive investment purposes not intended to circumvent this
Agreement, securities of any entity engaged, directly or indirectly, in a
Restricted Business if either (i) such entity is a public entity and the
Executive (A) is not a controlling Person of, or a member of a group that
controls, such entity and (B) owns, directly or indirectly, no more than 3% of
any class of equity securities of such entity or (ii) such entity is not a
public entity and the Executive (A) is not a controlling Person of, or a member
of a group that controls, such entity and (B) does not own, directly or
indirectly, more than 1% of any class of equity securities of such entity.
(e) Definitions. For purposes of this Section 9:
(i) "Restricted Business" means the business of designing,
manufacturing, servicing, operating, marketing, assembling, renting or leasing
of air or gas compressors or devices using comparable technologies or other
business in which Holdings or its subsidiaries may be engaged during the term of
Executive's employment with the Company. To
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<PAGE>
the extent that any entity is primarily engaged in a business other than a
Restricted Business, the term "Restricted Business" shall mean the operations,
division, segment or subsidiary of such entity that is engaged in any Restricted
Business.
(ii) "Restricted Area" means any country in which Holdings or its
subsidiaries engages in any Restricted Business at any time during the term of
Executive's employment with the Company.
10. Other Provisions.
10.1. Mitigation. Except as provided in Section 7(d) hereof, the
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in Section 7 be reduced by any
compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company, or otherwise.
10.2. Notices. Any notice or other communication required or which
may be given hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid, and shall be deemed given when so
delivered personally, telegraphed, telexed, or sent by
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<PAGE>
facsimile transmission or, if mailed, four days after the date of mailing, as
follows:
(a) If the Company, to:
4430 Brittmoore
Houston, Texas 77041
Attention: Board of Directors
With copies to:
Castle Harlan, Inc.
150 E. 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Andre Weiss, Esq.
(b) If the Executive, to his home address set forth in the records
of the Company.
10.3 Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect thereto.
10.4 Waiver and Amendments. This Agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any
right, power or privilege hereunder, nor any single or partial exercise of any
right, power or privilege hereunder, preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.
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<PAGE>
10.5 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of Delaware.
10.6 Assignability. This Agreement, and the Executive's rights
and obligations hereunder, may not be assigned by the Executive. The Company may
assign this Agreement and its rights, together with its obligations, to any
other entity which will substantially carry on the business of the Company.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
10.8 Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning of terms
contained herein.
10.9 Remedies; Specific Performance. The parties hereto hereby
acknowledge that the provisions of Section 9 are reasonable and necessary for
the protection of the Company. In addition, the Executive further acknowledges
that the Company will be irrevocably damaged if such covenants are not
specifically enforced. Accordingly, the Executive agrees that, in addition to
any other relief to which the Company may be entitled, the Company will be
entitled to seek and obtain injunctive relief (without the requirement of any
bond) from a court of competent jurisdiction for the purposes of restraining the
Executive from any actual or threatened breach of such covenants. In addition,
without limiting the Company's remedies for any breach of any restriction on the
Executive set forth in Section 9, except as required by law, the Executive shall
not be entitled to any payments set forth in Section 6 hereof if the Executive
breaches any of the covenants applicable to the Executive contained in Section
9, the Executive will
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<PAGE>
immediately return to the Company any such payments previously received under
Section 7 upon such a breach, and, in the event of such breach, the Company will
have no obligation to pay any of the amounts that remain payable by the Company
under Section 6.
10.10 Severability. If any term, provision, covenant or
restriction of this Agreement, or any part thereof, is held by a court of
competent jurisdiction of any foreign, federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority to be invalid, void, unenforceable or against public policy for any
reason, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected or impaired or invalidated. The Executive acknowledges that the
restrictive covenants contained in Section 9 are a condition of this Agreement
and are reasonable and valid in geographical and temporal scope and in all other
respects.
10.11 Judicial Modification. If any court or arbitrator determines
that any of the covenants in Section 9, or any part of any of them, is invalid
or unenforceable, the remainder of such covenants and parts thereof shall not
thereby be affected and shall be given full effect, without regard to the
invalid portion. If any court or arbitrator determines that any of such
covenants, or any part thereof, is invalid or unenforceable because of the
geographic or temporal scope of such provision, such court or arbitrator shall
reduce such scope to the minimum extent necessary to make such covenants valid
and enforceable.
11. Arbitration.
Any controversy or claim arising out of or in connection with this
Agreement (other than pursuant to Section 9) shall be settled by arbitration in
accordance with the rules then obtaining of the American Arbitration
Association. Such controversies shall be
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submitted to three arbitrators, one arbitrator being selected by the Company,
one arbitrator being selected by the Executive, and the third being selected by
the two so selected by the Company and the Executive or, if they cannot agree
upon a third, by the American Arbitration Association. In the event that either
the Company or the Executive, within one month after any notification of any
demand for arbitration hereunder, shall not have selected its arbitrator and
given notice thereof by registered or certified mail to the other, such
arbitrator shall be selected by the American Arbitration Association.
Confirmation of any award in any such arbitration may be held in any court
having jurisdiction of the person against whom such award is rendered.
Regardless of the circumstances giving rise to the need for arbitration, until
such arbitration shall be finally determined and ended, the Base Salary of the
Executive pursuant to Section 3.1, subject to the provisions of Sections 6 and
7, shall be paid monthly until the expiration of the term of this Agreement. If
the results of such arbitration are more favorable to the position taken by the
Executive than that taken by the Company, in the opinion of the arbitrators,
then all costs and expenses incurred by the Executive in connection with such
arbitration shall be paid by the Company. In the event that the arbitrators make
a formal finding that the Executive did not have a reasonable basis for
instituting the proceeding, contest or dispute giving rise to such arbitration,
the Executive shall pay to the Company its reasonable legal fees and expenses
incurred in the defense of the proceeding, contest or dispute giving rise to
such arbitration.
-18-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have executed this Agreement as of the day and year first above
mentioned.
EXECUTIVE
/s/ Robert Ryan
-----------------------------------------
Robert Ryan
UNIVERSAL COMPRESSION, INC.
By: /s/ Ernie Danner
------------------------------------
Title: ---------------------------------
UNIVERSAL COMPRESSION
HOLDINGS, INC.
By: /s/ Ernie Danner
------------------------------------
Title: ---------------------------------
-19-
<PAGE>
MANAGEMENT AGREEMENT
AGREEMENT made as of February 20, 1998, between Castle Harlan,
Inc., a Delaware corporation ("CHI"), Universal Compression Holdings, Inc., a
Delaware corporation ("Holdings") and Universal Compression, Inc., a Texas
corporation and wholly-owned subsidiary of Holdings (the "Company").
WHEREAS, the Company desires to retain CHI to provide business
and organizational strategy, financial and investment management, advisory and
merchant and investment banking services to the Company and Holdings upon the
terms and conditions hereinafter set forth, and CHI is willing to undertake such
obligations;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Appointment. The Company hereby engages CHI, and CHI
hereby agrees under the terms and conditions set forth herein, to provide
certain services to the Company and Holdings as described in Section 3 hereof.
2. Term. The term of this Agreement shall be for an initial
term of five (5) years. Such term shall be renewed automatically for additional
one-year terms thereafter unless (i) CHI or the Company shall give notice in
writing within 90 days before the expiration of the initial five-year term or
any one-year renewal thereof of its desire to terminate this Agreement, or (ii)
Castle Harlan Partners III, L.P., its affiliates and related accounts and funds
managed by CHI and affiliates of CHI cease to own beneficially for purposes of
Section 13(d) of the Securities Exchange Act of 1934, as amended at least 20% of
the then outstanding capital stock of Holdings. The provisions of Paragraph 7
and otherwise as the context so requires shall survive the termination of this
Agreement.
3. Duties of CHI.
3.1 Definition of "Services". CHI shall provide the
Company and Holdings with consulting services related to business and
organizational strategy, financial and investment management, and merchant and
investment banking services (collectively, the "Services").
3.2 Exclusions from "Services". Notwithstanding anything
in the foregoing to the contrary, the following services are specifically
excluded from the definition of "Services":
(i) Independent Accounting Services. Accounting services
rendered to the Company, Holdings or CHI with prior notice and consultation with
the Company's management, by an independent accounting firm or accountant (i.e.,
an accountant who is not an employee of CHI);
<PAGE>
(ii) Independent Actuarial Services. Actuarial services
rendered to the Company, Holdings or CHI with prior notice and consultation with
the Company's management, by an independent actuarial firm or actuary (i.e., an
actuary who is not an employee of CHI);
(iii) Legal Services. Legal services rendered to the
Company, Holdings or CHI with prior notice and consultation with the Company's
management, by an independent law firm or attorney (i.e., an attorney who is not
an employee of CHI); and
(iv) Transaction Services. Services in connection with
any transaction in which the Company or its affiliates may be, or may consider
becoming, involved, including acquisitions, divestitures or financings, it being
understood that CHI shall have the right of first refusal concerning all
opportunities to perform, for an additional fee, any of such transaction
services. Such right must be exercised within 30 business days of receipt by CHI
of such offer.
4. Powers of CHI. So that it may properly perform its duties
hereunder, CHI shall, subject to Section 5 hereof, have the power to take all
action and do all things necessary and proper to carry out the duties set forth
in Section 3 hereof.
5. Limitations on CHI's Powers. Notwithstanding anything
herein to the contrary, CHI shall not do any of the following without the
written authorization of the Company or Holdings, as the case may be:
(i) Enter into any contract, lease or other agreement
whatsoever on behalf of the Company or Holdings.
(ii) Hire or fire employees of the Company or Holdings, or
establish compensation rates or employee policies for any of the employees of
the Company or Holdings.
(iii) Compromise, settle, forgive or write-off any of
the Company's or Holdings' accounts receivable.
(iv) Pay any of the Company's or Holdings' accounts
payable that the Company or Holdings has notified CHI are subject to dispute.
6. Compensation and Reimbursement. As consideration payable
to CHI or any of its affiliates for providing the Services to the Company and
Holdings, the Company shall pay to CHI an annual management fee of $3 million
(the "Annual Fee") payable in advance on the date hereof for the first year and
quarterly in advance thereafter commencing on February 20, 1999 and thereafter
on each May 20, August 20, November 20 and February 20 thereafter, provided that
such payments would not result in a breach of (i) the Credit Agreement, dated as
of the date hereof, among the Company, as borrower, Holdings, the Banks party
thereto from time to time, and Bankers Trust Company, as agent, (ii) the
Indenture, dated as of the date hereof, by
-2-
<PAGE>
and between the Company and United States Trust Company of New York, as trustee
(the "Trustee") or (iii) the Indenture, dated as of the date hereof, by and
between Holdings and the Trustee, in which event only the amounts that would not
result in such a breach shall be paid and the balance shall accrue interest at
the Bankers Trust Company prime rate plus 2% per annum and be paid in whole or
in part at the earliest day as such payment would not result in such breach. In
addition to the Annual Fee, the Company shall, at the direction of CHI, pay
directly or reimburse CHI for its Out-of-Pocket Expenses (as hereinafter
defined) incurred in connection with the Services provided for in Section 3
hereof. In addition, the Company will reimburse CHI for its Out-of-Pocket
Expenses incurred by CHI in connection with the acquisition of Tidewater
Compression Service, Inc. ("TCS") by the Company. For purposes of this
Agreement, the term "Out-of-Pocket Expenses" shall mean the reasonable amounts
paid by CHI in connection with the Services provided for in Section 3 and the
acquisition of TCS by the Company, including (i) fees and disbursements of any
independent professionals and organizations, including independent auditors and
outside legal counsel, investment bankers or other financial advisors or
consultants, (ii) costs of any outside services of independent contractors such
as financial printers, couriers, business publications or similar services and
(iii) transportation, per diem, telephone calls, entertainment and all other
reasonable expenses actually incurred by CHI in rendering the Services provided
for herein. All reimbursements for Out-of-Pocket Expenses shall be made promptly
upon or as soon as practicable after presentation by CHI to the Company of the
statement in connection therewith.
7. Indemnification. The Company will indemnify and hold
harmless CHI and its officers, directors, employees, agents, representatives and
affiliates (each being an "Indemnified Party") from and against any and all
losses, claims, damages and liabilities, joint or several, to which such
Indemnified Party may become subject under any applicable federal or state law,
any claim made by any third party or otherwise, relating to or arising out of
the advisory and consulting Services contemplated by this Agreement or the
engagement of CHI pursuant to, and the performance by CHI or such Indemnified
Party of the Services, and the Company will reimburse any Indemnified Party for
all costs and expenses (including reasonable attorneys' fees and expenses) as
they are incurred in connection with the investigation of, preparation for or
defense of any pending or threatened claim, or any action or proceeding arising
therefrom, whether or not such Indemnified Party is a party thereto. The Company
will not be liable under the foregoing indemnification provision to the extent
that any loss, claim, damage, liability, cost or expense is determined by a
court, in a final judgment from which no further appeal may be taken, to have
resulted solely from the gross negligence or willful misconduct of CHI. The
reimbursement and indemnity obligations of the Company under this section shall
be in addition to any liability which the Company or Holdings may otherwise
have, shall extend upon the same terms and conditions to any affiliate of CHI
and the stockholders, officers, directors, employees, agents, representatives,
affiliates and controlling persons (if any), as the case may be, of CHI and any
such affiliate and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, CHI, any
such
-3-
<PAGE>
affiliate and any such person. The foregoing provisions shall survive the
termination of this Agreement.
8. Independent Contractors. Nothing herein shall be construed
to create a joint venture or partnership between the parties hereto or an
employer/employee relationship. CHI shall be an independent contractor pursuant
to this Agreement. The parties hereto shall have no express or implied right or
authority to assume or create any obligations on behalf of or in the name of the
other parties or to bind the other parties to any contract, agreement or
undertaking with any third party.
9. Assignment. This Agreement shall be binding upon and inure
to the benefit of the parties' successors and permitted assigns. However,
neither this Agreement nor any of the rights of the parties hereunder may be
transferred or assigned by the parties hereto, except that (i) if the Company or
Holdings shall merge or consolidate with or into, or sell or otherwise transfer
substantially all of its assets to, another corporation that assumes the
Company's or Holdings' obligations under this Agreement, the Company or
Holdings, as the case may be, may assign its rights hereunder to that
corporation, and (ii) CHI may assign its rights and obligations hereunder to any
other person or entity controlled, directly or indirectly, by John K. Castle.
Any attempted transfer or assignment in violation of this Section 9 shall be
void.
10. Miscellaneous.
10.1 Amendments and Waivers. The failure of any party to
seek redress for the violation of or to insist upon the strict performance of
any term of this Agreement shall not constitute a waiver of such term and such
party shall be entitled to enforce such term without regard to such forbearance.
This Agreement may be amended only by the written consent of each party hereto,
and each party hereto may take any action herein prohibited or omit to take
action herein required to be performed by it, and any breach of or compliance
with any covenant, agreement, warranty or representation may be waived only by
the written waiver of the party against whom such action or inaction may
negatively affect, but, in any case, such consent or waiver shall only be
effective in the specific instance and for the specific purpose for which given.
10.2 Notices. Any notice or other communication required
or which may be given hereunder shall be in writing and shall be delivered
personally, telecopied with confirmed receipt, sent by certified, registered, or
express mail, postage prepaid, or sent by a national next-day delivery service
to the parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice, and shall be deemed given when so
delivered personally or telecopied, or if mailed, 2 days after the date of
mailing, or, if by national
-4-
<PAGE>
next-day delivery service, on the day after delivery to such service as follows:
(i) if to the Company, to it at:
4430 Brittmoore
Houston, Texas 77041
Attention: Stephen A. Snider
(ii) if to CHI or Holdings, to them at:
150 E. 58th Street
New York, New York 10155
Attention: Jeffrey M. Siegal
or at such other address or addresses as either party hereto shall have
specified by notice in writing to the other party (provided, that such notice of
change of address shall be deemed to have been duly given only when actually
received).
10.3 Entire Agreement. This Agreement contains the
entire agreement between the parties hereto and supersedes all prior agreements
and understandings, oral and written, between the parties hereto with respect to
the subject matter hereof.
10.4 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein.
10.5 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
10.6 Applicable Law; Consents. This Agreement and the
validity and performance of the terms hereof shall be governed by and construed
in accordance with the laws of the State of New York without regard to
principles of conflicts of law or choice of law. The parties hereto hereby agree
that all actions or proceedings arising directly or indirectly from or in
connection with this Agreement shall be litigated only in the Supreme Court of
the State of New York or the United States District Court for the Southern
District of New York located in New York County, New York. To the extent
permitted by applicable law, the parties hereto consent to the jurisdiction and
venue of the foregoing courts and consent that any process or notice of motion
or other application to either of said courts or a judge thereof may be served
inside or outside the State of New York or the Southern District of New York by
registered mail, return receipt requested, directed to such party at its address
set forth in this Agreement (and service so made shall be deemed complete five
days after the same has been posted as aforesaid) or by personal service or in
such other manner as may be permissible under the rules of said courts.
-5-
<PAGE>
10.7 Severability. If any term, provision, covenant or
restriction of this Agreement, or any part thereof, is held by a court of
competent jurisdiction or any foreign federal, state, county or local government
or any other governmental, regulatory or administrative agency or authority to
be invalid, void, unenforceable or against public policy for any reason, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
UNIVERSAL COMPRESSION, INC.
By: /s/ Ernie Danner
_______________________________
Name: Ernie Danner
Title: Chief Financial Officer
UNIVERSAL COMPRESSION HOLDINGS, INC.
By: /s/ Ernie Danner
_______________________________
Name: Ernie Danner
Title: Chief Financial Officer
Executive Vice President and Director
CASTLE HARLAN, INC.
By: /s/ Howard Weiss
_______________________________
Name: Howard Weiss
Title:
-7-
<PAGE>
FINDERS AND CONSULTING SERVICES AGREEMENT
This FINDERS AND CONSULTING SERVICES AGREEMENT is made as of
the 20th day of February, 1998, by and between SAMUEL URCIS, an individual
residing at 1160 Marilyn Drive, Beverly Hills, California 90210 ("Urcis"), S.
URCIS & COMPANY, a California corporation ("UrcisCo"), UNIVERSAL COMPRESSION,
INC., a Texas corporation (the "Company") and UNIVERSAL COMPRESSION HOLDINGS,
INC., a Delaware corporation ("Holdings").
WHEREAS, Tidewater, Inc. has agreed to sell (the
"Acquisition") Tidewater Compression Service, Inc. ("TCS") to TW Acquisition
Corporation ("TW") and TW is a direct wholly-owned subsidiary of Holdings;
WHEREAS, upon the consummation of the Acquisition (the
"Closing"), TW will be merged into TCS and TCS will change its name to Universal
Compression, Inc.;
WHEREAS, Holdings expects to invest in, and otherwise engages
in transactions involving, companies in the energy field services industry
related to TCS's business;
WHEREAS, Urcis and UrcisCo have researched and followed the
energy field services industry for many years and have provided finder services
to TW and Holdings;
WHEREAS, each of the Company and Holdings desires to retain
UrcisCo to provide advice concerning investments in, and transactions involving,
companies in the energy field services industry and UrcisCo desires to provide
such advice to the Company and Holdings; and
WHEREAS, Holdings desires to retain Urcis as a director and
Chairman of the Executive Committee of Holdings, and Urcis desires to serve as a
director and Chairman of the Executive Committee of Holdings;
NOW, THEREFORE, it is agreed as follows:
1. Appointment of Consultant. Effective upon the date of
Closing (the "Closing Date"), and until this Agreement is terminated in
accordance with Paragraph 5 hereof, the Company and Holdings hereby retain
UrcisCo as a consultant to provide them with advice, from time to time, as the
Company and Holdings may request, concerning investments in, and other
transactions involving, companies in the energy field services industry.
2. Acceptance by Consultant. UrcisCo hereby accepts such
appointment and agrees to provide the Company and Holdings with advice
concerning investments in, and other transactions involving, companies in the
energy field services industry, and to give the Company and Holdings his best
judgment and efforts in rendering his services pursuant to this Agreement.
<PAGE>
3. Retention as Director. Effective upon the Closing Date,
Holdings agrees to use its best efforts to retain Urcis as a director and
Chairman of the Executive Committee of Holdings.
4. Fees; Grant of Stock Option. For services rendered to date,
Holdings will pay Urcis a finders fee of $1,750,000 upon Closing, $1,100,000 of
which will be used to purchase (i) 17,600 shares of Holdings Series A Preferred
Stock at $50 per share and (ii) 4,400 shares of Holdings Common Stock at $50 per
share. For services rendered hereunder beginning as of the Closing Date, the
Company shall pay UrcisCo an annual consulting fee of $150,000, payable in equal
monthly installments of $12,500 in advance on the first business day of each
month.
Urcis is hereby granted an option that will expire on the
tenth anniversary date of the date hereof in the form of the Stock Option
Agreement attached as Exhibit A hereto to purchase from Holdings, 5,957 shares
of Common Stock at an exercise price of $50 per share. Holdings shall pay for
reasonable out-of-pocket expenses incurred by Urcis in rendering services
herewith in connection with the Acquisition.
5. Term and Termination.
(a) The term of this Agreement shall be for an initial term of
five (5) years commencing upon the Closing Date. Such term shall be renewed
automatically for additional one-year periods unless either of the parties
hereto shall give notice in writing ninety (90) days before the expiration of
the initial five-year term or any one-year renewal thereof of its desire to
terminate this Agreement.
(b) This Agreement shall terminate upon the termination of the
Management Agreement between Castle Harlan, Inc., Holdings and Universal
Compression, Inc. dated as of the date hereof. Any termination of this Agreement
shall be without payment of any penalty, except that the Company shall remain
liable to UrcisCo for the payment of fees pursuant to Paragraph 4 hereof for the
period prior to the effective date of such termination. Nothing herein shall
relieve any party of any liability for any breach of this Agreement.
6. Independent Contractor. UrcisCo shall be deemed to be an
independent contractor and shall have no authority to act for or bind the
Company or Holdings.
7. Arbitration. In order to minimize the potentially high
costs incurred by all parties involved in disputes, any controversy arising out
of or relating to this Agreement or the termination of this Agreement, including
without limitation, any claim by Urcis or UrcisCo against Holdings or any of its
affiliates, directors, officers or employees under federal, state or local
statutory or common law, and any dispute under the scope of this paragraph,
shall be resolved by binding arbitration in New York, New York. The arbitration
will be conducted in accordance with the presently prevailing commercial dispute
resolution rules of the American Arbitration Association (the "AAA"). Urcis,
UrcisCo, the Company and Holdings agree to keep confidential from third parties
(other than the arbitrator and the AAA) the existence of any dispute, unless
otherwise required by law. A judgment on the arbitrator's decision shall be
final
2
<PAGE>
and may be entered in any court having jurisdiction. The arbitration
procedure shall be in lieu of any and all actions in law or equity.
8. Entire Agreement. This Agreement contains the entire
agreement of the parties hereto with respect to the matters set forth herein and
supersedes any prior understanding or arrangement, oral or written, with respect
thereto.
9. Amendment. This Agreement shall not be amended except by a
writing signed by the parties hereto. No waiver of any provision of this
Agreement shall be implied from any course of dealing between the parties hereto
or from any failure by any such party to assert its rights hereunder on any
occasion or series of occasions.
10. Governing Law. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of New York without
reference to the principles of conflicts of laws.
11. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
-----------------------------
SAMUEL URCIS
S. URCIS & COMPANY
By:
------------------------
Name: Samuel Urcis
Title: President
UNIVERSAL COMPRESSION, INC.
By:
------------------------
Name:
Title:
UNIVERSAL COMPRESSION HOLDINGS, INC.
By:
------------------------
Name:
Title:
<PAGE>
Exhibit 10.11
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT (this "Agreement"), dated as of February
20, 1998, is by Universal Compression, Inc., a Texas corporation (the
"Company").
W I T N E S S E T H
WHEREAS, TW Acquisition Corp. a Delaware corporation ("TW"),
has heretofore executed and delivered to the Initial Purchasers a purchase
agreement (the "Purchase Agreement"), dated as of February 13, 1998, providing
for the terms pursuant to which the Initial Purchasers will purchase
$242,599,000 aggregate principal amount at maturity of 9-7/8% Senior Discount
Notes due 2008 (the "Notes") of TW (the "Offering");
WHEREAS, TW has heretofore executed and delivered to the
Initial Purchasers an indenture (the "Indenture"), dated as of February 20,
1998, providing for certain covenants governing the Notes;
WHEREAS, TW has heretofore executed and delivered to the
Initial Purchasers a registration rights agreement (the "Registration Rights
Agreement"), dated as of February 20, 1998, providing for the registration of
the Notes and the Exchange Notes of TW under the Securities Act of 1933, as
amended;
WHEREAS, following the consummation of the Offering, TW will
merge (the "Merger") with and into Tidewater Compression Service, Inc. and
Tidewater Compression Service, Inc. will change its name to Universal
Compression, Inc.;
WHEREAS, pursuant to the Purchase Agreement, the Indenture and
the Registration Rights Agreement, the Company upon consummation of the Merger
is required to assume all of the obligations of TW under the Purchase Agreement,
the Indenture and the Registration Rights Agreement; and
WHEREAS, pursuant to Section 7(j) of the Purchase Agreement,
the Company is obligated to enter into this Agreement and deliver an executed
copy of this Agreement on the Closing Date of the Offering.
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which
<PAGE>
-2-
is hereby acknowledged, the Company covenants and agrees for the benefit of the
Initial Purchasers as follows:
1. ASSUMPTION. The Company hereby agrees to assume all of the
obligations of TW and all of its own obligations under each of the Purchase
Agreement, the Indenture and the Registration Rights Agreement.
2. DEFINITIONS. Capitalized terms used herein but not defined shall
have the meanings given to such terms in the Purchase Agreement, the Indenture
and the Registration Rights Agreement.
3. NEW YORK LAW TO GOVERN. The internal law of the State of New
York, without regard to the choice of law rules thereof, shall govern and be
used to construe this Agreement.
4. COUNTERPARTS. The parties may sign any number of copies of this
Agreement. Each signed copy shall be an original, but all of them together
represent the same agreement.
5. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
<PAGE>
-3-
IN WITNESS WHEREOF, the parties hereto has caused this
Agreement to be duly executed and delivered, all as of the date first above
written.
UNIVERSAL COMPRESSION, INC.
By: /s/ Ernie Danner
---------------------------
Name:
Title:
<PAGE>
- ------------------------------------------------------------------------------
CO-INVESTOR SUBSCRIPTION AGREEMENT
among
UNIVERSAL COMPRESSION HOLDINGS, INC.,
and
EACH OF THE SIGNATORIES HERETO NAMED ON THE SIGNATURE PAGE HERETO
UNDER THE CAPTION "CO-INVESTORS"
Dated as of February 20, 1998.
- ------------------------------------------------------------------------------
<PAGE>
CO-INVESTOR SUBSCRIPTION AGREEMENT
CO-INVESTOR SUBSCRIPTION AGREEMENT dated as of February 20,
1998 (the "Agreement"), by and among Universal Compression Holdings, Inc., a
Delaware corporation ("Holdings"), each of the signatories hereto named on the
signature page hereto under the caption "Co-Investors" (collectively, the
"Co-Investors").
WHEREAS, TW Acquisition Corporation, a Delaware corporation
and a wholly-owned subsidiary of Holdings ("TW"), proposes to acquire (the
"Acquisition") all of the issued and outstanding shares of common stock of
Tidewater Compression Service, Inc., a Texas corporation ("Compression"),
pursuant to a Stock Purchase Agreement (the "Stock Purchase Agreement"), dated
December 18, 1997, by and between TW (which, after acquiring the stock of, and
being merged into, Compression will change its name to Universal Compression
Inc. (the "Company")) and Tidewater Inc., a Delaware corporation;
WHEREAS, in connection with the Acquisition, Holdings is
providing certain equity financing at the closing of the Acquisition (the
"Equity Financing") to the Company to fund a portion of the purchase price of
the Acquisition;
WHEREAS, Castle Harlan Partners III, L.P., a Delaware limited
partnership, and related funds, accounts and individuals will provide Holdings
with at least 51% of the Equity Financing in return for Common Stock of
Holdings, par value $.01 per share (the "Common Stock") and Series A Preferred
Stock of Holdings, par value $.01 per share (the "Preferred Stock") in an amount
equal to such percentage contribution;
WHEREAS, in connection with the Equity Financing, the
Co-Investors desire to subscribe from Holdings, and Holdings desires to issue
and sell to the Co-Investors, the number of shares of Common Stock and the
number of shares of Preferred Stock, each as set forth opposite the name of each
Co-Investor on Annex I hereto for a purchase price set forth opposite the name
of each Co-Investor on Annex I (the "Purchase Price").
NOW, THEREFORE, in order to implement the foregoing and in
consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
1. Definitions.
As used in this Agreement, the following terms shall have the
meanings ascribed to them below:
"Affiliate" shall, as to Holdings or any other specified
Person, mean (i) any Person directly or indirectly controlling, controlled by or
under direct or indirect common control with Holdings (or other specified
Person), (ii) any Person, directly or indirectly, having Beneficial Ownership of
at least 10% of any class of outstanding capital stock or other evidence of
Beneficial Ownership in Holdings or such other Person; provided, however, that
no holder of
<PAGE>
Holdings Securities shall by reason of such holding be an Affiliate
of Holdings or any of its Subsidiaries for purposes of this Agreement and (iii)
any employee of Castle Harlan, Inc. ("CHI") or Affiliates of CHI.
"Business Day" shall mean any day other than a Saturday,
Sunday or any other day on which commercial banks are required or authorized by
law or regulation to be closed in New York, New York.
"Beneficial Ownership" shall be interpreted herein to have the
same meaning as set forth in Section 13(d) of the Exchange Act.
"Closing" shall have the meaning set forth in Section 2.2.
"Closing Date" shall have the meaning set forth in
Section 2.2.
"Common Stock" shall have the meaning set forth in the recital
hereto.
"Company" shall have the meaning set forth in the first
paragraph hereof.
"Holdings Securities" shall have the meaning set forth in
Section 2.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and all rules and regulations promulgated thereunder.
"Preferred Stock" shall have the meaning set forth in the
recital hereto.
"Purchase Price" shall have the meaning set forth in the
recital hereto.
"Co-Investor" shall have the meaning set forth in the first
paragraph hereof.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement, dated the date hereof, among Holdings and certain of its
stockholders.
"Securities Act" shall mean the Securities Act of 1933, as
amended and all rules and regulations promulgated thereunder.
"Stockholders Agreement" shall mean the Stockholders
Agreement, dated the date hereof, among Holdings and certain of its
stockholders.
"Stock Purchase Agreement" shall have the meaning set forth
in the recitals hereto.
"Subsidiary" shall mean any Person of which Holdings or other
specified Person now or hereafter shall at the time own directly or indirectly
at least a majority of the outstanding capital stock (or other evidence of
Beneficial Ownership) entitled to vote generally or at least a majority of the
partnership, joint venture or similar interest, or in which Holdings or other
specified Person is a general partner or joint venturer without limited
liability.
-2-
<PAGE>
"Voting Agreement" shall mean the Voting Agreement, dated the
date hereof, among Holdings, Castle Harlan Partners III, L.P. and the
Co-Investors.
2. Purchase
2.1 Purchase. Upon the consummation of the Acquisition and on
the terms and subject to the conditions set forth in this Agreement, the
Co-Investors hereby agree to subscribe and purchase, and Holdings hereby agrees
to issue and sell to the Co-Investors, on the Closing Date, the shares of the
Common Stock and the shares of the Preferred Stock set forth opposite its name
on Annex I for the Purchase Price set forth opposite its name thereon. The
Common Stock and Preferred Stock purchased pursuant to this Agreement are
sometimes collectively referred to herein as the "Holdings Securities."
2.2 The Closing. The closing (the "Closing") of the purchase
of Holdings Securities shall take place at the offices of Schulte Roth & Zabel
LLP, 900 Third Avenue, New York, New York 10022, on the Business Day (the
"Closing Date") set forth in a notice to the Co-Investors at least one Business
Day in advance.
At the Closing, (i) Holdings shall issue and deliver to the
Co-Investors, against payment of the Purchase Price therefor, certificates
representing Holdings Securities to be sold by it pursuant to Section 2.1
hereof, (ii) each Co-Investor shall deliver to Holdings against delivery of the
certificate or certificates representing Holdings Securities, by wire transfer
to such account as Holdings shall designate in writing at least two Business
Days prior to the Closing Date, the Purchase Price payable in immediately
available funds, and (iii) each party to this Agreement shall deliver to the
other such other documents, instruments and writings as may be required to be
delivered in accordance with this Agreement or as may be reasonably requested by
such other party.
3. Representations and Warranties of the Co-Investors.
Each Co-Investor represents and warrants to Holdings as
follows:
3.1 Authorization. It has full power and authority to execute
and deliver this Agreement and to perform its obligations hereunder and this
Agreement has been duly authorized, executed and delivered by it and is valid,
binding and enforceable in accordance with its terms, except that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws of general application relating to or affecting
the rights and remedies of creditors.
3.2 Compliance with Laws and Other Instruments. The execution
and delivery of this Agreement and the consummation of the transaction
contemplated hereby will not (a) conflict with (i) any provision of any
governing instrument applicable to such Co-Investor, or (ii) any material
permit, franchise, judgment, decree, statute, rule or regulation applicable to
such Co-Investor or its business or property, or (b) result in any material
breach of any terms or provisions of, or constitute a material default under,
any material contract, agreement or instrument to which such Co-Investor is a
party or by which it is bound.
-3-
<PAGE>
3.3 Status and Investment Intent. (a) It is an "accredited
investor" as defined in Rule 501(a) under the Securities Act, and it is
acquiring Holdings Securities hereunder for its own account for investment
purposes only and not with a view to, or with any present intention of,
distribution thereof except as is otherwise provided in this Agreement with
respect to Holdings Securities, provided, that the disposition of its property
shall at all times be within its control. Such Co-Investor understands that it
must bear the economic risk of an investment in Holdings Securities for an
indefinite period of time because, among other reasons, the offering and sale of
Holdings Securities have not been registered under the Securities Act and,
therefore, Holdings Securities cannot be sold unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. A legend to this effect shall be set forth on the face of each
certificate evidencing Holdings Securities.
(b) It has sufficient knowledge and experience
in financial and business matters so as to be capable of evaluating the merits
and risks of its investment in Holdings Securities and it is capable of bearing
the economic risks of such investment, including a complete loss of its
investment. Such Co-Investor has not relied in connection with this investment
upon any representations, warranties or agreements other than those set forth in
this Agreement and the Stock Purchase Agreement.
3.4 Access to Information. It has been given the opportunity
to examine all documents and to ask questions of, and to receive answers from,
Holdings and its representatives concerning the terms and conditions of the
purchase of Holdings Securities and to obtain any additional information which
Holdings possesses or can reasonably acquire.
4. Representations and Warranties of Holdings.
Holdings represents and warrants to the Co-Investors as
follows:
4.1 Authorization. Holdings has full corporate power and
authority to execute and deliver this Agreement and the Registration Rights
Agreement and to perform its obligations hereunder and thereunder and this
Agreement and the Registration Rights Agreement have been duly authorized,
executed and delivered by Holdings and are valid, binding and enforceable
against Holdings in accordance with their respective terms, except that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws of general application relating to or affecting
the rights and remedies of creditors.
4.2 Capitalization. The authorized capitalization of Holdings
at closing will consist of (i) 1,000,000 shares of Common Stock, of which
325,000 shares are issued and outstanding, and (ii) 5,000,000 shares of
preferred stock, of which 2,000,000 shares have been designated as Series A
Preferred Stock and are issued and outstanding. Annex I attached hereto sets
forth the name of each holder of Common Stock and Preferred Stock and the number
of shares and percentage ownership of Common Stock and Preferred Stock to be
held by each such person after giving effect to (i) the sales thereof hereunder
and (ii) the other sales thereof being effected on the Closing Date. Other than
as set forth on Annex I, there are no other options or other securities
convertible into or exchangeable or exercisable for shares of Common Stock or
Preferred Stock outstanding on the date hereof. Other than the Stockholders
Agreement,
-4-
<PAGE>
Holdings has not entered into any contract or agreement granting preemptive
rights with respect to the Common Stock or Preferred Stock.
4.3 Compliance with Laws and Other Instruments. The execution
and delivery of this Agreement and the consummation of the transaction
contemplated hereby will not (a) conflict with (i) any provision of any
governing instrument applicable to Holdings, or (ii) any material permit,
franchise, judgment, decree, statute, rule or regulation applicable to Holdings
or its business or property, or (b) result in any material breach of any terms
or provisions of, or constitute a material default under, any material contract,
agreement or instrument to which Holdings is a party or by which Holdings is
bound.
4.4 Organization and Good Standing. Holdings (a) is duly
organized and validly existing under the laws of the state of Delaware, (b) is
duly qualified as a foreign corporation and authorized to do business in other
jurisdictions in which the nature of its business or property makes such
qualification necessary, except where such failure to qualify would not have a
material adverse effect on the business, operations or condition, financial or
otherwise, of Holdings and its Subsidiaries, taken as a whole, and (c) has the
corporate power to own its properties and to carry on its business as now
conducted and as currently proposed to be conducted.
4.5 Certificate of Incorporation and By-Laws. The copies of
the Certificate of Incorporation and By-Laws of Holdings and all amendments to
each, which are annexed hereto as Exhibit A, are true, correct and complete.
4.6 Valid Issuance. Holdings Securities being issued and sold
hereunder by Holdings have been duly authorized and will, upon consummation of
the transactions contemplated herein, be validly issued, fully-paid and
non-assessable.
4.7 Newly Formed Entity. Holdings was incorporated under the
laws of the State of Delaware on December 1, 1997 and has not, since that date,
entered into any agreements or contracts other than the (i) Stock Purchase
Agreement and all agreements and documents relating to the transactions
contemplated by the Stock Purchase Agreement and the financing relating thereto,
(ii) consulting and management agreements and (iii) this Agreement, the
Management Subscription Agreement, dated as of the date hereof, among Holdings
and certain members of its management, the Voting Trust Agreement, dated as of
the date hereof, among Holdings, certain stockholders of Holdings and John K.
Castle, as voting trustee, the Registration Rights Agreement and the Voting
Agreement.
4.8 Securities Laws. The offer and sale of the Holdings
Securities pursuant to this Agreement does not violate, and will not violate,
the Securities Act or any state securities or "blue sky" laws.
4.9 Small Business Matters. The information regarding Holdings
and its affiliates set forth in SBA Form 480, Form 652 and Part A of Form 1031
delivered at the Closing is accurate and complete. Copies of such forms shall
have been completed and executed by the Company and delivered to those
Co-Investors that so request at the Closing.
-5-
<PAGE>
5. Closing Conditions.
The obligation of each Co-Investor to purchase any Holdings
Securities pursuant to this Agreement shall be subject to the satisfaction,
prior to or substantially contemporaneously with the making of such purchase at
the Closing, of the following conditions, compliance with which, or the
occurrence of which, may be waived in whole or in part by any Co-Investor in
writing:
5.1 Legal Opinions, etc. The Co-Investors shall have received
from Schulte Roth & Zabel LLP, counsel to Holdings, an opinion dated the date of
the Closing in form and substance reasonably satisfactory to each of the
Co-Investors.
5.2 Representations, Warranties and Conditions; Officers'
Certificate. The representations and warranties of Holdings contained herein
shall be true and correct in all material respects on and as of the date of the
Closing with the same force and effect as though made on and as of the date of
the Closing; and the Co-Investors shall have received on the date of the Closing
a certificate of Holdings to these effects and to the effect that the conditions
specified in this Section 5.2 have been satisfied and Holdings has performed and
complied with all agreements required by this Agreement to be performed or
complied with by it prior to or at the Closing.
5.3 Taxes, Penalties, etc. The purchase of and payment for
Holdings Securities shall not subject any Co-Investor to any penalty or tax
liability and shall not be prohibited by law.
5.4 No Change in Law; Litigation, etc. No legal requirement
shall have been enacted or become effective, nor shall any legislation have been
introduced for passage to any legislature, nor shall have any investigation by
any governmental authority or administrative body been commenced, nor shall any
decision of any court of competent jurisdiction have been rendered, nor shall
any litigation or other action or proceeding have been commenced, which in any
Co-Investor's reasonable judgment could materially and adversely affect the
transaction contemplated by this Agreement.
5.5 General. All instruments and legal and corporate
proceedings in connection with the transaction contemplated by this Agreement
shall be in form and substance reasonably satisfactory to the Co-Investors, and
the Co-Investors shall have received counterpart, original, or certified or
other copies, of all documents, including records of corporate proceedings and
opinions of counsel, that they may have requested in connection therewith.
5.6 SBA Documents and Information. Holdings shall have
executed and delivered to each Co-Investor requesting the same a Size Status
Declaration on SBA Form 480 and an Assurance of Compliance on SBA Form 652 and
information necessary for the preparation of a Portfolio Financing Report on SBA
Form 1031.
5.7 Consummation of the Acquisition. The Acquisition and all
related transactions shall be consummated on a substantially contemporaneous
basis with the Closing on
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<PAGE>
the terms set forth in the Stock Purchase Agreement and the Company shall be a
wholly-owned subsidiary of Holdings.
6. Miscellaneous.
6.1 Assignability; Binding Effect. Except as otherwise
provided in this Section (and except for any transfer by Mellon Bank, N.A. as
trustee for the Bell Atlantic Master Trust to any successor trustee or nominee
for, or successor by reorganization of, such Trust), no right under this
Agreement shall be assignable and any attempted assignment in violation of this
provision shall be void. Holdings shall have the right to assign its rights and
obligations hereunder to any successor entity (including any entity acquiring
substantially all of the assets of Holdings), whereupon references herein to
Holdings shall be deemed to be to such successor. This Agreement, and the rights
and obligations of the parties hereunder, shall be binding upon and inure to the
benefit of any and all successors, permitted assigns, personal representatives
and all other legal representatives, in whatsoever capacity, by operation of law
or otherwise, of the parties hereto, in each case with the same force and effect
as if the foregoing persons were named herein as parties hereto.
6.2 Notices. Any notice or other communication required or
which may be given hereunder shall be in writing and shall be delivered
personally, telecopied with confirmed receipt, sent by certified, registered, or
express mail, postage prepaid, or sent by a national next-day delivery service
to the parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice, and shall be deemed given when so
delivered personally or telecopied, or if mailed, 5 days after the date of
mailing, or, if by national next-day delivery service, on the day after delivery
to such service as follows:
(a) If to Holdings, to it at the following address:
Castle Harlan, Inc.
150 E. 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Andre Weiss, Esq.
(b) If to the Co-Investors, to them at their
respective addresses set forth next to their names on
Annex II hereto;
or at such other address or addresses as either party hereto shall have
specified by notice in writing to the other party (provided, that such notice of
change of address shall be deemed to have been duly given only when actually
received).
-7-
<PAGE>
6.3 Applicable Law; Consents. This Agreement and the validity
and performance of the terms hereof shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of law or choice of law. The parties hereto hereby agree that all
actions or proceedings arising directly or indirectly from or in connection with
this Agreement shall be litigated only in the Supreme Court of the State of New
York or the United States District Court for the Southern District of New York
located in New York County, New York. To the extent permitted by applicable law,
the parties hereto consent to the jurisdiction and venue of the foregoing courts
and consent that any process or notice of motion or other application to either
of said courts or a judge thereof may be served inside or outside the State of
New York or the Southern District of New York by registered mail, return receipt
requested, directed to such party at its address set forth in this Agreement
(and service so made shall be deemed complete five days after the same has been
posted as aforesaid) or by personal service or in such other manner as may be
permissible under the rules of said courts.
6.4 Entire Agreement; Amendments and Waivers. This Agreement
and the Stock Purchase Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof. The failure of any party to
seek redress for the violation of or to insist upon the strict performance of
any term of this Agreement shall not constitute a waiver of such term and such
party shall be entitled to enforce such term without regard to such forbearance.
This Agreement may be amended only by the written consent of each party hereto,
and each party hereto may take any action herein prohibited or omit to take
action herein required to be performed by it, and any breach of or compliance
with any covenant, agreement, warranty or representation may be waived only by
the written waiver of the party against whom such action or inaction may
negatively affect, but, in any case, such consent or waiver shall only be
effective in the specific instance and for the specific purpose for which given.
6.5 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein.
6.6 Severability. If any term, provision, covenant or
restriction of this Agreement, or any part thereof, is held by a court of
competent jurisdiction or any foreign federal, state, county or local government
or any other governmental, regulatory or administrative agency or authority to
be invalid, void, unenforceable or against public policy for any reason, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
6.7 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart.
6.8 Specific Performance. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement, the
non-breaching party would be irreparably harmed and could not be made whole by
monetary damages. It is accordingly agreed that the parties hereto shall and do
hereby waive the defense in any action for specific performance that a
-8-
<PAGE>
remedy at law would be adequate and that the parties hereto, in addition to any
other remedy to which they may be entitled at law or in equity, shall be
entitled to compel specific performance of this Agreement in any action
instituted in the Supreme Court of the State of New York or the United States
District Court for the Southern District of New York, or, in the event such
courts shall not have jurisdiction of such action, in any court of the United
States or any state thereof having subject matter jurisdiction of such action.
6.9 Survival of Covenants. All covenants, agreements,
representations and warranties made herein or in any other document referred to
herein or delivered to a party pursuant hereto or in connection herewith shall
survive the execution and delivery to such party of this Agreement and of
Holdings Securities.
6.10 Brokers Fees, etc. Each party hereto represents and
warrants to each other party that no broker's, finder's or placement fee or
commission will be payable to any Person alleged to have been retained by such
representing and warranting party with respect to the transaction contemplated
by this Agreement. Each party hereto hereby indemnifies each other party against
and agrees that it will hold each other party and each of such party's
Affiliates (and each of the trustee, employees and other fiduciaries or agents
of such party) harmless from any claim, demand or liability for any broker's,
finder's or placement fee or commission alleged to have been incurred by such
indemnifying party, including without limitation reasonable attorneys' fees.
6.11 Expenses. Whether or not the transaction contemplated by
this Agreement shall be consummated, Holdings agrees to pay, on demand, all
expenses in connection with this transaction and operations hereunder, including
without limitation (i) payment by wire transfer at the closing hereunder of the
reasonable fees and expenses of special counsel to each Co-Investor (upon
reasonable documentation thereof), arising in connection with the negotiation
and execution of this Agreement, the Stockholders Agreement, the Registration
Rights Agreement and the Voting Agreement and the consummation of the
transactions contemplated hereby and thereby, (ii) the out-of-pocket expenses
incurred by each Co-Investor (upon reasonable documentation thereof) in
connection with the investigation and consummation of such transactions, (iii)
any taxes, including recording or filing fees and transfer and documentary stamp
and similar taxes, payable in respect of execution and delivery of this
Agreement and the other agreements mentioned in clause (i), (iv) all expenses
(including enforcement, reasonable attorneys' fees and expenses) incurred in
respect of the exercise or performance, or the preservation or enforcement, of
any right granted to the Co-Investors, and the consideration of any legal
questions relevant thereto and (v) all expenses (including reasonable attorneys'
fees and expenses) in connection with any amendments or waivers (whether or not
the same become effective) of this Agreement or any of such other agreements
mentioned in clause (ii).
-9-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
UNIVERSAL COMPRESSION HOLDINGS INC.
By: /s/ Ernie Danner
-------------------------------
Name: Ernie Danner
Title: Chief Financial Officer
CO-INVESTORS:
MELLON BANK, N.A., AS TRUSTEE
FOR THE BELL ATLANTIC MASTER
TRUST, AS DIRECTED BY
BELL ATLANTIC CORPORATION
By: /s/ Bernadette Rist
-------------------------------
Name: Bernadette Rist
Title Authorized Signature
FIRST UNION CAPITAL PARTNERS, INC.
By: /s/ James C. Cook
-------------------------------
Name: James C. Cook
Title: Senior Vice President
<PAGE>
BT CAPITAL PARTNERS, INC.
By: /s/ Michael J. Batal, III
-------------------------------
Name: Michael J. Batal, III
Title: Managing Director
WILMINGTON TRUST, AS TRUSTEE OF
DU PONT PENSION TRUST
By: /s/ Mary Alice Snyder
-------------------------------
Name: Mary Alice Snyder
Title: Vice President
BROWN UNIVERSITY THIRD CENTURY FUND
By: /s/ Marvyn Carton
-------------------------------
Name: Marvyn Carton
Title: Vice Chairman
<PAGE>
ANNEX I
CAPITALIZATION CHART
<PAGE>
ANNEX II
<TABLE>
<CAPTION>
Co-Investor Address
----------- -------
<S> <C>
Mellon Bank, N.A., as Trustee for the Bell Atlantic One Mellon Bank Center
Master Trust Room 3346
Pittsburgh, PA 15258-0001
Attention: Robert F. Sass
with a copy to:
Bell Atlantic Management Company
200 Park Avenue
New York, NY 10166
Attention: A. Jay Baldwin, Conrad A. Francis and
Bruce Francese, Esq.
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Arthur G. Siler, Esq.
First Union Capital Partners, Inc. One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: James C. Cook
BT Capital Partners, Inc. Mail Stop 2255
130 Liberty Street
New York, NY 10006
Attention: Gregory Chiate
Wilmington Trust, as Trustee of Du Pont Pension Trust Du Pont Pension Fund Investments
Delaware Corporate Center
1 Righter Parkway
Wilmington, DE 19803
Attention: John Wolak
Brown University Third Century Fund 164 Angell Street
Box C
Providence, RI 02912
Attention: James Kilpatrick
</TABLE>
<PAGE>
EXHIBIT A
CERTIFICATE OF INCORPORATION
AND
BY-LAWS
<PAGE>
VOTING AGREEMENT, dated as of February 20, 1998 (the
"Agreement"), by and among Universal Compression Holdings, Inc. ("Holdings"),
Castle Harlan Partners III, L.P., a Delaware limited partnership ("CHPIII,"
and together with related accounts or funds managed by Castle Harlan, Inc.
("CHI") or an Affiliate of CHI, referred to herein collectively as "CHP"), and
the undersigned (collectively, the "Co-Investors").
WHEREAS, Holdings and the Co-Investors are parties to a
Stock Purchase Agreement, dated as of the date hereof (the "Purchase
Agreement"), whereby the Co-Investors purchased from Holdings and Holdings
issued and sold to the Co-Investors (i) the number of shares of Common Stock,
par value $.01 per share ("Common Stock") of Holdings and (ii) the number of
shares of Series A Preferred Stock, par value $.01 per share ("Preferred
Stock") of Holdings set forth opposite the name of each Co-Investor on Annex
I.
WHEREAS, in connection with such purchase, CHPIII, Holdings
and the Co-Investors hereby wish to set forth their understanding with respect
to the manner in which each Co-Investor will exercise its voting rights as a
stockholder of Holdings in matters requiring the vote of the stockholders of
Holdings.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions.
"Affiliate" shall, as to Holdings or any other specified
Person, mean (i) any Person directly or indirectly controlling, controlled by
or under direct or indirect common control with Holdings (or other specified
Person), and (ii) any Person, directly or indirectly, having Beneficial
Ownership of at least 10% of any class of outstanding capital stock or other
evidence of Beneficial Ownership in Holdings or such other Person; provided,
however, that no holder of Holdings Securities shall by reason of such holding
be an Affiliate of Holdings or any of its Subsidiaries for purposes of this
Agreement, and (iii) any employee of CHI or Affiliates of CHI.
"Beneficial Ownership" shall be interpreted herein to have
the same meaning as set forth in Section 13(d) of the Exchange Act.
"Change in Control" shall mean any of the following: (i) a
majority of Holdings' board of directors shall be comprised of Persons other
than designees of the entities or persons constituted within CHP or Affiliates
of CHP and of CHP's Affiliates; (ii) CHP and the Affiliates of CHP shall cease
to have Beneficial Ownership, directly or indirectly, of equity securities of
Holdings representing at least 30% (until Holdings' initial public offering of
Common Stock has been consummated or, if no Change in Control has occurred
prior thereto, 15% thereafter, in each case) of the total combined ordinary
voting power of all equity securities of Holdings; (iii) the sole general
partner of CHPIII shall be neither Castle Harlan Partners III GP, Inc. or an
entity controlling,
<PAGE>
controlled by or under common control with Castle Harlan Partners III GP,
Inc.; or (iv) all or substantially all the assets of Universal Compression,
Inc. and its Subsidiaries are directly or through transfer of equity interests
transferred or otherwise disposed of in one or a series of related
transactions to an entity in which CHP and its Affiliates fail to own the
foregoing percentages, as appropriate, and after which Holdings ceases to own
directly or indirectly substantially all equity interests of each entity
acquiring such assets.
"CHP" shall have the meaning set forth in the first
paragraph hereof.
"CHPIII" shall have the meaning set forth in the first
paragraph hereof.
"CHI" shall have the meaning set forth in the first
paragraph hereof.
"Common Stock" shall have the meaning set forth in the
recital hereto.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and all rules and regulations promulgated thereunder.
"Extraordinary Event" shall have the meaning set forth in
Section 2.
"Holdings" shall have the meaning set forth in the first
paragraph hereof.
"Holdings Securities" shall mean the Common Stock and the
Preferred Stock as collectively referred to herein.
"Preferred Stock" shall have the meaning set forth in the
recital hereto.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder.
"Subsidiary" shall mean any Person of which Holdings or
other specified Person now or hereafter shall at the time own directly or
indirectly at least a majority of the outstanding capital stock (or other
evidence of Beneficial Ownership) entitled to vote generally or at least a
majority of the partnership, joint venture or similar interest, or in which
Holdings or other specified Person is a general partner or joint venturer
without limited liability.
2. Agreement to Vote Shares. From and after the date of this
Agreement until the occurrence of a Change in Control, in the event that there
shall be presented for a vote by the holders of Holdings Securities at any
regular or special meeting of the stockholders of Holdings, or in any written
consent executed by holders of Holdings Securities in lieu of such a meeting
of stockholders, any matter, proposition or proposal relating to any of:
(a) (i) an increase or decrease in the authorized
capital of Holdings, (ii) the creation or authorization of any class of
capital stock of Holdings, (iii) the issuance or sale of any shares of capital
stock or rights to acquire capital stock of
2
<PAGE>
Holdings or any subsidiary of Holdings (by conversion, exercise of a warrant
or option or otherwise);
(b) any amendment of the certificate of
incorporation or by-laws of Holdings;
(c) the incurrence of any indebtedness for borrowed
money;
(d) the appointment, election, termination or
removal of any officer or director of Holdings;
(e) the declaration or payment of any dividend or
other distribution to the stockholders of Holdings;
(f) (i) entering into any transaction of merger,
consolidation or amalgamation, or liquidation, winding up or dissolution, (ii)
the conveyance, sale, lease, transfer or other disposition of, in a
transaction or related series of transactions, substantially all of Holdings'
or any of its Subsidiaries' property, business or assets, (iii) acquisition by
purchase or otherwise of all of the capital stock or other evidences of
Beneficial Ownership of Holdings or any of its Subsidiaries, or (iv) any
recapitalization or similar restructuring transaction;
(g) the acquisition, directly or indirectly, of a
significant amount of assets other than in the ordinary course of business;
(h) the sale or disposition of, directly or
indirectly, a significant amount of assets other than in the ordinary course
of business;
(i) adoption of any stock option plan for employees
or any material changes in any such stock option plan or any other executive
compensation plan of Holdings or any of its Subsidiaries;
(j) any change in the annual compensation of any
officer of Holdings;
(k) any other extraordinary transaction, including
any transaction that changes or would change the nature of the business of
Holdings or its Subsidiaries; and
(l) any other proposal to be voted on or consented
to by stockholders of Holdings;
each Co-Investor agrees (and, as a condition to its transfer of any Holdings
Securities to a Person not otherwise a party to this Agreement or to the
Voting Trust Agreement, dated the date hereof, by and among Holdings, John K.
Castle, as voting trustee, and certain of the stockholders of Holdings, shall
cause such transferee to agree) to vote and execute written consents for all
shares of Holdings Securities which it is or becomes entitled to
3
<PAGE>
vote in the same proportion for and against such matter, proposition or
proposal as CHPIII shall vote, or execute written consents with respect to,
its shares of Holdings Securities with respect to such matter, proposition or
proposal.
3. Further Action. Each party hereto agrees to execute and
deliver any instrument and take any action that may reasonably be requested by
any other party for the purpose of effectuating the provisions of this
Agreement.
4. Miscellaneous Provisions.
(a) Assignment; Binding Effect. Except as otherwise
provided in this Agreement (and except for any transfer by Mellon Bank, N.A.
as trustee for the Bell Atlantic Master Trust to any successor trustee or
nominee for, or successor by reorganization of, such Trust), no right under
this Agreement shall be assignable and any attempted assignment in violation
of this provision shall be void. This Agreement, and the rights and
obligations of the parties hereunder, shall be binding upon and inure to the
benefit of any and all successors, permitted assigns, personal representatives
and all other legal representatives, in whatsoever capacity, by operation of
law or otherwise, of the parties hereto, in each case with the same force and
effect as if the foregoing persons were named herein as parties hereto.
(b) Notices. Any notice or other communication
required or which may be given hereunder shall be in writing and shall be
delivered personally, telecopied with confirmed receipt, sent by certified,
registered, or express mail, postage prepaid, or sent by a national next-day
delivery service to the parties at the following addresses or at such other
addresses as shall be specified by the parties by like notice, and shall be
deemed given when so delivered personally or telecopied, or if mailed, 2 days
after the date of mailing, or, if by national next-day delivery service, on the
day after delivery to such service as follows:
(i) If to Holdings, to it at the following address:
Castle Harlan, Inc.
150 E. 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
(ii) If to CHPIII or the other entities or persons
constituted within CHP, to any of them at the
following address:
Castle Harlan Partners III, L.P.
150 E. 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
4
<PAGE>
with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Andre Weiss, Esq.
(iii) If to the Co-Investors, to them at their
respective addresses set forth next to their names
on Annex II hereto;
or at such other address or addresses as either party hereto shall have
specified by notice in writing to the other party (provided, that such notice
of change of address shall be deemed to have been duly given only when
actually received).
(c) Applicable Law; Consent to Jurisdiction. This
Agreement and the validity and performance of the terms hereof shall be
governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts of law or choice of law. The parties
hereto hereby agree that all actions or proceedings arising directly or
indirectly from or in connection with this Agreement shall be litigated only
in the Supreme Court of the State of New York or the United States District
Court for the Southern District of New York located in New York County, New
York. To the extent permitted by applicable law, the parties hereto consent to
the jurisdiction and venue of the foregoing courts and consent that any
process or notice of motion or other application to either of said courts or a
judge thereof may be served inside or outside the State of New York or the
Southern District of New York by registered mail, return receipt requested,
directed to such party at its address set forth in this Agreement (and service
so made shall be deemed complete five days after the same has been posted as
aforesaid) or by personal service or in such other manner as may be
permissible under the rules of said courts.
(d) Entire Agreement; Amendments and Waivers. This
Agreement sets forth the entire understanding of the parties with respect to
the subject matter hereof. The failure of any party to seek redress for the
violation of or to insist upon the strict performance of any term of this
Agreement shall not constitute a waiver of such term and such party shall be
entitled to enforce such term without regard to such forbearance. This
Agreement may be amended only by the written consent of Holdings, CHPIII, and
the Co-Investors holding a majority of Holdings Securities (excluding Holdings
Securities held by CHPIII or any entity constituted within CHP), and each
party hereto may take any action herein prohibited or omit to take action
herein required to be performed by it, and any breach of or compliance with
any covenant, agreement, warranty or representation may be waived only by the
written waiver of the party against whom such action or inaction may
negatively affect, but, in any case, such consent or waiver shall only be
effective in the specific instance and for the specific purpose for which
given.
5
<PAGE>
(e) Headings. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein.
(f) Severability. If any term, provision, covenant
or restriction of this Agreement, or any part thereof, is held by a court of
competent jurisdiction or any foreign federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority to be invalid, void, unenforceable or against public policy for any
reason, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
(g) Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
(h) Specific Performance. Each of the parties
hereto acknowledges and agrees that in the event of any breach of this
Agreement, the non-breaching party would be irreparably harmed and could not
be made whole by monetary damages. It is accordingly agreed that the parties
hereto shall and do hereby waive the defense in any action for specific
performance that a remedy at law would be adequate and that the parties
hereto, in addition to any other remedy to which they may be entitled at law
or in equity, shall be entitled to compel specific performance of this
Agreement in any action instituted in the Supreme Court of the State of New
York or the United States District Court for the Southern District of New
York, or, in the event such courts shall not have jurisdiction of such action,
in any court of the United States or any state thereof having subject matter
jurisdiction of such action.
(i) Survival of Covenants. All covenants,
agreements, representations and warranties made herein
or in any other document referred to herein or delivered to a party pursuant
hereto or in connection herewith shall survive the execution and delivery to
such party of this Agreement and the Holdings Securities.
(j) Legends. All certificates evidencing Common
Stock and Preferred Stock held by the Co-Investors shall bear a legend to the
effect that the holders thereof are subject to the voting obligations as set
forth in this Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first set forth above.
CASTLE HARLAN PARTNERS III, L.P.
BY: CASTLE HARLAN INC.,
its Investment Manager
/s/ Howard Weiss
By: ________________________
Name:
Title:
UNIVERSAL COMPRESSION
HOLDINGS, INC.
/s/ Ernie Danner
By: ________________________
Name: Ernie Danner
Title: Chief Financial Officer
7
<PAGE>
CO-INVESTORS
MELLON BANK, N.A., AS TRUSTEE
FOR THE BELL ATLANTIC MASTER
TRUST, AS DIRECTED BY BELL
ATLANTIC CORPORATION
/s/ Benadette Rist
By: ________________________
Name: Benadette Rist
Title: Authorized Signatory
FIRST UNION CAPITAL PARTNERS, INC.
/s/ James C. Cook
By: ________________________
Name: James C. Cook
Title: Senior Vice-President
BT CAPITAL PARTNERS, INC.
/s/ Michael J. Batal, III
By: ___________________________
Name: Michael J. Batal, III
Title: Managing Director
WILMINGTON TRUST, AS TRUSTEE OF
DU PONT PENSION TRUST
/s/ Mary Alice Snyder
By: ________________________
Name: Mary Alice Snyder
Title: Vice President
BROWN UNIVERSITY THIRD
CENTURY FUND
/s/ Marvyn Carton
By: ________________________
Name: Marvyn Carton
Title: Vice Chairman
8
<PAGE>
ANNEX I
<TABLE>
<CAPTION>
Co-Investor Number of Shares Purchase Price
----------- ---------------- --------------
Common Preferred Common Preferred
Stock Stock Stock Stock
----- ----- ----- -----
<S> <C> <C> <C> <C>
Mellon Bank, N.A., as Trustee for 32,000 128,000 $1,600,000 $6,400,000
the Bell Atlantic Master Trust
First Union Capital Partners, Inc. 32,000 128,000 $1,600,000 $6,400,000
BT Capital Partners, Inc. 32,000 128,000 $1,600,000 $6,400,000
Wilmington Trust, as Trustee for Du 32,000 128,000 $1,600,000 $6,400,000
Pont Pension Trust
Brown University Third Century Fund 2,000 8,000 $100,000 $400,000
</TABLE>
9
<PAGE>
ANNEX II
<TABLE>
<CAPTION>
Co-Investor Address
----------- -------
<S> <C>
Mellon Bank, N.A., as Trustee for the Bell One Mellon Bank Center
Atlantic Master Trust Room 3346
Pittsburgh, PA 15258-0001
Attention: Robert F. Sass
with a copy to:
Bell Atlantic Management Company
200 Park Avenue
New York, NY 10166
Attention: A. Jay Baldwin, Conrad A. Francis
and Bruce Francese, Esq.
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Arthur G. Siler, Esq.
First Union Capital Partners, Inc. One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: James C. Cook
BT Capital Partners, Inc. Mail Stop 2255
130 Liberty Street
New York, NY 10006
Attention: Gregory Chiate
Wilmington Trust, as Trustee for the Du Pont Du Pont Pension Fund Investments
Pension Trust Delaware Corporate Center
1 Righter Parkway
Wilmington, DE 19803
Attention: John Wolak
Brown University Third Century Fund 164 Angell Street
Box C
Providence, RI 02912
Attention: James Kilpatrick
</TABLE>
10
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made as of February 20, 1998, by and among
Universal Compression Holdings, Inc., a Delaware corporation ("Holdings"),
Castle Harlan Partners III, L.P., a Delaware limited partnership ("CHP"), each
other person or entity signatory hereto (the "Co-Investors"), and each of the
other Persons who becomes a party to this Agreement after the date hereof
pursuant to Section 7.5 below (collectively, with CHP and the Co-Investors, the
"Holders"). Certain capitalized terms used herein are defined in Section 6
below.
WHEREAS, CHP and related accounts, funds and individuals (the
"CHP Parties") and each of the Co-Investors have purchased shares (the
"Purchased Shares") of Common Stock, $.01 par value per share, of Holdings (the
"Common Stock"); and
WHEREAS, in order to induce the Holders to purchase the Purchased
Shares, Holdings has agreed to provide certain registration rights on the terms
and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
hereby agree as follows:
1. REGISTRATION UNDER THE SECURITIES ACT
1.1 Demand Registrations.
(a) Requests for Registration. Subject to Section 1.1(b) hereof,
either (i) the CHP Parties or (ii) other Holders owning of record in the
aggregate at least 25% of the Common Stock owned by such other Holders may at
any time request registration under the Securities Act of all or any portion of
its Registrable Securities on Form S-l or, if available, on Form S-2 or S-3 or
any similar short-form registration. All registrations requested pursuant to
this Section l.1(a) are referred to herein as "Demand Registrations." Each
request for a Demand Registration shall specify the approximate number of
Registrable Securities requested to be registered; provided, however, that a
request for an offering shall not qualify for a Demand Registration unless the
market value of the Registrable Securities to be included is at least $5 million
in the case of a non-underwritten offering and $20 million in the case of an
underwritten offering. Within [20] days after receipt of any such request,
Holdings shall give written notice of such requested registration to all other
Holders of Registrable Securities and, subject to Section 1.1(d), shall include,
without preference to the initiating Holders, in such registration all
Registrable Securities with respect to which Holdings has received written
requests for inclusion from the Holders therein within [20] days after the
receipt of Holdings' notice.
(b) Determination of Demand Registration. The CHP Parties shall
be entitled to receive three and the other Holders shall be entitled to receive
two Demand Registrations but, in
<PAGE>
each case, solely after the consummation of a Qualified IPO (as hereinafter
defined) of Holdings' securities. A registration shall not count as one of the
Demand Registrations until it has become effective (unless such Demand
Registration has not become effective due solely to the fault of the initiating
Holders), and unless at least [75]% of the Registrable Securities requested to
be included in such registration are registered; provided that in any event
Holdings shall pay all Registration Expenses in connection with any registration
initiated as a Demand Registration whether or not it has become effective.
(c) Priority on Demand Registrations. Holdings shall not include
in any Demand Registration any securities other than the Registrable Securities
without the prior written consent of the initiating Holders. If a Demand
Registration is an underwritten offering and the managing underwriters advise
Holdings in writing that in their opinion the number of Registrable Securities
and, if permitted hereunder, other securities requested to be included in such
offering exceeds the number of Registrable Securities and other securities, if
any, which can be sold therein without adversely affecting the marketability of
the offering, Holdings shall include in such registration prior to the inclusion
of any securities which are not Registrable Securities such Registrable
Securities requested to be included by the Holders which in the opinion of such
underwriters can be sold without adversely affecting the marketability of the
offering, pro rata among such requesting Holders on the basis of the number of
such Registrable Securities owned by each such requesting Holder. To the extent
that any Holders are members of management of Holdings or any of its
subsidiaries and the managing underwriters advise Holdings that the inclusion of
their shares would impair the marketability of the offering, Holdings shall be
entitled to refrain from including their shares in the registration and such
Holders shall have no claims against Holdings with respect thereto.
(d) Restrictions on Demand Registrations. Holdings shall not be
obligated to effect any Demand Registration within 180 days after the effective
date of a previous Demand Registration. Holdings may postpone for up to 180
consecutive days in any two-year period the filing or the effectiveness of a
registration statement for a Demand Registration if Holdings determines that
such Demand Registration would reasonably be expected to have a material adverse
effect on any proposal or plan by Holdings or any of its Subsidiaries to engage
in any acquisition of assets (other than in the ordinary course of business) or
any merger, consolidation, tender offer, reorganization or similar transaction;
provided that in such event, the holders of Registrable Securities initially
requesting such Demand Registration shall be entitled to withdraw such request
and, if such request is withdrawn, such Demand Registration shall not count as
one of the permitted Demand Registrations hereunder and Holdings shall pay all
Registration Expenses in connection with such registration.
(e) Selection of Underwriters. The Board of Directors of Holdings
shall select the investment banker(s) and manager(s) to administer each Demand
Registration, which banker(s) or manager(s), to the extent that Holdings will
not sell securities therein, shall be subject to the reasonable approval of the
Holders holding a majority of the Common Stock participating therein; provided,
however, that any such banker(s) or manager(s) in which any participating Holder
has a direct or indirect equity interest of 5% or more shall be subject to the
approval of such Holder.
-2-
<PAGE>
1.2. Piggyback Registrations.
(a) Right to Piggyback. Whenever Holdings proposes to register
any of its securities under the Securities Act and the registration form to be
used may be used for the registration of Registrable Securities (a "Piggyback
Registration"), Holdings shall give prompt written notice to all Holders of its
intention to effect such a registration and shall include, subject to Sections
1.2(b) and 1.2(c), in such registration all Registrable Securities with respect
to which Holdings has received written requests for inclusion therein within
twenty (20) days after Holdings' notice.
(b) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of Holdings, and
the managing underwriters advise Holdings in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering without adversely affecting the
marketability of the offering, Holdings shall include in such registration (i)
first, the securities Holdings proposes to sell, (ii) second, the Registrable
Securities requested to be included in such registration, pro rata on the basis
of the amount of Registrable Securities owned by each such requesting Holder,
and (iii) third, other securities requested to be included in such registration,
pro rata among other holders of such securities. To the extent that any Holders
are members of management of Holdings or any of its subsidiaries and the
managing underwriters advise Holdings that the inclusion of their shares would
impair the marketability of the offering, Holdings shall be entitled to refrain
from including their shares in the registration and such Holders shall have no
claims against Holdings with respect thereto.
(c) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders
(other than the Holders) of Holdings securities, and the managing underwriters
advise Holdings in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering without adversely affecting the marketability of the
offering, Holdings shall include in such registration (i) first, the securities
requested to be included therein by the holders requesting such registration,
(ii) second, the securities Holdings proposes to sell, (iii) third, the
Registrable Securities requested to be included in such registration, pro rata
among the Holders of such Registrable Securities on the basis of the number of
shares owned by each such requesting Holder, and (iv) fourth, other securities
requested to be included in such registration, pro rata among other holders of
such securities. To the extent that any Holders are members of management of
Holdings or any of its subsidiaries and the managing underwriters advise
Holdings that the inclusion of their shares would impair the marketability of
the offering, Holdings shall be entitled to refrain from including their shares
in the registration and such Holders shall have no claims against Holdings with
respect thereto.
(d) Selection of Underwriters. Holdings shall select the
investment banker(s) and manager(s) to administer each Piggyback Registration.
1.3 Registration Procedures. Whenever the Holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, Holdings shall
-3-
<PAGE>
use its reasonable best efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of disposition
thereof, and pursuant thereto Holdings shall as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission
a registration statement with respect to such Registrable Securities (and any
post-effective amendment to such registration statement Holdings deems to be
necessary) and use its reasonable best efforts to cause such registration
statement to become effective and to comply with the provisions of the
Securities Act applicable to it (provided that before filing a registration
statement or prospectus or any amendments or supplements thereto, Holdings shall
furnish to each counsel for Holders of Registrable Securities covered by such
registration statement copies of all such documents proposed to be filed, which
documents shall be subject to the review and comment of such counsel);
(b) furnish to each seller of Registrable Securities such number
of copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller (including, without limitation, the documentation referred
to in Section 1.3(o) below);
(c) keep the registration statement with respect to such
Registrable Securities continuously effective in order to permit the prospectus
forming a part thereof to be usable for the offer and sale of the Registrable
Securities for a period of time not less than the earlier of: (i) 180 days after
the date such registration statement is declared effective; and (ii) the date
that all of the Registrable Securities covered by such registration statement
have been sold pursuant to such registration statement;
(d) use its reasonable best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that Holdings shall not be required to
(i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subsection, (ii) subject itself to
taxation in any such jurisdiction or (iii) consent to general service of process
in any such jurisdiction);
(e) notify each seller of such Registrable Securities and any
underwriter, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act (i) when a registration statement or any
post-effective amendment has become effective under the Securities Act, (ii) of
the happening of any event as a result of which the prospectus included in such
registration statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein not misleading, and, at the
request of any such seller, Holdings shall prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not contain an untrue statement
of a
-4-
<PAGE>
material fact or omit to state any fact necessary to make the statements
therein not misleading, and (iii) of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any of the Registrable Securities included in such registration statement for
sale in any jurisdiction;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by Holdings are then
listed and, if not so listed, to be listed on a securities exchange or on the
NASD automated quotation system and, if listed on the NASD automated quotation
system, use its reasonable best efforts to secure designation of all such
Registrable Securities covered by such registration statement as a NASDAQ
"national market system security" within the meaning of Rule 11Aa2-1 of the
Securities and Exchange Commission or, failing that, to secure NASDAQ
authorization for such Registrable Securities and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register as such with respect to such Registrable Securities with the NASD;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including effecting a stock split or a combination of
shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of Holdings, and cause Holdings' officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(j) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of Holdings' first full fiscal quarter after the effective date of
the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) permit any Holder of Registrable Securities which Holder is
an underwriter or controlling person of Holdings, to participate in the
preparation of such registration or comparable statement and to require the
insertion therein of material, furnished to Holdings in writing, which in the
reasonable judgment of such holder and its counsel should be included;
-5-
<PAGE>
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Registrable Securities included in such registration statement for sale in
any jurisdiction, Holdings shall use its reasonable best efforts promptly to
obtain the withdrawal of such order;
(m) use its reasonable best efforts to cause such Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the sellers thereof to consummate the disposition of such Registrable
Securities;
(n) obtain a cold comfort letter from Holdings' independent
public accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters; and
(o) use reasonable efforts to cause certificates for the
Registrable Securities covered by such registration statement to be delivered by
the holders thereof to the underwriters in such denominations and registered in
such names as the underwriters may request.
2. Holdback Agreements.
2.1 Each Holder of Registrable Securities hereby agrees to not effect
any public sale or distribution (including sales pursuant to Rule 144 other than
Rule 144(k)) of equity securities of Holdings, or any securities convertible
into or exchangeable or exercisable for such securities, during the seven days
prior to and the 90-day period beginning on the effective date of any
underwritten registered public offering of equity securities of Holdings or
securities convertible or exchangeable into or exercisable for equity securities
of Holdings (except as part of such underwritten registration), unless the
underwriters managing the registered public offering otherwise agree, and each
such holder will deliver an undertaking to the managing underwriters (if
requested) consistent with this covenant. No Holder shall be obligated to comply
the provisions of this Section 2.1 more than two times in any 12-month period.
2.2 Holdings (i) shall not effect any public sale or distribution of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
90-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-4 or S-8 or any
successor forms), unless the underwriters managing the registered public
offering otherwise agree, and (ii) shall use reasonable efforts to cause each
holder of at least 5% of the outstanding Common Stock purchased from Holdings at
any time after the date of this Agreement (other than in a registered public
offering) to agree not to effect any public sale or distribution (including
sales pursuant to Rule 144 other than Rule 144(k)) of any such securities during
such period (except as part of such underwritten registration, if otherwise
permitted), unless the underwriters managing the registered public offering
otherwise agree. Holdings shall not be obligated to comply the provisions of
this Section 2.2 more than two times in any 12-month period.
-6-
<PAGE>
3. Registration Expenses.
3.1 All Registration Expenses shall be borne by Holdings. Also, Holdings
shall be responsible for its internal expenses (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly review, the
expense of any liability insurance and the expenses and fees for listing the
securities to be registered on each securities exchange on which similar
securities issued by Holdings are then listed or on the NASD automated quotation
system.
3.2 In connection with each Demand Registration, Holdings shall
reimburse the Holders of Registrable Securities included in such registration
for the reasonable fees and disbursements of one counsel chosen by the Holders
of a majority of the Registrable Securities included in such registration. In
connection with each Piggyback Registration, Holdings shall reimburse the
Holders of Registrable Securities included in such registration for the
reasonable fees and disbursements of one counsel chosen by the Holders of a
majority of the Registrable Securities included in such registration.
4. Indemnification.
4.1 Holdings agrees to indemnify, to the extent permitted by law, each
Holder of Registrable Securities, its officers and directors and each Person who
controls such Holder (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to Holdings by such Holder expressly for use
therein or by such Holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after Holdings
has furnished such Holder with a sufficient number of copies of the same. In
connection with an underwritten offering, Holdings shall indemnify such
underwriters, their officers and directors and each Person who controls such
underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the Holders of Registrable
Securities.
4.2 In connection with any registration statement in which a Holder of
Registrable Securities is participating, each such Holder shall furnish to
Holdings in writing such information as Holdings reasonably requests for use in
connection with any such registration statement or prospectus and, to the extent
permitted by law, shall indemnify Holdings, its directors and officers and each
Person who controls Holdings (within the meaning of the Securities Act) against
any losses, claims, damages, liabilities and expenses resulting from any untrue
or alleged untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that any information or affidavit so
furnished in writing by such Holder contains such untrue statement or omits a
material fact required to be stated therein
-7-
<PAGE>
necessary to make the statements therein not misleading; provided that the
obligation to indemnify shall be individual to each Holder and shall be limited
to the net amount of proceeds received by such Holder from the sale of
Registrable Securities pursuant to such registration statement.
4.3 Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel (in addition to local counsel) for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim.
4.4 The indemnification provided for under this Agreement shall remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities. If the
indemnification provided under Section 4.1 or Section 4.2 this Agreement (other
than as it relates to underwriters) is for any reason unavailable to, or
insufficient to hold harmless, an indemnified party, then each indemnifying
party shall contribute to the amount paid or payable to the indemnified party or
parties an amount that is proportionate to reflect the relative fault of such
indemnifying party on the one hand and the indemnified party or parties on the
other.
5. Participation in Underwritten Registrations. No Person may participate
in any registration hereunder which is underwritten unless such Person (i)
agrees to sell such Person's securities on the basis provided in any customary
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements (which shall be on the same terms for all Holders
of Registrable Securities participating in such registration) and (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents customarily required under the terms of such
underwriting arrangements.
-8-
<PAGE>
6. Definitions.
"Qualified IPO" means one or more public offerings of Common
Stock, the aggregate proceeds of which (after underwriting discounts or
commissions but before the expenses of the offering) are at least $50 million
pursuant to a registration statement filed with, and declared effective by, the
Securities Exchange Commission ("SEC"), upon the consummation of which the
common stock is listed on a United States securities exchange or included in the
NASDAQ Stock Market System, other than a registration on Form S-4 or S-8 (or its
equivalent).
"Person" means any individual, firm, partnership, corporation,
trust, joint venture, limited liability company, association, joint stock
company, unincorporated organization or any other entity or organization,
including a governmental entity or any department, agency or political
subdivision thereof.
"Public Sale" means any sale of equity interests of Holdings to
the public pursuant to an offering registered under the Securities Act or to the
public through a broker, dealer or market maker pursuant to the provisions of
Rule 144 adopted under the Securities Act.
"Registrable Securities" means (i) the Purchased Shares, (ii) any
other shares of Common Stock issued as a dividend or other distribution on or as
a result of a subdivision, combination or reclassification of any such shares of
Common Stock; (iii) any other shares of Common Stock acquired by the Holders at
any time; and (iv) any Common Stock issued to the Holders in any merger,
consolidation or business combination involving Holdings.
"Registration Expenses" means all expenses incident to Holdings'
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses,
fees and disbursements of custodians, and fees and disbursements of counsel for
Holdings and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained by Holdings and
such other expenses payable by Holdings as provided herein.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder, or any successor statute.
"Subsidiary" means, with respect to any Person, any company,
partnership, limited liability company, association or other business entity of
which at the time of such determination (i) if a company, a majority of the
total voting power of shares of stock entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof, or (ii) if a partnership, limited liability company, association or
other business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, limited liability company, association or
other business entity if such Person or Persons shall be allocated a majority of
partnership, limited liability
-9-
<PAGE>
company, association or other business entity gains or losses or shall be or
control any managing director or general partner of such partnership, limited
liability company, association or other business entity.
7. Miscellaneous.
7.1 No Inconsistent Agreements. Holdings shall not hereafter enter into
any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement. Holdings shall also not grant more favorable registration rights to
any party than those granted to the holders of Registrable Securities in this
Agreement. At the date hereof, Holdings is not party to any registration rights
agreement (other than this Agreement) relating to the capital stock of Holdings.
7.2 Adjustments Affecting Registrable Securities. Holdings shall not
take any action, or permit any change to occur, with respect to its securities
which would materially and adversely affect the ability of the Holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement or which would materially and adversely
affect the marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
7.3 Specific Performance. The parties hereto acknowledge and agree that
in the event of any breach of this Agreement, the non-breaching parties would be
irreparably harmed and could not be made whole by monetary damages. It is
accordingly agreed that the parties hereto shall and do hereby waive the defense
in any action for specific performance that a remedy at law would be adequate
and that the parties hereto, in addition to any other remedy to which they may
be entitled at law or in equity, shall be entitled to compel specific
performance of this Agreement in any action instituted in the Supreme Court of
the State of New York or the United States District Court for the Southern
District of New York, or, in the event such courts shall not have jurisdiction
of such action, in any court of the United States or any state thereof having
subject matter jurisdiction of such action.
7.4 Amendments and Waivers. The failure of any party to enforce any of
the provisions of this Agreement shall in no way be construed as a waiver of
such provisions and shall not affect the right of such party thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
No modification, amendment or waiver of any provision of this Agreement shall be
effective against Holdings or the Holders of Registrable Securities except by a
written agreement signed by each of Holdings, CHP and those Holders (other than
the CHP Parties) holding a majority of the Common Stock of Holdings (excluding
those held by the CHP Parties).
7.5 Additional Parties. The Board of Directors of Holdings shall,
subject to the prior written consent of CHP, be entitled, but not obligated, to
allow any holder of shares of Common Stock and any holder of securities
convertible into, exercisable or exchangeable for Common Stock to execute a
counterpart to this Agreement and become a party hereto (each, an "Additional
Party"), in which case the shares of Common Stock issued or issuable to any such
Additional Party shall be deemed "Registrable Securities" for purposes of this
Agreement.
-10-
<PAGE>
7.6 Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not including, without limitation, any Person which is
the successor to Holdings.
7.7 Severability. If any term, provision, covenant or restriction of
this Agreement, or any part thereof, is held by a court of competent
jurisdiction or any foreign federal, state, county or local government or any
other governmental, regulatory or administrative agency or authority to be
invalid, void, unenforceable or against public policy for any reason, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
7.8 Entire Agreement. Except as otherwise expressly set forth herein,
this document embodies the complete agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
7.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
7.10 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning of terms
contained herein.
7.11 Governing Law; Consent of Jurisdiction; Waiver of Jury Trial. This
Registration Rights Agreement and the validity and performance of the terms
hereof shall be governed by and construed in accordance with the laws of the
State of New York without regard to principles of conflicts of law or choice of
law, except to the extent that the laws of Delaware regulate Holdings' issuance
of securities. The parties hereto hereby agree that all actions or proceedings
arising directly or indirectly from or in connection with this Registration
Rights Agreement shall be litigated only in the Supreme Court of the State of
New York or the United States District Court for the Southern District of New
York located in New York County, New York. To the extent permitted by applicable
law, the parties hereto consent to the jurisdiction and venue of the foregoing
courts and consent that any process or notice of motion or other application to
either of said courts or a judge thereof may be served inside or outside the
State of New York or the Southern District of New York by registered mail,
return receipt requested, directed to such party at its address set forth in
this Registration Rights Agreement (and service so made shall be deemed complete
five (5) days after the same has been posted as aforesaid) or by personal
service or in such other manner as may be permissible under the rules of said
courts. The parties hereto hereby waive any right to a jury trial in connection
with any litigation pursuant to this Registration Rights Agreement.
7.12 Notices. Any notice or other communication required or which may be
given hereunder shall be in writing and shall be delivered personally,
telecopied with confirmed
-11-
<PAGE>
receipt, sent by certified, registered, or express mail, postage prepaid, or
sent by a national next-day delivery service. Such notice or other communication
shall be sent to the Holder of Registrable Securities at the address indicated
on Annex I hereto or to such other address or to the attention of such other
person as the recipient party has specified by prior written notice to the
sending party and shall be deemed given when so delivered personally or
telecopied, or if mailed, 5 days after the date of mailing, or, if by national
next-day delivery service, on the day after delivery to such service.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Registration Rights Agreement on the day and year first above written.
UNIVERSAL COMPRESSION HOLDINGS, INC.
/s/ Ernie Danner
By: ________________________________
Name: Ernie Danner
Title: Chief Financial Officer
CASTLE HARLAN PARTNERS III, L.P.
By: Castle Harlan, Inc.
Investment Manager
/s/ Howard Weiss
By: ________________________________
Name: Howard Weiss
Title:
/s/ Samuel Urcis
____________________________________
SAMUEL URCIS
CASTLE AFFILIATED PARTIES:
BRANFORD CASTLE HOLDINGS, INC.
/s/ John K. Castle
By: _______________________________
Name: John K. Castle
Title:
CASTLE HARLAN OFFSHORE PARTNERS III, L.P.
/s/ Howard Weiss
By: _______________________________
Name: Howard Weiss
Title:
CASTLE HARLAN AFFILIATES III, L.P.
/s/ Howard Weiss
By: _______________________________
Name:
Title:
-13-
<PAGE>
FROGMORE FORUM FAMILY FUND L.L.C.
/s/ Howard Weiss
By: _______________________________
Name: Howard Weiss
Title:
/s/ Leonard M. Harlan
____________________________________
LEONARD M. HARLAN
-14-
<PAGE>
CO-INVESTORS:
MELLON BANK, N.A., AS TRUSTEE FOR THE BELL
ATLANTIC MASTER TRUST, AS DIRECTED BY
BELL ATLANTIC CORPORATION
/s/ Bernadette Rist
By: _______________________________
Name: Bernadette Rist
Title: Authorized Signatory
FIRST UNION CAPITAL PARTNERS, INC.
/s/ James C. Cook
By: _______________________________
Name: James C. Cook
Title: Senior Vice President
BT CAPITAL PARTNERS, INC.
/s/ Michael J. Batal, III
By: _______________________________
Name: Michael J. Batal
Title: Managing Director
WILMINGTON TRUST, AS TRUSTEE OF DU PONT
PENSION TRUST
/s/ Mary Alice Snyder
By: _______________________________
Name: Mary Alice Snyder
Title: Vice President
BROWN UNIVERSITY THIRD CENTURY FUND
/s/ Marvyn Carton
By: _______________________________
Name: Marvyn Carton
Title: Vice Chairman
-15-
<PAGE>
MANAGEMENT STOCKHOLDERS:
/s/ Steven Snider
____________________________________
STEVEN SNIDER
/s/ Ernie Danner
____________________________________
ERNIE DANNER
/s/ Thomas Hartford
____________________________________
THOMAS HARTFORD
/s/ Newton Schnoor
____________________________________
NEWTON SCHNOOR
/s/ Robert Ryan
____________________________________
ROBERT RYAN
-16-
<PAGE>
ANNEX I
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Universal Compression Holdings, Inc. c/o Castle Harlan Partners III, L.P.
150 East 58th Street
37th Floor
New York, NY 10155
Attention: Jeffrey M. Siegal
Castle Harlan Partners III, L.P. c/o Castle Harlan Partners III, L.P.
150 East 58th Street
37th Floor
New York, NY 10155
Attention: Jeffrey M. Siegal
with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Andre Weiss, Esq.
Samuel Urcis 1160 Marilyn Drive
Beverly Hills, CA 90210
Branford Castle Holdings, Inc. c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
Castle Harlan Offshore Partners III, L.P. c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
Castle Harlan Affiliates III, L.P. c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
</TABLE>
-17-
<PAGE>
<TABLE>
<S> <C>
Frogmore Forum Family Fund L.L.C. c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
Leonard M. Harlan c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
Mellon Bank, N.A., as Trustee for the Bell One Mellon Bank Center
Atlantic Master Trust Room 3346
Pittsburgh, PA 15258-0001
Attention: Robert F. Sass
with a copy to:
Bell Atlantic Management Company
200 Park Avenue
New York, NY 10166
Attention: A. Jay Baldwin, Conrad A.
Francis and Bruce Francese, Esq.
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Arthur G. Siler, Esq.
First Union Capital Partners, Inc. One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: James C. Cook
BT Capital Partners, Inc. Mail Stop 2255
130 Liberty Street
New York, NY 10006
Attention: Gregory Chiate
</TABLE>
-18-
<PAGE>
<TABLE>
<S> <C>
Wilmington Trust, as Trustee for the Du Pont Du Pont Pension Fund Investments
Pension Trust Delaware Corporate Center
1 Righter Parkway
Wilmington, DE 19803
Attention: John Wolak
Brown University Third Century Fund 164 Angell Street
Box C
Providence, RI 02912
Attention: James Kilpatrick
Stephen Snider c/o Universal Compression, Inc.
4430 Brittmoore
Houston, TX
Ernie Danner c/o Universal Compression, Inc.
4430 Brittmoore
Houston, TX 77041
Thomas Hartford c/o Universal Compression, Inc.
4430 Brittmoore
Houston, TX 77041
Newton Schnoor c/o Universal Compression, Inc.
4430 Brittmoore
Houston, TX 77041
Robert Ryan c/o Universal Compression, Inc.
4430 Brittmoore
Houston, TX 77041
</TABLE>
-19-
<PAGE>
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of February 20, 1998 (the
"Agreement"), among Universal Compression Holdings, Inc. ("Holdings"), Castle
Harlan Partners III, L.P. ("CHPIII," and together with related accounts or funds
managed by Castle Harlan, Inc. ("CHI") or an Affiliate of CHI, referred to
herein collectively as "CHP"), and such persons whose names appear on the
signature page hereto respectively under the headings "Co-Investors," "Castle
Affiliated Parties" and "Management Stockholders" (CHP, and such persons
together with future holders of Holdings Securities that become parties hereto
by executing and delivering to Holdings (with the approval of Holdings, an
Instrument of Accession in the form of Exhibit B in the case of new issuances of
Holdings Securities) are sometimes herein referred to collectively as the
"Stockholders" and individually as a "Stockholder").
WHEREAS, TW Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Holdings ("TW"), acquired on the date hereof (the
"Acquisition") all of the issued and outstanding shares of common stock of
Tidewater Compression Service, Inc., a Texas corporation ("Compression"),
pursuant to a Stock Purchase Agreement, dated December 18, 1997, by and between
TW (which, after acquiring the stock of, and being merged into, Compression,
changed its name to Universal Compression Inc. (the "Company")) and Tidewater
Inc., a Delaware corporation;
WHEREAS, in connection with the Acquisition, Holdings provided
the Company with equity financing (the "Equity Financing") to fund a portion of
the purchase price of the Acquisition;
WHEREAS, each of the Stockholders have heretofore purchased from
Holdings shares of Common Stock (the "Common Stock"), par value $.01 per share,
of Holdings and shares of Series A Preferred Stock (the "Preferred Stock"), par
value $.01 per share, of Holdings as set forth next to each such Stockholder's
name on Exhibit A attached hereto; and
WHEREAS, the parties hereto desire to enter into this Agreement
to place certain restrictions on the sale, assignment, transfer or other
disposition of the shares of Common Stock and Preferred Stock and to provide for
certain rights and obligations in respect thereto as hereinafter provided.
NOW, THEREFORE, in order to implement the foregoing and in
consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
1. Definitions. (a) As used in this Agreement, the following
terms shall have the meanings ascribed to them below:
"Affiliate" shall, as to Holdings or any other specified Person,
mean (i) any Person directly or indirectly controlling, controlled by or under
direct or indirect common control with Holdings (or other specified Person),
(ii) any Person, directly or indirectly, having Beneficially Ownership of at
least 10% of any class of outstanding capital stock or other
<PAGE>
evidence of Beneficial Ownership in Holdings or such other Person; provided,
however, that no holder of Holdings Securities shall by reason of such holding
be an Affiliate of Holdings or any of its Subsidiaries for purposes of this
Agreement, and (iii) any employee of CHI or Affiliates of Castle Harlan Inc.
"Beneficial Ownership" shall have the same meaning as set forth
in Section 13(d) of the Exchange Act.
"Benefit Plan Investor" shall mean a "benefit plan investor"
within the meaning of Department of Labor Regulation Section 2510.3-101(f)(2) or
successor rule or regulation, as from time to time amended and in effect.
"Business Day" shall mean any day other than a Saturday, Sunday
or any other day on which commercial banks are required or authorized by law or
regulation to be closed in New York, New York.
"CHI" shall have the meaning set forth in the first paragraph
hereof.
"CHP" shall have the meaning set forth in the first paragraph
hereof.
"CHPIII" shall have the meaning set forth in the first paragraph
hereof.
"CHP Stock" means Common Stock (or Common Stock equivalents)
and/or Preferred Stock held by CHP or its Affiliates.
"Co-Investors" shall mean the Stockholders named under the
caption "Co-Investors" on the signature page hereto and all transferees thereof
pursuant to Section 7(b).
"Common Stock" shall have the meaning set forth in the recitals
hereto.
"Company" shall have the meaning set forth in the recitals
hereto.
"Compelled Sale Notice" shall have the meaning set forth in
Section 5(b).
"Compelled Sale Notice Date" shall have the meaning set forth in
Section 5(c).
"Compelled Sale Offer" shall have the meaning set forth in
Section 5(a).
"Compelled Sale Offer Price" shall have the meaning set forth in
Section 5(a).
"Compelled Sale Purchaser" shall have the meaning set forth in
Section 5(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated thereunder.
"Fully-Diluted Basis" shall mean giving effect, without
duplication, to (i) all shares of Holdings Securities outstanding at the time of
determination plus (ii) all shares of
2
<PAGE>
Holdings Securities issuable upon conversion of any convertible securities or
the exercise of any option, warrant or similar right, whether or not then
presently exercisable.
"Governmental Authority" shall mean any federal, state or local
governmental, administrative, or regulatory authority or agency.
"Holdings" shall have the meaning set forth in the first
paragraph hereof.
"Holdings Securities" means, collectively, Common Stock and/or
Preferred Stock.
"Investment Units" shall have the meaning set forth in Section
5(a).
"Issuance Notice" shall have the meaning set forth in Section
4(b).
"Management Stockholders" shall mean the Stockholders named under
the caption "Management Stockholders" on the signature page hereto and all other
Stockholders who are employees of Holdings or any of its Subsidiaries.
"Notice of Intention" shall have the meaning set forth in Section
6(a).
"Notice of Exercise" shall have the meaning set forth in Section
6(b).
"Offer Price" shall have the meaning set forth in Section 6(a).
"Offered Shares" shall have the meaning set forth in Section
6(a).
"Operating Company" shall mean an "operating company" within the
meaning of Department of Labor Regulation ss.2510.3-101(c) or successor rule or
regulation, as from time to time amended and in effect.
"Person" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization or
government or department or agency thereof.
"Plan Assets" shall mean "plan assets" within the meaning of
Department of Labor Regulation ss.2510.3-101 or successor rule or regulation, as
from time to time amended and in effect.
"Preferred Stock" shall have the meaning set forth in the
recitals hereto.
"Preemptive Right" shall have the meaning set forth in Section 4.
"Public Sale" means a sale pursuant to an effective registration
statement under the Securities Act or a sale to the public pursuant to Rule 144.
"Purchased Employee Shares" means any shares of Common Stock or
Preferred Stock purchased by any employee or director of Holdings, or Cliff
Laborde and John Laborde, in
3
<PAGE>
any case within one year of the date hereof at $50 per share, which may be
increased at a rate not to exceed 9% per annum from the date hereof until the
date of purchase by such employee or director.
"Qualified IPO" means one or more public offerings of Common
Stock, the aggregate proceeds of which (after underwriting discounts or
commissions but before the expenses of the offering) are at least $50 million
pursuant to a registration statement filed with, and declared effective by, the
Securities Exchange Commission ("SEC"), upon the consummation of which the
common stock is listed on a United States securities exchange or included in the
NASDAQ Stock Market System, other than a registration on Form S-4 or S-8 (or its
equivalent).
"Regulatory Requirement" shall have the meaning set forth in
Section 10.9
"Securities Act" shall mean the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder.
"Stockholders" shall have the meaning set forth in the first
paragraph hereof.
"Subsidiary" shall mean any Person of which Holdings or other
specified Person now or hereafter shall at the time own directly or indirectly
at least a majority of the outstanding capital stock (or other evidence of
Beneficial Ownership) entitled to vote generally or at least a majority of the
partnership, joint venture or similar interests, or in which Holdings or other
specified Person is a general partner or joint venturer without limited
liability.
"Voting Agreement" shall mean the Voting Agreement, dated the
date hereof, among Holdings, Castle Harlan Partners III, L.P. and the
Co-Investors.
"Voting Securities" means capital stock of Holdings as generally
vote on all matters brought before holders of Common Stock for approval or other
vote.
"Voting Trust Agreement" shall mean the Voting Trust Agreement,
dated the date hereof, among Holdings, certain Stockholders and John K. Castle,
as voting trustee.
"Wholly-Owned Subsidiary" shall mean with respect to any Person,
any Subsidiary all of whose outstanding capital stock (or other evidence of
Beneficial Ownership) entitled to vote generally other than directors'
qualifying shares is owned by such Person, directly or indirectly.
(b) All references herein to Common Stock and Preferred
Stock, whether used in the definition of Holdings Securities, CHP Stock or
otherwise shall include any other Voting Securities to the extent issued and
outstanding.
4
<PAGE>
2. Representations and Warranties of the Stockholders.
Each of the Stockholders represents and warrants as follows:
2.1 Authorization. Such Stockholder has full power and authority
to execute and deliver this Agreement and to perform such Stockholder's
obligations hereunder and this Agreement has been duly authorized, executed and
delivered by such Stockholder and is valid, binding and enforceable in
accordance with its terms, except that such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization and similar laws of general
application relating to or affecting the rights and remedies of creditors.
2.2 Compliance with Laws and Other Instruments. The execution and
delivery of this Agreement will not (a) conflict with (i) any provision of any
governing instrument applicable to such Stockholder or (ii) any material permit,
franchise, judgment, decree, statute, rule or regulation applicable to such
Stockholder or its business or property, or (b) result in any material breach of
any terms or provisions of, or constitute a material default under, any material
contract, or instrument to which such Stockholder is a party or by which it is
bound.
2.3 Consents. No filing, consent, approval or authorization of or
action with any Governmental Authority, is required to be made or obtained by or
with respect to such Stockholder in connection with the execution and delivery
of this Agreement by such Stockholder, other than such filings, consents,
approvals, authorizations or actions, the failure of which to make or obtain,
individually or in the aggregate, would not materially affect such Stockholder's
obligations hereunder.
3. Tag Along Rights.
(a) Each Stockholder shall have the right (the "Tag Along
Right") to participate on the terms set forth below in any sale by CHP and its
Affiliates of CHP Stock that would, if consummated, result in CHP and its
Affiliates owning on an economic basis less than an aggregate of 180,640 shares
of Common Stock (in the event of sales of Common Stock) or 722,560 shares of
Preferred Stock (in the event of sales of Preferred Stock) (each being a
"Trigger Amount"), in each case less Purchased Employee Shares; provided, that,
any Stockholder electing to exercise its Tag Along Right hereunder shall, to the
extent such sale by CHP and its Affiliates includes both Common Stock and
Preferred Stock, be required to exercise such rights as to both Common Stock and
Preferred Stock in the manner set forth in Section 3(b). At least 20 days prior
to any such transfer of CHP Stock, CHPIII will deliver a sale notice to the
Stockholders specifying the identity of the prospective transferee(s) and
disclosing in reasonable detail the price and other terms and conditions of the
proposed transfer, including, without limitation, the expected aggregate
holdings (in terms of dollars and percentage) by CHP and its Affiliates of the
Common Stock and the Preferred Stock immediately after consummation of such
proposed sale. The Stockholders may elect to participate in the proposed
transfer by delivering written notice to CHPIII prior to the expiration of such
20-day period.
5
<PAGE>
(b) If one or more of the Stockholders elect to
participate in such transfer, each such participating Stockholder will be
entitled to sell in such proposed transfer, at the same price and on the same
terms as CHP and its Affiliates as follows:
(i) a number of shares of Common Stock equal to the
product of (x) the quotient determined by dividing the number of shares of
Common Stock then held by such Stockholder (including shares of Common Stock
issuable upon the exercise of any warrants or options held by such Stockholder)
by the aggregate number of shares of Common Stock then held by CHP and its
Affiliates and all participating Stockholders (including shares of Common Stock
issuable upon the exercise of any warrants or options held by all such
participating Stockholders) multiplied by (y) the number of shares of Common
Stock (or Common Stock equivalents) to be sold in such proposed transfer.
(ii) a number of shares of Preferred Stock equal to the
product of (x) the quotient determined by dividing the number of shares of
Preferred Stock then held by such Stockholder by the aggregate number of shares
of Preferred Stock then held by CHP and its Affiliates and all participating
Stockholders multiplied by (y) the number of shares of Preferred Stock to be
sold in such proposed transfer.
(c) The provisions of this Section 3 shall not apply to
transfers by any entity or person constituted within CHP (i) to each other or to
Affiliates of any such entity at a price not in excess of such entity's original
cost, (ii) to the partners of such entities as part of a distribution by such
entities or (iii) of Common Stock and Preferred Stock in amounts that would not
result in CHP and its Affiliates owning less than the Trigger Amount, provided
each such transferee agrees to be bound by the provisions of this Agreement.
(d) No Stockholder shall be required to make any
representation or warranty in connection with the exercise of its participation
rights under this Section 3 other than as to such Stockholder's ownership and
authority to transfer, free of liens, claims and encumbrances, the shares of
Common Stock and/or Preferred Stock proposed to be transferred by such
Stockholder and any other representation or warranty reasonably requested by the
purchaser thereof as related solely to such Stockholder or its regulatory
status.
4. Preemptive Rights.
(a) If after the date hereof Holdings proposes to issue
any shares of Common Stock or Preferred Stock or any other Voting Security (or
obligations of any kind convertible into or exchangeable or exercisable for any
shares of Common Stock or Preferred Stock or such other Voting Security), each
Stockholder shall have the right (the "Preemptive Right") to purchase a portion
of such securities sufficient to enable such holder to maintain its voting
percentage interest in the Voting Securities (on a Fully-Diluted Basis)
immediately prior to such issuance; provided, that, any Stockholder electing to
exercise its Preemptive Right hereunder shall, to the extent Holdings issues
both Common Stock and Preferred Stock, be required to exercise such right as to
both the Common Stock and the Preferred Stock in the same proportion as such
classes are issued.
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(b) Holdings shall give each Stockholder at least 30 days'
prior written notice of any such proposed issuance setting forth in reasonable
detail the proposed terms and conditions thereof, including without limitation
the identity of the proposed recipient (the "Issuance Notice"), and shall offer
to each such Stockholder the opportunity to purchase such securities at the same
price, on the same terms, and at the same time as the securities are proposed to
be issued by Holdings. A Stockholder may exercise its right of first refusal by
delivery of a written notice to Holdings within 15 days after delivery of the
Issuance Notice, which exercise shall be irrevocable.
(c) The Preemptive Rights shall not apply to the following
issuances: (i) issuances of securities of a type that could not be acquired by
all the Stockholders pursuant to this Section 4 if such acquisition is at such
time prohibited because it would result in a violation of Holdings or its
Subsidiaries covenants under its credit facilities or instruments; (ii)
issuances of Holdings Securities in connection with a transaction (other than a
transaction with any entity constituted within CHP or any of their Affiliates)
that the Board of Directors of Holdings deems to be a strategic transaction,
including, without limitation, any acquisition of any business or assets used in
the business of Holdings or its Subsidiaries; (iii) issuances where Holdings
Securities are issued as a unit with securities of Holdings that are not
Holdings Securities; (iv) issuances where Stockholders (other than CHP) holding
a majority of the Holdings Securities (excluding those held by CHP) determine
that such issuance should be exempt from the provisions of this Section 4; (v)
issuances in any underwritten public offering; (vi) issuances in connection with
mergers, consolidations or acquisitions of assets or businesses; and (vii)
issuances to directors and employees of Holdings and any Subsidiary thereof.
5. Drag Along Rights.
(a) CHPIII shall have the right in connection with a bona
fide offer (a "Compelled Sale Offer") by a Person not an Affiliate of CHP (a
"Compelled Sale Purchaser") to purchase at least 80% of the shares of Common
Stock, Preferred Stock and any other equity securities (including, without
limitation, warrants, options and preferred stock) of Holdings (each, an
"Investment Unit" and collectively, "Investment Units") held by CHPIII (for
either cash, securities of a class registered under Section 12 of the Exchange
Act (or convertible into such a class of securities) or any combination thereof)
to require each (but not less than each, other than the Management Stockholders
to the extent of any Investment Units acquired by such Stockholders within 12
months after the Closing Date, other than Common Stock acquired pursuant to the
Company's Incentive Stock Option plan) of the other Stockholders to sell the
same percentage or all of the Investment Units then held by such Stockholders,
to the Compelled Sale Purchaser, for the equivalent consideration per Investment
Unit (a "Compelled Sale Offer Price(s)") and otherwise on the same terms and
conditions upon which CHP sells its Investment Units.
(b) If CHP elects to exercise its right to compel sale
pursuant to this Section 5, CHPIII shall deliver a written notice (a "Compelled
Sale Notice") of the Compelled Sale Offer to each Stockholder and Holdings at
least 20 days prior to the consummation of any such sale, setting forth the
Compelled Sale Offer Price(s), the identity of the Compelled Sale
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Purchaser and the other terms and conditions thereof. Each Stockholder shall
deliver to CHPIII in escrow, not less than five Business Days before the
proposed date of consummation of the Compelled Sale Offer, the duly endorsed
certificate or certificates representing the requisite number of the Investment
Units owned by such Stockholder, together with a limited power-of-attorney
authorizing CHPIII to transfer such Investment Units to the Compelled Sale
Purchaser pursuant to the terms of the Compelled Sale Offer at the Compelled
Sale Offer Price(s), and in accordance with the provisions hereof.
(c) CHPIII shall have 60 days from the date the Compelled
Sale Notice is received by the Stockholders (the "Compelled Sale Notice Date")
to sell, and to cause the other entities constituting CHP to sell, to the
Compelled Sale Purchaser at the Compelled Sale Offer Price(s) all of the
Investment Units subject to the Compelled Sale Offer. Immediately after
completion of any such sale pursuant to this Section 5, CHPIII shall notify
Holdings and each Stockholder of such completion and shall furnish such evidence
of such sale (including time of completion) and the terms thereof as Holdings or
any Stockholder may reasonably request. CHPIII shall substantially concurrently
with such closing also remit to each Stockholder the proceeds of such sale
attributable to the sale of such Stockholder's Investment Units immediately upon
receipt thereof. If any sale to a Compelled Sale Purchaser is not completed by
the expiration of the 60-day period referred to in this Section 5(c), then,
without prejudice to CHPIII's right to seek to compel a sale under this Section
5 in the future, CHPIII shall return to each Stockholder all certificates
representing the Investment Units of such Stockholder.
(d) No Stockholder required to sell Investment Units
pursuant to a Compelled Sale Offer shall be required to make any representation
or warranty in connection with such Compelled Sale Offer other than as to such
Stockholder's ownership and authority to transfer, free of liens, claims and
encumbrances, the Investment Units proposed to be sold by it.
6. Right of First Offer.
(a) If after February 20, 2000 hereof any Stockholder
(other than a Stockholder of the type described in the last sentence of this
Section 6(a)) wishes to transfer any Common Stock and/or Preferred Stock held by
it to an unaffiliated third party pursuant to the second paragraph of Section 7,
then such Stockholder shall deliver a written notice of its desire to so
transfer (a "Notice of Intention"), accompanied by a copy of a proposal relating
to such transfer, to CHPIII and Holdings, setting forth such Stockholder's
desire to make such transfer, the number of shares of Common Stock and/or
Preferred Stock proposed to be transferred (the "Offered Shares") and the price
(the "Offer Price") at which such Stockholder proposes to transfer such stock.
For purposes of this Section 6, references to "Stockholder" exclude all
Management Stockholders.
(b) Upon receipt of the Notice of Intention, CHP shall
have the right to purchase at the price specified in the Notice of Intention,
all or, subject to Section 6(d), any portion of the Offered Shares, exercisable
by the delivery of notice to such Stockholder (the "Notice of Exercise"), with a
copy to Holdings, within 20 days from the date of receipt of the Notice of
Intention. In the event CHP elects not to exercise its right to purchase the
Offered
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Shares (or if CHP fails to provide the Notice of Exercise within such 20-day
period), Holdings may exercise the right set forth in this Section 6 to purchase
the Offered Shares by providing a Notice of Exercise within 30 days after the
date of its receipt of the Notice of Intention. The right of CHP and Holdings
pursuant to this Section 6 shall terminate if not exercised within 20 days, in
the case of CHP, or 30 days, in the case of Holdings, after receipt of the
Notice of Intention.
(c) In the event CHP or Holdings exercises its rights to
purchase all or, subject to Section 6(d), a portion of the Offered Shares, then
such Stockholder must sell the Offered Shares to CHP or Holdings, as applicable,
after not less than 30 days and not more than 60 days from the date of the
delivery of the Notice of Exercise received by such Stockholder.
(d) Notwithstanding the foregoing provisions of this
Section 6, unless such Stockholder shall have consented to the purchase of less
than all of the Offered Shares, neither CHP nor Holdings may purchase any
Offered Shares unless all of the Offered Shares are to be purchased.
(e) If the Notice of Intention has been duly given and CHP
and Holdings elect not to exercise their rights or wish to exercise their rights
only as to a portion of the Offered Shares (without the consent of such
Stockholder), then such Stockholder shall have the right for a period of up to
180 days from the expiration of the 30 day period commencing on the date of
delivery of the Notice of Intention (unless such Stockholder is notified prior
to such date by both CHP and Holdings that neither intends to exercise its
rights under this Section 6) to sell the Offered Shares to any such third party
for a price not less than the Offer Price and on the same terms and conditions
as provided in the Notice of Intention; provided, that upon consummation of such
sale, such third party is required to exercise (i) an Instrument of Accession in
the form of Exhibit B hereto and thereby become a party to, and be bound by the
terms and provisions of, this Agreement and (ii) an appropriate supplement to
the Voting Agreement or the Voting Trust Agreement, as applicable, and thereby
become a party to, and be bound by the terms and provisions of, the Voting
Agreement or the Voting Trust Agreement, as applicable.
(f) In the event CHP and Holdings do not exercise their
rights under this Section 6 to purchase the Offered Shares and such Stockholder
shall not have sold the Offered Shares to such third party within such 180-day
period, then such Stockholder shall not be permitted to give another Notice of
Intention for a period of 90 days from the last day of such 180-day period.
7. Restrictions on Transfer.
(a) Except as provided in Sections 3, 4, 5, 6 and this
Section 7 hereof, the Stockholders shall not transfer or otherwise dispose of
any Investment Units owned by such Stockholders, or any interest therein, and
any attempt by such Stockholders to effect a transfer or disposition in
violation of this Section 7 or Sections 3, 4, 5 and 6 hereof shall be void and
ineffective for all purposes. The words "transfer" and "dispose" include the
making of any sale, exchange, assignment, gift, security interest, pledge or
other encumbrance, or any contract
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<PAGE>
therefor (other than a voting trust or other agreement or arrangement with
respect to the transfer of voting rights or any other beneficial interest in the
Investment Units to an Affiliate of CHP), the creation of any other claim
thereto or any other transfer or disposition whatsoever, whether voluntary or
involuntary, affecting the right, title, interest or possession in or to the
Investment Units.
(b) Nothing in this Section 7 or any other Section hereof
shall restrict the transfer or other disposition of the Investment Units: (i) to
a personal representative or to one or more members of any Stockholder's family
or to trusts or similar entities established for their benefit or to any other
charitable or non-profit organization, (ii) to any other Stockholder or to any
Affiliate of any Stockholder, (iii) upon any liquidation or any other
distribution to the partners or any other holders of a beneficial interest in
any Stockholder; (iv) between or among the entities or persons constituting CHP
and/or any of its Affiliates; (v) to any entity that is a successor trustee to
the trustee for such Stockholder or nominee for, or successor by reorganization
of, a qualified pension trust acting as trustee for such Stockholder; or (vi) to
Holdings or any Subsidiary of Holdings (but not including Common Stock held by
CHP or any of its Affiliates); provided, however, that such transferee(s) shall
take such Investment Units subject to and be fully bound by this Agreement with
the same effect as if he, she or it were a party hereto and shall execute and
deliver to Holdings an Instrument of Accession in the form of Exhibit B hereto
and references herein to Common Stock or Preferred Stock held or owned by any
Stockholder shall be deemed to include Common Stock or Preferred Stock held or
owned by any such transferee(s) (and the transferee shall be deemed a
Stockholder for purposes of this Agreement). As used in this Agreement, the term
"personal representative" shall mean the executor or executors of the will or
administrator or administrators of the estate, the heirs, legatees or other
beneficiaries thereunder and all other legal representatives (by operation of
law or otherwise) of a holder of Investment Units.
(c) The Stockholders agree that each stock certificate
representing Common Stock or Preferred Stock issued to any holder bound by the
terms hereof shall bear the following legend:
SHARES OF UNIVERSAL COMPRESSION HOLDINGS, INC.
("HOLDINGS") REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A STOCKHOLDERS AGREEMENT, DATED AS OF
FEBRUARY 20, 1998, WHICH CONTAINS PROVISIONS
REGARDING THE RESTRICTIONS ON THE TRANSFER OF SUCH
SHARES AND OTHER MATTERS. A COPY OF SUCH AGREEMENT
IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL
OFFICE OF HOLDINGS. THE SHARES REPRESENTED BY THIS
CERTIFICATE WERE NOT REGISTERED UNDER, AND ARE
SUBJECT TO, THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT
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OR IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT AS DETERMINED BY HOLDINGS.
(d) In the event any Stockholder sells all or any portion
of its Investment Units pursuant to any Section of this Agreement, such
Stockholder shall, upon the reasonable request of Holdings, provide prompt
written notice to Holdings setting forth the net proceeds such Stockholder
received upon such sale or transfer. The obligation of such Stockholder under
this Section 7(d) shall apply each time such Stockholder sells Investment Units
hereunder.
8. Holdings Covenants.
Holdings covenants and agrees as follows, with such covenants to
be effective so long as Holdings Securities are outstanding (or such shorter
period as may be indicated below):
8.1 Plan Assets. So long as any Stockholder that is a Benefit
Plan Investor holds any equity securities of Holdings, Holdings shall take all
actions necessary to allow it to continue to constitute an Operating Company, or
otherwise not to cause any of the underlying assets of Holdings or any of its
Subsidiaries to be deemed "Plan Assets" with respect to such Stockholder.
8.2 Annual Reports; Quarterly Reports; Monthly Reports. (a)
Holdings will furnish to all Stockholders, as soon as practicable, and in any
event within 120 days after the end of each fiscal year, audited consolidated
statements of income and cash flows of Holdings and its Subsidiaries for such
fiscal year, and consolidated balance sheets of Holdings and its Subsidiaries as
of the end of such fiscal year, setting forth in each case comparisons to the
preceding fiscal year.
(b) Holdings will furnish to all Stockholders, as soon as
practicable, and in any event within 60 days after the end of each of the first
three fiscal quarters in each fiscal year, unaudited consolidated statements of
income and cash flows of Holdings and its Subsidiaries for such quarterly fiscal
period, and consolidated balance sheets of Holdings and its Subsidiaries as of
the end of such quarterly fiscal period, setting forth in each case comparisons
to the corresponding period in the preceding fiscal year.
(c) Each of the financial statements referred to in paragraphs
(a) and (b) will be prepared in accordance with generally accepted accounting
principles.
8.3 Corporate Existence. Holdings will, and will cause each of
its Subsidiaries to, preserve and keep in full force and effect its corporate
existence, rights and franchises necessary or desirable in the normal conduct of
business; provided that nothing in this Section shall prohibit (i) the merger of
any Subsidiary into Holdings or the merger or consolidation of any Subsidiary
with or into another entity if the corporation surviving such consolidation or
merger is a Subsidiary of Holdings and (ii) the termination of the corporate
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existence of any Subsidiary if Holdings in good faith determines that such
termination is in its best interest.
8.4 Insurance. Holdings will maintain, and will cause its
Subsidiaries to maintain, with financially sound and reputable insurance
companies, funds or underwriters insurance of the kinds and in accordance with
the general practices of businesses engaged in similar activities.
8.5 Compliance with Laws. Holdings will comply, and will cause
each of its Subsidiaries to comply, in all material respects with all applicable
laws and regulations wherever its business is conducted, and all applicable
decrees, orders and judgments, the non-compliance with which could reasonably be
expected to have a materially adverse effect on the business, operations or
condition, financial or otherwise, of Holdings and its Subsidiaries, taken as a
whole.
8.6 Transaction with Affiliates. Holdings will not, and will not
permit any of its Subsidiaries to, enter into or permit to exist any transaction
or series of related transactions with, or for the benefit of, an Affiliate
unless such transaction is on terms no less favorable than those that might
reasonably have been obtained in a comparable transaction at such time on an
arm's length basis from a Person that is not an Affiliate of Holdings or such
Subsidiaries (it being agreed that (i) the Management Agreement, dated as of the
date hereof, between Holdings, the Company and CHI, and (ii) the Finders and
Consulting Services Agreement, between Holdings and Samuel Urcis, dated as of
the date hereof, shall each be deemed to comply with this covenant).
8.7 Rules 144 and 144A. So long as Holdings shall not have filed
a registration statement pursuant to Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act,
Holdings shall, at any time and from time to time, upon the request of a
Stockholder, furnish in writing to such Stockholder a statement as of a date not
earlier than 12 months prior to the date of such request of the nature of the
business of Holdings and the products and services it offers and copies of
Holdings' most recent balance sheet and profit and loss and retained earnings
statements, together with similar financial statements for such part of the two
preceding fiscal years as Holdings shall have been in operation, all such
financial statements to be audited to the extent audited statements are
reasonably available, provided that, in any event the most recent financial
statements so furnished shall include a balance sheet as of a date less than 16
months prior to the date of such request, statements of profit and loss and
retained earnings for the 12 months preceding the date of such balance sheet,
and, if such balance sheet is not as of a date less than 6 months prior to the
date of such request, additional statements of profit and loss and retained
earnings for the period from the date of such balance sheet to a date less than
6 months prior to the date of such request. If Holdings shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, Holdings shall file the reports required to be filed by it under
the Securities Act and the Exchange Act and the rules and regulations adopted by
the Securities and Exchange Commission thereunder (or, if Holdings is not
required to file such reports, will, upon the request of such
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<PAGE>
Stockholder, make publicly available other information) and will take such
further action as such Stockholder may reasonably request, all to the extent
required from time to time to enable such Stockholder to sell securities of
Holdings without registration under the Securities Act within the limitation of
the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule
may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the Securities and Exchange Commission. Upon the request of
a Stockholder, Holdings will deliver to such Stockholder a written statement as
to whether it has complied with the requirements of this Section. Holdings, upon
written request, will cooperate with and assist a Stockholder or any member of
the National Association of Securities Dealers, Inc. system for Private Offering
Resales and Trading through Automated Linkages ("PORTAL") in applying to
designate and thereafter maintaining the eligibility of Common Stock and
Preferred Stock for trading through PORTAL.
8.8 Board Observer. Each of (i) Mellon Bank, N.A., as Trustee for
the Bell Atlantic Master Trust, (ii) BT Capital Partners, Inc., (iii) First
Union Capital Partners, Inc., and (iv) Wilmington Trust, as Trustee for Du Pont
Pension Trust, may select a representative to attend as an observer all
meetings, including telephonic meetings, of Holdings' Board of Directors. In
such event, Holdings will give each such Stockholder as designates such a
representative written notice of each meeting of its Board of Directors at the
same time and in the same manner as notice is given to the directors. Such
representative shall also be provided with all written materials and other
information (including minutes of meetings) given to directors in connection
with such meetings at the same time such materials and information are given to
the directors. If Holdings proposes to take any action by written consent in
lieu of a meeting of its Board of Directors, Holdings shall give written notice
thereof to each such Stockholder promptly following the effective date of such
consent describing in reasonable detail the nature and substance of such action.
In the event Holdings establishes separate committees of the Board of Directors,
the right to a representative granted hereunder shall extend to all meetings,
including telephone meetings, of the Compensation and Audit Committees, but
shall in no event extend to meetings of Holdings' Executive Committee. The Board
of Director observer rights granted under this Section 8.8 are exclusive to each
such entity and are thereby not assignable by any such Stockholder under any
circumstances.
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9. Termination.
(a) The obligations and restrictions set forth under Sections 3
through 8 of this Agreement shall terminate upon the earlier of (i) completion
of a Qualified IPO; provided that if the Qualified IPO is completed within two
years after the date hereof, such termination shall occur on the two year
anniversary after the date hereof; (ii) the date upon which CHP's economic
ownership of the capital stock of Holdings represents less than 10% of the
outstanding capital stock of Holdings and (iii) the tenth anniversary date of
the date hereof.
(b) Upon such termination, the Stockholders shall be entitled
upon written request to Holdings to exchange their certificates representing the
Common Stock and Preferred Stock for certificates that do not contain the
legends required by this Agreement (other than last sentence of the legend
provided for in Section 7(b)).
10. Miscellaneous.
10.1 Assignability; Binding Effect. Except as otherwise provided
in this Agreement, no right under this Agreement shall be assignable and any
attempted assignment in violation of this provision shall be void. This
Agreement, and the rights and obligations of the parties hereunder, shall be
binding upon and inure to the benefit of any and all successors, permitted
assigns, personal representatives and all other legal representatives, in
whatsoever capacity, by operation of law or otherwise, of the parties hereto, in
each case with the same force and effect as if the foregoing persons were named
herein as parties hereto.
10.2 Notices. Any notice or other communication required or which
may be given hereunder shall be in writing and shall be delivered personally,
telecopied with confirmed receipt, sent by certified, registered, or express
mail, postage prepaid, or sent by a national next-day delivery service to the
parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice, and shall be deemed given when so
delivered personally or telecopied, or if mailed, 2 days after the date of
mailing, or, if by national next-day delivery service, on the day after delivery
to such service as follows:
(a) If to Holdings, to it at the following address:
c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
with copies to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Andre Weiss, Esq.
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<PAGE>
(b) If to CHPIII, to it at the following address:
Castle Harlan Partners III, L.P.
159 E. 58th Street
New York, New York 10155
Attention: Jeffrey M. Siegal
(c) If to the other Stockholders, at their addresses as
set forth on Annex I
or at such other address or addresses as the parties hereto shall have specified
by notice in writing to the other parties (provided, that such notice of change
of address shall be deemed to have been duly given only when actually received).
10.3 Applicable Law; Consents. This Agreement and the validity
and performance of the terms hereof shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of law or choice of law, except to the extent that the laws of
Delaware regulate corporate governance or the issuance of Holdings' securities.
The parties hereto hereby agree that all actions or proceedings arising directly
or indirectly from or in connection with this Agreement shall be litigated only
in the Supreme Court of the State of New York or the United States District
Court for the Southern District of New York located in New York County, New
York. To the extent permitted by applicable law, the parties hereto consent to
the jurisdiction and venue of the foregoing courts and consent that any process
or notice of motion or other application to either of said courts or a judge
thereof may be served inside or outside the State of New York or the Southern
District of New York by registered mail, return receipt requested, directed to
such party at its address set forth in this Agreement (and service so made shall
be deemed complete five days after the same has been posted as aforesaid) or by
personal service or in such other manner as may be permissible under the rules
of said courts.
10.4 Amendment and Waivers; Entire Agreement. This Agreement may
be amended or provisions hereof waived only by a written instrument signed by
Holdings, CHP and the Stockholders (other than CHP) then owning at least 51% of
the Common Stock and Preferred Stock then owned by all of the Stockholders
(other than CHP), and then such amendment or waiver shall be effective only in
the specific instance and for the specific purpose for which approved; provided,
however, that the admission of a holder of Holdings Securities as a Stockholder
shall not be considered an amendment hereto. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof, and
there are no restrictions, agreements, promises, representations, warranties,
covenants or undertakings with respect to the subject matter hereof other than
those expressly set forth herein. This Agreement supersedes all prior agreements
and understandings between the parties with respect to this subject matter,
except for the various stock purchase agreements entered into by each of the
Stockholders prior to entering into this Agreement.
10.5 Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning of terms
contained herein.
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10.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
10.7 Specific Performance; Stockholders' Remedies. Each of the
parties hereto acknowledges and agrees that in the event of any breach of this
Agreement, the non-breaching party would be irreparably harmed and could not be
made whole by monetary damages. It is accordingly agreed that the parties hereto
shall and do hereby waive the defense in any action for specific performance
that a remedy at law would be adequate and that the parties hereto, in addition
to any other remedy to which they may be entitled at law or in equity, shall be
entitled to compel specific performance of this Agreement in any action
instituted in the Supreme Court of the State of New York or the United States
District Court for the Southern District of New York, or, in the event such
courts shall not have jurisdiction of such action, in any court of the United
States or any state thereof having subject matter jurisdiction of such action.
Any party hereto may also seek legal or equitable remedies,
including an injunction or specific performance, for any default or breach
hereunder by each of the other parties hereto of such other party's
representations and warranties, covenants and agreements herein.
10.8 Survival of Covenants. All covenants, agreements,
representations and warranties made herein or in any other document referred to
herein or delivered to a party pursuant hereto or in connection herewith shall
survive the execution and delivery to such party of this Agreement.
10.9 Regulatory Compliance by Certain Stockholders. In the event
that any Stockholder determines that, by reason of any future federal or state
rule, regulation, guideline, order, interpretive release, ruling, request or
directive (having the force of law and where the failure to comply therewith
would be unlawful) (collectively, a "Regulatory Requirement"), it is effectively
restricted or prohibited from holding its capital stock (or any equity
securities distributable to such Stockholder in any merger, reorganization,
readjustment or other reclassification or exchange with respect to Holdings) or
otherwise realizing upon or receiving the benefits intended hereunder, and
following such Stockholder's exercise of its reasonable best efforts to overcome
such Regulatory Requirement, Holdings and the other Stockholders shall make all
reasonable efforts to take such action as such Stockholder may deem to be
reasonably necessary to permit such Stockholder to comply with such Regulatory
Requirement. Such action to be taken may include Holdings' authorization or
creation as may be reasonably necessary of one or more new classes of capital
stock and the modification or amendment of Holdings' Certificate of
Incorporation, this Agreement or other documents or instruments executed in
connection with the capital stock held by such Stockholder. Such Stockholder
shall give written notice to Holdings and the Stockholders of any such
determination and the action or actions reasonably necessary to comply with such
Regulatory Requirement, and Holdings, and the Stockholders shall take all steps
reasonably necessary to comply with such determination as
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expeditiously as possible. Such Stockholder shall be responsible for the costs
and expenses associated with complying with such Regulatory Requirements.
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IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
UNIVERSAL COMPRESSION HOLDINGS, INC.
By: /s/ Ernie Danner
________________________________
Name: Ernie Danner
Title: Chief Financial Officer
CASTLE HARLAN PARTNERS III, L.P.
By: Castle Harlan, Inc.
Investment Manager
By: /s/ Howard Weiss
________________________________
Name: Howard Weiss
Title:
/s/ Samuel Urcis
------------------------------------
SAMUEL URCIS
CASTLE AFFILIATED PARTIES:
BRANFORD CASTLE HOLDINGS, INC.
By: /s/ Howard Weiss
________________________________
Name:
Title:
CASTLE HARLAN OFFSHORE PARTNERS III, L.P.
By: /s/ Howard Weiss
________________________________
Name:
Title:
CASTLE HARLAN AFFILIATES III, L.P.
By: /s/ Howard Weiss
________________________________
Name
Title:
18
<PAGE>
FROGMORE FORUM FAMILY FUND L.L.C.
By: /s/ Howard Weiss
________________________________
Name:
Title:
/s/ Leonard M. Harlan
____________________________________
LEONARD M. HARLAN
19
<PAGE>
CO-INVESTORS:
MELLON BANK, N.A., AS TRUSTEE FOR THE BELL
ATLANTIC MASTER TRUST, AS DIRECTED BY
BELL ATLANTIC CORPORATION
By: /s/ Bernadette Rist
________________________________
Name: Bernadette Rist
Title Authorized Signatory
FIRST UNION CAPITAL PARTNERS, INC.
By: /s/ James C. Cooke
________________________________
Name: James C. Cooke
Title: Senior Vice President
BT CAPITAL PARTNERS, INC.
By: /s/ Michael J. Batal, III
________________________________
Name: Michael J. Batal
Title: Managing Director
WILMINGTON TRUST, AS TRUSTEE OF DU PONT
PENSION TRUST
By: /s/ Mary Alice Snyder
________________________________
Name: Mary Alice Snyder
Title: Vice President
BROWN UNIVERSITY THIRD CENTURY FUND
By: /s/ Mervyn Carton
________________________________
Name: Mervyn Carton
Title: Vice Chairman
20
<PAGE>
MANAGEMENT STOCKHOLDERS:
/s/ Steven Snider
____________________________________
STEVEN SNIDER
/s/ Ernie Danner
____________________________________
ERNIE DANNER
/s/ Thomas Hartford
____________________________________
THOMAS HARTFORD
21
<PAGE>
Exhibit A
Number of Number of
Shares of Shares of
Name of Stockholder Common Stock Preferred Stock
- ------------------- ------------ ---------------
Castle Harlan Partners III, L.P. 178,287 713,148
Samuel Urcis 4,400 17,600
Castle Affiliated Parties:
- --------------------------
Branford Castle Holdings, Inc. 1,181 4,724
Castle Harlan Offshore Partners 2,923 11,692
III, L.P.
Castle Harlan Affiliates III, L.P. 2,980 11,920
Frogmore Forum Family Fund, L.L.C. 679 2,716
Leonard M. Harlan 590 2,360
Co-Investors:
- -------------
Mellon Bank, N.A., as Trustee 32,000 128,000
for the Bell Atlantic Master
Trust
First Union Capital Partners, Inc. 32,000 128,000
BT Capital Partners, Inc. 32,000 128,000
Wilmington Trust, as Trustee 32,000 128,000
of Du Pont Pension Trust
Brown University Third 2,000 8,000
Century Fund
<PAGE>
Management Stockholders:
- ------------------------
Stephen Snider 2,000 8,000
Ernie Danner 1,000 4,000
Thomas Hartford 960 3,840
<PAGE>
EXHIBIT B
INSTRUMENT OF ACCESSION
The undersigned, __________________________, as a condition
precedent to becoming the owner or holder of record of ____ ( ) shares of Common
Stock, par value $0.01 per share ("Common Stock"), of Universal Compression
Holdings, Inc., a Delaware corporation ("Holdings"), and __________ (________)
shares of Preferred Stock, par value $.01 per share, of Holdings, hereby agrees
to become a stockholder, party to and bound by that certain Stockholders
Agreement, dated as of ________ __, 1998, by and among Holdings and certain
stockholders of Holdings. This Instrument of Accession shall take effect and
shall become an integral part of the said Stockholders Agreement immediately
upon execution and delivery to Holdings of this Instrument.
IN WITNESS WHEREOF, this INSTRUMENT OF ACCESSION has been duly
executed by or on behalf of the undersigned as of the date below written.
Signature: ______________________________
Address: ______________________________
______________________________
______________________________
Date: ___________________________________
Accepted:
By: ___________________________
Date: _________________________
<PAGE>
ANNEX I
<TABLE>
<CAPTION>
Stockholder Name Address
---------------- -------
<S> <C>
Castle Harlan Partners III, L.P. 150 East 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
Samuel Urcis
1160 Marilyn Drive
Beverly Hills, CA 90210
Branford Castle Holdings, Inc. c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
Castle Harlan Offshore Partners III, L.P. c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
Castle Harlan Affiliates III, L.P. c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
Frogmore Forum Family Fund L.L.C. c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
Attention: Jeffrey M. Siegal
Leonard M. Harlan c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
Mellon Bank, N.A., as Trustee for the Bell One Mellon Bank Center
Atlantic Master Trust Room 3346
Pittsburgh, PA 15258-0001
Attention: Robert F. Sass
with a copy to:
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Bell Atlantic Management Company
200 Park Avenue
New York, NY 10166
Attention: A. Jay Baldwin, Conrad A. Francis
and Bruce Francese, Esq.
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Arthur G. Siler, Esq.
First Union Capital Partners, Inc. One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: James C. Cook
BT Capital Partners, Inc. Mail Stop 2255
130 Liberty Street
New York, NY 10006
Attention: Gregory Chiate
Wilmington Trust, as Trustee of Du Pont Du Pont Pension Fund Investments
Pension Trust Delaware Corporate Center
1 Righter Parkway
Wilmington, DE 19803
Attention: John Wolak
Brown University Third Century Fund 164 Angell Street
Box C
Providence, RI 02912
Attention: James Kilpatrick
Stephen Snider c/o Universal Compression, Inc.
4430 Brittmoore
Houston, TX 77041
Ernie Danner c/o Universal Compression, Inc.
4430 Brittmoore
Houston, TX 77041
Thomas Hartford c/o Universal Compression, Inc.
4430 Brittmoore
Houston, TX 77041
</TABLE>
<PAGE>
- ------------------------------------------------------------------------------
MANAGEMENT SUBSCRIPTION AGREEMENT
among
UNIVERSAL COMPRESSION HOLDINGS, INC.,
and
EACH OF THE SIGNATORIES HERETO NAMED ON THE SIGNATURE PAGE HERETO
UNDER THE CAPTION "PURCHASERS"
Dated as of February 20, 1998.
- ------------------------------------------------------------------------------
<PAGE>
MANAGEMENT SUBSCRIPTION AGREEMENT
MANAGEMENT SUBSCRIPTION AGREEMENT, dated as of February 20,
1998 (the "Agreement"), by and among Universal Compression Holdings, Inc., a
Delaware corporation ("Holdings"), and the persons listed on the signature page
hereto under the heading "Purchasers" (such persons collectively referred to as
the "Purchasers").
WHEREAS, TW Acquisition Corporation, a Delaware corporation
and a wholly-owned subsidiary of Holdings ("TW"), proposes to acquire (the
"Acquisition") all of the issued and outstanding shares of common stock of
Tidewater Compression Service, Inc., a Texas corporation ("Compression"),
pursuant to a Stock Purchase Agreement, dated December 18, 1997, by and between
TW (which, after acquiring the stock of, and being merged into, Compression will
change its name to Universal Compression Inc. (the "Company")) and Tidewater
Inc., a Delaware corporation;
WHEREAS, in connection with the Acquisition, Holdings is
providing certain equity financing at the closing of the Acquisition (the
"Equity Financing") to the Company to fund a portion of the purchase price of
the Acquisition;
WHEREAS, Castle Harlan Partners III, L.P., a Delaware limited
partnership, and related parties will provide Holdings with at least 51% of the
Equity Financing in return for Common Stock of Holdings, par value $.01 per
share (the "Common Stock") and Series A Preferred Stock of Holdings, par value
$.01 per share (the "Preferred Stock") in an amount equal to such percentage
contribution;
WHEREAS, in connection with the Equity Financing, each
Purchaser desires to purchase from Holdings, and Holdings desires to issue and
sell to each Purchaser, the number of shares of Common Stock and the number of
shares of Preferred Stock, each as set forth opposite the name of each Purchaser
on Annex I hereto for a purchase price set forth opposite the name of each
Purchaser on Annex I (the "Purchase Price").
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions.
As used in this Agreement, the following terms shall have the
meanings ascribed to them below:
"Business Day" shall mean any day other than a Saturday,
Sunday or any other day on which commercial banks are required or authorized by
law or regulation to be closed in New York, New York.
"Closing" shall have the meaning set forth in Section 2.
2
<PAGE>
"Closing Date" shall have the meaning set forth in Section 2.
"Common Stock" shall have the meaning set forth in the recital
hereto.
"Company" shall have the meaning set forth in the first
recital hereto.
"Conditional Purchasers" shall mean Stephen Snider and Thomas
Hartford.
"Conditional Shares" shall mean the number of shares of Common
Stock and Preferred Stock (on the basis of one share of Common Stock for every
four shares of Preferred Stock) that each Conditional Purchaser is obligated to
purchase from Holdings in accordance with Section 2(a)(2); provided, however,
that such Purchaser shall in no event be required to purchase a greater number
of shares than set forth opposite such Purchaser's name on Annex II.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and all rules and regulations promulgated thereunder.
"Holdings" shall have the meaning set forth in the first
paragraph hereof.
"Holdings Securities" shall have the meaning set forth in
Section 2.
"Preferred Stock" shall have the meaning set forth in the
recitals hereto.
"Purchase Price" shall have the meaning set forth in the
recitals hereto.
"Purchasers" shall have the meaning set forth in the first
paragraph hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended and all rules and regulations promulgated thereunder.
3
<PAGE>
2. Purchase.
(a) Purchase; Conditional Purchase; Option to Purchase. (1)
Upon the consummation of the Acquisition and on the terms set forth in this
Agreement, each Purchaser hereby agrees to purchase, and Holdings hereby agrees
to issue and sell to such Purchaser, no later than April 20, 1998, the shares of
the Common Stock and the shares of the Preferred Stock set forth opposite his
name on Annex I for the Purchase Price set forth opposite his name thereon;
provided, that, Samuel Urcis hereby agrees to consummate the purchase of the
shares of Common Stock and Preferred Stock set forth opposite his name on Annex
I on the date hereof.
(2) In the event and to the extent a Conditional Purchaser
exercises his options to purchase Tidewater Inc. common stock, such Conditional
Purchaser hereby agrees to immediately sell such common stock and apply the
proceeds thereof, after deducting any federal, state and local income tax
payments due or paid with respect to the exercise of related options and the
sale of such shares, to acquire the Conditional Shares.
(3) Holdings hereby further agrees to issue and sell to each
of the following Purchasers, at the option of such Purchaser and at any time on
or before (i) in the case of Ernie Danner, April 20, 1998 and (ii) in the case
of Stephen Snider and Thomas Hartford, February 20, 1999, the shares of Common
Stock and Preferred Stock set forth opposite his name on Annex III for the
Purchase Price. Notwithstanding the prior sentence, the number of shares
available for purchase by a Conditional Purchaser pursuant to the option granted
under this Section 2(a)(3) shall be reduced share-for-share by the number of
shares such Purchaser acquires pursuant to Section 2(a)(2).
(4) All purchases of Common Stock and Preferred Stock
hereunder shall be made on a tandem basis of four shares of Preferred Stock for
each share of Common Stock. The Common Stock and Preferred Stock purchased
pursuant to this Agreement are sometimes collectively referred to herein as the
"Holdings Securities."
(b) The Closing. The closing (the "Closing") of any purchase
of Holdings Securities by the Purchasers pursuant Section 2(a) shall take place
at the offices of Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York
10022, on the Business Day (the "Closing Date") set forth in a notice to each
applicable Purchaser at least one Business Day in advance.
At the Closing, (i) Holdings shall issue and deliver to each
Purchaser, against payment of the Purchase Price therefor, certificates
representing Holdings Securities to be sold by it pursuant to Section 2(a)
hereof, (ii) each Purchaser shall deliver to Holdings against delivery of the
certificate or certificates representing Holdings Securities, by wire transfer
to such account as Holdings shall designate in writing at least two Business
Days prior to the Closing Date, the Purchase Price payable in immediately
available funds, and (iii) each party to this Agreement shall deliver to the
other such other documents, instruments and writings as may be required to be
delivered in accordance with this Agreement or as may be reasonably requested by
such other party.
4
<PAGE>
3. Representations and Warranties of the Purchasers.
(a) Each Purchaser represents and warrants that such Purchaser
is acquiring Holdings Securities for investment for its own account and not with
a view to, or for resale in connection with, the distribution or other
disposition thereof in violation of the Securities Act. Each Purchaser agrees
that such Purchaser will not, directly or indirectly, offer, transfer, sell,
pledge, hypothecate or otherwise dispose of any Holdings Securities (or solicit
any offers to buy, purchase, or otherwise acquire or take a pledge of any
Holdings Securities), except in compliance with the Securities Act, the rules
and regulations promulgated thereunder, applicable state securities laws and the
provisions of this Agreement. Each Purchaser represents and warrants that no
other person or entity will have any interest, beneficial or otherwise, in
Holdings Securities acquired by such Purchaser hereby.
(b) Each Purchaser acknowledges that such Purchaser has been
advised that (i) Holdings Securities are not registered under the Securities
Act, and Holdings has no obligation to effectuate any such registration, (ii)
Holdings Securities must be held indefinitely and such Purchaser must continue
to bear the economic risk of the investment in Holdings Securities unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available, (iii) Rule 144 promulgated under the Securities Act
is not presently available with respect to the sale of any securities of
Holdings, and Holdings has no obligation nor any intention to make such Rule
available, (iv) when and if any Holdings Securities may be disposed of without
registration in reliance on Rule 144, the amounts that may be disposed of may be
limited in accordance with the terms and conditions of such Rule, (v) if the
Rule 144 exemption is not available, public sale without registration will
require compliance with Regulation D or some other exemption under the
Securities Act, (vi) restrictive legends will be placed on the certificates
representing Holdings Securities and (vii) a notation will be made in the
appropriate records of Holdings indicating that Holdings Securities are subject
to restrictions on transfer and, if Holdings should at some time in the future
engage the services of a stock transfer agent, appropriate stop-transfer
restrictions will be issued to such transfer agent with respect to Holdings
Securities.
(c) Each Purchaser hereby covenants that if any Holdings
Securities are disposed of by such Purchaser (i) in reliance upon Rule 144 under
the Securities Act, such Purchaser shall deliver to Holdings at or prior to the
time of such disposition an executed copy of Form 144 (if required by Rule 144)
and such other documentation as Holdings may reasonably require in connection
with such disposition or (ii) in reliance on Rule 144 or pursuant to another
exemption from registration under the Securities Act, such Purchaser shall
deliver to Holdings a legal opinion, reasonably satisfactory to Holdings, as to
the availability of and compliance with such exemption.
(d) Each Purchaser represents and warrants that (i) such
Purchaser can afford to hold Holdings Securities for an indefinite period and to
suffer the complete loss of its investment in Holdings Securities, (ii) it
understands and has taken cognizance of all the risk factors related to its
acquisition of Holdings Securities and (iii) such Purchaser's knowledge and
5
<PAGE>
experience in financial and business matters is such that it is capable of
evaluating the merits and risks of acquiring Holdings Securities.
4. Representations and Warranties of Holdings.
Holdings represents and warrants to the Purchasers as follows:
(a) The authorized capitalization of Holdings currently
consists of (i) 1,000,000 shares of Common Stock, of which 325,000 shares are
issued and outstanding and (ii) 5,000,000 shares of Preferred Stock, of which
2,000,000 shares designated as Series A Preferred Stock are issued and
outstanding.
(b) Holdings Securities being issued and sold hereunder by
Holdings have been duly authorized and will, upon consummation of the
transactions contemplated herein, be validly issued, fully-paid and
non-assessable
5. Further Action. Each party hereto agrees to execute and deliver any
instrument and take any action that may reasonably be requested by any other
party for the purpose of effectuating the provisions of this Agreement.
6. Miscellaneous Provisions.
(a) Assignability; Binding Effect. Except as otherwise
provided in this Section, no right under this Agreement shall be assignable and
any attempted assignment in violation of this provision shall be void. Holdings
shall have the right to assign its rights and obligations hereunder to any
successor entity (including any entity acquiring substantially all of the assets
of Holdings), whereupon references herein to Holdings shall be deemed to be to
such successor. Holdings shall also have the right to assign this Agreement in
whole or in part to CHPIII in consideration for CHPIII's Equity Financing so
that the Holdings Securities are sold by CHPIII to the Purchasers hereunder.
Holdings hereby assigns its rights and obligations under Section 2(a) to CHPIII.
This Agreement, and the rights and obligations of the parties hereunder, shall
be binding upon and inure to the benefit of any and all successors, permitted
assigns, personal representatives and all other legal representatives, in
whatsoever capacity, by operation of law or otherwise, of the parties hereto, in
each case with the same force and effect as if the foregoing persons were named
herein as parties hereto.
(b) Notices. Any notice or other communication required or
which may be given hereunder shall be in writing and shall be delivered
personally, telecopied with confirmed receipt, sent by certified, registered, or
express mail, postage prepaid, or sent by a national next-day delivery service
to the parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice, and shall be deemed given when so
delivered personally or telecopied, or if mailed, 2 days after the date of
mailing, or, if by national next-day delivery service, on the day after delivery
to such service as follows:
6
<PAGE>
(i) if to Holdings, to it at:
c/o Castle Harlan, Inc.
150 East 58th Street
37th Floor
New York, New York 10155
Attention: Jeffrey M. Siegal
Telecopier No.: 212-207-8042
with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Andre Weiss, Esq.
(ii) If to the Purchasers, to them at their respective
addresses set forth next to their names on Annex IV hereto
(c) Applicable Law; Consent. This Agreement and the validity
and performance of the terms hereof shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of law or choice of law. The parties hereto hereby agree that all
actions or proceedings arising directly or indirectly from or in connection with
this Agreement shall be litigated only in the Supreme Court of the State of New
York or the United States District Court for the Southern District of New York
located in New York County, New York. To the extent permitted by applicable law,
the parties hereto consent to the jurisdiction and venue of the foregoing courts
and consent that any process or notice of motion or other application to either
of said courts or a judge thereof may be served inside or outside the State of
New York or the Southern District of New York by registered mail, return receipt
requested, directed to such party at its address set forth in this Agreement
(and service so made shall be deemed complete five days after the same has been
posted as aforesaid) or by personal service or in such other manner as may be
permissible under the rules of said courts.
(d) Entire Agreement; Amendments and Waivers. This Agreement
sets forth the entire understanding of the parties with respect to the subject
matter hereof. The failure of any party to seek redress for the violation of or
to insist upon the strict performance of any term of this Agreement shall not
constitute a waiver of such term and such party shall be entitled to enforce
such term without regard to such forbearance. This Agreement may be amended only
by the written consent of each party hereto, and each party hereto may take any
action herein prohibited or omit to take action herein required to be performed
by it, and any breach of or compliance with any covenant, agreement, warranty or
representation may be waived only by the written waiver of the party against
whom such action or inaction may negatively affect, but, in any case, such
consent or waiver shall only be effective in the specific instance and for the
specific purpose for which given.
7
<PAGE>
(e) Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretations of
the Agreement.
(f) Severability. If any term, provision, covenant or
restriction of this Agreement, or any part thereof, is held by a court of
competent jurisdiction or any foreign federal, state, county or local government
or any other governmental, regulatory or administrative agency or authority to
be invalid, void, unenforceable or against public policy for any reason, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
(g) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart.
(h) Specific Performance. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement, the
non-breaching party would be irreparably harmed and could not be made whole by
monetary damages. It is accordingly agreed that the parties hereto shall and do
hereby waive the defense in any action for specific performance that a remedy at
law would be adequate and that the parties hereto, in addition to any other
remedy to which they may be entitled at law or in equity, shall be entitled to
compel specific performance of this Agreement in any action instituted in the
Supreme Court of the State of New York or the United States District Court for
the Southern District of New York, or, in the event such courts shall not have
jurisdiction of such action, in any court of the United States or any state
thereof having subject matter jurisdiction of such action.
(i) Survival of Covenants. All covenants, agreements,
representations and warranties made herein or in any other document referred to
herein or delivered to a party pursuant hereto or in connection herewith shall
survive the execution and delivery to such party of this Agreement and of
Holdings Securities.
(j) Brokers Fees, etc. Each party hereto represents and
warrants to each other party that no broker's, finder's or placement fee or
commission will be payable to any Person alleged to have been retained by such
representing and warranting party with respect to the transaction contemplated
by this Agreement. Each party hereto hereby indemnifies each other party against
and agrees that it will hold each other party and each of such party's
affiliates (and each of the trustee, employees and other fiduciaries or agents
of such party) harmless from any claim, demand or liability for any broker's,
finder's or placement fee or commission alleged to have been incurred by such
indemnifying party, including without limitation reasonable attorneys' fees.
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first set forth above.
UNIVERSAL COMPRESSION
HOLDINGS, INC.
/s/ Ernie Danner
By:-------------------------------
Name: Ernie Danner
Title: Chief Financial Officer
/s/ Samuel Urcis
-------------------------------
SAMUEL URCIS
/s/ Ernie Danner
-------------------------------
ERNIE DANNER
/s/ Stephen Snider
-------------------------------
STEPHEN SNIDER
/s/ Thomas Hartford
-------------------------------
THOMAS HARTFORD
9
<PAGE>
ANNEX I
<TABLE>
<CAPTION>
Purchaser Number of Shares Purchase Price
---------- ------------------------------- ----------------------------
Common Preferred Common Preferred
Stock Stock Stock Stock
----- ----- ----- -----
<S> <C> <C> <C> <C>
Samuel Urcis 4,400 17,600 $220,000 $880,000
Ernie Danner -- -- -- --
Stephen Snider 2,000 8,000 $100,000 $400,000
Thomas Hartford 960 3,840 $48,000 $192,000
</TABLE>
10
<PAGE>
ANNEX II
<TABLE>
<CAPTION>
Purchaser Number of Shares Purchase Price
---------- ------------------------------- ------------------------------
Common Preferred Common Preferred
Stock Stock Stock Stock
------ ----- ----- -----
<S> <C> <C> <C> <C>
Samuel Urcis -- -- -- --
Ernie Danner -- -- -- --
Stephen Snider 2,000 8,000 $100,000 $400,000
Thomas Hartford 960 3,840 $48,000 $192,000
</TABLE>
11
<PAGE>
ANNEX III
<TABLE>
<CAPTION>
Purchaser Number of Shares Purchase Price
---------- ------------------------------- -----------------------------
Common Preferred Common Preferred
Stock Stock Stock Stock
----- ------ ----- -----
<S> <C> <C> <C> <C>
Samuel Urcis -- -- -- --
Ernie Danner 2,000 8,000 $100,000 $400,000
Stephen Snider 2,000 8,000 $100,000 $400,000
Thomas Hartford 960 3,840 $48,000 $192,000
</TABLE>
12
<PAGE>
ANNEX IV
Purchaser Address
--------- -------
Samuel Urcis 1160 Marilyn Drive
Beverly Hills, CA 90210
Ernie Danner c/o Universal Compression, Inc.
4430 Brittmoore
Houston, TX 77041
Stephen Snider c/o Universal Compression, Inc.
4430 Brittmoore
Houston, TX 77041
Thomas Hartford c/o Universal Compression, Inc.
4430 Brittmoore
Houston, TX 77041
13
<PAGE>
MANAGEMENT STOCK BUYBACK AGREEMENT
STOCK BUYBACK AGREEMENT, dated as of February 20, 1998 (the
"Agreement"), by and among Universal Compression Holdings, Inc., a Delaware
corporation ("Holdings") and the persons listed on the signature page hereto
under the heading "Purchasers" (such persons collectively referred to as the
"Purchasers").
WHEREAS, Holdings and the Purchasers are parties to the
Management Stock Purchase Agreement, dated the date hereof (the "Purchase
Agreement"), whereby each Purchaser is acquiring the number of shares of the
Common Stock of Holdings, par value $.01 per share (the "Common Stock"), and the
number of shares of the Series A Preferred Stock of Holdings, par value $.01 per
share (the "Preferred Stock") as is set forth opposite such person's name on
Annex I;
WHEREAS, in connection with such purchase, Holdings and the
Purchasers wish to set forth their understanding with respect to their
respective rights to force the sale, in the case of Holdings, or force the
purchase, in the case of the Purchasers, of the Common Stock and/or Preferred
Stock acquired pursuant to the Purchase Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. General. Except as provided in Sections 3, 4, 5 and 7 of
the Stockholders Agreement, dated as of the date hereof, by and among Holdings
and the stockholders party thereto (the "Stockholders Agreement"), each share of
Common Stock and Preferred Stock acquired by the Purchasers at any time may not
be sold, disposed of or otherwise transferred except to Holdings in accordance
with this Agreement. Each certificate representing shares of Common Stock and
Preferred Stock acquired by each Purchaser shall bear a legend to such effect.
In the event that any Purchaser, in accordance with the Stockholders Agreement,
transfers all or any shares of Common Stock or Preferred Stock to a person other
than Holdings, such transferee shall be obligated to comply with the provisions
of this Agreement. The Common Stock and Preferred Stock are sometimes
collectively referred to herein as the "Holdings Securities."
2. Call by Holdings. Within six months following such
Purchaser's termination of employment with Holdings and Universal Compression,
Inc., Holdings shall have the right to purchase from each Purchaser, all of the
Holdings Securities owned by such Purchaser for an amount equal to:
(a) in the case of Common Stock (i) where such Purchaser
resigns prior to the expiration (the "Expiration") of the Purchaser's term of
employment under such Purchaser's employment agreement, if any, or is terminated
for Cause at any time, the lesser of (x) the product of (A) the Common Share
Value (valued as of the end of the month preceding such Purchaser's resignation
from or termination of employment) multiplied by (B) the number of shares of
Common Stock held by such Purchaser, and (y) the product of
<PAGE>
(A) the price per share of Common Stock paid by the Purchaser to acquire
such shares multiplied by (B) the number of shares of Common Stock held
by such Purchaser, or (ii) where such Purchaser resigns after the
Expiration, the Fair Market Value of such shares of Common Stock, and
(b) in the case of Preferred Stock (i) where such Purchaser
resigns prior to the Expiration or is terminated for Cause at any time, the
product of (A) the Preferred Share Value multiplied by (B) the number of shares
of Preferred Stock held by such Purchaser, or (ii) where such Purchaser resigns
after the Expiration, the Fair Market Value of such shares of Preferred Stock.
If such purchase of Holdings Securities by Holdings is
prohibited pursuant to the terms of any agreement to which Holdings is a party,
the period during which Holdings may make such purchase shall be extended by an
additional six months from the expiration of the initial six-month period.
3. Put by Purchaser. Each Purchaser shall have the right to
sell to Holdings, within three months following such Purchaser's death or
disability or termination of employment by Holdings for any reason other than
Cause, all of the Holdings Securities owned by such Purchaser for an amount
equal to:
(a) in the case of Common Stock, the Fair Market Value of such
shares of Common Stock, and
(b) in the case of Preferred Stock, the Fair Market Value of
such shares of Preferred Stock.
4. Definitions. For purposes of this Agreement:
(i) "Cause" shall mean termination (a) upon the willful and
continued failure by a Purchaser to substantially perform his duties with
Holdings or its subsidiaries (other than any such failure resulting from his
incapacity due to physical or mental illness), after a written demand for
substantial performance is delivered to such Purchaser by the Board of Directors
of Holdings or such subsidiary, which demand specifically identifies the manner
in which such Purchaser is believed not to have substantially performed his
duties, or (b) a Purchaser's willful engagement in conduct which is or is likely
to become demonstrably and materially injurious to Holdings or such subsidiary,
monetarily or otherwise;
(ii) "Common Share Value" shall mean the quotient of (i) the
amount equal to the excess, if any, of the Holdings Equity Value over the
Holdings Preferred Value divided by (ii) the number of shares of Common Stock
outstanding on a fully diluted basis.
(iii) "EBITDA" shall mean, for any period, the amount equal
to: (a) the net income (or net loss) of Holdings and its subsidiaries during
such period after deduction of all expenses, taxes and other charges, determined
in accordance with generally accepted
<PAGE>
accounting principles, after eliminating therefrom all extraordinary
items of income and expense (including the elimination of any expense
reported on the financial statements of Holdings or any subsidiary for
such period in respect of the management fee owed to Castle Harlan, Inc.
("CHI") pursuant to the Management Agreement between CHI, Holdings and
Universal Compression, Inc., dated as of the date hereof); plus (b) to
the extent deducted from net income, dividends on Holdings' Preferred
Stock; plus (c) any provision for (or less any benefit from) income
taxes included in the determination of (a) above; plus (d) depreciation,
depletion and amortization; plus (e) the expenses of Holdings and its
subsidiaries charged to income for interest on indebtedness (including
the current portion thereof), determined in accordance with generally
accepted accounting principles.
(iv) "Fair Market Value" shall mean the fair market value of
the shares of Common Stock or Preferred Stock, as the case may be, that are
being purchased from or sold by a Purchaser pursuant to this Agreement, such
value to be determined by a nationally recognized investment banking firm
selected by the Board of Directors of Holdings, which selection shall be subject
to such Purchaser's approval (such approval or disapproval not to be
unreasonably withheld) within thirty (30) days of notice to him of such
selection.
(v) "Holdings Equity Value" shall mean, as of any date, an
amount equal to EBITDA for the four immediately preceding fiscal quarters,
multiplied by seven, minus the sum of (a) the amount of Holdings' indebtedness
for borrowed money (including any obligation owed in respect of capitalized
leases) (determined in accordance with generally accepted accounting principles
as set forth on Holdings' most recent quarterly balance sheet, including current
and long term portions) and accrued interest thereon, and (b) the amount of the
liquidation preference of any preferred stock (other than Preferred Stock)
outstanding and accrued dividends thereon.
(vi) "Holdings Preferred Value" shall mean the Preferred Share
Value multiplied by the number of shares of Preferred Stock outstanding on a
fully diluted basis.
(vii) "Preferred Share Value" shall mean the lesser of (a) the
Holdings Equity Value divided by the number of shares of Preferred Stock
outstanding on a fully diluted basis and (b) the liquidation value per share of
Preferred Stock assigned to the Preferred Stock, plus all accrued and unpaid
dividends thereon, if any.
5. Payment. The purchase of Holdings Securities by Holdings
pursuant to the foregoing provisions shall be paid for in cash, to the extent
permitted under the loan agreements and debt instruments relating to Holdings or
any of its subsidiaries, or, to the extent cash payments are not permitted
thereunder, by means of a subordinated payment-in-kind promissory note issued by
Holdings bearing interest, payable annually, at the lowest interest rate
required to avoid imputed interest, which note shall be repaid as soon as
permitted.
<PAGE>
6. Further Action. Each party hereto agrees to execute and
deliver any instrument and take any action that may reasonably be requested by
any other party for the purpose of effectuating the provisions of this
Agreement.
7. Miscellaneous Provisions.
(a) Assignability; Binding Effect. Except as
otherwise provided in this Section, no right under this Agreement shall be
assignable and any attempted assignment in violation of this provision shall be
void. Holdings shall have the right to assign its rights and obligations
hereunder to any successor entity (including any entity acquiring substantially
all of the assets of Holdings), whereupon references herein to Holdings shall be
deemed to be to such successor. This Agreement, and the rights and obligations
of the parties hereunder, shall be binding upon and inure to the benefit of any
and all successors, permitted assigns, personal representatives and all other
legal representatives, in whatsoever capacity, by operation of law or otherwise,
of the parties hereto, in each case with the same force and effect as if the
foregoing persons were named herein as parties hereto.
(b) Notices. Any notice or other communication
required or which may be given hereunder shall be in writing and shall be
delivered personally, telecopied with confirmed receipt, sent by certified,
registered, or express mail, postage prepaid, or sent by a national next-day
delivery service to the parties at the following addresses or at such other
addresses as shall be specified by the parties by like notice, and shall be
deemed given when so delivered personally or telecopied, or if mailed, 2 days
after the date of mailing, or, if by national next-day delivery service, on the
day after delivery to such service as follows:
(i) if to Holdings, to it at:
c/o Castle Harlan, Inc.
150 East 58th Street
37th Floor
New York, New York 10155
Attention: Jeffrey M. Siegal
Telecopier No.: 212-207-8042
with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Andre Weiss, Esq.
(ii) if to a Purchaser, to it at:
Universal Compression, Inc.
<PAGE>
4430 Brittmoore
Houston, TX
(c) Applicable Law; Consent to Jurisdiction. This Agreement
and the validity and performance of the terms hereof shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles of conflicts of law or choice of law. The parties hereto hereby agree
that all actions or proceedings arising directly or indirectly from or in
connection with this Agreement shall be litigated only in the Supreme Court of
the State of New York or the United States District Court for the Southern
District of New York located in New York County, New York. To the extent
permitted by applicable law, the parties hereto consent to the jurisdiction and
venue of the foregoing courts and consent that any process or notice of motion
or other application to either of said courts or a judge thereof may be served
inside or outside the State of New York or the Southern District of New York by
registered mail, return receipt requested, directed to such party at its address
set forth in this Agreement (and service so made shall be deemed complete five
days after the same has been posted as aforesaid) or by personal service or in
such other manner as may be permissible under the rules of said courts.
(d) Entire Agreement; Amendments and Waivers.
This Agreement sets forth the entire understanding of the parties with respect
to the subject matter hereof. The failure of any party to seek redress for the
violation of or to insist upon the strict performance of any term of this
Agreement shall not constitute a waiver of such term and such party shall be
entitled to enforce such term without regard to such forbearance. This Agreement
may be amended only by the written consent of each party hereto, and each party
hereto may take any action herein prohibited or omit to take action herein
required to be performed by it, and any breach of or compliance with any
covenant, agreement, warranty or representation may be waived only by the
written waiver of the party against whom such action or inaction may negatively
affect, but, in any case, such consent or waiver shall only be effective in the
specific instance and for the specific purpose for which given.
(d) Headings. The headings in this Agreement
are for reference purposes only and shall not in any way affect the meaning or
interpretations of the Agreement.
(e) Severability. If any term, provision,
covenant or restriction of this Agreement, or any part thereof, is held by a
court of competent jurisdiction or any foreign federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority to be invalid, void, unenforceable or against public policy for any
reason, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
(f) Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original,
but all of which shall
<PAGE>
constitute one and the same instrument, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
(g) Specific Performance. Each of the parties
hereto acknowledges and agrees that in the event of any breach of this
Agreement, the non-breaching party would be irreparably harmed and could not be
made whole by monetary damages. It is accordingly agreed that the parties hereto
shall and do hereby waive the defense in any action for specific performance
that a remedy at law would be adequate and that the parties hereto, in addition
to any other remedy to which they may be entitled at law or in equity, shall be
entitled to compel specific performance of this Agreement in any action
instituted in the Supreme Court of the State of New York or the United States
District Court for the Southern District of New York, or, in the event such
courts shall not have jurisdiction of such action, in any court of the United
States or any state thereof having subject matter jurisdiction of such action.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first set forth above.
UNIVERSAL COMPRESSION HOLDINGS, INC.
By: /s/ Ernie Danner
-------------------------------
Name: Ernie Danner
Title: Chief Financial Officer
PURCHASERS:
/s/ Stephen Snider
------------------------------
STEPHEN SNIDER
/s/ Thomas Hartford
------------------------------
THOMAS HARTFORD
/s/ Newton Schnoor
------------------------------
NEWTON SCHNOOR
/s/ Robert Ryan
------------------------------
ROBERT RYAN
<PAGE>
ANNEX I
<TABLE>
<CAPTION>
Purchaser Number of Shares Purchase Price
--------- ---------------- --------------
Common Preferred Common Preferred
Stock Stock Stock Stock
------- --------- ------ ---------
<S> <C> <C> <C> <C>
Stephen Snider 2,000 8,000 $100,000 $400,000
Thomas Hartford 960 3,840 $48,000 $192,000
Newton Schnoor -- -- -- --
Robert Ryan -- -- -- --
</TABLE>
<PAGE>
Exhibit A
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, made as of this 20th day of
February, 1998, by and between UNIVERSAL COMPRESSION HOLDINGS, INC., a Delaware
corporation ("Holdings") and ERNIE DANNER (the "Executive").
WHEREAS, Holdings has agreed to grant to the Executive an
option to purchase Holdings Common Stock, $.01 par value per share (the "Common
Stock"), pursuant to the terms and conditions of this Agreement in consideration
for past services to Holdings and TW Acquisition Corporation ("TW"), a
wholly-owned subsidiary of Holdings; and
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the parties
agree as follows:
1. DEFINITIONS. For purposes of this Agreement, all
capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Employment Agreement between Universal Compression, Inc.,
Holdings and the Executive dated as of the date hereof.
2. GRANT OF OPTION. Holdings hereby grants to the Executive an
option (the "Option") to purchase 4,780 shares of Common Stock at $50 per share.
This Option is granted under Holdings' Incentive Stock Option Plan and shall
constitute, to the extent permissible, an Incentive Stock Option under Section
422 of the Internal Revenue Code of 1986, as amended, and otherwise shall be a
Non-Qualified Stock Option.
3. OPTION TERMS AND CONDITIONS.
(a) Exercise of Option. The Option shall become
immediately exercisable upon the execution of this Agreement. The Option shall
expire on the tenth anniversary date of the date hereof.
(b) Termination of Employment.
(i) Termination due to Death, Disability or
Retirement. In the event the Executive's employment with Universal Compression,
Inc. ("Compression") terminates on account of death, disability or retirement,
the Option shall be and remain exercisable for the balance of the term of the
Option.
(ii) Termination of Employment Without Cause. In the
event the Executive's employment with Compression shall terminate without Cause,
the Option shall be and remain exercisable for the balance of the term of the
Option.
<PAGE>
(iii) Termination of Employment for Cause. In the
event the Executive's employment with Compression shall terminate for Cause
pursuant to the Employment Agreement, the Option shall terminate on the date of
such termination.
4. NON-ASSIGNABILITY. No Option granted hereby and no right
arising thereunder shall be transferable during the lifetime of the Executive or
by will or by the laws of descent and distribution. During the lifetime of the
Executive, the Option shall be exercisable only by the Executive. Any Option
which is exercisable at the date of the Executive's death shall be exercisable
in accordance with the terms of this Agreement by the executor or administrator,
as the case may be, of the Executive's estate for the next three (3) months
following the date of the Executive's death and shall then terminate.
5. MODE OF EXERCISE. The Option shall be exercised by giving
to Holdings written notice stating (a) the number of shares with respect to
which the Option is being exercised, (b) the aggregate Exercise Price for such
shares, and (c) the method of payment. At the option of the Executive, such
aggregate Exercise Price may be paid: (i) in cash; (ii) with the consent of the
board of directors of Holdings (the "Board"), by delivery of a promissory note
to Holdings payable over a three (3) year period and bearing interest at the
prime rate; (iii) by delivery of shares of Common Stock owned by the Executive
having a Market Price (as determined by Section 6 hereof) equal in amount to the
aggregate Exercise Price of the Option being exercised; (iv) by any combination
of (i), (ii) and (iii); or (v) by cancellation of any portion of the Option, in
which case the number of shares of Common Stock to be received shall be computed
using the following formula:
X = Y x (A - $50)
-------------
A
Where: X = the number of shares of Common Stock to be
issued pursuant to clause (v) above;
Y = the number of shares of Common Stock that
otherwise would have been issuable in
respect of that portion of the Option to be
exercised pursuant to clause (v) above if
such exercise had been pursuant to clause
(i), (ii), (iii) or (iv) above;
A = the Market Price of one share of Common Stock
on the date of exercise;
provided, however, that clauses (iii) and (v) shall be inapplicable if no Market
Price is applicable under clause (iv) of Section 6.
6. Market Price of Common Stock. The "Market Price" of the
Common Stock on any day shall be determined as follows: (i) if the Common Stock
is listed on a national securities exchange or quoted through the NASDAQ
National Market System, the Market Price on any day shall be the average of the
high and low reported Consolidated Trading sales prices, or if no such sale is
made on such day, the average of the closing bid and asked prices reported on
the Consolidated Trading listing for such day; (ii) if the Common Stock is
quoted on the NASDAQ inter-dealer quotation system, the Market Price on any day
shall be the average of the
2
<PAGE>
representative bid and asked prices at the close of business for such day; (iii)
if the Common Stock is not listed on a national stock exchange or quoted on
NASDAQ, the Market Price on any day shall be the average of the high bid and low
asked prices reported by the National Quotation Bureau, Inc. for such day; or
(iv) if none of clauses (i) - (iii) are applicable, the Market Price as may be
determined by the Board of Directors of Holdings or any Committee thereof, there
being no obligation to make such determination.
7. TRANSFER RESTRICTIONS. The Executive understands that the
Common Stock issuable upon the exercise of this Option may not be registered
under the Securities Act of 1933, as amended (the "Act"). The Executive
acknowledges that the Common Stock will be purchased for investment only, and
that it may not be sold or transferred in the absence of either an effective
registration statement under the Act or an opinion of experienced securities
counsel, acceptable in form and content to Holdings in its sole discretion,
which states that registration is not required under the Act.
By executing this Agreement, the Executive agrees to refrain
from re-offering, reselling, or otherwise disposing of any of the Common Stock
acquired upon the exercise of the Option in any manner which would violate the
Act or any other Federal or state securities law.
All stock certificates representing shares of Common Stock
acquired pursuant to the exercise of an Option that are issued by Holdings shall
contain a legend substantially in the following form:
"SHARES OF UNIVERSAL COMPRESSION HOLDINGS, INC. ("HOLDINGS")
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS
AGREEMENT, DATED AS OF FEBRUARY 20, 1998, WHICH CONTAINS
PROVISIONS REGARDING THE RESTRICTIONS ON THE TRANSFER OF SUCH
SHARES AND OTHER MATTERS. A COPY OF SUCH AGREEMENT IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF HOLDINGS.
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE NOT REGISTERED
UNDER, AND ARE SUBJECT TO, THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER THE SECURITIES ACT OR IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT."
The shares of Common Stock acquired pursuant to the Option
shall be subject to the provisions regarding transfers of shares in the
Stockholders Agreement dated as of even date herewith (the "Stockholders
Agreement"). At the request of Holdings, the Executive shall become a party to
the Stockholders Agreement.
3
<PAGE>
8. OPTION SUBJECT TO SECURITIES AND OTHER REGULATIONS. The
Option granted hereunder and the obligation of Holdings to sell and deliver
shares under such Option shall be subject to all applicable Federal and state
laws, rules and regulations and to such approvals by any government or
regulatory agency as may be required. Holdings, in its discretion, may postpone
the issuance or delivery of shares upon any exercise of the Option until
completion of any stock exchange listing, or other qualification of such shares
under any state or Federal law, rule or regulation as Holdings may consider
appropriate, and may require the Executive, his beneficiary or his legal
representative to make such representations and furnish such information as it
may consider appropriate in connection with the issuance or delivery of the
shares in compliance with applicable laws, rules and regulations.
Upon demand by the Board, the Executive (or any person acting
under Section 4 of this Agreement) shall deliver to the Board at the time of
exercise of the Option a written representation that the shares to be acquired
upon the exercise of the Option are being acquired for his own account and not
with a view to, or for resale in connection with, any distribution in violation
of federal or state securities laws. Upon such demand, delivery of such
representation prior to the delivery of any shares issued upon exercise of the
Option shall be a condition precedent to the right of the Executive or such
other person to purchase any shares.
9. ANTI-DILUTION ADJUSTMENTS. In the event of any change in
the Common Stock by reason of any stock dividend, cash dividend,
recapitalization, reorganization, merger, consolidation, split-up, combination
or exchange of shares, or of any similar change affecting the Common Stock, the
number and kind of shares subject to the Option and the Option price thereof
shall be appropriately adjusted consistent with such change in such manner as
the Board may deem equitable to prevent substantial dilution or enlargement of
the rights granted to, or available for, the Executive.
10. CALL RIGHT. Upon any termination of the employment of the
Executive prior to a public offering of Common Stock, Holdings may purchase
Common Stock acquired upon any exercise of the Option then held by the Executive
in accordance with the terms and provisions of the Management Stock Buyback
Agreement, dated as of the date hereof, by and between Holdings and certain
other purchasers of Holdings Common Stock signatory thereto.
11. RIGHTS PRIOR TO EXERCISE OF OPTION. The Participant shall
not have any rights as a stockholder with respect to any shares subject to the
Option prior to the date on which the Executive is recorded as the holder of
such shares on the records of Holdings.
12. TAXES. Holdings may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding of all
Federal, state, local and other taxes required by law to be withheld with
respect to the Option including, but not limited to: (i) reducing the number of
shares of Common Stock otherwise deliverable, based upon their fair market value
on the date of exercise, to permit deduction of the amount of any such
withholding taxes from the amount otherwise payable under this Agreement; (ii)
deducting the amount of any such withholding taxes from any other amount then or
thereafter payable to the Executive; or (iii) requiring the Executive, his
beneficiary or his legal representative to pay to Holdings the amount
4
<PAGE>
required to be withheld or to execute such documents as Holdings deems necessary
or desirable to enable it to satisfy its withholding obligations as a condition
of releasing the Common Stock.
13. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of Delaware.
14. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have executed this Agreement as of the day and year first
above mentioned.
EXECUTIVE
/s/ Ernie Danner
_________________________________________
Ernie Danner
UNIVERSAL COMPRESSION HOLDINGS, INC.
/s/ Ernie Danner
By: _________________________________
Title: _________________________________
6
<PAGE>
Exhibit A
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, made as of this 20th day of
February, 1998, by and between UNIVERSAL COMPRESSION HOLDINGS, INC., a Delaware
corporation ("Holdings") and STEPHEN A. SNIDER (the "Executive").
WHEREAS, Holdings has agreed to grant to the Executive an option
to purchase Holdings Common Stock, $.01 par value per share (the "Common
Stock"), pursuant to the terms and conditions of this Agreement in consideration
for past services to Holdings and TW Acquisition Corporation ("TW"), a
wholly-owned subsidiary of Holdings; and
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the parties
agree as follows:
1. DEFINITIONS. For purposes of this Agreement, all capitalized
terms used but not defined herein shall have the meanings ascribed to them in
the Employment Agreement between Universal Compression, Inc., Holdings and the
Executive dated as of the date hereof.
2. GRANT OF OPTION. Holdings hereby grants to the Executive an
option (the "Option") to purchase 6,619 shares of Common Stock at $50 per share.
This Option is granted under Holdings' Incentive Stock Option Plan and shall
constitute, to the extent permissible, an Incentive Stock Option under Section
422 of the Internal Revenue Code of 1986, as amended, and otherwise shall be a
Non-Qualified Stock Option.
3. OPTION TERMS AND CONDITIONS.
(a) Exercise of Option. The Option shall become
exercisable in accordance with the following schedule:
Years from Grant Date Amount Exercisable
--------------------- ------------------
1 Year 33 1/3%
2 Years 33 1/3%
3 Years 33 1/3%
(b) Termination of Employment.
(i) Termination due to Death, Disability or
Retirement. In the event the Executive's employment with Universal Compression,
Inc. ("Compression") terminates on account of death, disability or retirement,
the vested portion of the Option shall be and remain exercisable for the balance
of the term of the Option.
<PAGE>
(ii) Termination of Employment Without Cause. In
the event the Executive's employment with Compression shall terminate without
Cause, the vested portion of the Option shall be and remain exercisable for the
balance of the term of the Option.
(iii) Termination of Employment for Cause. In the
event the Executive's employment with Compression shall terminate for Cause
pursuant to the Employment Agreement, the Option shall terminate on the date of
such termination.
4. NON-ASSIGNABILITY. No Option granted hereby and no right
arising thereunder shall be transferable during the lifetime of the Executive or
by will or by the laws of descent and distribution. During the lifetime of the
Executive, the Option shall be exercisable only by the Executive. Any Option
which is exercisable at the date of the Executive's death shall be exercisable
in accordance with the terms of this Agreement by the executor or administrator,
as the case may be, of the Executive's estate for the next three (3) months
following the date of the Executive's death and shall then terminate.
5. MODE OF EXERCISE. The Option shall be exercised by giving to
Holdings written notice stating (a) the number of shares with respect to which
the Option is being exercised, (b) the aggregate Exercise Price for such shares,
and (c) the method of payment. At the option of the Executive, such aggregate
Exercise Price may be paid: (i) in cash; (ii) with the consent of the board of
directors of Holdings (the "Board"), by delivery of a promissory note to
Holdings payable over a three (3) year period and bearing interest at the prime
rate; (iii) by delivery of shares of Common Stock owned by the Executive having
a Market Price (as determined by Section 6 hereof) equal in amount to the
aggregate Exercise Price of the Option being exercised; (iv) by any combination
of (i), (ii) and (iii); or (v) by cancellation of any portion of the Option, in
which case the number of shares of Common Stock to be received shall be computed
using the following formula:
X = Y x (A - $50)
-------------
A
Where: X = the number of shares of Common Stock to be issued
pursuant to clause (v) above;
Y = the number of shares of Common Stock that otherwise
would have been issuable in respect of that portion
of the Option to be exercised pursuant to clause
(v) above if such exercise had been pursuant to
clause (i), (ii), (iii) or (iv) above;
A = the Market Price of one share of Common Stock on
the date of exercise;
provided, however, that clauses (iii) and (v) shall be inapplicable if no Market
Price is applicable under clause (iv) of Section 6.
2
<PAGE>
6. Market Price of Common Stock. The "Market Price" of the Common
Stock on any day shall be determined as follows: (i) if the Common Stock is
listed on a national securities exchange or quoted through the NASDAQ National
Market System, the Market Price on any day shall be the average of the high and
low reported Consolidated Trading sales prices, or if no such sale is made on
such day, the average of the closing bid and asked prices reported on the
Consolidated Trading listing for such day; (ii) if the Common Stock is quoted on
the NASDAQ inter-dealer quotation system, the Market Price on any day shall be
the average of the representative bid and asked prices at the close of business
for such day; (iii) if the Common Stock is not listed on a national stock
exchange or quoted on NASDAQ, the Market Price on any day shall be the average
of the high bid and low asked prices reported by the National Quotation Bureau,
Inc. for such day; or (iv) if none of clauses (i) - (iii) are applicable, the
Market Price as may be determined by the Board or any Committee thereof, there
being no obligation to make such determination.
7. TRANSFER RESTRICTIONS. The Executive understands that the
Common Stock issuable upon the exercise of this Option may not be registered
under the Securities Act of 1933, as amended (the "Act"). The Executive
acknowledges that the Common Stock will be purchased for investment only, and
that it may not be sold or transferred in the absence of either an effective
registration statement under the Act or an opinion of experienced securities
counsel, acceptable in form and content to Holdings in its sole discretion,
which states that registration is not required under the Act.
By executing this Agreement, the Executive agrees to refrain from
re-offering, reselling, or otherwise disposing of any of the Common Stock
acquired upon the exercise of the Option in any manner which would violate the
Act or any other Federal or state securities law.
All stock certificates representing shares of Common Stock
acquired pursuant to the exercise of an Option that are issued by Holdings shall
contain a legend substantially in the following form:
"SHARES OF UNIVERSAL COMPRESSION HOLDINGS, INC. ("HOLDINGS")
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS
AGREEMENT, DATED AS OF FEBRUARY 20, 1998, WHICH CONTAINS
PROVISIONS REGARDING THE RESTRICTIONS ON THE TRANSFER OF SUCH
SHARES AND OTHER MATTERS. A COPY OF SUCH AGREEMENT IS AVAILABLE
FOR INSPECTION AT THE PRINCIPAL OFFICE OF HOLDINGS. THE SHARES
REPRESENTED BY THIS CERTIFICATE WERE NOT REGISTERED UNDER, AND
ARE SUBJECT TO, THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE SECURITIES
ACT
3
<PAGE>
OR IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT."
The shares of Common Stock acquired pursuant to the Option shall
be subject to the provisions regarding transfers of shares in the Stockholders
Agreement dated as of even date herewith (the "Stockholders Agreement"). At the
request of Holdings, the Executive shall become a party to the Stockholders
Agreement.
8. OPTION SUBJECT TO SECURITIES AND OTHER REGULATIONS. The Option
granted hereunder and the obligation of Holdings to sell and deliver shares
under such Option shall be subject to all applicable Federal and state laws,
rules and regulations and to such approvals by any government or regulatory
agency as may be required. Holdings, in its discretion, may postpone the
issuance or delivery of shares upon any exercise of the Option until completion
of any stock exchange listing, or other qualification of such shares under any
state or Federal law, rule or regulation as Holdings may consider appropriate,
and may require the Executive, his beneficiary or his legal representative to
make such representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of the shares in
compliance with applicable laws, rules and regulations.
Upon demand by the Board, the Executive (or any person acting
under Section 4 of this Agreement) shall deliver to the Board at the time of
exercise of the Option a written representation that the shares to be acquired
upon the exercise of the Option are being acquired for his own account and not
with a view to, or for resale in connection with, any distribution in violation
of federal or state securities laws. Upon such demand, delivery of such
representation prior to the delivery of any shares issued upon exercise of the
Option shall be a condition precedent to the right of the Executive or such
other person to purchase any shares.
9. ANTI-DILUTION ADJUSTMENTS. In the event of any change in the
Common Stock by reason of any stock dividend, cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or of any similar change affecting the Common Stock, the number and kind
of shares subject to the Option and the Option price thereof shall be
appropriately adjusted consistent with such change in such manner as the Board
may deem equitable to prevent substantial dilution or enlargement of the rights
granted to, or available for, the Executive.
10. CALL RIGHT. Upon any termination of the employment of the
Executive prior to a public offering of Common Stock, Holdings may purchase
Common Stock acquired upon any exercise of the Option then held by the Executive
in accordance with the terms and provisions of the Management Stock Buyback
Agreement, dated as of the date hereof, by and between Holdings and certain
other purchasers of Holdings Common Stock signatory thereto.
11. RIGHTS PRIOR TO EXERCISE OF OPTION. The Participant shall not
have any rights as a stockholder with respect to any shares subject to the
Option prior to the date on which the Executive is recorded as the holder of
such shares on the records of Holdings.
4
<PAGE>
12. TAXES. Holdings may make such provisions and take such steps
as it may deem necessary or appropriate for the withholding of all Federal,
state, local and other taxes required by law to be withheld with respect to the
Option including, but not limited to: (i) reducing the number of shares of
Common Stock otherwise deliverable, based upon their fair market value on the
date of exercise, to permit deduction of the amount of any such withholding
taxes from the amount otherwise payable under this Agreement; (ii) deducting the
amount of any such withholding taxes from any other amount then or thereafter
payable to the Executive; or (iii) requiring the Executive, his beneficiary or
his legal representative to pay to Holdings the amount required to be withheld
or to execute such documents as Holdings deems necessary or desirable to enable
it to satisfy its withholding obligations as a condition of releasing the Common
Stock.
13. GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of Delaware.
14. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have executed this Agreement as of the day and year first above
mentioned.
EXECUTIVE
/s/ Stephen A. Snider
------------------------------------
Stephen A. Snider
UNIVERSAL COMPRESSION HOLDINGS, INC.
/s/ Ernie Danner
By: _______________________________
Title: ____________________________
6
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, made as of this 20th day of
February, 1998, by and between UNIVERSAL COMPRESSION HOLDINGS, INC., a Delaware
corporation ("Holdings") and THOMAS E.
HARTFORD (the "Executive").
WHEREAS, Holdings has agreed to grant to the Executive an option
to purchase Holdings Common Stock, $.01 par value per share (the "Common
Stock"), pursuant to the terms and conditions of this Agreement in consideration
for past services to Holdings and TW Acquisition Corporation ("TW"), a
wholly-owned subsidiary of Holdings; and
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the parties
agree as follows:
1. DEFINITIONS. For purposes of this Agreement, all capitalized
terms used but not defined herein shall have the meanings ascribed to them in
the Employment Agreement between Universal Compression, Inc., Holdings and the
Executive dated as of the date hereof.
2. GRANT OF OPTION. Holdings hereby grants to the Executive an
option (the "Option") to purchase 4,780 shares of Common Stock at $50 per share.
This Option is granted under Holdings' Incentive Stock Option Plan and shall
constitute, to the extent permissible, an Incentive Stock Option under Section
422 of the Internal Revenue Code of 1986, as amended, and otherwise shall be a
Non-Qualified Stock Option.
3. OPTION TERMS AND CONDITIONS.
(a) Exercise of Option. The Option shall become
exercisable in accordance with the following schedule:
Years from Grant Date Amount Exercisable
--------------------- ------------------
1 Year 33 1/3%
2 Years 33 1/3%
3 Years 33 1/3%
(b) Termination of Employment.
(i) Termination due to Death, Disability or
Retirement. In the event the Executive's employment with Universal Compression,
Inc. ("Compression") terminates on account of death, disability or retirement,
the vested portion of the Option shall be and remain exercisable for the balance
of the term of the Option.
<PAGE>
(ii) Termination of Employment Without Cause. In
the event the Executive's employment with Compression shall terminate without
Cause, the vested portion of the Option shall be and remain exercisable for the
balance of the term of the Option.
(iii) Termination of Employment for Cause. In the
event the Executive's employment with Compression shall terminate for Cause
pursuant to the Employment Agreement, the Option shall terminate on the date of
such termination.
4. NON-ASSIGNABILITY. No Option granted hereby and no right
arising thereunder shall be transferable during the lifetime of the Executive or
by will or by the laws of descent and distribution. During the lifetime of the
Executive, the Option shall be exercisable only by the Executive. Any Option
which is exercisable at the date of the Executive's death shall be exercisable
in accordance with the terms of this Agreement by the executor or administrator,
as the case may be, of the Executive's estate for the next three (3) months
following the date of the Executive's death and shall then terminate.
5. MODE OF EXERCISE. The Option shall be exercised by giving to
Holdings written notice stating (a) the number of shares with respect to which
the Option is being exercised, (b) the aggregate Exercise Price for such shares,
and (c) the method of payment. At the option of the Executive, such aggregate
Exercise Price may be paid: (i) in cash; (ii) with the consent of the board of
directors of Holdings (the "Board"), by delivery of a promissory note to
Holdings payable over a three (3) year period and bearing interest at the prime
rate; (iii) by delivery of shares of Common Stock owned by the Executive having
a Market Price (as determined by Section 6 hereof) equal in amount to the
aggregate Exercise Price of the Option being exercised; (iv) by any combination
of (i), (ii) and (iii); or (v) by cancellation of any portion of the Option, in
which case the number of shares of Common Stock to be received shall be computed
using the following formula:
X = Y x (A - $50)
-------------
A
Where: X = the number of shares of Common Stock to be issued
pursuant to clause (v) above;
Y = the number of shares of Common Stock that otherwise
would have been issuable in respect of that portion
of the Option to be exercised pursuant to clause
(v) above if such exercise had been pursuant to
clause (i), (ii), (iii) or (iv) above;
A = the Market Price of one share of Common Stock on
the date of exercise;
provided, however, that clauses (iii) and (v) shall be inapplicable if no Market
Price is applicable under clause (iv) of Section 6.
2
<PAGE>
6. Market Price of Common Stock. The "Market Price" of the Common
Stock on any day shall be determined as follows: (i) if the Common Stock is
listed on a national securities exchange or quoted through the NASDAQ National
Market System, the Market Price on any day shall be the average of the high and
low reported Consolidated Trading sales prices, or if no such sale is made on
such day, the average of the closing bid and asked prices reported on the
Consolidated Trading listing for such day; (ii) if the Common Stock is quoted on
the NASDAQ inter-dealer quotation system, the Market Price on any day shall be
the average of the representative bid and asked prices at the close of business
for such day; (iii) if the Common Stock is not listed on a national stock
exchange or quoted on NASDAQ, the Market Price on any day shall be the average
of the high bid and low asked prices reported by the National Quotation Bureau,
Inc. for such day; or (iv) if none of clauses (i) - (iii) are applicable, the
Market Price as may be determined by the Board or any Committee thereof, there
being no obligation to make such determination.
7. TRANSFER RESTRICTIONS. The Executive understands that the
Common Stock issuable upon the exercise of this Option may not be registered
under the Securities Act of 1933, as amended (the "Act"). The Executive
acknowledges that the Common Stock will be purchased for investment only, and
that it may not be sold or transferred in the absence of either an effective
registration statement under the Act or an opinion of experienced securities
counsel, acceptable in form and content to Holdings in its sole discretion,
which states that registration is not required under the Act.
By executing this Agreement, the Executive agrees to refrain from
re-offering, reselling, or otherwise disposing of any of the Common Stock
acquired upon the exercise of the Option in any manner which would violate the
Act or any other Federal or state securities law.
All stock certificates representing shares of Common Stock
acquired pursuant to the exercise of an Option that are issued by Holdings shall
contain a legend substantially in the following form:
"SHARES OF UNIVERSAL COMPRESSION HOLDINGS, INC. ("HOLDINGS")
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS
AGREEMENT, DATED AS OF FEBRUARY 20, 1998, WHICH CONTAINS
PROVISIONS REGARDING THE RESTRICTIONS ON THE TRANSFER OF SUCH
SHARES AND OTHER MATTERS. A COPY OF SUCH AGREEMENT IS AVAILABLE
FOR INSPECTION AT THE PRINCIPAL OFFICE OF HOLDINGS. THE SHARES
REPRESENTED BY THIS CERTIFICATE WERE NOT REGISTERED UNDER, AND
ARE SUBJECT TO, THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE SECURITIES
ACT
3
<PAGE>
OR IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT."
The shares of Common Stock acquired pursuant to the Option shall
be subject to the provisions regarding transfers of shares in the Stockholders
Agreement dated as of even date herewith (the "Stockholders Agreement"). At the
request of Holdings, the Executive shall become a party to the Stockholders
Agreement.
8. OPTION SUBJECT TO SECURITIES AND OTHER REGULATIONS. The Option
granted hereunder and the obligation of Holdings to sell and deliver shares
under such Option shall be subject to all applicable Federal and state laws,
rules and regulations and to such approvals by any government or regulatory
agency as may be required. Holdings, in its discretion, may postpone the
issuance or delivery of shares upon any exercise of the Option until completion
of any stock exchange listing, or other qualification of such shares under any
state or Federal law, rule or regulation as Holdings may consider appropriate,
and may require the Executive, his beneficiary or his legal representative to
make such representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of the shares in
compliance with applicable laws, rules and regulations.
Upon demand by the Board, the Executive (or any person acting
under Section 4 of this Agreement) shall deliver to the Board at the time of
exercise of the Option a written representation that the shares to be acquired
upon the exercise of the Option are being acquired for his own account and not
with a view to, or for resale in connection with, any distribution in violation
of federal or state securities laws. Upon such demand, delivery of such
representation prior to the delivery of any shares issued upon exercise of the
Option shall be a condition precedent to the right of the Executive or such
other person to purchase any shares.
9. ANTI-DILUTION ADJUSTMENTS. In the event of any change in the
Common Stock by reason of any stock dividend, cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or of any similar change affecting the Common Stock, the number and kind
of shares subject to the Option and the Option price thereof shall be
appropriately adjusted consistent with such change in such manner as the Board
may deem equitable to prevent substantial dilution or enlargement of the rights
granted to, or available for, the Executive.
10. CALL RIGHT. Upon any termination of the employment of the
Executive prior to a public offering of Common Stock, Holdings may purchase
Common Stock acquired upon any exercise of the Option then held by the Executive
in accordance with the terms and provisions of the Management Stock Buyback
Agreement, dated as of the date hereof, by and between Holdings and certain
other purchasers of Holdings Common Stock signatory thereto.
11. RIGHTS PRIOR TO EXERCISE OF OPTION. The Participant shall not
have any rights as a stockholder with respect to any shares subject to the
Option prior to the date on which the Executive is recorded as the holder of
such shares on the records of Holdings.
4
<PAGE>
12. TAXES. Holdings may make such provisions and take such steps
as it may deem necessary or appropriate for the withholding of all Federal,
state, local and other taxes required by law to be withheld with respect to the
Option including, but not limited to: (i) reducing the number of shares of
Common Stock otherwise deliverable, based upon their fair market value on the
date of exercise, to permit deduction of the amount of any such withholding
taxes from the amount otherwise payable under this Agreement; (ii) deducting the
amount of any such withholding taxes from any other amount then or thereafter
payable to the Executive; or (iii) requiring the Executive, his beneficiary or
his legal representative to pay to Holdings the amount required to be withheld
or to execute such documents as Holdings deems necessary or desirable to enable
it to satisfy its withholding obligations as a condition of releasing the Common
Stock.
13. GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of Delaware.
14. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have executed this Agreement as of the day and year first above
mentioned.
EXECUTIVE
/s/ Thomas E. Hartford
____________________________________
Thomas E. Hartford
UNIVERSAL COMPRESSION HOLDINGS, INC.
/s/ Ernie Danner
By: _______________________________
Title: ____________________________
6
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, made as of this 20th day of
February, 1998, by and between UNIVERSAL COMPRESSION HOLDINGS, INC., a Delaware
corporation ("Holdings") and SAMUEL URCIS ("Urcis").
WHEREAS, Holdings has agreed to grant to Urcis an option to
purchase Holdings Common Stock, $.01 par value per share (the "Common Stock"),
pursuant to the terms and conditions of this Agreement in consideration for past
services to Holdings and TW Acquisition Corporation ("TW"), a wholly-owned
subsidiary of Holdings; and
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the parties
agree as follows:
1. DEFINITIONS. For purposes of this Agreement, all capitalized
terms used but not defined herein shall have the meanings ascribed to them in
the Finders and Consulting Services Agreement between Holdings and Urcis dated
as of the date hereof.
2. GRANT OF OPTION. Holdings hereby grants to Urcis an option
(the "Option") to purchase 5,957 shares of Common Stock at $50 per share. This
Option is granted under Holdings Incentive Stock Option Plan and shall
constitute, to the extent permissible, an Incentive Stock Option under Section
422 of the Internal Revenue Code of 1986, as amended, and otherwise shall be a
Non-Qualified Stock Option.
3. OPTION TERMS AND CONDITIONS. The Option shall become
immediately exercisable upon the execution of this Agreement. The Option shall
expire on the tenth anniversary date of the date hereof.
4. NON-ASSIGNABILITY. No Option granted hereby and no right
arising thereunder shall be transferable during the lifetime of Urcis or by will
or by the laws of descent and distribution. During the lifetime of Urcis, the
Option shall be exercisable only by Urcis. Any Option which is exercisable at
the date of Urcis' death shall be exercisable in accordance with the terms of
this Agreement by the executor or administrator, as the case may be, of Urcis'
estate for the next three (3) months following the date of Urcis' death and
shall then terminate.
5. MODE OF EXERCISE. The Option shall be exercised by giving to
Holdings written notice stating (a) the number of shares with respect to which
the Option is being exercised, (b) the aggregate Exercise Price for such shares,
and (c) the method of payment. At the option of Urcis, such aggregate Exercise
Price may be paid: (i) in cash; (ii) with the consent of the board of directors
of Holdings (the "Board"), by delivery of a promissory note to Holdings payable
over a three (3) year period and bearing interest at the prime rate; (iii) by
delivery of shares of Common Stock owned by Urcis having a Market Price (as
determined by Section 6 hereof) equal in amount to the aggregate Exercise Price
of the Option being exercised; (iv) by any combination of (i), (ii) and (iii);
or (v) by cancellation of any portion of the Option, in
<PAGE>
which case the number of shares of Common Stock to be received shall be computed
using the following formula:
X = Y x (A - $50)
-------------
A
Where: X = the number of shares of Common Stock to be issued
pursuant to clause (v) above;
Y = the number of shares of Common Stock that otherwise
would have been issuable in respect of that portion
of the Option to be exercised pursuant to clause
(v) above if such exercise had been pursuant to
clause (i), (ii), (iii) or (iv) above;
A = the Market Price of one share of Common Stock on
the date of exercise;
provided, however, that clauses (iii) and (v) shall be inapplicable if no Market
Price is applicable under clause (iv) of Section 6.
6. Market Price of Common Stock. The "Market Price" of the Common
Stock on any day shall be determined as follows: (i) if the Common Stock is
listed on a national securities exchange or quoted through the NASDAQ National
Market System, the Market Price on any day shall be the average of the high and
low reported Consolidated Trading sales prices, or if no such sale is made on
such day, the average of the closing bid and asked prices reported on the
Consolidated Trading listing for such day; (ii) if the Common Stock is quoted on
the NASDAQ inter-dealer quotation system, the Market Price on any day shall be
the average of the representative bid and asked prices at the close of business
for such day; (iii) if the Common Stock is not listed on a national stock
exchange or quoted on NASDAQ, the Market Price on any day shall be the average
of the high bid and low asked prices reported by the National Quotation Bureau,
Inc. for such day; or (iv) if none of clauses (i) - (iii) are applicable, the
Market Price as may be determined by the Board or any Committee thereof, there
being no obligation to make such determination.
7. TRANSFER RESTRICTIONS. Urcis understands that the Common Stock
issuable upon the exercise of this Option may not be registered under the
Securities Act of 1933, as amended (the "Act"). Urcis acknowledges that the
Common Stock will be purchased for investment only, and that it may not be sold
or transferred in the absence of either an effective registration statement
under the Act or an opinion of experienced securities counsel, acceptable in
form and content to Holdings in its sole discretion, which states that
registration is not required under the Act.
2
<PAGE>
By executing this Agreement, Urcis agrees to refrain from
re-offering, reselling, or otherwise disposing of any of the Common Stock
acquired upon the exercise of the Option in any manner which would violate the
Act or any other Federal or state securities law.
All stock certificates representing shares of Common Stock
acquired pursuant to the exercise of an Option that are issued by Holdings shall
contain a legend substantially in the following form:
"SHARES OF UNIVERSAL COMPRESSION HOLDINGS, INC. ("HOLDINGS")
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS
AGREEMENT, DATED AS OF FEBRUARY 20, 1998, WHICH CONTAINS
PROVISIONS REGARDING THE RESTRICTIONS ON THE TRANSFER OF SUCH
SHARES AND OTHER MATTERS. A COPY OF SUCH AGREEMENT IS AVAILABLE
FOR INSPECTION AT THE PRINCIPAL OFFICE OF HOLDINGS. THE SHARES
REPRESENTED BY THIS CERTIFICATE WERE NOT REGISTERED UNDER, AND
ARE SUBJECT TO, THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE SECURITIES
ACT OR IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT."
The shares of Common Stock acquired pursuant to the Option shall
be subject to the provisions regarding transfers of shares in the Stockholders
Agreement dated as of even date herewith (the "Stockholders Agreement"). At the
request of Holdings, Urcis shall become a party to the Stockholders Agreement.
8. OPTION SUBJECT TO SECURITIES AND OTHER REGULATIONS. The Option
granted hereunder and the obligation of Holdings to sell and deliver shares
under such Option shall be subject to all applicable Federal and state laws,
rules and regulations and to such approvals by any government or regulatory
agency as may be required. Holdings, in its discretion, may postpone the
issuance or delivery of shares upon any exercise of the Option until completion
of any stock exchange listing, or other qualification of such shares under any
state or Federal law, rule or regulation as Holdings may consider appropriate,
and may require Urcis, his beneficiary or his legal representative to make such
representations and furnish such information as it may consider appropriate in
connection with the issuance or delivery of the shares in compliance with
applicable laws, rules and regulations.
Upon demand by the Board, Urcis (or any person acting under
Section 4 of this Agreement) shall deliver to the Board at the time of exercise
of the Option a written representation that the shares to be acquired upon the
exercise of the Option are being acquired for his own account and not with a
view to, or for resale in connection with, any distribution. Upon such
3
<PAGE>
demand, delivery of such representation prior to the delivery of any shares
issued upon exercise of the Option shall be a condition precedent to the right
of Urcis or such other person to purchase any shares.
9. ANTI-DILUTION ADJUSTMENTS. In the event of any change in the
Common Stock by reason of any stock dividend, cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or of any similar change affecting the Common Stock, the number and kind
of shares subject to the Option and the Option price thereof shall be
appropriately adjusted consistent with such change in such manner as the Board
may deem equitable to prevent substantial dilution or enlargement of the rights
granted to, or available for, Urcis.
10. RIGHTS PRIOR TO EXERCISE OF OPTION. The Participant shall not
have any rights as a stockholder with respect to any shares subject to the
Option prior to the date on which Urcis is recorded as the holder of such shares
on the records of Holdings.
11. TAXES. Holdings may make such provisions and take such steps
as it may deem necessary or appropriate for the withholding of all Federal,
state, local and other taxes required by law to be withheld with respect to the
Option including, but not limited to: (i) reducing the number of shares of
Common Stock otherwise deliverable, based upon their fair market value on the
date of exercise, to permit deduction of the amount of any such withholding
taxes from the amount otherwise payable under this Agreement; (ii) deducting the
amount of any such withholding taxes from any other amount then or thereafter
payable to Urcis; or (iii) requiring Urcis, his beneficiary or his legal
representative to pay to Holdings the amount required to be withheld or to
execute such documents as Holdings deems necessary or desirable to enable it to
satisfy its withholding obligations as a condition of releasing the Common
Stock.
12. GOVERNING LAW. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of New York without
reference to principles of conflicts of laws.
13. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have executed this Agreement as of the day and year first above
mentioned.
/s/ Samuel Urcis
____________________________________
Samuel Urcis
UNIVERSAL COMPRESSION HOLDINGS, INC.
/s/ Ernie Danner
By: _______________________________
Title: ____________________________
5
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, made as of this 20th day of
February, 1998, by and between UNIVERSAL COMPRESSION HOLDINGS, INC., a Delaware
corporation ("Holdings") and NEWTON SCHNOOR (the "Executive").
WHEREAS, Holdings has agreed to grant to the Executive an option
to purchase Holdings Common Stock, $.01 par value per share (the "Common
Stock"), pursuant to the terms and conditions of this Agreement in consideration
for past services to Holdings and TW Acquisition Corporation ("TW"), a
wholly-owned subsidiary of Holdings; and
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the parties
agree as follows:
1. DEFINITIONS. For purposes of this Agreement, all capitalized
terms used but not defined herein shall have the meanings ascribed to them in
the Employment Agreement between Universal Compression, Inc., Holdings and the
Executive dated as of the date hereof.
2. GRANT OF OPTION. Holdings hereby grants to the Executive an
option (the "Option") to purchase 2,206 shares of Common Stock at $50 per share.
This Option is granted under Holdings' Incentive Stock Option Plan and shall
constitute, to the extent permissible, an Incentive Stock Option under Section
422 of the Internal Revenue Code of 1986, as amended, and otherwise shall be a
Non-Qualified Stock Option.
3. OPTION TERMS AND CONDITIONS.
(a) Exercise of Option. The Option shall become
exercisable in accordance with the following schedule:
Years from Grant Date Amount Exercisable
--------------------- ------------------
1 Year 33 1/3%
2 Years 33 1/3%
3 Years 33 1/3%
(b) Termination of Employment.
(i) Termination due to Death, Disability or
Retirement. In the event the Executive's employment with Universal Compression,
Inc. ("Compression") terminates on account of death, disability or retirement,
the vested portion of the Option shall be and remain exercisable for the balance
of the term of the Option.
<PAGE>
(ii) Termination of Employment Without Cause. In
the event the Executive's employment with Compression shall terminate without
Cause, the vested portion of the Option shall be and remain exercisable for the
balance of the term of the Option.
(iii) Termination of Employment for Cause. In the
event the Executive's employment with Compression shall terminate for Cause
pursuant to the Employment Agreement, the Option shall terminate on the date of
such termination.
4. NON-ASSIGNABILITY. No Option granted hereby and no right
arising thereunder shall be transferable during the lifetime of the Executive or
by will or by the laws of descent and distribution. During the lifetime of the
Executive, the Option shall be exercisable only by the Executive. Any Option
which is exercisable at the date of the Executive's death shall be exercisable
in accordance with the terms of this Agreement by the executor or administrator,
as the case may be, of the Executive's estate for the next three (3) months
following the date of the Executive's death and shall then terminate.
5. MODE OF EXERCISE. The Option shall be exercised by giving to
Holdings written notice stating (a) the number of shares with respect to which
the Option is being exercised, (b) the aggregate Exercise Price for such shares,
and (c) the method of payment. At the option of the Executive, such aggregate
Exercise Price may be paid: (i) in cash; (ii) with the consent of the board of
directors of Holdings (the "Board"), by delivery of a promissory note to
Holdings payable over a three (3) year period and bearing interest at the prime
rate; (iii) by delivery of shares of Common Stock owned by the Executive having
a Market Price (as determined by Section 6 hereof) equal in amount to the
aggregate Exercise Price of the Option being exercised; (iv) by any combination
of (i), (ii) and (iii); or (v) by cancellation of any portion of the Option, in
which case the number of shares of Common Stock to be received shall be computed
using the following formula:
X = Y x (A - $50)
-------------
A
Where: X = the number of shares of Common Stock to be issued
pursuant to clause (v) above;
Y = the number of shares of Common Stock that otherwise
would have been issuable in respect of that portion
of the Option to be exercised pursuant to clause
(v) above if such exercise had been pursuant to
clause (i), (ii), (iii) or (iv) above;
A = the Market Price of one share of Common Stock on
the date of exercise;
provided, however, that clauses (iii) and (v) shall be inapplicable if no Market
Price is applicable under clause (iv) of Section 6.
2
<PAGE>
6. Market Price of Common Stock. The "Market Price" of the Common
Stock on any day shall be determined as follows: (i) if the Common Stock is
listed on a national securities exchange or quoted through the NASDAQ National
Market System, the Market Price on any day shall be the average of the high and
low reported Consolidated Trading sales prices, or if no such sale is made on
such day, the average of the closing bid and asked prices reported on the
Consolidated Trading listing for such day; (ii) if the Common Stock is quoted on
the NASDAQ inter-dealer quotation system, the Market Price on any day shall be
the average of the representative bid and asked prices at the close of business
for such day; (iii) if the Common Stock is not listed on a national stock
exchange or quoted on NASDAQ, the Market Price on any day shall be the average
of the high bid and low asked prices reported by the National Quotation Bureau,
Inc. for such day; or (iv) if none of clauses (i) - (iii) are applicable, the
Market Price as may be determined by the Board or any Committee thereof, there
being no obligation to make such determination.
7. TRANSFER RESTRICTIONS. The Executive understands that the
Common Stock issuable upon the exercise of this Option may not be registered
under the Securities Act of 1933, as amended (the "Act"). The Executive
acknowledges that the Common Stock will be purchased for investment only, and
that it may not be sold or transferred in the absence of either an effective
registration statement under the Act or an opinion of experienced securities
counsel, acceptable in form and content to Holdings in its sole discretion,
which states that registration is not required under the Act.
By executing this Agreement, the Executive agrees to refrain from
re-offering, reselling, or otherwise disposing of any of the Common Stock
acquired upon the exercise of the Option in any manner which would violate the
Act or any other Federal or state securities law.
All stock certificates representing shares of Common Stock
acquired pursuant to the exercise of an Option that are issued by Holdings shall
contain a legend substantially in the following form:
"SHARES OF UNIVERSAL COMPRESSION HOLDINGS, INC. ("HOLDINGS")
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS
AGREEMENT, DATED AS OF FEBRUARY 20, 1998, WHICH CONTAINS
PROVISIONS REGARDING THE RESTRICTIONS ON THE TRANSFER OF SUCH
SHARES AND OTHER MATTERS. A COPY OF SUCH AGREEMENT IS AVAILABLE
FOR INSPECTION AT THE PRINCIPAL OFFICE OF HOLDINGS. THE SHARES
REPRESENTED BY THIS CERTIFICATE WERE NOT REGISTERED UNDER, AND
ARE SUBJECT TO, THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE SECURITIES
ACT
3
<PAGE>
OR IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT."
The shares of Common Stock acquired pursuant to the Option shall
be subject to the provisions regarding transfers of shares in the Stockholders
Agreement dated as of even date herewith (the "Stockholders Agreement"). At the
request of Holdings, the Executive shall become a party to the Stockholders
Agreement.
8. OPTION SUBJECT TO SECURITIES AND OTHER REGULATIONS. The Option
granted hereunder and the obligation of Holdings to sell and deliver shares
under such Option shall be subject to all applicable Federal and state laws,
rules and regulations and to such approvals by any government or regulatory
agency as may be required. Holdings, in its discretion, may postpone the
issuance or delivery of shares upon any exercise of the Option until completion
of any stock exchange listing, or other qualification of such shares under any
state or Federal law, rule or regulation as Holdings may consider appropriate,
and may require the Executive, his beneficiary or his legal representative to
make such representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of the shares in
compliance with applicable laws, rules and regulations.
Upon demand by the Board, the Executive (or any person acting
under Section 4 of this Agreement) shall deliver to the Board at the time of
exercise of the Option a written representation that the shares to be acquired
upon the exercise of the Option are being acquired for his own account and not
with a view to, or for resale in connection with, any distribution in violation
of federal or state securities laws. Upon such demand, delivery of such
representation prior to the delivery of any shares issued upon exercise of the
Option shall be a condition precedent to the right of the Executive or such
other person to purchase any shares.
9. ANTI-DILUTION ADJUSTMENTS. In the event of any change in the
Common Stock by reason of any stock dividend, cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or of any similar change affecting the Common Stock, the number and kind
of shares subject to the Option and the Option price thereof shall be
appropriately adjusted consistent with such change in such manner as the Board
may deem equitable to prevent substantial dilution or enlargement of the rights
granted to, or available for, the Executive.
10. CALL RIGHT. Upon any termination of the employment of the
Executive prior to a public offering of Common Stock, Holdings may purchase
Common Stock acquired upon any exercise of the Option then held by the Executive
in accordance with the terms and provisions of the Management Stock Buyback
Agreement, dated as of the date hereof, by and between Holdings and certain
other purchasers of Holdings Common Stock signatory thereto.
11. RIGHTS PRIOR TO EXERCISE OF OPTION. The Participant shall not
have any rights as a stockholder with respect to any shares subject to the
Option prior to the date on which the Executive is recorded as the holder of
such shares on the records of Holdings.
4
<PAGE>
12. TAXES. Holdings may make such provisions and take such steps
as it may deem necessary or appropriate for the withholding of all Federal,
state, local and other taxes required by law to be withheld with respect to the
Option including, but not limited to: (i) reducing the number of shares of
Common Stock otherwise deliverable, based upon their fair market value on the
date of exercise, to permit deduction of the amount of any such withholding
taxes from the amount otherwise payable under this Agreement; (ii) deducting the
amount of any such withholding taxes from any other amount then or thereafter
payable to the Executive; or (iii) requiring the Executive, his beneficiary or
his legal representative to pay to Holdings the amount required to be withheld
or to execute such documents as Holdings deems necessary or desirable to enable
it to satisfy its withholding obligations as a condition of releasing the Common
Stock.
13. GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of Delaware.
14. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have executed this Agreement as of the day and year first above
mentioned.
EXECUTIVE
/s/ Newton Schnoor
____________________________________
Newton Schnoor
UNIVERSAL COMPRESSION HOLDINGS, INC.
/s/ Ernie Danner
By: _______________________________
Title: ____________________________
6
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, made as of this 20th day of
February, 1998, by and between UNIVERSAL COMPRESSION HOLDINGS, INC., a Delaware
corporation ("Holdings") and ROBERT RYAN (the "Executive").
WHEREAS, Holdings has agreed to grant to the Executive an option
to purchase Holdings Common Stock, $.01 par value per share (the "Common
Stock"), pursuant to the terms and conditions of this Agreement in consideration
for past services to Holdings and TW Acquisition Corporation ("TW"), a
wholly-owned subsidiary of Holdings; and
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the parties
agree as follows:
1. DEFINITIONS. For purposes of this Agreement, all capitalized
terms used but not defined herein shall have the meanings ascribed to them in
the Employment Agreement between Universal Compression, Inc., Holdings and the
Executive dated as of the date hereof.
2. GRANT OF OPTION. Holdings hereby grants to the Executive an
option (the "Option") to purchase 2,206 shares of Common Stock at $50 per share.
This Option is granted under Holdings' Incentive Stock Option Plan and shall
constitute, to the extent permissible, an Incentive Stock Option under Section
422 of the Internal Revenue Code of 1986, as amended, and otherwise shall be a
Non-Qualified Stock Option.
3. OPTION TERMS AND CONDITIONS.
(a) Exercise of Option. The Option shall become
exercisable in accordance with the following schedule:
Years from Grant Date Amount Exercisable
--------------------- ------------------
1 Year 33 1/3%
2 Years 33 1/3%
3 Years 33 1/3%
(b) Termination of Employment.
(i) Termination due to Death, Disability or
Retirement. In the event the Executive's employment with Universal Compression,
Inc. ("Compression") terminates on account of death, disability or retirement,
the vested portion of the Option shall be and remain exercisable for the balance
of the term of the Option.
<PAGE>
(ii) Termination of Employment Without Cause. In
the event the Executive's employment with Compression shall terminate without
Cause, the vested portion of the Option shall be and remain exercisable for the
balance of the term of the Option.
(iii) Termination of Employment for Cause. In the
event the Executive's employment with Compression shall terminate for Cause
pursuant to the Employment Agreement, the Option shall terminate on the date of
such termination.
4. NON-ASSIGNABILITY. No Option granted hereby and no right
arising thereunder shall be transferable during the lifetime of the Executive or
by will or by the laws of descent and distribution. During the lifetime of the
Executive, the Option shall be exercisable only by the Executive. Any Option
which is exercisable at the date of the Executive's death shall be exercisable
in accordance with the terms of this Agreement by the executor or administrator,
as the case may be, of the Executive's estate for the next three (3) months
following the date of the Executive's death and shall then terminate.
5. MODE OF EXERCISE. The Option shall be exercised by giving to
Holdings written notice stating (a) the number of shares with respect to which
the Option is being exercised, (b) the aggregate Exercise Price for such shares,
and (c) the method of payment. At the option of the Executive, such aggregate
Exercise Price may be paid: (i) in cash; (ii) with the consent of the board of
directors of Holdings (the "Board"), by delivery of a promissory note to
Holdings payable over a three (3) year period and bearing interest at the prime
rate; (iii) by delivery of shares of Common Stock owned by the Executive having
a Market Price (as determined by Section 6 hereof) equal in amount to the
aggregate Exercise Price of the Option being exercised; (iv) by any combination
of (i), (ii) and (iii); or (v) by cancellation of any portion of the Option, in
which case the number of shares of Common Stock to be received shall be computed
using the following formula:
X = Y x (A - $50)
-------------
A
Where: X = the number of shares of Common Stock to be issued
pursuant to clause (v) above;
Y = the number of shares of Common Stock that otherwise
would have been issuable in respect of that portion
of the Option to be exercised pursuant to clause
(v) above if such exercise had been pursuant to
clause (i), (ii), (iii) or (iv) above;
A = the Market Price of one share of Common Stock on
the date of exercise;
provided, however, that clauses (iii) and (v) shall be inapplicable if no Market
Price is applicable under clause (iv) of Section 6.
2
<PAGE>
6. Market Price of Common Stock. The "Market Price" of the Common
Stock on any day shall be determined as follows: (i) if the Common Stock is
listed on a national securities exchange or quoted through the NASDAQ National
Market System, the Market Price on any day shall be the average of the high and
low reported Consolidated Trading sales prices, or if no such sale is made on
such day, the average of the closing bid and asked prices reported on the
Consolidated Trading listing for such day; (ii) if the Common Stock is quoted on
the NASDAQ inter-dealer quotation system, the Market Price on any day shall be
the average of the representative bid and asked prices at the close of business
for such day; (iii) if the Common Stock is not listed on a national stock
exchange or quoted on NASDAQ, the Market Price on any day shall be the average
of the high bid and low asked prices reported by the National Quotation Bureau,
Inc. for such day; or (iv) if none of clauses (i) - (iii) are applicable, the
Market Price as may be determined by the Board or any Committee thereof, there
being no obligation to make such determination.
7. TRANSFER RESTRICTIONS. The Executive understands that the
Common Stock issuable upon the exercise of this Option may not be registered
under the Securities Act of 1933, as amended (the "Act"). The Executive
acknowledges that the Common Stock will be purchased for investment only, and
that it may not be sold or transferred in the absence of either an effective
registration statement under the Act or an opinion of experienced securities
counsel, acceptable in form and content to Holdings in its sole discretion,
which states that registration is not required under the Act.
By executing this Agreement, the Executive agrees to refrain from
re-offering, reselling, or otherwise disposing of any of the Common Stock
acquired upon the exercise of the Option in any manner which would violate the
Act or any other Federal or state securities law.
All stock certificates representing shares of Common Stock
acquired pursuant to the exercise of an Option that are issued by Holdings shall
contain a legend substantially in the following form:
"SHARES OF UNIVERSAL COMPRESSION HOLDINGS, INC. ("HOLDINGS")
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS
AGREEMENT, DATED AS OF FEBRUARY 20, 1998, WHICH CONTAINS
PROVISIONS REGARDING THE RESTRICTIONS ON THE TRANSFER OF SUCH
SHARES AND OTHER MATTERS. A COPY OF SUCH AGREEMENT IS AVAILABLE
FOR INSPECTION AT THE PRINCIPAL OFFICE OF HOLDINGS. THE SHARES
REPRESENTED BY THIS CERTIFICATE WERE NOT REGISTERED UNDER, AND
ARE SUBJECT TO, THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE SECURITIES
ACT
3
<PAGE>
OR IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT."
The shares of Common Stock acquired pursuant to the Option shall
be subject to the provisions regarding transfers of shares in the Stockholders
Agreement dated as of even date herewith (the "Stockholders Agreement"). At the
request of Holdings, the Executive shall become a party to the Stockholders
Agreement.
8. OPTION SUBJECT TO SECURITIES AND OTHER REGULATIONS. The Option
granted hereunder and the obligation of Holdings to sell and deliver shares
under such Option shall be subject to all applicable Federal and state laws,
rules and regulations and to such approvals by any government or regulatory
agency as may be required. Holdings, in its discretion, may postpone the
issuance or delivery of shares upon any exercise of the Option until completion
of any stock exchange listing, or other qualification of such shares under any
state or Federal law, rule or regulation as Holdings may consider appropriate,
and may require the Executive, his beneficiary or his legal representative to
make such representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of the shares in
compliance with applicable laws, rules and regulations.
Upon demand by the Board, the Executive (or any person acting
under Section 4 of this Agreement) shall deliver to the Board at the time of
exercise of the Option a written representation that the shares to be acquired
upon the exercise of the Option are being acquired for his own account and not
with a view to, or for resale in connection with, any distribution in violation
of federal or state securities laws. Upon such demand, delivery of such
representation prior to the delivery of any shares issued upon exercise of the
Option shall be a condition precedent to the right of the Executive or such
other person to purchase any shares.
9. ANTI-DILUTION ADJUSTMENTS. In the event of any change in the
Common Stock by reason of any stock dividend, cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or of any similar change affecting the Common Stock, the number and kind
of shares subject to the Option and the Option price thereof shall be
appropriately adjusted consistent with such change in such manner as the Board
may deem equitable to prevent substantial dilution or enlargement of the rights
granted to, or available for, the Executive.
10. CALL RIGHT. Upon any termination of the employment of the
Executive prior to a public offering of Common Stock, Holdings may purchase
Common Stock acquired upon any exercise of the Option then held by the Executive
in accordance with the terms and provisions of the Management Stock Buyback
Agreement, dated as of the date hereof, by and between Holdings and certain
other purchasers of Holdings Common Stock signatory thereto.
11. RIGHTS PRIOR TO EXERCISE OF OPTION. The Participant shall not
have any rights as a stockholder with respect to any shares subject to the
Option prior to the date on which the Executive is recorded as the holder of
such shares on the records of Holdings.
4
<PAGE>
12. TAXES. Holdings may make such provisions and take such steps
as it may deem necessary or appropriate for the withholding of all Federal,
state, local and other taxes required by law to be withheld with respect to the
Option including, but not limited to: (i) reducing the number of shares of
Common Stock otherwise deliverable, based upon their fair market value on the
date of exercise, to permit deduction of the amount of any such withholding
taxes from the amount otherwise payable under this Agreement; (ii) deducting the
amount of any such withholding taxes from any other amount then or thereafter
payable to the Executive; or (iii) requiring the Executive, his beneficiary or
his legal representative to pay to Holdings the amount required to be withheld
or to execute such documents as Holdings deems necessary or desirable to enable
it to satisfy its withholding obligations as a condition of releasing the Common
Stock.
13. GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of Delaware.
14. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have executed this Agreement as of the day and year first above
mentioned.
EXECUTIVE
/s/ Robert Ryan
____________________________________
Robert Ryan
UNIVERSAL COMPRESSION HOLDINGS, INC.
/s/ Ernie Danner
By: _______________________________
Title: ____________________________
<PAGE>
Exhbit 23.1
Independent Auditors' Report on
Financial Statement Schedule and Consent
The Board of Directors
Universal Compression, Inc:
The audits referred to in our report dated November 21, 1997, included the
related financial statement schedule for each of the years in the three-year
period ended March 31, 1997, included in the registration statement. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We consent to the use of our reports included herein and to the references to
our firm under the headings "Summary Historical and Pro Forma Financial and
Other Data" and "Experts" in the prospectus.
KPMG Peat Marwick LLP
New Orleans, Louisiana
March 19, 1998
FORM T-1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2) _______
------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification No.)
114 West 47th Street 10036-1532
New York, NY (Zip Code)
(Address of principal
executive offices)
------------------
Universal Compression, Inc.
(Exact name of obligor as specified in its charter)
Texas 74-1282680
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
4430 Brittmore Road 77041
Houston, Texas (Zip Code)
(Address of principal executive offices)
------------------
9 7/8% Senior Discount Notes due 2008
(Title of the indenture securities)
================================================================================
<PAGE>
- 2 -
GENERAL
1. General Information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
Universal Compression, Inc. currently is not in default under any of its
outstanding securities for which United States Trust Company of New York is
Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12,
13, 14 and 15 of Form T-1 are not required under General Instruction B.
16. List of Exhibits
T-1.1 -- Organization Certificate, as amended, issued by
the State of New York Banking Department to transact
business as a Trust Company, is incorporated by
reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to
the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE>
- 3 -
16. List of Exhibits
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New
York, as amended, is incorporated by reference to
Exhibit T-1.4 to Form T-1 filed on September 15, 1995
with the Commission pursuant to the Trust Indenture
Act of 1939, as amended by the Trust Indenture Reform
Act of 1990 (Registration No.
33-97056).
T-1.6 -- The consent of the trustee required by Section
321(b) of the Trust Indenture Act of 1939, as amended
by the Trust Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the
trustee pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of March 6, 1998, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States Trust
Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 6th day
of March, 1998.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By:
-----------------------------------
Christine C. Collins
Assistant Vice President
<PAGE>
Exhibit T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By:
----------------------------------
/S/ Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
DECEMBER 31, 1997
($ IN THOUSANDS)
ASSETS
Cash and Due from Banks $ 80,246
Short-Term Investments 386,006
Securities, Available for Sale 661,596
Loans 1,774,551
Less: Allowance for Credit Losses 16,202
------------
Net Loans 1,758,349
Premises and Equipment 61,477
Other Assets 124,499
------------
Total Assets $ 3,072,173
------------
LIABILITIES
Deposits:
Non-Interest Bearing $ 686,507
Interest Bearing 1,773,254
------------
Total Deposits 2,459,761
Short-Term Credit Facilities 295,342
Accounts Payable and Accrued Liabilities 149,775
------------
Total Liabilities $ 2,904,878
------------
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 49,541
Retained Earnings 100,235
Unrealized Gains on Securities
Available for Sale (Net of Taxes) 2,524
------------
Total Stockholder's Equity 167,295
------------
Total Liabilities and
Stockholder's Equity $ 3,072,173
------------
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
February 9, 1998
Exhibit 99.1
LETTER OF TRANSMITTAL
for
Offer to Exchange up to $242,500,000
9 7/8% Senior Discount Notes due 2008
for up to $242,500,000 of any and all Outstanding
9 7/8% Senior Discount Notes due 2008
--------------------------------------
UNIVERSAL COMPRESSION, INC.
The Exchange Offer Will Expire at 5:00 P.M., New York City Time,
On , Unless Extended By
Universal Compression, Inc. (the "Expiration Date")
--------------------------------------
The Exchange Agent
for the Exchange Offer is:
THE UNITED STATES TRUST COMPANY OF NEW YORK
By Registered or Certified Mail, by Overnight Courier or by Hand:
United States Trust Company of New York
114 W. 47th Street
New York, New York 10036
Attention: Gerard F. Ganey
or
By Facsimile:
United States Trust Company of New York
Attention: Gerard F. Ganey
Facsimile Number: (212) 852-1626
--------------------------------------
Delivery of this Letter of Transmittal to an address other than as set forth
above or transmission of instructions via a facsimile transmission to a number
other than as set forth above will not constitute a valid delivery. The
instructions contained herein should be read carefully before this Letter of
Transmittal is completed.
<PAGE>
This Letter of Transmittal is to be used either if
certificates of Notes are to be forwarded herewith to the Exchange Agent or if
delivery of Notes is to be made by book-entry transfer to an account maintained
by the Exchange Agent at The Depository Trust Company, pursuant to the
procedures set forth in the section of the Prospectus entitled "The Exchange
Offer -- Procedures for Tendering Book-Entry Interests." Delivery of documents
to a book-entry transfer facility does not constitute delivery to the Exchange
Agent.
The undersigned must check the appropriate boxes at page 8
below and sign this Letter of Transmittal to indicate the action the undersigned
desires to take with respect to the Exchange Offer.
2
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned acknowledges receipt of the Prospectus dated
___________, 1998 (the "Prospectus") of Universal Compression, Inc. (the
"Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which
together describe the Company's offer (the "Exchange Offer") to exchange up to
$242,500,000 aggregate principal amount at maturity of 9 7/8% Senior Discount
Notes due 2008 (the "Exchange Notes"), for up to $242,500,000 of any and all
outstanding 9 7/8% Senior Discount Notes due 2008 (the "Original Notes"). The
terms of the Exchange Notes are substantially identical in all respects
(including principal amount at maturity, interest rate and maturity) to the
terms of the Original Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the Exchange Notes are freely transferable by
holders thereof (except as provided herein or in the Prospectus) and are issued
without any right to registration under the Securities Act of 1933, as amended
(the "Securities Act"). Capitalized terms used herein but not defined herein
have the meanings ascribed to them in the Prospectus.
Upon the terms and subject to the conditions of the Exchange
Offer, the undersigned hereby tenders to the Company the principal amount at
maturity of the Original Notes indicated in Box 1 below. The undersigned is the
registered owner of all the Original Notes being tendered by it, and the
undersigned represents that it has received from each beneficial owner of
tendered Notes ("Beneficial Owner(s)") a duly completed and executed form of
"Instructions to Registered Holder from Beneficial Owner" accompanying this
Letter of Transmittal, instructing the undersigned to take the action described
in this Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of
the Original Notes tendered herewith, the undersigned hereby irrevocably
exchanges, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Original Notes. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of the Company in connection with the Exchange
Offer) to cause the Original Notes to be assigned, transferred and exchanged.
The undersigned agrees that acceptance of any and all validly tendered Original
Notes by the Company and the issuance of Exchange Notes in exchange therefor
shall constitute performance in full by the Company of its obligations under the
Registration Rights Agreement and that the Company shall have no further
obligations or liabilities thereunder.
The undersigned hereby represents and warrants that the
undersigned accepts the terms and conditions of the Exchange Offer and has full
power and authority to tender, exchange, assign and transfer the Original Notes
tendered hereby and to acquire Exchange Notes issuable upon the exchange of such
tendered Original Notes, and that, when such tendered Original Notes are
accepted for exchange, the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The undersigned and each Beneficial Owner
will, upon request, execute and deliver any additional documents deemed by the
Exchange Agent or the Company to be necessary or desirable to complete and give
effect to the transactions contemplated hereby.
The undersigned represents that it and each Beneficial Owner
acknowledge that the Exchange Offer is being made in reliance on an
interpretation by the staff of the Securities and Exchange Commission (the
"SEC"), not issued to the Company or in connection with the Exchange Offer, to
the
3
<PAGE>
effect that the Exchange Notes issued pursuant to the Exchange Offer in
exchange for the Original Notes may be offered for resale, resold and otherwise
transferred by holders thereof (other than any holder that is (i) an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act, (ii) a
broker-dealer who acquired Original Notes directly from the Company or (iii) a
broker-dealer who acquired Original Notes as a result of market-making or other
trading activities) without compliance with the registration and prospectus
delivery provisions of the Securities Act provided that such Exchange Notes are
acquired in the ordinary course of such holders' business and such holders are
not engaged in, and do not intend to engage in, and have no arrangement or
understanding with any person to participate in, a distribution of such Exchange
Notes and as to broker-dealer prospectus delivery requirements, subject to the
provisions of the paragraph below. See "Shearman & Sterling," SEC No-Action
Letter (available July 2, 1993). Any holder who tenders in the Exchange Offer
for the purpose of participating in a distribution of the Exchange Notes cannot
rely on such interpretation by the staff of the SEC and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. See "Morgan Stanley & Co., Inc."
SEC No-Action Letter (available June 5, 1991), and "Exxon Capital Holdings
Corporation," SEC No-Action Letter (available May 13, 1988).
The undersigned hereby represents and warrants that (i) the
Exchange Notes or interests therein received by the undersigned and any
Beneficial Owner(s) pursuant to the Exchange Offer are being acquired by the
undersigned and any Beneficial Owner(s) in the ordinary course of business of
the undersigned and any Beneficial Owner(s) receiving such Exchange Notes, (ii)
neither the undersigned nor any Beneficial Owner(s) is participating, intends to
participate or has an arrangement or understanding with any person to
participate in the distribution of such Exchange Notes, (iii) the undersigned
and any Beneficial Owner(s) acknowledge and agree that any person who is a
broker-dealer under the Exchange Act or is participating in the Exchange Offer
for the purpose of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale of the Exchange Notes and any interest
therein acquired by such person and cannot rely on the position of the staff of
the SEC set forth in the no-action letters that are referred to above, (iv) the
undersigned and each Beneficial Owner understand that a secondary resale
transaction described in the preceding clause (iii) and any resale of the
Exchange Notes and any interest therein obtained by the undersigned and in
exchange for the Original Notes acquired by the undersigned directly from either
the Company or the Initial Purchasers should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 and 508, as applicable of Regulation S-K of the SEC, and
(v) neither the undersigned nor any Beneficial Owner(s) is an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company, or if either the
undersigned or any Beneficial Owner(s) is an affiliate, that the undersigned and
any such Beneficial Owner(s) will comply with the prospectus delivery
requirements of the Securities Act in connection with the disposition of any
Exchange Notes to the extent applicable. If the undersigned or any Beneficial
Owner(s) is a broker-dealer, the undersigned further represents that (x) it and
any such Beneficial Owner(s) acquired Original Notes for the undersigned's and
any such Beneficial Owner's own account as a result of market-making activities
or other trading activities, (y) neither the undersigned nor any Beneficial
Owner(s) has entered into any arrangement or understanding with the Company or
any "affiliate" of the Company (within the meaning of Rule 405 under the
Securities Act) to distribute the Exchange Notes to be received in the Exchange
Offer and (z) the undersigned and any Beneficial Owner(s) acknowledge that the
undersigned and such Beneficial Owner(s) will deliver a copy of a prospectus
meeting the requirements of the Securities Act in connection with any resale of
Exchange Notes. By so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with the
4
<PAGE>
resales of Exchange Notes received in exchange for Original Notes where Original
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company intends to make the
Prospectus (as it may be amended or supplemented) available to any broker-dealer
for use in connection with any such resale for a period of 180 days after the
consummation of the Exchange Offer.
The Exchange Offer is not being made to, nor will tenders be
accepted from or on behalf of, holders of the Original Notes in any jurisdiction
in which the making of the Exchange Offer or acceptance thereof would not be in
compliance with the laws of such jurisdiction or would otherwise not be in
compliance with any provision of any applicable security law. For purposes of
compliance with state blue sky laws, the undersigned represents and warrants to
the Company that the state in which each Beneficial Owner's principal business
office is located or the state of each Beneficial Owner's principal residence is
one of the states which is listed on Schedule A attached hereto. The undersigned
hereby represents and warrants that the information set forth in Box 2 is true
and correct.
The Exchange Offer is subject to certain conditions as set
forth in the Prospectus under the caption " The Exchange Offer." The undersigned
recognizes that as a result of these conditions (which may be waived, in whole
or in part, by the Company), as more particularly set forth in the Prospectus,
the Company may not be required to exchange any of the Original Notes tendered
hereby, and in such event, the Original Notes not exchanged will be returned to
the undersigned at the address indicated below. The undersigned acknowledges
that, prior to the Exchange Offer, there has been no public market for the
Original Notes or the Exchange Notes. The Company does not intend to list the
Exchange Notes on a national securities exchange or to seek approval for
quotation through any automated quotation system. There can be no assurance that
an active market for the Exchange Notes will develop or as to the liquidity of
or the trading market for the Exchange Notes. The undersigned understands and
acknowledges that the Company reserves the right in its sole discretion to
purchase or make offers for any Original Notes that remain outstanding
subsequent to the Expiration Date and, to the extent permitted by applicable
law, purchase Original Notes in the open market, in privately negotiated
transactions or otherwise.
The undersigned understands that tenders of the Original Notes
pursuant to any one of the procedures described in the Prospectus under the
caption "The Exchange Offer" and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company in accordance with the
terms and subject to the conditions of the Exchange Offer.
All questions as to the validity, form, eligibility (including
time of receipt), and withdrawal of the tendered Original Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Original Notes not properly tendered or if, in the sole judgment of the Company,
the Exchange Offer would violate any law, statute, rule or regulation or an
interpretation thereof of the SEC staff. The Company also reserves the right to
waive any irregularities or conditions of tender as to particular Original
Notes. The Company's interpretation of the terms and conditions of the Exchange
Offer (including the instructions in this Letter of Transmittal) will be final
and binding on all parties. Unless waived, any defects are final and binding on
all parties. Unless waived, any defects or irregularities in connection with
tenders of Original Notes must be cured within such time as the Company shall
determine. Neither the Company, the Exchange Agent nor any other person shall be
under any duty to give notification of defects or irregularities with respect to
tenders of Original Notes, nor shall any of them incur any liability for failure
to give such notification. Tenders of Original Notes will not be deemed to have
been made until such irregularities have been cured or waived. Any Original
Notes
5
<PAGE>
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
without cost to such holder by the Exchange Agent to the tendering holder of the
Original Notes, as soon as practicable following the Expiration Date.
All authority herein conferred or agreed to be conferred shall
not be affected by, and shall survive, the death or incapacity of the
undersigned and any Beneficial Owner(s), and every obligation of the
undersigned or any Beneficial Owner(s) shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned and any such
Beneficial Owner(s). The undersigned also agrees that, except as provided in the
Prospectus and set forth in Instruction 3 below, the Original Notes tendered
hereby cannot be withdrawn.
Certificates, if any, for all Exchange Notes delivered in
exchange for tendered Original Notes and any Original Notes delivered herewith
but not exchanged, and registered in the name of the undersigned, shall be
delivered to the undersigned at the address shown below the signature of the
undersigned, unless otherwise indicated on page 8.
6
<PAGE>
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION
OF NOTES TENDERED HEREWITH" BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO
HAVE TENDERED THE ORIGINAL NOTES AND MADE THE REPRESENTATIONS DESCRIBED HEREIN
AND IN THE PROSPECTUS.
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
__________________________________________________________________________
__________________________________________________________________________
Signature(s) of Holder(s)
Date: _______________________
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) of Original Notes. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, please set forth the
full title of such person.) See Instruction 4.
Name(s): ___________________________________________________________________
___________________________________________________________________
(Please Print)
Capacity (full title):
Address: ____________________________________________________________________
(Including Zip Code)
Area Code and Telephone No.: ________________________________________________
Taxpayer Identification No.: _________________________________________________
GUARANTEE OF SIGNATURE(S)
(If Required - See Instruction 4)
Authorized Signature: _______________________________________________________
Name: _______________________________________________________________________
Title: ______________________________________________________________________
Address: ____________________________________________________________________
____________________________________________________________________
Name of Firm: _______________________________________________________________
Area Code and Telephone No: _________________________________________________
Date: ________________________
7
<PAGE>
/ / CHECK HERE IF TENDERED ORIGINAL NOTES ARE ENCLOSED HEREWITH.
/ / CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _________ / / The Depository Trust Company
Account Number: _____________________________________________________
Transaction Code Number: ____________________________________________
/ / CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s): ______________________________________________
Name of Eligible Institution that Guaranteed Delivery:
If Delivered by Book-Entry Transfer:
Account Number: _____________________________________________________
/ / CHECK HERE ONLY IF EXCHANGE NOTES OR UNEXCHANGED NOTES DELIVERED
HEREWITH ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO
THE UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Notes to:
Name: ______________________________________________________________
(Please Print)
Address: ___________________________________________________________
___________________________________________________________
Tax Identification Number: _________________________________________
Social Security No.: _______________________________________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: ______________________________________________________________
Address: ___________________________________________________________
___________________________________________________________
8
<PAGE>
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
A holder that is a participant in The Depository Trust
Company's system may utilize The Depository Trust Company's Automated Tender
Offer Program to tender Original Notes.
List in Box 1 the Original Notes to which this Letter of
Transmittal relates. If the space provided below is inadequate, information
should be listed on a separate signed schedule affixed hereto.
- --------------------------------------------------------------------------
BOX 1
DESCRIPTION OF NOTES TENDERED HEREWITH
Aggregate Principal
Name(s) and Address(es) Amount at Maturity Principal Amount
of Registered Holder(s) Certificate Represented at Maturity
(Please fill in) Number(s)* by Notes Tendered**
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------
* Need not be completed by book-entry holders
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount at maturity represented by such Original
Notes. See Instruction 3.
- -----------------------------------------------------------------------------
BOX 2
BENEFICIAL OWNER(S)
State of Principal Residence
or Principal Place of Business Principal Amount at Maturity of
or Each Beneficial Owner of Tendered Notes held
Tendered Notes for Account of Beneficial Owner
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
9
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions
of the Exchange Offer
1. Delivery of this Letter of Transmittal and Certificates; Guaranteed
Delivery Procedures.
Certificates for all physically delivered Original Notes or
confirmation of any book-entry transfer to the Exchange Agent's account at a
book-entry transfer facility of Original Notes tendered by book-entry transfer,
as well as a properly completed and duly executed copy of this Letter of
Transmittal or facsimile thereof, and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at its address set
forth on the front page of this Letter of Transmittal on or prior to the
Expiration Date (as defined in the Prospectus).
The method of delivery of this Letter of Transmittal, the
Original Notes and any other required documents is at the election and risk of
the holder, and except as otherwise provided below, the delivery will be deemed
made only when actually received by the Exchange Agent. The method of delivery
of this Letter of Transmittal and all other required documents to the Exchange
Agent is at the election and risk of the holder. Instead of delivery by mail, it
is recommended that holders use an overnight or hand delivery service, properly
insured. In all cases, sufficient time should be allowed to assure delivery to
the Exchange Agent before the Expiration Date. No Letter of Transmittal should
be sent to the Company.
Holders who wish to tender their Original Notes but whose
Original Notes are not immediately available or who cannot deliver their
Original Notes and all other required documents to the Exchange Agent on or
prior to the Expiration Date or comply with book-entry transfer procedures on a
timely basis may tender their Original Notes pursuant to the guaranteed delivery
procedure set forth in the Prospectus under "The Exchange Offer--Guaranteed
Delivery Procedures." Such holders' tender may be effected if:
(i) such tender is made by or through an Eligible Institution
(as defined below);
(ii) on or prior to the Expiration Date, the Exchange Agent
has received from such Eligible Institution (a) either a properly
completed and duly executed Letter of Transmittal (or a facsimile
thereof) or a properly transmitted Agent's Message and (b) a Notice of
Guaranteed Delivery, substantially in the form included herewith (by
facsimile transmission, mail or hand delivery), setting forth the name
and address of such holder of Original Notes and the amount of Original
Notes tendered, stating that the tender is being made thereby and
guaranteeing that within five NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery, a Book-Entry
Confirmation or the certificates relating to the Original Notes in
registered form and all other documents required by this Letter of
Transmittal will be deposited by the Eligible Institution with the
Exchange Agent; and
(iii) a Book-Entry Confirmation or the certificates relating
to the Definitive Registered Notes, and all other documents required by
this Letter of Transmittal, are received by the Exchange Agent within
five NYSE trading days after the date of execution of the Notice of
Guaranteed Delivery.
<PAGE>
No alternative, conditional, irregular or contingent tenders
will be accepted. All tendering holders, by execution of this Letter of
Transmittal (or facsimile thereof), shall waive any right to receive notice of
the acceptance of the Original Notes for exchange.
2. Beneficial Owner Instructions to Registered Holders.
Only a holder in whose name tendered Original Notes are
registered on the books of the Exchange Agent (or the legal representative or
attorney-in-fact of such registered holder) may execute and deliver this Letter
of Transmittal. Any Beneficial Owner of tendered Original Notes who is not the
registered holder must arrange promptly with the registered holder to execute
and deliver this Letter of Transmittal on his or her behalf through the
execution and delivery to the registered holder of the "Instructions to
Registered Holder from Beneficial Owner" form accompanying this Letter of
Transmittal.
3. Partial Tender; Withdrawals.
If less than the entire principal amount at maturity of
Original Notes is tendered, the tendering holder must fill in the principal
amount at maturity tendered in the box entitled "Principal Amount at Maturity
Tendered." A newly issued certificate (or a credit of Book-Entry Interests) for
the principal amount at maturity of Original Notes submitted but not tendered
will be sent to such holder (or credited to its account) as soon as practicable
after the Expiration Date. All Original Notes delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated.
Original Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date. For a withdrawal to be
effective, (i) a written notice of withdrawal (sent by facsimile, registered or
certified mail, or overnight courier or by-hand) must be timely received by the
Exchange Agent or (ii) the appropriate procedures of The Depository Trust
Company's Automated Tender Offer Program must be complied with. Any such notice
of withdrawal (a) must (i) specify the person named in the Letter of Transmittal
as having tendered Original Notes to be withdrawn (including the principal
amount at maturity of such Original Notes), and (ii) specify the name and number
of the account at DTC to be credited with the withdrawn Original Notes and
otherwise comply with the procedures of DTC. Any such notice of withdrawal with
respect to Definitive Registered Notes must (x) specify the name of the person
having tendered the Definitive Registered Notes to be withdrawn and (y) identify
the Definitive Registered Notes to be withdrawn (including the certificate
number and principal amount of Original Notes). Any such withdrawal must be
signed by the holder in the same manner as the original signature on the Letter
of Transmittal by which such Original Notes were tendered (including any
required signature guarantees). The Exchange Agent will return the properly
withdrawn Original Notes promptly following receipt of notice of withdrawal. All
questions as to the validity, form and eligibility (including time of receipt)
of such withdrawal notices shall be determined by the Company in its sole
discretion and whose determination shall be final and binding on all parties.
Any Original Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Properly withdrawn Original
Notes may be retendered by following one of the procedures described above at
any time on or prior to the Expiration Date.
4. Signature on this Letter of Transmittal; Written Instruments and
Endorsements; Guarantee of Signatures.
2
<PAGE>
If this Letter of Transmittal is signed by the registered
holder(s) of the Original Notes tendered hereby, the signature must correspond
with the name(s) as written on the face of the certificates without alteration
or any change whatsoever.
If any of the Original Notes tendered hereby are owned of
record by two or more joint owners, all such owners must sign this Letter of
Transmittal.
If any of the Original Notes tendered hereby are registered in
several names, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal as there are different
registrations of Original Notes.
When this Letter of Transmittal is signed by the registered
holder or holders (which term, for the purposes described herein, shall include
a book-entry transfer facility whose name appears on a security listing as the
owner of the Original Notes) of Original Notes listed and tendered hereby, no
endorsements of certificates or separate written instruments of transfer or
exchange are required.
If this Letter of Transmittal is signed by a person other than
the registered holder or holders of the Original Notes listed, such Original
Notes must be endorsed or accompanied by separate written instruments of
transfer or exchange in form satisfactory to the Company and duly executed by
the registered holder, in either case signed exactly as the name or names of the
registered holder or holders appear(s) on the Original Notes.
If this Letter of Transmittal or any certificates or separate
written instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 4 must be
guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal or notice of
withdrawal need not be guaranteed by an Eligible Institution, provided the
Original Notes are tendered: (i) by a registered holder of such Original Notes;
or (ii) for the account of an Eligible Institution.
For purposes of this Letter of Transmittal, an "Eligible
Institution" shall mean any firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office or
correspondent in the United States.
5. Transfer Taxes.
The Company shall pay all transfer taxes, if any, applicable
to the transfers and exchange of Original Notes to it or its order pursuant to
the Exchange Offer. If a transfer tax is imposed for any reason other than the
transfer and exchange of Original Notes to the Company or its order pursuant to
the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted herewith, the amount of such transfer taxes will be billed
directly to such tendering holder.
3
<PAGE>
Except as provided in this Instruction 5, it will not be
necessary for transfer tax stamps to be affixed to the Original Notes listed in
this Letter of Transmittal.
6. Mutilated, Lost, Stolen or Destroyed Notes.
Any holder whose Original Notes have been mutilated, lost,
stolen or destroyed should contact the Exchange Agent at the address indicated
above for further instructions.
7. Acceptance of Tendered Original Notes and Issuance of Exchange Notes;
Return of Original Notes.
Upon satisfaction or waiver of all of the conditions of the
Exchange Offer, the Company will accept, promptly after the Expiration Date, all
Original Notes properly tendered and will issue Exchange Notes promptly after
acceptance of the Original Notes. For purposes of the Exchange Offer, the
Company shall be deemed to have accepted tendered Original Notes when, as and if
the Company has given oral or written notice thereof (oral notice being promptly
confirmed in writing) to the Exchange Agent. If any tendered Original Notes are
not exchanged pursuant to the Exchange Offer for any reason, such unexchanged
Original Notes will be returned, without expense, to the undersigned at the
address indicated above. Book-entry interests in Original Notes will be credited
to an account maintained with The Depository Trust Company as promptly as
practicable.
4
<PAGE>
Schedule A
5
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF
UNIVERSAL COMPRESSION, INC.
9 7/8% Senior Notes due 2008
The undersigned hereby acknowledges receipt of the Prospectus
dated , 1998 (the "Prospectus") of Universal Compression, Inc. (the "Company"),
and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Company's offer (the "Exchange Offer") to exchange up to
$242,500,000 aggregate principal amount at maturity of its 9 7/8% Senior
Discount Notes due 2008 (the "Exchange Notes") up to $242,500,000 of any and all
outstanding 9 7/8% Senior Discount Notes due 2008 (the "Notes"). Capitalized
terms used herein but not defined herein have the meaning ascribed to them in
the Prospectus.
This will instruct you, the registered holder, as to the
action to be taken by you relating to the Exchange Offer with respect to the
Original Notes held by you for the account of the undersigned.
The aggregate face amount of the Original Notes held by you
for the account of the undersigned is (fill in amount):
$_____________ of the 9 7/8% Senior Discount Notes due 2008.
With respect to the Exchange Offer, the undersigned hereby
instructs you (check appropriate box):
/ / To TENDER the following Notes held by you for the
account of the undersigned (insert principal amount at
maturity of Original Notes to be tendered, *if any):
$_____________ of the 9 7/8% Senior Discount Notes due 2008.
* The minimum permitted tender is $1,000 in principal amount
at maturity of Original Notes. All other tenders must be in
integral multiples of $1,000 of principal amount at maturity.
/ / NOT to TENDER any Original Notes held by you for the
account of the undersigned.
If the undersigned instructs you to tender the Original Notes
held by you for the account of the undersigned, it is understood that you are
authorized (a) to make, on behalf of the undersigned (and the undersigned, by
its signature below, hereby makes to you), the representations and warranties
contained in the Letter of Transmittal that are to be made with respect to the
undersigned as a Beneficial Owner (as defined in the Letter of Transmittal),
including, but not limited to, representations to the effect that (i) the
undersigned's principal residence or principal business office is in the state
of (fill in state) which is listed on Schedule
A attached to the Letter of Transmittal, (ii) the undersigned is acquiring the
Exchange Notes or interests therein in the ordinary course of business of the
undersigned, (iii) the undersigned is not participating, does not intend to
participate, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes, (iv) the undersigned
acknowledges and agrees that any person who is a broker-dealer registered under
the
<PAGE>
Exchange Act or is participating in the Exchange Offer for the purpose of
distributing the Exchange Notes must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale of the Exchange Notes or any interest therein acquired by such person and
cannot rely on the position of the Staff of the Securities and Exchange
Commission ("SEC") set forth in the no-action letters that are referred to in
the section of the Prospectus entitled "The Exchange Offer -- Resales of the
Exchange Notes" and the Letter of Transmittal; (v) the undersigned understands
that a secondary resale transaction described in clause (iv) above and any
resale of the Exchange Notes and any interest therein obtained by the
undersigned in exchange for the Original Notes acquired by the undersigned
directly from the Company should be covered by an effective registration
statement containing the selling security holder information required by Items
507 and 508, as applicable, of Regulation S-K of the SEC, and (vi) except as
otherwise disclosed in writing herewith, the undersigned is not an "affiliate,"
as defined in Rule 405 under the Securities Act, of the Company, (b) to agree,
on behalf of the undersigned, as set forth in the Letter of Transmittal; and (c)
to take such other action as may be necessary under the Prospectus or the Letter
of Transmittal to effect the valid tender of such Original Notes. If the
undersigned is a broker-dealer, the undersigned further (x) represents that it
acquired Original Notes for the undersigned's own account as a result of
market-making activities or other trading activities, (y) represents that it has
not entered into any arrangement or understanding with the Company or any
"affiliate" of the Company (within the meaning of Rule 405 under the Securities
Act) to distribute the Exchange Notes to be received in the Exchange Offer and
(z) acknowledges that it will deliver a copy of a Prospectus meeting the
requirements of the Securities Act in connection with any resale of Exchange
Notes.
2
<PAGE>
SIGN HERE
Name of Beneficial Owner(s): _____________________________________________
Signature(s): ___________________________________________________
Name(s) (please print): _________________________________________
Address: _________________________________________________________________
_________________________________________________________________
Telephone Number: ________________________________________________________
Taxpayer Identification or Social Security Number: _______________
Date: ____________________________________________________________
3
<PAGE>
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
With Respect to
UNIVERSAL COMPRESSION, INC.
9 7/8% Senior Discount Notes due 2008
This form must be used by a holder of the 9 7/8% Senior Discount Notes
due 2008 (the "Original Notes") of Universal Compression, Inc. (the "Company")
who wishes to tender Original Notes to the Exchange Agent pursuant to the
guaranteed delivery procedures described in "The Exchange Offer--Guaranteed
Delivery Procedures" of the Prospectus dated __________ (the "Prospectus") and
in Instruction 1 to the Letter of Transmittal. Any holder who wishes to tender
Original Notes pursuant to such guaranteed delivery procedures must ensure that
the Exchange Agent receives this Notice of Guaranteed Delivery prior to the
Expiration Date of the Exchange Offer. Capitalized terms not defined herein have
the meanings ascribed to them in the Prospectus or the Letter of Transmittal.
To: The United States Trust Company of New York, Exchange Agent
By Registered or Certified Mail, by Overnight Courier or by Hand:
The United States Trust Company of New York
114 W. 47th Street
New York, New York 10036
Attention: Gerard F. Ganey
or
By Facsimile:
The United States Trust Company of New York
Attention: Gerard F. Ganey
Facsimile Number: (212) 852-1626
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and
subject to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Original Notes specified below pursuant to the guaranteed delivery procedures
set forth in the Prospectus and in Instruction 1 of the Letter of Transmittal.
The undersigned hereby tenders the Original Notes listed below:
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CERTIFICATE NUMBER(S) (IF KNOWN) AGGREGATE PRINCIPAL
OF ORIGINAL NOTES AMOUNT TENDERED
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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<PAGE>
Name of Tendering Holder: ______________________________________________________
Signature(s): _________________________________________________________
Name(s) (please print): _______________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________
Telephone Number: ______________________________________________________________
Date: _________________
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of
Transmittal, together with the Original Notes tendered hereby in proper form for
transfer and any other required documents, all by 5:00 p.m., New York City time,
before the fifth NYSE trading day following the Expiration Date.
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SIGN HERE
Name of firm (please print): _________________________
Authorized Signature: ________________________________
Name (please print): _________________________________
Address: _____________________________________________
_____________________________________________
_____________________________________________
Telephone Number: ____________________________________
Date: ________________________________________________
- --------------------------------------------------------------------------------
DO NOT SEND TENDERED ORIGINAL NOTES WITH THIS FORM. ACTUAL DELIVERY OF TENDERED
ORIGINAL NOTES MUST BE MADE IN ACCORDANCE WITH, AND BE ACCOMPANIED BY, AN
EXECUTED LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS.
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date. The
method of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and risk of the holder, and
the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. Instead of delivery by mail, it is recommended
that the holder use an overnight or hand delivery service. Facsimile
transmission is permissible, provided, however, that receipt is confirmed by
telephone and an original is delivered by guaranteed overnight courier. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedure, see the section set forth in
the
<PAGE>
Prospectus entitled "The Exchange Offer--Guaranteed Delivery Procedures" and
Instruction 1 of the Letter of Transmittal.
2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the tendered
Original Notes referred to herein, the signature must correspond with the
name(s) written on the face of the tendered Original Notes without alteration or
any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a person other than
the registered holder(s) of any tendered Original Notes listed, this Notice of
Guaranteed Delivery must be accompanied by appropriate bond powers, signed as
the name of the registered holder(s) appears on the tendered Original Notes.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, office of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders also may contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
