<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 2000
REGISTRATION NO. 333-34090
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
UNIVERSAL COMPRESSION HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
DELAWARE 7359 13-3989167
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
4440 BRITTMOORE ROAD
HOUSTON, TEXAS 77041
(713) 335-7000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
STEPHEN A. SNIDER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
UNIVERSAL COMPRESSION HOLDINGS, INC.
4440 BRITTMOORE ROAD
HOUSTON, TEXAS 77041
(713) 335-7000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<S> <C> <C>
VALERIE L. BANNER CHRISTINE B. LAFOLLETTE T. MARK KELLY
SENIOR VICE PRESIDENT AND KING & SPALDING VINSON & ELKINS L.L.P.
GENERAL COUNSEL 1100 LOUISIANA, SUITE 3300 1001 FANNIN, SUITE 2300
UNIVERSAL COMPRESSION HOLDINGS, HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77002-6760
INC. (713) 751-3239 (713) 758-4592
4440 BRITTMOORE ROAD FAX: (713) 751-3290 FAX: (713) 615-5531
HOUSTON, TEXAS 77041
(713) 335-7241
FAX: (713) 466-6720
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of the Registration Statement.
If any securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF MAXIMUM NUMBER OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED SHARES(1) PRICE(2) REGISTRATION FEE(3)
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<S> <C> <C> <C>
Common Stock, par value $.01 per share 8,050,000 $185,150,000 $48,880
- -----------------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Includes 1,050,000 shares subject to the underwriters' over-allotment
option.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act.
(3) $46,754 has been paid with previous filings.
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 THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THIS 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> 2
EXPLANATORY NOTE
This registration statement contains two forms of prospectus: one to be
used in connection with an underwritten offering in the United States and
Canada, and one to be used in a concurrent international offering, of common
stock, par value $0.01 per share, of Universal Compression Holdings, Inc. The
U.S. prospectus for the offering in the United States and Canada follows
immediately after this explanatory note. After the U.S. prospectus are the
alternate pages for the international prospectus. A copy of the complete U.S.
prospectus and international prospectus in the exact forms in which they are to
be used after effectiveness will be filed with the Securities and Exchange
Commission pursuant to Rule 424(b) under the Securities Act.
<PAGE> 3
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER
TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 22, 2000
PROSPECTUS
7,000,000 SHARES
[UNIVERSAL COMPRESSION LOGO]
COMMON STOCK
----------------------
This is Universal Compression Holdings, Inc.'s initial public offering.
Universal is selling all of the shares. The U.S. underwriters are offering
5,600,000 shares in the U.S. and Canada and the international managers are
offering 1,400,000 shares outside the U.S. and Canada.
We expect the public offering price to be between $21.00 and $23.00 per
share. Currently, no public market exists for the shares. Our common stock has
been approved for listing on the New York Stock Exchange under the trading
symbol "UCO," subject to official notice of issuance.
INVESTING IN THE COMMON STOCK INVOLVES RISKS THAT ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
----------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to
Universal Compression Holdings, Inc. ..................... $ $
</TABLE>
The U.S. underwriters may also purchase up to an additional 840,000 shares
from Universal at the public offering price, less the underwriting discount,
within 30 days from the date of this prospectus to cover over-allotments. The
international managers may similarly purchase up to an additional 210,000 shares
from Universal.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The shares will be ready for delivery on or about , 2000.
----------------------
MERRILL LYNCH & CO. SALOMON SMITH BARNEY
DEUTSCHE BANC ALEX. BROWN
FIRST UNION SECURITIES, INC.
WASSERSTEIN PERELLA SECURITIES, INC.
----------------------
The date of this prospectus is , 2000.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 7
Special Note Regarding Forward-Looking Statements........... 13
Use of Proceeds............................................. 14
Dividend Policy............................................. 14
Dilution.................................................... 15
Capitalization.............................................. 16
Pro Forma Consolidated Financial Information................ 17
Selected Historical Consolidated Financial and Operating
Data...................................................... 21
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 25
Business.................................................... 31
Management.................................................. 43
Principal Stockholders...................................... 52
Related Transactions........................................ 55
Description of Capital Stock................................ 58
Anti-Takeover Provisions of Our Restated Certificate of
Incorporation and Bylaws.................................. 59
Shares Eligible for Future Sale............................. 61
Material United States Federal Tax Consequences to Non-U.S.
Holders of Common Stock................................... 62
Underwriting................................................ 65
Legal Matters............................................... 68
Experts..................................................... 68
Where You Can Find More Information......................... 69
Index to Financial Statements............................... F-1
</TABLE>
---------------------
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospects may have changed since that date.
i
<PAGE> 5
Map of the United States depicting the 23 states in which Universal
operates and the location of its 30 field and sales offices, including its
corporate headquarters. Underneath the map is a listing of the five countries
outside the United States in which Universal operates (Argentina, Australia,
Colombia, Mexico and Venezuela).
<PAGE> 6
Two pictures depicting natural gas compressors used in field production.
<PAGE> 7
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully, including our financial data
and related notes. The terms "Universal," "our company" and "we," when used in
this prospectus, refer to Universal Compression Holdings, Inc. and its
subsidiaries, including Universal Compression, Inc., as a combined entity,
except where it is made clear that such term means only the parent company, and
includes its predecessors, including Tidewater Compression Service, Inc. Unless
we indicate otherwise, the information contained in this prospectus (other than
in the historical financial statements) assumes that the underwriters'
over-allotment option is not exercised and reflects the conversion of all of our
non-voting common stock into common stock on a 1-for-1 basis, a 7.4248-for-1
common stock split and the conversion of all of our outstanding preferred stock
at a post-split ratio of one share of preferred stock into 2.3256 shares of
common stock, in each case concurrently with this offering.
OUR COMPANY
OVERVIEW
We are a leading natural gas compression services company, providing a full
range of rental, sales, operations, maintenance and fabrication services and
products to the natural gas industry. These services and products are essential
to the production, transportation and processing of natural gas by producers,
gatherers and pipeline companies. We acquired our business in 1998 through the
acquisition of Tidewater Compression Service, Inc., which has been in the gas
compression services business since 1954. Today, we own one of the largest gas
compressor fleets in the United States and have a growing presence in key
international markets.
Since 1998, we have increased our capital investments in our business and,
as a result, have experienced significant growth. The horsepower of our fleet
has increased 29%, from 492,417 as of March 31, 1998 to 633,398 as of March 31,
2000, with our average capacity per unit increasing from 179 horsepower to 240
horsepower. Our revenues have increased 25%, from $108.8 million for the fiscal
year ended March 31, 1998 to $136.4 million for the fiscal year ended March 31,
2000. For the fiscal year ended March 31, 2000, approximately $98.3 million of
our revenues was derived from our compression rental services, with the
remaining approximately $38.1 million being derived from fabrication and other
compression activities.
We distinguish ourselves by providing comprehensive, high quality natural
gas compression services to over 650 customers that are involved in natural gas
production, transportation and processing -- from the wellhead through the
gathering system and through the pipeline. Due to our low cost, centralized
operating structure, we are able to offer these high quality services to our
customers at competitive prices while maintaining high margins. By outsourcing
their compression needs, we believe our customers generally are able to increase
their revenues by producing a higher volume of natural gas through decreased
compressor downtime. In addition, outsourcing allows our customers to reduce
their operating and maintenance costs and capital investments and meet their
changing compression needs more efficiently. Our full service orientation
enhances customer loyalty, enables us to attract new customers and allows us to
grow our business with our existing customers.
We operate in every significant natural gas producing region in the United
States through our 30 compression sales and service locations. We have a highly
standardized compressor fleet, with approximately 481,000 horsepower operating
under contract in 23 states as of March 31, 2000. Our revenues from domestic
compression rental services were $83.6 million for the fiscal year ended March
31, 2000. We believe that our size and broad scope result in economies of scale
since the addition of incremental compressors in a region does not require us to
proportionately increase our investment in field personnel and administrative
support.
1
<PAGE> 8
Since 1993, we have expanded our presence in select international markets,
including Argentina, Colombia, Venezuela and Australia. As of March 31, 2000, we
had 50 units aggregating approximately 52,000 horsepower operating under
contract in these markets. In addition, in March 2000, we were awarded
significant compression service projects in Mexico and Argentina which will
increase the amount of horsepower we operate internationally by at least 25%
within the next year. We are also pursuing opportunities in other strategic
international areas, including other South American countries and Southeast
Asia. Our revenues from international operations have increased by 116% in the
last year, from $6.8 million for the fiscal year ended March 31, 1999 to $14.7
million for the fiscal year ended March 31, 2000.
We believe that the capital raised in this offering and the financing and
operating lease arrangements which we will enter into concurrently with this
offering will allow us to continue to expand our compressor fleet and take
advantage of the significant growth and consolidation opportunities in our
industry, both domestically and internationally.
INDUSTRY CONDITIONS
At the end of 1998, there was approximately 14.8 million horsepower of
field compression equipment in the United States, of which approximately 4.1
million horsepower was outsourced. From 1993 to 1998, the compression rental
industry grew at a rate of approximately 15.4% per year in the United States in
terms of horsepower, with the percentage of outsourced horsepower increasing
from 13% to 28%. Our industry also has recently begun to grow rapidly
internationally.
The demand for compression services is linked to natural gas consumption
rather than exploration activities. As a result, our financial performance
historically has been less affected by the short-term market cycles and volatile
commodity prices of oil and natural gas than companies operating in other
sectors of the energy industry. Demand for compression services has increased
over time, even during periods of volatile natural gas prices. We believe the
natural gas compression services industry continues to have significant growth
potential due to the following factors:
- natural gas consumption is increasing in the United States at an average
rate of 2.0% to 2.5% per year and internationally at an average rate of
3.0% to 4.0% per year,
- the aging of producing natural gas fields in the United States will
require more compression to continue producing the same volume of natural
gas,
- natural gas producers are increasingly outsourcing gas compression
requirements to reduce overall cost of compression, improve run-time
performance, reduce capital requirements and better meet changing
compression needs,
- the production of natural gas in international markets will continue to
grow as a result of increasing demand for energy, the desire to replace
oil with natural gas as a fuel source in local markets to allow the
exportation of more oil, the recognition of natural gas as the clean air
fuel of choice and environmental laws curtailing the prior practice of
flaring gas and
- continued development of pipeline infrastructure, particularly in South
America, and privatization of state-owned energy producers
internationally, leading to increased outsourcing of compression.
We believe that we are well positioned to participate in a
disproportionately high share of the future growth in this industry as we are
one of the few compression service providers with sufficient fleet size and
geographic scope to meet the full service needs of customers worldwide.
OUR GROWTH STRATEGY
Our growth strategy is to continue to focus on meeting the evolving needs
and demands of our customers by providing consistent, superior services and
dependable, high quality products. We believe that this approach strengthens our
relationships with our existing customers, helps us attract new customers and
2
<PAGE> 9
diversifies our revenue base, resulting in increased market share, revenues and
earnings. The key elements of our strategy are described below:
- FOCUSING ON PROVIDING A COMPLETE RANGE OF HIGH QUALITY SERVICES. We will
continue to provide a complete range of high quality compression services
to meet the changing compression needs of our customers. To accomplish
this, we will continue to expand, upgrade and reconfigure our rental
fleet, work closely with our customers to find strategic solutions and
provide our operations and maintenance personnel with extensive training.
- CONTINUING A CENTRALIZED, STANDARDIZED APPROACH TO OUR BUSINESS. Our
centralized structure and automated inventory system enable us to respond
quickly and efficiently to our customers' compression requirements, which
can be identified early by our field sales and service personnel. In
addition, we have standardized our fleet, enabling us to develop
expertise in operating and maintaining our compressors, provide our
customers with consistent, high quality service, optimize our inventory
and reduce our costs.
- EXPANDING OUR OPERATIONS IN SELECT INTERNATIONAL MARKETS. We plan to
capitalize on the growing international compression market by expanding
our existing presence in Argentina, Colombia, Venezuela and Australia and
offering our services in other key markets, including Southeast Asia,
Mexico and other South American countries. We believe that our experience
in these markets and our strong reputation for the engineering and
fabrication of high specification gas and air compressors positions us to
expand our business internationally.
- EXPANDING OUR RENTAL FLEET AND CUSTOMER BASE THROUGH THE PURCHASE AND
LEASEBACK OF COMPRESSORS. We are providing an increasing number of
customers the opportunity to sell their existing compression equipment to
us in purchase and leaseback transactions. These transactions enable a
customer to outsource its compression operations and reallocate capital
to its core business activities while typically enjoying improved
operational performance. Through purchase and leaseback transactions, we
are able to expand our rental fleet while promoting our operations and
maintenance services to new customers and strengthening our relationships
with existing customers.
- PURSUING INDUSTRY CONSOLIDATION OPPORTUNITIES. Since 1993, we have
completed six acquisitions. We intend to continue to pursue acquisitions
of complementary businesses to expand our fleet and our customer base. We
believe that continuing industry consolidation will present us with
opportunities to acquire attractive compression service companies and
assets in the future.
Our principal executive offices are located at 4440 Brittmoore Road,
Houston, Texas 77041 and our telephone number at that address is (713) 335-7000.
Our website is located at www.universalcompression.com. Information contained on
our website is not a part of this prospectus.
3
<PAGE> 10
THE OFFERING
Common stock offered by
Universal:
U.S. offering.................. 5,600,000 shares
International offering......... 1,400,000 shares
Total.................. 7,000,000 shares
Shares outstanding after the
offering......................... 12,983,584 shares
Use of proceeds.................. We estimate that our net proceeds from this
offering without exercise of the
over-allotment option will be approximately
$142.9 million. We intend to use these net
proceeds and the net proceeds of our
concurrent operating lease facility:
- to repay all outstanding indebtedness
under our existing credit facility and
international debt arrangements and
redeem our 11 3/8% senior discount notes
and
- for general corporate purposes, which may
include the repurchase of some of our
9 7/8% senior discount notes.
Risk factors..................... See "Risk Factors" and other information
included in this prospectus for a
discussion of factors you should consider
carefully before deciding to invest in
shares of our common stock.
NYSE symbol...................... "UCO."
The number of shares outstanding after the offering includes 287,723 shares
issued on April 28, 2000 in connection with our acquisition of Spectrum Rotary
Compression Inc. This number excludes 1,912,421 shares reserved for issuance
under our stock option plan, of which options to purchase 612,399 shares at a
weighted average exercise price of $14.91 per share have been issued as of April
28, 2000. In connection with this offering, we have authorized the grant of
options to purchase an aggregate of 250,600 shares at an exercise price equal to
the initial public offering price. The number of shares outstanding after the
offering assumes that the underwriters' over-allotment option is not exercised.
If the over-allotment option is exercised in full, we will issue and sell an
additional 1,050,000 shares.
4
<PAGE> 11
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OPERATING DATA
The following tables present summary historical and pro forma consolidated
financial and operating data for Universal and for Tidewater Compression
Service, Inc., the predecessor of Universal that was acquired on February 20,
1998, for the periods and dates indicated. The pro forma financial and operating
data for Universal are derived from the consolidated pro forma financial data
included elsewhere in this prospectus. The pro forma income statement and other
financial and operating data give effect to the offering and the concurrent
operating lease facility as though each occurred on April 1, 1999. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." The pro forma balance sheet data
give effect to the offering and the concurrent operating lease facility as
though each occurred on March 31, 2000. The summary pro forma financial and
operating data for the year ended March 31, 1998 were derived from the pro forma
consolidated financial statements, give effect to the acquisition of Tidewater
Compression as if it had occurred on April 1, 1997 and have been prepared under
the purchase method of accounting. Under this method of accounting, based on an
allocation of the purchase price of Universal, its identifiable assets and
liabilities have been adjusted to their estimated fair values. The pro forma
income statement and other financial and operating data presented below are not
necessarily indicative of the financial results that would have occurred had the
offering and the concurrent operating lease facility occurred on April 1, 1999,
or indicative of our financial position had the offering and lease facility
occurred on March 31, 2000, and should not be viewed as indicative of operations
or financial position in future periods. See "Selected Historical Consolidated
Financial and Operating Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for more information regarding
the historical, the pro forma consolidated and the other financial and operating
data.
5
<PAGE> 12
<TABLE>
<CAPTION>
TIDEWATER COMPRESSION
(PREDECESSOR COMPANY) UNIVERSAL
---------------------------------- --------------------------------------
PERIOD FROM PERIOD FROM
APRIL 1, DECEMBER 12,
YEARS ENDED 1997 1997 PRO FORMA
MARCH 31, THROUGH THROUGH YEAR ENDED YEAR ENDED
------------------- FEBRUARY 20, MARCH 31, MARCH 31, MARCH 31,
1996 1997 1998 1998 1998 1999
-------- -------- ------------ ------------ ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues........................... $110,464 $113,886 $ 95,686 $ 13,119 $ 108,805 $129,498
Gross margin(1).................... 51,685 48,332 47,752 6,891 58,443 61,887
Selling, general and administrative
expenses......................... 10,508 11,004 8,669 1,305 13,037 16,863
Depreciation and amortization...... 26,997 26,163 23,310 1,560 19,307 19,314
Operating income(2)................ 14,180 11,165 15,773 4,026 26,099 25,710
Operating lease facility expense... -- -- -- -- -- --
Interest expense................... 3,706 -- -- 3,203 32,474 29,313
Income tax expense (benefit)....... 3,745 4,724 6,271 409 (1,888) (1,031)
Net income (loss).................. 5,972 7,842 10,759 430 (3,214) (2,361)
OTHER FINANCIAL DATA:
EBITDA(3).......................... $ 40,420 $ 38,729 $ 40,340 $ 5,930 $ 49,742 $ 48,435
Capital expenditures:
Expansion........................ $ (2,423) $(12,464) $(11,902) $ (1,820) $ (13,722) $(63,408)
Maintenance...................... (3,971) (4,056) (5,698) (218) (9,716) (7,626)
Other............................ 5,124 7,684 3,803 (351,107) (347,304) 8,038
Cash flows from (used in):
Operating activities............. $ 50,810 $ 41,923 $ 33,491 $ (1,005) $ 22,076 $ 22,793
Investing activities............. (1,270) (8,836) (13,797) (353,145) (370,742) (62,996)
Financing activities............. 49,506 (33,121) (17,870) 356,532 352,872 40,748
OTHER DATA:
Total number of rental units (end
of period)....................... 2,787 2,764 2,780 2,749 2,749 2,701
Aggregate horsepower (end of
period).......................... 473,282 473,973 495,653 492,417 492,417 544,600
Average horsepower per unit (end of
period).......................... 170 171 178 179 179 202
Average horsepower
utilization(4)................... 73.9% 77.4% 81.8% 83.9% 82.0% 80.3%
<CAPTION>
UNIVERSAL
---------------------------
PRO FORMA
AS ADJUSTED(6)
YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31,
2000 2000
---------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
INCOME STATEMENT DATA:
Revenues........................... $136,449 $136,449
Gross margin(1).................... 68,961 68,961
Selling, general and administrative
expenses......................... 16,797 13,597
Depreciation and amortization...... 26,006 22,447
Operating income(2)................ 26,158 32,916
Operating lease facility expense... -- 5,702
Interest expense................... 34,327 18,600
Income tax expense (benefit)....... (1,994) 4,384
Net income (loss).................. (5,982) 4,424
OTHER FINANCIAL DATA:
EBITDA(3).......................... $ 55,557 $ 55,557
Capital expenditures:
Expansion........................ $(49,871) $(49,871)
Maintenance...................... (9,920) (9,920)
Other............................ (1,312) (1,312)
Cash flows from (used in):
Operating activities............. $ 47,144 $ 51,955
Investing activities............. (61,103) (56,482)
Financing activities............. 12,435 3,003
OTHER DATA:
Total number of rental units (end
of period)....................... 2,645 2,645
Aggregate horsepower (end of
period).......................... 633,398 633,398
Average horsepower per unit (end of
period).......................... 240 240
Average horsepower
utilization(4)................... 80.7% 80.7%
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 2000
----------------------------
ACTUAL AS ADJUSTED(6)
----------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $ 7,209 $ 10,015
Total assets.............................................. 469,942 416,020
Total debt(5)............................................. 377,485 186,939
Stockholders' equity...................................... 74,677 211,301
</TABLE>
- ---------------
(1) Gross margin is defined as total revenue less (i) rental expense, (ii) cost
of sales (exclusive of depreciation and amortization), (iii) gain on asset
sales and (iv) interest income.
(2) Operating income is defined as income before income taxes less gain on asset
sales and interest income plus interest expense and operating lease facility
expense.
(3) EBITDA is defined as net income plus income taxes, interest expense, leasing
expense, management fees, depreciation and amortization. EBITDA represents a
measure upon which management assesses financial performance, and certain
covenants in our 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 our operating performance
or to net cash provided by operating activities as a measure of our
liquidity. Additionally, the EBITDA computation used herein may not be
comparable to other similarly titled measures of other companies.
(4) Reflects an average horsepower utilization over each period based upon our
total average fleet horsepower.
(5) Includes capital lease obligations.
(6) As adjusted to reflect the application of the net proceeds to us from this
offering and our concurrent operating lease facility.
6
<PAGE> 13
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the risks described below and the other information
contained in this prospectus before deciding to invest in our common stock. The
risks described below are not the only ones facing our company. Additional risks
not presently known to us or which we currently consider immaterial may also
adversely affect our company. If any of the following risks actually occur, our
business, financial condition and operating results could be materially
adversely affected. In such case, the trading price of our common stock could
decline, and you could lose part or all of your investment.
RISKS INHERENT IN OUR INDUSTRY
WE ARE SIGNIFICANTLY DEPENDENT ON DEMAND FOR NATURAL GAS, AND A PROLONGED,
SUBSTANTIAL REDUCTION IN THIS DEMAND COULD ADVERSELY AFFECT THE DEMAND FOR OUR
SERVICES AND PRODUCTS.
Gas compression operations are materially dependent upon the demand for
natural gas. Demand may be affected by, among other factors, natural gas prices,
demand for energy and availability of alternative energy sources. Any prolonged,
substantial reduction in the demand for natural gas would, in all likelihood,
depress the level of production, exploration and development activity and result
in a decline in the demand for our compression services and products. This could
materially adversely affect our results of operations.
MOST OF OUR COMPRESSOR LEASES HAVE SHORT INITIAL TERMS, AND WE WOULD NOT RECOUP
THE COSTS OF OUR INVESTMENT IF WE WERE UNABLE TO RE-LEASE THE COMPRESSORS.
In most cases, the initial terms of our leases, unless extended by the
lessee, are too short to enable us to recoup the average cost of acquiring or
fabricating compressors under currently prevailing lease rates. As a result, we
assume substantial risk of not recovering our entire investment in the equipment
we acquire or fabricate. Although we historically have been successful in
re-leasing our compressors, there can be no assurance that we will continue to
be able to do so or that a substantial number of our rental customers will not
terminate their leases at approximately the same time. This would have an
adverse effect on our revenues.
WE INTEND TO MAKE SUBSTANTIAL CAPITAL INVESTMENTS TO IMPLEMENT OUR GROWTH
STRATEGY.
We anticipate that we will continue to make substantial capital investments
to expand our compressor rental fleet. For the fiscal year ended March 31, 2000,
we invested approximately $61.1 million in net capital investments after giving
effect to $4.4 million of asset sales. Historically, we have financed these
investments through internally generated funds, debt offerings and our credit
facility and, to a lesser extent, lease financings. In addition to the operating
lease facility that we are negotiating to enter into concurrently with this
offering as discussed in "Capitalization," we intend to utilize leasing
transactions in the future. These significant capital investments require cash
that we could otherwise apply to other business needs. However, if we do not
incur these expenditures while our competitors make substantial fleet
investments, our market share may decline and our business may be adversely
affected. In addition, if we are unable to generate sufficient cash internally
or obtain alternative sources of capital, it could materially adversely affect
our growth.
OUR BUSINESS SUBJECTS US TO POTENTIAL LIABILITIES WHICH MAY NOT BE COVERED BY
INSURANCE.
Natural gas service operations are subject to inherent risks, such as
equipment defects, malfunction and failures and natural disasters which can
result in uncontrollable flows of gas or well fluids, fires and explosions.
These risks could expose us to substantial liability for personal injury,
wrongful death, property damage, pollution and other environmental damages.
Although we have obtained insurance against many of these risks, there can be no
assurance that our insurance will be adequate to cover our liabilities. Further,
there can be no assurance that insurance will be generally available in the
future or, if available, that premiums will be commercially justifiable. If we
were to incur substantial liability and such damages were not covered by
insurance or were in excess of policy limits, or if we were to incur liability
at a time
7
<PAGE> 14
when we are not able to obtain liability insurance, our business, results of
operations and financial condition could be materially adversely affected.
WE ARE SUBJECT TO SUBSTANTIAL ENVIRONMENTAL REGULATION, AND CHANGES IN THESE
REGULATIONS COULD INCREASE OUR COSTS OR LIABILITIES.
We are subject to stringent and complex federal, state and local laws and
regulatory standards, including regulations regarding the discharge of materials
into the environment, emission controls and other environmental protection
concerns. Environmental laws and regulations may, in certain circumstances,
impose "strict liability" for environmental contamination, rendering us liable
for cleanup costs, natural resource damages and other damages as a result of our
conduct that was lawful at the time it occurred or the conduct of, or conditions
caused by, prior operators or other third parties. In addition, it is not
uncommon for the neighboring land owners and other third parties to file claims
for personal injury, property damage and recovery of response costs. Cleanup
costs and other damages arising as a result of environmental laws, and costs
associated with changes in existing environmental laws and regulations or the
adoption of new laws and regulations could be substantial and could have a
material adverse effect on our operations and financial condition. Moreover,
failure to comply with these environmental laws and regulations may result in
the imposition of administrative, civil and criminal penalties.
We currently are engaged in remediation and monitoring activities with
respect to some of our properties. We believe that former owners and operators
of some of these properties, including Tidewater Inc., are responsible under
environmental laws and contractual agreements to pay for or perform some of
these activities, or to indemnify us for some of our remedial costs. There can
be no assurance that these other entities will fulfill their legal or
contractual obligations, and their failure to do so could result in material
costs to us.
We routinely deal with natural gas, oil and other petroleum products. As a
result of our engineered products and overhaul and field operations, we
generate, manage and dispose of or otherwise recycle hazardous wastes and
substances, such as solvents, thinner, waste paint, waste oil, washdown wastes
and sandblast material. Although it is our policy to utilize generally accepted
operating and disposal practices in accordance with applicable environmental
laws and regulations, hydrocarbons or other wastes may have been disposed or
released on, under or from properties owned, leased, or operated by us or on or
under other locations where such wastes have been taken for disposal. These
properties and the wastes disposed on them may be subject to investigatory,
remedial and monitoring requirements under federal, state and local
environmental laws.
We believe that our operations are in substantial compliance with
applicable environmental laws and regulations. Nevertheless, the modification or
interpretation of existing federal, state and local environmental laws or
regulations, the more vigorous enforcement of existing environmental laws or
regulations, or the adoption of new environmental laws or regulations may also
negatively impact oil and natural gas exploration and production companies,
which in turn could have a material adverse effect on us and other similarly
situated service companies.
WE MAY BE UNABLE TO IDENTIFY SUITABLE ACQUISITION CANDIDATES OR SUCCESSFULLY
INTEGRATE ACQUIRED COMPANIES INTO OUR BUSINESS.
In accordance with our business strategy, we intend to pursue the
acquisition of other companies, assets and product lines that either complement
or expand our existing business. We are unable to predict whether or when any
prospective candidate will become available or the likelihood of a material
acquisition being completed.
In the event we are able to identify acceptable acquisition candidates, the
acquisition of a business involves a number of potential risks, including the
diversion of management's attention to the assimilation of the operations and
personnel of the acquired business and possible short-term adverse effects on
our operating results during the integration process. In addition, we may seek
to finance any such acquisition through the issuance of new debt and/or equity
securities. This could result in dilution to our existing
8
<PAGE> 15
stockholders. Alternatively, a substantial portion of our financial resources
could be used to complete any large acquisition for cash, which would reduce our
funds available for capital investment, operations or other activities.
WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY.
The natural gas compression service and engineered products business is
highly competitive. Our main competitors are large national and multinational
companies which have significantly greater financial resources than our company.
These competitors, like us, offer a wide range of compressors for sale or lease.
If these companies substantially increase the resources they devote to the
development and marketing of competitive products and services, we may not be
able to compete effectively.
RISKS SPECIFIC TO AN INVESTMENT IN OUR COMPANY
WE ARE HIGHLY LEVERAGED AND VULNERABLE TO INTEREST RATE INCREASES.
As of March 31, 2000, we had approximately $377.5 million in outstanding
indebtedness, including capital lease obligations and the current portion of
long-term debt. Of this amount, approximately $148.3 million bears interest at
floating rates. In addition, our financing lease transactions bear interest at
floating rates. Both the interest payments under our new credit facility and the
lease payments under our operating lease facility that will close concurrently
with this offering bear interest at a floating rate (based on a base rate or
LIBOR, at our option, in the case of the credit facility, and based on LIBOR, in
the case of the operating lease facility), plus a variable amount depending on
our operating results. Changes in economic conditions could result in higher
interest and lease payment rates, thereby increasing our interest expense and
lease payments and reducing our funds available for capital investment,
operations or other purposes. In addition, a substantial portion of our cash
flow must be used to service our debt, which may affect our ability to make
acquisitions or capital expenditures.
Substantially all of our assets will be pledged as collateral under our new
credit facility and our new operating lease facility, and our debt agreements
and new operating lease facility contain covenants that restrict our operations.
These covenants place limitations on, among other things, our ability to enter
into acquisitions, sales and operating lease transactions, incur additional
indebtedness and create liens, and could hinder our flexibility and restrict our
ability to take advantage of market opportunities or respond to changing market
conditions. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
OUR INTERNATIONAL OPERATIONS SUBJECT US TO SPECIAL RISKS THAT ARE DIFFICULT TO
PREDICT, INCLUDING POLITICAL INSTABILITY, FOREIGN EXCHANGE RATE AND REPATRIATION
RISKS.
Approximately 10.8% of our revenues during the fiscal year ended March 31,
2000 was derived from international operations. We intend to continue to expand
our business in Latin America and Southeast Asia and, ultimately, other
international markets, directly and through joint ventures. Our international
operations are affected by global economic and political conditions. Changes in
economic or political conditions in any of the countries in which we operate
could result in exchange rate movement, new currency or exchange controls or
other restrictions being imposed on our operations or expropriation. In
addition, the financial condition of foreign customers may not be as strong as
that of our current domestic customers.
Our operations may also be adversely affected by significant fluctuations
in the value of the U.S. dollar. Although we attempt to match costs and revenues
in terms of local currencies, we anticipate that as we continue our 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, we anticipate
that increasing portions of our revenues, costs, assets and liabilities will be
subject to fluctuations in foreign currency valuations. While we may use foreign
currency forward contracts or other currency hedging mechanisms to minimize our
exposure to currency fluctuation, there can be no assurance that any hedges
9
<PAGE> 16
will be implemented, or if implemented, will achieve the desired effect. We may
experience economic loss and a negative impact on earnings solely as a result of
foreign currency exchange rate fluctuations. Further, the markets in which we
conduct business could restrict the removal or conversion of the local or
foreign currency, resulting in our inability to hedge against these risks.
WE ARE DEPENDENT ON PARTICULAR SUPPLIERS AND ARE VULNERABLE TO PRODUCT SHORTAGES
AND PRICE INCREASES.
As a consequence of having a highly standardized fleet, some of the
components used in our products are obtained from a single source or a limited
group of suppliers. Our reliance on these suppliers involves several risks,
including price increases, inferior component quality and a potential inability
to obtain an adequate supply of required components in a timely manner. The
partial or complete loss of certain of these sources could have at least a
temporary material adverse effect on our results of operations and could damage
our customer relationships. Further, a significant increase in the price of one
or more of these components could have a material adverse effect on our results
of operations.
OUR SUCCESS DEPENDS ON KEY MEMBERS OF OUR MANAGEMENT TEAM, THE LOSS OF WHOM
COULD DISRUPT OUR BUSINESS.
Our success depends to a significant degree upon the continued
contributions of key management, operations, engineering, sales and marketing,
customer support, finance and manufacturing personnel. We are particularly
dependent on Stephen A. Snider, our Chief Executive Officer. We do not maintain
and do not intend to obtain key man life insurance for any of our employees. We
have entered into employment agreements with Messrs. Stephen Snider, Richard
FitzGerald, Newton Schnoor and Ernie Danner, and Ms. Valerie Banner, all of whom
are members of our senior management team. The departure of any of our key
personnel could have a material adverse effect on our business, operating
results and financial condition. In addition, we believe that our success
depends on our ability to attract and retain additional qualified employees. If
we fail to recruit other skilled personnel, we could be unable to compete
effectively.
CASTLE HARLAN HAS PRACTICAL CONTROL OVER MOST MATTERS REQUIRING APPROVAL OF OUR
STOCKHOLDERS.
Upon completion of the offering, Castle Harlan Partners III and its
affiliates will own approximately 24.9% of our common stock (23.0% if the
underwriters' over-allotment option is exercised in full). In addition, Castle
Harlan is a party to various voting agreements and voting trusts with our
stockholders that currently give Castle Harlan 100% control over our voting
stock. Following the offering, some of our stockholders, including all of our
employees and officers and four of our directors, will be released from these
voting arrangements. As a result, Castle Harlan will have voting control of up
to 42.7% of our common stock (excluding the effect of stock options and the
underwriters' over-allotment option) following this offering for a period of up
to three and a half years. Further, we have agreed to nominate a total of three
persons designated by Castle Harlan for election to our board of directors, so
long as Castle Harlan and its affiliates beneficially own at least 15% of our
outstanding stock (including shares over which it has voting control pursuant to
voting agreements and trusts). In addition, shares held by Samuel Urcis, one of
our directors who will not be considered a director designee of Castle Harlan,
will continue to be subject to a voting trust agreement with Castle Harlan.
Castle Harlan's significant ownership and control of our stock and board
representation give it the ability to exercise substantial influence over our
policies, management and affairs and significant control over corporate actions
requiring stockholder approval, including the approval of transactions involving
a change in control. The interests of Castle Harlan could conflict with the
interests of our other stockholders.
A SIGNIFICANT NUMBER OF SHARES OF COMMON STOCK WILL BECOME ELIGIBLE FOR SALE IN
THE FUTURE WHICH COULD DEPRESS OUR STOCK PRICE.
Sales of substantial amounts of our common stock in the public market
subsequent to this offering could adversely affect the market price of our
common stock. Upon completion of the offering, we will have 12,983,584 shares of
common stock outstanding (14,033,584 shares if the underwriters' over-allotment
option is exercised in full). Of these shares, the 7,000,000 shares of common
stock offered by
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<PAGE> 17
this prospectus and, if exercised in full, the 1,050,000 shares subject to the
underwriters' over-allotment option, will be freely tradable without restriction
or further registration under the Securities Act of 1933, as amended, unless
they are held by persons deemed to be our "affiliates" or acting as
"underwriters," as those terms are defined in the Securities Act. Upon
completion of this offering, the remaining 5,983,584 shares of our common stock
will be eligible for resale, of which 155,444 shares will be freely tradeable as
of the date of this prospectus and another 9,720 shares will be freely tradeable
90 days later. We, our executive officers and directors, and our other
significant stockholders holding a total of 5,818,420 shares of our common stock
have agreed not to sell any shares of common stock for a period of 180 days from
the date of this prospectus without the consent of Merrill Lynch. Upon
expiration of the 180-day lock-up period, 2,141,076 of such shares will become
freely tradeable. The remaining 3,677,344 of such shares after the 180-day
period will be "restricted securities" within the meaning of Rule 144 under the
Securities Act and will be eligible for resale subject to the volume, manner of
sale, holding period and other limitations of Rule 144; however, 3,230,797 of
such shares are not subject to the holding period restrictions of Rule 144. In
addition, options to purchase 612,399 shares of our common stock will be
exercisable by our officers, directors and employees upon completion of the
offering. In addition, we have authorized the grant, in connection with this
offering, of options to purchase an aggregate of 250,600 shares of our common
stock and we expect to grant additional options in the future. We intend to file
a registration statement covering the sale of the approximately 1.9 million
shares of our common stock reserved for issuance under our incentive stock
option plan. The sale of a substantial number of shares within a short period of
time could cause our stock price to decrease, or make it more difficult for us
to raise funds through future offerings of common stock.
THERE HAS BEEN NO PUBLIC MARKET FOR OUR COMMON STOCK AND, AS A RESULT, THE
MARKET PRICE OF OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY.
Prior to this offering, there has been no public market for our common
stock. We will list our common stock for trading on the New York Stock Exchange.
However, there can be no assurance that an active trading market for our common
stock will develop after this offering or, if developed, that it will be
sustained. The initial public offering price of our common stock will be
determined through negotiations between our management and the representatives
of the underwriters. This price may bear no relationship to the price at which
our common stock will trade after the offering. For information relating to the
factors to be considered in determining the initial public offering price, see
"Underwriting." Prices for our common stock after this offering may be
influenced by a number of factors, some of which are beyond our control. These
factors include the liquidity of the market for our common stock, investor
perceptions of our business, our company and the energy services industry and
general economic and other conditions, including those listed below under
"Special Note Regarding Forward-Looking Statements."
WE MAY HAVE TO MAKE PAYMENTS TO TIDEWATER AND HOLDERS OF OUR SENIOR NOTES IF
CERTAIN EVENTS OCCUR.
Pursuant to the Purchase Price Adjustment Agreement entered into in
connection with the acquisition of Tidewater Compression, we may have to pay an
amount to Tidewater Inc. based on a formula if any of the following liquidity
events occurs:
- Castle Harlan sells its shares of our common stock,
- we sell all or substantially all of our assets or we or our operating
subsidiary merge with another entity or
- we enter into some types of recapitalizations.
If any of the liquidity events described above occurs and Castle Harlan
receives an amount greater than its accreted investment, defined as its initial
investment increased at a compounded rate of 6.25% each quarter, which equates
to approximately 27.4% annually, we must make a payment to Tidewater equal to
10% of the amount, if any, that Castle Harlan receives in excess of its accreted
investment. Any payment is to be made in the same form of consideration as
received by Castle Harlan. As of April 1, 2000, Castle Harlan's accreted
investment was approximately $24.00 per share, which will continue to
11
<PAGE> 18
grow at a compounded rate of 6.25% per quarter. As of April 1, 2000, assuming an
initial public offering price of $22.00 per share was applied to all of the
shares owned by Castle Harlan, there would have been no payment due in the event
the provisions of the Purchase Price Adjustment Agreement were triggered. In any
event, no payment is triggered by this offering or the stock split and
conversion effected concurrently with this offering.
In addition to the Tidewater purchase price adjustment, in the event we
experience a change of control, the holders of our 11 3/8% senior discount notes
and our 9 7/8% senior discount notes will have the right to require that we
redeem those notes at a price equal to 101% of the accreted value, plus accrued
and unpaid interest to date.
If any of these payment events occurs, we may not have available funds
sufficient to pay these obligations and, if we do have sufficient funds
available, such payment will reduce our funds available for capital investment,
operations and other purposes.
WE ARE A HOLDING COMPANY AND RELY ON OUR SUBSIDIARIES FOR OPERATING INCOME.
We are a holding company and, as such, we derive all of our operating
income from our operating subsidiary and its subsidiaries. We do not have any
significant assets other than the stock of our operating subsidiary.
Consequently, we are dependent on the earnings and cash flow of our subsidiaries
to meet our obligations and pay dividends. Our subsidiaries are separate legal
entities that are not legally obligated to make funds available to us. We cannot
assure you that our subsidiaries will be able to, or be permitted to, pay to us
amounts necessary to meet our obligations or to pay dividends.
A THIRD PARTY COULD BE PREVENTED FROM ACQUIRING CONTROL OF US BECAUSE OF THE
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER AND BYLAWS.
There are provisions in our restated certificate of incorporation and
bylaws that may make it more difficult for a third party to acquire, or attempt
to acquire, control of us, even if a change in control would result in the
purchase of your shares at a premium to the market price or would otherwise be
beneficial to you. For example, our restated certificate of incorporation
authorizes our board of directors to issue preferred stock without stockholder
approval. If our board of directors elects to issue preferred stock, it could be
more difficult for a third party to acquire us. In addition, provisions of our
restated certificate of incorporation, such as a staggered board of directors
and limitations on the removal of directors, no stockholder action by written
consent and limitations on stockholder proposals at meetings of stockholders,
could make it more difficult for a third party to acquire control of us.
Delaware corporation law may also discourage takeover attempts that have not
been approved by our board of directors.
WE DO NOT EXPECT TO PAY DIVIDENDS.
We have never paid cash dividends on our common stock and we do not
anticipate paying any cash dividends in the foreseeable future. In addition, our
ability to pay dividends is restricted by our existing bank credit agreement and
the indentures related to our senior notes, and will be restricted under our new
credit facility and our new operating lease facility.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
Investors participating in the offering will incur immediate and
substantial dilution on the basis of pro forma net tangible book value of $13.16
per share, assuming an initial public offering price of $22.00 per share. To the
extent outstanding options to purchase our common stock are exercised, there may
be further dilution. See "Dilution."
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<PAGE> 19
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. All statements other
than statements of historical facts contained in this prospectus, including
statements regarding our future financial position, growth strategy, budgets,
projected costs and plans and objectives of management for future operations,
are forward-looking statements. Although we believe our expectations reflected
in these forward-looking statements are based on reasonable assumptions, no
assurance can be given that these expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from the
expectations reflected in the forward-looking statements include, among other
things:
- conditions in the oil and gas industry, including the demand for natural
gas and the price of oil and natural gas,
- competition among the various providers of contract compression services
and products,
- changes in safety, health and environmental regulations pertaining to the
production and transportation of natural gas,
- changes in economic or political conditions in the markets in which we
operate and
- introduction of competing technologies by other companies.
These statements relate to future events or our future financial performance.
These forward-looking statements may be found in the "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and other sections of this prospectus. In
some cases, you can identify forward-looking statements by terminology such as
"may," "will," "should," "expect," "plan," "intend," "anticipate," "believe,"
"estimate," "predict," "potential," or "continue," the negative of such terms or
other comparable terminology.
The forward-looking statements in this prospectus are based largely on our
expectations and are subject to a number of risks and uncertainties which may be
beyond our control. Actual results may differ materially from the anticipated or
implied results in the forward-looking statements due to the factors listed in
the "Risk Factors" section and elsewhere in this prospectus. We do not intend to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. In light of these risks and
uncertainties, we can give no assurances that the forward-looking events and
circumstances included in this prospectus will occur.
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<PAGE> 20
USE OF PROCEEDS
Our net proceeds from the sale of the 7,000,000 shares of common stock in
this offering, assuming an initial public offering price of $22.00 per share,
are estimated to be $142.9 million, after deducting underwriting discounts and
commissions and estimated offering expenses. If the underwriters' over-
allotment option is exercised in full, our net proceeds will be approximately
$164.4 million.
Concurrently with the completion of this offering, we are negotiating to
enter into a new $200.0 million operating lease facility, with initial proceeds
expected to be approximately $61.3 million, and to enter into a new $50.0
million revolving credit facility. This offering will not be consummated unless
we concurrently close our new operating lease facility and revolving credit
facility. As of March 31, 2000, our indebtedness and amounts to be repaid,
including prepayment penalties, with the proceeds of this offering and our
concurrent operating lease facility are as follows:
<TABLE>
<CAPTION>
AMOUNT OF WEIGHTED
AMOUNT PROCEEDS TO BE AVERAGE
DESCRIPTION OUTSTANDING APPLIED INTEREST RATE MATURITY
----------- ----------- -------------- ------------- --------
<S> <C> <C> <C> <C>
Term loan.............................. $73.3 million $73.3 million 8.69% 2005
Revolving credit facility.............. 75.0 million 75.0 million 8.36% 2003
11 3/8% senior discount notes.......... 31.7 million 35.3 million 11.38% 2009
Colombian financing lease 10.6 million 10.6 million 10.45% 2004
arrangements.........................
</TABLE>
We will use the approximately $10.0 million of remaining net proceeds for
general corporate purposes, which will include the cost of solicitation of
consent of the holders of, and may include the repurchase of some of, our 9 7/8%
senior discount notes. Pending these uses and the redemption of our 11 3/8%
senior discount notes, we may invest the net proceeds temporarily in short-term,
investment-grade, interest bearing securities or guaranteed obligations of the
United States government.
Our Colombian financing lease was entered into in July 1999. The proceeds
of this financing were used for general working capital purposes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain all available funds and any future earnings for use
in the operation and expansion of our business and do not anticipate declaring
or paying any cash dividends in the foreseeable future. In addition, our
existing credit agreement and the indentures related to our senior discount
notes contain restrictions on the payment of dividends on the common stock, as
will our new credit facility and our new operating lease facility. Any future
determination as to the declaration and payment of dividends will be at the
discretion of our board of directors and will depend on then existing
conditions, including our financial condition, results of operations,
contractual restrictions, capital requirements, business prospects and other
factors that our board of directors considers relevant.
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<PAGE> 21
DILUTION
If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share and the net
tangible book value per share after this offering. Our net tangible book value
as of March 31, 2000 was approximately $(24.6) million, or $(4.44) per share.
Net tangible book value per share represents our net tangible book value, which
is our total tangible assets less total liabilities, divided by the total number
of outstanding shares of common stock after giving effect to the common stock
split and conversion of all outstanding shares of preferred stock and non-voting
common stock into common stock that will occur concurrently with this offering.
After giving effect to the receipt of the net proceeds from this offering and
our concurrent operating lease facility and deducting the underwriting discounts
and commissions and estimated offering expenses, our pro forma net tangible book
value as of March 31, 2000 would have been approximately $112.2 million, or
$8.84 per share. This represents an immediate increase in pro forma net tangible
book value of $13.28 per share to existing stockholders and an immediate
dilution of $13.16 per share to new investors purchasing shares at the initial
public offering price. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $22.00
Pro forma net tangible book value per share as of March 31,
2000...................................................... (4.44)
Increase per share attributable to the offering........... 13.28
-------
Pro forma net tangible book value per share after the
offering............................................... 8.84
------
Dilution per share to new investors......................... $13.16
======
</TABLE>
The following table sets forth, as of March 31, 2000, on the pro forma
basis described above, the number of shares of common stock purchased from us by
existing stockholders and by the new investors at the assumed initial public
offering price, together with the total price and average price per share paid
by each of these groups, before deducting underwriting discounts and commissions
and estimated offering expenses.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ---------- -------- -------------
(IN
THOUSANDS)
<S> <C> <C> <C> <C> <C>
Existing stockholders.................. 5,707,769 44.9% $ 86,164 35.9% $15.10
New investors.......................... 7,000,000 55.1 154,000 64.1 22.00
---------- ----- -------- -----
Total........................ 12,707,769 100.0% $240,164 100.0%
========== ===== ======== =====
</TABLE>
The data in the table above assumes no exercise of the underwriters'
over-allotment option and excludes 612,399 shares of common stock issuable upon
exercise of options outstanding as of April 28, 2000 with a weighted average
exercise price of $14.91 per share, as well as the 250,600 shares of common
stock issuable upon the exercise of options that we will grant in connection
with this offering at the initial public offering price that will vest over a
three-year period. Assuming the underwriters' over-allotment option and the
stock options covering the 612,399 shares that will be exercisable upon
completion of this offering are exercised, pro forma net tangible book value per
share would increase $1.22 per share to $10.06 per share.
15
<PAGE> 22
CAPITALIZATION
The following table sets forth our actual capitalization as of March 31,
2000 and our capitalization as of such date as adjusted to give effect to the
issuance of 7,000,000 shares of our common stock in this offering at an assumed
initial public offering price of $22.00 per share and the following:
- the conversion of all of our non-voting common stock into common stock on
a one-for-one basis, a 7.4248-for-1 common stock split and the conversion
of all of our outstanding preferred stock at a post-split ratio of one
share of preferred stock into 2.3256 shares of common stock, in each case
concurrently with this offering and with a payment in cash in lieu of
issuance of a fractional share,
- the issuance of 156,818 shares of our common stock upon the closing of
this offering in connection with service agreements with certain of our
affiliates,
- the application of the estimated net proceeds of $142.9 million from this
offering to repay certain indebtedness under our term loan and revolving
credit facility, redeem our 11 3/8% senior discount notes and repay our
Colombian financing lease arrangements, as described under "Use of
Proceeds" and
- the application of the initial estimated $61.3 million of proceeds from
our concurrent operating lease facility that we are currently
negotiating, less expenses associated with the facility.
You should read the following table in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and related notes appearing elsewhere in
this prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
--------------------------
ACTUAL AS ADJUSTED
---------- -------------
(IN THOUSANDS, EXCEPT FOR
SHARE AMOUNTS)
<S> <C> <C>
Long-term debt, excluding current portion:
Term loan................................................. $ 72,563 $ --
Revolving credit facility................................. 75,000 --
9 7/8% Senior discount notes.............................. 183,820 183,820
11 3/8% Senior discount notes............................. 31,653 --
Other..................................................... 10,243 1,719
-------- --------
Total long-term debt................................... 373,279 185,539
Stockholders' equity:
Series A preferred stock, $0.01 par value, 5,000,000
shares authorized, 1,320,128 shares issued and
1,318,896 outstanding; 50,000,000 authorized and none
outstanding as adjusted................................ 13 --
Common stock, $0.01 par value, 994,000 shares authorized,
330,032 shares issued and 329,724 shares outstanding;
200,000,000 shares authorized, 12,707,769 shares issued
and 12,695,861 shares outstanding as adjusted.......... 3 127
Class A non-voting common stock, $0.01 par value, 6,000
shares authorized, 4,120 shares issued, 3,210 shares
outstanding; none as adjusted.......................... -- --
Additional paid-in capital................................ 82,697 219,210
Retained deficit.......................................... (7,913) (7,913)
Treasury stock, 2,450 shares at cost; 11,908 as
adjusted............................................... (123) (123)
-------- --------
Total stockholders' equity............................. 74,677 211,301
-------- --------
Total capitalization.............................. $447,956 $396,840
======== ========
</TABLE>
The data in the table above excludes approximately 612,399 shares of common
stock issuable upon the exercise of options outstanding as of April 28, 2000
with a weighted average exercise price of $14.91 per share, as well the 250,600
shares issuable upon the exercise of options that we will grant in connection
with this offering at the initial public offering price. The data also excludes
287,723 shares issued on April 28, 2000 in connection with our acquisition of
Spectrum.
16
<PAGE> 23
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The pro forma consolidated balance sheet as of March 31, 2000 and the pro
forma consolidated statement of operations for the year ended March 31, 2000
have been prepared to give effect to the common stock split, share conversion,
this offering and the concurrent operating lease transaction described in this
prospectus as if they had occurred at the balance sheet date and at the
beginning of the income statement period.
The accompanying pro forma consolidated financial information should be
read in conjunction with the historical consolidated financial statements and
the notes thereto, which are included elsewhere in this prospectus. The pro
forma consolidated financial statements are provided for informational purposes
only and do not purport to represent what our financial position or results of
operations would actually have been had the common stock split, share
conversion, this offering or the concurrent operating lease transaction occurred
on such dates or to project our results of operations or financial position for
any future period.
17
<PAGE> 24
UNIVERSAL COMPRESSION HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
------------------------------------
PRO FORMA
ACTUAL ADJUSTMENTS AS ADJUSTED
-------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents..................................... $ 1,403 $ -- $ 1,403
Accounts receivable, net................................. 17,267 -- 17,267
Inventories.............................................. 8,727 -- 8,727
Current deferred tax asset............................... 227 -- 227
Other.................................................... 1,571 -- 1,571
-------- --------- --------
Total current assets............................. 29,195 -- 29,195
Property, plant and equipment
Rental equipment(1)...................................... 349,198 (64,544) 284,654
Other.................................................... 19,617 -- 19,617
Less: accumulated depreciation(1)........................ (38,466) 3,227 (35,239)
-------- --------- --------
Net property, plant, and equipment............... 330,349 (61,317) 269,032
-------- --------- --------
Goodwill and intangibles, net of amortization.............. 99,250 -- 99,250
Other assets, net(2)....................................... 7,570 1,461 9,031
Long-term deferred tax asset(3)............................ 3,578 5,934 9,512
-------- --------- --------
Total assets..................................... $469,942 $ (53,922) $416,020
======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities................. $ 17,780 $ -- $ 17,780
Current portion of long-term debt(4)..................... 4,206 (2,806) 1,400
-------- --------- --------
Total current liabilities........................ 21,986 (2,806) 19,180
Capital lease obligation(4)................................ 10,243 (8,524) 1,719
Long-term deferred tax liabilities......................... -- -- --
Long-term debt(4).......................................... 363,036 (179,216) 183,820
-------- --------- --------
Total liabilities................................ 395,265 (190,546) 204,719
Total stockholders' equity(5).............................. 74,677 136,624 211,301
-------- --------- --------
Total liabilities and stockholders' equity....... $469,942 $ (53,922) $416,020
======== ========= ========
</TABLE>
18
<PAGE> 25
UNIVERSAL COMPRESSION HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 2000
---------------------------------------
PRO FORMA
ACTUAL ADJUSTMENTS AS ADJUSTED
--------- ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues:
Rental................................................... $ 98,295 $ -- $ 98,295
Sales.................................................... 38,000 -- 38,000
Other.................................................... 154 -- 154
-------- ----------- --------
Total revenue.................................... 136,449 -- 136,449
Costs and expenses:
Rentals, exclusive of depreciation and amortization...... 35,352 -- 35,352
Cost of sales, exclusive of depreciation and
amortization.......................................... 31,943 -- 31,943
Depreciation and amortization(6)......................... 26,006 (3,559) 22,447
Operating lease(7)....................................... -- 5,702 5,702
Selling, general and administrative(8)................... 16,797 (3,200) 13,597
Interest expense(9)...................................... 34,327 (15,727) 18,600
-------- ----------- --------
Total costs and expenses......................... 144,425 (16,784) 127,641
Income (loss) before income taxes.......................... (7,976) 16,784 8,808
-------- ----------- --------
Income taxes (benefit)(10)................................. (1,994) 6,378 4,384
-------- ----------- --------
Net income (loss).......................................... $ (5,982) $ 10,406 $ 4,424
======== =========== ========
Earnings per share
Basic.................................................... $ 0.35
========
Diluted.................................................. $ 0.34
========
</TABLE>
19
<PAGE> 26
UNIVERSAL COMPRESSION HOLDINGS, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(1) Reflects the estimated initial funding of the sale of compression equipment
pursuant to the proposed operating lease facility that we are negotiating
to enter into concurrently with this offering. The appraised value of the
compression equipment covered by the operating lease facility is assumed to
equal the net book value of the equipment.
(2) Represents (a) the elimination of balances of prepaid financing costs
associated with some of the debt obligations to be redeemed with the
proceeds of this offering and the operating lease facility ($3.5 million),
(b) the recording of prepaid finance costs associated with our new
revolving credit facility ($1.0 million) and (c) the capitalization of
costs associated with entering into the operating lease facility ($4.0
million).
(3) Reflects the estimated deferred income taxes related to expense items
associated with this offering and the operating lease facility.
(4) Redemption of debt:
<TABLE>
<S> <C>
Credit agreement.......................................... $148.3 million
11 3/8% senior discount notes............................. $ 31.7 million
Other..................................................... $ 10.6 million
--------------
Total........................................... $190.6 million
</TABLE>
(5) Represents (a) the estimated net proceeds from this offering of $142.9
million, (b) the additional paid-in capital attributable to stock issued to
Castle Harlan in connection with the termination of its management
agreement, to Mr. Urcis for termination of his consulting agreement and to
Mr. Danner for services upon closing of this offering ($3.4 million), and
(c) the effect of the following items associated with the consummation of
this offering and concurrent operating lease transaction, gross of tax: (x)
the write-off of prepaid financing costs ($3.5 million), (y) the redemption
premium on the 11 3/8% senior discount notes ($3.6 million) and the cost of
solicitation of the consent of the holders of the 9 7/8% senior discount
notes ($1.9 million) and (z) the recognition of $6.6 million for the
termination of the Castle Harlan management agreement, the termination of
Mr. Urcis' consulting agreement and the payment for Mr. Danner's services.
(6) Reflects the elimination of depreciation expense associated with the sale
of compression equipment pursuant to the operating lease facility, with
initial funding under the operating lease of $61.3 million.
(7) Reflects the expenses associated with the operating lease facility,
including the related commitment fee.
(8) Represents elimination of Castle Harlan management fees ($3.0 million) and
Mr. Urcis' consulting fees ($0.2 million).
(9) Reflects the adjustment of interest expense related to the redemption of
certain indebtedness at the beginning of the period totaling $177.8 million
and $12.8 million of incremental borrowing during the period from the
proceeds of this offering and the operating lease facility. Also includes
the commitment fees associated with our new revolving credit facility.
(10) An effective income tax rate of 38% is assumed.
20
<PAGE> 27
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
The tables on the following pages present selected historical consolidated
financial and operating data for Universal and for Tidewater Compression
Service, Inc., the predecessor of Universal that was acquired on February 20,
1998, for the periods and dates indicated. The historical financial and
operating data for Universal are derived from Universal's audited consolidated
financial statements included elsewhere in this prospectus and include the
impact of the Tidewater Compression acquisition from the date of acquisition.
The summary historical financial and operating data for Tidewater
Compression as of and for each of the years in the three-year period ended March
31, 1997 and for the period from April 1, 1997 through February 20, 1998 and the
summary historical financial data for Universal as of and for the 39-day period
ending March 31, 1998 and for the years ended March 31, 1999 and March 31, 2000
have been derived from the respective audited financial statements.
You should read the following selected consolidated financial data in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and related
notes appearing elsewhere in this prospectus.
21
<PAGE> 28
<TABLE>
<CAPTION>
TIDEWATER COMPRESSION (PREDECESSOR COMPANY) UNIVERSAL
---------------------------------------------- -------------------------
PERIOD FROM PERIOD FROM
APRIL 1, DECEMBER 12,
1997 1997 PRO FORMA
YEARS ENDED MARCH 31, THROUGH THROUGH YEAR ENDED
------------------------------- FEBRUARY 20, MARCH 31, MARCH 31,
1995 1996 1997 1998 1998(7) 1998(8)
--------- -------- -------- ------------ ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................................. $ 84,682 $110,464 $113,886 $ 95,686 $ 13,119 $108,805
Gross margin(1).......................... 37,604 51,685 48,332 47,752 6,891 58,443
Selling, general and administrative
expenses............................... 8,888 10,508 11,004 8,669 1,305 13,037
Depreciation and amortization............ 15,472 26,997 26,163 23,310 1,560 19,307
Operating income(2)...................... 13,244 14,180 11,165 15,773 4,026 26,099
Interest expense......................... 3,469 3,706 -- -- 3,203 32,474
Income tax expense (benefit)............. 4,648 3,745 4,724 6,271 409 (1,888)
Net income (loss)........................ 6,319 5,972 7,842 10,759 430 (3,214)
OTHER FINANCIAL DATA:
EBITDA(3)................................ $ 29,908 $ 40,420 $ 38,729 $ 40,340 $ 5,930 $ 49,742
Acquisitions(4)(5)....................... 240,000 -- -- -- 351,872 --
Capital expenditures:
Expansion.............................. $(249,505) $ (2,423) $(12,464) $(11,902) $ (1,820) $(13,722)
Maintenance............................ (10,812) (3,971) (4,056) (5,698) (218) (9,716)
Other.................................. 3,565 5,124 7,684 3,803 (351,107) (347,304)
Cash flows from (used in):
Operating activities................... $ 35,880 $ 50,810 $ 41,923 $ 33,491 $ (1,005) $ 22,076
Investing activities................... (256,752) (1,270) (8,836) (13,797) (353,145) (370,742)
Financing activities................... 220,872 49,506 (33,121) (17,870) 356,532 352,872
OTHER DATA:
Total number of rental units (end of
period)................................ 2,876 2,787 2,764 2,780 2,749 2,749
Aggregate horsepower (end of period)..... 479,740 473,282 473,973 495,653 492,417 492,417
Average horsepower per unit (end of
period)................................ 167 170 171 178 179 179
Average horsepower utilization(6)........ 82.3% 73.9% 77.4% 81.8% 83.9% 82.0%
</TABLE>
22
<PAGE> 29
<TABLE>
<CAPTION>
UNIVERSAL
--------------------------
YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31,
1999 2000
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
INCOME STATEMENT DATA:
Revenues.................................................. $129,498 $136,449
Gross margin(1)........................................... 61,887 68,961
Selling, general and administrative expenses.............. 16,863 16,797
Depreciation and amortization............................. 19,314 26,006
Operating income(2)....................................... 25,710 26,158
Interest expense.......................................... 29,313 34,327
Income tax expense (benefit).............................. (1,031) (1,994)
Net income (loss)......................................... (2,361) (5,982)
OTHER FINANCIAL DATA:
EBITDA(3)................................................. $ 48,435 $ 55,557
Acquisitions(4)(5)........................................ -- --
Capital expenditures:
Expansion............................................... $(63,408) $(49,871)
Maintenance............................................. (7,626) (9,920)
Other................................................... 8,038 (1,312)
Cash flows from (used in):
Operating activities.................................... $ 22,793 $ 47,144
Investing activities.................................... (62,996) (61,103)
Financing activities.................................... 40,748 12,435
OTHER DATA:
Total number of rental units (end of period).............. 2,701 2,645
Aggregate horsepower (end of period)...................... 544,600 633,398
Average horsepower per unit (end of period)............... 202 240
Average horsepower utilization(6)......................... 80.3% 80.7%
</TABLE>
<TABLE>
<CAPTION>
TIDEWATER COMPRESSION
(PREDECESSOR COMPANY) UNIVERSAL
--------------------- ------------------------------
AS OF MARCH 31, AS OF MARCH 31,
--------------------- ------------------------------
1996 1997 1998 1999 2000
--------- --------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(9)........................................ $ 16,192 $ 13,953 $ 13,882 $ 23,742 $ 7,209
Total assets.............................................. 274,312 257,090 380,226 437,991 469,942
Total debt(10)............................................ 229,657 194,371 286,862 344,677 377,485
Stockholders' equity...................................... 49,705 57,547 81,680 80,774 74,677
</TABLE>
- ---------------
(1) Gross margin is defined as total revenue less (i) rental expense, (ii) cost
of sales (exclusive of depreciation and amortization), (iii) gain on asset
sales and (iv) interest income.
(2) Operating income is defined as income before income taxes less gain on asset
sales and interest income plus interest expense.
(3) EBITDA is defined as net income plus income taxes, interest expense, leasing
expense, management fees, depreciation and amortization. EBITDA represents a
measure upon which management assesses financial performance, and certain
covenants in our 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 our operating performance
or to net cash provided by operating activities as a measure of our
liquidity. Additionally, the EBITDA computation used herein may not be
comparable to other similarly titled measures of other companies.
(4) Tidewater Compression acquired the assets of Brazos Gas Compressing Company
for $35.0 million in October 1994 and the natural gas compression assets of
Halliburton Compression Services for $205.0 million in December 1994. The
results of Brazos Gas Compressing's and Halliburton Compression's operations
have been included in our results of operations from the respective dates of
acquisition.
(5) On February 20, 1998, we acquired 100% of the voting securities of Tidewater
Compression for approximately $350.0 million. The results of Tidewater
Compression's operations have been included in our operations from the date
of the acquisition.
(6) Reflects an average horsepower utilization over each period based upon our
total average fleet horsepower.
(7) Represents our historical consolidated financial statements for the period
from December 12, 1997 (inception) through March 31, 1998. However, we had
no operations until the acquisition of Tidewater Compression on February 20,
1998.
(footnotes continued on next page)
23
<PAGE> 30
(8) The pro forma selected financial data for the year ended March 31, 1998 were
derived from the unaudited pro forma consolidated financial statements and
give effect to the acquisition of Tidewater Compression as if it had
occurred on April 1, 1997. The unaudited pro forma consolidated financial
statements and other data have been prepared under the purchase method of
accounting. Under this method of accounting, based on an allocation of the
purchase price of Universal, its identifiable assets and liabilities have
been adjusted to their estimated fair values. The unaudited pro forma
consolidated financial statements and other data have been prepared based on
the foregoing and on certain assumptions described in the notes below:
<TABLE>
<CAPTION>
TIDEWATER ACQUISITION UNIVERSAL
COMPRESSION(A) UNIVERSAL(B) ADJUSTMENTS PRO FORMA
-------------- ------------ ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues:
Rentals......................... $71,644 $ 9,060 $ -- $ 80,704
Sales........................... 19,924 4,037 -- 23,961
Other........................... 3,024 22 -- 3,046
Gain on asset sales............. 1,094 -- -- 1,094
------- ------- -------- --------
Total revenues.................... 95,686 13,119 -- 108,805
Costs and expenses:
Rentals......................... 31,924 2,804 (3,800)(c) 30,928
Cost of sales................... 14,753 3,408 -- 18,161
Depreciation and amortization... 23,310 1,560 (5,563)(d) 19,307
General and administrative...... 8,669 1,305 3,063(e) 13,037
Interest expense................ -- 3,203 29,271(f) 32,474
------- ------- -------- --------
78,656 12,280 22,971 113,907
Income (loss) before income
taxes........................... 17,030 839 (22,971) (5,102)
Income tax expense (benefit)...... 6,271 409 (8,568)(g) (1,888)
------- ------- -------- --------
Net income (loss)............... $10,759 $ 430 $(14,403) $ (3,214)
======= ======= ======== ========
</TABLE>
- ---------------
(a) Represents the historical financial statements of Tidewater
Compression, our predecessor, for the period from April 1, 1997 through
February 20, 1998.
(b) Represents our historical consolidated financial statements for the
period from December 12, 1997 (inception) through March 31, 1998.
However, we had no operations until the acquisition of Tidewater
Compression on February 20, 1998.
(c) Reflects the effect of a change in accounting policy for capitalization
of major overhauls.
(d) Reflects an adjustment to depreciation expense resulting from the
allocation of purchase price and the change in accounting policy
referred to in note (c). Depreciation and amortization expense for
rental equipment is calculated using a 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 two to 25 years. Depreciation for
capitalization overhauls is calculated using a three-year estimated
useful life. Goodwill amortization is calculated over an estimated
40-year life.
(e) Reflects the management fee paid to Castle Harlan of $3.0 million and
estimated incremental costs associated with being a stand-alone public
company. Such stand-alone costs include legal, accounting and personnel
costs.
(f) Interest expense adjustments are as follows based on the assumptions
described below:
<TABLE>
<CAPTION>
FISCAL YEAR 1998
----------------
(IN THOUSANDS)
<S> <C>
Revolving credit facility, $35.0 million at 9.75%........... $ 3,427
Senior discount notes, $25.0 million at 11.375%, due 2009... 3,313
Senior discount notes, $152.0 million at 9.875%, due 2008... 16,886
Term loan credit facility, $75.0 million at 10%............. 7,481
Commitment fee, $48.0 million at 0.5%....................... 239
-------
31,346
Amortization of deferred financing costs.................... 1,128
-------
Total interest expense...................................... $32,474
=======
</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 interest rates on the revolving credit facility and the term loan
credit facility at March 31, 1998 under an available prime rate option
were 9.75% and 10.0%, respectively. Interest on each of the senior
discount notes due 2009 and the senior discount notes due 2008 has been
calculated based on the fixed rate of 11.375% and 9.875%, respectively,
compounded semiannually on principal plus accumulated interest. A
fluctuation of .125% of actual rates related to the revolving credit
facility and the term loan credit facility would result in an approximate
change of $137,000 in interest expense.
(g) Reflects an adjustment to income tax expense to reflect an effective
tax rate of 37%.
(9) Working capital is defined as current assets minus current liabilities.
(10) Includes capital lease obligations.
24
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Selected Historical Consolidated Financial and Operating Data and the
accompanying financial statements and related notes included elsewhere in this
prospectus. The following discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in these forward-looking statements. Factors
that could cause or contribute to such differences include but are not limited
to, those discussed below and elsewhere in this prospectus, particularly in
"Risk Factors."
BACKGROUND
We were formed in December 1997 to acquire all of the outstanding stock of
Tidewater Compression Service, Inc. Upon completion of the acquisition on
February 20, 1998, Tidewater Compression became our wholly-owned operating
subsidiary and changed its name to Universal Compression, Inc. Pursuant to the
Tidewater Compression acquisition, Castle Harlan Partners III, a private
investment fund managed by Castle Harlan, Inc., a merchant banking firm,
acquired control of us. The acquisition and related fees and expenses were
financed through a cash contribution from Castle Harlan Partners, borrowings
under our senior secured credit agreement and proceeds from the issuance of our
9 7/8% Senior Discount Notes due 2008 and our 11 3/8% Senior Discount Notes due
2009.
FISCAL YEAR ENDED MARCH 31, 2000 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1999
Revenues. Our total revenues for the fiscal year ended March 31, 2000
increased $6.9 million, or 5.3%, to $136.4 million compared to $129.5 million
for the fiscal year ended March 31, 1999 due to an increase in rental revenues.
Rental revenues increased by $12.7 million, or 14.8%, to $98.3 million during
the fiscal year ended March 31, 2000 from $85.6 million during the fiscal year
ended March 31, 1999. Domestic rental revenues increased by $4.8 million, or
6.0%, to $83.6 million during the fiscal year ended March 31, 2000 from $78.8
million during the fiscal year ended March 31, 1999. International rental
revenues increased by $7.9 million, or 116%, to $14.7 million during the fiscal
year ended March 31, 2000 from $6.8 million during the fiscal year ended March
31, 1999. The increase in both domestic and international rental revenues
primarily resulted from expansion of our rental fleet. Domestic average rented
horsepower for the fiscal year ended March 31, 2000 increased by 11.3% to
approximately 444,000 horsepower from approximately 399,000 horsepower for the
fiscal year ended March 31, 1999. In addition, international average rented
horsepower more than doubled to approximately 45,000 horsepower for the fiscal
year ended March 31, 2000 from approximately 20,000 horsepower for the fiscal
year ended March 31, 1999, primarily through additional service in Argentina and
Colombia. Revenues from fabrication and sales decreased to $38.1 million from
$43.6 million, a decrease of 12.6%, due to a lower level of equipment and parts
activity.
Gross Margin. Gross margin before depreciation and amortization for the
fiscal year ended March 31, 2000 increased $7.1 million, or 11.5%, to $69.0
million from gross margin of $61.9 million for the fiscal year ended March 31,
1999. The rental gross margin for the fiscal year ended March 31, 2000 increased
$8.3 million, or 15.2%, to $62.9 million compared to gross margin of $54.6
million for the fiscal year ended March 31, 1999. Gross margin increased
primarily as the result of the revenue growth discussed above while rental
margins remained constant at 64% for the fiscal years ended March 31, 2000 and
1999.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the fiscal year ended March 31, 2000 decreased $0.1
million, or 0.5%, to $16.8 million compared to $16.9 million for the fiscal year
ended March 31, 1999. As a percentage of revenue, selling, general and
administrative expenses represented 12.3% of revenues for the fiscal year ended
March 31, 2000 compared to 13.0% of revenues for the fiscal year ended March 31,
1999.
Interest Expense. Interest expense increased $5.0 million to $34.3 million
for the fiscal year ended March 31, 2000 from $29.3 million for the fiscal year
ended March 31, 1999, primarily as the result of
25
<PAGE> 32
increased borrowings under the revolving credit facility, increased accretion of
discount notes, the financing lease and increased interest rates.
Net Loss. We had a net loss of $6.0 million for the fiscal year ended March
31, 2000 compared to a net loss of $2.4 million for the fiscal year ended March
31, 1999. This increase in net loss was primarily due to interest expense
increasing from $29.3 million to $34.3 million and depreciation and amortization
related to the continued expansion of our assets increasing from $19.3 million
to $26.0 million, which was offset by an increased income tax benefit and the
factors discussed above.
FISCAL YEAR ENDED MARCH 31, 1999 COMPARED TO PRO FORMA FISCAL YEAR ENDED MARCH
31, 1998
The Tidewater Compression acquisition closed on February 20, 1998 and was
accounted for under purchase accounting. To provide for a comparison of the two
twelve-month periods, actual results for the twelve months ended March 31, 1999
are compared to pro forma results for the Tidewater Compression acquisition for
the twelve months ended March 31, 1998.
Revenues. Revenues for fiscal year 1999 increased $20.7 million, or 19.0%,
to $129.5 million compared to revenues of $108.8 million for pro forma fiscal
1998, due to increases in both rental revenues and revenues from fabrication and
equipment sales. Rental revenues increased 6.1% to $85.6 million. The increase
in rental revenues was principally due to a 10.6% expansion of the rental fleet,
which was partially offset by a slight reduction in utilized horsepower and
rental pricing. Additionally, we increased the amount of our horsepower rented
in international markets by 15.0% through additional service in Latin America.
Revenue from fabrication and other sales increased to $43.6 million from $24.0
million, an increase of 81.7%, due to a higher level of fabrication activity and
the sale of equipment from the rental fleet to customers who exercised purchase
options on equipment previously rented.
Gross Margin. Gross margin before depreciation and amortization for fiscal
1999 increased $3.5 million, or 6.0%, to $61.9 million from $58.4 million for
pro forma fiscal 1998. The rental gross margin for fiscal 1999 increased $4.8
million, or 9.6%, to $54.6 million compared to gross margin of $49.8 million for
fiscal 1998. Gross margin increased primarily as the result of revenue growth
which was offset by reduced fabrication margins.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for fiscal 1999 increased $3.8 million, or 29.3%,
compared to selling, general and administrative expenses for pro forma fiscal
1998. As a percentage of revenues, selling, general and administrative expenses
for fiscal 1999 represented 13.0% of revenues compared to 12.0% of revenues from
pro forma fiscal 1998. The increase was primarily due to increased sales and
engineering expense in fiscal 1999 as we added the additional personnel
necessary to manage and rent a larger rental fleet, and the increase in expenses
necessary to operate as a stand alone company.
Net Loss. Primarily as a result of interest expense of $29.3 million
related to the indebtedness incurred in the Tidewater Compression acquisition,
increased income taxes and the factors discussed above, we generated a net loss
for fiscal 1999 of $2.4 million, as compared to net loss of $3.2 million for pro
forma fiscal 1998.
PRO FORMA FISCAL YEAR ENDED MARCH 31, 1998 COMPARED TO FISCAL YEAR ENDED MARCH
31, 1997
To provide for a comparison of the two twelve month periods, pro forma
results for the twelve months ended March 31, 1998 are compared to actual
results for the twelve months ended March 31, 1997.
Revenues. Pro forma revenues for fiscal 1998 declined $5.1 million, or
4.5%, to $108.8 million compared to $113.9 million for fiscal 1997, which was
primarily due to a decline in revenues from fabrication and equipment sales.
Revenues from fabrication and sales declined to $24.0 million from $36.6
million, a decline of 34.4%, due to a shift of the focus of our sales force away
from low margin sales of third-party fabricated Ajax gas compressor units.
Rental revenues increased 11.0% to $80.7 million, principally due to a 6%
increase in utilized horsepower and a 1% increase in rental pricing.
Additionally,
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we increased the amount of horsepower rented in international markets by 54%,
principally through additional service in Argentina.
Gross Margin. Pro forma gross margin before depreciation and amortization
for fiscal 1998 increased $10.1 million, or 20.9%, to $58.4 million from $48.3
million for fiscal 1997. The increase was due to higher utilization and
resulting operating efficiencies related to the rental fleet and the
capitalization of $3.8 million of overhaul expenses in the pro forma statements
for fiscal 1998. The rental gross margin for fiscal 1998 increased $10.9
million, or 28%, to $49.8 million compared to $38.9 million for fiscal 1997.
Selling, General and Administrative Expenses. Pro forma selling, general
and administrative expenses for fiscal 1998 increased $2.0 million, or 18.2%, to
$13.0 million compared to $11.0 million for fiscal 1997. The increase was
principally due to the inclusion of $3.0 million of management fees to Castle
Harlan Partners III. As a percentage of revenue, pro forma general and
administrative expenses for the fiscal year 1998 represented 12% of revenue
compared to 9.5% of revenue for fiscal 1997.
Net Income (Loss). Our pro forma results for fiscal 1998 reflected a net
loss of $3.2 million compared to net income of $7.8 million for fiscal 1997.
This was primarily a result of pro forma interest expense of $32.5 million
related to the indebtedness incurred in the Tidewater Compression acquisition,
reduced income taxes and the factors discussed above.
EFFECTS OF INFLATION
In recent years, inflation has been modest and has not had a material
impact upon the results of our operations.
LIQUIDITY AND CAPITAL RESOURCES
Our cash and cash equivalents balance at March 31, 2000 was $1.4 million
compared to $2.9 million at March 31, 1999. For the fiscal year ended March 31,
2000, we generated cash flow from operations of $47.1 million, received $4.4
million from the sale of assets and obtained $13.7 million in additional
financing. We primarily used this cash flow to make capital expenditures of
$65.5 million and net principal payments of $1.2 million under our established
lines of credit.
We continue to emphasize our investment in larger horsepower compression
rental units and the purchase and leaseback of customer owned equipment. Our
other principal uses of cash during fiscal 2001 will be to fund our working
capital needs and to meet required principal and interest payments on our debt
obligations.
Our existing senior secured credit agreement provides for $75.0 million
under a term loan and $85.0 million under a revolving credit facility, which
includes a sublimit for letters of credit. At March 31, 2000, we had $73.3
million outstanding under the term loan, which matures in February 2005, and
$75.0 million outstanding under the revolving credit facility, which matures in
February 2003. The available capacity under the revolving credit facility at
March 31, 2000 was approximately $7.7 million after giving effect to outstanding
letters of credit. As of March 31, 2000, the interest rate on the term loan was
8.69% and the interest rate on the revolving credit facility was 8.36%. Under
the revolving credit facility, a commitment fee of 0.50% per annum on the
average unutilized commitment is payable quarterly. Our operating subsidiary is
the borrower, and some of its subsidiaries, together with us, are guarantors
under the credit agreement.
The credit agreement contains certain financial covenants and limitations
on, among other things, our ability to enter into acquisition and sales
transactions, our ability to incur additional indebtedness and our ability to
permit additional liens on our assets. The credit agreement also limits the
making of loans and advances and the payment of cash dividends by our operating
subsidiary to us to $1.0 million in any given fiscal year. In addition, we have
substantial dividend payment restrictions under the indentures related to the
senior discount notes, as described below. We were in compliance with all of
these covenants and limitations as of March 31, 2000, and will repay all of the
outstanding indebtedness of the term loan and
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the revolving credit facility with a portion of the proceeds from this offering
and our concurrent operating lease facility.
We are in negotiations with Deutsche Bank Securities Inc., as lead
arranger, to replace our existing credit facility with a new $50.0 million
secured revolving credit facility which has a five-year term. The revolver will
bear interest at our option at a base rate or LIBOR plus, in each case, a
variable amount depending on our operating results. As of May 17, 2000, we
estimate that this rate initially will be 8.58%. The revolver will be secured by
a lien on all of our personal property that is not subject to our new operating
lease facility. The revolver will contain limitations on our ability to enter
into acquisition and sales transactions, incur additional indebtedness and place
additional liens on our assets. Immediately after giving effect to this
offering, we expect that we will be able to borrow the full amount of the
commitment under the new revolver.
In addition to our existing credit agreement, as of March 31, 2000 we had
approximately $183.8 million outstanding under our 9 7/8% Senior Discount Notes
due 2008 and approximately $31.7 million outstanding under our 11 3/8% Senior
Discount Notes due 2009. We have solicited and received the required consent of
holders of our 9 7/8% senior discount notes to amend the indenture governing
these notes to permit the liens on equipment required under our new operating
lease facility and any future lease arrangements that we may enter into. We have
covenanted that immediately after giving effect to any operating lease
arrangements, we will continue to have at least $100 million total book assets.
In exchange for the consent, our operating subsidiary will pay a fee to
consenting holders of $10.00 per $1,000 of accreted value of the 9 7/8% notes
(up to approximately $2.0 million in the aggregate at the closing of this
offering). The effectiveness of the amendment is subject to the successful
consummation of this offering with proceeds contributed as equity to our
operating subsidiary of not less than $58.0 million. In addition, we have agreed
to pay an aggregate of $450,000 to Deutsche Bank Securities Inc. and Wasserstein
Perella Securities, Inc., who acted as solicitation agents with respect to the
consent solicitation. We did not solicit the consent of holders of our 11 3/8%
senior discount notes as we intend to exercise a covenant defeasance and redeem
these notes with a portion of the proceeds from this offering.
Interest on both series of notes is payable semi-annually commencing August
15, 2003. These notes are general unsecured obligations and rank equally in
right of payment to amounts owed under our existing credit agreement and other
current and future senior indebtedness that we may have, including our new
revolving credit facility. The 9 7/8% notes, which will remain outstanding
following this offering, are redeemable by us at our option in whole or in part
beginning February 15, 2003. In addition, we have the right to redeem up to 35%
of the outstanding 9 7/8% notes at a redemption price equal to 109.875% of their
accreted value as a result of this offering within 120 days following the
closing of the offering. We may purchase a portion of our 9 7/8% notes from time
to time in privately negotiated transactions.
The indentures governing the notes contain numerous covenants that restrict
our ability to, among other things, incur additional indebtedness or liens, pay
dividends, make certain types of investments, sell or otherwise dispose of our
assets, enter into arrangements with our affiliates or merge or consolidate with
any other entity. In addition, if we experience a change of control, the holders
of our notes have the right to require us to repurchase their notes at a price
equal to 101% of the accreted value. This offering will not result in a change
of control for purposes of the indentures. We were in compliance with all of
these covenants and limitations as of March 31, 2000.
On July 21, 1999, we received $8.1 million as the first phase of a
financing lease with Societe Generale Financial Corporation with respect to new
compression equipment. We received an additional $3.8 million under this
financing lease in October 1999. The financing lease, which relates to our
Colombian operations, has a term of five years and bears interest at a rate of
LIBOR plus 4.25%. We will repay all amounts outstanding under this financing
lease with a portion of the proceeds from this offering.
We are currently negotiating a new $200.0 million operating lease facility
that will close concurrently with this offering. Under this facility, we will
sell some of our currently owned and hereafter acquired compression equipment to
a newly formed Delaware business trust, the equity interests of which will be
owned by Deutsche Bank AG, New York Branch, its affiliates or other financial
institutions, and lease it
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back from the trust for a five-year term. The rental payments under the lease
will include an amount based on LIBOR plus a variable amount depending on our
operating results, applied to the funded amount of the lease. As of May 17,
2000, we estimate that this rate initially will be approximately 8.83%. The
first funding of the lease facility will be for approximately $61.3 million and
will be funded concurrently with the closing of this offering. The subsequent
fundings will be for up to $138.7 million and must be funded, if at all, within
eighteen months of the closing of this offering. Payments under the lease
facility are due quarterly in arrears. In addition to the lease payments, we
will pay a lease structuring and arrangement fee estimated to be $3.5 million on
the closing of the facility, a participation fee on the closing of each tranche
and a $35,000 administration fee each year that the lease facility is in effect,
in which Bankers Trust Company, an affiliate of Deutsche Bank Securities Inc.,
will participate.
The lease facility matures five years from the closing of this offering, at
which time we have an option to repurchase the leased equipment for the cost of
the equipment. In addition, we have the right to repurchase at such price all of
the equipment at any time during the term of the lease facility. We have
substantial residual value guarantees on the equipment under our operating lease
facility (approximately 85% of the funded amount) that are due upon termination
of the lease and which may be satisfied by a cash payment or the exercise of our
purchase option. Pursuant to the lease facility, we will be restricted by
certain covenants relating to our operations, including our ability to enter
into acquisition and sales transactions, incur additional indebtedness, permit
additional liens on our assets and pay dividends. Our obligations under this
lease facility will be secured by liens on our compression equipment subject to
the lease and certain related rights.
This offering will not be consummated unless we concurrently close our new
revolving credit facility and operating lease facility.
As of March 31, 2000, we had net operating losses for federal tax purposes
totalling approximately $91.8 million. As currently contemplated, this offering
constitutes an ownership change for tax purposes which may limit our ability to
fully utilize these loss carryforwards in future years. See Note 6 to Universal
Compression Holdings, Inc. Notes to Consolidated Financial Statements.
We anticipate that the proceeds from this offering and the operating lease
facility, together with internally generated cash flow, including improvement in
our working capital position, availability under our new revolving credit
facility and permitted international borrowings, will be sufficient to fund our
growth strategy, domestic and international operations and obligations through
fiscal year 2001.
RECENT ACCOUNTING PRONOUNCEMENTS
Effective April 1, 1998, we adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." For the fiscal
years ended March 31, 1999 and 2000, the effect of transactions which would have
given rise to further disclosure were not significant.
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," and
subsequently delayed the effective date of this statement with the issuance of
SFAS No. 137 in June 1999. SFAS No. 133, which is now effective for our fiscal
year ending March 31, 2002, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. We will be analyzing SFAS No. 133
to determine what, if any, impact or additional disclosure requirements this
pronouncement will have.
SEASONAL FLUCTUATIONS
Our results of operations have not historically reflected any material
seasonal tendencies.
YEAR 2000 ISSUES UPDATE
We began to address Year 2000 compliance issues in 1998 when we formed a
Year 2000 committee to manage our Year 2000 compliance initiative. The committee
focused its efforts on both information
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technology systems, primarily computer hardware and software, and
non-information technology systems, embedded technology such as
microcontrollers, in all aspects of our businesses and operations.
We did not experience any serious Year 2000 problems at the beginning of
this year, and no disruption of normal business activities or operations
occurred which could have had a material adverse effect on our results of
operations, liquidity or financial condition. However, we are continuing to
monitor, on an ongoing basis, any future uncertainties arising from the Year
2000 problem. We do not believe that any future problems, primarily computer
system problems in nature, could have a material adverse effect on our results
of operations. The aggregate cost of the required modifications and testing was
approximately $100,000 and consisted primarily of our internal costs for our
information systems group. The costs for the required modifications and testing
were expensed as incurred.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to some market risk due to the floating interest rate under
our revolving credit facility, term loan and financing leases. Our existing
revolving credit facility bears interest at LIBOR plus 2.25%, is due February
2005 and had an outstanding principal balance of $75.0 million as of March 31,
2000. Our existing term loan bears interest at LIBOR plus 2.5%, is due February
2003 and had an outstanding principal balance of $73.3 million as of March 31,
2000. The Colombian financing lease bears interest at LIBOR plus 4.25%, is due
October 2004 and had an outstanding principal balance of $10.6 million as of
March 31, 2000. Our new revolving credit facility and operating lease facility
that we are negotiating to enter into concurrently with the closing of this
offering will have interest and lease payments based on a floating rate (a base
rate or LIBOR, at our option, in the case of the credit facility, and LIBOR, in
the case of the operating lease facility) plus a variable amount depending on
our operating results. As of May 17, 2000, we estimate that this rate initially
will be 8.58% for the revolving credit facility and 8.83% for the operating
lease facility. The operating lease facility has a five-year term and will have
an outstanding principal balance of approximately $61.3 million at the time of
the closing. The LIBOR rate at March 31, 2000 was 6.13% and at May 17, 2000 was
6.58%. A 1.0% increase in interest rates could result in a $1.6 million annual
increase in interest expense on the existing principal balances. In order to
minimize any significant foreign currency credit risk, we generally
contractually require that payment be made in U.S. dollars. If payment is not
made in U.S. dollars, we generally utilize the exchange rate into U.S. dollars
on the payment date or balance payments in local currency against local
expenses.
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BUSINESS
BACKGROUND
We were formed in December 1997 to acquire all of the outstanding stock of
Tidewater Compression. Upon completion of the acquisition in February 1998,
Tidewater Compression became our wholly-owned operating subsidiary and changed
its name to Universal Compression, Inc. Through this subsidiary, our gas
compression service operations date back to 1954. The business grew dramatically
from 1993 to 1995 through the acquisition of four rental compression companies:
Allison Production Services and BJC Operating Company in 1993 and Halliburton
Compression Services and Brazos Gas Compressing Company in 1994. Following these
acquisitions and prior to the Tidewater Compression acquisition, management
focused on standardizing our compressor fleet, and also completed a number of
smaller acquisitions. Since the Tidewater Compression acquisition, we have
focused on our growth strategy.
OVERVIEW
We are a leading natural gas compression services company, providing a full
range of rental, sales, operations, maintenance and fabrication services and
products to the natural gas industry. These services and products are essential
to the production, transportation and processing of natural gas by producers,
gatherers and pipeline companies. Today, we own one of the largest gas
compressor fleets in the United States, and have a growing presence in key
international markets.
Since 1998, we have increased our capital investments in our business and,
as a result, have experienced significant growth. The horsepower of our fleet
has increased 29%, from 492,417 as of March 31, 1998 to 633,398 as of March 31,
2000, with our average capacity per unit increasing from 179 horsepower to 240
horsepower. Our revenues have increased 25%, from $108.8 million for the fiscal
year ended March 31, 1998 to $136.4 million for the fiscal year ended March 31,
2000. For the fiscal year ended March 31, 2000, approximately $98.3 million of
our revenues was derived from our compression rental services, with the
remaining approximately $38.1 million being derived from fabrication and other
compression activities.
We distinguish ourselves by providing comprehensive, high quality natural
gas compression services to over 650 customers that are involved in natural gas
production, transportation and processing -- from the wellhead through the
gathering system and through the pipeline. Due to our low cost, centralized
operating structure, we are able to offer these high quality services to our
customers at competitive prices while maintaining high margins. By outsourcing
their compression needs, we believe our customers generally are able to increase
their revenues by producing a higher volume of natural gas through decreased
compressor downtime. In addition, outsourcing allows our customers to reduce
their operating and maintenance costs and capital investments and meet their
changing compression needs more efficiently. Our full service orientation
enhances customer loyalty, enables us to attract new customers and allows us to
grow our business with our existing customers.
We operate in every significant natural gas producing region in the United
States through our 30 compression sales and service locations. We have a highly
standardized compressor fleet, with approximately 481,000 horsepower operating
under contract in 23 states as of March 31, 2000. Our revenues from domestic
compression rental services were $83.6 million for the fiscal year ended March
31, 2000. We believe that our size and broad scope result in economies of scale
since the addition of incremental compressors in a region does not require us to
proportionately increase our investment in field personnel and administrative
support.
Since 1993, we have expanded our presence in select international markets,
including Argentina, Colombia, Venezuela and Australia. As of March 31, 2000, we
had 50 units aggregating approximately 52,000 horsepower operating under
contract in these markets. In addition, in March 2000, we were awarded
significant compression service projects in Mexico and Argentina which will
increase the amount of horsepower we operate internationally by at least 25%
within the next year. We are also pursuing opportunities in other strategic
international areas, including other South American countries and
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Southeast Asia. Our revenues from international operations have increased by
116% in the last year, from $6.8 million for the fiscal year ended March 31,
1999 to $14.7 million for the fiscal year ended March 31, 2000.
Our financial performance has been generally less affected by the
short-term market cycles and volatile commodity prices than the financial
performance of companies operating in other sectors of the oil and gas industry
because:
- compression is an essential component of natural gas production,
- our operations are tied primarily to natural gas consumption, which is
less cyclical in nature than exploration activities,
- compression equipment rental is often a lower cost alternative for
natural gas production, gathering and transportation companies,
- we have a broad customer base,
- we operate in diverse geographic regions,
- our compressors remain on-site for an average of 30 months before
reassignment and
- our standardized compressor fleet is durable and reliable.
Adding to this stability is the fact that while compressors often must be
highly engineered or reconfigured to meet the unique demands of our customers,
the fundamental technology of compression equipment has been stable and has not
experienced rapid technological change.
We believe that the capital raised in this offering and the financing and
operating lease arrangements which we will enter into concurrently with this
offering will allow us to continue to expand our compressor fleet and take
advantage of the significant growth and consolidation opportunities in our
industry, both domestically and internationally.
OUR GROWTH STRATEGY
Our growth strategy is to continue to focus on meeting the evolving needs
and demands of our customers by providing consistent, superior services and
dependable, high quality products. We believe that this approach strengthens our
relationships with our existing customers, helps us to attract new customers and
diversifies our revenue base, resulting in increased market share, revenues and
earnings. The key elements of our strategy are described below:
- FOCUSING ON PROVIDING A COMPLETE RANGE OF HIGH QUALITY SERVICES. We
believe that the key to our success is providing our customers with
consistent, high quality service and a full range of dependable
compression equipment tailored to their needs at competitive prices. Our
services and products deliver higher run-times resulting in increased
production and revenues for our customers.
- We have the equipment, personnel and logistical capabilities to provide
our customers with a wide variety of compression equipment and services
on a timely basis. We work with our customers to provide engineering
solutions to help them design a customized compression plan and then
provide them with the services and products to implement that plan. We
continuously expand, upgrade and reconfigure our rental fleet to ensure
our ability to meet the changing requirements of our customers in the
diverse geographic markets that we serve. In addition, our rigorous
preventative maintenance program and extensive field service network
permits us to promptly address maintenance issues. In recent years, we
have increased the overall size and average horsepower of our fleet and
have increased our fabrication of upper range units (generally over 600
horsepower) to better serve the needs of our customers at wellheads,
gathering systems, processing plants and pipelines. Since March 31,
1998, the horsepower of our fleet has increased by 29%.
- In April 1999, we completed construction of a high bay, heavy capacity
fabrication facility in Houston, Texas which allows us to increase our
capacity to fabricate larger compression units.
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- Our operations and maintenance personnel are highly-trained and, we
believe, among the most experienced in the industry. We have an
extensive maintenance and diagnostic program for our equipment and
provide remote monitoring of large horsepower units and compression
systems. As a result, we are able to provide consistent, high quality
service and achieve very high run-times for our compressors, resulting
in increased production and revenues for our customers.
- CONTINUING A CENTRALIZED, STANDARDIZED APPROACH TO OUR BUSINESS.
- We have centralized our management, corporate functions, training and
inventory controls. Our centralized system enables us to respond quickly
to market opportunities and changing conditions, and allows us to
provide consistent, high quality service and standardized pricing to our
customers operating in multiple locations worldwide.
- As a complement to these centralized functions, we have positioned
highly-trained sales and field personnel in all of the major domestic
gas producing regions in which our customers operate and, in some cases,
on-site with our key customers. This local presence, experience and
in-depth knowledge of our customers' operating needs and growth plans
provides us with significant competitive advantages and
internally-driven market share growth. Our field service and sales
personnel assist in identifying the needs of our customers and
communicate those needs to our sales force and corporate headquarters,
which allows us to participate in growth opportunities in the industry,
wherever they may occur.
- Using our automated inventory system, we are able to determine product
availability, identify the most efficient solution and promptly provide
the necessary parts and labor to any location worldwide.
- We have standardized our fleet of rental compressors to three compressor
platforms, Gemini, Ajax and Ariel. By standardizing, we are able to
develop extensive expertise in operating and maintaining our
compressors, provide consistent, high quality training of our operations
and maintenance personnel, efficiently resize and reconfigure our
compressors and reduce our costs by minimizing our inventory.
- We believe that we have one of the best safety records in the industry,
which enhances our customer loyalty and our ability to attract and
retain quality employees.
- In order to attract, motivate and retain our highly experienced sales
force and operations personnel, we have implemented a profit sharing
plan designed to link the compensation of our employees at all levels
with their individual performance as well as ours. In addition, we have
provided broad employee stock ownership opportunities. We have awarded
shares of our stock to employees following the Tidewater Compression
acquisition, have given all of our employees the opportunity to purchase
shares of our stock and have granted stock options to 20% of our
workforce.
- EXPANDING OUR OPERATIONS IN SELECT INTERNATIONAL MARKETS. With
approximately 52,000 horsepower operating internationally as of March 31,
2000, and an additional 13,000 horsepower under recently awarded
contracts, we have a strategic presence in the rapidly growing
compression markets of Argentina, Colombia, Venezuela and Australia, and
are building a presence in Mexico. We plan to leverage our existing
presence and customer base and strong reputation for the engineering and
fabrication of high specification gas and air compressors to expand our
offerings in these markets as well as others, including other South
American countries and Southeast Asia.
- EXPANDING OUR RENTAL FLEET AND CUSTOMER BASE THROUGH THE PURCHASE AND
LEASEBACK OF COMPRESSORS. As the trend toward outsourcing of compression
services continues, we are providing an increasing number of customers
the opportunity to sell their existing compression equipment to us in
purchase and leaseback transactions. In these transactions, we purchase a
customer's in-place compression equipment at the current market value and
then lease that equipment back to the customer under long-term operating
and maintenance contracts. As a result, the customer is able to
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outsource its compression operations and reallocate capital to its core
business activities while typically enjoying improved operational
performance. In addition, these arrangements expand our rental fleet and
provide us with the opportunity to promote our operations and maintenance
services, as well as to strengthen our relationships with these
customers. As of the date of this prospectus, we have consummated eight
purchase leaseback transactions aggregating approximately 26,000
horsepower with our customers.
- PURSUING INDUSTRY CONSOLIDATION OPPORTUNITIES. The rental compression
services industry has experienced significant consolidation over the past
several years but remains highly fragmented, with only a small number of
companies providing comprehensive compression services. We actively
participate in this consolidation trend. Since 1993, we have completed
six acquisitions, including our recent acquisition of Spectrum Rotary
Compression Inc., as described below. Integration of these acquired
businesses allows us to expand our fleet and to offer our comprehensive
range of products and services to an expanded customer base. We believe
that continuing industry consolidation will present us with opportunities
to acquire attractive smaller regional operators and large compression
service companies and assets in the future.
On April 28, 2000, we acquired all of the stock of Spectrum Rotary
Compression Inc. from Energy Spectrum Partners LP in exchange for 17,201
shares of our common stock and 68,804 shares of our preferred stock (which
common stock and preferred stock will be converted into an aggregate of
287,723 shares of common stock concurrently with this offering),
representing 4.91% and 4.96%, respectively, of our outstanding shares of
these classes prior to this offering and 2.2% of our common stock
following this offering. Spectrum has approximately 10,700 horsepower in
its fleet and provides us with an increased presence in the screw
compressor market. The shares issued to Spectrum are subject to a voting
agreement to be voted in the same manner as the Castle Harlan shares are
voted until completion of this offering.
INDUSTRY
Natural Gas Compression Overview
Natural gas compression is a mechanical process whereby a volume of gas at
an existing pressure is compressed to a desired higher pressure. We offer both
slow and high speed reciprocating compressors driven either by internal
combustion engines or electric motors. We also offer screw compressors for
applications involving low pressure natural gas. Most natural gas compression
applications involve compressing gas for its delivery from one point to another.
Low pressure or partially depleted natural gas wells require compression for
delivery of produced gas into higher pressured gas gathering systems.
Compression is required because over the life of an oil or gas well, natural
reservoir pressure typically declines as reserves are produced. As the natural
reservoir pressure of the well declines below the line pressure of the gas
gathering or pipeline system used to transport the gas to market, gas no longer
naturally flows into the pipeline. It is at this time that compression equipment
is applied in both field and gathering systems to boost the well's pressure
levels and allow gas to be brought to market. Compression is also used to
reinject natural gas down producing oil wells to help lift liquids to the
surface, known as gas lift operations. In secondary oil recovery operations,
natural gas compression is used to inject natural gas into wells to maintain
reservoir pressure. Compression is also used in gas storage projects to inject
gas into underground reservoirs during off-peak seasons for withdrawal later
during periods of high demand. Natural gas compression services are also used
for compressing feedstocks in refineries and for refrigeration applications in
natural gas processing plants.
Natural gas compression that is used prior to the "main line transmission
system," which transports gas from production to storage or the end user, is
considered "field" compression. We have been active in both segments of the
field compression market, production and gas gathering. During the production
phase, compression is used to boost the pressure of natural gas from the
wellhead so that natural gas can flow into the gathering system or pipeline for
transmission to an end-user. Typically, these applications require portable low
to mid-range horsepower compression equipment located at or near the wellhead.
The
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continually dropping pressure levels in natural gas fields require constant
modification and variation of on-site compression equipment.
In an effort to reduce costs for wellhead operators, operators of gathering
systems tend to keep the pressure of the gathering systems low. As a result,
more pressure is often needed to force the gas from the low pressure gathering
systems into the higher pressure pipelines. These applications generally require
larger horsepower compression equipment (600 horsepower and higher). Similarly,
as gas is transported through a pipeline, large compression units are applied
all along the pipeline to allow the natural gas to continue to flow through the
pipeline to its destination.
Gas producers, transporters and processors have historically owned and
maintained most of the compression equipment used in their operations. However,
in recent years, there has been a growing trend toward outsourcing compression
equipment. Customers that elect to outsource compression equipment have two
options for maintaining and/or operating such equipment. Full maintenance calls
for the service company to be responsible for the scheduled preventative
maintenance, 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. The other option is contract compression, which requires the
service company to maintain and operate and, in many cases, to install the
equipment. Often, a service company providing contract compression 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.
Rental compression units are primarily employed in the field compression
segment encompassing production and natural gas gathering. Renting compression
equipment offers customers:
- the ability to efficiently meet their changing compression needs over
time while limiting their capital investments in compression equipment,
- access to the compression service provider's specialized personnel and
technical skills, including engineers, field service and maintenance
employees, which generally leads to improved run times and production
rates and
- overall reduction in their compression costs through the elimination of a
spare parts inventory and other expenditures associated with owning and
maintaining compressor units.
Natural Gas Industry Conditions
A significant factor in the growth of the gas compression equipment market
is the increasing consumption of natural gas, both domestically and
internationally. In other words, it is the demand for natural gas, rather than
the more cyclical oil and gas exploration activities, that drives the demand for
compression services. As a result, our financial performance historically has
been less affected by the short-term market cycles and volatile commodity prices
of oil and natural gas than that of companies operating in other sectors of the
energy industry.
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. The closure of nuclear power plants and the current economic expansion have
contributed to the increased consumption of natural gas. In recent years,
natural gas has increased its market share of total domestic energy consumption.
Domestic consumption of natural gas increased by 13% from 1990 through 1998 to
approximately 22 trillion cubic feet, and industry sources forecast the domestic
consumption of natural gas to increase approximately 25% to 27 to 30 trillion
cubic feet by 2010.
At the end of 1998, there was approximately 14.8 million horsepower of
field compression equipment in the United States, of which approximately 4.1
million horsepower was outsourced. From 1993 to 1998, the compression services
industry grew at a rate of approximately 15.4% per year in the United States in
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<PAGE> 42
terms of horsepower, with the percentage of outsourced horsepower increasing
from 13% to 28%. We believe the domestic gas compression market will continue to
grow due to the following factors:
- higher natural gas consumption, which is increasing in the United States
at an average rate of 2.0% to 2.5% per year,
- the aging of producing natural gas fields in the United States, which
will require more compression to continue producing the same volume of
natural gas and
- increasing outsourcing by companies of compression needs in order to
reduce operating costs, improve production and efficiency and reallocate
capital to core business activities.
The international gas compression services market is currently
substantially smaller than the domestic market. However, we estimate significant
growth opportunities for international demand for compressor products and
services due to the following factors:
- higher natural gas consumption, which is increasing internationally at an
average rate of 3.0% to 4.0% per year,
- implementation of international environmental and conservation laws
preventing the prior practice of "flaring" of natural gas and recognition
of natural gas as a clean alternative to carbon fuels,
- a desire by a number of oil exporting nations to replace oil with natural
gas as a fuel source in local markets to allow greater exportation of
oil,
- increasing development of pipeline infrastructure, particularly in South
America, necessary to transport gas to local markets,
- growing demand for electrical power generation, for which the fuel of
choice tends to be natural gas and
- privatization of state-owned international energy producers, resulting in
increased outsourcing due to the focus on reducing capital expenditures
and enhancing cash flow and profitability.
As contrasted to the domestic market, the current international rental
compression market is substantially comprised of large horsepower compressors
that are maintained and operated by compression service providers. A significant
portion of this market involves comprehensive installation projects, which
include the design, fabrication, delivery, installation, operation and
maintenance of the compressors and the related gas treatment equipment by the
rental company. In these comprehensive projects, the customer's only
responsibility is to provide fuel gas within specifications. As a result of the
full service nature of these projects and the fact that these compressors
generally remain on-site for three to seven years, we are able to achieve higher
revenues and margins on these projects.
We believe we are well positioned to participate in a disproportionate
share of the future growth in this industry as we are one of the few compression
service providers with sufficient fleet size, operating infrastructure and
geographic scope to meet the diverse, full service needs of our customers.
Companies in our industry can achieve significant advantages through increased
size and geographic scope. As the number of rental units in a rental fleet
increases, the number of sales, engineering, administrative and maintenance
personnel required does not increase proportionately. As a result, companies
such as us with larger rental fleets have relatively lower operating costs and
higher margins due to economies of scale than smaller companies.
OPERATIONS
Rental Compressor Fleet
In recent years, there has been substantial growth in customer demand in
the over 600 horsepower category. As a result, we have focused, and will
continue to focus, future growth on this segment of the market. We have
increased the overall size and average horsepower of our fleet and have
increased our
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<PAGE> 43
fabrication of upper range units (generally over 600 horsepower) to meet this
demand and better serve the needs of our customers at wellheads, gathering
systems, processing plants and pipelines. Since March 31, 1998, the total
horsepower of our fleet has increased by 29%. For the fiscal year ended March
31, 2000, the average horsepower utilization rate for our fleet was
approximately 80.7%, which reflects average horsepower utilization based upon
our total average fleet horsepower. For the quarter ended March 31, 2000, this
average rate was approximately 83.5%
As of March 31, 2000, we owned 2,645 natural gas compressors ranging in
size from 15 horsepower to 3,000 horsepower, with an average of 240 horsepower,
as reflected in the following table:
<TABLE>
<CAPTION>
HORSEPOWER RANGE NUMBER OF UNITS TOTAL HORSEPOWER % OF HORSEPOWER
- ---------------- --------------- ---------------- ---------------
<S> <C> <C> <C>
0 - 99............................. 902 55,591 8.8%
100 - 299.............................. 1,132 189,711 30.0%
300 - 599.............................. 331 121,178 19.1%
600 and over............................ 280 266,918 42.1%
----- ------- ------
Total......................... 2,645 633,398 100.0%
</TABLE>
We have standardized our rental fleet around three gas compressor
platforms: Gemini for smaller horsepower applications (less than 150
horsepower), Ajax for mid-range applications (100-600 horsepower) and Ariel for
larger horsepower applications (over 600 horsepower). These three compressor
platforms represent over 90% of our horsepower. This high level of fleet
standardization and durability:
- enables us to minimize our fleet maintenance capital requirements,
- enables us to minimize inventory costs,
- facilitates low-cost compressor resizing and
- allows us to develop strong technical proficiency in our maintenance and
overhauling operations, which enables us to achieve high run-time rates
while maintaining low operating costs, a benefit both to us and our
customers.
In addition to being dependable, our smaller Gemini compressors are
lightweight and highly portable. Our Ajax compressors are a strong choice for
mid-range compression projects because of their high reliability and
versatility. Due to their design, the Ajax compressors burn the broadest variety
of fuel gas, including "sour" gas, which is produced in a number of domestic and
international regions. Our larger horsepower units are generally Ariel
compressors powered by Caterpillar or Waukesha engines. These compressors
operate at higher speeds and, although larger than the lower horsepower
compressors, are transportable. The combination of these larger horsepower units
and the lower horsepower Ajax and Gemini units enable us to offer our customers
gas compressors for use in most segments of the production, gathering and
transportation process.
We believe our rental fleet is in excellent condition as we provide full
maintenance on virtually all of our operating units.
Domestic Operations
We own one of the largest domestic rental fleets of natural gas
compressors, comprising over 581,000 horsepower and approximately 2,595 units as
of March 31, 2000. We have compressor services operations in 23 states and
operate out of 30 sales and service locations. We operate in every natural gas
producing region of the United States. Our geographic diversity and nationwide
operations enable us to:
- provide responsive and cost effective service to our rental customers, as
well as for units owned by others,
- increase our revenues with relatively little incremental overhead expense
and
- offer our customers the ability to deal with one nationwide provider for
all of their compression equipment and service needs.
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<PAGE> 44
Our marketing and client service functions are performed on a coordinated
basis by our sales and field service personnel. Our salespersons regularly visit
their customers to ensure customer satisfaction and determine customer needs as
to services currently being provided and also to ascertain potential future
compressor requirements of these customers, which provides us with significant
competitive advantages. Our salespersons also communicate regularly with our
field service and sales employees who, in many cases, have day-to-day
relationships with key customer personnel and may have advance notice of
customer planning. This ongoing communication between our sales and field
service personnel allows us to quickly identify and respond to customer requests
in this relationship driven, service intensive industry.
When a salesperson is advised of a new compression service opportunity,
that salesperson obtains relevant information concerning the project including
gas flow, pressure and gas composition. The salesperson will then search a
computerized data base to determine the availability of an appropriate
compressor unit in our fleet for that project. If an appropriate compressor is
available, it is immediately deployed. If a unit requires maintenance or
reconfiguration, our maintenance personnel will service it as quickly as
possible to meet the needs of the customer. If providing the appropriate unit
would entail significant overhaul cost, the salesperson will communicate with
the customer, engineer and field service personnel and contact a supervisor to
determine the timing of the required maintenance or overhaul to develop a
competitive rental proposal.
Rental rates generally are determined by compressor category based on our
standardized rental rates with variations as necessary to secure the service
contract and assure profitability of each contract. Our service contracts
usually are variations of a standard service contract associated with a master
service agreement. The standard rental contract covers the technical
specifications, equipment selection and performance, site location and pricing
for the individual project. To ensure the proper pricing and service
arrangements on larger horsepower installations and new compression
opportunities, our engineers and financial personnel are highly involved in the
early stages of the proposal process.
The majority of our service 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. At the end of the initial term, rentals continue at the option of the
lessee on a month-to-month basis. After that time, the compressor may be
returned or replaced with a different compressor. This constant need for varying
the size and/or configuration of compressor packages in the same location over
time is a significant advantage of outsourced compressors over owned
compressors. Our standardized fleet and efficient operations allow us to provide
different compressors and reconfigure our units to meet these changing needs
quickly and profitably.
International Operations
In recent years, we have expanded our presence in select international
markets, including Argentina, Colombia, Venezuela and Australia. Our presence in
these international markets, which dates back over five years, usually generates
higher margins for us and produces longer-term contracts than our domestic
business. As of March 31, 2000, we had 50 units aggregating approximately 52,000
horsepower operating under contract in these markets. In addition, in March
2000, we were awarded significant contract compression service projects in
Mexico and Argentina which will increase the amount of horsepower we operate
internationally by at least 25% within the next year. We are also pursuing
opportunities in other strategic international areas, including other South
American countries and Southeast Asia. For the fiscal year ended March 31, 2000,
approximately 15% of our rental revenue was generated internationally.
Our international operations are focused on large horsepower compressor
markets and frequently involve long-term comprehensive service projects. These
projects require us to provide complete engineering and design in the proposal
process. Our extensive engineering and design capabilities and reputation of
high quality fabrication give us a competitive advantage in these markets. In
addition, our new high bay fabrication facility positions us to be able to meet
increasing demand for these services and products in the future. Commercial
negotiations proceed only after the acceptance of proposed engineering
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<PAGE> 45
designs and concepts. International service agreements differ significantly from
domestic service agreements as individual contracts are negotiated for each
project.
Operations, Maintenance and Overhaul Services
We provide a comprehensive contract compression service, which includes
rental, operation and maintenance services, for most of our larger horsepower
units, including our international units, and also on units owned by our
customers. When providing these full contract compression services, we work
closely with a customer's field service personnel so that the compressor can be
adjusted to efficiently match changing characteristics of the gas produced. We
generally operate the large horsepower compressors, and include the operations
fee as part of our rental rate. Large horsepower units are more complex, and by
operating the equipment ourselves we reduce our maintenance and overhaul
expenses. While we do not require our customers to retain us to operate smaller
horsepower units, we generally train our customers' personnel in fundamental
compressor operations.
We maintain major overhaul and repackaging facilities in Mineral Wells,
Texas, Houston, Texas and Grand Junction, Colorado. Each of these overhaul
facilities is equipped with in-house engine rebuild and test equipment, full
machine shops, environmentally-approved painting facilities and high capacity
cranes. We also maintain 23 field service facilities. We provide maintenance
services on substantially all of our rental fleet and contract compression for
most of our larger horsepower units. Maintenance services include the scheduled
preventative maintenance repair and general up-keep of compressor equipment. As
a complement to our maintenance business, we offer, at additional cost, supplies
and services such as antifreeze, lubricants, property damage insurance on the
equipment, and prepaid freight to the job site. We also may provide for
installation, which for our typical lower, mid-range and smaller horsepower
units involves significantly less engineering and cost than the comprehensive
service concept prevalent in the international markets. We also routinely
repackage or reconfigure some of our existing fleet to adapt to our customers'
needs.
We have over 300 trained and equipped field service representatives and
mechanics located throughout the United States and 50 such representatives in
international locations. The field service representatives are responsible for
preventive maintenance, repair, preparation and installation of rental units.
The mechanics perform major overhaul and unit rework in the major overhaul
facilities. On average, each of our units undergoes a major overhaul once every
six to eight years. A major overhaul involves the rebuilding of the unit in
order to materially extend its useful life or to enhance the unit's ability to
fulfill broader or different rental applications. One of our overhaul facilities
operates a unit test loop and also functions as a full-time training center for
our personnel.
Our field gas compressors are maintained in accordance with daily, weekly,
monthly and annual maintenance schedules that have been developed and refined
over our long history of maintaining and operating compressors. These procedures
are constantly updated as technology changes and our operations group develops
new techniques and procedures. In addition, because our field technicians
provide maintenance on virtually all of our installed compression equipment,
they are familiar with the condition of our equipment and can readily identify
potential problems. In our experience, these rigorous procedures maximize
component life and unit availability and minimize avoidable downtime.
We also have a technical service group which is involved in our
comprehensive service proposals and monitors our larger horsepower units. This
group utilizes technologically advanced diagnostic equipment that permits
sophisticated field and remote diagnostic analyses of engines and compressors,
as well as emission analyses to insure compliance with regulatory requirements.
FABRICATION AND SALES
As a complement to our compressor rental service operations, we design,
engineer, assemble and sell natural gas and air compressors for engineering and
construction firms, as well as for exploration and production companies both
domestically and internationally. We also fabricate compressors for our own
fleet. Our fabrication facilities are located in Houston, Texas. In April 1999,
we completed construction of
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<PAGE> 46
a new 20,000 square foot heavy capacity fabrication shop and paint booth. This
facility enhances our ability to expand our fleet of higher horsepower
compressors.
When servicing our equipment sale customers, we provide compressors that
are built in accordance with specific criteria of the customer as well as
compressors that are prepackaged. We act as a distributor for Ariel gas
compressors and as an original equipment manufacturer for Atlas Copco air
compressors. Some of the compressors manufactured by these entities are used by
us in our engineered products operations. Twenty-eight percent of our total
revenues for the year ended March 31, 2000 were generated from our fabrication
and sales operations.
MARKETS AND CUSTOMERS
Our customer base consists of over 650 domestic and international companies
engaged in all aspects of the oil and gas industry, including major integrated
oil and gas companies, international state owned oil and gas companies, large
and small independent producers, natural gas processors, gatherers and
pipelines. We have entered into strategic alliances with some of our key
customers. These alliances are essentially preferred vendor arrangements and
give us preferential consideration for the compression needs of these customers.
In exchange, we provide these customers with enhanced product availability,
product support and favorable pricing. In fiscal year 2000, no single customer
accounted for as much as 10% of our total revenues. Our top 20 customers
accounted for approximately 54% of our rental revenues in fiscal year 2000.
PROPERTIES
The following table describes our owned facilities:
<TABLE>
<CAPTION>
LOCATION SQUARE FEET ACREAGE USES
- -------- ----------- ------- ----
<S> <C> <C> <C>
Houston, Texas....................... 114,000 30.0 Corporate headquarters,
repackaging, overhaul and
fabrication
Mineral Wells, Texas................. 83,000 37.0 Repackaging, overhaul and field
service
Grand Junction, Colorado............. 11,000 2.8 Repackaging, overhaul and field
service
Stinnett, Texas...................... 4,000 4.0 Field service
</TABLE>
In addition to our owned facilities, we lease 19 domestic field service
offices, seven domestic sales offices and two international sales offices.
COMPETITION
The natural gas compressor rental, maintenance, service and fabrication
business is highly competitive. We face competition from large national and
multinational companies with greater financial resources and, on a regional
basis, from several smaller companies.
As of March 31, 2000, our main competitors were Hanover Compression
Company, Weatherford Global Compression Services, Production Operators, Inc. (a
subsidiary of Schlumberger Limited), Compressor Systems, Inc. and J-W Operating
Company. We believe that we compete effectively on the basis of customer
service, including the availability of our personnel in remote locations, price,
flexibility in meeting customer needs and quality and reliability of our
compressors and related services.
Our engineered products division competes with other fabricators of
compressor units. The compressor fabrication business is dominated by a few
major competitors, several of which also compete with us in the compressor
rental business.
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<PAGE> 47
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
We are subject to stringent and complex federal, state and local laws and
regulations regarding the protection of the environment. Compliance with these
laws and regulations may affect the costs of our operations. Moreover, failure
to comply with these environmental laws and regulations may result in the
imposition of administrative, civil, and criminal penalties. Not all of our
properties may be in full compliance with all applicable environmental
requirements. However, as part of the regular evaluation of our operations, we
are updating the environmental condition of our acquired properties as necessary
and, overall, we believe that we are in substantial compliance with applicable
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 our
financial condition or results of operations.
Under the Comprehensive Environmental Response, Compensation and Liability
Act, referred to as "CERCLA," and related state laws and regulations, joint and
several liability can be imposed without regard to fault or the legality of the
original conduct on certain classes of persons that contributed to the release
of a "hazardous substance" into the environment. These persons include the owner
and operator of a contaminated site where a hazardous substance release occurred
and any company that transported, disposed of, or arranged for the transport or
disposal of hazardous substances released at the site. Under CERCLA, we may be
liable for the costs of cleaning up the hazardous substances that have been
released into the environment and for damages to natural resources. In addition,
it is not uncommon for the neighboring land owners and other third parties to
file claims for personal injury, property damage and recovery of response costs.
As part of our operations, we generate wastes, including hazardous wastes
such as used paints and solvents. The management and disposal of hazardous
wastes are subject to the Resource Conservation and Recovery Act, referred to as
RCRA, and comparable state laws. These laws and the regulations implemented
thereunder govern the generation, storage, transfer and disposal of hazardous
wastes. The U.S. Environmental Protection Agency and various state agencies have
limited the approved methods of disposal for certain hazardous and nonhazardous
wastes.
We currently own or lease, and have in the past owned or leased, a number
of properties that have been used, some for many years by third parties over
whom we have no control, in support of natural gas compression services or other
industrial operations. As with any owner or operator of property, we may be
subject to clean-up costs and liability under CERCLA, RCRA or other
environmental laws for hazardous waste, asbestos or any other toxic or hazardous
substance that may exist on or under any of our properties, including waste
disposed or groundwater contaminated by prior owners or operators. In the past,
we have performed certain remediation activities required under environmental
laws. The cost of this remediation has not been material to date. We are
currently undertaking groundwater monitoring at two of our facilities, which may
further define remedial obligations. We believe that former owners and operators
of many of these properties, including Tidewater, Inc., are responsible under
environmental laws and contractual agreements to pay for or perform such
remediation, or to indemnify us for our remedial costs. There can be no
assurance that these other entities will fulfill their legal or contractual
obligations, and their failure to do so could result in material costs to us.
In most cases, our customers contractually assume all environmental
compliance and permitting obligations and environmental risks related to
compressor operations, even in cases where we operate and maintain the
compressors on their behalf. Under most of our rental service agreements, our
customers must indemnify us for any loss or liability we may suffer as a result
of the failure to comply with applicable environmental laws, including
requirements pertaining to necessary permits such as air permits.
Air pollutant emissions from natural gas compressor engines are a
substantial environmental concern for the natural gas transportation industry.
Federal regulations are expected to require operators to impose or increase
obligations to reduce emissions of nitrogen oxides from internal combustion
engines in transmission service.
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<PAGE> 48
Stricter standards in environmental legislation or regulations that may
affect us 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 (including, but not limited to, regulations concerning
ambient air quality standards and global climate change) could require us to
undertake significant capital expenditures and could otherwise have a material
adverse effect on our business, results of operations and financial condition.
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 us.
Our foreign operations are potentially subject to similar governmental
controls and restrictions relating to the environment. We believe that we are in
substantial compliance with any such foreign requirements pertaining to the
environment.
BACKLOG
As of March 31, 2000, we had a compressor unit fabrication backlog for sale
to third parties of approximately $11.1 million, compared to $12.7 million as of
March 31, 1999. All backlog is expected to be produced within a 180-day period.
Generally, units to be sold to third parties are assembled according to each
customer's specifications and sold on a turnkey basis. We purchase components
for such compressor units from third party suppliers.
LEGAL PROCEEDINGS
We are not currently defending any material litigation or proceeding and
are not aware of any such litigation or proceeding threatened against us.
INSURANCE
We believe that our insurance coverage is customary for the industry and
adequate for our business. As is customary in the natural gas service operations
industry, we review our safety equipment and procedures and carry insurance
against some, but not all, risks of our business. Losses and liabilities would
reduce our revenues and increase our costs to the extent not covered by
insurance. The natural gas service operations business can be hazardous,
involving unforeseen circumstances such as uncontrollable flows of gas or well
fluids, fires and explosions or environmental damage. To address the hazards
inherent in our business, we maintain an insurance program covering our
worldwide interests. This insurance coverage includes physical damage coverage,
third party general liability insurance, employer's liability, including well
control, environmental and pollution and other coverage, although coverage for
environmental and pollution-related losses is subject to significant
limitations. In addition, our service contracts shift certain risks to our
customers.
EMPLOYEES
As of March 31, 2000, we had approximately 550 employees. None of our
employees are covered by a collective bargaining agreement. We believe that our
relationship with our employees is satisfactory.
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<PAGE> 49
MANAGEMENT
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to each
person who is a director or an executive officer of Universal or, where noted,
its operating subsidiary:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Stephen A. Snider.............. 52 President, Chief Executive Officer and Director
Ernie L. Danner................ 45 Executive Vice President and Director
Richard W. FitzGerald.......... 46 Senior Vice President and Chief Financial Officer
Valerie L. Banner.............. 44 Senior Vice President, General Counsel and Secretary
Newton H. Schnoor.............. 52 Senior Vice President and Controller
Jack B. Hilburn, Jr. .......... 55 Senior Vice President of Operations of Universal
Compression, Inc.
Kirk E. Townsend............... 42 Vice President of Sales of Universal Compression,
Inc.
Hanford P. Jones............... 48 Vice President of Engineered Products of Universal
Compression, Inc.
Samuel Urcis................... 65 Director and Chairman of the Executive Committee of
the Board
Thomas C. Case................. 51 Director
John K. Castle................. 59 Director
C. Kent May.................... 60 Director
William M. Pruellage........... 26 Director
</TABLE>
The following individuals are our executive officers:
Stephen A. Snider has been President of Universal since consummation of the
Tidewater Compression acquisition, and President of Universal Compression, Inc.
and its predecessor since 1994. Mr. Snider joined Tidewater in 1975 as General
Manager of air compressor operations. In 1979, Mr. Snider established Tidewater
Compression's operations in the Northeastern United States. In 1981, he assumed
responsibility for the Western United States operations of Tidewater
Compression. Mr. Snider left Tidewater in 1983 to own and operate businesses
unrelated to the energy industry. He returned to Tidewater in 1991 as Senior
Vice President of Compression. Mr. Snider has 25 years of experience in senior
management of operating companies, and also serves as a director of Energen
Corporation.
Ernie L. Danner joined Universal as Chief Financial Officer and Executive
Vice President upon consummation of the Tidewater Compression acquisition. In
April 1999, his duties as Chief Financial Officer were assumed by Richard
FitzGerald. Prior to joining Universal, Mr. Danner served as Chief Financial
Officer and Senior Vice President of MidCon Corp., an interstate pipeline
company and a wholly-owned subsidiary of Occidental Petroleum Corporation. From
1988 until May 1997, Mr. Danner served as Vice President, Chief Financial
Officer and Treasurer of INDSPEC Chemical Company and he also served as a
director of INDSPEC. From 1984 to December 1988, he was the Executive Vice
President -- Finance, Administration and Planning of Adams and Porter, an
international agency specializing in marine and energy insurance.
Richard W. FitzGerald has been Senior Vice President and Chief Financial
Officer of Universal since April 1999. Mr. FitzGerald held the position of Vice
President -- Financial Planning and Services of KN Energy from February 1998 to
April 1999. Prior to that date, Mr. FitzGerald served as Vice President and
Controller of MidCon Corp., a wholly-owned subsidiary of Occidental Petroleum
Corporation, for a period in excess of five years.
Valerie L. Banner has been Senior Vice President, General Counsel and
Secretary of Universal since June 1998. Ms. Banner was in private practice as a
solo practitioner from March 1996 to May 1998. Prior to that time, Ms. Banner
was employed as Vice President and General Counsel of Team, Inc., an American
Stock Exchange company providing industrial services, for a period in excess of
five years.
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<PAGE> 50
Newton H. Schnoor has been Senior Vice President and Controller of
Universal and Universal Compression, Inc., our operating subsidiary, since
consummation of the Tidewater Compression acquisition, and prior to such
acquisition Mr. Schnoor was Vice President and Controller of our operating
subsidiary and its predecessor since 1985. Mr. Schnoor joined Tidewater in 1979
as Controller of the Western Division of its rental operations. In 1985, Mr.
Schnoor supervised the national consolidation and reorganization of the
accounting group in Houston. Mr. Schnoor has over 19 years of management
experience in the natural gas compression industry.
Jack B. Hilburn, Jr. has been Senior Vice President of Operations of
Universal Compression, Inc., our operating subsidiary, since April 1999. Mr.
Hilburn is responsible for all field operations, overhaul shops and warehouses.
Mr. Hilburn joined Universal in 1994 to oversee domestic operations. In
September 1996, Mr. Hilburn was promoted to Vice President of Operations and in
April 1999, he was promoted to Senior Vice President of Operations. Prior to
1994, Mr. Hilburn was employed by Marathon Oil Corporation in various
capacities, including Region Manager of southeast onshore and lower 48 offshore
production operations, and later as Manager of Operations and Construction
Services. Mr. Hilburn has over 26 years of management experience in the oil and
gas industry.
Kirk E. Townsend has been Vice President of Sales of Universal Compression,
Inc., our operating subsidiary, since October 1999. Mr. Townsend is presently
responsible for all sales activities both domestic and international. Mr.
Townsend joined Universal in 1979 as a domestic sales representative. In 1986,
he became an international sales representative for Universal. Mr. Townsend was
promoted to Vice President of Business Development in April 1999, and Vice
President of Sales in October 1999. Mr. Townsend has over 21 years of sales and
management experience in the natural gas compression industry.
Hanford P. Jones has been Vice President of Engineered Products of
Universal Compression, Inc., our operating subsidiary, since April 1999. Mr.
Jones is responsible for all engineering and fabrication production of Universal
Compression's packaging division. Mr. Jones joined Universal Compression in
January 1999, as General Manager of Engineered Products. From May 1998 to
January 1999, Mr. Jones performed engineering and pipeline operation consulting
services for various companies. Prior to May 1998, Mr. Jones was employed by
NorAm Energy Corporation for a period in excess of 18 years in various
capacities, including Region Manager of NorAm's Western Region, and later as
Chief Engineer and Engineering Manager. Mr. Jones has over 25 years of
engineering and management experience in the oil and gas industry.
In addition to Messrs. Snider and Danner, the following individuals serve
on our board of directors:
Samuel Urcis 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. Mr.
Urcis has served as a Director of the Glaucoma Research Foundation, and as a
Trustee of the Monterey Institute of International Studies. Mr. Urcis serves as
a director of Universal pursuant to an agreement entered into in connection with
the Tidewater Compression acquisition.
Thomas C. Case served as the President of Mobil Global Gas & Power, Inc.
and was responsible for gas marketing and power development in North and South
America from 1998 until December 1999. Mr. Case retired from Mobil on April 1,
2000. From 1996 to 1997, Mr. Case was the Executive Vice President of Duke
Energy (formerly Pan Energy) Trading and Market Services, a joint venture
between Duke Energy and Mobil. From 1991 to 1996, he held various positions with
Mobil serving at various times as President and Executive Vice President/Chief
Operating Officer of Mobil Natural Gas Inc., Manager of Strategic Planning for
Exploration and Production of Mobil and President of Mobil Russia.
44
<PAGE> 51
John K. Castle has been Chairman of Castle Harlan, Inc. since 1987. Mr.
Castle is also Chairman of Castle Harlan Partners III G.P., Inc., which is the
general partner of the general partner of Castle Harlan Partners, III, L.P.,
Universal's controlling stockholder, and of Castle Connolly Medical Ltd. and
Castle Connolly Graduate Medical Publishing, LLC. He serves as Chairman and
Chief Executive Officer of Branford Castle Holdings, Inc., an investment holding
company. Immediately prior to forming Branford Castle Holdings, Inc. in 1986,
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., Commemorative Brands, Inc., H&C Purchase Corporation,
Wilshire Restaurant Group, Inc. and 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 Presbyterian Hospital Authority, the
Whitehead Institute of Biomedical Research. Formerly, Mr. Castle was a Director
of the Equitable Life Assurance Society of the United States and Trustee of the
New York Medical College, where he served as Chairman of the Board for 11 years.
C. Kent May is a Senior Vice President, General Counsel, Secretary and a
Director of Anchor Glass Container Corporation. He is General Counsel, Secretary
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 &
Mellotte, L.L.C. since 1964 and was Managing Partner of the firm from 1991 to
1996. Mr. May is a Director of the Mendelssohn Choir and the John Ghaznavi
Foundation.
William M. Pruellage became a Director of Universal in April 2000. Mr.
Pruellage is an Associate with Castle Harlan, Inc. Prior to joining Castle
Harlan in July 1997, Mr. Pruellage worked as an investment banking analyst at
Merrill Lynch since July 1995. Prior to that time, Mr. Pruellage was a student
at Georgetown University, where he studied finance and international business.
Mr. Pruellage is also a director of Wilshire Restaurant Group, Inc. and Taylor
Publishing Company.
No family relationship exists between any of our executive officers or
between any of them and any of our directors. Each of our directors has served
for at least two fiscal years, except Mr. Case, who was elected during fiscal
year 1999, and Mr. Pruellage, who was elected in April 2000.
Following this offering, we will appoint one additional individual who is
independent of Universal and Castle Harlan to serve on our board of directors.
In addition, in connection with the early termination of our management
agreement with Castle Harlan, we have agreed that at Castle Harlan's request, we
will nominate an additional director designated by Castle Harlan. See "Related
Transactions -- Management Agreement."
ELECTION OF CERTAIN DIRECTORS
We have agreed with Castle Harlan to nominate three persons designated by
it as directors, so long as these designees are reasonably qualified, and we
have agreed that we will recommend in our future proxy statements that our
stockholders vote for these designees. Castle Harlan will have this right as
long as it, together with its affiliates, continues to beneficially own at least
15% of our outstanding common stock (including the shares over which it has
voting control pursuant to voting agreements and voting trusts).
CLASSIFIED BOARD OF DIRECTORS
Our directors are divided into three classes serving staggered three-year
terms. As a result, stockholders will elect approximately one-third of the board
of directors each year. These provisions, together with the provisions of the
restated certificate of incorporation that allow the board of directors to fill
vacancies in or increase the size of the board of directors, would prevent a
stockholder from removing incumbent directors and filling such vacancies with
its nominees in order to gain control of the board.
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<PAGE> 52
C. Kent May and Thomas C. Case serve as Class A Directors, whose terms
expire at the 2001 annual meeting of our stockholders, Ernie L. Danner and
Stephen A. Snider serve as Class B Directors, whose terms expire at the 2002
annual meeting of our stockholders, and John K. Castle, Samuel Urcis and William
M. Pruellage serve as Class C Directors, whose terms expire at the 2003 annual
meeting of our stockholders.
COMMITTEES OF THE BOARD
Our board of directors has established an Executive Committee, Audit
Committee and Compensation Committee.
The Executive Committee, to the extent permitted by Delaware law, has all
powers and rights of our board of directors. The members of the Executive
Committee are Messrs. Urcis (Chairman), Castle, Pruellage and Snider.
The Audit Committee is primarily concerned with the effectiveness of our
accounting policies and practices, financial reporting and internal controls.
The Audit Committee is authorized to (i) select, retain and dismiss our
independent auditors, (ii) review the plans, scope and results of the annual
audit, the independent auditors' letter of comments and management's response
thereto, and the scope of any non-audit services which may be performed by the
independent auditors, (iii) manage our policies and procedures with respect to
internal accounting and financial controls and (iv) review any changes in
accounting policy. The current members of the Audit Committee are Messrs. Urcis
(Chairman), May and Case, and following the closing of this offering, the
members will be Messrs. May and Case.
The Compensation Committee is authorized and directed to review and approve
compensation and benefits of the executive officers, to review and approve the
annual salary plans, and to review and advise our board of directors regarding
the benefits, including bonuses, and other terms and conditions of employment of
our other employees. Members of the Compensation Committee are Messrs. Castle,
Pruellage and Urcis.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation for
fiscal 2000, 1999 and 1998 for our Chief Executive Officer and our other four
highest paid officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
------------------- UNDERLYING ALL OTHER
FISCAL SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)
--------------------------- ------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Stephen A. Snider........................ 2000 170,000 35,000 6,619 15,000(1)
President & Chief Executive Officer 1999 170,000 43,890 6,619 41,965(1)
1998 170,000 172,500 6,619 1,128,976(1)
Richard W. FitzGerald(2)................. 2000 146,049 20,000 2,206 34,132(3)
Senior Vice President & 1999 -- -- -- --
Chief Financial Officer 1998 -- -- -- --
Newton H. Schnoor........................ 2000 100,000 15,000 2,206 8,191(4)
Senior Vice President & Controller 1999 95,000 26,058 2,206 6,851(4)
1998 78,354 48,600 2,206 106,245(4)
Kirk E. Townsend......................... 2000 229,521(5) 15,000 1,550 21,878(6)
Vice President of Sales of 1999 154,436(5) -- 400 9,331(6)
Universal Compression, Inc. 1998 235,041(5) -- 400 12,722(6)
Jack B. Hilburn, Jr. .................... 2000 110,000 15,000 2,206 4,843(7)
Senior Vice President of Operations 1999 91,250 17,310 900 7,774(7)
of Universal Compression, Inc. 1998 85,000 34,500 900 91,985(7)
</TABLE>
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<PAGE> 53
- ---------------
(1) Includes (a) matching contributions made by Tidewater and Universal to Mr.
Snider's 401(k) account of $5,100 during fiscal 2000 and fiscal 1999 and
$2,069 during fiscal 1998, (b) $3,876 in health premiums paid by Tidewater
and Universal on behalf of Mr. Snider under its executive medical plans
during each of fiscal 1998, 1999 and 2000, (c) payments made by Tidewater
and Universal on behalf of Mr. Snider pursuant to their Supplemental Savings
Plans of $3,187 during fiscal 2000 and fiscal 1999 and $3,031 during fiscal
1998, (d) $29,800 paid by Universal to Mr. Snider for moving expenses during
fiscal 1999 and (e) $1,120,000 paid to Mr. Snider in fiscal 1998 as
incentive compensation pursuant to the completion of the Tidewater
Compression acquisition.
(2) Mr. FitzGerald joined Universal in April 1999.
(3) Includes (a) matching contributions made to Mr. FitzGerald's 401(k) account
of $3,750, (b) health care premiums paid on behalf of Mr. FitzGerald under
our Executive Medical Plan of $3,553, (c) payment made on behalf of Mr.
FitzGerald pursuant to our Supplemental Savings Plan of $750 and (d) $25,886
paid to Mr. FitzGerald for moving expenses.
(4) Includes (a) matching contributions made to Mr. Schnoor's 401(k) account of
$3,000 during fiscal 2000, $2,850 during fiscal 1999 and $2,350 during
fiscal 1998, (b) $3,876 in health care premiums paid on behalf of Mr.
Schnoor under our Executive Medical Plan during each of fiscal 2000 and
1999, (c) payment made on behalf of Mr. Schnoor pursuant to our Supplemental
Savings Plan of $1,000 during fiscal 2000 and $125 during fiscal 1999 and
(d) $103,500 paid to Mr. Schnoor during fiscal 1998 as incentive
compensation pursuant to the completion of the Tidewater Compression
acquisition.
(5) Includes sales commissions.
(6) Includes (a) matching contributions made to Mr. Townsend's 401(k) account of
$6,886 during fiscal 2000, $7,051 during fiscal 1999 and $4,449 during
fiscal 1998, (b) $3,876 in health care premiums paid on behalf of Mr.
Townsend under our Executive Medical Plan during fiscal 2000, (c) payment
made on behalf of Mr. Townsend to our Supplemental Savings Plan of $2,543
during fiscal 2000, (d) an automobile allowance paid to Mr. Townsend of
$4,281 during fiscal 2000, $4,068 during fiscal 1999 and $5,412 during
fiscal 1998 and (e) $4,200 paid to Mr. Townsend for club dues during fiscal
2000.
(7) Includes (a) matching contributions made to Mr. Hilburn's 401(k) account of
$2,225 during fiscal 1999 and $1,381 during fiscal 1998, (b) health care
premiums paid on behalf of Mr. Hilburn of $3,876 in each of fiscal 2000 and
fiscal 1999 and $162 in fiscal 1998, (c) an automobile allowance paid to Mr.
Hilburn of $720 in fiscal 2000, $1,341 in fiscal 1999 and $2,631 in fiscal
1998 and (d) $87,500 paid to Mr. Hilburn during fiscal 1998 as incentive
compensation pursuant to the completion of the Tidewater Compression
acquisition.
The following table sets forth grants of options to purchase shares of
common stock during fiscal 2000:
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OR OPTION TERM(2)
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION --------------------
GRANTED IN 2000 ($/SHARE) DATE 5% 10%
---------- ---------------- ----------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stephen A. Snider.......... -- -- -- -- -- --
Richard W. FitzGerald...... 16,379 30.8% $6.73 4/09 $69,324 $175,679
Newton H. Schnoor.......... -- -- -- -- -- --
Kirk E. Townsend........... 4,826 9.1 6.73 11/09 20,426 51,763
3,712 7.0 6.73 4/09 15,711 39,814
Jack B. Hilburn............ 9,697 18.3 6.73 4/09 41,042 104,009
</TABLE>
47
<PAGE> 54
- ---------------
(1) All outstanding options will vest in full upon completion of this offering.
(2) The hypothetical potential appreciation shown in these columns reflects the
required calculations at annual assumed appreciation rates of 5% and 10%, as
set by the Securities and Exchange Commission, and therefore is not intended
to represent either historical appreciation or anticipated future
appreciation of Universal's common stock.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING
UNEXERCISED OPTIONS AS OF VALUE OF OPTIONS
MARCH 31, 2000(1)(2) AS OF MARCH 31, 2000(3)
---------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Stephen A. Snider.......................... 32,763 16,382 $500,291 $250,153
Richard W. FitzGerald...................... -- 16,379 -- 250,107
Newton H. Schnoor.......................... 10,919 5,460 166,733 83,374
Kirk E. Townsend........................... 2,554 8,954 39,000 136,728
Jack B. Hilburn............................ 4,455 11,924 68,028 182,079
</TABLE>
- ---------------
(1) No options were exercised by any named executive officer during fiscal year
2000.
(2) All unexercisable options will vest in full upon completion of this
offering.
(3) Calculated using an assumed initial public offering price of $22.00 per
share as the assumed fair market value per share of common stock on March
31, 2000.
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with the following officers:
- Stephen Snider on February 20, 1998 pursuant to which Mr. Snider serves
as our President for an annual base salary of $170,000, plus a target
bonus of up to 70% of such base salary;
- Ernie Danner on February 20, 1998 pursuant to which Mr. Danner serves as
our Executive Vice President for an annual base salary of $24,000, plus a
discretionary bonus;
- Richard FitzGerald effective April 12, 1999 pursuant to which Mr.
FitzGerald serves as Senior Vice President and Chief Financial Officer
for an annual base salary of $150,000, plus a target bonus of up to 50%
of such base salary;
- Valerie Banner effective June 1, 1998 pursuant to which Ms. Banner serves
as our Senior Vice President and General Counsel for an annual base
salary of $100,000, plus a target bonus of up to 50% of such base salary;
and
- Newton Schnoor on February 20, 1998 pursuant to which Mr. Schnoor serves
as our Senior Vice President and Controller for an annual base salary of
$100,000, plus a target bonus of up to 50% of such base salary.
Each employment agreement has an initial term of three years, except for
Ms. Banner's, which has a one-year term with automatic one-year renewals
thereafter. If during the stated duration or any extension of duration, a
"change of control" occurs, each agreement automatically extends to a date that
is the second anniversary of the change of control. In addition, each employment
agreement, other than Ms. Banner's, provides that if the officer is terminated
without cause during the initial term, the officer will be paid for the
remainder of the term, plus a bonus amount based on previously paid bonuses. Ms.
Banner's employment agreement provides that if her employment is terminated
without cause, she is entitled to a lump sum severance payment equal to her
annual base salary in effect at the time of termination plus her average annual
bonus. Pursuant to the employment agreements and our officers' incentive plan,
bonuses are payable based on our safety record and financial performance, plus a
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<PAGE> 55
discretionary component. These agreements also place restrictions on the ability
of these individuals to disclose confidential information, to compete against us
and to hire or solicit certain of our employees if the individual's employment
with us is terminated.
CHANGE OF CONTROL AGREEMENTS
In addition to the change of control provisions described above, we have
entered into change of control agreements with Messrs. Townsend and Hilburn.
Pursuant to those agreements, in the event that the executive's employment with
us is terminated within one year after a "change in control" of us, then the
executive is entitled to severance pay and other benefits. The severance payment
is based upon the executive's annual base salary and bonus target amount at the
time of termination. The agreements define a "change in control" to mean the
beneficial ownership by any person or entity other than Castle Harlan of more
than 50% of our outstanding capital stock or, in specified circumstances, the
failure to reelect a majority of the members of our board of directors. These
agreements also restrict the ability of Messrs. Townsend and Hilburn to compete
against us.
INCENTIVE STOCK OPTION PLAN
In February 1998, we adopted our incentive stock option plan to advance the
interests of our company and to improve stockholder value by providing
additional incentives to motivate and retain key employees. Our stock option
plan was amended on April 20, 2000 and on May 15, 2000 to increase the number of
shares subject to the plan, expand the eligible participants, revise the plan
provisions addressing adjustment of options upon changes in our capitalization
and modify the provisions addressing exercise of options upon termination of
employment, payment of option exercise price and certain other matters. Our
board of directors or the compensation committee of our board of directors
administers our stock option plan.
Shares Subject to the Plan: General Terms
Under our stock option plan, we can grant options totaling 1,912,421
post-split shares of our common stock. That number will be adjusted
automatically if there shall be any future change in our capitalization from a
stock dividend or split and may be adjusted to reflect a change in our
capitalization resulting from a merger, consolidation, acquisition, separation
(including a spin-off or spin-out), reorganization or liquidation. As of March
31, 2000, we have options outstanding under our stock option plan to acquire
273,207 shares of our common stock at an exercise price of $6.73 per share, none
of which have been exercised. On April 20, 2000, we granted options to purchase
an additional 339,192 shares of our common stock at an exercise price of $21.50
per share, all of which remain outstanding. These options vest over various
periods, however, all of the outstanding options will accelerate and fully vest
upon the closing of this offering. In connection with this offering, we have
authorized the grant of options to purchase an aggregate of 250,600 shares of
our common stock at an exercise price equal to the initial public offering price
that will vest over a three-year period.
Messrs. Hilburn and Townsend each received stock options. In addition,
Messrs. Snider, Danner, FitzGerald and Schnoor and Ms. Banner each received
stock options and have registration rights with respect to their stock.
Eligibility
Our key employees, non-employee directors or consultants, including those
of our subsidiaries, are eligible to be selected by our board of directors or
compensation committee to receive options under our stock option plan. Our board
of directors or compensation committee, as administrator of our stock option
plan, determines, subject to the terms of the plan, the exercise prices, vesting
schedules, expiration dates and other material conditions under which recipients
may exercise their options.
Types of Stock Options
Options granted under our stock option plan may be either options that are
intended to qualify for treatment as "incentive stock options" under Section 422
of the Internal Revenue Code or options that are
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<PAGE> 56
not so intended, which are non-qualified stock options. The exercise price of
options under our stock option plan must be at least the fair market value of a
share of our common stock on the date of grant, and not less than 110% of such
fair market value in the case of an incentive stock option granted to a
participant owning 10% or more of our common stock. Our stock option plan limits
the number of shares covered by incentive stock options exercisable by an
individual for the first time in a calendar year to an aggregate fair market
value of $100,000, as measured on the date of the grant. In addition, no one
participant may be granted options to purchase more than 742,480 shares of our
common stock in any calendar year.
Our board of directors or compensation committee may condition the exercise
of any option upon any factors the board of directors or compensation committee
may determine. No option granted under our stock option plan is transferrable by
an optionee other than by will or by the laws of descent and distribution.
Termination of Awards
The term of an option may not exceed ten years (or five years in the case
of an incentive stock option granted to a participant owning 10% or more of our
common stock). In addition, an optionee who leaves our employment will generally
have no more than 30 days to exercise an option to the extent exercisable,
reduced to no days if employment is terminated for cause or voluntary
resignation, and increased to three months if termination is due to death,
disability or retirement after age 65.
Amendments to Our Incentive Stock Option Plan
Our board of directors may amend, suspend or terminate our stock option
plan, as long as no amendment or termination adversely affects options or awards
previously granted.
Federal Income Tax Consequences
The following is a brief summary of federal income tax consequences of
certain transactions under the stock option plan, based on federal income tax
laws and regulations in effect on May 1, 2000 applicable to participants who are
both citizens and residents of the United States. This summary is not intended
to be exhaustive and does not describe tax consequences other than federal
income taxes, such as foreign, state and local taxes and estate or inheritance
taxes. Additional or different federal income tax consequences to a participant
or to us may result depending on individual circumstances and considerations not
described below.
Incentive stock options. In general, a participant will not recognize
taxable income upon the grant or the exercise of an incentive stock option. For
purposes of the alternative minimum tax, however, the participant will be
required to treat an amount equal to the difference between the fair market
value of the common stock on the date of exercise over the exercise price as an
item of adjustment in computing the participant's alternative minimum taxable
income. If the participant does not dispose of the common stock received
pursuant to the exercise of the incentive stock option within either (i) two
years after the date of the grant of the incentive stock option or (ii) one year
after the date of exercise of the incentive stock option, a subsequent
disposition of the common stock will generally result in long-term capital gain
or loss to such individual with respect to the difference between the amount
realized on the disposition and the exercise price. We will not be entitled to
any income tax deduction as a result of such disposition. We also normally will
not be entitled to take an income tax deduction at either the grant or the
exercise of an incentive stock option. If the participant disposes of the common
stock acquired upon exercise of the incentive stock option within either of the
above-mentioned time periods, then in the year of such disposition, the
participant generally will recognize ordinary income, and we generally will be
entitled to an income tax deduction (provided we satisfy applicable federal
income tax reporting requirements), in an amount equal to the lesser of (i) the
excess of the fair market value of the common stock on the date of exercise over
the exercise price or (ii) the amount realized upon disposition over the
exercise price. Any gain in excess of such amount recognized by the participant
as ordinary income would be taxed to the individual as short-term or long-term
capital gain (depending on the applicable holding period).
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<PAGE> 57
Non-qualified stock options. A participant will not recognize any taxable
income upon the grant of a non-qualified stock option, and will not be entitled
to take an income tax deduction at the time of such grant. Upon the exercise of
a non-qualified stock option, the participant generally will recognize ordinary
income and we generally will be entitled to take an income tax deduction
(provided we satisfy applicable federal income tax reporting requirements) in an
amount equal to the excess of the fair market value of the common stock on the
date of exercise over the exercise price. Upon a subsequent sale of the common
stock by the participant, the participant will recognize short-term or long-term
capital gain or loss (depending on the applicable holding period).
The preceding summary does not discuss special rules that will apply to a
participant who exercises an option by paying the exercise price, in whole or in
part, by the transfer of common stock.
EMPLOYEE STOCK OWNERSHIP
In connection with the Tidewater Compression acquisition, we issued to each
of our employees at the time (other than management) ten shares of our
non-voting common stock as a bonus, which shares will convert into an aggregate
of approximately 23,754 shares of common stock concurrently with this offering.
Under our Non-Qualified Stock Purchase Plan, all of our employees and
directors were offered the opportunity to purchase shares of our stock, and 44
employees and two directors purchased at $50 per share during March 1999, a
total of 1,996 shares of common stock and 7,984 shares of Series A preferred
stock (which shares of common stock and preferred stock will be split and
converted into 33,387 shares of common stock concurrently with the closing of
this offering). There will be no additional shares offered under this Stock
Purchase Plan and the plan will be terminated upon consummation of this
offering.
COMPENSATION OF DIRECTORS
Directors who are not officers of Universal, are not affiliated with Castle
Harlan and are not otherwise being paid, directly or indirectly, by us receive
an annual director 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 and Thomas C. Case are entitled to this compensation. Upon completion of
this offering, Samuel Urcis also will be entitled to this compensation.
Directors are not otherwise compensated for their services.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our by-laws provide that our directors and officers are indemnified to the
fullest extent permitted by law. In addition, we have entered into
indemnification agreements with our officers and directors that, among other
things, require us to indemnify our officers and directors to the fullest extent
permitted by law, and to advance to the officers and directors all related
expenses, subject to repayment if it is subsequently determined that
indemnification is not permitted. We are also required to indemnify and advance
all expenses incurred by our officers and directors seeking to enforce their
rights under the indemnification agreements, and cover officers and directors
under our 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, we have been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification of directors and officers is against public policy as expressed
in the Securities Act and is therefore unenforceable.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
John K. Castle, William M. Pruellage and Samuel Urcis are the sole members
of our compensation committee. None of our executive officers serve as a member
of the board of directors or the compensation committee of another entity which
has an executive officer serving on our board of directors or compensation
committee.
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<PAGE> 58
PRINCIPAL STOCKHOLDERS
The table below sets forth certain information regarding beneficial
ownership of our common stock as of March 31, 2000 and as adjusted to reflect
(1) the sale of shares of common stock offered in this offering, (2) the
conversion of preferred stock and non-voting common stock to common stock to be
effected concurrently with the offering, and (3) the 7.4248-for-one common stock
split also to be effected concurrently with the offering:
- each person known by us to beneficially own five percent or more of any
class of our capital stock,
- each of our directors,
- each of our executive officers and
- all of our directors and executive officers as a group.
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 the stockholder's name. Except as
otherwise set forth below, shares of common stock not outstanding but deemed
beneficially owned by virtue of a person or group having the right to acquire
them within 60 days, which include outstanding stock options, all of which will
become fully exercisable upon completion of this offering, are treated as
outstanding only for purposes of determining the percentage owned by such person
or group. Except as otherwise set forth below, each named owner has sole voting
power and investment power of the shares set forth. The address for each
executive officer and director set forth below is c/o Universal Compression
Holdings, Inc., 4440 Brittmoore Road, Houston, Texas 77041.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE BENEFICIALLY OWNED(1)
SHARES OF -------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK BEFORE THE OFFERING AFTER THE OFFERING
- ------------------------------------ ------------ ---------------------- ------------------
<S> <C> <C> <C>
Castle Harlan Partners III(2)(3)
150 East 58th Street
New York, New York 10155................... 6,669,584 100.0% 41.6%
DB Capital Partners SBIC, L.P.(4)
130 Liberty Street, 25th Floor
New York, New York 10006................... 535,269 8.0% 3.9%
First Union Capital Partners, Inc.(4)
301 S. College Street, 5th Floor
One First Union Center
Charlotte, North Carolina 28288............ 535,269 8.0% 3.9%
Mellon Bank N.A., as Trustee for the
Bell Atlantic Master Trust(4)
245 Park Avenue, 40th Floor
New York, New York 10166................... 535,269 8.0% 3.9%
Wilmington Trust, as Trustee of
Du Pont Pension Trust(4)
Delaware Corporate Center
1 Righter Parkway
Wilmington, Delaware 19803................. 535,269 8.0% 3.9%
Thomas C. Case............................... 334 * *
John K. Castle(3)(5)(6)...................... 6,669,584 100.0% 41.6%
Samuel Urcis(7).............................. 219,698 3.3% 1.6%
C. Kent May.................................. 334 * *
William M. Pruellage......................... 167 * *
</TABLE>
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<PAGE> 59
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE BENEFICIALLY OWNED(1)
SHARES OF -------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK BEFORE THE OFFERING AFTER THE OFFERING
- ------------------------------------ ------------ ---------------------- ------------------
<S> <C> <C> <C>
Stephen A. Snider(8)......................... 143,605 2.2% 1.1%
Ernie L. Danner(9)........................... 160,092 2.4% 1.2%
Richard FitzGerald(10)....................... 38,049 * *
Valerie L. Banner(11)........................ 37,380 * *
Newton Schnoor(12)........................... 43,401 * *
Jack B. Hilburn, Jr.(13)..................... 36,778 * *
Kirk E. Townsend(14)......................... 41,591 * *
Hanford P. Jones(15)......................... 15,109 * *
All directors and executive officers as a
group (13 persons)(2)(3)(5)(7)............. 6,669,584 100.0% 45.4%
</TABLE>
- ---------------
* Indicates less than 1% of the outstanding stock.
(1) Based upon 6,669,584 shares and 13,669,584 shares of common stock
outstanding before and after the offering, respectively, which numbers
include 287,723 shares issued in connection with our acquisition of
Spectrum. There are presently 11,908 treasury shares issued that are not
counted as outstanding in calculating the beneficial ownership percentage.
(2) Includes, after the completion of this offering, 3,228,205 shares of common
stock held by related entities and persons and 2,461,125 shares of common
stock held by certain other entities and individuals, all of which Castle
Harlan Partners III, L.P. may direct the voting of such shares pursuant to
voting trust agreements or a voting agreement. Prior to the completion of
this offering, includes 980,254 shares of common stock subject to such
voting trust agreements or voting agreement which will terminate with
respect to such shares upon the completion of this offering. Also includes
136,364 shares (based on an assumed initial public offering price of $22.00
per share) that Castle Harlan, Inc., an affiliate of Castle Harlan Partners
III, L.P., will receive upon the closing of this offering in connection
with the early termination of its management agreement. All such shares may
be deemed to be beneficially owned by Castle Harlan Partners III, L.P.
Castle Harlan Partners III, L.P. disclaims beneficial ownership of these
shares.
(3) John K. Castle and Leonard M. Harlan are the controlling stockholders of
Castle Harlan Partners III, G.P., Inc., the general partner of the general
partner of Castle Harlan Partners III, L.P., and as such, each of them may
be deemed to be a beneficial owner of the shares owned by Castle Harlan
Partners III, L.P. Both Mr. Castle and Mr. Harlan disclaim beneficial
ownership of the shares in excess of their respective pro rata partnership
interests in Castle Harlan Partners III, L.P. and its affiliates.
(4) All shares subject to the voting agreement referred to in notes (2) and
(6).
(5) Includes, after the completion of this offering, 3,514,801 shares of common
stock held by entities and persons related to Castle Harlan Partners III,
L.P. and certain other individuals, the voting of which John K. Castle may
direct pursuant to unrelated voting trust agreements under which Mr. Castle
acts as voting trustee. Prior to the completion of this offering, includes
an additional 692,465 shares of common stock subject to such voting trust
agreements which will terminate with respect to such shares upon the
completion of this offering. All such shares may be deemed to be
beneficially owned by Mr. Castle. Mr. Castle disclaims beneficial ownership
of the shares subject to the voting trust agreements, other than 19,449
shares of common stock owned by Branford Castle Holdings, Inc. subject to
the voting trust.
(6) Includes, after the completion of this offering, 2,174,529 shares of common
stock held by certain entities, the voting of which Castle Harlan Partners
III, L.P. may control pursuant to a voting agreement. All such shares may
be deemed to be beneficially owned by Mr. Castle. Mr. Castle disclaims
beneficial ownership of these shares.
(7) Includes 99,135 shares subject to options which will become fully
exercisable upon completion of the offering. Also includes 40,145 shares of
common stock owned by Castle Harlan Partners, which shares Mr. Urcis has
the option to purchase. Also includes 6,818 shares (based on assumed
initial public offering price of $22.00 per share) that Mr. Urcis will
receive at the closing of this offering in
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<PAGE> 60
connection with termination of his finders and consulting agreement. All of
Mr. Urcis's shares will remain subject to the voting trust agreement with
Castle Harlan.
(8) Includes 110,152 shares of common stock subject to options granted by
Universal to Mr. Snider which will become fully exercisable upon completion
of this offering.
(9) Includes 79,548 shares of common stock subject to an option granted by
Universal to Mr. Danner, all of which are fully exercisable. Also includes
13,636 shares (based on assumed initial public offering price of $22.00 per
share) that Mr. Danner will receive upon the closing of this offering for
his services. Also includes 33,455 shares of common stock owned by Castle
Harlan Partners, which shares Mr. Danner has an option to purchase.
(10) Includes 36,712 shares of common stock subject to an option granted by
Universal to Mr. FitzGerald which will become fully exercisable upon
completion of this offering and 1,337 shares of common stock purchased by
Mr. FitzGerald on January 31, 2000.
(11) Includes 36,712 shares of common stock subject to an option granted by
Universal to Ms. Banner which will become fully exercisable upon completion
of this offering, and 668 shares of common stock purchased by Ms. Banner on
January 31, 2000.
(12) Includes 36,712 shares of common stock subject to an option granted by
Universal to Mr. Schnoor which will become fully exercisable upon
completion of this offering.
(13) Includes 36,712 shares of common stock subject to options granted by
Universal to Mr. Hilburn which will become fully exercisable upon
completion of this offering.
(14) Includes 25,794 shares of common stock subject to options granted by
Universal to Mr. Townsend which will become fully exercisable upon
completion of this offering.
(15) Includes 14,976 shares of common stock subject to options granted by
Universal to Mr. Jones which will become fully exercisable upon completion
of this offering.
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<PAGE> 61
RELATED TRANSACTIONS
MANAGEMENT AGREEMENT
In connection with the 1998 Tidewater Compression acquisition, we entered
into a management agreement with Castle Harlan, Inc. pursuant to which Castle
Harlan agreed to provide business and organizational strategy, financial and
investment management and merchant and investment banking services to us. As
compensation for these services, we agreed to pay Castle Harlan a fee of $3.0
million per year, payable quarterly in advance. The agreement is for a term of
five years, renewable automatically from year to year thereafter unless Castle
Harlan or its affiliates then beneficially owns less than 20% of our outstanding
capital stock. We agreed to indemnify Castle Harlan against liabilities, costs,
charges and expenses relating to the performance of its duties, other than those
resulting from Castle Harlan's gross negligence or willful misconduct. Messrs.
Castle, Pruellage and Urcis, directors of Universal, are affiliates of Castle
Harlan. We have agreed with Castle Harlan that this management agreement (other
than the indemnification provisions) will terminate upon the completion of this
offering in exchange for (1) our payment to Castle Harlan of $3.0 million in
cash, which is equal to one year's management fee and (2) our issuance to Castle
Harlan of shares of our common stock valued at $3.0 million based on the initial
public offering price (136,364 shares based on an assumed initial public
offering price of $22.00 per share), which shares are subject to registration
rights. We will make this payment and issue these shares within three business
days after the closing of the offering. We have also agreed with Castle Harlan
to nominate a total of three Castle Harlan designees for election to our board
for so long as such designees are reasonably qualified and Castle Harlan and its
affiliates beneficially own at least 15% of our outstanding stock (including
shares over which it has voting control pursuant to voting agreements and
trusts).
REGISTRATION RIGHTS AGREEMENT
In connection with the acquisition of Tidewater Compression and Spectrum,
we entered into a registration rights agreement with Castle Harlan Partners and
some of our other stockholders. Under the registration rights agreement, these
stockholders generally have the right to require us to register any or all of
their shares of common stock under the Securities Act of 1933, as amended, at
our expense. In addition, these stockholders are generally entitled to include,
at our expense, their shares of our common stock covered by the registration
rights agreement in any registration statement that we propose to file with
respect to registration of our common stock under the Securities Act. In
connection with these registrations, we have agreed to indemnify the
stockholders against specified liabilities, including liabilities under the
Securities Act. The stockholders have waived their registration rights in
connection with this offering. Following this offering, we intend to enter into
registration rights agreements with certain affiliates of Castle Harlan.
STOCK REPURCHASE ARRANGEMENTS
We have entered into a stock repurchase agreement with some of our
officers. This agreement, among other things, gives us the right for a limited
time to repurchase the shares of our common stock owned by an officer upon the
termination of such officer's employment with us at an appraised value or at
cost, depending on the reason for termination. In addition, the agreement gives
the officers the right for a limited time to require us to purchase their shares
of our common stock at an appraised value in the event of their death or
disability. In March 1999, we entered into a stock purchase plan buyback
agreement in connection with our non-qualified stock purchase plan. This
agreement gives us the right, at our option, to repurchase shares of our common
stock from any employee whose employment with us is terminated at a formulaic
price based on our EBITDA less certain indebtedness. In addition, we have a
similar right to repurchase shares of our non-voting common stock previously
granted to many of our employees. These agreements will terminate upon the
closing of this offering.
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<PAGE> 62
STOCKHOLDERS AGREEMENT
All of the holders of our common and preferred stock, including Castle
Harlan Partners, are parties to a stockholders agreement providing for the right
of the holders to join in sales of our stock by Castle Harlan Partners, the
right of Castle Harlan Partners and the other stockholders to purchase shares of
our capital stock in order to maintain their percentage ownership of us in some
circumstances, the right of Castle Harlan Partners to require the other
stockholders to sell their shares of our stock upon a sale by Castle Harlan
Partners of substantially all of its shares of our stock, the obligation of the
other stockholders to offer to us or to Castle Harlan Partners the opportunity
to purchase our stock owned by the stockholders in the event the stockholders
proposed to sell the stock, restrictions on sales or transfers of the stock, and
obligations of us, including reporting and board of directors observer rights,
in favor of these holders.
Pursuant to its terms, all substantive provisions of the stockholders
agreement will terminate upon completion of this offering, including the tag
along rights, preemptive rights, drag along rights, right of first offer,
transfer restrictions and board observer rights currently held by some of our
significant stockholders.
VOTING AGREEMENTS
In connection with the Tidewater Compression acquisition, we entered into a
voting agreement and two voting trust agreements. The voting agreement requires
that some of our significant stockholders vote their shares of our common stock
in the same manner as Castle Harlan. A similar voting agreement was entered into
in connection with the Spectrum Compression acquisition in April 2000. The
voting trust agreements provide that all of our other stockholders, including
our employees, officers and directors, assign their shares of our common stock
to a voting trust of which John K. Castle serves as trustee in exchange for
interests in the trust. The interests in the trusts are subject to the transfer
restrictions applicable to shares of our stock under the stockholders agreement.
These voting agreements and trusts (other than the indemnification provisions of
the trusts) will terminate with respect to Energy Spectrum, our employees,
officers, and four directors, not including Mr. Urcis, upon the completion of
this offering. The voting agreement with our significant stockholders will
terminate upon the first to occur of certain changes of control or the
expiration of three years following the end of the 180-day lock-up period
following the consummation of this offering. Shares transferred to third parties
will not be subject to the voting agreement if the transfers of such shares by
such significant stockholders do not exceed 1% of our issued and outstanding
stock in any three-month period or are effected by exercise of a registration
right under our registration rights agreement. As a result of the arrangements
set forth in the voting agreement and the voting trust agreements, Castle Harlan
currently has voting control over 100% of our common stock and will have control
over up to 42.7% after this offering for up to three and a half years, including
the 24.9% of shares owned by it or its affiliates, but excluding the effect of
stock options and the underwriters' over-allotment option.
ARRANGEMENTS WITH SAMUEL URCIS
In consideration for finder services rendered by Samuel Urcis, one of our
directors, in connection with the Tidewater Compression acquisition, we entered
into an agreement with Mr. Urcis pursuant to which Mr. Urcis (a) was elected as
one of our directors and as chairman of the Executive Committee of our board of
directors, (b) was paid a finder's fee of $1,750,000, $1,100,000 of which was
used to purchase shares of our capital stock at the same price per share paid by
Castle Harlan Partners, (c) was granted options to purchase 5,957 shares of our
common stock, (d) performs consulting services for us and (e) is entitled to a
consulting fee from us of $150,000 per year. We also agreed to use our best
efforts to retain Mr. Urcis as a director and as chairman of our executive
committee. This agreement will terminate upon completion of this offering in
exchange for (1) our payment to Mr. Urcis of $150,000 in cash, which is equal to
one year's consulting fee, and (2) our issuance to Mr. Urcis of shares of our
common stock valued at $150,000 based on the initial public offering price
(6,818 shares based on an assumed initial public offering price of $22.00 per
share), which shares are subject to registration rights. We will make this
payment and issue these shares concurrently with the closing of this offering.
In addition, Mr. Urcis has options to purchase from us 44,230 shares and 54,905
shares of our common stock at exercise prices of
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<PAGE> 63
$6.73 and $21.50, respectively. Also, Castle Harlan granted Mr. Urcis a ten-year
option in 1998 to purchase from it 17,820 shares and 22,326 shares of our common
stock at exercise prices of $6.73 and $21.50, respectively.
TRANSACTIONS WITH ERNIE DANNER
In consideration for consulting services rendered by Ernie Danner, one of
our directors, in connection with the Tidewater Compression acquisition, Castle
Harlan granted Mr. Danner a ten-year option to purchase from it 18,605 shares
and 14,850 shares of our common stock at a price of $21.50 and $6.73 per share,
respectively. Also, Castle Harlan agreed that upon its sale of more than 75% of
our outstanding common stock, Castle Harlan will pay Mr. Danner $500,000 or
$750,000 if they realize a return in excess of 100% and 300%, respectively, of
their initial investment in our company. Upon completion of the Tidewater
Compression acquisition, Mr. Danner received from us 1,000 shares of common
stock and 4,000 shares of Series A preferred stock (convertible into 16,727
shares of common stock upon the closing of this offering) and $100,000 in cash.
Also, Mr. Danner has options to purchase from us 35,491 shares and 44,057 shares
of our common stock at exercise prices of $6.73 and $21.50, respectively. Upon
completion of this offering, Mr. Danner will receive from us for his services
shares of our common stock valued at $300,000 based on the initial public
offering price (13,636 shares based on an assumed initial public offering price
of $22.00 per share), which shares are subject to registration rights. In
addition, Mr. Danner is a director and 45% stockholder, along with Robert Ryan,
formerly an officer of Universal, in a company that purchased certain standard
air compressor equipment and related distributorship rights from us for $1.6
million in February 2000. We have agreed to provide this company with transition
services for two years for a fee of approximately $340,000.
PURCHASE PRICE ADJUSTMENT AGREEMENT
In connection with the acquisition of Tidewater Compression, we entered
into a Purchase Price Adjustment Agreement with Tidewater. Pursuant to that
agreement, upon the occurrence of a "liquidity event," we may have to make
certain payments to Tidewater. A "liquidity event" is defined in the agreement
to include:
- sales by Castle Harlan of its shares of our common stock,
- sales by us of all or substantially all of our assets or mergers by us or
our operating subsidiary with another entity or
- some types of recapitalizations.
If any of the liquidity events described above occurs and Castle Harlan
receives an amount greater than its accreted investment, defined as its initial
investment increased at a compounded rate of 6.25% each quarter, which equates
to approximately 27.4% annually, we must make a payment to Tidewater equal to
10% of the amount, if any, that Castle Harlan receives in excess of its accreted
investment. Any payment is to be made in the same form of consideration as
received by Castle Harlan. Any payment pursuant to this agreement would result
in an increase in goodwill in the year of payment and a corresponding increase
in goodwill and amortization expense in subsequent years. As of April 1, 2000,
Castle Harlan's accreted investment was approximately $24.00 per share, which
will continue to grow at a compounded rate of 6.25% per quarter. As of April 1,
2000, assuming an initial public offering price of $22.00 per share was applied
to all of the shares owned by Castle Harlan, there would have been no payment
due in the event the provisions of the Purchase Price Adjustment Agreement were
triggered. In any event, no payment is triggered by this offering or the stock
split and the conversion effected concurrently with this offering.
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<PAGE> 64
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, our authorized capital stock will
consist of 200,000,000 shares of common stock, $.01 par value, and 50,000,000
shares of preferred stock, $.01 par value.
COMMON STOCK
Upon closing of this offering, each share of our non-voting common stock
will be converted into common stock on a one-for-one basis and our restated
certificate of incorporation will be amended to eliminate the non-voting common
stock designations. We will effect a 7.4248-for-1 common stock split and a
conversion of all of our outstanding preferred stock and non-voting common stock
into common stock concurrently with this offering based on a $21.50 price per
share and a payment in cash in lieu of issuance of a fractional share. If the
stock split and the conversion of the non-voting common stock and all of our
preferred stock had occurred on March 31, 2000, 5,539,043 shares of our common
stock would have been outstanding and held by 369 stockholders on such date.
Holders of our common stock are entitled to one vote for each share on all
matters submitted to a vote of stockholders, including the election of
directors. As a result of arrangements set forth in the voting agreements and
voting trust agreements, Castle Harlan will have control for up to three and a
half years of up to 42.7% of our stock after this offering, including the 24.9%
of our shares owned by it or its affiliates. Subject to preferences of any
preferred stock that may be issued in the future, holders of our common stock
may receive such dividends as may be declared by our board of directors. We do
not expect to pay dividends on our common stock in the foreseeable future, and
our new revolving credit facility, senior notes and new operating lease facility
to be entered into concurrently with this offering restrict our ability to do
so. The common stock does not have any sinking fund provisions, redemption
provisions or preemptive rights. All outstanding shares of our common stock are
fully paid and non-assessable. In the event of our liquidation, dissolution or
winding up, holders of our common stock are entitled to receive a pro rata share
of all of our assets available for distribution to our stockholders.
SERIES A PREFERRED STOCK
Upon the closing of this offering, all of our outstanding preferred stock
will be converted into an aggregate of 3,227,209 shares of common stock on a one
share of preferred stock for 2.3256 shares of common stock basis and a payment
in cash in lieu of issuance of a fractional share. Our board of directors has
the authority, without further action by the stockholders, to issue an aggregate
of 50,000,000 shares of preferred stock in one or more series. Our board of
directors may, without stockholder approval, issue preferred stock with dividend
rates, voting rights and other preferences, which rights and preferences could
adversely affect the voting power of the holders of the common stock. Issuance
of preferred stock could have the effect of delaying, deferring or preventing a
change in control. Currently, we have no plans to issue any preferred stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is EquiServe Trust
Company, N.A.
LISTING
Our common stock has been approved for listing on the New York Stock
Exchange under the trading symbol "UCO," subject to official notice of issuance.
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<PAGE> 65
ANTI-TAKEOVER PROVISIONS OF OUR RESTATED CERTIFICATE
OF INCORPORATION AND BYLAWS
Some provisions of our restated certificate of incorporation and bylaws,
which will be effective upon the completion of this offering and are summarized
in the following paragraphs, may be deemed to have an anti-takeover effect and
may delay, defer or prevent a tender offer or takeover attempt that a
stockholder might consider in its best interest, including those attempts that
might result in a premium over the market price for the shares held by
stockholders.
CLASSIFIED BOARD OF DIRECTORS
Our restated certificate of incorporation divides our directors into three
classes serving staggered three-year terms. As a result, stockholders will elect
approximately one-third of the board of directors each year. These provisions,
when coupled with the provision of our restated certificate of incorporation
authorizing only the board of directors to fill vacant or newly created
directorships or increase the size of the board of directors and the provision
providing that directors may only be removed for cause may deter a stockholder
from removing incumbent directors or increasing the number of directorships and
simultaneously gaining control of the board of directors by filling the
vacancies or newly created directorships created by such removal or increase
with its own nominees.
CUMULATIVE VOTING
Our restated certificate of incorporation does not permit stockholders the
right to cumulate votes in the election of directors.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS
Our restated certificate of incorporation eliminates the ability of
stockholders to act by written consent and provides that special meetings of
stockholders may be called only by a majority of the board of directors or the
chairman of the board or the president, acting as such.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Our bylaws provide that stockholders seeking to bring business before an
annual meeting of stockholders or to nominate candidates for election as
directors at an annual meeting of stockholders must provide timely written
notice. To be timely, a stockholder's notice must be delivered to or mailed and
received at our principal executive offices not less than 45 days nor more than
75 days prior to the anniversary of the date on which we first mailed the proxy
materials for the preceding year's annual meeting of the stockholders; provided,
that in the event that the annual meeting is called for a date that is not
within 30 days before or after the anniversary of the preceding year's annual
meeting or, if no such proxy materials were mailed, timely notice by the
stockholder must be received not later than the later of the close of business
on the tenth day following the date on which public announcement of the date of
the annual meeting is first made or the 90th day before the meeting. In the case
of a special meeting of stockholders called for the purpose of electing
directors, timely notice by the stockholder must be received not later than the
close of business on the later of the tenth day following the day on which
public announcement is first made of the date of the special meeting and of the
nominees proposed by the board of directors or the 90th day before the meeting.
Our bylaws also specify certain requirements as to the form and content of a
stockholder's notice. These provisions may preclude stockholders from bringing
matters before an annual meeting of stockholders or from making nominations for
directors at an annual meeting of stockholders.
AUTHORIZED BUT UNISSUED SHARES
The authorized but unissued shares of common stock and preferred stock are
available for future issuance without stockholder approval. These additional
shares may be used for a variety of corporate purposes, including future public
offerings to raise additional capital, corporate acquisitions and employee
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<PAGE> 66
benefit plans. The existence of authorized but unissued shares of common stock
and preferred stock could render more difficult or discourage an attempt to
obtain control by means of a proxy contest, tender offer, merger or otherwise.
AMENDMENTS; SUPERMAJORITY VOTE REQUIREMENTS
The Delaware General Corporation Law provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or bylaws, unless
a greater vote is required. Our restated certificate of incorporation imposes
supermajority vote requirements in connection with amendments to our bylaws and
certain provisions of our restated certificate of incorporation, including those
provisions relating to the classified board of directors, removal of directors,
action by written consent and the ability of stockholders to call special
meetings.
DELAWARE BUSINESS COMBINATION STATUTE
Section 203 of the Delaware General Corporation Law imposes a three-year
moratorium on business combinations between a Delaware corporation and an
"interested stockholder" which is in general, a stockholder owning 15% or more
of a corporation's outstanding voting stock, or an affiliate or associate
thereof unless:
- prior to an interested stockholder becoming an interested stockholder,
the board of directors of the corporation approved either the business
combination or the transaction resulting in the interested stockholder
becoming an interested stockholder;
- upon consummation of the transaction resulting in an interested
stockholder becoming an interested stockholder, the interested
stockholder owns 85% of the voting stock outstanding at the time the
transaction commenced, excluding, from the calculation of outstanding
shares, shares beneficially owned by directors who are also officers and
certain employee stock plans; or
- on or after an interested stockholder becomes an interested stockholder,
the business combination is approved by the board of directors and
holders of at least 66 2/3% of the outstanding shares, other than those
shares beneficially owned by the interested stockholder, at a meeting of
stockholders.
Section 203 of the Delaware General Corporation Law generally applies to any
corporation incorporated in Delaware unless the corporation expressly elects not
to be governed by such legislation. Our current significant stockholders are not
subject to this provision.
LIMITATIONS ON DIRECTORS' LIABILITY
Our restated certificate of incorporation provides that none of our
directors shall be liable to us or our stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to us or our
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- in respect of certain unlawful dividend payments or stock redemptions or
repurchases; or
- for any transaction from which the director derived an improper personal
benefit.
Additionally, if the Delaware General Corporation Law is amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of our directors shall be limited to
the fullest extent permitted by the Delaware General Corporation Law, as
amended. The effect of these provisions is to eliminate our rights and our
stockholder's rights, through stockholders' derivative suits on our behalf or
otherwise, to recover monetary damages against a director for breach of
fiduciary duty as a director, including breaches resulting from grossly
negligent behavior, except in the situations described above. These provisions
do not limit the liability of directors under federal securities laws.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock, including shares issued
upon exercise of outstanding options, in the public market could adversely
affect prevailing market prices. Furthermore, as described below, 5,828,140
shares of our common stock outstanding as of the completion of this offering
will be available for sale after the expiration of contractual restrictions on
resale with us and/or the underwriters. Sales of substantial amounts of our
common stock in the public market after contractual restrictions lapse could
adversely affect the prevailing market price and our ability to raise capital in
the future.
Upon completion of this offering, we will have outstanding 12,983,584
shares of common stock, assuming no exercise of the underwriters' over-allotment
option and no exercise of outstanding options. Of these shares, the 7,000,000
shares of common stock sold in this offering will be freely tradable without
restriction under the Securities Act unless purchased by our "affiliates."
Affiliates may not resell their shares in a public distribution except in
compliance with the registration requirements of the Securities Act or pursuant
to Rule 144 thereunder. Of the remaining 5,983,584 shares of our outstanding
common stock eligible for resale, 155,444 will be freely tradeable, including
under Rules 144(k) and 701, upon the date of this prospectus and another 9,720
shares will be freely tradeable 90 days later pursuant to the lock-up period in
our registration rights agreement. We and our executive officers, directors and
other significant stockholders holding 5,818,420 shares of our common stock have
agreed not to sell any shares of common stock for a period of 180 days from the
date of this prospectus without the consent of Merrill Lynch. Upon expiration of
the 180-day lock-up period, 2,141,076 of such shares will become freely
tradeable. The remaining 3,677,344 of such shares after the 180-day period will
be "restricted securities" within the meaning of Rule 144 under the Securities
Act and will be eligible for resale subject to the volume, manner of sale,
holding period and other limitations of Rule 144; however, 3,230,797 of such
shares are not subject to the holding period restrictions of Rule 144.
RULE 144
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares of our common stock for at least one year would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of: (a) 1% of the number of shares of our common stock then
outstanding, which will equal approximately 129,836 shares immediately after
this offering; or (b) the average weekly trading volume of our common stock on
the New York Stock Exchange during the four calendar weeks preceding the filing
of a notice on Form 144. Sales under Rule 144 are also subject to manner of sale
provisions and notice requirements and to the availability of current public
information about Universal.
RULE 144(k)
Under Rule 144(k), a person who has not been one of our affiliates at any
time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, is entitled to sell those
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
RULE 701
Any employee, officer or director of, or consultant to, Universal who
purchased his or her shares under a written compensatory plan or contract may be
entitled to sell their shares in reliance on Rule 701. Rule 701 permits
affiliates to sell their Rule 701 shares under Rule 144 without complying with
the holding period requirements of Rule 144. Rule 701 further provides that
non-affiliates may sell these shares in reliance on Rule 144 without having to
comply with the holding period, public information, volume limitation or notice
provisions of Rule 144. However, some of the shares that we have issued under
Rule 701 are subject to lock-up agreements, which shares will only become
eligible for sale when the 180-day lock-up agreements expire.
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LOCK-UP AGREEMENTS
In connection with this offering, we, our executive officers and directors,
Castle Harlan, Spectrum Energy Partners and our other significant stockholders
have agreed not to directly or indirectly sell or take certain other actions
with respect to our common stock for a period of 180 days after the date of this
prospectus without the prior written consent of Merrill Lynch. See
"Underwriting -- No Sales of Similar Securities."
REGISTRATION RIGHTS
A description of our registration rights agreement is set forth under
"Related Transactions -- Registration Rights Agreement." In addition, certain of
our executive officers have registration rights with respect to their shares of
our stock. All registration rights in connection with this offering have been
waived.
STOCK OPTION PLAN
In connection with the offering, we intend to file a registration statement
covering the sale of 1,912,421 shares of our common stock reserved for issuance
under our stock option plan.
Upon expiration of the lock-up period, these shares may be sold at any time
subject to compliance with the volume limitations and other restrictions of Rule
144. Options to purchase 612,399 shares of our common stock will also be
outstanding upon completion of the offering. Such options generally provide for
incremental vesting over a three-year period, but vest in full upon completion
of this offering. In addition, in connection with this offering, we have
authorized the grant of options to purchase an aggregate of 250,600 shares of
our common stock at an exercise price equal to the initial public offering
price. See "Management -- Incentive Stock Option Plan."
MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES TO
NON-U.S. HOLDERS OF COMMON STOCK
The following is a summary of material U.S. federal income and estate tax
consequences expected to result under current law from the purchase, ownership
and disposition of common stock by non-U.S. holders of common stock. A "non-U.S.
holder" is any person or entity other than:
- A citizen or resident of the United States;
- A corporation, partnership or other entity created or organized in or
under the laws of the United States, any state thereof, or the District
of Columbia;
- An estate, the income of which is includable in gross income for U.S.
federal income tax purposes regardless of its source; or
- A trust, if its administration is subject to the primary supervision of a
United States court and one or more U.S. persons have the authority to
control all substantial decisions of the trust.
This summary does not address all of the U.S. federal income and estate tax
considerations that may be relevant to non-U.S. holders in light of their
particular circumstances or to non-U.S. holders that may be subject to special
treatment under United States federal income tax laws. This summary does not
discuss any aspect of state, local or foreign taxation, nor does it consider any
specific facts or circumstances that may apply to a particular non-U.S. holder
that may be subject to special treatment under the U.S. federal income tax laws,
such as insurance companies, tax-exempt organizations, financial institutions,
brokers, dealers in securities and U.S. expatriates. This summary is based on
current provisions of the Internal Revenue Code of 1986, as amended, Treasury
regulations, judicial opinions, published positions of the U.S. Internal Revenue
Service and other applicable authorities, all of which are subject to change,
possibly with retroactive effect. In this prospectus, the Internal Revenue Code
of 1986, as amended, is called the "Code." Prospective purchasers of common
stock are advised to consult their tax
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advisors regarding the U.S. federal, state and local, and non-U.S. income,
estate and other tax consequences of acquiring, holding and disposing of our
common stock.
DIVIDENDS
We do not currently anticipate paying any dividends. If we were to pay
dividends, however, any such dividends paid to a non-U.S. holder on shares of
our common stock would be subject to withholding of U.S. federal income tax at a
rate of 30%, unless a lower rate is prescribed under an applicable tax treaty or
unless the dividends are effectively connected with the conduct of a trade or
business of the non-U.S. holder. In general, dividends that are effectively
connected with the conduct of a trade or business within the United States will
be subject to U.S. federal income tax on a net income basis. Such tax is not
collected by withholding, provided the non-U.S. holder files the appropriate
certification with us or our agent. Any dividends received by a foreign
corporation that are effectively connected with the conduct of a trade or
business within the United States may also be subject to a "branch profits tax"
at a rate of 30% or such lower rate as may be specified by an applicable tax
treaty.
For purposes of the withholding tax rules discussed above and for purposes
of determining the applicability of a tax treaty rate under current U.S.
Treasury Regulations, dividends paid to a holder of common stock with an address
outside the United States will be presumed to be paid to a resident of the
country of address, unless the payor has knowledge to the contrary. Under U.S.
Treasury Regulations (referred to as "final regulations") that are effective for
payments made after December 31, 2000, a non-U.S. holder of common stock who
wishes to claim the benefit of a tax treaty rate would be required to satisfy
applicable certification and other requirements. In addition, under the final
regulations, in the case of common stock held by a foreign partnership:
- The certification requirement generally would be applied to the partners
of the partnership; and
- The partnership would be required to provide certain information,
including a U.S. taxpayer identification number.
A non-U.S. holder of common stock that is eligible for a reduced rate of
U.S. federal income tax withholding pursuant to a tax treaty may obtain a refund
of any excess amounts currently withheld by filing an appropriate claim for
refund with the Internal Revenue Service.
SALE OR DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to U.S. federal income tax
in respect of any gain recognized on the sale or other taxable disposition of
our common stock unless any one of the following conditions applies:
- The gain is effectively connected with the conduct of a trade or business
of the non-U.S. holder within the United States, or where a tax treaty
applies, is attributable to a U.S. permanent establishment maintained by
the non-U.S. holder;
- The non-U.S. holder is an individual who holds shares of common stock as
a capital asset and is present in the United States for 183 days or more
in the taxable year of the disposition and meets certain other tests;
- The non-U.S. holder is subject to tax under the provisions of U.S.
federal income tax law applicable to certain U.S. expatriates;
- The common stock disposed of is treated as a "United States real property
interest" (defined below) in the hands of the non-U.S. holder.
In general, our common stock will not be treated as a United States real
property interest if it is regularly traded on an established securities market
at any time during the calendar year of the sale or other disposition and the
non-U.S. holder has not owned, actually or constructively, more than 5% of the
outstanding stock at any time during the five-year period preceding the sale or
other disposition. If the
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preceding exception does not apply, our common stock nevertheless will not
constitute a United States real property interest unless, at some time during
the five-year period ending on the date of the non-U.S. holder's disposition of
common stock, we were a "United States real property holding corporation." We do
not believe that we are, or have been, a United States real property holding
corporation as of the date of this prospectus, and we do not expect to become a
United States real property holding corporation in the future (although there
can be no assurance that this expectation will prove to be accurate). Any
non-U.S. holder that may approach or exceed the 5% ownership threshold discussed
above, either alone or in conjunction with related persons, should consult its
own tax advisor.
INFORMATION REPORTING AND BACKUP WITHHOLDING
We must report annually to the Internal Revenue Service and to each
non-U.S. holder the amount of dividends paid to, and the tax withheld with
respect to, each non-U.S. holder. These reporting requirements apply regardless
of whether withholding was reduced by an applicable tax treaty. Copies of these
information returns may also be made available under the provisions of a treaty
or information exchange agreement with the tax authorities in the country in
which the non-U.S. holder resides or is established.
Under current law, U.S. backup withholding tax, which is a withholding tax
currently imposed at the rate of 31% on certain payments to persons who fail to
furnish the information required under U.S. information reporting requirements,
generally will not apply to dividends paid on common stock to a non-U.S. holder
at an address outside the United States unless the payor has knowledge that the
payee is a U.S. person.
Payment of the proceeds from a sale of common stock to or through a U.S.
office of a broker will be subject to information reporting and backup
withholding unless the owner certifies under penalties of perjury as to its
name, address and status as a non-U.S. holder or otherwise establishes an
exemption. Payment of the proceeds from a sale of common stock to or through a
non-U.S. office of a broker generally will not be subject to information
reporting or backup withholding. However, if such broker is a U.S. person, a
"controlled foreign corporation" or a foreign person that derives 50% or more of
its gross income from the conduct of a trade or business in the United States,
such payment will be subject to information reporting, but currently not backup
withholding, unless such broker has documentary evidence in its records that the
owner is a non-U.S. holder and certain other conditions are met or the owner
otherwise establishes an exemption.
Under the final regulations, generally effective for payments made after
December 31, 2000, the payment of dividends or the payment of proceeds from the
sale of common stock to a non-U.S. holder may be subject to information
reporting and backup withholding unless the recipient satisfies the
certification requirements or otherwise establishes an exemption.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules can be credited against the non-U.S. holder's federal
income tax liability, if any, or refunded, provided the required information is
furnished to the Internal Revenue Service in a timely manner.
ESTATE TAX
The fair market value of common stock owned, or treated as owned, by an
individual at the time of death will be includable in the individual's gross
estate for U.S. federal estate tax purposes and thus may be subject to U.S.
estate tax, even though the individual, at the time of death, is neither a
citizen of nor domiciled in the United States, unless an applicable estate tax
treaty provides otherwise.
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UNDERWRITING
We intend to offer the shares in the U.S. and Canada through the U.S.
underwriters and elsewhere through the international managers. Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Salomon Smith Barney Inc., Deutsche Bank
Securities Inc., First Union Securities, Inc. and Wasserstein Perella
Securities, Inc. are acting as U.S. representatives of the U.S. underwriters
named below. Subject to the terms and conditions described in a U.S. purchase
agreement among us and the U.S. underwriters, and concurrently with the sale of
1,400,000 shares to the international managers, we have agreed to sell to the
U.S. underwriters, and each of the U.S. underwriters severally has agreed to
purchase from us, the number of shares listed opposite its name below.
<TABLE>
<CAPTION>
NUMBER
OF SHARES
U.S. UNDERWRITER ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........
Salomon Smith Barney Inc....................................
Deutsche Bank Securities Inc................................
First Union Securities, Inc.................................
Wasserstein Perella Securities, Inc.........................
---------
Total.......................................... 5,600,000
=========
</TABLE>
We have also entered into an international purchase agreement with the
international managers for sale of the shares outside the U.S. and Canada for
whom Merrill Lynch International, Salomon Brothers International Limited,
Deutsche Bank AG, London, First Union Securities, Inc. and Wasserstein Perella
Securities, Inc. are acting as lead managers. Subject to the terms and
conditions in the international purchase agreement, and concurrently with the
sale of 5,600,000 shares of common stock to the U.S. underwriters under the U.S.
purchase agreement, Universal has agreed to sell to the international managers,
and the international managers have agreed to purchase from Universal, an
aggregate of 1,400,000 shares of common stock. The initial public offering price
per share and the total underwriting discount per share of common stock are
identical under the U.S. purchase agreement and the international purchase
agreement.
The U.S. underwriters and the international managers have agreed to
purchase all of the shares sold under the U.S. and international purchase
agreements if any of these shares are purchased. If an underwriter defaults, the
U.S. and international purchase agreements provide that the purchase commitments
of the nondefaulting underwriters may be increased or the purchase agreements
may be terminated. The closings for sale of shares to be purchased by the U.S.
underwriters and the international managers are conditioned on one another.
We have agreed to indemnify the U.S. underwriters and the international
managers against some liabilities, including some liabilities under the
Securities Act, or to contribute to payments the U.S. underwriters and
international managers may be required to make in respect of those liabilities.
The underwriters are offering the shares, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of legal matters by
their counsel, including the validity of the shares, and other conditions
contained in the purchase agreements, such as the receipt by the underwriters of
officer's certificates and legal opinions. The underwriters reserve the right to
withdraw, cancel or modify offers to the public and to reject orders in whole or
in part.
COMMISSIONS AND DISCOUNTS
The U.S. representatives have advised us that the U.S. underwriters propose
initially to offer the shares to the public at the initial public offering on
the cover page of this prospectus and to dealers at that price less a concession
not in excess of $ per share. The U.S. underwriters may allow, and the
dealers
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may reallow, a discount not in excess of $ per share to other dealers. After
the initial public offering, the public offering price, concession and discount
may be changed.
The following table shows the public offering price, underwriting discount
and proceeds before expenses to Universal. This information assumes either no
exercise or full exercise by the U.S. underwriters and the international
managers of their over-allotment options.
<TABLE>
<CAPTION>
PER SHARE WITHOUT OPTION WITH OPTION
--------- -------------- -----------
<S> <C> <C> <C>
Public offering price............................ $ $ $
Underwriting discount............................ $ $ $
Proceeds, before expenses, to Universal.......... $ $ $
</TABLE>
The expenses of the offering, not including the underwriting discount, are
estimated at $ and are payable by Universal.
OVER-ALLOTMENT OPTION
We have granted an option to the U.S. underwriters to purchase up to
840,000 additional shares at the public offering price less the underwriting
discount. The U.S. underwriters may exercise this option for 30 days from the
date of this prospectus solely to cover any over-allotments. If the U.S.
underwriters exercise this option, each will be obligated, subject to the
conditions contained in the purchase agreements, to purchase a number of
additional shares proportionate to that U.S. underwriter's initial amount
reflected in the above table.
We have also granted an option to the international managers, exercisable
for 30 days from the date of this prospectus, to purchase up to 210,000
additional shares to cover any over-allotments on terms similar to those granted
to the U.S. underwriters.
INTERSYNDICATE AGREEMENT
The U.S. underwriters and the international managers have entered into an
intersyndicate agreement that provides for the coordination of their activities.
Under the intersyndicate agreement, the U.S. underwriters and the international
managers may sell shares to each other for purposes of resale at the public
offering price, less an amount not greater than the selling concession. Under
the intersyndicate agreement, the U.S. underwriters and any dealer to whom they
sell shares will not offer to sell or sell shares to persons who are non-U.S. or
non-Canadian persons or to persons they believe intend to resell to persons who
are non-U.S. or non-Canadian persons, except in the case of transactions under
the intersyndicate agreement. Similarly, the international managers and any
dealer to whom they sell shares will not offer to sell or sell shares to U.S.
persons or Canadian persons or to persons they believe intend to resell to U.S.
persons or Canadian persons, except in the case of transactions under the terms
of the intersyndicate agreement.
NO SALES OF SIMILAR SECURITIES
We, our executive officers and directors and other significant stockholders
have agreed, with exceptions, not to sell or transfer any common stock for 180
days after the date of this prospectus without first obtaining the written
consent of Merrill Lynch. Specifically, we and these other individuals have
agreed not to directly or indirectly:
- offer, pledge, sell or contract to sell any common stock,
- sell any option or contract to purchase any common stock,
- purchase any option or contract to sell any common stock,
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- grant any option, right or warrant for the sale of any common stock,
other than in connection with the conversion of our preferred stock and
non-voting common stock into common stock and pursuant to our employee
benefit plan or non-employee director stock plan,
- lend or otherwise dispose of or transfer any common stock,
- request or demand that we file a registration statement related to the
common stock other than in connection with our employee benefit plan or
non-employee director stock plan, or
- enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of any common stock whether
any such swap or transaction is to be settled by delivery of shares or
other securities, in cash or otherwise.
This lockup provision applies to common stock and to securities convertible
into or exchangeable or exercisable for or repayable with common stock. It also
applies to common stock owned now or acquired later by the person executing the
agreement or for which the person executing the agreement later acquires the
power of disposition.
NEW YORK STOCK EXCHANGE LISTING
Our common stock has been approved for listing on the New York Stock
Exchange under the symbol "UCO," subject to official notice of issuance. To meet
the requirements for listing of our common stock on that exchange, the
underwriters and the international managers have undertaken to sell lots of 100
or more shares to a minimum of 2,000 beneficial owners.
Before this offering, there has been no public market for our common stock.
The initial public offering price will be determined through negotiations among
us and the U.S. representatives and the lead managers. In addition to prevailing
market conditions, the factors to be considered in determining the initial
public offering price are:
- the valuation multiples of publicly traded companies that the U.S.
representatives and the lead managers believe to be comparable to us,
- our financial information,
- the history of, and the prospects for, our company and the industry in
which we compete,
- an assessment of our management, our past and present operations, and the
prospects for, and timing of, our future revenues,
- the present state of our development, and
- the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to ours.
An active trading market for the shares may not develop. It is also
possible that after the offering the shares will not trade in the public market
at or above the initial public offering price.
The underwriters do not expect sales of our common stock to any accounts
over which they exercise discretionary authority to exceed 5% of the number of
shares being offered in this offering.
PRICE STABILIZATION AND SHORT POSITIONS AND PENALTY BIDS
Until the distribution of the common stock is completed, SEC rules may
limit the underwriters and selling group members from bidding for and purchasing
our common stock. However, the U.S. representatives may engage in transactions
that stabilize the price of our common stock, such as bids or purchases to peg,
fix or maintain that price.
If the underwriters create a short position in our common stock in
connection with this offering, i.e., if they sell more shares than are listed on
the cover of this prospectus, the U.S. representatives may reduce
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that short position by purchasing shares in the open market. The U.S.
representatives may also elect to reduce any short position by exercising all or
part of the over-allotment option described above. Purchases of the common stock
to stabilize its price or to reduce a short position may cause the price of the
common stock to be higher than it might be in the absence of such purchases.
The U.S. representatives may also impose a penalty bid on underwriters and
selling group members. This means that if the U.S. representatives purchase
shares in the open market to reduce the underwriter's short position or to
stabilize the price of such shares, they may reclaim the amount of the selling
concession from the underwriters and selling group members who sold those
shares. The imposition of a penalty bid may also affect the price of the shares
in that it discourages resales of those shares.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. In addition, neither
we nor any of the underwriters makes any representation that the U.S.
representatives or the lead managers will engage in these transactions or that
these transactions, once commenced, will not be discontinued without notice.
OTHER RELATIONSHIPS
We engaged Deutsche Bank Securities Inc. and Wasserstein Perella
Securities, Inc. to act as solicitation agents in connection with our
solicitation of the written consents of the holders of our outstanding 9 7/8%
senior discount notes to an amendment to the indenture governing such notes.
Deutsche Bank Securities Inc. and Wasserstein Perella Securities, Inc. will
receive ordinary and customary fees for their services as solicitation agents.
We have agreed to reimburse Deutsche Bank Securities Inc. and Wasserstein
Perella Securities, Inc. for all reasonable out-of-pocket expenses incurred in
connection with these engagements. Bankers Trust Company, an affiliate of
Deutsche Bank Securities Inc., will participate in our operating lease facility
and our new revolving credit facility, for which these affiliates will receive
ordinary and customary fees. In addition, DB Capital Partners SBIC, L.P., an
affiliate of Deutsche Bank Securities Inc., and First Union Capital Partners,
Inc., an affiliate of First Union Securities, Inc., are stockholders of our
company.
Some of the underwriters and their affiliates engage in transactions with,
and perform services for, our company in the ordinary course of business and
have engaged, and may in the future engage, in commercial banking and investment
banking transactions and services with our company, for which they have received
customary compensation.
LEGAL MATTERS
King & Spalding, Houston, Texas, will pass upon the validity of the shares
of common stock offered by this prospectus. Vinson & Elkins L.L.P., Houston,
Texas, will pass upon certain legal matters in connection with this offering for
the U.S. underwriters and the international managers.
EXPERTS
The financial statements of Universal Compression Holdings, Inc. as of
March 31, 1999 and 2000 and for the period from December 12, 1997 (inception)
through March 31, 1998 and for the years ended March 31, 1999 and 2000 and the
financial statements of Tidewater Compression Service, Inc. for the period from
April 1, 1997 through February 20, 1998 included in this prospectus and in the
registration statement have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports appearing herein and in the registration
statement, and have been so included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, a registration
statement on Form S-1, including the exhibits and schedules thereto, under the
Securities Act of 1933, as amended, with respect to the common stock offered
hereby. This prospectus does not contain all of the information contained in the
registration statement and the exhibits and schedules to the registration
statement. Some items are omitted in accordance with the rules and regulations
of the SEC. For further information about Universal and the common stock offered
under this prospectus, you should review the registration statement and the
exhibits and schedules filed as a part of the registration statement.
Descriptions of contracts or other documents referred to in this prospectus are
not necessarily complete. If the contract or document is filed as an exhibit to
the registration statement, you should review that contract or document. You
should be aware that when we discuss these contracts or documents in the
prospectus we are assuming that you will read the exhibits to the registration
statement for a more complete understanding of the contract or document.
Universal is subject to the informational requirements of the Securities
Exchange Act of 1934, and in accordance therewith files reports and other
information with the SEC. Materials filed with the SEC by Universal, including,
the registration statement and its exhibits and schedules, may be inspected
without charge at the public reference facilities maintained by the SEC in Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., 20549, and the
SEC's regional offices located at 500 West Madison Street, Suite 1400, Chicago,
Illinois, 60661, and Seven World Trade Center, 13th Floor, New York, New York,
10048. Copies of all or any portion of the registration statement may be
obtained from the Public Reference Section of the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington D.C. 20549, or by calling the SEC at
1-800-SEC-0330, at prescribed rates. The SEC also maintains a website at
www.sec.gov that contains reports, proxy and information statements and other
information regarding registrants, such as Universal, that make electronic
filings with the SEC.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNIVERSAL COMPRESSION HOLDINGS, INC.
Independent Auditors' Report of Deloitte & Touche LLP ...... F-2
Consolidated Financial Statements:
Consolidated Balance Sheets at March 31, 1999 and March
31, 2000............................................... F-3
Consolidated Statements of Operations for the period from
December 12, 1997 (inception) through March 31, 1998
and for the years ended March 31, 1999 and 2000........ F-4
Consolidated Statements of Stockholders' Equity for the
period from December 12, 1997 (inception) through March
31, 1998 and for the years ended March 31, 1999 and
2000................................................... F-5
Consolidated Statements of Cash Flows for the period from
December 12, 1997 (inception) through March 31, 1998
and for the years ended March 31, 1999 and 2000........ F-6
Notes to Consolidated Financial Statements................ F-7
TIDEWATER COMPRESSION SERVICE, INC.
Independent Auditors' Report of Deloitte & Touche LLP....... F-19
Financial Statements:
Statement of Operations for the period from April 1, 1997
through February 20, 1998.............................. F-20
Statement of Stockholders' Equity for the period from
April 1, 1997 through February 20, 1998................ F-21
Statement of Cash Flows for the period from April 1, 1997
through February 20, 1998.............................. F-22
Notes to Financial Statements............................. F-23
</TABLE>
F-1
<PAGE> 77
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Universal Compression Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Universal
Compression Holdings, Inc. and subsidiary (the "Company") as of March 31, 1999
and 2000, and the related consolidated statements of operations, stockholders'
equity and cash flows for the period from December 12, 1997 (inception) through
March 31, 1998 and for the years ended March 31, 1999 and 2000. 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits 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, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of March 31,
1999 and 2000, and the results of its operations and its cash flows for the
period from December 12, 1997 (inception) through March 31, 1998 and for the
years ended March 31, 1999 and 2000, in conformity with accounting principles
generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Houston, Texas
April 28, 2000
(May 22, 2000 as to Note 13)
F-2
<PAGE> 78
UNIVERSAL COMPRESSION HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1999 2000
---------- ----------
(IN THOUSANDS, EXCEPT
FOR SHARE AND PER SHARE
AMOUNTS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 2,927 $ 1,403
Receivables, net of allowance for bad debts of $123 and
$227 as of March 31, 1999 and 2000, respectively........ 22,469 17,267
Inventories............................................... 10,272 8,727
Current deferred tax asset................................ 426 227
Other..................................................... 938 1,571
-------- --------
Total current assets............................... 37,032 29,195
-------- --------
Property and equipment:
Rental equipment.......................................... 296,049 349,198
Other..................................................... 17,122 19,617
Accumulated depreciation.................................. (17,647) (38,466)
-------- --------
Total property and equipment....................... 295,524 330,349
-------- --------
Goodwill, net of accumulated amortization of $2,564 and
$5,202 as of March 31, 1999, and 2000, respectively....... 96,345 99,250
Other assets, net........................................... 8,632 7,570
Long-term deferred tax asset................................ 458 3,578
-------- --------
Total assets....................................... $437,991 $469,942
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligation............... $ -- $ 3,456
Current portion of long-term debt......................... 750 750
Accounts payable.......................................... 8,591 10,911
Accrued expenses.......................................... 3,949 6,869
-------- --------
Total current liabilities.......................... 13,290 21,986
Capital lease obligation.................................... -- 10,243
Long-term debt.............................................. 343,927 363,036
-------- --------
Total liabilities.................................. 357,217 395,265
-------- --------
Commitments and contingencies (Note 10)
Stockholders' equity:
Series A preferred stock, $.01 par value, 5,000,0000
shares authorized, 1,320,144 and 1,320,128 shares
issued, 1,320,144 and 1,318,896 shares outstanding at
March 31, 1999 and 2000, respectively, $50-per-share
liquidation value....................................... $ 13 $ 13
Common stock, $.01 par value, 994,000 shares authorized,
330,036 and 330,032 shares issued, 329,906 and 329,724
shares outstanding at March 31, 1999 and 2000,
respectively............................................ 3 3
Class A non-voting common stock, $.01 par value, 6,000
shares authorized, 4,120 shares issued, 4,080 and 3,210
shares outstanding at March 31, 1999 and 2000,
respectively............................................ -- --
Additional paid-in capital................................ 82,698 82,697
Retained deficit.......................................... (1,931) (7,913)
Treasury stock, 170 and 2,450 shares at cost at March 31,
1999 and 2000, respectively............................. (9) (123)
-------- --------
Total stockholders' equity......................... 80,774 74,677
-------- --------
Total liabilities and stockholders' equity......... $437,991 $469,942
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 79
UNIVERSAL COMPRESSION HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
DECEMBER 12, 1997 FOR THE FOR THE
(INCEPTION) THROUGH YEAR ENDED YEAR ENDED
MARCH 31, 1998 MARCH 31, 1999 MARCH 31, 2000
-------------------- --------------- ---------------
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues:
Rentals....................................... $ 9,060 $ 85,599 $ 98,295
Sales......................................... 4,037 43,588 38,000
Other......................................... 22 311 154
-------- -------- --------
Total revenues........................ 13,119 129,498 136,449
-------- -------- --------
Costs and expenses:
Rentals, exclusive of depreciation and
amortization............................... 2,804 31,010 35,352
Cost of sales, exclusive of depreciation and
amortization............................... 3,408 36,390 31,943
Depreciation and amortization................. 1,560 19,314 26,006
Selling, general and administrative........... 1,305 16,863 16,797
Interest expense.............................. 3,203 29,313 34,327
-------- -------- --------
Total costs and expenses.............. 12,280 132,890 144,425
-------- -------- --------
Income (loss) before income taxes............... 839 (3,392) (7,976)
Income taxes (benefit).......................... 409 (1,031) (1,994)
-------- -------- --------
Net income (loss)........................ $ 430 $ (2,361) $ (5,982)
======== ======== ========
Earnings per share:
Basic......................................... $ 1.32 $ (7.17) $ (17.94)
======== ======== ========
Diluted....................................... $ 1.32 $ (7.17) $ (17.94)
======== ======== ========
Weighted average shares outstanding:
Shares of common stock........................ 325,000 329,493 333,520
Dilutive potential shares of common stock..... -- -- --
-------- -------- --------
Total weighted average shares of
common stock outstanding............ 325,000 329,493 333,520
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 80
UNIVERSAL COMPRESSION HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD DECEMBER 12, 1997 (INCEPTION) THROUGH MARCH 31, 1998 AND
FOR THE PERIOD APRIL 1, 1998 THROUGH MARCH 31, 2000
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
COMMON PREFERRED PAID-IN EARNINGS TREASURY
STOCK STOCK CAPITAL (DEFICIT) STOCK TOTAL
------ --------- ---------- --------- -------- -------
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 12, 1997
(Inception)
Common stock issuance (325,000
shares at $.01 per share par
value)......................... $ 3 $-- $16,247 $ -- -- $16,250
Series A Preferred stock issuance
(1,300,000 shares at $.01 per
share shares at $.01 per share
par value)..................... -- 13 64,987 -- -- 65,000
Net income for period from
December 12, 1997 (inception)
through March 31, 1998......... -- -- -- 430 -- 430
--- --- ------- ------- ----- -------
Balance, March 31, 1998............. $ 3 $13 $81,234 $ 430 -- $81,680
Common stock issuance (9,156
shares at $.01 per share par
value)......................... -- -- 458 -- -- 458
Series A Preferred stock issuance
(20,144 shares at $.01 per
share par value)............... -- -- 1,006 -- -- 1,006
Treasury stock purchase (4,970
shares at $50 per share)....... -- -- -- -- (249) (249)
Sale of treasury stock (4,800
shares at $50 per share)....... -- -- -- -- 240 240
Net loss for the year ended March
31, 1999....................... -- -- -- (2,361) -- (2,361)
--- --- ------- ------- ----- -------
Balance, March 31, 1999............. $ 3 $13 $82,698 $(1,931) $ (9) $80,774
Common stock cancellation (4
shares at $.01 per share par
value)......................... -- -- -- -- -- --
Series A Preferred stock
cancellation (16 shares at $.01
per share par value)........... -- -- (1) -- -- (1)
Treasury stock purchase (2,880
shares at $50 per share)....... -- -- -- -- (144) (144)
Sale of treasury stock (600 shares
at $50 per share).............. -- -- -- -- 30 30
Net loss for the year ended March
31, 2000....................... -- -- -- (5,982) -- (5,982)
--- --- ------- ------- ----- -------
Balance, March 31, 2000............. $ 3 $13 $82,697 $(7,913) $(123) $74,677
=== === ======= ======= ===== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 81
UNIVERSAL COMPRESSION HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
DECEMBER 12, 1997
(INCEPTION) FOR THE FOR THE
THROUGH YEAR ENDED YEAR ENDED
MARCH 31, 1998 MARCH 31, 1999 MARCH 31, 2000
----------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................... $ 430 $ (2,361) $ (5,982)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization...................... 1,560 19,314 26,006
Gain on asset sales................................ (13) (192) (124)
Deferred income taxes.............................. 339 (1,223) (2,921)
Amortization of debt issuance costs................ 121 1,162 1,162
(Increase) Decrease in receivables................. (1,263) (10,807) 5,202
(Increase) Decrease in inventories................. (223) (2,594) 1,545
(Increase) Decrease in other current assets........ (2,951) 2,183 (633)
Increase (Decrease) in accounts payable............ (1,472) 2,537 2,320
Increase (Decrease) in accrued expenses............ 587 (3,569) 411
Deferred interest on notes payable................. 1,880 18,316 20,258
(Increase) Decrease in non-current assets.......... -- 27 (100)
--------- -------- --------
Net cash provided by (used in) operating
activities.................................. (1,005) 22,793 47,144
--------- -------- --------
Cash flows from investing activities:
Proceeds from asset sales............................ 765 8,038 4,442
Additions to property and equipment.................. (2,038) (68,081) (60,002)
Acquisition of Tidewater Compression Service, Inc.... (351,872) -- --
Other acquisitions................................... -- (2,953) (5,543)
--------- -------- --------
Net cash used in investing activities......... (353,145) (62,996) (61,103)
--------- -------- --------
Cash flows from financing activities:
Net borrowings (repayments) under revolving line of
credit............................................. 285,018 40,249 (400)
Repayments of long-term debt......................... (36) (750) (750)
Common stock issuance................................ 16,200 252 --
Preferred stock issuance (cancellation).............. 64,800 1,006 (1)
Debt issuance costs.................................. (9,450) -- --
Net proceeds from sale-leaseback of vehicles......... -- -- 3,119
Net proceeds from financing lease.................... -- -- 10,581
Purchase of treasury stock........................... -- (249) (144)
Sale of treasury stock............................... -- 240 30
--------- -------- --------
Net cash provided by financing activities..... 356,532 40,748 12,435
--------- -------- --------
Net increase (decrease) in cash and cash equivalents... 2,382 545 (1,524)
--------- -------- --------
Cash and cash equivalents at beginning of period....... -- 2,382 2,927
--------- -------- --------
Cash and cash equivalents at end of period............. $ 2,382 $ 2,927 $ 1,403
========= ======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest............................... $ 1,202 $ 9,653 $ 10,471
========= ======== ========
Cash paid for income taxes........................... $ -- $ 697 $ 772
========= ======== ========
Supplemental schedule of non-cash investing and
financing activities:
Class A non-voting common stock (4,120 shares) given
to employees....................................... $ -- $ 206 $ --
========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 82
UNIVERSAL COMPRESSION HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM DECEMBER 12, 1997 (INCEPTION) THROUGH MARCH 31, 1998
AND FOR THE YEARS ENDED MARCH 31, 1999 AND 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Universal Compression Holdings Inc. (the "Company") was formed on December
12, 1997 for the purpose of acquiring Tidewater Compression Service, Inc.
("TCS") from Tidewater Inc. ("Tidewater"). The Company formed an acquisition
subsidiary, TW Acquisition Corporation ("Acquisition Corp.") which acquired 100%
of the voting securities of TCS (the "Acquisition"). See Note 2. Immediately
following the Acquisition, Acquisition Corp. was merged with and into TCS, which
changed its name to Universal Compression, Inc. ("Universal"). The Company is a
holding company which conducts its operations through its wholly owned
subsidiary, Universal. Accordingly, the Company is dependent upon the
distribution of earnings from Universal whether in the form of dividends,
advances or payments on account of intercompany obligations, to service its debt
obligations.
NATURE OF OPERATIONS
The Company operates one of the largest rental fleets of natural gas
compressors in the United States and provides related maintenance services on
such compressors. The compressors are rented to oil and gas producers and
processors and pipeline companies and are used primarily to boost the pressure
of natural gas from the wellhead into gas-gathering systems, gas-processing
plants or into and through high-pressure pipelines. The Company also designs and
fabricates compressor packages for its own fleet as well as for sale to
customers.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the Company and
its wholly owned subsidiary, Universal. All significant intercompany accounts
and transactions have been eliminated in consolidation.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year amounts to
conform to the current year classification.
USE OF ESTIMATES
In preparing the Company'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.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
REVENUE RECOGNITION
Revenue from equipment rentals is recorded when earned over the period of
rental and maintenance contracts which generally range from one month to several
years. Parts and service revenue is recorded as products are delivered or
services are performed for the customer.
F-7
<PAGE> 83
UNIVERSAL COMPRESSION HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Compressor fabrication revenue is recognized using the completed-contract
method which recognizes revenue upon completion of the contract. This method is
used because the typical contract is completed within two to three 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.
CONCENTRATION OF CREDIT RISK
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 such as South America, Southeast Asia, Europe and
Canada. The Company reviews the financial condition of customers prior to
extending credit and periodically updates customer credit information. Payment
terms are on a short-term basis and in accordance with industry standards. No
single customer accounts for 10% or more of the Company's revenues. For the
period from December 12, 1997 (inception) through March 31, 1998 and the years
ended March 31, 1999 and 2000 the Company wrote off bad debts totaling $80,000,
$330,000 and $116,000, respectively.
INVENTORIES
Inventories are recorded at the lower of cost (first in first out FIFO
method) or market (net realizable value). Some items of compression equipment
are acquired and placed in inventories for subsequent sale or rental to others.
Acquisitions of these assets are considered operating activities in the
statement of cash flows.
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 20% for compression equipment, using
estimated useful lives of:
<TABLE>
<S> <C>
Compression equipment................................... 15 years
Other properties and equipment.......................... 2-25 years
</TABLE>
Maintenance and repairs are charged to expenses as incurred. Overhauls and
major improvements that benefit future periods are capitalized and depreciated
over the estimated period of benefits, generally three years. Depreciation
expense for the period from December 12, 1997 (inception) through March 31, 1998
and the years ended March 31, 1999 and 2000 was $1,366,226, $16,942,554 and
$23,368,262, respectively.
GOODWILL AND OTHER ASSETS
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis primarily over 40
years. At the balance sheet date, the Company evaluated the recoverability of
goodwill based on expectations of undiscounted cash flows from operations and
determined that no impairment had occurred. Included in other assets are debt
issuance costs, net of accumulated amortization, totaling approximately
$8,287,000 and $7,125,000 at March 31, 1999 and 2000, respectively. Such costs
are amortized over the period of the respective debt agreements on a
straight-line method which approximates the effective interest method.
STOCK-BASED COMPENSATION
Under Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," the Company elected to measure
compensation cost using the intrinsic value-based
F-8
<PAGE> 84
UNIVERSAL COMPRESSION HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
method as prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees." As such, the Company is required to make pro
forma disclosures of net income and, if presented, earnings per share as if the
fair value based method of accounting defined by SFAS No. 123 had been applied.
See Note 7.
INCOME TAXES
The Company accounts for income taxes using an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, all expected future events are considered other than enactments of
changes in the tax law or rates.
FOREIGN CURRENCY TRANSACTIONS
Activities outside the United States are measured using the local currency
as the functional currency. Assets and liabilities of these subsidiaries are
translated at the rates of exchange at the balance sheet date. Income and
expense items are translated at average monthly rates of exchange. The resultant
translation adjustments for the period from December 12, 1997 (inception)
through March 31, 1998 and the years ended March 31, 1999 and 2000 were not
significant.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of trade receivables and
payables (which have carrying values that approximate fair value) and long-term
debt. The fair values of the Company's term loan and revolving credit facility
(see Note 4) are representative of their carrying values based upon variable
rate terms. The fair value of the senior discount notes was approximately $172.0
million and $181.6 million, as compared to a carrying amount of $195.2 million
and $215.5 million at March 31, 1999 and 2000, respectively. The estimated fair
value amounts have been determined by the Company using appropriate valuation
methodologies and information available to management as of March 31, 2000 based
on the quoted market price from brokers of these notes.
ENVIRONMENTAL LIABILITIES
The costs to remediate and monitor environmental matters are accrued when
such liabilities are considered probable and a reasonable estimate of such costs
is determinable.
NEW ACCOUNTING PRONOUNCEMENTS
Effective April 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." This statement was effective for fiscal years beginning
after December 15, 1997 and required retroactive presentation of total nonowner
changes in equity, including items not currently reflected in net income, for
all periods presented. For the years ended March 31, 1999 and 2000, the effect
of transactions which would have given rise to further disclosure were not
significant.
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," and
subsequently delayed the effective date of this statement with the issuance of
SFAS No. 137 in June 1999. SFAS No. 133, which is now effective for the
Company's year ending March 31, 2002, establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The Company will be
analyzing SFAS No. 133 to determine what, if any, impact or additional
disclosure requirements this pronouncement will have.
F-9
<PAGE> 85
UNIVERSAL COMPRESSION HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EARNINGS PER SHARE
The Company has disclosed earnings per share data; however, such amounts
are not meaningful because the Company is beneficially owned by a single
stockholder under the terms of voting agreements.
2. TCS ACQUISITION
On February 20, 1998, Acquisition Corp. acquired 100% of the voting
securities of TCS for approximately $350 million. The Acquisition was recorded
using the purchase method of accounting and the purchase price was allocated to
the assets and liabilities acquired based on their fair values. The excess cost
of the Acquisition was recorded as goodwill which is being amortized on a
straight-line basis over its 40 year useful life. The operations of TCS are
included in the financial statements presented herein beginning February 20,
1998.
The following table presents the unaudited pro forma revenue, gross profit
and net income amounts as if the Acquisition occurred on December 12, 1997
(inception) (in thousands):
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 12, 1997
(INCEPTION) THROUGH
MARCH 31, 1998
-------------------
(UNAUDITED)
<S> <C>
Revenues.................................................... $32,630
-------
Gross profit................................................ $15,992
-------
Net loss.................................................... $(1,427)
</TABLE>
3. INVENTORIES
Inventories at March 31 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1999 2000
------- ------
<S> <C> <C>
Finished goods.............................................. $ 5,279 $5,551
Work-in-progress............................................ 4,993 3,176
------- ------
Total............................................. $10,272 $8,727
======= ======
</TABLE>
F-10
<PAGE> 86
UNIVERSAL COMPRESSION HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. LONG-TERM DEBT
The Company's debt at March 31 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1999 2000
-------- --------
<S> <C> <C>
Term loan, bearing interest of LIBOR + 2.5%, due February
2005 and collateralized by property of Universal.......... $ 74,063 $ 73,313
Revolving credit facility, bearing interest of LIBOR +
2.25%, due February 2003 and collateralized by property of
Universal................................................. 75,400 75,000
Senior discount notes, bearing interest of 9 7/8% per annum,
due 2008, net of discount of $75,615 and $58,680 at March
31, 1999 and 2000, respectively, unsecured................ 166,885 183,820
Senior discount notes, bearing interest of 11 3/8% per
annum, due 2009, net of discount of $15,171 and $11,847 at
March 31, 1999 and 2000, respectively, unsecured.......... 28,329 31,653
-------- --------
Total debt........................................ 344,677 363,786
Less current maturities..................................... 750 750
-------- --------
Total long-term debt.............................. $343,927 $363,036
======== ========
</TABLE>
The Company's senior secured credit agreement ("Credit Agreement") provides
for $75 million under the term loan and $85 million under the revolving credit
facility, which includes a sublimit for letters of credit. The available
capacity on the revolving credit facility at March 31, 1999 and 2000 was
approximately $8,143,000 and $7,701,000, respectively, after giving effect to
outstanding letters of credit. The interest rates on the term loan and the
revolving credit facility at March 31, 1999 were 7.44% and 7.19%, respectively.
The interest rates on the term loan and the revolving credit facility at March
31, 2000 were 8.69% and 8.36%, respectively. Under the revolving credit
facility, a commitment fee of 0.50% per annum on the average available
commitment is payable quarterly.
The Credit Agreement contains certain financial covenants and limitations
on, among other things, acquisitions, sales, indebtedness and liens. The Credit
Agreement also limits the payment of cash dividends related to Universal paying
up to $1 million to the Company in any given fiscal year. In addition, the
Company has substantial dividend payment restrictions under the indenture
related to the senior discount notes. The Company was in compliance with all
such covenants and limitations at March 31, 2000. As defined by the Credit
Agreement, any "change of control" would result in an "Event of Default" and all
amounts outstanding under the Credit Agreement would become due and payable. All
principal amounts and accrued interest would become due without further notice.
Interest related to both the 9 7/8% senior discount notes and the 11 3/8%
senior discount notes is payable semi-annually on August 15 and February 15,
commencing August 15, 2003.
Maturities of long-term debt as of March 31, 2000, in thousands, are
2001 -- $750; 2002 -- $750; 2003 -- $82,125; 2004 -- $30,938; 2005 -- $33,750;
and $215,473 thereafter.
5. CAPITAL LEASES
On July 21, 1999, a wholly owned subsidiary of the Company entered into a
financing lease with Societe Generale Financial Corporation regarding certain
compression equipment. The financing lease has a term of 5 years and bears
interest at a rate of LIBOR plus 4.25%. The financing lease is related to the
Colombian operations of the Company's subsidiary.
On June 17, 1999, Universal signed a master lease agreement with GE Capital
Fleet Services completing a sale and lease back of the majority of its service
vehicle fleet. Under the agreement, the
F-11
<PAGE> 87
UNIVERSAL COMPRESSION HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
vehicles were sold and leased back by Universal at lease terms ranging from 20
months to 56 months and will continue to be deployed by Universal under its
normal operating procedures.
Principal amortization associated with both leases is recorded in the
Consolidated Statements of Cash Flows. Property and equipment at March 31, 2000
include the following amounts for capitalized leases (in thousands):
<TABLE>
<S> <C>
Compression equipment...................................... $11,925
Service vehicles........................................... 4,363
-------
16,288
Less accumulated depreciation.............................. (2,365)
-------
Net assets under capital leases............................ $13,923
</TABLE>
Future minimum lease payments under non-cancelable capital leases as of
March 31, 2000 are as follows (in thousands):
<TABLE>
<S> <C>
2001....................................................... $ 3,456
2002....................................................... 3,302
2003....................................................... 3,171
2004....................................................... 2,774
2005....................................................... 996
Thereafter................................................. --
-------
Total $13,699
</TABLE>
6. INCOME TAXES
For the period from December 12, 1997 (inception) through March 31, 1998
and the years ended March 31, 1999 and 2000, substantially all of the Company's
income and losses before income taxes were derived from its U.S. operations.
Income tax expense (benefit) for the period from December 12, 1997
(inception) through March 31, 1998 and the years ended March 31, 1999 and 2000
consisted of the following (in thousands):
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
DECEMBER 12, 1997
(INCEPTION) THROUGH
MARCH 31, 1998 1999 2000
------------------- ------- -------
<S> <C> <C> <C>
Current:
Foreign........................................ $ 71 $ 145 $ 889
Deferred:
Federal........................................ 303 (1,055) (2,655)
State.......................................... 35 (121) (228)
---- ------- -------
Total.................................. $409 $(1,031) $(1,994)
==== ======= =======
</TABLE>
A reconciliation of the provision (benefit) for income taxes and the amount
computed by applying the federal statutory income tax rate to income before
taxes for the period from December 12, 1997
F-12
<PAGE> 88
UNIVERSAL COMPRESSION HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(inception) through March 31, 1998 and the years ended March 31, 1999 and 2000
is as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
DECEMBER 12, 1997
(INCEPTION) THROUGH
MARCH 31, 1998 1999 2000
------------------- ------- -------
<S> <C> <C> <C>
Benefit for income taxes at statutory rate....... $294 $(1,187) $(2,791)
State taxes...................................... 30 (121) (228)
Foreign taxes.................................... 71 145 889
Non-deductible expenses and other................ 14 132 136
---- ------- -------
Total.................................. $409 $(1,031) $(1,994)
==== ======= =======
</TABLE>
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at March 31 are (in thousands):
<TABLE>
<CAPTION>
1999 2000
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 24,235 $ 35,217
Other..................................................... 630 1,172
-------- --------
Total............................................. 24,865 36,389
Valuation allowance......................................... (145) (889)
-------- --------
Total............................................. 24,720 35,500
-------- --------
Deferred tax liabilities:
Depreciation differences on property and equipment........ (21,905) (28,319)
Other..................................................... (1,931) (3,376)
-------- --------
Total............................................. (23,836) (31,695)
-------- --------
Net deferred tax asset............................ $ 884 $ 3,805
======== ========
</TABLE>
A valuation allowance has been established against the Company's deferred
tax assets related to foreign tax credits. The Company believes that it is
probable that all other deferred tax assets will be realized on future tax
returns, primarily from the generation of future taxable income through both
profitable operations and future reversals of existing taxable temporary
differences.
As a result of the activity for the period from December 12, 1997
(inception) through March 31, 1998 and the years ended March 31, 1999 and 2000,
the Company has net operating loss ("NOL") carryforwards available to offset
future taxable income. The Company has NOL carryforwards of approximately
$91,752,000 at March 31, 2000 which will expire, if not utilized, as follows:
2018 -- $4,185,000; 2019 -- $30,939,000 and 2020 -- $56,628,000. Unrestricted
utilization of the carryforwards could be limited by Section 382 of the Internal
Revenue Code of 1986, as amended, depending on future changes in ownership. See
Note 13 for further information.
7. STOCKHOLDERS' EQUITY
COMMON STOCK
Under the Employee Stock Purchase Plan, 46 employees of the Company
purchased a total of 1,996 shares of common stock and 7,984 shares of Series A
preferred stock at $50 per share during March
F-13
<PAGE> 89
UNIVERSAL COMPRESSION HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1999. The Company received the cash proceeds from the stock purchase during
April 1999. At March 31, 1999, a receivable of $499,000 has been recorded
related to the employee stock purchases.
REDEEMABLE PREFERRED STOCK
At March 31, 2000, the Company has issued 1,320,128 shares of Series A
preferred stock ("Preferred Stock") which is redeemable at any time as a whole
or in part at the option of the Company for cash in the amount of $50 per share.
No dividends are payable at March 31, 2000 on the Preferred Stock. The Preferred
Stock in the event of any liquidation, dissolution or winding up of the Company,
or a merger or consolidation of the Company, or a sale of substantially all of
the assets of the Company, each case as would constitute a "Change of Control"
under the indenture, will begin to accrue dividends at a rate of 12% per annum
payable quarterly beginning 90 days subsequent to such "Change of Control."
Each share of Preferred Stock equates to one vote on all matters taken to
the common shareholders. All holders of Preferred Stock and common stock are
treated as one class in relation to voting rights.
STOCK OPTIONS
In order to motivate and retain key employees, the Company established an
incentive stock option plan. The Company measures compensation cost for this
plan using the intrinsic value method of accounting prescribed by APB No. 25
"Accounting for Stock Issued to Employees." Given the terms of the plan, no
compensation cost has been recognized for stock options granted under the plan.
The incentive stock plan became effective on February 20, 1998, and on that date
certain key employees were granted stock options. The options are exercisable
over a ten-year period and generally vest over the following time period:
<TABLE>
<S> <C>
Year 1...................................................... 33 1/3%
Year 2...................................................... 33 1/3%
Year 3...................................................... 33 1/3%
</TABLE>
The following is a summary of stock option activity for the period from
December 12, 1997 (inception) through March 31, 1998 and the years ended March
31, 1999 and 2000:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE PRICE
SHARES PER SHARE
------ -------------
<S> <C> <C>
Options outstanding, December 12, 1997(inception)........... -- --
Options granted........................................... 30,148 $50
------ ---
Options outstanding, March 31, 1998......................... 30,148 $50
------ ---
Options granted........................................... 11,616 $50
Options cancelled......................................... (6,290) $50
------ ---
Options outstanding, March 31, 1999......................... 35,474 $50
------ ---
Options granted........................................... 7,152 $50
Options cancelled......................................... (5,826) $50
------ ---
Options outstanding, March 31, 2000......................... 36,800 $50
------ ---
</TABLE>
As of March 31, 2000, under the incentive stock option plan the Company had
5,938 stock options available for grant.
F-14
<PAGE> 90
UNIVERSAL COMPRESSION HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The fair value of options at the date of grant was estimated using the
Black-Scholes model with the following weighted-average assumptions:
<TABLE>
<S> <C>
Expected life............................................... 3years
Interest rate............................................... 6.4%
Dividend yield.............................................. 0%
Expected volatility of the Company's stock price............ 0%
</TABLE>
On a pro forma basis after giving effect to the fair value based method of
accounting for employee stock compensation required by SFAS 123, compensation
expense would have been approximately $8,000, $76,000 and $109,000 for the
period from December 12, 1997 (inception) through March 31, 1998 and the years
ended March 31, 1999 and 2000, respectively.
8. EMPLOYEE BENEFITS
The Company has a defined contribution 401(k) plan covering substantially
all employees. The Company makes matching contributions under this plan equal to
50% of each participant's contribution of up to 6% of the participant's
compensation. Company contributions to the plan were approximately $159,000,
$493,000 and $473,000 for the period from December 12, 1997 (inception) through
March 31, 1998 and the years ended March 31, 1999 and 2000, respectively.
9. RELATED-PARTY TRANSACTIONS
MANAGEMENT AGREEMENT
Castle Harlan Inc., an affiliate of a major stockholder of the Company,
entered into an agreement whereby, in exchange for certain management services
rendered, the Company agreed to pay a fee to Castle Harlan Inc. totaling $3
million per year. The amount was paid in advance for the first year and
quarterly in advance thereafter. The agreement is for a term of five years,
renewable automatically from year to year thereafter unless Castle Harlan Inc.
or its affiliates beneficially own less than 20% of the then outstanding stock
of the Company. The Company paid Castle Harlan Inc. $3,000,000, $750,000 and
$3,000,000 during the period from December 12, 1997 (inception) through March
31, 1998 and the years ended March 31, 1999 and 2000, respectively. The fee is
recorded at the rate of $750,000 per quarter in selling, general and
administrative expenses.
As of March 31, 2000, 4,520 shares of common stock and 18,080 shares of
preferred stock held by certain officers of the Company are subject to certain
repurchase requirements by the Company in the event of termination of the
officer by the Company without "cause," disability or death as specified in the
Stock Repurchase Agreement. The Company maintains an insurance policy to fund
substantially all of its obligations in the event of disability or death.
FINDER'S FEE/CONSULTING ARRANGEMENT
The Company paid a member of its Board of Directors (the "Director")
$1,750,000 (a "finders fee") related to services provided by the Director for
the Acquisition. Upon consummation of the Acquisition, $1,100,000 of the finders
fee was issued to the Director as capital stock of the Company at $50 per share
par value. The Company paid the remaining $650,000 of the finders fee in cash to
the Director on March 4, 1998. In addition, the Company will pay the Director an
annual consulting fee of $150,000 for consulting services for a stated term of
five years. The agreement will automatically extend for one-year periods unless
the parties elect to terminate the agreement. The Company paid the Director
$12,500, $165,523 and $140,264 during the period from December 12, 1997
(inception) through March 31, 1998 and the years ended March 31, 1999 and 2000,
respectively.
F-15
<PAGE> 91
UNIVERSAL COMPRESSION HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company also paid a closing bonus to an officer of the Company
consisting of 1,000 shares of the Company's common stock, 4,000 shares of the
Company's preferred stock, both valued at $50 per share, and $100,000 cash for
services performed in conjunction with the Acquisition prior to his employment.
10. COMMITMENTS AND CONTINGENCIES
Rent expense for the period from December 12, 1997 (inception) through
March 31, 1998 and the years ended March 31, 1999 and 2000 was approximately
$43,000, $427,000 and $415,000, respectively. Commitments for future lease
payments were not significant at March 31, 2000.
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, operating
results, or cash flows.
An environmental assessment (the "Assessment") of the operations, physical
premises and assets of the Company was completed in connection with the
Acquisition. In the event that remediation is undertaken by the Company, then
pursuant to the stock purchase agreement, costs of such remediation shall be
paid as follows: Tidewater, Inc. shall pay 75% of the first $4 million, 83.33%
of the next $6 million, and 100% of the costs in excess of $10 million, although
not to exceed the upper limit of the range in the Assessment. Tidewater, Inc.
has disputed certain aspects of the Assessment, but has not disputed its
obligation to reimburse the Company for actual costs incurred in remediating
environmental conditions identified in the Assessment. The Company has recorded
a provision of approximately $1,100,000 at March 31, 2000 for environmental
remediation costs. The Company continues to further evaluate the Company's
remediation requirements under existing laws, rules and regulations. Considering
Tidewater's obligations pursuant to the stock purchase agreement, the Company
continues to believe that any unrecorded remediation obligations will not have a
material impact on its financial condition, results of operations and cash
flows. Should the Company incur remediation costs, a receivable from Tidewater,
Inc. for the expected reimbursement based on the terms of the stock purchase
agreement will be recorded. The unreimbursed portion of any such remediation
costs will be charged against the Company's environmental remediation liability.
At the time of the Acquisition, the Company entered into a Purchase Price
Adjustment Agreement with Tidewater, Inc. The agreement provides for potential
additional amounts to be paid to Tidewater, Inc. upon a liquidity event, as
defined in the agreement. The potential amount is based upon a formula related
to accreted growth on Castle Harlan's initial investment above a certain growth
rate which is compounded quarterly.
The Company has no other commitments or contingent liabilities which, in
the judgment of management, would result in losses that would materially affect
the Company's consolidated financial position or operating results.
11. INDUSTRY SEGMENTS AND GEOGRAPHIC INFORMATION
The Company has three principal industry segments: Domestic Rental and
Maintenance, International Rental and Maintenance and Engineered Products. The
two Rental and Maintenance Segments provide natural gas compression rental and
maintenance services to meet specific customer requirements. The Engineered
Products Segment involves the design, fabrication and sale of natural gas and
air compression packages to meet customer specifications. The International
Rental and Maintenance Segment represents substantially all of the Company's
foreign based operations.
F-16
<PAGE> 92
UNIVERSAL COMPRESSION HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance based on profit or loss from operations before interest expense and
income taxes.
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately since each business
requires different marketing strategies due to customer specifications. The
business was acquired as a unit (see Note 1 -- Organization).
The following table presents sales and other financial information by
industry segment for the year ended March 31, 2000 (in thousands):
<TABLE>
<CAPTION>
DOMESTIC INTERNATIONAL CORPORATE
RENTAL AND RENTAL AND ENGINEERED AND
MAINTENANCE MAINTENANCE PRODUCTS OTHER(A) TOTAL
----------- ------------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Revenues.............................. $ 83,577 $14,718 $25,258 $12,896 $136,449
Operating income (loss)............... $ 22,262 $ 3,974 $ 971 $(1,049) $ 26,158
Depreciation and amortization......... $ 19,104 $ 3,947 $ 196 $ 2,759 $ 26,006
Capital expenditures.................. $ 50,980 $ 8,079 $ 899 $ 44 $ 60,002
Identifiable assets................... $310,563 $49,204 $10,205 $99,970 $469,942
</TABLE>
The following table presents sales and other financial information by
industry segment for the year ended March 31, 1999 (in thousands):
<TABLE>
<CAPTION>
DOMESTIC INTERNATIONAL CORPORATE
RENTAL AND RENTAL AND ENGINEERED AND
MAINTENANCE MAINTENANCE PRODUCTS OTHER(A) TOTAL
----------- ------------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Revenues.............................. $ 78,821 $ 6,778 $22,429 $21,470 $129,498
Operating income (loss)............... $ 22,394 $ 2,483 $ 949 $ (116) $ 25,710
Depreciation and amortization......... $ 15,626 $ 1,020 $ 161 $ 2,507 $ 19,314
Capital expenditures.................. $ 48,428 $17,293 $ 2,123 $ 237 $ 68,081
Identifiable assets................... $311,490 $16,093 $11,421 $98,987 $437,991
</TABLE>
The following table presents sales and other financial information by
industry segment for the period from December 12, 1997 (inception) through March
31, 1998 (in thousands):
<TABLE>
<CAPTION>
DOMESTIC INTERNATIONAL CORPORATE
RENTAL AND RENTAL AND ENGINEERED AND
MAINTENANCE MAINTENANCE PRODUCTS OTHER(A) TOTAL
----------- ------------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Revenues.............................. $ 8,407 $ 652 $3,165 $ 895 $ 13,119
Operating income...................... $ 3,373 $ 298 $ 189 $ 166 $ 4,026
Depreciation and amortization......... $ 1,461 $ 83 $ 10 $ 6 $ 1,560
Capital expenditures.................. $ 1,465 $ 529 $ -- $ 44 $ 2,038
Identifiable assets................... $262,218 $14,752 $7,865 $95,391 $380,226
</TABLE>
- ---------------
(a) Corporate and Other segment represents primarily corporate activities, part
sales and services and all other items that could not be allocated to an
identifiable segment. The segment principally serves the oil and gas
market, including sales of parts and equipment utilized in the extraction
of natural gas and the service that the Company provides to customers'
natural gas compression units.
Revenues include sales to unaffiliated customers. Operating income is
defined as income before income taxes less gain on asset sales and interest
income plus interest expense. Identifiable assets are those tangible and
intangible assets that are identified with the operations of a particular
industry segment. Capital expenditures include fixed asset purchases.
F-17
<PAGE> 93
UNIVERSAL COMPRESSION HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized quarterly financial data for the year ended March 31, 2000 is as
follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30 SEPTEMBER 30 DECEMBER 31 MARCH 31
------- ------------ ----------- --------
<S> <C> <C> <C> <C>
Revenues................................. $33,808 $34,988 $33,729 $33,924
Operating income......................... $ 5,966 $ 6,632 $ 6,697 $ 6,863
Net loss................................. $(1,238) $(1,578) $(1,276) $(1,890)
</TABLE>
13. SUBSEQUENT EVENT
On April 5, 2000, the Company filed a Registration Statement on Form S-1 to
register the offering to the public of 7,000,000 shares of its common stock, par
value $.01 per share, under the Securities Act of 1933, as amended. As of May
22, 2000, this Registration Statement had not been declared effective. The
Company is also negotiating to enter into a new $50.0 million revolving credit
facility and $200.0 million operating lease facility concurrently with the
proposed offering. The Company will not consummate the offering unless it
concurrently closes these new financing arrangements. If the offering and
concurrent financing arrangements are consummated, the Company will concurrently
implement a recapitalization. Pursuant to the recapitalization, all of the
Company's non-voting common stock will be converted into shares of its common
stock on a one-for-one basis, the common stock will be split on a 7.4248-for-1
basis and all of the Company's outstanding preferred stock will be converted
into common stock on a post-split ratio of one share of preferred stock into
2.3256 shares of common stock.
F-18
<PAGE> 94
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Universal Compression, Inc.
We have audited the accompanying statements of income, stockholder's equity
and cash flows of Tidewater Compression Service, Inc. (the "Company") for the
period from April 1, 1997 through February 20, 1998. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the results of operations and cash flows of Tidewater Compression
Service, Inc. for the period from April 1, 1997 through February 20, 1998, in
conformity with generally accepted accounting principles in the United States of
America.
DELOITTE & TOUCHE LLP
Houston, Texas
June 1, 1998
F-19
<PAGE> 95
TIDEWATER COMPRESSION SERVICE, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 1, 1997
THROUGH
FEBRUARY 20, 1998
-----------------
(IN THOUSANDS)
<S> <C>
Revenues:
Rentals................................................... $71,644
Sales..................................................... 19,924
Other..................................................... 3,024
Gain on asset sales....................................... 1,094
-------
Total revenues.................................... 95,686
-------
Costs and expenses:
Rentals................................................... 31,924
Cost of sales............................................. 14,753
Depreciation and amortization............................. 23,310
General and administrative................................ 8,669
Interest expense.......................................... --
-------
Total costs and expenses.......................... 78,656
-------
Income before income taxes.................................. 17,030
Income taxes................................................ 6,271
-------
Net income........................................ $10,759
=======
</TABLE>
See accompanying notes to financial statements.
F-20
<PAGE> 96
TIDEWATER COMPRESSION SERVICE, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM APRIL 1, 1997 THROUGH FEBRUARY 20, 1998
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance, April 1, 1997................................ 49 25,627 31,871 57,547
Net income............................................ -- -- 10,759 10,759
--- ------- ------- -------
Balance, February 20, 1998............................ $49 $25,627 $42,630 $68,306
=== ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE> 97
TIDEWATER COMPRESSION SERVICE, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 1, 1997
THROUGH
FEBRUARY 20, 1998
-----------------
(IN THOUSANDS)
<S> <C>
Cash flows from operating activities:
Net income................................................ $10,759
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 23,310
Gain on asset sales.................................... (1,094)
Deferred income tax benefit............................ (1,825)
Decrease in receivables................................ 700
Increase in inventories................................ (610)
Decrease in other current assets....................... 11
Increase in accounts payable........................... 2,716
Decrease in accrued expenses........................... (476)
-------
Net cash provided by operating activities................... 33,491
-------
Cash flows from investing activities:
Proceeds from asset sales................................. 3,803
Additions to properties and equipment..................... (17,600)
-------
Net cash used in investing activities....................... (13,797)
-------
Cash flows from financing activities:
Net change in amount due to Tidewater Inc................. (17,870)
Repayments of long-term debt.............................. --
-------
Net cash used in financing activities....................... (17,870)
-------
Net increase in cash........................................ 1,824
Cash at beginning of period................................. --
-------
Cash at end of period....................................... $ 1,824
=======
Supplemental cash flow information -- cash paid for
interest.................................................. --
</TABLE>
See accompanying notes to financial statements.
F-22
<PAGE> 98
TIDEWATER COMPRESSION SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM APRIL 1, 1997 THROUGH FEBRUARY 20, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 revenues and expenses that are directly related to TCS' 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 based on
management's estimate of the time involved in providing such services and are
included in the accounts of TCS. Management believes the method used to allocate
the cost of these services is reasonable.
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 designs and fabricates compression packages
for its own fleet as well as for sale to customers.
USE OF ESTIMATES
In preparing TCS' 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.
REVENUE RECOGNITION
Revenue from equipment rentals and parts sales is recognized when earned.
Compressor fabrication revenue is recognized using 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.
INCOME TAXES
TCS' 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' 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
statements 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.
ENVIRONMENTAL LIABILITIES
The costs to remediate and monitor environmental matters are accrued when
such liabilities are considered probable and a reasonable estimate of such costs
is determinable.
F-23
<PAGE> 99
TIDEWATER COMPRESSION SERVICE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 multiemployer plans. Accordingly, the statement of operations
includes an allocation from Tidewater for the costs associated with the TCS
employees who participate in these plans that is comparable to TCS' required
contribution to the plans for the periods presented. Additionally, no assets and
liabilities have been reflected in the balance sheet 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.
FOREIGN CURRENCY TRANSACTIONS
Activities outside the United States, except those located in highly
inflationary economies, are measured using the local currency as the functional
currency. Assets and liabilities of these subsidiaries are translated at the
rates of exchange at the balance sheet date. Income and expense items are
translated at average monthly rates of exchange. The resultant translation
adjustments for the period from April 1, 1997 through February 20, 1998 were not
significant.
FOREIGN OPERATIONS AND EXPORT SALES
Foreign operations were not deemed significant for the period from April 1,
1997 through February 20, 1998. Export sales for the period from April 1, 1997
through February 20, 1998 were $15,528,000.
2. INCOME TAXES
For the period from April 1, 1997 through February 20, 1998, substantially
all of TCS' income before income taxes was derived from its U.S. operations.
Income tax expense (benefit) consisted of the following (in thousands):
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 1,
1997
THROUGH
FEBRUARY >20,
1998
-------------
<S> <C>
Current:
U.S. Federal.............................................. $ 7,220
State and foreign......................................... 876
Deferred.................................................... (1,825)
-------
Total............................................. $ 6,271
=======
</TABLE>
The actual income tax expense for each of the periods shown above 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.
F-24
<PAGE> 100
TIDEWATER COMPRESSION SERVICE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. 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 allocated pension expense to TCS of
approximately $282,000 for the period from April 1, 1997 through February 20,
1998.
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 $274,000 for the period from
April 1, 1997 through February 20, 1998.
4. COMMITMENTS AND CONTINGENCIES
Rent expense for the period from April 1, 1997 through February 20, 1998
was approximately $390,000. Commitments for future minimum lease payments were
not significant at February 20, 1998.
5. SUBSEQUENT EVENTS
On February 20, 1998, pursuant to the Stock Purchase Agreement, dated
December 18, 1997, between Tidewater and TW Acquisition Corporation
("Acquisition Corp."), the Acquisition Corp. acquired 100% of the voting
securities of TCS for a purchase price of approximately $350 million (the
"Acquisition"). Immediately following the Acquisition, Acquisition Corp. was
merged with and into TCS, which changed its name to Universal Compression, Inc.
F-25
<PAGE> 101
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Through and including , 2000 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealer's obligation to deliver a
prospectus when acting as underwriter and with respect to its unsold allotments
or subscriptions.
7,000,000 SHARES
[UNIVERSAL COMPRESSION LOGO]
COMMON STOCK
---------------------
PROSPECTUS
---------------------
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
DEUTSCHE BANC ALEX. BROWN
FIRST UNION SECURITIES, INC.
WASSERSTEIN PERELLA SECURITIES, INC.
, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 102
Picture depicting a natural gas compressor used in field production.
<PAGE> 103
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
<PAGE> 104
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER
TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 22, 2000
PROSPECTUS
7,000,000 SHARES
[UNIVERSAL COMPRESSION LOGO]
COMMON STOCK
----------------------
This is Universal Compression Holdings, Inc.'s initial public offering.
Universal is selling all of the shares. The international managers are offering
1,400,000 shares outside the U.S. and Canada and the U.S. underwriters are
offering 5,600,000 shares in the U.S. and Canada.
We expect the public offering price to be between $21.00 and $23.00 per
share. Currently, no public market exists for the shares. Our common stock has
been approved for listing on the New York Stock Exchange under the trading
symbol "UCO," subject to official notice of issuance.
INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
----------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to
Universal Compression Holdings, Inc. ..................... $ $
</TABLE>
The international managers may also purchase up to an additional 210,000
shares from Universal at the public offering price, less the underwriting
discount, within 30 days from the date of this prospectus to cover
over-allotments. The U.S. underwriters may similarly purchase up to an
additional 840,000 shares from Universal.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The shares will be ready for delivery on or about , 2000.
----------------------
MERRILL LYNCH INTERNATIONAL SCHRODER SALOMON SMITH BARNEY
DEUTSCHE BANC ALEX. BROWN
FIRST UNION SECURITIES, INC.
WASSERSTEIN PERELLA
SECURITIES, INC.
----------------------
The date of this prospectus is , 2000.
<PAGE> 105
UNDERWRITING
We intend to offer the shares outside the U.S. and Canada through the
international managers and in the U.S. and Canada through the U.S. underwriters.
Merrill Lynch International, Salomon Brothers International Limited, Deutsche
Bank AG, London, First Union Securities, Inc. and Wasserstein Perella
Securities, Inc. are acting as lead managers for the international managers
named below. Subject to the terms and conditions described in an international
purchase agreement among us and the international managers, and concurrently
with the sale of 5,600,000 shares to the U.S. underwriters, we have agreed to
sell to the international managers, and the international managers severally
have agreed to purchase from us, the number of shares listed opposite its name
below.
<TABLE>
<CAPTION>
NUMBER
INTERNATIONAL MANAGER OF SHARES
--------------------- ---------
<S> <C> <C>
Merrill Lynch International..............................................
Salomon Brothers International Limited...................................
Deutsche Bank AG, London.................................................
First Union Securities, Inc..............................................
Wasserstein Perella Securities, Inc......................................
---------
Total....................................................... 1,400,000
=========
</TABLE>
We have also entered into a U.S. purchase agreement with the U.S.
underwriters for sale of the shares in the U.S. and Canada for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Salomon Smith Barney Inc., Deutsche
Bank Securities Inc., First Union Securities, Inc. and Wasserstein Perella
Securities, Inc. are acting as U.S. representatives. Subject to the terms and
conditions in the U.S. purchase agreement, and concurrently with the sale of
1,400,000 shares to the international managers pursuant to the international
purchase agreement, we have agreed to sell to the U.S. underwriters, and the
U.S. underwriters severally have agreed to purchase 5,600,000 shares from us.
The initial public offering price per share and the total underwriting discount
per share are identical under the international purchase agreement and the U.S.
purchase agreement.
The international managers and the U.S. underwriters have agreed to
purchase all of the shares sold under the international and U.S. purchase
agreements if any of these shares are purchased. If an underwriter defaults, the
U.S. and international purchase agreements provide that the purchase commitments
of the nondefaulting underwriters may be increased or the purchase agreements
may be terminated. The closings for the sale of shares to be purchased by the
international managers and the U.S. underwriters are conditioned on one another.
We have agreed to indemnify the international managers and the U.S.
underwriters against some liabilities, including some liabilities under the
Securities Act, and to contribute to payments the international managers and the
U.S. underwriters may be required to make in respect of those liabilities.
The underwriters are offering the shares, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of legal matters by
their counsel, including the validity of the shares, and other conditions
contained in the purchase agreements, such as the receipt by the underwriters of
officer's certificates and legal opinions. The underwriters reserve the right to
withdraw, cancel or modify offers to the public and to reject orders in whole or
in part.
Schroder is a trademark of Schroders Holdings plc and is used under license
by Salomon Brothers International Limited.
COMMISSIONS AND DISCOUNTS
The lead managers have advised us that the international managers propose
initially to offer the shares to the public at the initial public offering price
listed on the cover page of this prospectus, and to dealers at that price less a
concession not in excess of $ per share. The international managers may
allow, and the dealers may reallow, a discount not in excess of $ per share
to other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
66
<PAGE> 106
The following table shows the public offering price, underwriting discount
and proceeds before expenses to Universal. The information assumes either no
exercise or full exercise by the international managers and the U.S.
underwriters of their over-allotment option.
<TABLE>
<CAPTION>
PER SHARE WITHOUT OPTION WITH OPTION
--------- -------------- -----------
<S> <C> <C> <C>
Public offering price............................ $ $ $
Underwriting discount............................ $ $ $
Proceeds, before expenses, to Universal.......... $ $ $
</TABLE>
The expenses of this offering, not including the underwriting discount, are
estimated at $ and are payable by Universal.
OVER-ALLOTMENT OPTION
We have granted an option to the international managers to purchase up to
210,000 additional shares at the public offering price less the underwriting
discount. The international managers may exercise this option for 30 days from
the date of this prospectus solely to cover any over-allotments. If the
international managers exercise this option, each international manager will be
obligated, subject to conditions contained in the purchase agreements, to
purchase a number of additional shares proportionate to that international
manager's initial amount reflected in the above table.
We have also granted an option to the U.S. underwriters, exercisable for 30
days from the date of this prospectus, to purchase up to 840,000 additional
shares to cover any over-allotments on terms similar to those granted to the
international managers.
INTERSYNDICATE AGREEMENT
The international managers and the U.S. underwriters have entered into an
intersyndicate agreement that provides for the coordination of their activities.
Under the intersyndicate agreement, the international managers and the U.S.
underwriters may sell shares to each other for purposes of resale at the initial
public offering price, less an amount not greater than the selling concession.
Under the intersyndicate agreement, the international managers and any dealer to
whom they sell shares will not offer to sell or sell shares to U.S. or Canadian
persons or to persons they believe intend to resell to U.S. or Canadian persons,
except in the case of transactions under the intersyndicate agreement.
Similarly, the U.S. underwriters and any dealer to whom they sell shares will
not offer to sell or sell shares to persons who are non-U.S. or non-Canadian
persons or to persons they believe intend to resell to persons who are non-U.S.
or non-Canadian persons, except in the case of transactions under the
intersyndicate agreement.
NO SALES OF SIMILAR SECURITIES
We, our executive officers and directors and other significant stockholders
have agreed, with exceptions, not to sell or transfer any common stock for 180
days after the date of this prospectus without first obtaining the written
consent of Merrill Lynch. Specifically, we and these other individuals have
agreed not to directly or indirectly:
- offer, pledge, sell, or contract to sell any common stock,
- sell any option or contract to purchase any common stock,
- purchase any option or contract to sell any common stock,
- grant any option, right or warrant for the sale of any common stock,
other than in connection with the conversion of our preferred stock and
non-voting common stock into common stock and pursuant to our employee
benefit plan or non-employee director stock plan,
- lend or otherwise dispose of or transfer any common stock,
- request or demand the we file a registration statement related to the
common stock other than in connection with our employee benefit plan or
non-employee director stock plan, or
67
<PAGE> 107
- enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of any common stock whether
any such swap or transaction is to be settled by delivery of shares or
other securities, in cash or otherwise.
This lockup provision applies to common stock and to securities convertible
into or exchangeable or exercisable for or repayable with common stock. It also
applies to common stock owned now or acquired later by the person executing the
agreement or for which the person executing the agreement later acquires the
power of disposition.
NEW YORK STOCK EXCHANGE LISTING
Our common stock has been approved for listing on the New York Stock
Exchange under the symbol "UCO," subject to official notice of issuance. To meet
the requirements for listing of our common stock on that exchange, the
underwriters have to undertake to sell lots of 100 or more shares to a minimum
of 2,000 beneficial owners.
Before this offering, there has been no public market for our common stock.
The initial public offering price will be determined through negotiations among
us and the lead managers and the U.S. representatives. In addition to prevailing
market conditions, the factors considered in determining the initial public
offering price are
- the valuation multiples of publicly traded companies that the lead
managers and the U.S. representatives believe to be comparable to us,
- our financial information,
- the history of, and the prospects for, our company and the industry in
which we compete,
- an assessment of our management, our past and present operations, and the
prospects for, and timing of, our future revenues,
- the present state of our development and
- the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to ours.
An active trading market for the shares may not develop. It is also
possible that after the offering the shares will not trade in the public market
at or above the initial public offering price.
The underwriters do not expect sales of our common stock to any accounts
over which they exercise discretionary authority to exceed 5% of the number of
shares being offered in this offering.
PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS
Until the distribution of the shares is completed, SEC rules may limit the
underwriters and selling group members from bidding for and purchasing our
common stock. However, the U.S. representatives may engage in transactions that
stabilize the price of our common stock such as bids or purchases to peg, fix or
maintain that price.
If the underwriters create a short position in our common stock in
connection with this offering, i.e., if they sell more shares than are listed on
the cover of this prospectus, the U.S. representatives may reduce that short
position by purchasing shares in the open market. The U.S. representatives may
also elect to reduce any short position by exercising all or part of the
over-allotment option described above. Purchases of the common stock to
stabilize its price to reduce a short position may cause the price of the common
stock to be higher than it might be in the absence of such purchases.
The U.S. representatives may also impose a penalty bid on underwriters and
selling group members. This means that if the U.S. representatives purchase
shares in the open market to reduce the underwriter's short position or to
stabilize the price of such shares, they may reclaim the amount of the selling
68
<PAGE> 108
concession from the underwriters and selling group members who sold those
shares. The imposition of a penalty bid may also affect the price of the shares
in that it discourages resales of those shares.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. In addition, neither
we nor any of the underwriters makes any representation that the lead managers
or the U.S. representatives will engage in these transactions or that these
transactions, once commenced, will not be discontinued without notice.
UK SELLING RESTRICTIONS
Each international manager has agreed that
- it has not offered or sold and will not offer or sell any shares of
common stock to persons in the United Kingdom, except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which do not constitute an
offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995;
- it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to the common stock in, from or otherwise involving the United
Kingdom; and
- it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the
issuance of common stock to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 as amended by the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1997 or
is a person to whom such document may otherwise lawfully be issued or
passed on.
NO PUBLIC OFFERING OUTSIDE THE UNITED STATES
No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the shares of common
stock, or the possession, circulation or distribution of this prospectus or any
other material relating to our company or shares of our common stock in any
jurisdiction where action for that purpose is required. Accordingly, the shares
of our common stock may not be offered or sold, directly or indirectly, and
neither this prospectus nor any other offering material or advertisements in
connection with the shares of common stock may be distributed or published, in
or from any country or jurisdiction except in compliance with any applicable
rules and regulations of any such country or jurisdiction.
OTHER RELATIONSHIPS
We engaged Deutsche Bank Securities Inc. and Wasserstein Perella
Securities, Inc. to act as solicitation agents in connection with our
solicitation of the written consents of the holders of our outstanding 9 7/8%
senior discount notes to an amendment to the indenture governing such notes.
Deutsche Bank Securities Inc. and Wasserstein Perella Securities, Inc. will
receive ordinary and customary fees for their services as solicitation agents.
We have agreed to reimburse Deutsche Bank Securities Inc. and Wasserstein
Perella Securities, Inc. for all reasonable out-of-pocket expenses incurred in
connection with these engagements. Bankers Trust Company, an affiliate of
Deutsche Bank Securities Inc., will participate in our operating lease facility
and our new revolving credit facility, for which these affiliates will receive
ordinary and customary fees. In addition, DB Capital Partners SBIC, L.P., an
affiliate of Deutsche Bank Securities Inc., and First Union Capital Partners,
Inc., an affiliate of First Union Securities, Inc., are stockholders of our
company.
Some of the underwriters and their affiliates engage in transactions with,
and perform services for, our company in the ordinary course of business and
have engaged, and may in the future engage, in
69
<PAGE> 109
commercial banking and investment banking transactions and services with our
company for which they have received, or will receive, customary compensation.
LEGAL MATTERS
King & Spalding, Houston, Texas, will pass upon the validity of the shares
of common stock offered by this prospectus. Vinson & Elkins L.L.P., Houston,
Texas, will pass upon certain legal matters in connection with this offering for
the U.S. underwriters and the international managers.
EXPERTS
The financial statements of Universal Compression Holdings, Inc. as of
March 31, 1999 and 2000 and for the period from December 12, 1997 (inception)
through March 31, 1998 and for the years ended March 31, 1999 and 2000 and the
financial statements of Tidewater Compression Service, Inc. for the period from
April 1, 1997 through February 20, 1998 included in this prospectus and in the
registration statement have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports appearing herein and in the registration
statement, and have been so included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, a registration
statement on Form S-1, including the exhibits and schedules thereto, under the
Securities Act of 1933, as amended, with respect to the common stock offered
hereby. This prospectus does not contain all of the information contained in the
registration statement and the exhibits and schedules to the registration
statement. Some items are omitted in accordance with the rules and regulations
of the SEC. For further information about Universal and the common stock offered
under this prospectus, you should review the registration statement and the
exhibits and schedules filed as a part of the registration statement.
Descriptions of contracts or other documents referred to in this prospectus are
not necessarily complete. If the contract or document is filed as an exhibit to
the registration statement, you should review that contract or document. You
should be aware that when we discuss these contracts or documents in the
prospectus we are assuming that you will read the exhibits to the registration
statement for a more complete understanding of the contract or document.
Universal is subject to the informational requirements of the Securities
Exchange Act of 1934, and in accordance therewith files reports and other
information with the SEC. Materials filed with the SEC by Universal, including,
the registration statement and its exhibits and schedules, may be inspected
without charge at the public reference facilities maintained by the SEC in Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., 20549, and the
SEC's regional offices located at 500 West Madison Street, Suite 1400, Chicago,
Illinois, 60661, and Seven World Trade Center, 13th Floor, New York, New York,
10048. Copies of all or any portion of the registration statement may be
obtained from the Public Reference Section of the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington D.C. 20549, or by calling the SEC at
1-800-SEC-0330, at prescribed rates. The SEC also maintains a website at
www.sec.gov that contains reports, proxy and information statements and other
information regarding registrants, such as Universal, that make electronic
filings with the SEC.
70
<PAGE> 110
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Through and including , 2000 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
7,000,000 SHARES
[UNIVERSAL COMPRESSION LOGO]
COMMON STOCK
----------------------
PROSPECTUS
----------------------
MERRILL LYNCH INTERNATIONAL
SCHRODER SALOMON SMITH BARNEY
DEUTSCHE BANC ALEX. BROWN
FIRST UNION SECURITIES, INC.
WASSERSTEIN PERELLA SECURITIES, INC.
, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 111
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder. Except
for the SEC registration fee, the NASD filing fee and the New York Stock
Exchange listing fee, all amounts are estimates.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 48,880
NASD filing fee............................................. 19,015
New York Stock Exchange listing fee......................... 123,100
Accounting fees and expenses................................ 165,000
Legal fees and expenses..................................... 637,000
Blue Sky fees and expenses (including counsel fees)......... 2,000
Printing and Engraving expenses............................. 200,000
Transfer Agent and Registrar fees and expenses.............. 30,000
Miscellaneous expenses...................................... 75,005
----------
Total............................................. $1,300,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a corporation, in its certificate of incorporation, to limit or
eliminate, subject to certain statutory limitations, the liability of directors
to the corporation or its stockholders for monetary damages for breaches of
fiduciary duty, except for liability (a) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (b) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the DGCL, or (d) for any transaction from which
the director derived an improper personal benefit. The registrant's Restated
Certificate of Incorporation provides that the personal liability of directors
of the registrant is eliminated to the fullest extent permitted by Section
102(b)(7) of the DGCL.
Under Section 145 of the DGCL, a corporation has the power to indemnify
directors and officers under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of being a director or officer of the
corporation if it is determined that the director or officer acted in accordance
with the applicable standard of conduct set forth in such statutory provision.
The registrant's Bylaws provide that the registrant will indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding by reason of the fact that he is
or was a director or officer of the registrant, or is or was serving at the
request of the registrant as a director, officer, employee or agent of another
entity, against certain liabilities, costs and expenses. The Bylaws further
permit the registrant to maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the registrant, or is or was
serving at the request of the registrant as a director, officer, employee or
agent of another entity, against any liability asserted against such person and
incurred by such person in any such capacity or arising out of his status as
such, whether or not the registrant would have the power to indemnify such
person against such liability under the DGCL. The registrant expects to maintain
directors' and officers' liability insurance. In addition, the registrant has
entered into indemnification agreements with each of its officers and directors,
as well as officers of its operating subsidiary. The form of these
indemnification agreements is filed as Exhibit 10.33 hereto.
Under the U.S. Purchase Agreement and International Purchase Agreement, the
U.S. Underwriters and the international managers are obligated, under certain
circumstances, to indemnify directors and
II-1
<PAGE> 112
officers of the registrant against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the "Securities Act"). Reference
is made to the forms of U.S. Purchase Agreement and International Purchase
Agreement filed as Exhibits 1.1 and 1.2, respectively, hereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Set forth below is certain information with respect to all securities of
Universal Compression Holdings, Inc. (the "Company") sold by the Company within
the past three years which were not registered under the Securities Act of 1933,
as amended. In addition, (i) on August 1, 1998, the Company issued an aggregate
of 4,120 shares of its non-voting common stock to 412 employees (10 shares each)
as a bonus and (ii) on April 28, 2000, the Company issued an aggregate of 17,201
shares of its common stock and 68,804 shares of its Series A Preferred Stock to
Energy Spectrum Partners L.P. (the "Spectrum Acquisition") in exchange for all
of the issued and outstanding equity stock of Spectrum Rotary Compression Inc.
All securities listed in this Item 15 were valued at $50 per share (except for
the Spectrum Acquisition) and were granted in reliance on an exemption under
Section 4(2) of the Securities Act.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OF SHARES OF
SERIES A VOTING
PREFERRED COMMON AGGREGATE
PURCHASER DATE STOCK STOCK CONSIDERATION
- --------- ---- --------- --------- -------------
<S> <C> <C> <C> <C>
Castle Harlan Partners III, L.P. .............. 2/20/98 713,148 178,287 $ 44,571,750
BT Capital Partners, Inc. ..................... 2/20/98 128,000 32,000 $ 8,000,000
First Union Capital Partners Inc. ............. 2/20/98 128,000 32,000 $ 8,000,000
Mellon Bank, N.A., as Trustee for the Bell
Atlantic Master Trust........................ 2/20/98 128,000 32,000 $ 8,000,000
Wilmington Trust, as Trustee of DuPont Pension
Trust........................................ 2/20/98 128,000 32,000 $ 8,000,000
Brown University Third Century Fund............ 2/20/98 8,000 2,000 $ 500,000
Castle Harlan Affiliates III, L.P. ............ 2/20/98 11,920 2,980 $ 745,000
Frogmore Forum Family Fund, L.L.C. ............ 2/20/98 2,716 679 $ 169,750
Leonard M. Harlan.............................. 2/20/98 2,360 590 $ 147,500
Samuel Urcis................................... 2/20/98 17,600 4,400 $ 1,100,000
Ernie Danner................................... 2/20/98 4,000 1,000 $ 0 (bonus)
Stephen Snider................................. 2/20/98 8,000 2,000 $ 500,000
Thomas Hartford................................ 2/20/98 3,840 960 $ 240,000
Branford Castle Holdings, Inc. ................ 2/20/98 4,724 1,181 $ 295,250
Castle Harlan Offshore Partners III, L.P....... 2/20/98 11,692 2,923 $ 730,750
John Peter Laborde............................. 1/11/99 8,000 2,000 $ 500,000
John Tracy Laborde............................. 1/11/99 1,600 400 $ 100,000
Cliffe Floyd Laborde........................... 1/11/99 1,600 400 $ 100,000
Gary Lee Laborde............................... 1/11/99 1,600 400 $ 100,000
John Peter Laborde, Jr......................... 1/11/99 1,600 400 $ 100,000
Mary Adrienne Laborde Parsons.................. 1/11/99 1,600 400 $ 100,000
Richard FitzGerald............................. 2/15/00 320 80 $ 20,000
Valerie L. Banner.............................. 2/15/00 160 40 $ 10,000
</TABLE>
II-2
<PAGE> 113
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT AND DESCRIPTION
------- ------------------------
<C> <S>
1.1** -- Form of U.S. Purchase Agreement.
1.2** -- Form of International Purchase Agreement.
3.1 -- Certificate of Incorporation of Universal Compression
Holdings, Inc., as amended to date (incorporated by
reference to Exhibit 3.1 of Amendment No. 2 to Form S-4/A
dated September 17, 1998 to Registrant's Registration
Statement on Form S-4 (File No. 333-48283)).
3.2** -- Form of Restated Certificate of Incorporation effective
immediately prior to closing of the offering made
pursuant to this Registration Statement.
3.3 -- Bylaws of Universal Compression Holdings, Inc.
(incorporated by reference to Exhibit 3.2 of Amendment
No. 1 to Form S-4/A dated July 30, 1998 to Registrant's
Registration Statement on Form S-4 (File No. 333-48283)).
3.4+ -- Amendment to Bylaws of Universal Compression Holdings,
Inc.
3.5** -- Form of Proposed Bylaws of Universal Compression
Holdings, Inc., to be effective upon the closing of the
offering.
4.1** -- Specimen common stock certificate of Universal
Compression Holdings, Inc.
4.2 -- Purchase Agreement, dated as of February 13, 1998,
between Universal Compression Holdings, Inc. and BT Alex.
Brown Incorporated (incorporated by reference to Exhibit
4.1 of Registrant's Registration Statement on Form S-4
dated March 19, 1998 (File No. 333-48283)).
4.3 -- Purchase Agreement, dated as of February 13, 1998,
between Universal Compression, Inc. and each of BT Alex.
Brown and Salomon Smith Barney (incorporated by reference
to Exhibit 4.1 to Universal Compression, Inc.'s
Registration Statement on Form S-4 dated March 19, 1998
(File No. 333-48279)).
4.4 -- Specimen of Universal Compression Holdings, Inc.'s
11 3/8% Senior Discount Note due 2009 (incorporated by
reference to Exhibit 4.2 to Registrant's Registration
Statement on Form S-4 dated March 19, 1998 (File No.
333-48283)).
4.5 -- Indenture, dated as of February 20, 1998, between
Universal Compression Holdings, Inc. and United States
Trust Company of New York, as Trustee, with respect to
the 11 3/8% Senior Discount Notes (incorporated by
reference to Exhibit 4.3 to Registrant's Registration
Statement on Form S-4 dated March 19, 1998 (File No.
333-48283)).
4.6 -- Indenture, dated as of February 20, 1998, between
Universal Compression, Inc. and the United States Trust
Company of New York, as Trustee, with respect to the
9 7/8% Senior Discount Notes (incorporated by reference
to Exhibit 4.3 to Universal Compression, Inc.'s
Registration Statement on Form S-4 dated March 19, 1998
(File No. 333-48279)).
4.7** -- First Supplemental Indenture, dated May 9, 2000, between
Universal Compression, Inc. and United States Trust
Company of New York, as Trustee, with respect to the
9 7/8% Senior Discount Notes.
</TABLE>
II-3
<PAGE> 114
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT AND DESCRIPTION
------- ------------------------
<C> <S>
4.8 -- Specimen of Universal Compression, Inc.'s 9 7/8% Senior
Discount Notes due 2008 (incorporated by reference to
Exhibit 4.2 to Universal Compression, Inc.'s Registration
Statement on Form S-4 dated March 19, 1998 (File No.
333-48279)).
4.9 -- Registration Rights Agreement, dated February 20, 1998,
between Universal Compression Holdings, Inc. and BT Alex.
Brown Incorporated (incorporated by reference to Exhibit
4.4 to Registrant's Registration Statement on Form S-4
dated March 19, 1998 (File No. 333-48283)).
4.10 -- Form of Notes under Credit Agreement (incorporated by
reference to Exhibit 4.6 to Registrant's Registration
Statement on Form S-4 dated March 19, 1998 (File No.
333-48283)).
4.11 -- Stock Purchase Plan Buyback Agreement, dated March 26,
1999, among Universal Compression Holdings, Inc. and the
persons named therein (incorporated by reference to
Exhibit 4.10 of Registrant's Annual Report on Form 10-K
for the year ended March 31, 1999).
5.1** -- Opinion of King & Spalding as to the legality of the
common stock being registered.
9.1 -- Voting Trust Agreement, dated February 20, 1998, among
Universal Compression Holdings, Inc., John K. Castle, as
voting trustee and certain stockholders party thereto
(incorporated by reference to Exhibit 9.1 of Amendment
No. 2 on Form S-4/A dated September 17, 1998 to
Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
9.2 -- Voting Trust Agreement, dated December 1, 1998, among
Universal Compression Holdings, Inc., John K. Castle, as
voting trustee and certain other parties thereto
(incorporated by reference to Exhibit 9.1 of Registrant's
Quarterly Report on Form 10-Q for the period ended
December 31, 1998)).
9.3+ -- Form of Instruments of Accession to Voting Trust
Agreement for each of Richard W. FitzGerald and Valerie
L. Banner.
9.4 -- Voting Agreement, dated February 20, 1998, among Castle
Harlan Partners, Universal Compression Holdings, Inc. and
certain other parties thereto (incorporated by reference
to Exhibit 10.13 to Registrant's Registration Statement
on Form S-4 dated March 19, 1998 (File No. 333-48283)).
9.5** -- First Amendment to Voting Agreement, dated May 19, 2000,
among Castle Harlan Partners, Universal Compression
Holdings, Inc. and certain other parties thereto.
9.6** -- Voting Agreement, dated April 28, 2000, between Universal
Compression Holdings, Inc. and Energy Spectrum Partners
LP.
10.1 -- Stock Purchase Agreement, dated December 18, 1997,
between TW Acquisition Corporation and Tidewater, Inc.
(incorporated by reference to Exhibit 10.1 to
Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
10.2 -- Incentive Stock Option Plan (incorporated by reference to
Exhibit 10 of Registrant's Quarterly Report on Form 10-Q
for the period ended September 30, 1998).
10.3** -- Amendment Number One to Incentive Stock Option Plan,
dated April 20, 2000.
10.4** -- Amendment Number Two to Incentive Stock Option Plan,
dated May 15, 2000.
</TABLE>
II-4
<PAGE> 115
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT AND DESCRIPTION
------- ------------------------
<C> <S>
10.5 -- Purchase Price Adjustment Agreement, dated February 20,
1998, among TW Acquisition Corporation, Universal
Compression Holdings, Inc., and Tidewater, Inc.
(incorporated by reference to Exhibit 10.2 to
Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
10.6 -- Employment Agreement, dated February 20, 1998, with
Stephen Snider (incorporated by reference to Exhibit 10.4
to Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (file No. 333-48283)).
10.7 -- Employment Agreement, dated February 20, 1998, with Ernie
L. Danner (incorporated by reference to Exhibit 10.5 to
Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
10.8 -- Employment Agreement, dated February 20, 1998, with
Newton Schnoor (incorporated by reference to Exhibit 10.7
to Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
10.9 -- Executive Employment Agreement, effective April 12, 1999,
with Richard FitzGerald (incorporated by reference to
Exhibit 10.1 to Registrant's Quarterly Report on Form
10-Q for the period ended December 31, 1999).
10.10 -- Executive Employment Agreement, effective June 1, 1998,
with Valerie L. Banner (incorporated by reference to
Exhibit 10.2 to Registrant's Quarterly Report on Form
10-Q for the period ended September 30, 1999).
10.11 -- Management Agreement, dated February 20, 1998, among
Universal Compression, Inc., Universal Compression
Holdings, Inc., and Castle Harlan, Inc. (incorporated by
reference to Exhibit 10.9 to Registrant's Registration
Statement on Form S-4 dated March 19, 1998 (File No.
333-48283)).
10.12** -- Master Transaction Agreement, dated April 5, 2000, among
Universal Compression Holdings, Inc., Castle Harlan
Partners III, L.P. and Castle Harlan, Inc.
10.13 -- Finders and Consulting Agreement, dated February 20, 1998
(incorporated by reference to Exhibit 10.10 to
Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
10.14** -- Finders and Consulting Termination Agreement, dated April
5, 2000, between Universal Compression Holdings, Inc. and
Samuel Urcis.
10.15 -- Assignment and Assumption Agreement, dated February 20,
1998, among Universal Compression, Inc., BT Alex. Brown
and Salomon Smith Barney (incorporated by reference to
Exhibit 10.11 to Registrant's Registration Statement on
Form S-4 dated March 19, 1998 (File No. 333-48283)).
10.16 -- Co-Investor Subscription Agreement, dated February 20,
1998, among Universal Compression Holdings, Inc. and
certain co-investors party thereto (incorporated by
reference to Exhibit 10.12 to Registrant's Registration
Statement on Form S-4 dated March 19, 1998 (File No.
333-48283)).
10.17 -- Registration Rights Agreement, dated February 20, 1998,
among Universal Compression Holdings, Inc. and certain
stockholders party thereto (incorporated by reference to
Exhibit 10.14 to Registrant's Registration Statement on
Form S-4 dated March 19, 1998 (File No. 333-48283)).
10.18+ -- Form of Instruments of Accession to Registration Rights
Agreement for each of Richard W. FitzGerald and Valerie
L. Banner.
</TABLE>
II-5
<PAGE> 116
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT AND DESCRIPTION
------- ------------------------
<C> <S>
10.19** -- Instrument of Accession to Registration Rights Agreement,
dated April 28, 2000, for Energy Spectrum Partners LP.
10.20 -- Stockholders Agreement, dated February 20, 1998, among
Universal Compression Holdings, Inc. and certain
stockholders party thereto (incorporated by reference to
Exhibit 10.15 to Registrant's Registration Statement on
Form S-4 dated March 19, 1998 (File No. 333-48283)).
10.21+ -- Form of Instruments of Accession to Stockholders
Agreement for each of Richard W. FitzGerald and Valerie
L. Banner.
10.22** -- Instrument of Accession to Stockholders Agreement, as
amended, for Energy Spectrum Partners LP.
10.23 -- Management Subscription Agreement, dated February 20,
1998, among Universal Compression Holdings, Inc. and
certain key members of Universal Compression, Inc.'s
management (incorporated by reference to Exhibit 10.16 to
Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
10.24 -- Management Stock Buyback Agreement among Universal
Compression Holdings, Inc. and certain key members of
Universal Compression, Inc.'s management (incorporated by
reference to Exhibit 10.17 to Registrant's Registration
Statement on Form S-4 dated March 19, 1998 (File No.
333-48283)).
10.25+ -- Form of Management Stock Buyback Agreements between
Universal Compression Holdings, Inc. and each of Richard
W. FitzGerald and Valerie L. Banner.
10.26 -- Stock Option Agreements between Universal Compression
Holdings, Inc. and each of Ernie Danner, Stephen Snider,
Samuel Urcis and Newton Schnoor (incorporated by
reference to Exhibit 10.18 to Registrant's Registration
Statement on Form S-4 dated March 19, 1998 (File No.
333-48283)).
10.27 -- Stock Option Agreement, dated April 12, 1999, between
Universal Compression Holdings, Inc. and Richard W.
FitzGerald (incorporated by reference to Exhibit 10.2 to
Registrant's Quarterly Report on Form 10-Q for the period
ended December 31, 1999).
10.28 -- Stock Option Agreement between Universal Compression
Holdings, Inc. and Valerie L. Banner (incorporated by
reference to Exhibit 10.3 to Universal Compression
Holdings, Inc.'s Quarterly Report on Form 10-Q for the
period ended September 30, 1999).
10.29+ -- Form of Stock Option Agreements between Universal
Compression Holdings, Inc. and each of Jack B. Hilburn,
H. Patrick Jones and Kirk E. Townsend.
10.30** -- Form of Stock Option Agreements of Universal Compression
Holdings, Inc., effective as of April 20, 2000.
10.31+ -- Agreement, dated October 27, 1999, among Universal
Compression, Inc., Universal Compression Holdings, Inc.
and Jack B. Hilburn.
10.32+ -- Agreement, dated October 27, 1999, among Universal
Compression Inc., Universal Compression Holdings, Inc.
and Kirk E. Townsend.
10.33+ -- Form of Indemnification Agreements for each of Samuel
Urcis, Stephen Snider, John K. Castle, Jeffrey Siegal,
William M. Pruellage, Newton Schnoor, C. Kent May, Jack
Hilburn, Ernie Danner, Thomas Case, Valerie Banner,
Duncan Allison, Kirk Townsend, Dana H. Cook, H. Pat Jones
and Richard FitzGerald.
</TABLE>
II-6
<PAGE> 117
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT AND DESCRIPTION
------- ------------------------
<C> <S>
10.34 -- Credit Agreement, dated February 20, 1998, among
Universal Compression, Inc., Universal Compression
Holdings, Inc., Bankers Trust Company, as agent and the
lenders party thereto (incorporated by reference to
Exhibit 4.5 to Registrant's Registration Statement on
Form S-4 dated March 19, 1998 (File No. 333-48283)).
10.35 -- Security Agreement, dated February 20, 1998, among
Universal Compression, Inc., Universal Compression
Holdings, Inc., Bankers Trust Company and the banks party
thereto (incorporated by reference to Exhibit 4.7 to
Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
10.36 -- Pledge Agreement, dated February 20, 1998, among
Universal Compression, Inc., Universal Compression
Holdings, Inc., Bankers Trust Company and the banks party
thereto (incorporated by reference to Exhibit 4.8 to
Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
10.37 -- Acknowledgement and Joinder Agreement, dated February 20,
1998, between Universal Compression, Inc. and Bankers
Trust Company (incorporated by reference to Exhibit 4.9
of Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
10.38 -- First Amendment to Credit Agreement, dated November 13,
1998, among Universal Compression Holdings, Inc.,
Universal Compression, Inc., Bankers Trust Company as
agent and the lenders party thereto (incorporated by
reference to Exhibit 4.1 of Registrant's Quarterly Report
on Form 10-Q for the period ended December 31, 1998).
10.39** -- Second Amendment to Credit Agreement, dated April 14,
2000, among Universal Compression Holdings, Inc.,
Universal Compression, Inc., Bankers Trust Company as
agent and the lenders party thereto.
10.40 -- Non-Qualified Stock Purchase Plan (incorporated by
reference to Exhibit 99.1 to Registrant's Registration
Statement on Form S-8 dated February 24, 1999 (File No.
333-72859)).
10.41** -- Form of Participation Agreement among Universal
Compression, Inc., Universal Compression Holdings, Inc.,
the Trust, Deutsche Bank AG, New York Branch, and the
other certificate holders party thereto, the
Administrative Agent, the Collateral Agent and the
lenders party thereto.
10.42** -- Form of Master Equipment Lease Agreement between the
Trust and Universal Compression, Inc.
10.43** -- Form of Loan Agreement among the Trust, the
Administrative Agent, the Collateral Agent and the
lenders party thereto.
10.44** -- Form of Assembly Agency Agreement between the Trust and
Universal Compression, Inc.
10.45** -- Form of Trust Agreement between the Certificate Holders
and the Trust.
10.46** -- Form of Credit Agreement among Universal Compression
Holdings, Inc., Universal Compression, Inc., Deutsche
Bank Securities, Inc., Bankers Trust Company and the
lenders party thereto.
10.47** -- Form of Security Agreement among Universal Compression
Holdings, Inc., Universal Compression, Inc., certain of
its subsidiaries and Bankers Trust Company, as Collateral
Agent.
</TABLE>
II-7
<PAGE> 118
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT AND DESCRIPTION
------- ------------------------
<C> <S>
10.48** -- Form of Pledge Agreement among Universal Compression
Holdings, Inc., Universal Compression, Inc., and Bankers
Trust Company, as Collateral Agent and Pledgee.
10.49** -- Form of Subsidiaries Guaranty.
21.1** -- Subsidiaries of Universal Compression Holdings, Inc.
23.1** -- Consent of King & Spalding (contained in Exhibit 5.1).
23.2** -- Consent of Deloitte & Touche LLP.
24.1+ -- Powers of Attorney (contained in signature page to
initial filing of this Registration Statement on Form S-1
(Registration No. 333-34090) filed on April 5, 2000).
24.2+ -- Power of Attorney of William M. Pruellage.
27.1+ -- Financial data schedule of Universal Compression
Holdings, Inc. (for SEC filing purposes only).
</TABLE>
- ---------------
** Filed herewith.
+ Previously filed.
(b) Financial Statement Schedules
Not Applicable.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant 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 Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant 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 hereunder, the Registrant
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.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or
II-8
<PAGE> 119
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.
II-9
<PAGE> 120
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on May 22, 2000.
UNIVERSAL COMPRESSION HOLDINGS, INC.
By: /s/ STEPHEN A. SNIDER
------------------------------------
Stephen A. Snider
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 has been signed by the following persons in the capacities indicated on
May 22, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ STEPHEN A. SNIDER President, Chief Executive Officer and
- ----------------------------------------------------- Director (Principal Executive Officer)
Stephen A. Snider
/s/ RICHARD FITZGERALD Senior Vice President and Chief Financial
- ----------------------------------------------------- Officer (Principal Financial Officer and
Richard FitzGerald Accounting Officer)
* Director
- -----------------------------------------------------
Thomas C. Case
* Director
- -----------------------------------------------------
John K. Castle
* Director
- -----------------------------------------------------
Ernie L. Danner
* Director
- -----------------------------------------------------
C. Kent May
* Director
- -----------------------------------------------------
William M. Pruellage
* Director
- -----------------------------------------------------
Samuel Urcis
* By /s/ STEPHEN A. SNIDER
------------------------------------------------
Stephen A. Snider
Attorney-in-fact
</TABLE>
II-10
<PAGE> 121
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT AND DESCRIPTION
------- ------------------------
<C> <S>
1.1** -- Form of U.S. Purchase Agreement.
1.2** -- Form of International Purchase Agreement.
3.1 -- Certificate of Incorporation of Universal Compression
Holdings, Inc., as amended to date (incorporated by
reference to Exhibit 3.1 of Amendment No. 2 to Form S-4/A
dated September 17, 1998 to Registrant's Registration
Statement on Form S-4 (File No. 333-48283)).
3.2** -- Form of Restated Certificate of Incorporation effective
immediately prior to closing of the offering made
pursuant to this Registration Statement.
3.3 -- Bylaws of Universal Compression Holdings, Inc.
(incorporated by reference to Exhibit 3.2 of Amendment
No. 1 to Form S-4/A dated July 30, 1998 to Registrant's
Registration Statement on Form S-4 (File No. 333-48283)).
3.4+ -- Amendment to Bylaws of Universal Compression Holdings,
Inc.
3.5** -- Form of Proposed Bylaws of Universal Compression
Holdings, Inc., to be effective upon the closing of the
offering.
4.1** -- Specimen common stock certificate of Universal
Compression Holdings, Inc.
4.2 -- Purchase Agreement, dated as of February 13, 1998,
between Universal Compression Holdings, Inc. and BT Alex.
Brown Incorporated (incorporated by reference to Exhibit
4.1 of Registrant's Registration Statement on Form S-4
dated March 19, 1998 (File No. 333-48283)).
4.3 -- Purchase Agreement, dated as of February 13, 1998,
between Universal Compression, Inc. and each of BT Alex.
Brown and Salomon Smith Barney (incorporated by reference
to Exhibit 4.1 to Universal Compression, Inc.'s
Registration Statement on Form S-4 dated March 19, 1998
(File No. 333-48279)).
4.4 -- Specimen of Universal Compression Holdings, Inc.'s
11 3/8% Senior Discount Note due 2009 (incorporated by
reference to Exhibit 4.2 to Registrant's Registration
Statement on Form S-4 dated March 19, 1998 (File No.
333-48283)).
4.5 -- Indenture, dated as of February 20, 1998, between
Universal Compression Holdings, Inc. and United States
Trust Company of New York, as Trustee, with respect to
the 11 3/8% Senior Discount Notes (incorporated by
reference to Exhibit 4.3 to Registrant's Registration
Statement on Form S-4 dated March 19, 1998 (File No.
333-48283)).
4.6 -- Indenture, dated as of February 20, 1998, between
Universal Compression, Inc. and the United States Trust
Company of New York, as Trustee, with respect to the
9 7/8% Senior Discount Notes (incorporated by reference
to Exhibit 4.3 to Universal Compression, Inc.'s
Registration Statement on Form S-4 dated March 19, 1998
(File No. 333-48279)).
4.7** -- First Supplemental Indenture, dated May 9, 2000, between
Universal Compression, Inc. and United States Trust
Company of New York, as Trustee, with respect to the
9 7/8% Senior Discount Notes.
4.8 -- Specimen of Universal Compression, Inc.'s 9 7/8% Senior
Discount Notes due 2008 (incorporated by reference to
Exhibit 4.2 to Universal Compression, Inc.'s Registration
Statement on Form S-4 dated March 19, 1998 (File No.
333-48279)).
</TABLE>
<PAGE> 122
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT AND DESCRIPTION
------- ------------------------
<C> <S>
4.9 -- Registration Rights Agreement, dated February 20, 1998,
between Universal Compression Holdings, Inc. and BT Alex.
Brown Incorporated (incorporated by reference to Exhibit
4.4 to Registrant's Registration Statement on Form S-4
dated March 19, 1998 (File No. 333-48283)).
4.10 -- Form of Notes under Credit Agreement (incorporated by
reference to Exhibit 4.6 to Registrant's Registration
Statement on Form S-4 dated March 19, 1998 (File No.
333-48283)).
4.11 -- Stock Purchase Plan Buyback Agreement, dated March 26,
1999, among Universal Compression Holdings, Inc. and the
persons named therein (incorporated by reference to
Exhibit 4.10 of Registrant's Annual Report on Form 10-K
for the year ended March 31, 1999).
5.1** -- Opinion of King & Spalding as to the legality of the
common stock being registered.
9.1 -- Voting Trust Agreement, dated February 20, 1998, among
Universal Compression Holdings, Inc., John K. Castle, as
voting trustee and certain stockholders party thereto
(incorporated by reference to Exhibit 9.1 of Amendment
No. 2 on Form S-4/A dated September 17, 1998 to
Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
9.2 -- Voting Trust Agreement, dated December 1, 1998, among
Universal Compression Holdings, Inc., John K. Castle, as
voting trustee and certain other parties thereto
(incorporated by reference to Exhibit 9.1 of Registrant's
Quarterly Report on Form 10-Q for the period ended
December 31, 1998)).
9.3+ -- Form of Instruments of Accession to Voting Trust
Agreement for each of Richard W. FitzGerald and Valerie
L. Banner.
9.4 -- Voting Agreement, dated February 20, 1998, among Castle
Harlan Partners, Universal Compression Holdings, Inc. and
certain other parties thereto (incorporated by reference
to Exhibit 10.13 to Registrant's Registration Statement
on Form S-4 dated March 19, 1998 (File No. 333-48283)).
9.5** -- First Amendment to Voting Agreement, dated May 19, 2000,
among Castle Harlan Partners, Universal Compression
Holdings, Inc. and certain other parties thereto.
9.6** -- Voting Agreement, dated April 28, 2000, between Universal
Compression Holdings, Inc. and Energy Spectrum Partners
LP.
10.1 -- Stock Purchase Agreement, dated December 18, 1997,
between TW Acquisition Corporation and Tidewater, Inc.
(incorporated by reference to Exhibit 10.1 to
Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
10.2 -- Incentive Stock Option Plan (incorporated by reference to
Exhibit 10 of Registrant's Quarterly Report on Form 10-Q
for the period ended September 30, 1998).
10.3** -- Amendment Number One to Incentive Stock Option Plan,
dated April 20, 2000.
10.4** -- Amendment Number Two to Incentive Stock Option Plan,
dated May 15, 2000.
</TABLE>
<PAGE> 123
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT AND DESCRIPTION
------- ------------------------
<C> <S>
10.5 -- Purchase Price Adjustment Agreement, dated February 20,
1998, among TW Acquisition Corporation, Universal
Compression Holdings, Inc., and Tidewater, Inc.
(incorporated by reference to Exhibit 10.2 to
Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
10.6 -- Employment Agreement, dated February 20, 1998, with
Stephen Snider (incorporated by reference to Exhibit 10.4
to Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (file No. 333-48283)).
10.7 -- Employment Agreement, dated February 20, 1998, with Ernie
L. Danner (incorporated by reference to Exhibit 10.5 to
Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
10.8 -- Employment Agreement, dated February 20, 1998, with
Newton Schnoor (incorporated by reference to Exhibit 10.7
to Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
10.9 -- Executive Employment Agreement, effective April 12, 1999,
with Richard FitzGerald (incorporated by reference to
Exhibit 10.1 to Registrant's Quarterly Report on Form
10-Q for the period ended December 31, 1999).
10.10 -- Executive Employment Agreement, effective June 1, 1998,
with Valerie L. Banner (incorporated by reference to
Exhibit 10.2 to Registrant's Quarterly Report on Form
10-Q for the period ended September 30, 1999).
10.11 -- Management Agreement, dated February 20, 1998, among
Universal Compression, Inc., Universal Compression
Holdings, Inc., and Castle Harlan, Inc. (incorporated by
reference to Exhibit 10.9 to Registrant's Registration
Statement on Form S-4 dated March 19, 1998 (File No.
333-48283)).
10.12** -- Master Transaction Agreement, dated April 5, 2000, among
Universal Compression Holdings, Inc., Castle Harlan
Partners III, L.P. and Castle Harlan, Inc.
10.13 -- Finders and Consulting Agreement, dated February 20, 1998
(incorporated by reference to Exhibit 10.10 to
Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
10.14** -- Finders and Consulting Termination Agreement, dated April
5, 2000, between Universal Compression Holdings, Inc. and
Samuel Urcis.
10.15 -- Assignment and Assumption Agreement, dated February 20,
1998, among Universal Compression, Inc., BT Alex. Brown
and Salomon Smith Barney (incorporated by reference to
Exhibit 10.11 to Registrant's Registration Statement on
Form S-4 dated March 19, 1998 (File No. 333-48283)).
10.16 -- Co-Investor Subscription Agreement, dated February 20,
1998, among Universal Compression Holdings, Inc. and
certain co-investors party thereto (incorporated by
reference to Exhibit 10.12 to Registrant's Registration
Statement on Form S-4 dated March 19, 1998 (File No.
333-48283)).
10.17 -- Registration Rights Agreement, dated February 20, 1998,
among Universal Compression Holdings, Inc. and certain
stockholders party thereto (incorporated by reference to
Exhibit 10.14 to Registrant's Registration Statement on
Form S-4 dated March 19, 1998 (File No. 333-48283)).
10.18+ -- Form of Instruments of Accession to Registration Rights
Agreement for each of Richard W. FitzGerald and Valerie
L. Banner.
</TABLE>
<PAGE> 124
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT AND DESCRIPTION
------- ------------------------
<C> <S>
10.19** -- Instrument of Accession to Registration Rights Agreement,
dated April 28, 2000, for Energy Spectrum Partners LP.
10.20 -- Stockholders Agreement, dated February 20, 1998, among
Universal Compression Holdings, Inc. and certain
stockholders party thereto (incorporated by reference to
Exhibit 10.15 to Registrant's Registration Statement on
Form S-4 dated March 19, 1998 (File No. 333-48283)).
10.21+ -- Form of Instruments of Accession to Stockholders
Agreement for each of Richard W. FitzGerald and Valerie
L. Banner.
10.22** -- Instrument of Accession to Stockholders Agreement, as
amended, for Energy Spectrum Partners LP.
10.23 -- Management Subscription Agreement, dated February 20,
1998, among Universal Compression Holdings, Inc. and
certain key members of Universal Compression, Inc.'s
management (incorporated by reference to Exhibit 10.16 to
Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
10.24 -- Management Stock Buyback Agreement among Universal
Compression Holdings, Inc. and certain key members of
Universal Compression, Inc.'s management (incorporated by
reference to Exhibit 10.17 to Registrant's Registration
Statement on Form S-4 dated March 19, 1998 (File No.
333-48283)).
10.25+ -- Form of Management Stock Buyback Agreements between
Universal Compression Holdings, Inc. and each of Richard
W. FitzGerald and Valerie L. Banner.
10.26 -- Stock Option Agreements between Universal Compression
Holdings, Inc. and each of Ernie Danner, Stephen Snider,
Samuel Urcis and Newton Schnoor (incorporated by
reference to Exhibit 10.18 to Registrant's Registration
Statement on Form S-4 dated March 19, 1998 (File No.
333-48283)).
10.27 -- Stock Option Agreement, dated April 12, 1999, between
Universal Compression Holdings, Inc. and Richard W.
FitzGerald (incorporated by reference to Exhibit 10.2 to
Registrant's Quarterly Report on Form 10-Q for the period
ended December 31, 1999).
10.28 -- Stock Option Agreement between Universal Compression
Holdings, Inc. and Valerie L. Banner (incorporated by
reference to Exhibit 10.3 to Universal Compression
Holdings, Inc.'s Quarterly Report on Form 10-Q for the
period ended September 30, 1999).
10.29+ -- Form of Stock Option Agreements between Universal
Compression Holdings, Inc. and each of Jack B. Hilburn,
H. Patrick Jones and Kirk E. Townsend.
10.30** -- Form of Stock Option Agreements of Universal Compression
Holdings, Inc., effective as of April 20, 2000.
10.31+ -- Agreement, dated October 27, 1999, among Universal
Compression, Inc., Universal Compression Holdings, Inc.
and Jack B. Hilburn.
10.32+ -- Agreement, dated October 27, 1999, among Universal
Compression Inc., Universal Compression Holdings, Inc.
and Kirk E. Townsend.
10.33+ -- Form of Indemnification Agreements for each of Samuel
Urcis, Stephen Snider, John K. Castle, Jeffrey Siegal,
William M. Pruellage, Newton Schnoor, C. Kent May, Jack
Hilburn, Ernie Danner, Thomas Case, Valerie Banner,
Duncan Allison, Kirk Townsend, Dana H. Cook, H. Pat Jones
and Richard FitzGerald.
</TABLE>
<PAGE> 125
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT AND DESCRIPTION
------- ------------------------
<C> <S>
10.34 -- Credit Agreement, dated February 20, 1998, among
Universal Compression, Inc., Universal Compression
Holdings, Inc., Bankers Trust Company, as agent and the
lenders party thereto (incorporated by reference to
Exhibit 4.5 to Registrant's Registration Statement on
Form S-4 dated March 19, 1998 (File No. 333-48283)).
10.35 -- Security Agreement, dated February 20, 1998, among
Universal Compression, Inc., Universal Compression
Holdings, Inc., Bankers Trust Company and the banks party
thereto (incorporated by reference to Exhibit 4.7 to
Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
10.36 -- Pledge Agreement, dated February 20, 1998, among
Universal Compression, Inc., Universal Compression
Holdings, Inc., Bankers Trust Company and the banks party
thereto (incorporated by reference to Exhibit 4.8 to
Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
10.37 -- Acknowledgement and Joinder Agreement, dated February 20,
1998, between Universal Compression, Inc. and Bankers
Trust Company (incorporated by reference to Exhibit 4.9
of Registrant's Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48283)).
10.38 -- First Amendment to Credit Agreement, dated November 13,
1998, among Universal Compression Holdings, Inc.,
Universal Compression, Inc., Bankers Trust Company as
agent and the lenders party thereto (incorporated by
reference to Exhibit 4.1 of Registrant's Quarterly Report
on Form 10-Q for the period ended December 31, 1998).
10.39** -- Second Amendment to Credit Agreement, dated April 14,
2000, among Universal Compression Holdings, Inc.,
Universal Compression, Inc., Bankers Trust Company as
agent and the lenders party thereto.
10.40 -- Non-Qualified Stock Purchase Plan (incorporated by
reference to Exhibit 99.1 to Registrant's Registration
Statement on Form S-8 dated February 24, 1999 (File No.
333-72859)).
10.41** -- Form of Participation Agreement among Universal
Compression, Inc., Universal Compression Holdings, Inc.,
the Trust, Deutsche Bank AG, New York Branch, and the
other certificate holders party thereto, the
Administrative Agent, the Collateral Agent and the
lenders party thereto.
10.42** -- Form of Master Equipment Lease Agreement between the
Trust and Universal Compression, Inc.
10.43** -- Form of Loan Agreement among the Trust, the
Administrative Agent, the Collateral Agent and the
lenders party thereto.
10.44** -- Form of Assembly Agency Agreement between the Trust and
Universal Compression, Inc.
10.45** -- Form of Trust Agreement between the Certificate Holders
and the Trust.
</TABLE>
<PAGE> 126
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT AND DESCRIPTION
------- ------------------------
<C> <S>
10.46** -- Form of Credit Agreement among Universal Compression
Holdings, Inc., Universal Compression, Inc., Deutsche
Bank Securities, Inc., Bankers Trust Company and the
lenders party thereto.
10.47** -- Form of Security Agreement among Universal Compression
Holdings, Inc., Universal Compression, Inc., certain of
its subsidiaries and Bankers Trust Company, as Collateral
Agent.
10.48** -- Form of Pledge Agreement among Universal Compression
Holdings, Inc., Universal Compression, Inc., and Bankers
Trust Company, as Collateral Agent and Pledgee.
10.49** -- Form of Subsidiaries Guaranty.
21.1** -- Subsidiaries of Universal Compression Holdings, Inc.
23.1** -- Consent of King & Spalding (contained in Exhibit 5.1).
23.2** -- Consent of Deloitte & Touche LLP.
24.1+ -- Powers of Attorney (contained in signature page to
initial filing of this Registration Statement on Form S-1
(Registration No. 333-34090) filed on April 5, 2000).
24.2+ -- Power of Attorney of William M. Pruellage.
27.1+ -- Financial data schedule of Universal Compression
Holdings, Inc. (for SEC filing purposes only).
</TABLE>
- ---------------
** Filed herewith.
+ Previously filed.
<PAGE> 1
EXHIBIT 1.1
================================================================================
UNIVERSAL COMPRESSION HOLDINGS, INC.
(a Delaware corporation)
5,600,000 Shares of Common Stock
U.S. PURCHASE AGREEMENT
Dated: ________, 2000
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. Representations and Warranties..................................................................3
(a) Representations and Warranties by the Company...................................................3
(i) Compliance with Registration Requirements..............................................3
(ii) Independent Accountants................................................................4
(iii) Financial Statements...................................................................4
(iv) No Material Adverse Change in Business.................................................5
(v) Good Standing of the Company...........................................................5
(vi) Good Standing of Subsidiaries..........................................................5
(vii) Capitalization.........................................................................6
(viii) Authorization of Agreement.............................................................6
(ix) Authorization and Description of Securities............................................6
(x) Absence of Defaults and Conflicts......................................................6
(xi) Absence of Labor Dispute...............................................................7
(xii) Absence of Proceedings.................................................................7
(xiii) Accuracy of Exhibits...................................................................8
(xiv) Possession of Intellectual Property....................................................8
(xv) Absence of Further Requirements........................................................8
(xvi) Possession of Licenses and Permits.....................................................8
(xvii) Title to Property......................................................................9
(xviii) Investment Company Act.................................................................9
(xix) Environmental Laws.....................................................................9
(xx) Registration Rights...................................................................10
(b) Officer's Certificates.........................................................................10
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing................................................10
(a) Initial Securities.............................................................................10
(b) Option Securities..............................................................................10
(c) Payment........................................................................................10
(d) Denominations; Registration....................................................................11
SECTION 3. Covenants of the Company.......................................................................11
(a) Compliance with Securities Regulations and Commission Requests.................................11
(b) Filing of Amendments...........................................................................12
(c) Delivery of Registration Statements............................................................12
(d) Delivery of Prospectuses.......................................................................12
(e) Continued Compliance with Securities Laws......................................................12
(f) Blue Sky Qualifications........................................................................13
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
(g) Rule 158.......................................................................................13
(h) Use of Proceeds................................................................................13
(i) Listing........................................................................................13
(j) Restriction on Sale of Securities..............................................................13
(k) Reporting Requirements.........................................................................14
SECTION 4. Payment of Expenses............................................................................14
(a) Expenses.......................................................................................14
(b) Termination of Agreement.......................................................................15
SECTION 5. Conditions of U.S. Underwriters' Obligations...................................................15
(a) Effectiveness of Registration Statement........................................................15
(b) Opinion of Counsel for Company.................................................................15
(c) Opinion of Counsel for U.S. Underwriters.......................................................15
(d) Officers' Certificate..........................................................................16
(e) Accountant's Comfort Letter....................................................................16
(f) Bring-down Comfort Letter......................................................................16
(g) Approval of Listing............................................................................16
(h) No Objection...................................................................................16
(i) Lock-up Agreements.............................................................................17
(j) Concurrent Completion of Other Transactions....................................................17
(k) Purchase of Initial International Securities...................................................17
(m) Conditions to Purchase of U.S. Option Securities...............................................17
(i) Officers' Certificate.................................................................17
(ii) Opinion of Counsel for Company........................................................17
(iii) Opinion of Counsel for U.S. Underwriters..............................................17
(iv) Bring-down Comfort Letter.............................................................18
(n) Additional Documents...........................................................................18
(o) Termination of Agreement.......................................................................18
SECTION 6. Indemnification................................................................................18
(a) Indemnification of U.S. Underwriters...........................................................18
(b) Indemnification of Company, Directors and Officers.............................................19
(c) Actions against Parties; Notification..........................................................19
SECTION 7. Contribution...................................................................................20
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.................................21
SECTION 9. Termination of Agreement.......................................................................22
(a) Termination; General...........................................................................22
(b) Liabilities....................................................................................22
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 10. Default by One or More of the U.S. Underwriters................................................22
SECTION 11. Notices........................................................................................23
SECTION 12. Parties........................................................................................23
SECTION 13. Governing Law and Time.........................................................................23
SECTION 14. Effect of Headings.............................................................................24
</TABLE>
<PAGE> 5
SCHEDULES
Schedule A - List of U. S. Underwriters
Schedule B - Pricing Information
Schedule C - List of Persons and Entities Subject to Lock-up
EXHIBITS
Exhibit A - Form of Opinion of Valerie L. Banner, General Counsel of
the Company
Exhibit B - For of Opinion of King & Spalding
Exhibit C - Form of Opinion of Schulte, Roth & Zabel, LLP
Exhibit D - Form of Lock-up Letter
<PAGE> 6
UNIVERSAL COMPRESSION HOLDINGS, INC.
(a Delaware corporation)
5,600,000 Shares of Common Stock
(Par Value $.01 Per Share)
U.S. PURCHASE AGREEMENT
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
as Representative of the several Underwriters
World Financial Center, North Tower
New York, New York 10281-1209
Ladies and Gentlemen:
UNIVERSAL COMPRESSION HOLDINGS, INC., a Delaware corporation (the "Company")
confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") and each of the other U.S. Underwriters
named in Schedule A hereto (collectively, the "U.S. Underwriters", which term
shall also include any underwriter substituted as hereinafter provided in
Section 10 hereof), for whom Merrill Lynch is acting as representative (in such
capacity, the "U.S. Representative"), with respect to the issue and sale by the
Company and the purchase by the U.S. Underwriters, acting severally and not
jointly, of the respective numbers of shares of Common Stock, par value $.01 per
share, of the Company ("Common Stock") set forth in said Schedule A, and with
respect to the grant by the Company to the Underwriters, acting severally and
not jointly, of the option described in Section 2(b) hereof to purchase all or
any part of 840,000 additional shares of Common Stock to cover over-allotments,
if any. The aforesaid 5,600,000 shares of Common Stock (the "Initial U.S.
Securities") to be purchased by the U.S. Underwriters and all or any part of the
840,000 shares of Common Stock subject to the option described in Section 2(b)
hereof (the "U.S. Option Securities") are hereinafter called, collectively, the
"U.S. Securities".
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "International Purchase Agreement")
providing for the offering by the Company of an aggregate of 1,400,000 shares of
Common Stock (the "Initial International Securities") through arrangements with
certain underwriters outside the United States and Canada (the "International
Managers") for which Merrill Lynch International is acting as lead manager (the
"Lead Manager") and the grant by the Company to the International Managers,
acting severally and not jointly, of an option to purchase all or any part of
the International Managers' pro rata portion of up to 210,000 additional shares
of Common Stock solely to cover over-allotments, if any (the "International
Option
1
<PAGE> 7
Securities" and, together with the U.S. Option Securities, the "Option
Securities"). The Initial International Securities and the International Option
Securities are hereinafter called collectively the "International Securities."
It is understood that the Company is not obligated to sell and the U.S.
Underwriters are not obligated to purchase, any Initial U.S. Securities unless
all of the Initial International Securities are contemporaneously purchased by
the International Managers.
The U.S. Underwriters and the International Managers are hereinafter
collectively called the "Underwriters," the Initial U.S. Securities and the
Initial International Securities are hereinafter collectively called the
"Initial Securities," and the U.S. Securities and the International Securities
are hereinafter collectively called the "Securities."
The Underwriters will concurrently enter into an Intersyndicate
Agreement of even date herewith (the "Intersyndicate Agreement") providing for
the coordination of certain transactions among the Underwriters under the
direction by Merrill Lynch (in such capacity, the "Global Coordinator").
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the U.S. Representative and the
International Manager deem advisable after this Agreement has been executed and
delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-34090) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). Two
forms of prospectus are to be used in connection with the offering and sale of
the Securities: one relating to the U.S. Securities (the "Form of U.S.
Prospectus") and one relating to the International Securities (the "Form of
International Prospectus"). The Form of International Prospectus is identical to
the Form of U.S. Prospectus, except for the front cover and back cover pages and
the information under the caption "Underwriting". The information included in
any such prospectus or in any such Term Sheet, as the case may be, that was
omitted from such registration statement at the time it became effective but
that is deemed to be part of such registration statement at the time it became
effective (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule
430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
"Rule 434 Information." Each Form of U.S. Prospectus and Form of International
Prospectus used before such registration statement became effective, and any
prospectus that omitted, as applicable, the Rule
2
<PAGE> 8
430A Information or the Rule 434 Information, that was used after such
effectiveness and prior to the execution and delivery of this Agreement, is
herein called a "preliminary prospectus." Such registration statement, including
the exhibits thereto and schedules thereto at the time it became effective and
including the Rule 430A Information and the Rule 434 Information, as applicable,
is herein called the "Registration Statement." Any registration statement filed
pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as the
"Rule 462(b) Registration Statement," and after such filing the term
"Registration Statement" shall include the Rule 462(b) Registration Statement.
The final Form of U.S. Prospectus and the final Form of International Prospectus
in the forms first furnished to the Underwriters for use in connection with the
offering of the Securities are herein called the "U.S. Prospectus" and the
"International Prospectus," respectively, and collectively, the "Prospectuses"
If Rule 434 is relied on, the terms "U.S. Prospectus" and "International
Prospectus" shall refer to the preliminary U.S. Prospectus dated May 3, 2000 and
the preliminary International Prospectus dated May 3, 2000, respectively, each
together with the applicable Term Sheet, and all references in this Agreement to
the date of such Prospectuses shall mean the date of the applicable Term Sheet.
For purposes of this Agreement, all references to the Registration Statement,
any preliminary prospectus, the U.S. Prospectus, the International Prospectus or
any Term Sheet or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each U.S. Underwriter as of the date hereof, as of
the Closing Time referred to in Section 2(c) hereof, and as of each Date of
Delivery (if any) referred to in Section 2(b) hereof, and agrees with each U.S.
Underwriter, as follows:
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information
has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any U.S. Option
Securities are purchased, at the Date of Delivery), the Registration
Statement, the Rule 462(b) Registration Statement and any amendments
and supplements thereto complied and will comply in all material
respects with the requirements
3
<PAGE> 9
of the 1933 Act and the 1933 Act Regulations and did not and 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 not misleading, and the Prospectuses, any
preliminary prospectuses and any supplement thereto or prospectus
wrapper prepared in connection therewith, at their respective times of
issuance and at the Closing Time, complied and will comply in all
material respects with any applicable laws or regulations of foreign
jurisdictions in which the Prospectuses and such preliminary
prospectuses, as amended or supplemented, if applicable, are
distributed in connection with the offer and sale of U. S. Securities.
Neither of the Prospectuses nor any amendments or supplements thereto
(including any prospectus wrapper), at the time the Prospectuses or any
amendments or supplements thereto were issued and at the Closing Time
(and, if any U.S. Option Securities are purchased, at the Date of
Delivery), included or will include an untrue statement of a material
fact or omitted or will omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. If Rule 434 is used, the
Company will comply with the requirements of Rule 434 and the
Prospectuses shall not be "materially different", as such term is used
in Rule 434, from the prospectuses included in the Registration
Statement at the time it became effective. The representations and
warranties in this subsection shall not apply to statements in or
omissions from the Registration Statement or U.S. Prospectus made in
reliance upon and in conformity with information furnished to the
Company in writing by any U.S. Underwriter through Merrill Lynch
expressly for use in the Registration Statement or the U.S. Prospectus.
Each preliminary prospectus and the prospectuses filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectuses
delivered to the Underwriters for use in connection with this offering
was identical in all material respects to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(ii) Independent Accountants. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.
(iii) Financial Statements. The audited financial statements
included in the Registration Statement and the Prospectuses, together
with the related schedules and notes, present fairly in all material
respects the financial position of the Company and its consolidated
subsidiaries at the dates indicated and the statement of operations,
stockholders' equity and cash flows of the Company and its consolidated
subsidiaries for the periods specified; said financial statements have
been prepared in conformity with generally accepted
4
<PAGE> 10
accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved. The supporting schedules included in the
Registration Statement present fairly in all material respects in
accordance with GAAP the information required to be stated therein. The
selected financial data and the summary financial information included
in the Prospectuses present fairly in all material respects the
information shown therein and have been compiled on a basis consistent
with that of the audited financial statements included in the
Registration Statement. The pro forma financial statements and the
related notes thereto included in the Registration Statement and the
Prospectuses present fairly in all material respects the information
shown therein, have been prepared in all material respects in
accordance with the Commission's rules and guidelines with respect to
pro forma financial statements and have been properly compiled on the
bases described therein, and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate
in all material respects to give effect to the transactions and
circumstances referred to therein.
(iv) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectuses, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business
(a "Material Adverse Effect"), (B) there have been no transactions
entered into by the Company or any of its subsidiaries, other than
those in the ordinary course of business, which are material with
respect to the Company and its subsidiaries considered as one
enterprise, and (C) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock.
(v) Good Standing of the Company. The Company has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the state of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform
its obligations under this Agreement; and the Company is duly qualified
as a foreign corporation to transact business and is in good standing
in each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect.
(vi) Good Standing of Subsidiaries. Universal Compression,
Inc., a Texas corporation (the "Operating Subsidiary"), is the only
"significant subsidiary" of the Company (as such term is defined in
Rule 1-02 of Regulation S-X). The Operating Subsidiary has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of
5
<PAGE> 11
the jurisdiction of its incorporation, has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectuses and is duly qualified as a
foreign corporation to transact business and are in good standing in
each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect; except as
otherwise disclosed in the Registration Statement, all of the issued
and outstanding capital stock of such subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and is
owned directly by the Company, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity (other than
pursuant to the Company's Credit Agreement, dated February 20, 1998, as
amended); none of the outstanding shares of capital stock of the
Operating Subsidiary was issued in violation of the preemptive or
similar rights of any securityholder of such subsidiary. The only
subsidiaries of the Company are the subsidiaries listed on Exhibit 21
to the Registration Statement. The subsidiaries listed on Exhibit 21 to
the Registration Statement other than the Operating Subsidiary,
considered in the aggregate as a single subsidiary, do not constitute a
"significant subsidiary" as defined in Rule 1-02 of Regulation S-X.
(vii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectuses in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement, pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectuses, or pursuant to the recapitalization described in the
Prospectuses under the caption "Capitalization", pursuant to the
Company's acquisition of Spectrum Rotary Compression Inc. or pursuant
to the exercise of convertible securities or options referred to in the
Prospectuses). The shares of issued and outstanding capital stock of
the Company have been duly authorized and validly issued and are fully
paid and non-assessable; none of the outstanding shares of capital
stock of the Company was issued in violation of the preemptive or other
similar rights of any securityholder of the Company.
(viii) Authorization of Agreement. This Agreement and the
International Purchase Agreement have been duly authorized, executed
and delivered by the Company and the Operating Subsidiary.
(ix) Authorization and Description of Securities. The
Securities to be purchased by the U.S. Underwriters and the
International Managers have been duly authorized for issuance and sale
to the U.S. Underwriters pursuant to this Agreement and the
International Managers pursuant to the International Purchase
Agreement, respectively, and, when issued and delivered by the Company
pursuant to this Agreement and the International Purchase Agreement,
respectively, against payment of the consideration set forth herein and
the
6
<PAGE> 12
International Purchase Agreement, respectively, will be validly issued,
fully paid and non-assessable; the Common Stock conforms to all
statements relating thereto contained in the Prospectuses and such
description conforms to the rights set forth in the instruments
defining the same; no holder of the Securities will be subject to
personal liability by reason of being such a holder; and the issuance
of the Securities is not subject to the preemptive or other similar
rights of any securityholder of the Company.
(x) Absence of Defaults and Conflicts. Neither the Company nor
any of its subsidiaries is in violation of its charter or by-laws or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or other agreement
or instrument to which the Company or any of its subsidiaries is a
party or by which it or any of them may be bound, or to which any of
the property or assets of the Company or any subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults
that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein and in the Registration Statement
(including the $200 million operating lease facility (the "Synthetic
Lease Transaction") and the $50 million credit facility (the "Credit
Facility") as described in the Prospectuses under the caption
"Management's Discussion and Analysis of Financial Condition and
Results of Operation - Liquidity and Capital Resources" and the
issuance and sale of the Securities and the use of the proceeds from
the sale of the Securities as described in the Prospectus under the
caption "Use of Proceeds") and compliance by the Company and the
Operating Subsidiary with their respective obligations hereunder have
been duly authorized by all necessary corporate action and do not and
will not, whether with or without the giving of notice or passage of
time or both, conflict with or constitute a breach of, or default or
Repayment Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company, the Operating Subsidiary or any other subsidiary
pursuant to, the Agreements and Instruments (except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not
result in a Material Adverse Effect), nor will such action result in
(i) any violation of the provisions of the charter or by-laws of the
Company or the Operating Subsidiary, (ii) any violation of the
provisions of the charter or by-laws of any subsidiary other than the
Operating Subsidiary (except for such violations that would not result
in a Material Adverse Effect) or (iii) any violation of any applicable
law, statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any subsidiary or any of their
assets, properties or operations (except for such violations that would
not result in a Material Adverse Effect). As used herein, a "Repayment
Event" means any event or condition which gives the holder of any note,
debenture or other evidence of indebtedness (or any person
7
<PAGE> 13
acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any subsidiary.
(xi) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any subsidiary exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or any subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to
result in a Material Adverse Effect.
(xii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might reasonably be expected to result in a Material Adverse Effect, or
which might reasonably be expected to materially and adversely affect
the properties or assets thereof or the consummation of the
transactions contemplated in this Agreement, the Synthetic Lease
Transaction or the performance by the Company or the Operating
Subsidiary of their respective obligations hereunder; the aggregate of
all pending legal or governmental proceedings to which the Company or
any subsidiary is a party or of which any of their respective property
or assets is the subject which are not described in the Registration
Statement, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material
Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement or the Prospectuses or to be filed as exhibits thereto which
have not been so described and filed as required.
(xiv) Possession of Intellectual Property. The Company and its
subsidiaries own or possess or hold under a valid license, or can
acquire on reasonable terms, adequate patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them, and neither the Company
nor any of its subsidiaries has received any notice or is otherwise
aware of any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.
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<PAGE> 14
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement or the Synthetic Lease
Transaction, except such as have been already obtained or as may be
required under the 1933 Act or the 1933 Act Regulations or state
securities laws.
(xvi) Possession of Licenses and Permits. The Company and its
subsidiaries possess such permits, licenses, approvals, consents and
other authorizations (collectively, "Governmental Licenses") issued by
the appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them, except
where the failure to possess such Governmental License would not have a
Material Adverse Effect; the Company and its subsidiaries are in
compliance with the terms and conditions of all such Governmental
Licenses, except where the failure so to comply would not, singly or in
the aggregate, have a Material Adverse Effect; all of the Governmental
Licenses are valid and in full force and effect, except when the
invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
(xvii) Title to Property. The Company and its subsidiaries
have good and marketable title to all real property owned by the
Company and its subsidiaries and good title to all other properties
owned by them that are material to the Company's business, in each
case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such
as (a) are described in the Prospectus or (b) do not, singly or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by
the Company or any of its subsidiaries; and all of the leases and
subleases material to the business of the Company and its subsidiaries,
considered as one enterprise, and under which the Company or any of its
subsidiaries holds properties described in the Prospectus, are in full
force and effect, and neither the Company nor any subsidiary has any
notice of any material claim of any sort that has been asserted by
anyone adverse to the rights of the Company or any subsidiary under any
of the leases or subleases mentioned above, or affecting or questioning
the rights of the Company or such subsidiary to the continued
possession of the leased or subleased premises under any such lease or
sublease.
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<PAGE> 15
(xviii) Investment Company Act. The Company is not, and upon
the issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectuses will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
(xix) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor any of its subsidiaries is in violation of any federal, state,
local or foreign statute, law, rule, regulation, ordinance, code,
policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to pollution or protection of
human health, the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum
or petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company and its subsidiaries have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements
in all material respects, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against
the Company or any of its subsidiaries and (D) there are no events or
circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by
any private party or governmental body or agency, against or affecting
the Company or any of its subsidiaries relating to Hazardous Materials
or any Environmental Laws.
(xx) Registration Rights. There are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement other than those
described in the Prospectuses under the caption "Shares Eligible For
Future Sale - Registration Rights", all of which have been waived.
(b) Officer's Certificates. Any certificate signed by any officer of
the Company, or any of its subsidiaries delivered to the U.S. Representative or
to counsel for the U.S. Underwriters shall be deemed a representation and
warranty by the Company to each U.S. Underwriter as to the matters covered
thereby.
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing.
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<PAGE> 16
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each U.S. Underwriter, severally and not
jointly, and each U.S. Underwriter, severally and not jointly, agrees to
purchase from the Company, at the price per share set forth in Schedule B, the
number of Initial U.S. Securities set forth in Schedule A opposite the name of
such U.S. Underwriter, plus any additional number of Initial U.S. Securities
which such U.S. Underwriter may become obligated to purchase pursuant to the
provisions of Section 10 hereof.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the U.S. Underwriters,
severally and not jointly, to purchase up to an additional 840,000 shares of
Common Stock at the price per share set forth in Schedule B, less an amount per
share equal to any dividends or distributions declared by the Company and
payable on the Initial U.S. Securities but not payable on the U.S. Option
Securities. The option hereby granted will expire 30 days after the date hereof
and may be exercised in whole or in part from time to time only for the purpose
of covering over-allotments which may be made in connection with the offering
and distribution of the Initial U.S. Securities upon notice by the U.S.
Representative to the Company setting forth the number of U.S. Option Securities
as to which the several U.S. Underwriters are then exercising the option and the
time and date of payment and delivery for such U.S. Option Securities. Any such
time and date of delivery (a "Date of Delivery") shall be determined by the U.S.
Representative, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Time, as
hereinafter defined. If the option is exercised as to all or any portion of the
U.S. Option Securities, each of the U.S. Underwriters, acting severally and not
jointly, will purchase that proportion of the total number of U.S. Option
Securities then being purchased which the number of Initial U.S. Securities set
forth in Schedule A opposite the name of such U.S. Underwriter bears to the
total number of Initial U.S. Securities, subject in each case to such
adjustments as the U.S. Representative in its discretion shall make to eliminate
any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial U.S. Securities shall be made at the offices of
[Vinson & Elkins L.L.P., 1001 Fannin Street, Houston, Texas,] or at such other
place as shall be agreed upon by the U.S. Representative and the Company, at
9:00 A.M. (Eastern standard time) on the third (fourth, if the pricing occurs
after 4:30 P.M. (Eastern standard time) on any given day) business day after the
date hereof (unless postponed in accordance with the provisions of Section 10),
or such other time not later than ten business days after such date as shall be
agreed upon by the U.S. Representative and the Company (such time and date of
payment and delivery being herein called "Closing Time").
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<PAGE> 17
In addition, in the event that any or all of the U.S. Option Securities
are purchased by the U.S. Underwriters, payment of the purchase price for, and
delivery of certificates for, such U.S. Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be agreed upon by the
U.S. Representative and the Company, on each Date of Delivery as specified in
the notice from the U.S. Representative to the Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the U.S. Representative for the respective accounts of the U.S. Underwriters of
the U.S. Securities to be purchased by them in book entry form through the
facilities of The Depositary Trust Company, New York, New York ("DTC"). It is
understood that each U.S. Underwriter has authorized the U.S. Representative,
for its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the Initial U.S. Securities and the U.S. Option Securities,
if any, which it has agreed to purchase. Merrill Lynch, individually and not as
representative of the U.S. Underwriters, may (but shall not be obligated to)
make payment of the purchase price for the Initial U.S. Securities or the U.S.
Option Securities, if any, to be purchased by any U.S. Underwriter whose funds
have not been received by the Closing Time or the relevant Date of Delivery, as
the case may be, but such payment shall not relieve such U.S. Underwriter from
its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial U.S.
Securities and the U.S. Option Securities, if any, shall be in such
denominations as the U.S. Representative may request in writing at least one
full business day before the Closing Time or the relevant Date of Delivery, as
the case may be. The certificates for the Initial U.S. Securities and the U.S.
Option Securities, if any, shall be registered in the name of Cede & Co.
pursuant to the DTC Agreement and will be made available for examination and
packaging by the U.S. Representative in The City of New York not later than
10:00 A.M. (Eastern time) on the business day prior to the Closing Time or the
relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
U.S. Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule 430A
or Rule 434, as applicable, and will notify the U.S. Representative promptly,
and confirm the notice in writing, (i) when any post-effective amendment to the
Registration Statement shall become effective, or any supplement to the
Prospectuses or any amended Prospectus shall have been filed, (ii) of the
receipt of any comments from the Commission, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectuses or for additional information, and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
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<PAGE> 18
preliminary prospectus, or of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the initiation or
threatening of any proceedings for any of such purposes. The Company will
promptly effect the filings necessary pursuant to Rule 424(b) and will take such
steps as it deems necessary to ascertain promptly whether the form of prospectus
transmitted for filing under Rule 424(b) was received for filing by the
Commission and, in the event that it was not, it will promptly file such
prospectus. The Company will make every reasonable effort to prevent the
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the U.S. Representative
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)), any Term Sheet or any
amendment, supplement or revision to either the prospectuses included in the
Registration Statement at the time it became effective or to the Prospectuses
will furnish the U.S. Representative with copies of any such documents a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file or use any such document to which the U.S. Representative
or counsel for the U.S. Underwriters shall object.
(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the U.S. Representative and counsel for the U.S. Underwriters,
without charge, copies of the Registration Statement as originally filed and of
each amendment thereto (including exhibits filed therewith) and signed copies of
all consents and certificates of experts or duplicates thereof, and will also
deliver to the U.S. Representative, without charge, a conformed copy of the
Registration Statement as originally filed and of each amendment thereto
(without exhibits) for each of the U.S. Underwriters. The copies of the
Registration Statement and each amendment thereto furnished to the U.S.
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each U.S.
Underwriter, without charge, as many copies of each preliminary prospectus as
such U.S. Underwriter reasonably requested, and the Company hereby consents to
the use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each U.S. Underwriter, without charge, during the period when the
U.S. Prospectus is required to be delivered under the 1933 Act or the Securities
Exchange Act of 1934 (the "1934 Act"), such number of copies of the U.S.
Prospectus (as amended or supplemented) as such U.S. Underwriter may reasonably
request. The U.S. Prospectus and any amendments or supplements thereto furnished
to the U.S. Underwriters will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations so as to permit the completion of
the distribution of the
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<PAGE> 19
Securities as contemplated in this Agreement, the International Purchase
Agreement and in the Prospectuses. If at any time when a prospectus is required
by the 1933 Act to be delivered in connection with sales of the Securities, any
event shall occur or condition shall exist as a result of which it is necessary,
in the opinion of counsel for the U.S. Underwriters or for the Company, to amend
the Registration Statement or amend or supplement the Prospectuses in order that
the Prospectuses will not include any untrue statements of a material fact or
omit to state a material fact necessary in order to make the statements therein
not misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend the Registration Statement or amend or
supplement any Prospectus in order to comply with the requirements of the 1933
Act or the 1933 Act Regulations, the Company will promptly prepare and file with
the Commission, subject to Section 3(b), such amendment or supplement as may be
necessary to correct such statement or omission or to make the Registration
Statement or the Prospectuses comply with such requirements, and the Company
will furnish to the U.S. Underwriters such number of copies of such amendment or
supplement as the U.S. Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the U.S. Underwriters, to qualify the Securities for offering
and sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the U.S. Representative may designate and
to maintain such qualifications in effect for a period of not less than one year
from the later of the effective date of the Registration Statement and any Rule
462(b) Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any Rule
462(b) Registration Statement.
(g) Rule 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received by
it from the sale of the Securities in the manner specified in the Prospectuses
under "Use of Proceeds".
(i) Listing. The Company will use its reasonable best efforts to effect
the listing of the Common Stock on the New York Stock Exchange.
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<PAGE> 20
(j) Restriction on Sale of Securities. During a period of 180 days from
the date of the Prospectuses, the Company will not, without the prior written
consent of Merrill Lynch, (i) directly or indirectly, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of any share of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or file any registration
statement under the 1933 Act with respect to any of the foregoing or (ii) enter
into any swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Securities to be sold hereunder, (B) any shares of Common Stock issued by
the Company upon the exercise of an option or warrant or the conversion or split
of a security outstanding on the date hereof and referred to in the Prospectus,
(C) any shares of Common Stock issued or options to purchase Common Stock
granted pursuant to existing employee benefit plans of the Company referred to
in the Prospectus or (D) any shares of Common Stock issued pursuant to any
non-employee director stock plan or dividend reinvestment plan.
(k) Reporting Requirements. The Company, during the period when the
Prospectuses are required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to the
1934 Act within the time periods required by the 1934 Act and the rules and
regulations of the Commission thereunder.
SECTION 4. Payment of Expenses.
(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters, including any stock or
other transfer taxes and any stamp or other duties payable upon the sale,
issuance or delivery of the Securities to the Underwriters and the transfer of
the Securities between the U.S. Underwriters and the International Managers,
(iv) the fees and disbursements of the Company's counsel, accountants and other
advisors, (v) the qualification of the Securities under securities laws in
accordance with the provisions of Section 3(f) hereof, including filing fees and
the reasonable fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of the Blue Sky
Survey and any supplement thereto, (vi) the printing and delivery to the
Underwriters of copies of each preliminary prospectus, any Term Sheets and of
the Prospectuses and any amendments or supplements thereto, (vii) the
preparation, printing and delivery to the Underwriters
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<PAGE> 21
of copies of the Blue Sky Survey and any supplement thereto, (viii) the fees and
expenses of any transfer agent or registrar for the Securities and (ix) the
filing fees incident to, and the reasonable fees and disbursements of counsel to
the Underwriters in connection with, the review by the National Association of
Securities Dealers, Inc. (the "NASD") of the terms of the sale of the Securities
and (x) the fees and expenses incurred in connection with the listing of the
Securities on the New York Stock Exchange.
(b) Termination of Agreement. If this Agreement is terminated by the
U.S. Representative in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the U.S. Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the U.S. Underwriters.
SECTION 5. Conditions of U.S. Underwriters' Obligations. The
obligations of the several U.S. Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Company contained in
Section 1 hereof or in certificates of any officer of the Company or any
subsidiary of the Company delivered pursuant to the provisions hereof, to the
performance by the Company of its covenants and other obligations hereunder, and
to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the U.S. Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434,
a Term Sheet shall have been filed with the Commission in accordance with Rule
424(b).
(b) Opinion of Counsel for Company. At Closing Time, the U.S.
Representative shall have received the favorable opinion, dated as of Closing
Time, of each of Valerie L. Banner, General Counsel of the Company, King &
Spalding, counsel for the Company and Schulte, Roth & Zabel, LLP, in form and
substance satisfactory to counsel for the U.S. Underwriters, together with
signed or reproduced copies of such letter for each of the other U.S.
Underwriters to the effect set forth in Exhibits A, B and C hereto and to such
further effect as counsel to the U.S. Underwriters may reasonably request. In
giving such opinion such counsel may rely, as to all matters governed by the
laws of jurisdictions other than the law of the State of New York and the
federal law of the United States, upon the opinions of Morris, Nichols, Arsht &
Tunnell and [Schulte Roth & Zabel LLP]. Such counsel may also state that,
insofar as such opinion involves factual matters, they have relied,
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<PAGE> 22
to the extent they deem proper, upon certificates of officers of the Company and
its subsidiaries and certificates of public officials.
(c) Opinion of Counsel for U.S. Underwriters. At Closing Time, the U.S.
Representative shall have received the favorable opinion, dated as of Closing
Time, of Vinson & Elkins L.L.P., counsel for the U.S. Underwriters, together
with signed or reproduced copies of such letter for each of the other U.S.
Underwriters with respect to the matters set forth in clauses (i), (ii), (v),
(vi) (solely as to preemptive or other similar rights arising by operation of
law or under the charter or by-laws of the Company, as amended), (viii) through
(x), inclusive, (xii), (xiv) (solely as to the information in the Prospectus
under "Description of Capital Stock--Common Stock") and the penultimate
paragraph of Exhibit B hereto. In giving such opinion such counsel may rely, as
to all matters governed by the laws of jurisdictions other than the law of the
State of New York, the federal law of the United States and the General
Corporation Law of the State of Delaware, upon the opinions of counsel
satisfactory to the U.S. Representative. Such counsel may also state that,
insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of officers of the Company and its
subsidiaries and certificates of public officials.
(d) Officers' Certificate. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectuses, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, and the U.S.
Representative shall have received a certificate of the President or a Vice
President of the Company and of the chief financial or chief accounting officer
of the Company, dated as of Closing Time, to the effect that (i) there has been
no such material adverse change, (ii) the representations and warranties in
Section 1(a) hereof are true and correct with the same force and effect as
though expressly made at and as of Closing Time, (iii) the Company has complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to Closing Time, and (iv) no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or are contemplated by the
Commission.
(e) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the U.S. Representative shall have received from Deloitte & Touche
LLP a letter dated such date, in form and substance satisfactory to the U.S.
Representative, together with signed or reproduced copies of such letter for
each of the other U.S. Underwriters containing statements and information of the
type ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectuses.
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(f) Bring-down Comfort Letter. At Closing Time, the U.S. Representative
shall have received from Deloitte & Touche LLP a letter, dated as of Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (e) of this Section, except that the specified
date referred to shall be a date not more than three business days prior to
Closing Time.
(g) Approval of Listing. At Closing Time, the Securities shall have
been approved for listing on the New York Stock Exchange, subject only to
official notice of issuance.
(h) No Objection. The NASD shall have confirmed that it has no
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(i) Lock-up Agreements. At the date of this Agreement, the U.S.
Representative shall have received an agreement substantially in the form of
Exhibit D hereto signed by the persons listed on Schedule C hereto.
(j) Concurrent Completion of Other Transactions. The closing of the
Synthetic Lease Transaction and the Credit Facility shall occur
contemporaneously with the purchase by the U.S. Underwriters of the Initial U.S.
Securities under this Agreement.
(k) Purchase of Initial International Securities. Contemporaneously
with the purchase by the U.S. Underwriters of the Initial U.S. Securities under
this Agreement, the International Managers shall have purchased the Initial
International Securities under the International Purchase Agreement.
(l) No downgrading. Subsequent to the date of this Agreement, no
downgrading shall have occurred in the rating accorded any of the Company's or
any of its subsidiaries' securities by any "nationally recognized statistical
rating organization," as that term is defined by the Commission for purposes of
Rule 436(g)(2) under the 1933 Act, and no such securities rating organization
shall have publicly announced that it has under surveillance or review, with
possible negative implications, its ratings of any of the Company's or its
subsidiaries' securities.
(m) Conditions to Purchase of U.S. Option Securities. In the event that
the U.S. Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the U.S. Option Securities, the representations
and warranties of the Company contained herein and the statements in any
certificates furnished by the Company or any subsidiary of the Company hereunder
shall be true and correct as of each Date of Delivery and, at the relevant Date
of Delivery, the U.S. Representative shall have received:
(i) Officers' Certificate. A certificate, dated such Date of
Delivery, of the
18
<PAGE> 24
President or a Vice President of the Company and of the chief financial
or chief accounting officer of the Company confirming that the
certificate delivered at the Closing Time pursuant to Section 5(d)
hereof remains true and correct as of such Date of Delivery.
(ii) Opinion of Counsel for Company. The favorable opinion of
each of Valerie L. Banner, General Counsel of the Company, King &
Spalding, counsel for the Company and Schulte, Roth & Zabel LLP,
counsel to the Company, in form and substance satisfactory to counsel
for the U.S. Underwriters, dated such Date of Delivery, relating to the
U.S. Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the respective opinions required by
Section 5(b) hereof.
(iii) Opinion of Counsel for U.S. Underwriters. The favorable
opinion of Vinson & Elkins L.L.P., counsel for the U.S. Underwriters,
dated such Date of Delivery, relating to the U.S. Option Securities to
be purchased on such Date of Delivery and otherwise to the same effect
as the opinion required by Section 5(c) hereof.
(iv) Bring-down Comfort Letter. A letter from Deloitte &
Touche LLP, in form and substance satisfactory to the U.S.
Representative and dated such Date of Delivery, substantially in the
same form and substance as the letter furnished to the U.S.
Representative pursuant to Section 5(f) hereof, except that the
"specified date" in the letter furnished pursuant to this paragraph
shall be a date not more than five days prior to such Date of Delivery.
(n) Additional Documents. At Closing Time and at each Date of Delivery,
Vinson & Elkins L.L.P counsel for the U.S. Underwriters, shall have been
furnished with such documents and opinions as they may require for the purpose
of enabling them to pass upon the issuance and sale of the U. S. Securities as
herein contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Company in connection with
the issuance and sale of the Securities as herein contemplated shall be
satisfactory in form and substance to the U.S. Representative and such counsel.
(o) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of U.S. Option
Securities, on a Date of Delivery which is after the Closing Time, the
obligations of the several U.S. Underwriters to purchase the relevant U.S.
Option Securities, may be terminated by the U.S. Representative by notice to the
Company at any time at or prior to Closing Time or such Date of Delivery, as the
case may be, and such termination shall be without liability of any party to any
other party except as provided in Section 4 and except that Sections 1, 6, 7 and
8 shall survive any such termination and remain in full force and effect.
19
<PAGE> 25
SECTION 6. Indemnification.
(a) Indemnification of U.S. Underwriters. The Company and the Operating
Subsidiary jointly and severally, agree to indemnify and hold harmless each U.S.
Underwriter and each person, if any, who controls any U.S. Underwriter within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as
follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectuses (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all expense whatsoever, as incurred
(including the reasonable fees and disbursements of counsel chosen by
Merrill Lynch), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission to the extent that any such
expense is not paid under (i) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
U.S. Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectuses (or any amendment or supplement thereto); and provided further that
the Company will not be liable to any U.S. Underwriter with respect to any
preliminary prospectus to the extent that any such loss, liability, claim,
damage or expense would not have been incurred, but for the fact that such U.S.
Underwriter, in contravention of a requirement of applicable law, sold U.S.
Securities to a person to whom such U.S. Underwriter failed to send or give, at
or prior to the written confirmation of the sale of such U.S. Securities (the
"Confirmation"), a copy of the Prospectus, as then amended or supplemented if
the Company has previously furnished copies thereof (sufficiently in advance of
the Confirmation and in sufficient quantity to allow for distribution by the
Confirmation) and the loss, liability, claim,
20
<PAGE> 26
damage or expense of such U.S. Underwriter resulted from an untrue statement or
omission of a material fact contained in or omitted from the preliminary
prospectus that was corrected in the Prospectus as, if applicable, amended or
supplemented prior to the Confirmation and such Prospectus was required by law
to be delivered at or prior to the Confirmation.
(b) Indemnification of Company, Directors and Officers. Each U.S.
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectuses (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such U.S.
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto) or such preliminary prospectus or the
Prospectuses (or any amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a
21
<PAGE> 27
statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any indemnified party.
SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the U.S. Underwriters on the other hand from the offering of the U.S.
Securities pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and of the U.S.
Underwriters on the other hand in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
U.S. Underwriters on the other hand in connection with the offering of the U.S.
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the U.S.
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the U.S.
Underwriters, in each case as set forth on the cover of the Prospectuses, or, if
Rule 434 is used, the corresponding location on the Term Sheet, bear to the
aggregate initial public offering price of the U.S. Securities as set forth on
such cover.
The relative fault of the Company on the one hand and the U.S.
Underwriters on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by the U.S. Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company, the Operating Subsidiary and the U.S. Underwriters 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 U.S. Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 7. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
7 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged
22
<PAGE> 28
untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no U.S. Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the U.S. Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such U.S. Underwriter has otherwise been required to pay by reason of any 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 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a
U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such U.S.
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. The U.S.
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial U.S. Securities set forth
opposite their respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
subsidiaries submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any U.S.
Underwriter or controlling person, or by or on behalf of the Company, and shall
survive delivery of the U.S. Securities to the U.S. Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The U.S. Representative may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
if there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the Prospectuses, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States or the international
financial markets, in which Merrill Lynch conducts sales of equity securities,
any outbreak of hostilities or escalation thereof or other calamity or crisis or
any change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect
23
<PAGE> 29
of which is such as to make it, in the judgment of the U.S. Representative,
impracticable to market the U.S. Securities or to enforce contracts for the sale
of the U.S. Securities, or (iii) if trading in any securities of the Company has
been suspended or materially limited by the Commission or the New York Stock
Exchange, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the Nasdaq National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the National Association of Securities Dealers,
Inc. or any other governmental authority, or (iv) if a banking moratorium has
been declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the U.S. Underwriters. If one or
more of the U.S. Underwriters shall fail at Closing Time or a Date of Delivery
to purchase the U.S. Securities which it or they are obligated to purchase under
this Agreement (the "Defaulted Securities"), the U.S. Representative shall have
the right, within 24 hours thereafter, to make arrangements for one or more of
the non-defaulting U.S. Underwriters, or any other underwriters, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may
be agreed upon and upon the terms herein set forth; if, however, the U.S.
Representative shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the number of U.S. Securities to be purchased on such date, each of
the non-defaulting U.S. Underwriters shall be obligated, severally and
not jointly, to purchase the full amount thereof in the proportions
that their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting U.S. Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
number of U.S. Securities to be purchased on such date, this Agreement
or, with respect to any Date of Delivery which occurs after the Closing
Time, the obligation of the U.S. Underwriters to purchase and of the
Company to sell the U.S. Option Securities to be purchased and sold on
such Date of Delivery shall terminate without liability on the part of
any non-defaulting U.S. Underwriter.
No action taken pursuant to this Section shall relieve any defaulting U.S.
Underwriter from liability in respect of its default.
24
<PAGE> 30
In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after the
Closing Time, which does not result in a termination of the obligation of the
U.S. Underwriters to purchase and the Company to sell the relevant U.S. Option
Securities, as the case may be, either the U.S. Representative or the Company
shall have the right to postpone Closing Time or the relevant Date of Delivery,
as the case may be, for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectuses or in any other
documents or arrangements. As used herein, the term "U.S. Underwriter" includes
any person substituted for a U.S. Underwriter under this Section 10.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the U.S.
Underwriters shall be directed to the U.S. Representative at North Tower, World
Financial Center, New York, New York 10281-1201, attention of Equity Capital
Markets; and notices to the Company shall be directed to it at 4440 Brittmoore
Road, Houston, Texas 77041, attention of Mr. Stephen A. Snider, with a copy to
Ms. Valerie L. Banner.
SECTION 12. Parties. This Agreement shall each inure to the benefit of
and be binding upon the U.S. Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the U.S.
Underwriters and the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the U.S. Underwriters and the Company and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Securities from any U.S.
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. Governing Law and Time. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS
OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
25
<PAGE> 31
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the U.S. Underwriters and the Company in accordance with its terms.
Very truly yours,
UNIVERSAL COMPRESSION
HOLDINGS, INC.
By
--------------------------------------
Name:
Title:
UNIVERSAL COMPRESSION, INC.
solely with respect to its obligations
under Sections 6 and 7 hereof
By
--------------------------------------
Name:
Title:
26
<PAGE> 32
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
---------------------------------
Name:
Title:
Authorized Signatory
For itself and as U.S. Representative of the other U.S. Underwriters named in
Schedule A hereto.
<PAGE> 33
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Initial U.S.
Name of U.S. Underwriter Securities
------------------------ ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Salomon Smith Barney Inc.
Deutsche Bank Securities Inc.
First Union Securities, Inc.
Wasserstein Perella Securities, Inc.
---------
Total 5,600,000
=========
</TABLE>
Schedule A-1
<PAGE> 34
SCHEDULE B
UNIVERSAL COMPRESSION HOLDINGS, INC.
7,000,000 Shares of Common Stock
(Par Value $.01 Per Share)
1. The initial public offering price per share for the U.S. Securities,
determined as provided in said Section 2, shall be $____.
2. The purchase price per share for the U.S. Securities to be paid by
the several U.S. Underwriters shall be $______ being an amount equal to the
initial public offering price set forth above less $______ per share; provided
that the purchase price per share for any U.S. Option Securities purchased upon
the exercise of the over-allotment option described in Section 2(b) shall be
reduced by an amount per share equal to any dividends or distributions declared
by the Company and payable on the Initial U.S. Securities but not payable on the
U.S. Option Securities.
Schedule B-1
<PAGE> 35
SCHEDULE C
1. Each executive officer and director of the Company
2. Castle Harlan Partners III, and affiliates
3. John K. Castle
3. Energy Spectrum Partners, L.P.
4. DB Capital partners SBIC L.P.
5. First Union Capital Partners, Inc.
6. Mellon Bank N.A., as Trustee for the Bell Atlantic Master Trust
7. Wilmington Trust, as Trustee of Du Pont Pension Trust
Schedule C-1
<PAGE> 36
EXHIBIT A
Exhibit A-1
<PAGE> 37
Exhibit B
[Date], 2000
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Salomon Smith Barney Inc.
Deutsche Bank Securities Inc.
First Union Securities, Inc.
Wasserstein Perella Securities, Inc.
As U.S. Underwriters
Merrill Lynch International
Salomon Brothers International Limited
Deutsche Bank AG, London
First Union Securities, Inc.
Wasserstein Perella Securities, Inc.
As International Managers
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Universal Compression Holdings, Inc. Initial Public Offering
Gentlemen:
This letter acknowledges that the undersigned, a stockholder of
Universal Compression Holdings, Inc., a Delaware corporation (the "Company"),
understands that the Company has filed with the U.S. Securities and Exchange
Commission (the "Commission") (i) a registration statement on Form S-1 (the
"Registration Statement") relating to the registration under the U.S. Securities
Act of 1933, as amended, and the offering thereof in accordance with the rules
and regulations of the Commission thereunder (collectively, the "Securities
Act"), of shares of Common Stock of the Company, par value $.01 per share
("Common Stock"), and (ii) a preliminary prospectus dated April 5, 2000 (the
"Prospectus"), relating to the initial public
Exhibit B-1
<PAGE> 38
offering (the "Offering") of shares of Common Stock. The undersigned understands
that you propose to enter into a U.S. Purchase Agreement (the "U.S. Purchase
Agreement") and an International Purchase Agreement (the "International Purchase
Agreement" and together with the U.S. Purchase Agreement, the "Purchase
Agreements") with the Company providing for the Offering. If the Offering is
effected, it will occur following the date that the Registration Statement is
declared effective by the Commission.
In recognition of the benefit that the Offering will confer upon the
undersigned as a stockholder of the Company, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
undersigned agrees that, should the Offering be effected, during a period of 180
days from the date of the Purchase Agreements, the undersigned will not, without
the prior written consent of Merrill Lynch, directly or indirectly, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer any shares of Common Stock or
any securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or hereafter acquired, including without limitation shares of
Common Stock acquired upon conversion of shares of preferred stock, by the
undersigned or with respect to which the undersigned has or hereafter acquires
the power of disposition, or file any registration statement under the
Securities Act of 1933, as amended, with respect to any of the foregoing or (ii)
enter into any swap or any other agreement or any transaction that transfers, in
whole or in part, directly or indirectly, the economic consequence of ownership
of the Common Stock, whether any such swap or transaction is to be settled by
delivery of Common Stock or other securities, in cash or otherwise.
The undersigned understands that you, the other underwriters to be
named in the Purchase Agreements and the Company will rely upon the
representations set forth in this agreement in proceeding with the Offering.
This agreement shall be binding on the undersigned and his, her or its
respective successors, heirs, personal representatives and assigns.
Very truly yours,
[Name]
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Exhibit B-2
<PAGE> 39
The foregoing is accepted and agreed to
as of the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Salomon Smith Barney Inc.
Deutsche Bank Securities Inc.
First Union Securities, Inc.
Wasserstein Perella Securities, Inc.
As U.S. Underwriters
Merrill Lynch International
Salomon Brothers International Limited
Deutsche Bank AG, London
First Union Securities, Inc.
Wasserstein Perella Securities, Inc.
As International Managers
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
Exhibit B-3
<PAGE> 40
Annex A
[FORM OF ACCOUNTANTS' COMFORT LETTER PURSUANT TO SECTION 5(e)]
Annex A-1
<PAGE> 1
EXHIBIT 1.2
================================================================================
UNIVERSAL COMPRESSION HOLDINGS, INC.
(a Delaware corporation)
1,400,000 Shares of Common Stock
INTERNATIONAL PURCHASE AGREEMENT
Dated: , 2000
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1. Representations and Warranties..............................................3
(a) Representations and Warranties by the Company........................3
(i) Compliance with Registration Requirements...................3
(ii) Independent Accountants.....................................4
(iii) Financial Statements........................................4
(iv) No Material Adverse Change in Business......................5
(v) Good Standing of the Company................................5
(vi) Good Standing of Subsidiaries...............................5
(vii) Capitalization..............................................6
(viii) Authorization of Agreement..................................6
(ix) Authorization and Description of Securities.................6
(x) Absence of Defaults and Conflicts...........................6
(xi) Absence of Labor Dispute....................................8
(xii) Absence of Proceedings......................................8
(xiii) Accuracy of Exhibits........................................8
(xiv) Possession of Intellectual Property.........................8
(xv) Absence of Further Requirements.............................9
(xvi) Possession of Licenses and Permits..........................9
(xvii) Title to Property...........................................9
(xviii) Investment Company Act.....................................10
(xix) Environmental Laws.........................................10
(xx) Registration Rights........................................10
(b) Officer's Certificates..............................................10
SECTION 2. Sale and Delivery to International Managers; Closing.......................11
(a) Initial Securities..................................................11
(b) Option Securities...................................................11
(c) Payment.............................................................11
(d) Denominations; Registration.........................................12
SECTION 3. Covenants of the Company...................................................12
(a) Compliance with Securities Regulations and Commission Requests......12
(b) Filing of Amendments................................................13
(c) Delivery of Registration Statements.................................13
(d) Delivery of Prospectuses............................................13
(e) Continued Compliance with Securities Laws...........................14
(f) Blue Sky Qualifications.............................................14
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
(g) Rule 158............................................................14
(h) Use of Proceeds.....................................................14
(i) Listing.............................................................15
(j) Restriction on Sale of Securities...................................15
(k) Reporting Requirements..............................................15
SECTION 4. Payment of Expenses........................................................15
(a) Expenses............................................................15
(b) Termination of Agreement............................................16
SECTION 5. Conditions of International Managers' Obligations..........................16
(a) Effectiveness of Registration Statement.............................16
(b) Opinion of Counsel for Company......................................16
(c) Opinion of Counsel for International Managers.......................17
(d) Officers' Certificate...............................................17
(e) Accountant's Comfort Letter.........................................17
(f) Bring-down Comfort Letter...........................................18
(g) Approval of Listing.................................................18
(h) No Objection........................................................18
(i) Lock-up Agreements..................................................18
(j) Concurrent Completion of Other Transactions.........................18
(k) Purchase of Initial International Securities........................18
(m) Conditions to Purchase of International Option Securities...........18
(i) Officers' Certificate......................................19
(ii) Opinion of Counsel for Company.............................19
(iii) Opinion of Counsel for International Managers..............19
(iv) Bring-down Comfort Letter..................................19
(n) Additional Documents................................................19
(o) Termination of Agreement............................................19
SECTION 6. Indemnification............................................................20
(a) Indemnification of International Managers...........................20
(b) Indemnification of Company, Directors and Officers..................21
(c) Actions against Parties; Notification...............................21
SECTION 7. Contribution...............................................................22
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.............23
SECTION 9. Termination of Agreement...................................................23
(a) Termination; General................................................23
(b) Liabilities.........................................................24
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 10. Default by One or More of the International Managers......................24
SECTION 11. Notices...................................................................25
SECTION 12. Parties...................................................................25
SECTION 13. Governing Law and Time....................................................25
SECTION 14. Effect of Headings........................................................25
</TABLE>
<PAGE> 5
SCHEDULES
Schedule A - List of International Managers
Schedule B - Pricing Information
Schedule C - List of Persons and Entities Subject to Lock-up
EXHIBITS
Exhibit A - Form of Opinion of Valerie L. Banner, General Counsel of
the Company
Exhibit B - Form of Opinion of King & Spalding
Exhibit C - Form of Opinion of Schulte, Roth & Zabel, LLP
Exhibit D - Form of Lock-up Letter
<PAGE> 6
UNIVERSAL COMPRESSION HOLDINGS, INC.
(a Delaware corporation)
1,400,000 Shares of Common Stock
(Par Value $.01 Per Share)
INTERNATIONAL PURCHASE AGREEMENT
MERRILL LYNCH INTERNATIONAL
as Lead Manager of the several International Managers
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England
Ladies and Gentlemen:
UNIVERSAL COMPRESSION HOLDINGS, INC., a Delaware corporation (the "Company")
confirms its agreement with Merrill Lynch International ("Merrill Lynch") and
each of the other international underwriters named in Schedule A hereto
(collectively, the "International Managers", which term shall also include any
underwriter substituted as hereinafter provided in Section 10 hereof), for whom
Merrill Lynch is acting as representative (in such capacity, the "Lead
Manager"), with respect to the issue and sale by the Company and the purchase by
the International Managers, acting severally and not jointly, of the respective
numbers of shares of Common Stock, par value $.01 per share, of the Company
("Common Stock") set forth in said Schedule A, and with respect to the grant by
the Company to the International Managers, acting severally and not jointly, of
the option described in Section 2(b) hereof to purchase all or any part of
210,000 additional shares of Common Stock to cover over-allotments, if any. The
aforesaid 1,400,000 shares of Common Stock (the "Initial International
Securities") to be purchased by the International Managers and all or any part
of the 210,000 shares of Common Stock subject to the option described in Section
2(b) hereof (the "International Option Securities") are hereinafter called,
collectively, the "International Securities."
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "U.S. Purchase Agreement") providing for
the offering by the Company of an aggregate of 5,600,000 shares of Common Stock
(the "Initial U.S. Securities") through arrangements with certain underwriters
in the United States and Canada (the "U.S. Underwriters") for which Merrill
Lynch, Pierce, Fenner & Smith Incorporated is acting as representative (the
"U.S. Representative") and the grant by the Company to the U.S. Underwriters,
acting severally and not jointly, of an option to purchase all or any part of
the U.S. Underwriters' pro rata portion of up to 840,000 additional
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<PAGE> 7
shares of Common Stock solely to cover over-allotments, if any (the "U.S. Option
Securities" and, together with the International Option Securities, the "Option
Securities"). The Initial U.S. Securities and the U.S. Option Securities are
hereinafter called collectively the "U.S. Securities." It is understood that the
Company is not obligated to sell and the International Managers are not
obligated to purchase, any Initial International Securities unless all of the
Initial U.S. Securities are contemporaneously purchased by the U.S.
Underwriters.
The International Managers and the U.S. Underwriters are hereinafter
collectively called the "Underwriters," the Initial International Securities and
the Initial U.S. Securities are hereinafter collectively called the "Initial
Securities," and the International Securities and the U.S. Securities are
hereinafter collectively called the "Securities."
The Underwriters will concurrently enter into an Intersyndicate
Agreement of even date herewith (the "Intersyndicate Agreement") providing for
the coordination of certain transactions among the Underwriters under the
direction of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated (in such capacity, the "Global Coordinator").
The Company understands that the International Managers propose to make
a public offering of the International Securities as soon as the Lead Manager
deems advisable after this Agreement has been executed and delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-34090) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). Two
forms of prospectus are to be used in connection with the offering and sale of
the Securities: one relating to the International Securities (the "Form of
International Prospectus") and one relating to the U.S. Securities (the "Form of
U.S. Prospectus"). The Form of International Prospectus is identical to the Form
of U.S. Prospectus, except for the front cover and back cover pages and the
information under the caption "Underwriting." The information included in any
such prospectus or in any such Term Sheet, as the case may be, that was omitted
from such registration statement at the time it became effective but that is
deemed to be part of such registration statement at the time it became effective
(a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
"Rule 434 Information." Each Form of International Prospectus and Form of U.S.
Prospectus used before such
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<PAGE> 8
registration statement became effective, and any prospectus that omitted, as
applicable, the Rule 430A Information or the Rule 434 Information, that was used
after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto and schedules thereto at the time it
became effective and including the Rule 430A Information and the Rule 434
Information, as applicable, is herein called the "Registration Statement." Any
registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations
is herein referred to as the "Rule 462(b) Registration Statement," and after
such filing the term "Registration Statement" shall include the Rule 462(b)
Registration Statement. The final Form of U.S. Prospectus and the final Form of
International Prospectus in the forms first furnished to the Underwriters for
use in connection with the offering of the Securities are herein called the
"U.S. Prospectus" and the "International Prospectus," respectively, and
collectively, the "Prospectuses" If Rule 434 is relied on, the terms
"International Prospectus" and "U.S. Prospectus" shall refer to the preliminary
International Prospectus dated May 3, 2000 and the preliminary U.S. Prospectus
dated May 3, 2000, respectively, each together with the applicable Term Sheet,
and all references in this Agreement to the date of such Prospectuses shall mean
the date of the applicable Term Sheet. For purposes of this Agreement, all
references to the Registration Statement, any preliminary prospectus, the
International Prospectus, the U.S. Prospectus or any Term Sheet or any amendment
or supplement to any of the foregoing shall be deemed to include the copy filed
with the Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval system ("EDGAR").
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each International Manager as of the date hereof, as
of the Closing Time referred to in Section 2(c) hereof, and as of each Date of
Delivery (if any) referred to in Section 2(b) hereof, and agrees with each
International Manager, as follows:
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information
has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any International
Option Securities are purchased, at the Date of Delivery), the
Registration Statement, the Rule 462(b) Registration Statement and any
amendments and
3
<PAGE> 9
supplements thereto complied and will comply in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations and
did not and 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 not misleading, and the
Prospectuses, any preliminary prospectuses and any supplement thereto
or prospectus wrapper prepared in connection therewith, at their
respective times of issuance and at the Closing Time, complied and will
comply in all material respects with any applicable laws or regulations
of foreign jurisdictions in which the Prospectuses and such preliminary
prospectuses, as amended or supplemented, if applicable, are
distributed in connection with the offer and sale of International
Securities. Neither of the Prospectuses nor any amendments or
supplements thereto (including any prospectus wrapper), at the time the
Prospectuses or any amendments or supplements thereto were issued and
at the Closing Time (and, if any International Option Securities are
purchased, at the Date of Delivery), included or will include an untrue
statement of a material fact or omitted or will omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
If Rule 434 is used, the Company will comply with the requirements of
Rule 434 and the Prospectuses shall not be "materially different", as
such term is used in Rule 434, from the prospectuses included in the
Registration Statement at the time it became effective. The
representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or
International Prospectus made in reliance upon and in conformity with
information furnished to the Company in writing by any International
Manager through Merrill Lynch expressly for use in the Registration
Statement or the International Prospectus.
Each preliminary prospectus and the prospectuses filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectuses
delivered to the Underwriters for use in connection with this offering
was identical in all material respects to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(ii) Independent Accountants. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.
(iii) Financial Statements. The audited financial statements
included in the Registration Statement and the Prospectuses, together
with the related schedules and notes, present fairly in all material
respects the financial position of the Company and its consolidated
subsidiaries at the dates indicated and the statement of operations,
stockholders'
4
<PAGE> 10
equity and cash flows of the Company and its consolidated subsidiaries
for the periods specified; said financial statements have been prepared
in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The
supporting schedules included in the Registration Statement present
fairly in all material respects in accordance with GAAP the information
required to be stated therein. The selected financial data and the
summary financial information included in the Prospectuses present
fairly in all material respects the information shown therein and have
been compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement. The pro forma
financial statements and the related notes thereto included in the
Registration Statement and the Prospectuses present fairly in all
material respects the information shown therein, have been prepared in
all material respects in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements and have been
properly compiled on the bases described therein, and the assumptions
used in the preparation thereof are reasonable and the adjustments used
therein are appropriate in all material respects to give effect to the
transactions and circumstances referred to therein.
(iv) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectuses, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business
(a "Material Adverse Effect"), (B) there have been no transactions
entered into by the Company or any of its subsidiaries, other than
those in the ordinary course of business, which are material with
respect to the Company and its subsidiaries considered as one
enterprise, and (C) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock.
(v) Good Standing of the Company. The Company has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the state of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform
its obligations under this Agreement; and the Company is duly qualified
as a foreign corporation to transact business and is in good standing
in each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect.
(vi) Good Standing of Subsidiaries. Universal Compression,
Inc., a Texas corporation (the "Operating Subsidiary"), is the only
"significant subsidiary" of the Company
5
<PAGE> 11
(as such term is defined in Rule 1-02 of Regulation S-X). The Operating
Subsidiary has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectuses and is duly qualified as a foreign corporation to transact
business and are in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a
Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock
of such subsidiary has been duly authorized and validly issued, is
fully paid and non-assessable and is owned directly by the Company free
and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity (other than pursuant to the Company's
Credit Agreement, dated February 20, 1998, as amended); none of the
outstanding shares of capital stock of any Subsidiary was issued in
violation of the preemptive or similar rights of any securityholder of
such Subsidiary. The only subsidiaries of the Company are the
subsidiaries listed on Exhibit 21 to the Registration Statement. The
subsidiaries listed on Exhibit 21 to the Registration Statement
excluding the Operating Subsidiary, considered in the aggregate as a
single Subsidiary, do not constitute a "significant subsidiary" as
defined in Rule 1-02 of Regulation S-X.
(vii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectuses in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement, pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectuses, or pursuant to the recapitalization described in the
Prospectuses under the caption "Capitalization", pursuant to the
Company's acquisition of Spectrum Rotary Compression Inc. or pursuant
to the exercise of convertible securities or options referred to in the
Prospectuses). The shares of issued and outstanding capital stock of
the Company have been duly authorized and validly issued and are fully
paid and non-assessable; none of the outstanding shares of capital
stock of the Company was issued in violation of the preemptive or other
similar rights of any securityholder of the Company.
(viii) Authorization of Agreement. This Agreement and the U.S.
Purchase Agreement have been duly authorized, executed and delivered by
the Company and the Operating Subsidiary.
(ix) Authorization and Description of Securities. The
Securities to be purchased by the International Managers and the U.S.
Underwriters have been duly authorized for issuance and sale to the
International Managers pursuant to this Agreement and the U.S.
Underwriters pursuant to the U.S. Purchase Agreement, respectively,
and, when issued and
6
<PAGE> 12
delivered by the Company pursuant to this Agreement and the U.S.
Purchase Agreement, respectively, against payment of the consideration
set forth herein and the U.S. Purchase Agreement, respectively, will be
validly issued, fully paid and non-assessable; the Common Stock
conforms to all statements relating thereto contained in the
Prospectuses and such description conforms to the rights set forth in
the instruments defining the same; no holder of the Securities will be
subject to personal liability by reason of being such a holder; and the
issuance of the Securities is not subject to the preemptive or other
similar rights of any securityholder of the Company.
(x) Absence of Defaults and Conflicts. Neither the Company nor
any of its subsidiaries is in violation of its charter or by-laws or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or other agreement
or instrument to which the Company or any of its subsidiaries is a
party or by which it or any of them may be bound, or to which any of
the property or assets of the Company or any subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults
that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein and in the Registration Statement
(including the $200 million operating lease facility (the "Synthetic
Lease Transaction") and the $50 million credit facility (the "Credit
Facility") as described in the Prospectuses under the caption
"Management's Discussion and Analysis of Financial Condition and
Results of Operation B Liquidity and Capital Resources" and the
issuance and sale of the Securities and the use of the proceeds from
the sale of the Securities as described in the Prospectus under the
caption "Use of Proceeds") and compliance by the Company and the
Operating Subsidiary with their respective obligations hereunder have
been duly authorized by all necessary corporate action and do not and
will not, whether with or without the giving of notice or passage of
time or both, conflict with or constitute a breach of, or default or
Repayment Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company, the Operating Subsidiary or any other subsidiary
pursuant to, the Agreements and Instruments (except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not
result in a Material Adverse Effect), nor will such action result in
(i) any violation of the provisions of the charter or by-laws of the
Company or the Operating Subsidiary, (ii) any violation of the
provisions of the charter or by-laws of any subsidiary other than the
Operating Subsidiary (except for such violations that would not result
in a Material Adverse Effect) or (iii) any violation of any applicable
law, statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any subsidiary or any of their
assets, properties or operations (except for such violations that would
not result in a Material Adverse Effect). As used herein, a "Repayment
Event" means any event or condition which
7
<PAGE> 13
gives the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder's behalf) the right
to require the repurchase, redemption or repayment of all or a portion
of such indebtedness by the Company or any subsidiary.
(xi) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any subsidiary exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or any subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to
result in a Material Adverse Effect.
(xii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might reasonably be expected to result in a Material Adverse Effect, or
which might reasonably be expected to materially and adversely affect
the properties or assets thereof or the consummation of the
transactions contemplated in this Agreement, the Synthetic Lease
Transaction or the performance by the Company or the Operating
Subsidiary of their respective obligations hereunder; the aggregate of
all pending legal or governmental proceedings to which the Company or
any subsidiary is a party or of which any of their respective property
or assets is the subject which are not described in the Registration
Statement, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material
Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement or the Prospectuses or to be filed as exhibits thereto which
have not been so described and filed as required.
(xiv) Possession of Intellectual Property. The Company and its
subsidiaries own or possess or hold under a valid license, or can
acquire on reasonable terms, adequate patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them, and neither the Company
nor any of its subsidiaries has received any notice or is otherwise
aware of any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.
8
<PAGE> 14
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement or the Synthetic Lease
Transaction, except such as have been already obtained or as may be
required under the 1933 Act or the 1933 Act Regulations or state
securities laws.
(xvi) Possession of Licenses and Permits. The Company and its
subsidiaries possess such permits, licenses, approvals, consents and
other authorizations (collectively, "Governmental Licenses") issued by
the appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them, except
where the failure to possess such Governmental License would not have a
Material Adverse Effect; the Company and its subsidiaries are in
compliance with the terms and conditions of all such Governmental
Licenses, except where the failure so to comply would not, singly or in
the aggregate, have a Material Adverse Effect; all of the Governmental
Licenses are valid and in full force and effect, except when the
invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
(xvii) Title to Property. The Company and its subsidiaries
have good and marketable title to all real property owned by the
Company and its subsidiaries and good title to all other properties
owned by them that are material to the Company's business, in each
case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such
as (a) are described in the Prospectus or (b) do not, singly or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by
the Company or any of its subsidiaries; and all of the leases and
subleases material to the business of the Company and its subsidiaries,
considered as one enterprise, and under which the Company or any of its
subsidiaries holds properties described in the Prospectus, are in full
force and effect, and neither the Company nor any subsidiary has any
notice of any material claim of any sort that has been asserted by
anyone adverse to the rights of the Company or any subsidiary under any
of the leases or subleases mentioned above, or affecting or questioning
the rights of the Company or such subsidiary to the continued
possession of the leased or subleased premises under any such lease or
sublease.
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<PAGE> 15
(xviii) Investment Company Act. The Company is not, and upon
the issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectuses will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
(xix) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor any of its subsidiaries is in violation of any federal, state,
local or foreign statute, law, rule, regulation, ordinance, code,
policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to pollution or protection of
human health, the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum
or petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company and its subsidiaries have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements
in all material respects, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against
the Company or any of its subsidiaries and (D) there are no events or
circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by
any private party or governmental body or agency, against or affecting
the Company or any of its subsidiaries relating to Hazardous Materials
or any Environmental Laws.
(xx) Registration Rights. There are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement other than those
described in the Prospectuses under the caption "Shares Eligible For
Future Sale B Registration Rights", all of which have been waived.
(b) Officer's Certificates. Any certificate signed by any officer of
the Company, or any of its subsidiaries delivered to the Global Coordinator, the
Lead Manager or to counsel for the International Managers shall be deemed a
representation and warranty by the Company to each International Manager as to
the matters covered thereby.
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SECTION 2. Sale and Delivery to International Managers; Closing.
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each International Manager, severally and
not jointly, and each International Manager, severally and not jointly, agrees
to purchase from the Company, at the price per share set forth in Schedule B,
the number of Initial International Securities set forth in Schedule A opposite
the name of such International Manager, plus any additional number of Initial
International Securities which such International Manager may become obligated
to purchase pursuant to the provisions of Section 10 hereof.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the International Managers,
severally and not jointly, to purchase up to an additional 210,000 shares of
Common Stock at the price per share set forth in Schedule B, less an amount per
share equal to any dividends or distributions declared by the Company and
payable on the Initial International Securities but not payable on the
International Option Securities. The option hereby granted will expire 30 days
after the date hereof and may be exercised in whole or in part from time to time
only for the purpose of covering over-allotments which may be made in connection
with the offering and distribution of the Initial International Securities upon
notice by the Global Coordinator to the Company setting forth the number of
International Option Securities as to which the several International Managers
are then exercising the option and the time and date of payment and delivery for
such International Option Securities. Any such time and date of delivery (a
"Date of Delivery") shall be determined by the Global Coordinator, but shall not
be later than seven full business days after the exercise of said option, nor in
any event prior to the Closing Time, as hereinafter defined. If the option is
exercised as to all or any portion of the International Option Securities, each
of the International Managers, acting severally and not jointly, will purchase
that proportion of the total number of International Option Securities then
being purchased which the number of Initial International Securities set forth
in Schedule A opposite the name of such International Manager bears to the total
number of Initial International Securities, subject in each case to such
adjustments as the Global Coordinator in its discretion shall make to eliminate
any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial International Securities shall be made at the
offices of [Vinson & Elkins L.L.P., 1001 Fannin Street, Houston, Texas,] or at
such other place as shall be agreed upon by the Global Coordinator and the
Company, at 9:00 A.M. (Eastern standard time) on the third (fourth, if the
pricing occurs after 4:30 P.M. (Eastern standard time) on any given day)
business day after the date hereof (unless postponed in accordance with the
provisions of Section 10), or such other time not later than ten business days
after such date as shall be agreed upon by the Global Coordinator and the
Company (such time and date of payment and delivery being herein called "Closing
Time").
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In addition, in the event that any or all of the International Option
Securities are purchased by the International Managers, payment of the purchase
price for, and delivery of certificates for, such International Option
Securities shall be made at the above-mentioned offices, or at such other place
as shall be agreed upon by the Global Coordinator and the Company, on each Date
of Delivery as specified in the notice from the Global Coordinator to the
Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Lead Manager for the respective accounts of the International Managers of
the International Securities to be purchased by them in book entry form through
the facilities of The Depositary Trust Company, New York, New York ("DTC"). It
is understood that each International Manager has authorized the Lead Manager,
for its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the Initial International Securities and the International
Option Securities, if any, which it has agreed to purchase. Merrill Lynch,
individually and not as representative of the International Managers, may (but
shall not be obligated to) make payment of the purchase price for the Initial
International Securities or the International Option Securities, if any, to be
purchased by any International Manager whose funds have not been received by the
Closing Time or the relevant Date of Delivery, as the case may be, but such
payment shall not relieve such International Manager from its obligations
hereunder.
(d) Denominations; Registration. Certificates for the Initial
International Securities and the International Option Securities, if any, shall
be in such denominations as the Lead Manager may request in writing at least one
full business day before the Closing Time or the relevant Date of Delivery, as
the case may be. The certificates for the Initial International Securities and
the International Option Securities, if any, shall be registered in the name of
Cede & Co. pursuant to the DTC Agreement and will be made available for
examination and packaging by the Lead Manager in The City of New York not later
than 10:00 A.M. (Eastern time) on the business day prior to the Closing Time or
the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
International Manager as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule 430A
or Rule 434, as applicable, and will notify the Global Coordinator promptly, and
confirm the notice in writing, (i) when any post- effective amendment to the
Registration Statement shall become effective, or any supplement to the
Prospectuses or any amended Prospectus shall have been filed, (ii) of the
receipt of any comments from the Commission, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectuses or for additional
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information, and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings for any of
such purposes. The Company will promptly effect the filings necessary pursuant
to Rule 424(b) and will take such steps as it deems necessary to ascertain
promptly whether the form of prospectus transmitted for filing under Rule 424(b)
was received for filing by the Commission and, in the event that it was not, it
will promptly file such prospectus. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Global Coordinator
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)), any Term Sheet or any
amendment, supplement or revision to either the prospectuses included in the
Registration Statement at the time it became effective or to the Prospectuses
will furnish the Global Coordinator with copies of any such documents a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file or use any such document to which the Global Coordinator
or counsel for the International Managers shall object.
(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the Lead Manager and counsel for the International Managers,
without charge, copies of the Registration Statement as originally filed and of
each amendment thereto (including exhibits filed therewith) and signed copies of
all consents and certificates of experts or duplicates thereof, and will also
deliver to the Lead Manager, without charge, a conformed copy of the
Registration Statement as originally filed and of each amendment thereto
(without exhibits) for each of the International Managers. The copies of the
Registration Statement and each amendment thereto furnished to the International
Managers will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each
International Manager, without charge, as many copies of each preliminary
prospectus as such International Manager reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the 1933
Act. The Company will furnish to each International Manager, without charge,
during the period when the International Prospectus is required to be delivered
under the 1933 Act or the Securities Exchange Act of 1934 (the "1934 Act"), such
number of copies of the International Prospectus (as amended or supplemented) as
such International Manager may reasonably request. The International Prospectus
and any amendments or supplements thereto furnished to the International
Managers will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
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(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations so as to permit the completion of
the distribution of the Securities as contemplated in this Agreement, the U.S.
Purchase Agreement and in the Prospectuses. If at any time when a prospectus is
required by the 1933 Act to be delivered in connection with sales of the
Securities, any event shall occur or condition shall exist as a result of which
it is necessary, in the opinion of counsel for the International Managers or for
the Company, to amend the Registration Statement or amend or supplement the
Prospectuses in order that the Prospectuses will not include any untrue
statements of a material fact or omit to state a material fact necessary in
order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of such counsel, at any such time to amend
the Registration Statement or amend or supplement any Prospectus in order to
comply with the requirements of the 1933 Act or the 1933 Act Regulations, the
Company will promptly prepare and file with the Commission, subject to Section
3(b), such amendment or supplement as may be necessary to correct such statement
or omission or to make the Registration Statement or the Prospectuses comply
with such requirements, and the Company will furnish to the International
Managers such number of copies of such amendment or supplement as the
International Managers may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the International Managers, to qualify the Securities for
offering and sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the Global Coordinator may designate and
to maintain such qualifications in effect for a period of not less than one year
from the later of the effective date of the Registration Statement and any Rule
462(b) Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any Rule
462(b) Registration Statement.
(g) Rule 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received by
it from the sale of the Securities in the manner specified in the Prospectuses
under "Use of Proceeds".
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(i) Listing. The Company will use its reasonable best efforts to effect
the listing of the Common Stock on the New York Stock Exchange.
(j) Restriction on Sale of Securities. During a period of 180 days from
the date of the Prospectuses, the Company will not, without the prior written
consent of Merrill Lynch, (i) directly or indirectly, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of any share of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or file any registration
statement under the 1933 Act with respect to any of the foregoing or (ii) enter
into any swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Securities to be sold hereunder, (B) any shares of Common Stock issued by
the Company upon the exercise of an option or warrant or the conversion or split
of a security outstanding on the date hereof and referred to in the Prospectus,
(C) any shares of Common Stock issued or options to purchase Common Stock
granted pursuant to existing employee benefit plans of the Company referred to
in the Prospectus or (D) any shares of Common Stock issued pursuant to any
non-employee director stock plan or dividend reinvestment plan.
(k) Reporting Requirements. The Company, during the period when the
Prospectuses are required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to the
1934 Act within the time periods required by the 1934 Act and the rules and
regulations of the Commission thereunder.
SECTION 4. Payment of Expenses.
(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters, including any stock or
other transfer taxes and any stamp or other duties payable upon the sale,
issuance or delivery of the Securities to the Underwriters and the transfer of
the Securities between the U.S. Underwriters and the International Managers,
(iv) the fees and disbursements of the Company's counsel, accountants and other
advisors, (v) the qualification of the Securities under securities laws in
accordance with the provisions of Section 3(f) hereof, including filing fees and
the reasonable fees and disbursements of
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<PAGE> 21
counsel for the Underwriters in connection therewith and in connection with the
preparation of the Blue Sky Survey and any supplement thereto, (vi) the printing
and delivery to the Underwriters of copies of each preliminary prospectus, any
Term Sheets and of the Prospectuses and any amendments or supplements thereto,
(vii) the preparation, printing and delivery to the Underwriters of copies of
the Blue Sky Survey and any supplement thereto, (viii) the fees and expenses of
any transfer agent or registrar for the Securities and (ix) the filing fees
incident to, and the reasonable fees and disbursements of counsel to the
Underwriters in connection with, the review by the National Association of
Securities Dealers, Inc. (the "NASD") of the terms of the sale of the Securities
and (x) the fees and expenses incurred in connection with the listing of the
Securities on the New York Stock Exchange.
(b) Termination of Agreement. If this Agreement is terminated by the
Lead Manager in accordance with the provisions of Section 5 or Section 9(a)(i)
hereof, the Company shall reimburse the International Managers for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the International Managers.
SECTION 5. Conditions of International Managers' Obligations. The
obligations of the several International Managers hereunder are subject to the
accuracy of the representations and warranties of the Company contained in
Section 1 hereof or in certificates of any officer of the Company or any
subsidiary of the Company delivered pursuant to the provisions hereof, to the
performance by the Company of its covenants and other obligations hereunder, and
to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the International Managers. A
prospectus containing the Rule 430A Information shall have been filed with the
Commission in accordance with Rule 424(b) (or a post-effective amendment
providing such information shall have been filed and declared effective in
accordance with the requirements of Rule 430A) or, if the Company has elected to
rely upon Rule 434, a Term Sheet shall have been filed with the Commission in
accordance with Rule 424(b).
(b) Opinion of Counsel for Company. At Closing Time, the Lead Manager
shall have received the favorable opinion, dated as of Closing Time, of each of
Valerie L. Banner, General Counsel of the Company, King & Spalding, counsel for
the Company and Schulte, Roth & Zabel, LLP, in form and substance satisfactory
to counsel for the International Managers, together with signed or reproduced
copies of such letter for each of the other International Managers to the effect
set forth in Exhibits A, B and C hereto and to such further effect as counsel to
the International
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<PAGE> 22
Managers may reasonably request. In giving such opinion such counsel may rely,
as to all matters governed by the laws of jurisdictions other than the law of
the State of New York and the federal law of the United States, upon the
opinions of Morris, Nichols, Arsht & Tunnell and [Schulte Roth & Zabel LLP].
Such counsel may also state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon certificates of
officers of the Company and its subsidiaries and certificates of public
officials.
(c) Opinion of Counsel for International Managers. At Closing Time, the
Lead Manager shall have received the favorable opinion, dated as of Closing
Time, of Vinson & Elkins L.L.P., counsel for the International Managers,
together with signed or reproduced copies of such letter for each of the other
International Managers with respect to the matters set forth in clauses (i),
(ii), (v), (vi) (solely as to preemptive or other similar rights arising by
operation of law or under the charter or by-laws of the Company, as amended),
(viii) through (x), inclusive, (xii), (xiv) (solely as to the information in the
Prospectus under "Description of Capital Stock--Common Stock") and the
penultimate paragraph of Exhibit B hereto. In giving such opinion such counsel
may rely, as to all matters governed by the laws of jurisdictions other than the
law of the State of New York, the federal law of the United States and the
General Corporation Law of the State of Delaware, upon the opinions of counsel
satisfactory to the Lead Manager. Such counsel may also state that, insofar as
such opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and its subsidiaries and
certificates of public officials.
(d) Officers' Certificate. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectuses, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, and the Lead Manager
shall have received a certificate of the President or a Vice President of the
Company and of the chief financial or chief accounting officer of the Company,
dated as of Closing Time, to the effect that (i) there has been no such material
adverse change, (ii) the representations and warranties in Section 1(a) hereof
are true and correct with the same force and effect as though expressly made at
and as of Closing Time, (iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior to
Closing Time, and (iv) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or are contemplated by the Commission.
(e) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Lead Manager shall have received from Deloitte & Touche LLP a
letter dated such date, in form and substance satisfactory to the Lead Manager,
together with signed or reproduced copies of such letter for each of the other
International Managers containing statements and information of the type
ordinarily included in accountants' Acomfort letters" to underwriters with
respect to the financial
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<PAGE> 23
statements and certain financial information contained in the Registration
Statement and the Prospectuses.
(f) Bring-down Comfort Letter. At Closing Time, the Lead Manager shall
have received from Deloitte & Touche LLP a letter, dated as of Closing Time, to
the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (e) of this Section, except that the specified date
referred to shall be a date not more than three business days prior to Closing
Time.
(g) Approval of Listing. At Closing Time, the Securities shall have
been approved for listing on the New York Stock Exchange, subject only to
official notice of issuance.
(h) No Objection. The NASD shall have confirmed that it has no
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(i) Lock-up Agreements. At the date of this Agreement, the Lead Manager
shall have received an agreement substantially in the form of Exhibit D hereto
signed by the persons listed on Schedule C hereto.
(j) Concurrent Completion of Other Transactions. The closing of the
Synthetic Lease Transaction and the Credit Facility shall have occurred
contemporaneously with the purchase by the International Managers of the Initial
International Securities under this Agreement.
(k) Purchase of Initial International Securities. Contemporaneously
with the purchase by the International Managers of the Initial International
Securities under this Agreement, the U.S. Underwriters shall have purchased the
Initial U.S. Securities under the U.S. Purchase Agreement.
(l) No downgrading. Subsequent to the date of this Agreement, no
downgrading shall have occurred in the rating accorded any of the Company's or
any of its subsidiaries' securities by any "nationally recognized statistical
rating organization," as that term is defined by the Commission for purposes of
Rule 436(g)(2) under the 1933 Act, and no such securities rating organization
shall have publicly announced that it has under surveillance or review, with
possible negative implications, its ratings of any of the Company's or its
subsidiaries' securities.
(m) Conditions to Purchase of International Option Securities. In the
event that the International Managers exercise their option provided in Section
2(b) hereof to purchase all or any portion of the International Option
Securities, the representations and warranties of the Company contained herein
and the statements in any certificates furnished by the Company or any
subsidiary of the Company hereunder shall be true and correct as of each Date of
Delivery and, at the relevant Date of Delivery, the Lead Manager shall have
received:
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(i) Officers' Certificate. A certificate, dated such Date of
Delivery, of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at the Closing Time pursuant
to Section 5(d) hereof remains true and correct as of such Date of
Delivery.
(ii) Opinion of Counsel for Company. The favorable opinion of
each of Valerie L. Banner, General Counsel of the Company, King &
Spalding, counsel for the Company and Schulte, Roth & Zabel LLP,
counsel to the Company, in form and substance satisfactory to counsel
for the International Managers, dated such Date of Delivery, relating
to the International Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the respective opinions
required by Section 5(b) hereof.
(iii) Opinion of Counsel for International Managers. The
favorable opinion of Vinson & Elkins L.L.P., counsel for the
International Managers, dated such Date of Delivery, relating to the
International Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion required by
Section 5(c) hereof.
(iv) Bring-down Comfort Letter. A letter from Deloitte &
Touche LLP, in form and substance satisfactory to the Lead Manager and
dated such Date of Delivery, substantially in the same form and
substance as the letter furnished to the Lead Manager pursuant to
Section 5(f) hereof, except that the "specified date" in the letter
furnished pursuant to this paragraph shall be a date not more than five
days prior to such Date of Delivery.
(n) Additional Documents. At Closing Time and at each Date of Delivery,
Vinson & Elkins L.L.P counsel for the International Managers, shall have been
furnished with such documents and opinions as they may require for the purpose
of enabling them to pass upon the issuance and sale of the International
Securities as herein contemplated, or in order to evidence the accuracy of any
of the representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company in
connection with the issuance and sale of the Securities as herein contemplated
shall be satisfactory in form and substance to the Lead Manager and such
counsel.
(o) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of International
Option Securities, on a Date of Delivery which is after the Closing Time, the
obligations of the several International Managers to purchase the relevant
International Option Securities, may be terminated by the Lead Manager by notice
to the Company at any time at or prior to Closing Time or such Date of Delivery,
as the case may be, and such termination shall be without liability of any party
to any other party except as provided in Section 4 and except that Sections 1,
6, 7 and 8 shall survive any such termination and remain in full force and
effect.
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SECTION 6. Indemnification.
(a) Indemnification of International Managers. The Company and the
Operating Subsidiary jointly and severally, agree to indemnify and hold harmless
each International Manager and each person, if any, who controls any
International Manager within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectuses (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all expense whatsoever, as incurred
(including the reasonable fees and disbursements of counsel chosen by
Merrill Lynch), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission to the extent that any such
expense is not paid under (i) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
International Manager through Merrill Lynch expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the Prospectuses (or any amendment or supplement thereto); and
provided further that the Company will not be liable to any International
Manager with respect to any preliminary prospectus to the extent that any such
loss, liability, claim, damage or expense would not have been incurred, but for
the fact that such International Manager, in contravention of a requirement of
applicable law, sold International Securities to a person to whom such
International Manager failed to send or give, at or prior to the written
confirmation of the sale of such International Securities (the "Confirmation"),
a copy of the Prospectus, as then amended or supplemented if the Company has
previously furnished copies thereof (sufficiently in advance of the Confirmation
and in sufficient quantity to allow for distribution by the Confirmation)
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and the loss, liability, claim, damage or expense of such International Manager
resulted from an untrue statement or omission of a material fact contained in or
omitted from the preliminary prospectus that was corrected in the Prospectus as,
if applicable, amended or supplemented prior to the Confirmation and such
Prospectus was required by law to be delivered at or prior to the Confirmation.
(b) Indemnification of Company, Directors and Officers. Each
International Manager severally agrees to indemnify and hold harmless the
Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the Prospectuses (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such International Manager through Merrill Lynch expressly for use in
the Registration Statement (or any amendment thereto) or such preliminary
prospectus or the Prospectuses (or any amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all
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liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the International Managers on the other hand from the offering of the
International Securities pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of the
International Managers on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
International Managers on the other hand in connection with the offering of the
International Securities pursuant to this Agreement shall be deemed to be in the
same respective proportions as the total net proceeds from the offering of the
International Securities pursuant to this Agreement (before deducting expenses)
received by the Company and the total underwriting discount received by the
International Managers, in each case as set forth on the cover of the
Prospectuses, or, if Rule 434 is used, the corresponding location on the Term
Sheet, bear to the aggregate initial public offering price of the International
Securities as set forth on such cover.
The relative fault of the Company on the one hand and the International
Managers on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by the International Managers and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company, the Operating Subsidiary and the International Managers
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 International
Managers were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this Section 7. The aggregate amount of losses, liabilities, claims,
damages and expenses incurred by an indemnified party and referred to above in
this Section 7 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in investigating, preparing
22
<PAGE> 28
or defending against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue or alleged untrue statement or omission or alleged
omission.
Notwithstanding the provisions of this Section 7, no International
Manager shall be required to contribute any amount in excess of the amount by
which the total price at which the International Securities underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages which such International Manager has otherwise been required to pay
by reason of any 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 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
International Manager within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
International Manager, and each director of the Company, each officer of the
Company who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company.
The International Managers' respective obligations to contribute pursuant to
this Section 7 are several in proportion to the number of Initial International
Securities set forth opposite their respective names in Schedule A hereto and
not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
subsidiaries submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any
International Manager or controlling person, or by or on behalf of the Company,
and shall survive delivery of the International Securities to the International
Managers.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Lead Manager may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
if there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the Prospectuses, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States or the international
financial markets, in which Merrill Lynch conducts sales of equity securities,
any outbreak of hostilities or
23
<PAGE> 29
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political, financial
or economic conditions, in each case the effect of which is such as to make it,
in the judgment of the Lead Manager, impracticable to market the International
Securities or to enforce contracts for the sale of the International Securities,
or (iii) if trading in any securities of the Company has been suspended or
materially limited by the Commission or the New York Stock Exchange, or if
trading generally on the American Stock Exchange or the New York Stock Exchange
or in the Nasdaq National Market has been suspended or materially limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the National Association of Securities Dealers, Inc. or
any other governmental authority, or (iv) if a banking moratorium has been
declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the International Managers. If
one or more of the International Managers shall fail at Closing Time or a Date
of Delivery to purchase the International Securities which it or they are
obligated to purchase under this Agreement (the "Defaulted Securities"), the
Lead Manager shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non-defaulting International Managers, or
any other underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Lead Manager shall not have completed such arrangements
within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the number of International Securities to be purchased on such date,
each of the non-defaulting International Managers shall be obligated,
severally and not jointly, to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder
bear to the underwriting obligations of all non-defaulting
International Managers, or
(b) if the number of Defaulted Securities exceeds 10% of the
number of International Securities to be purchased on such date, this
Agreement or, with respect to any Date of Delivery which occurs after
the Closing Time, the obligation of the International Managers to
purchase and of the Company to sell the International Option Securities
to be purchased and sold on such Date of Delivery shall terminate
without liability on the part of any non-defaulting International
Manager.
24
<PAGE> 30
No action taken pursuant to this Section shall relieve any defaulting
International Manager from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after the
Closing Time, which does not result in a termination of the obligation of the
International Managers to purchase and the Company to sell the relevant
International Option Securities, as the case may be, either the Lead Manager or
the Company shall have the right to postpone Closing Time or the relevant Date
of Delivery, as the case may be, for a period not exceeding seven days in order
to effect any required changes in the Registration Statement or Prospectuses or
in any other documents or arrangements. As used herein, the term "International
Manager" includes any person substituted for an International Manager under this
Section 10.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
International Managers shall be directed to the Lead Manager at North Tower,
World Financial Center, New York, New York 10281-1201, attention of Equity
Capital Markets; and notices to the Company shall be directed to it at 4440
Brittmoore Road, Houston, Texas 77041, attention of Mr. Stephen A. Snider, with
a copy to Ms. Valerie L. Banner.
SECTION 12. Parties. This Agreement shall each inure to the benefit of
and be binding upon the International Managers and the Company and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the International Managers and the Company and their respective successors
and the controlling persons and officers and directors referred to in Sections 6
and 7 and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the International Managers and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities from
any International Manager shall be deemed to be a successor by reason merely of
such purchase.
SECTION 13. Governing Law and Time. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS
OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
25
<PAGE> 31
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the International Managers and the Company in accordance with its terms.
Very truly yours,
UNIVERSAL COMPRESSION
HOLDINGS, INC.
By
----------------------------------
Name:
Title:
UNIVERSAL COMPRESSION, INC.
solely with respect to its
obligations under Sections 6 and 7
hereof
By
----------------------------------
Name:
Title:
26
<PAGE> 32
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH INTERNATIONAL
By
---------------------------------
Name:
Title:
Authorized Signatory
For itself and as Lead Manager of the other International Managers named in
Schedule A hereto.
27
<PAGE> 33
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Initial
International
Name of International Manager Securities
-------------
<S> <C>
Merrill Lynch International.............................................................
Salomon Brothers International Limited
Deutsche Bank AG, London
First Union Securities, Inc.
Wasserstein Perella Securities, Inc.
----------
Total................................................................................... 1,400,000
==========
</TABLE>
Schedule A-1
<PAGE> 34
SCHEDULE B
UNIVERSAL COMPRESSION HOLDINGS, INC.
7,000,000 Shares of Common Stock
(Par Value $.01 Per Share)
1. The initial public offering price per share for the International
Securities, determined as provided in said Section 2, shall be $____.
2. The purchase price per share for the International Securities to be
paid by the several International Managers shall be $______ being an amount
equal to the initial public offering price set forth above less $______ per
share; provided that the purchase price per share for any Internatioanl Option
Securities purchased upon the exercise of the over-allotment option described in
Section 2(b) shall be reduced by an amount per share equal to any dividends or
distributions declared by the Company and payable on the Initial International
Securities but not payable on the International Option Securities.
Schedule B-1
<PAGE> 35
SCHEDULE C
1. Each executive officer and director of the Company
2. Castle Harlan Partners III, and affiliates
3. John K. Castle
3. Energy Spectrum Partners, L.P.
4. DB Capital partners SBIC L.P.
5. First Union Capital Partners, Inc.
6. Mellon Bank N.A., as Trustee for the Bell Atlantic Master Trust
7. Wilmington Trust, as Trustee of Du Pont Pension Trust
Schedule C-1
<PAGE> 36
EXHIBIT B
[Date], 2000
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Salomon Smith Barney Inc.
Deutsche Bank Securities Inc.
First Union Securities, Inc.
Wasserstein Perella Securities, Inc.
As U.S. Underwriters
Merrill Lynch International
Salomon Brothers International Limited
Deutsche Bank AG, London
First Union Securities, Inc.
Wasserstein Perella Securities, Inc.
As International Managers
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Universal Compression Holdings, Inc. Initial Public Offering
Gentlemen:
This letter acknowledges that the undersigned, a stockholder of
Universal Compression Holdings, Inc., a Delaware corporation (the "Company"),
understands that the Company has filed with the U.S. Securities and Exchange
Commission (the "Commission") (i) a registration statement on Form S-1 (the
"Registration Statement") relating to the registration under the U.S. Securities
Act of 1933, as amended, and the offering thereof in accordance with the rules
and regulations of the Commission thereunder (collectively, the "Securities
Act"), of shares of Common Stock of the Company, par value $.01 per share
("Common Stock"), and (ii) a preliminary prospectus dated April 5, 2000 (the
"Prospectus"), relating to the initial public
Schedule B-1
<PAGE> 37
offering (the "Offering") of shares of Common Stock. The undersigned understands
that you propose to enter into a U.S. Purchase Agreement (the "U.S. Purchase
Agreement") and an International Purchase Agreement (the "International Purchase
Agreement" and together with the U.S. Purchase Agreement, the "Purchase
Agreements") with the Company providing for the Offering. If the Offering is
effected, it will occur following the date that the Registration Statement is
declared effective by the Commission.
In recognition of the benefit that the Offering will confer upon the
undersigned as a stockholder of the Company, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
undersigned agrees that, should the Offering be effected, during a period of 180
days from the date of the Purchase Agreements, the undersigned will not, without
the prior written consent of Merrill Lynch, directly or indirectly, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer any shares of Common Stock or
any securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or hereafter acquired, including without limitation shares of
Common Stock acquired upon conversion of shares of preferred stock, by the
undersigned or with respect to which the undersigned has or hereafter acquires
the power of disposition, or file any registration statement under the
Securities Act of 1933, as amended, with respect to any of the foregoing or (ii)
enter into any swap or any other agreement or any transaction that transfers, in
whole or in part, directly or indirectly, the economic consequence of ownership
of the Common Stock, whether any such swap or transaction is to be settled by
delivery of Common Stock or other securities, in cash or otherwise.
The undersigned understands that you, the other underwriters to be
named in the Purchase Agreements and the Company will rely upon the
representations set forth in this agreement in proceeding with the Offering.
This agreement shall be binding on the undersigned and his, her or its
respective successors, heirs, personal representatives and assigns.
Very truly yours,
[Name]
By:
------------------------------
Name:
-----------------------------
Title:
----------------------------
Schedule B-2
<PAGE> 38
The foregoing is accepted and agreed to
as of the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Salomon Smith Barney Inc.
Deutsche Bank Securities Inc.
First Union Securities, Inc.
Wasserstein Perella Securities, Inc.
As U.S. Underwriters
Merrill Lynch International
Salomon Brothers International Limited
Deutsche Bank AG, London
First Union Securities, Inc.
Wasserstein Perella Securities, Inc.
As International Managers
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Schedule B-3
<PAGE> 39
Annex A
[FORM OF ACCOUNTANTS' COMFORT LETTER PURSUANT TO SECTION 5(e)]
Annex A-1
<PAGE> 1
EXHIBIT 3.2
RESTATED CERTIFICATE OF INCORPORATION
OF
UNIVERSAL COMPRESSION HOLDINGS, INC.
(ORIGINALLY INCORPORATED ON DECEMBER 1, 1997
UNDER THE NAME TW HOLDINGS CORPORATION)
FIRST: The name of the corporation is Universal Compression Holdings, Inc.
(hereinafter referred to as the "Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the registered agent of the
Corporation at that address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the Delaware General
Corporation Law.
FOURTH: A. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is two hundred fifty million
(250,000,000) consisting of two hundred million (200,000,000) shares of Common
Stock, par value one cent ($.01) per share (the "Common Stock") and fifty
million (50,000,000) shares of Preferred Stock, par value one cent ($.01) per
share (the "Preferred Stock").
Upon the effectiveness of this Restated Certificate of Incorporation, each
issued share of Common Stock shall be
<PAGE> 2
subdivided, reclassified and changed into 7.4248 shares of Common Stock of the
Corporation; each issued share of non-voting common stock, par value $.01 per
share, of the Corporation shall be reclassified, changed and converted into
7.4248 shares of Common Stock of the Corporation; and each issued share of
Series A Preferred Stock, par value $.01 per share, of the Corporation shall be
reclassified, changed and converted into 2.3256 shares of Common Stock of the
Corporation; provided, however, in lieu of any fractional interests in shares of
Common Stock to which any stockholder would otherwise be entitled pursuant
hereto (taking into account all shares of capital stock owned by such
stockholder), such stockholder shall be entitled to receive a cash payment equal
to the amount determined by the Board of Directors to be the fair value of such
a share multiplied by such fraction.
B. The board of directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of shares of Preferred Stock in
series, and by filing a certificate pursuant to the applicable law of the State
of Delaware (such certificate being hereinafter referred to as a "Preferred
Stock Designation"), to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers, preferences,
and rights of the shares of each such series and any qualifications, limitations
or
2
<PAGE> 3
restrictions thereof. The number of authorized shares of Preferred Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the Common
Stock, without a vote of the holders of the Preferred Stock, or of any series
thereof, unless a vote of any such holders is required pursuant to the terms of
any Preferred Stock Designation.
C. Each outstanding share of Common Stock shall entitle the holder
thereof to one vote on each matter properly submitted to the stockholders of the
Corporation for their vote; provided, however, that, except as otherwise
required by law, holders of Common Stock shall not be entitled to vote on any
amendment to this Restated Certificate of Incorporation (including any
Certificate of Designations relating to any series of Preferred Stock) that
relates solely to the terms of one or more outstanding series of Preferred Stock
if the holders of such affected series are entitled, either separately or
together as a class with the holders of one or more other such series, to vote
thereon by law or pursuant to this Restated Certificate of Incorporation
(including any Certificate of Designations relating to any series of Preferred
Stock).
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the
3
<PAGE> 4
Corporation, and for further definition, limitation and regulation of the powers
of the Corporation and of its directors and stockholders:
A. The business and affairs of the Corporation shall be managed by or
under the direction of the board of directors. In addition to the powers
and authority expressly conferred upon them by statute or by this Restated
Certificate of Incorporation or the by-laws of the Corporation, the
directors are hereby empowered to exercise all such powers and do all such
acts and things as may be exercised or done by the Corporation.
B. The directors of the Corporation need not be elected by written
ballot unless the by-laws so provide.
C. Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting
of stockholders of the Corporation and may not be effected by any consent
in writing by such stockholders.
D. Special meetings of stockholders of the Corporation may be called
only by the Chairman of the Board or the President or by the board of
directors acting pursuant to a resolution adopted by a majority of the
Whole Board. For purposes of this Restated Certificate of Incorporation,
the term "Whole Board" shall mean the total number of authorized
4
<PAGE> 5
directors whether or not there exist any vacancies in previously authorized
directorships.
SIXTH: A. Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, the number of
directors shall be fixed from time to time exclusively by the board of directors
pursuant to a resolution adopted by a majority of the Whole Board. The
directors, other than those who may be elected by the holders of any series of
Preferred Stock under specified circumstances, shall be divided into three
classes, with the term of office of the first class ("Class A") to expire at the
Corporation's first annual meeting of stockholders after the directors are first
elected to such classes, the term of office of the second class ("Class B") to
expire at the Corporation's second annual meeting of stockholders after the
directors are first elected to such classes and the term of office of the third
class ("Class C") to expire at the Corporation's third annual meeting of
stockholders after the directors are first elected to such classes. At each
annual meeting of stockholders, directors elected to succeed those directors
whose terms expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election.
B. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, newly created
5
<PAGE> 6
directorships resulting from any increase in the authorized number of directors
or any vacancies in the board of directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall, unless
otherwise required by law or by resolution of the board of directors, be filled
only by a majority vote of the directors then in office, though less than a
quorum (and not by stockholders), and directors so chosen shall hold office for
a term expiring at the annual meeting of stockholders at which the term of
office of the class to which they have been chosen expires. No decrease in the
authorized number of directors shall shorten the term of any incumbent director.
C. Advance notice of stockholder nominations for the election of directors
and of business to be brought by stockholders before any meeting of the
stockholders of the Corporation shall be given in the manner provided in the
by-laws of the Corporation.
D. Subject to the rights of the holders of any series of Preferred Stock
then outstanding, any director, or the entire board of directors, may be removed
from office at any time, but only for cause and only by the affirmative vote of
the holders of at least eighty percent (80%) of the voting power of all of the
then-outstanding shares of capital stock of the
6
<PAGE> 7
Corporation entitled to vote generally in the election of directors, voting
together as a single class.
SEVENTH: The board of directors is expressly empowered to adopt, amend or
repeal by-laws of the Corporation. Any adoption, amendment or repeal of the
by-laws of the Corporation by the board of directors shall require the approval
of a majority of the Whole Board. The stockholders shall also have power to
adopt, amend or repeal the by-laws of the Corporation; provided, however, that,
in addition to any vote of the holders of any class or series of stock of the
Corporation required by law or by this Restated Certificate of Incorporation,
the affirmative vote of the holders of at least eighty percent (80%) of the
voting power of all of the then-outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to adopt, amend or repeal any
provision of the by-laws of the Corporation.
EIGHTH: A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174
7
<PAGE> 8
of the Delaware General Corporation Law, or (iv) for any transaction from which
the director derived an improper personal benefit. If the Delaware General
Corporation Law is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.
All references in this Article EIGHTH to a director shall be deemed to
refer to any such director acting in his or her capacity as a Continuing
Director.
NINTH: The Corporation reserves the right to amend or repeal any provision
contained in this Restated Certificate of Incorporation in the manner prescribed
by the laws of the State of Delaware and all rights conferred upon stockholders
are granted subject to this reservation; provided, however, that,
notwithstanding any other provision of this Restated Certificate of
Incorporation or any provision of law that might otherwise permit a lesser vote
or no vote, but in addition to any vote of the holders of any class or series of
the stock of this
8
<PAGE> 9
corporation required by law or by this Restated Certificate of Incorporation,
the affirmative vote of the holders of at least eighty percent (80%) of the
voting power of all of the then-outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of Directors, voting
together as a single class, shall be required to amend or repeal this Article
NINTH, Sections C or D of Article FIFTH, Article SIXTH, Article SEVENTH, Article
EIGHTH or Article TENTH.
TENTH : The board of directors is expressly authorized to cause the
Corporation to issue rights pursuant to Section 157 of the Delaware General
Corporation Law and, in that connection, to enter into any agreements necessary
or convenient for such issuance, and to enter into other agreements necessary
and convenient to the conduct of the business of the corporation. Any such
agreement may include provisions limiting, in certain circumstances, the ability
of the board of directors of the Corporation to redeem the securities issued
pursuant thereto or to take other action thereunder or in connection therewith
unless there is a specified number or percentage of Continuing Directors then in
office. Pursuant to Section 141(a) of the Delaware General Corporation Law, the
Continuing Directors shall have the power and authority to make all decisions
and determinations, and exercise or perform such other acts, that any such
agreement provides that such Continuing Directors shall make, exercise or
9
<PAGE> 10
perform. For purposes of this Article TENTH and any such agreement, the term,
"Continuing Directors," shall mean (1) those directors who were members of the
board of directors of the Corporation at the time the Corporation entered into
such agreement and any director who subsequently becomes a member of the board
of directors, if such director's nomination for election to the board of
directors in recommended or approved by the majority vote of the Continuing
Directors then in office and (2) such other members of the board of directors,
if any, designated in, or in the manner provided in, such agreement as
Continuing Directors.
10
<PAGE> 11
IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which
restates and integrates and further amends the provisions of the Certificate of
Incorporation of this Corporation, and which has been duly adopted in accordance
with Sections 242 and 245 of the Delaware General Corporation Law, has been
executed by its duly authorized officer this ___ day of ______, 2000 and shall
become effective at ______ __.m. on ________, 2000.
UNIVERSAL COMPRESSION HOLDINGS, INC.
By:
-----------------------------------------
Name:
Title:
11
<PAGE> 1
EXHIBIT 3.5
UNIVERSAL COMPRESSION HOLDINGS, INC.
BY-LAWS
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting.
(1) An annual meeting of the stockholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix.
(2) Nominations of persons for election to the Board of Directors and the
proposal of business to be transacted by the stockholders may be made at an
annual meeting of stockholders (a) pursuant to the Corporation's notice with
respect to such meeting, (b) by or at the direction of the Board of Directors or
(c) by any stockholder of record of the Corporation who was a stockholder of
record at the time of the giving of the notice provided for in the following
paragraph, who is entitled to vote at the meeting and who has complied with the
notice procedures set forth in this section.
(3) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of the foregoing
paragraph, (1) the stockholder must
<PAGE> 2
have given timely notice thereof in writing to the Secretary of the Corporation,
(2) such business must be a proper matter for stockholder action under the
General Corporation Law of the State of Delaware, (3) if the stockholder, or the
beneficial owner on whose behalf any such proposal or nomination is made, has
provided the Corporation with a Solicitation Notice, as that term is defined in
subclause (c)(iii) of this paragraph, such stockholder or beneficial owner must,
in the case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the Corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the Corporation's voting shares reasonably believed by such
stockholder or beneficial holder to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice and (4) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this section. To be
timely, a stockholder's notice shall be delivered to the Secretary
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at the principal executive offices of the Corporation not less than 45 or more
than 75 days prior to the first anniversary (the "Anniversary") of the date on
which the Corporation first mailed its proxy materials for the preceding year's
annual meeting of stockholders; provided, however, that if the date of the
annual meeting is advanced more than 30 days prior to or delayed by more than 30
days after the anniversary of the preceding year's annual meeting, or if no such
proxy materials were mailed, notice by the stockholder to be timely must be so
delivered not later than the close of business on the later of (i) the 90th day
prior to such annual meeting or (ii) the 10th day following the day on which
public announcement of the date of such meeting is first made. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person as would be required to be disclosed in solicitations of
proxies for the election of such nominees as directors pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and such person's written consent to serve as a director if elected; (b) as to
any other business that the stockholder proposes to bring before the meeting, a
brief description of such business, the reasons for conducting such business at
the meeting and any material interest in such business
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of such stockholder and the beneficial owner, if any, on whose behalf the
proposal is made; (c) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made (i) the name
and address of such stockholder, as they appear on the Corporation's books, and
of such beneficial owner, (ii) the class and number of shares of the Corporation
that are owned beneficially and of record by such stockholder and such
beneficial owner, and (iii) whether either such stockholder or beneficial owner
intends to deliver a proxy statement and form of proxy to holders of, in the
case of a proposal, at least the percentage of the Corporation's voting shares
required under applicable law to carry the proposal or, in the case of a
nomination or nominations, a sufficient number of holders of the Corporation's
voting shares to elect such nominee or nominees (an affirmative statement of
such intent, a "Solicitation Notice").
(4) Notwithstanding anything in the second sentence of the third paragraph
of this Section 1 to the contrary, in the event that the number of directors to
be elected to the Board of Directors is increased and there is no public
announcement naming all of the nominees for director or specifying the size of
the increased Board of Directors made by the Corporation at least 55 days prior
to the Anniversary, a stockholder's notice required by
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this Bylaw shall also be considered timely, but only with respect to nominees
for any new positions created by such increase, if it shall be delivered to the
Secretary at the principal executive offices of the Corporation not later than
the close of business on the 10th day following the day on which such public
announcement is first made by the Corporation.
(5) Only persons nominated in accordance with the procedures set forth in
this Section 1 shall be eligible to serve as directors and only such business
shall be conducted at an annual meeting of stockholders as shall have been
brought before the meeting in accordance with the procedures set forth in this
section. The chairman of the meeting shall have the power and the duty to
determine whether a nomination or any business proposed to be brought before the
meeting has been made in accordance with the procedures set forth in these
By-Laws and, if any proposed nomination or business is not in compliance with
these By-Laws, to declare that such defectively proposed business or nomination
shall not be presented for stockholder action at the meeting and shall be
disregarded.
(6) For purposes of these By-Laws, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or a comparable national news service or in a document publicly filed by
the
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Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(7) Notwithstanding the foregoing provisions of this Section 1, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to matters set forth
in this Section 1. Nothing in this Section 1 shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 2. Special Meetings.
(1) Special meetings of the stockholders, other than those required by
statute, may be called at any time by the Chairman of the Board or the President
or by the Board of Directors acting pursuant to a resolution adopted by a
majority of the Whole Board. For purposes of these By-Laws, the term "Whole
Board" shall mean the total number of authorized directors whether or not there
exist any vacancies in previously authorized directorships. Notice of every
special meeting, stating the time, place and purpose, shall be given by mailing,
postage prepaid, at least ten but not more than sixty days before each such
meeting, a copy of such notice addressed to each stockholder of the Corporation
at the stockholder's post office address as recorded
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on the books of the Corporation. The Board of Directors may postpone or
reschedule any previously scheduled special meeting.
(2) Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. Nominations of persons for election to the
Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Corporation's notice of meeting (a)
by or at the direction of the Board of Directors or (b) by any stockholder of
record of the Corporation who is a stockholder of record at the time of giving
of notice provided for in this paragraph, who shall be entitled to vote at the
meeting and who complies with the notice procedures set forth in Section 1 of
this Article I. Nominations by stockholders of persons for election to the Board
of Directors may be made at such a special meeting of stockholders if the
stockholder's notice required by the third paragraph of Section 1 of this
Article I shall be delivered to the Secretary at the principal executive offices
of the Corporation not later than the close of business on the later of the 90th
day prior to such special meeting or the 10th day following the day on which
public announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting.
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(3) Notwithstanding the foregoing provisions of this Section 2, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to matters set forth
in this Section 2. Nothing in this Section 2 shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time by
the Delaware General Corporation Law or the Certificate of Incorporation of the
Corporation).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new
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record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum.
At any meeting of the stockholders, the holders of a majority of all of the
shares of the stock entitled to vote at the meeting, present in person or by
proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be required by law. Where a
separate vote by a class or classes or series is required, a majority of the
shares of such class or classes or series present in person or represented by
proxy shall constitute a quorum entitled to take action with respect to that
vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the meeting
may adjourn the meeting to another place, date, or time.
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Section 5. Organization.
Such person as the Board of Directors may have designated or, in the
absence of such a person, the Chairman of the Board or, in his or her absence,
the President of the Corporation or, in his or her absence, such person as may
be chosen by the holders of a majority of the shares entitled to vote who are
present, in person or by proxy, shall call to order any meeting of the
stockholders and act as chairman of the meeting. In the absence of the Secretary
of the Corporation, the secretary of the meeting shall be such person as the
chairman of the meeting appoints.
Section 6. Conduct of Business.
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him or her in order.
The chairman shall have the power to adjourn the meeting to another place, date
and time. The date and time of the opening and closing of the polls for each
matter upon which the stockholders will vote at the meeting shall be announced
at the meeting.
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Section 7. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing or by a
transmission permitted by law filed in accordance with the procedure established
for the meeting. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this paragraph
may be substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original writing or transmission.
The Corporation may, and to the extent required by law, shall, in advance
of any meeting of stockholders, appoint one or more inspectors to act at the
meeting and make a written report thereof. The Corporation may designate one or
more alternate inspectors to replace any inspector who fails to act. If no
inspector or alternate is able to act at a meeting of stockholders, the person
presiding at the meeting may, and to the extent required by law, shall, appoint
one or more inspectors to act at the meeting. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign an oath
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faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. Every vote taken by ballots shall
be counted by a duly appointed inspector or inspectors.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law, all other matters shall be determined by a
majority of the votes cast affirmatively or negatively.
Section 8. Stock List.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder in the
manner provided by law.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
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ARTICLE II - BOARD OF DIRECTORS
Section 1. Number, Election and Term of Directors.
Subject to the rights of the holders of any series of preferred stock to
elect directors under specified circumstances, the number of directors shall be
fixed from time to time exclusively by the Board of Directors pursuant to a
resolution adopted by a majority of the Whole Board. The directors, other than
those who may be elected by the holders of any series of preferred stock under
specified circumstances, shall be divided, with respect to the time for which
they severally hold office, into three classes with the term of office of the
first class to expire at the Corporation's first annual meeting of stockholders,
the term of office of the second class to expire at the Corporation's second
annual meeting of stockholders and the term of office of the third class to
expire at the Corporation's third annual meeting of stockholders, with each
director to hold office until his or her successor shall have been duly elected
and qualified. At each annual meeting of stockholders, commencing with the first
annual meeting, (i) directors elected to succeed those directors whose terms
then expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election, with each
director to hold office until his or her successor shall have been duly elected
and qualified, and
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(ii) if authorized by a resolution of the Board of Directors, directors may be
elected to fill any vacancy on the Board of Directors, regardless of how such
vacancy shall have been created.
Section 2. Newly Created Directorships and Vacancies.
Subject to the rights of the holders of any series of preferred stock then
outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause shall, unless otherwise required by law or by resolution
of the Board of Directors, be filled only by a majority vote of the directors
then in office, though less than a quorum (and not by stockholders), and
directors so chosen shall hold office for a term expiring at the annual meeting
of stockholders at which the term of office of the class to which they have been
elected expires and until such director's successor shall have been duly elected
and qualified. No decrease in the number of authorized directors shall shorten
the term of any incumbent director.
Section 3. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors
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and publicized among all directors. A notice of each regular meeting shall not
be required.
Section 4. Special Meetings.
Special meetings of the Board of Directors may be called by the Chairman of
the Board, the President or by a majority of the Whole Board and shall be held
at such place, on such date, and at such time as they or he or she shall fix.
Notice of the place, date, and time of each such special meeting shall be given
to each director by whom it is not waived by mailing written notice not less
than five (5) days before the meeting or by telephone or by telegraphing or
telexing or by facsimile or electronic transmission of the same not less than
twenty-four (24) hours before the meeting. Unless otherwise indicated in the
notice thereof, any and all business may be transacted at a special meeting.
Section 5. Quorum.
At any meeting of the Board of Directors, a majority of the total number of
the Whole Board shall constitute a quorum for all purposes. If a quorum shall
fail to attend any meeting, a majority of those present may adjourn the meeting
to another place, date, or time, without further notice or waiver thereof.
Section 6. Participation in Meetings By Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board of Directors
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or committee by means of conference telephone or other communications equipment
by means of which all persons participating in the meeting can hear each other
and such participation shall constitute presence in person at such meeting.
Section 7. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board of Directors may from time to time determine,
and all matters shall be determined by the vote of a majority of the directors
present, except as otherwise provided herein or required by law. Action may be
taken by the Board of Directors without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
Section 8. Compensation of Directors.
Unless otherwise restricted by the certificate of incorporation, the Board
of Directors shall have the authority to fix the compensation of the directors.
The directors may be paid their expenses, if any, of attendance at each meeting
of the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or paid a stated salary or paid other
compensation as director. No such payment shall preclude any director from
serving the Corporation in any other capacity
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and receiving compensation therefor. Members of special or standing committees
may be allowed compensation for attending committee meetings.
Section 9: Chairman of the Board.
The Board of Directors may elect from among its members a Chairman of the
Board; provided, however, if the Board of Directors fails to so elect a Chairman
of the Board, and at such time the President is a member of the Board of
Directors, the President shall act as Chairman of the Board. Subject to the
provisions of these By-laws and to the direction of the Board of Directors, he
or she shall have the responsibility for the general management and control of
the business and affairs of the Corporation and shall perform all duties and
have all powers which are commonly incident to the office of chief executive or
which are delegated to him or her by the Board of Directors. He or she shall
have power to sign all stock certificates, contracts and other instruments of
the Corporation which are authorized and shall have general supervision and
direction of all of the other officers, employees and agents of the Corporation.
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ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors.
The Board of Directors may from time to time designate committees of the
Board of Directors, with such lawfully delegable powers and duties as it thereby
confers, to serve at the pleasure of the Board of Directors and shall, for those
committees and any others provided for herein, elect a director or directors to
serve as the member or members, designating, if it desires, other directors as
alternate members who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of any member of
any committee and any alternate member in his or her place, the member or
members of the committee present at the meeting and not disqualified from
voting, whether or not he or she or they constitute a quorum, may by unanimous
vote appoint another member of the Board of Directors to act at the meeting in
the place of the absent or disqualified member.
Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third (1/3) of the members shall
constitute a quorum
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unless the committee shall consist of one (1) or two (2) members, in which event
one (1) member shall constitute a quorum; and all matters shall be determined by
a majority vote of the members present. Action may be taken by any committee
without a meeting if all members thereof consent thereto in writing, and the
writing or writings are filed with the minutes of the proceedings of such
committee.
ARTICLE IV - OFFICERS
Section 1. Generally.
The officers of the Corporation shall consist of a President, one or more
Vice Presidents, a Secretary, a Treasurer and such other officers as may from
time to time be appointed by the Board of Directors. Officers shall be elected
by the Board of Directors, which shall consider that subject at its first
meeting after every annual meeting of stockholders. Each officer shall hold
office until his or her successor is elected and qualified or until his or her
earlier resignation or removal. Any number of offices may be held by the same
person. The salaries of officers elected by the Board of Directors shall be
fixed from time to time by the Board of Directors or by such officers as may be
designated by resolution of the Board of Directors.
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Section 2. Chief Executive Officer
Subject to the provisions of these By-laws and to the direction of the
Board of Directors, the Chief Executive Officer shall have the responsibility
for the general management and control of the business and affairs of the
Corporation and shall perform all duties and have all powers which are commonly
incident to the office of chief executive or which are delegated to him or her
by the Board of Directors. He or she shall have power to sign all stock
certificates, contracts and other instruments of the Corporation which are
authorized and shall have general supervision and direction of all of the other
officers, employees and agents of the Corporation.
Section 3. President.
The President shall be the chief operating officer of the Corporation. He
or she shall have general responsibility for the management and control of the
operations of the Corporation and shall perform all duties and have all powers
which are commonly incident to the office of chief operating officer or which
are delegated to him or her by the Board of Directors. Subject to the direction
of the Board of Directors and the Chairman of the Board, the President shall
have power to sign all stock certificates, contracts and other instruments of
the Corporation which are authorized and shall have general supervision of all
of the other
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officers (other than the Chairman of the Board or any Vice Chairman), employees
and agents of the Corporation.
Section 4. Vice President.
Each Vice President shall have such powers and duties as may be delegated
to him or her by the Board of Directors. One (1) Vice President shall be
designated by the Board of Directors to perform the duties and exercise the
powers of the President in the event of the President's absence or disability.
Section 5. Treasurer.
The Treasurer shall have the responsibility for maintaining the financial
records of the Corporation. He or she shall make such disbursements of the funds
of the Corporation as are authorized and shall render from time to time an
account of all such transactions and of the financial condition of the
Corporation. The Treasurer shall also perform such other duties as the Board of
Directors may from time to time prescribe.
Section 6. Secretary.
The Secretary shall issue all authorized notices for, and shall keep
minutes of, all meetings of the stockholders and the Board of Directors. He or
she shall have charge of the corporate books and shall perform such other duties
as the Board of Directors may from time to time prescribe.
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Section 7. Delegation of Authority.
The Board of Directors may from time to time delegate the powers or duties
of any officer to any other officers or agents, notwithstanding any provision
hereof.
Section 8. Removal.
Any officer of the Corporation may be removed at any time, with or without
cause, by the Board of Directors.
Section 9. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the President or any
officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other Corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other Corporation.
ARTICLE V - STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the President or a Vice President, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer,
certifying the number
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of shares owned by him or her. Any or all of the signatures on the certificate
may be by facsimile.
Section 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these
By-laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Date.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may, except as
otherwise required by law, fix a record date, which record date shall not
precede the date on which the resolution fixing the record date is adopted and
which record date shall not be more than sixty (60) nor less than ten (10) days
before the date of any meeting of stockholders, nor more than sixty (60) days
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prior to the time for such other action as hereinbefore described; provided,
however, that if no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held, and, for
determining stockholders entitled to receive payment of any dividend or other
distribution or allotment of rights or to exercise any rights of change,
conversion or exchange of stock or for any other purpose, the record date shall
be at the close of business on the day on which the Board of Directors adopts a
resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 4. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of stock,
another may be issued in its place pursuant to such regulations as the Board of
Directors may establish concerning proof of such loss, theft or destruction and
concerning the giving of a satisfactory bond or bonds of indemnity.
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Section 5. Regulations.
The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI - NOTICES
Section 1. Notices.
Except as otherwise specifically provided herein or required or permitted
by law, all notices required to be given to any stockholder, director, officer,
employee or agent shall be in writing and may in every instance be effectively
given by hand delivery to the recipient thereof, by depositing such notice in
the mails, postage paid, recognized overnight delivery service or by sending
such notice by facsimile, receipt acknowledged, or by prepaid telegram or
mailgram. Any such notice shall be addressed to such stockholder, director,
officer, employee or agent at his or her last known address as the same appears
on the books of the Corporation. The time when such notice is received, if hand
delivered, or dispatched, if delivered through the mails or by telegram or
mailgram, shall be the time of the giving of the notice.
Section 2. Waivers.
A written waiver of any notice, signed by a stockholder, director, officer,
employee or agent, whether before or after the
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time of the event for which notice is to be given, shall be deemed equivalent to
the notice required to be given to such stockholder, director, officer, employee
or agent. Neither the business nor the purpose of any meeting need be specified
in such a waiver. Attendance at any meeting shall constitute waiver of notice
except attendance for the sole purpose of objecting to the timeliness of notice.
ARTICLE VII - MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these By-laws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the name of
the Corporation, which seal shall be in the charge of the Secretary. If and when
so directed by the Board of Directors or a committee thereof, duplicates of the
seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
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Section 3. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year.
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods.
In applying any provision of these By-laws which requires that an act be
done or not be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
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ARTICLE VIII - INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Right to Indemnification.
Each person who was or is made a party or is threatened to be made a party
to or is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a director or an officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement)
-28-
<PAGE> 29
reasonably incurred or suffered by such indemnitee in connection therewith;
provided, however, that, except as provided in Section 3 of this ARTICLE VIII
with respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation.
Section 2. Right to Advancement of Expenses.
In addition to the right to indemnification conferred in Section 1 of this
ARTICLE VIII, an indemnitee shall also have the right to be paid by the
Corporation the expenses (including attorney's fees) incurred in defending any
such proceeding in advance of its final disposition (hereinafter an "advancement
of expenses"); provided, however, that, if the Delaware General Corporation Law
requires, an advancement of expenses incurred by an indemnitee in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
Corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of
such indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision
-29-
<PAGE> 30
from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Section 2 or otherwise. The rights to indemnification and to
the advancement of expenses conferred in Sections 1 and 2 of this ARTICLE VIII
shall be contract rights and such rights shall continue as to an indemnitee who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
Section 3. Right of Indemnitee to Bring Suit.
If a claim under Section 1 or 2 of this ARTICLE VIII is not paid in full by
the Corporation within sixty (60) days after a written claim has been received
by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty (20) days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce
-30-
<PAGE> 31
a right to an advancement of expenses) it shall be a defense that, and (ii) in
any suit brought by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the Corporation shall be entitled to
recover such expenses upon a final adjudication that, the indemnitee has not met
any applicable standard for indemnification set forth in the Delaware General
Corporation Law. Neither the failure of the Corporation (including its directors
who are not parties to such action, a committee of such directors, independent
legal counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its directors who are not parties to
such action, a committee of such directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses
-31-
<PAGE> 32
pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under this ARTICLE VIII or otherwise shall be on the Corporation.
Section 4. Non-Exclusivity of Rights.
The rights to indemnification and to the advancement of expenses conferred
in this ARTICLE VIII shall not be exclusive of any other right which any person
may have or hereafter acquire under any statute, the Corporation's Certificate
of Incorporation, By-laws, agreement, vote of stockholders or directors or
otherwise.
Section 5. Insurance.
The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
Section 6. Indemnification of Employees and Agents of the Corporation.
The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and to the advancement of
expenses to any employee or agent of the
-32-
<PAGE> 33
Corporation to the fullest extent of the provisions of this Article with respect
to the indemnification and advancement of expenses of directors and officers of
the Corporation.
ARTICLE IX - AMENDMENTS
In furtherance and not in limitation of the powers conferred by law, the
Board of Directors is expressly authorized to make, alter, amend and repeal
these By-Laws subject to the power of the holders of capital stock of the
Corporation to alter, amend or repeal the By-Laws; provided, however, that, with
respect to the power of holders of capital stock to make, alter, amend and
repeal By-Laws of the Corporation, notwithstanding any other provision of these
By-Laws or any provision of law which might otherwise permit a lesser vote or no
vote, but in addition to any affirmative vote of the holders of any particular
class or series of the capital stock of the Corporation required by law, these
By-Laws or any preferred stock, the affirmative vote of the holders of at least
eighty percent (80%) of the voting power of all of the then-outstanding shares
entitled to vote generally in the election of directors, voting together as a
single class, shall be required to make, alter, amend or repeal any provision of
these By-Laws.
-33-
<PAGE> 1
Exhibit 4.1
<TABLE>
<S> <C> <C>
INCORPORATED UNDER THE LAWS COMMON STOCK
OF THE STATE OF DELAWARE PAR VALUE $.01 EACH
THIS CERTIFICATE IS TRANSFERABLE CUSIP 913431 10 2
IN BOSTON, MA OR NEW YORK, NY SEE REVERSE FOR CERTAIN DEFINITIONS
UNIVERSAL COMPRESSION HOLDINGS, INC.
-------------------------------------------------------------------------------------------
This Certifies that
[GRAPHIC APPEARS [GRAPHIC APPEARS
HERE] HERE]
is the owner of
-------------------------------------------------------------------------------------------
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF
Universal Compression Holdings, Inc. transferable on the books of the Corporation by the
holder hereof, in person or by duly authorized attorney, upon surrender of this Certificate
properly endorsed. This Certificate is not valid until countersigned by the Transfer Agent
and registered by the Registrar.
Witness the facsimile seal of this Corporation and the signatures of its duly authorized officers.
Dated
Countersigned and Registered:
EquiServe Trust Company, N.A.
Transfer Agent
and Registrar,
/s/ STEPHEN A. SNIDER /s/ RICHARD W. FITZGERALD By /s/ CLINSTON MORRIS
President Assistant Secretary Auhorized Signature.
</TABLE>
<PAGE> 2
[UNIVERSAL COMPRESSION LOGO]
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS
THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR
OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF OF THE
CORPORATION, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH
PREFERENCES AND/OR RIGHTS.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- _________Custodian______________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right
of survivorship and not as under Uniform Gifts to Minors
tenants in common
Act ________________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ____________________________________ hereby sell, assign
and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please print or typewrite name and address including postal zip code of assignee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- -------------------------------------------------------------------------
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
---------------------------------------------
- --------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated,
----------------------------
NOTICE: X
---------------------------------
THE SIGNATURE(S) TO THIS AS- (SIGNATURE)
SIGNMENT MUST CORRESPOND WITH
THE NAME(S) AS WRITTEN UPON --->
THE FACE OF THE CERTIFICATE
IN EVERY PARTICULAR WITHOUT X
ALTERATION OR ENLARGEMENT OR ---------------------------------
ANY CHANGE WHATEVER. (SIGNATURE)
----------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
----------------------------------------
SIGNATURE(S) GUARANTEED BY:
---------------------------------------
<PAGE> 1
EXHIBIT 4.7
THIS FIRST SUPPLEMENTAL INDENTURE is dated as of May 9,
2000 between UNIVERSAL COMPRESSION, INC., a Texas corporation, as
successor-in-interest to TW Acquisition Corporation, a Delaware corporation (the
"Company"), and UNITED STATES TRUST COMPANY OF NEW YORK, as trustee under the
Indenture hereinafter mentioned (the "Trustee").
WHEREAS, the Company has heretofore executed and delivered to
the Trustee an indenture dated as of February 20, 1998 (the "Indenture"),
providing for the creation and issuance of $242,500,000 in aggregate principal
amount at maturity of the Company's 9 7/8% Senior Discount Notes due 2008 (the
"Notes");
WHEREAS, the Company has solicited the consent of the Holders
of the Notes pursuant to a Consent Solicitation Statement dated April 17, 2000
as supplemented by Supplement to Consent Solicitation Statement dated April 28,
2000 (collectively, the "Consent Solicitation Statement") to amend the
definition of "Permitted Liens" contained in the Indenture;
WHEREAS, pursuant to Section 9.02 of the Indenture, the
Company and the Trustee may amend the definition of "Permitted Liens" contained
in the Indenture with the written consent of the Holders of not less than a
majority in aggregate principal amount of the Notes then outstanding; and
WHEREAS, the Company has received the consent of the Holders
of a majority in aggregate principal amount of the Notes to the amendment to the
Indenture described in the Consent Solicitation Statement;
NOW, THEREFORE, for and in consideration of the premises and
in order to effect the amendment to the Indenture described in the Consent
Solicitation Statement, the Company and the Trustee agree pursuant to Section
9.02 of the Indenture as follows:
Article 1
Amendment of Indenture
Section 1.01. Amendment of Section 1.01. Pursuant to Section
9.02 of the Indenture, Section 1.01 of the Indenture is hereby amended as
follows:
Immediately and automatically upon receipt by the Trustee not
later than 5:00 p.m. (New York time) on May 9, 2001 of an Officers' Certificate
in the form attached hereto as Exhibit A (the "Equity Condition Certificate"),
the definition of "Permitted Liens" contained in the Indenture shall be amended
and restated in its entirety to read as follows:
"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;
<PAGE> 2
(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 or operating lease; provided that
such Liens do not extend to any property or assets which is not leased
property subject to such capitalized lease or operating lease;
(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 setoff;
(x) Liens securing Interest Swap Obligations which
Interest Swap Obligations relate to Indebtedness that is otherwise
permitted under this Indenture;
-2-
<PAGE> 3
(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;
(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 Restructured
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; and
(xiv) Liens securing obligations with respect to
operating leases and guaranties thereof, provided that such Liens do
not extend to or cover any property or assets of the Company or any of
its Restricted Subsidiaries other than the property subject to such
leases, any property or rights (including rights under subleases)
relating to such leased property and the equity interests of the lessee
in any such lease, provided, however, that at the time of entering into
(and immediately after giving effect to) any such lease, the Company
and its Restricted Subsidiaries have consolidated assets (net of book
depreciation, if applicable) in excess of $100 million (excluding any
property subject to, or rights relating to, all such leases),
calculated in accordance with GAAP, as evidenced by an Officers'
Certificate delivered to the Trustee.
Article 2
The Trustee
Section 2.01. Privileges and Immunities of Trustee. The
Trustee accepts the amendment of the Indenture effected by this First
Supplemental Indenture but only upon the terms and conditions set forth in the
Indenture, including the terms and provisions defining and limiting the
liabilities and responsibilities of the Trustee, which terms and provisions
shall in like manner define and limit its liabilities and responsibilities in
the performance of the trust created by the Indenture as hereby amended. The
Trustee shall not be responsible for the validity or sufficiency of this First
Supplemental Indenture, for the due execution thereof by the Company for the
recitals contained herein or for the validity or accuracy of the contents of any
Equity Condition Certificate delivered hereunder, each of which is the Company's
responsibility.
-3-
<PAGE> 4
Article 3
Miscellaneous Provisions
Section 3.01. Instruments to be Read Together. Except as
supplemented hereby, all provisions in the Indenture shall remain in full force
and effect. This First Supplemental Indenture is an indenture supplemental to
and in implementation of the Indenture, and said Indenture and this First
Supplemental Indenture shall henceforth be read together.
Section 3.02. Confirmation. The Indenture as amended and
supplemented by this First Supplemental Indenture is in all respects confirmed
and preserved.
Section 3.03. Terms Defined. Capitalized terms used herein
without definition shall have the meanings assigned to them in the Indenture.
Section 3.04. Counterparts. This First Supplemental Indenture
may be signed in any number of counterparts each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
Section 3.05. Effectiveness, Etc.. Without qualifying the
provisions of Section 1.01 of this First Supplemental Indenture, this First
Supplemental Indenture will take effect immediately upon execution thereof by
the parties hereto and shall automatically cease to be in effect in the event
that the Equity Condition Certificate is not delivered hereunder on or before
5:00 p.m. (New York time) on May 9, 2001.
Section 3.06. Trust Indenture Act. If any provision of this
First Supplemental Indenture limits, qualifies or conflicts with any provision
of the Trust Indenture Act that is required under such Act to be part of and
govern any provision of this First Supplemental Indenture, the provisions of
such Act shall control. If any provision of this First Supplemental Indenture
modifies or excludes any provision of the Trust Indenture Act that may be so
modified or excluded, the provision of such Act shall be deemed to apply to the
Indenture or to be excluded by this First Supplemental Indenture, as the case
may be.
Section 3.07. Illegality, Unenforceability. In case any
provision in this First Supplemental Indenture shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Section 3.08. Benefits of Supplemental Indenture. Nothing in
this First Supplemental Indenture, the Indenture or the Notes, express or
implied, shall give to any Person, other than the parties hereto and thereto and
their successors hereunder and thereunder and the Holders of the Notes, any
benefit of any legal or equitable right, remedy or claim under the Indenture,
this First Supplemental Indenture or the Notes.
Section 3.09. Successors and Assigns. All agreements in this
First Supplemental Indenture made by the Company and the Trustee shall inure to
the benefit of the Company and the Trustee and their respective successors and
assigns. The provisions of this First
-4-
<PAGE> 5
Supplemental Indenture shall bind the Holders of the Notes from time to time,
the Company, the Trustee and their respective successors and assigns, whether so
expressed or not.
Section 3.10. Governing Law. This First Supplemental Indenture
shall be governed by and construed in accordance with the laws of the State of
New York, without regard to the conflict of laws principles thereof.
Section 3.11. Captions. The captions of the sections of this
First Supplemental Indenture were formulated, used and inserted in this First
Supplemental Indenture for convenience only and shall not be deemed to affect
the meaning or construction of any of the provisions hereof.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the date first above written.
UNIVERSAL COMPRESSION, INC.
By: /s/ Richard W. FitzGerald
--------------------------------------
Richard W. FitzGerald
Senior Vice President and Chief
Financial Officer
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: /s/ Christine C. Collins
--------------------------------------
Christine C. Collins
Assistant Vice President
-6-
<PAGE> 1
[K&S LETTERHEAD]
EXHIBIT 5.1
May 22, 2000
Universal Compression Holdings, Inc.
4440 Brittmoore Road
Houston, Texas 77041
Re: Universal Compression Holdings, Inc. -- Form S-1 Registration
Statement
Ladies and Gentlemen:
We have acted as counsel for Universal Compression Holdings, Inc., a
Delaware corporation (the "Company"), in connection with the registration
pursuant to a Registration Statement on Form S-1 (File No. 333-34090),
originally filed with the Securities and Exchange Commission (the "SEC") on
April 5, 2000, (such Registration Statement, as amended at the effective date
hereof being referred to herein as the "Registration Statement"). The
Registration Statement relates to the offer and sale of shares of common stock,
par value $0.01 per share, of the Company (the "Common Stock"), to be sold by
the Company to the U.S. Underwriters and the International Managers
(collectively the "Underwriters") pursuant to the U.S. Purchase Agreement and
the International Purchase Agreement, the forms of which will be filed as
exhibits to the Registration Statement (the "Underwriting Agreements") and such
additional shares of Common Stock, representing up to twenty percent (20%) of
the maximum aggregate offering price set forth in the Registration Statement,
which may be sold to the Underwriters and which would be registered with the SEC
pursuant to Rule 462(b) promulgated under the Securities Act of 1933, as amended
(the "Act").
We are rendering this opinion as of the time the Registration Statement
becomes effective in accordance with Section 8(a) of the Act.
In connection with the opinion expressed herein, we have assumed that
the Registration Statement will have become effective and the shares of Common
Stock covered by this opinion will be issued and sold in compliance with
applicable federal and state securities laws and in the manner described in the
Registration Statement and the applicable prospectus.
<PAGE> 2
Universal Compression Holdings, Inc.
May 22, 2000
Page 2
As such counsel, we have examined and relied upon such records,
documents, certificates and other instruments as in our judgment are necessary
or appropriate to form the basis for the opinions hereinafter set forth. In all
such examinations, we have assumed the genuineness of signatures on original
documents and the conformity to such original documents of all copies submitted
to us as certified, conformed or photographic copies, and as to certificates of
public officials, we have assumed the same to have been properly given and to be
accurate.
This opinion is limited in all respects to the General Corporation Law
of the State of Delaware, and no opinion is expressed with respect to the laws
of any other jurisdiction or any effect which such laws may have on the opinions
expressed herein. This opinion is limited to the matters stated herein, and no
opinion is implied or may be inferred beyond the matters expressly stated
herein.
Based upon the foregoing, we are of the opinion that the shares of
Common Stock to be issued and sold by the Company pursuant to the Underwriting
Agreements, including any additional shares of Common Stock to be sold and
registered pursuant to Rule 462(b) promulgated under the Act, are duly
authorized, and when the price per share has been established by the pricing
committee of the Board of Directors of the Company and the shares of Common
Stock are issued in accordance with the terms of the Underwriting Agreements
against payment therefor, will be validly issued, fully paid and nonassessable.
This opinion is given as of the date hereof, and we assume no
obligation to update this opinion to reflect any fact or circumstance that may
hereafter come to our attention or any change in law or regulation that may
hereafter occur.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the incorporation by reference of this opinion and
consent in any registration statement that may be filed to register additional
shares of Common Stock pursuant to Rule 462(b) promulgated under the Act, and to
the reference to us under the caption "Legal Matters" in the prospectuses that
form a part thereof. In giving such consent, we do not thereby admit that we are
in the category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
KING & SPALDING
<PAGE> 1
EXHIBIT 9.5
FIRST AMENDMENT TO VOTING AGREEMENT
This FIRST AMENDMENT TO VOTING AGREEMENT (this "Amendment"),
dated as of May 19, 2000, amending that certain Voting Agreement, dated as of
February 20, 1998 (the "Voting Agreement"), is made and entered into by and
among Universal Compression Holdings, Inc., a Delaware corporation ("Holdings"),
Castle Harlan Partners III, L.P., a Delaware limited partnership ("CHP III"),
and the undersigned (collectively, the "Co-Investors"). Capitalized terms used
herein but not defined shall have the meanings set forth in the Voting
Agreement.
RECITALS:
WHEREAS, Holdings desires to offer shares of its common stock,
par value $.01 per share (the "Common Stock"), to the public in an initial
public offering (the "Offering") and, in connection with the Offering, the
Company desires to effect a recapitalization of its capital stock (the
"Recapitalization"); and
WHEREAS, Holdings, CHP III and the Co-Investors entered into
that certain Voting Agreement; and
WHEREAS, in connection with the Recapitalization, Holdings,
CHP III and the Co-Investors desire to amend the Voting Agreement upon the terms
and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements and
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the undersigned hereby
agree as follows:
1. The definition of "Holdings Securities" in Section 1 of the
Voting Agreement is amended hereby by deleting the definition in its entirety
and substituting therefor the following:
"Holdings Securities" shall mean the Common Stock and the
Preferred Stock as collectively referred to herein and any and
all securities of Holdings that may be issued in respect of,
in exchange for or in the substitution of any shares of Common
Stock or Preferred Stock."
2. Effective as of the date of consummation of the Offering,
the definition of "Change in Control" in Section 1 of the Voting Agreement is
amended hereby by deleting the definition in its entirety and substituting
therefor the following:
<PAGE> 2
"Change in Control" shall mean any of the following: (i) (a)
CHP and the Affiliates of CHP shall cease to have the
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 and
(b) CHP and the Affiliates of CHP shall cease to own of record
directly or through their partners or members equity
securities of Holdings representing at least 10% of the total
combined ordinary voting power of all equity securities of
Holdings; (ii) the sole general partner of CHPIII shall be
neither Castle Harlan Partners III GP, Inc. or an entity
controlling, controlled by or under common control with Castle
Harlan Partners III GP, Inc.; or (iii) 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
of indirectly substantially all equity interests of each
entity acquiring such assets."
3. Section 2 of the Voting Agreement is amended hereby
(i) by deleting the introduction to Section 2 up to
clause (a) and substituting therefor the following:
"From and after the date of this Agreement until the first to
occur of a Change in Control or the expiration of three years
following the end of the period following the consummation of
an initial public offering of Common Stock during which the
Co-Investors are restricted by agreement from selling their
Holdings Securities, 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 related to any of:"
(ii) by deleting the parenthetical in the text
thereof following clause (l);
and
(iii) by adding to Section 2 the following:
<PAGE> 3
"As a condition to the transfer by a Co-Investor of any
Holdings Securities to a Person not otherwise a party to this
Agreement, or to a Voting Trust Agreement, which CHP or an
Affiliate of CHP acts as the voting trustee of Holdings
Securities, such Co-Investor agrees to cause the transferee
thereof to agree to be bound by this Agreement unless, in each
case, following consummation of an initial public offering of
Common Stock any of the following is applicable: (x) such
transfer does not exceed, together with all other transfers of
Holdings Securities (but excluding transfers pursuant to
clause (y) below) for the account of such Co-Investor within
the preceding three months, one percent of the issued and
outstanding shares of Holding Securities as set forth in the
most recent Form 10-K or Form 10-Q (or such successor forms
thereto) filed by Holdings with the Securities and Exchange
Commission or (y) such transfer is pursuant to a Demand
Registration or Piggyback Registration as such terms are
defined in Sections 1.1(a) and 1.2(a), respectively, of the
Registration Rights Agreement, dated as of February 20, 1998,
by and among Holdings, CHPIII, each other person or entity
signatory thereto and each of the other Persons who becomes a
party to such agreement after the date thereof."
[SIGNATURE PAGES FOLLOW]
<PAGE> 4
IN WITNESS WHEREOF, the undersigned have executed this
Amendment as of the date first set forth above.
CASTLE HARLAN PARTNERS III, L.P.
By: CASTLE HARLAN, INC.
its Investment Manager
By: /s/ JOHN K. CASTLE
----------------------------------------
Name: John K. Castle
--------------------------------------
Title:
--------------------------------------
UNIVERSAL COMPRESSION HOLDINGS, INC.
By: /s/ ERNIE L. DANNER
----------------------------------------
Name: Ernie L. Danner
--------------------------------------
Title: Executive Vice President
--------------------------------------
<PAGE> 5
CO-INVESTORS
MELLON BANK, N.A., AS TRUSTEE FOR THE BELL
ATLANTIC MASTER TRUST, AS DIRECTED BY BELL
ATLANTIC CORPORATION, solely in its capacity
as Trustee and not in its individual
capacity
By: /s/ Bernadette Rist
----------------------------------------
Name: Bernadette Rist
--------------------------------------
Title: Authorized Signatory
-------------------------------------
FIRST UNION CAPITAL PARTNERS, INC.
By: /s/ James C. Cook
----------------------------------------
Name: James C. Cook
--------------------------------------
Title: Partner
-------------------------------------
BT CAPITAL PARTNERS, INC.
By: /s/ Tristram Perkins
----------------------------------------
Name: Tristram Perkins
--------------------------------------
Title: Associate
-------------------------------------
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/ Jonathan L. Shear
----------------------------------------
Name: Jonathan L. Shear
--------------------------------------
Title: Treasurer
-------------------------------------
<PAGE> 1
EXHIBIT 9.6
VOTING AGREEMENT
This VOTING AGREEMENT, dated as of April 28, 2000 (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 Energy
Spectrum Partners LP, a Delaware limited partnership ("Energy").
WHEREAS, Holdings and Energy are parties to a certain Stock
Purchase Agreement, dated as of April 4, 2000 (the "Purchase Agreement"),
whereby Energy acquired from Holdings and Holdings issued to Energy (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 on Annex I.
WHEREAS, in connection with such purchase, CHPIII, Holdings
and Energy hereby wish to set forth their understanding with respect to the
manner in which Energy 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) CHP
and the Affiliates of CHP shall cease to have the 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;
(ii) the sole general partner of CHP III shall be neither Castle Harlan Partners
III GP, Inc. or an entity controlling, controlled by or under common control
with Castle Harlan Partners III GP, Inc.; or (iii) 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
<PAGE> 2
foregoing percentages, as appropriate, and after which Holdings ceases to own
directly of 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 and any and all Shares of
Holdings that may be issued in respect of, in exchange for or in the
substitution of any Shares.
"Preferred Stock" shall have the meaning set forth in the
recital hereto.
"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, 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 statement on Form S-4 or S-8 (or its
equivilant).
"Securities Act" shall mean the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder.
"Shares" shall mean the shares of Common Stock and Preferred
Stock now owned of record or beneficially by Energy or that may be so owned in
the future hereafter from time to time by Energy.
"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> 3
2. Agreement to Vote Shares. From and after the date of this
Agreement until the earlier of the occurrence of a Change in Control or a
Qualified IPO, 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 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;
3
<PAGE> 4
Energy agrees (and, as a condition to its transfer of any Holdings Securities to
a Person not otherwise a party to this Agreement) to vote and execute written
consents for all shares of Holdings Securities which it is or becomes entitled
to 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, 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: William Puellage
(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: William Puellage
with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
4
<PAGE> 5
New York, NY 10022
Attention: Andre Weiss, Esq.
(iii) If to Energy, to it at the following address:
c/o Energy Spectrum Partners LP
5956 Sherry Lane
Suite 900
Dallas, Texas 75225
Attention: Leland B. White
with a copy to:
Baker Botts L.L.P.
2001 Ross Avenue
Dallas, Texas 75201
Attention: Geoffrey L. Newton
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 Energy, 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> 6
(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 Energy 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> 7
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
By: /s/ John K. Castle
-----------------------------------------
Name: John K. Castle
Title:
UNIVERSAL COMPRESSION HOLDINGS, INC.
By: /s/ Ernie L. Danner
-----------------------------------------
Ernie L. Danner
Executive Vice President
ENERGY SPECTRUM PARTNERS LP
By: Energy Spectrum Capital LP,
its general partner
By: Energy Spectrum LLC,
its general partner
By: /s/ Leland B. White
-----------------------------------------
Leland B. White
Vice President
7
<PAGE> 8
ANNEX I
<TABLE>
<CAPTION>
Name Number of Shares
---- ----------------
Common Preferred
Stock Stock
----- -----
<S> <C> <C>
Energy Spectrum Partners LP 17,201 68,804
</TABLE>
8
<PAGE> 1
EXHIBIT 10.3
AMENDMENT NUMBER ONE
TO THE
UNIVERSAL COMPRESSION HOLDINGS, INC.
INCENTIVE STOCK OPTION PLAN
WHEREAS, Universal Compression Holdings, Inc., a Delaware corporation
(the "Corporation"), previously adopted the Universal Compression Holdings, Inc.
Incentive Stock Option Plan (the "Plan");
WHEREAS, Section 17 of the Plan reserves to the Corporation the right
to amend the Plan by action of its Board of Directors (the "Board"); and
WHEREAS, the Corporation desires to amend the Plan in certain respects.
NOW, THEREFORE, pursuant to the power of amendment reserved in Section
17 of the Plan, the Board amends the Plan as follows:
1.
Section 1 of the Plan is hereby amended, as of the date of adoption of
this Amendment, to add "and non-employee directors and consultants" after "key
executive employees" therein.
2.
The definition of the term "Participant" under Section 2 of the Plan is
hereby amended in its entirety, as of the date of adoption of this Amendment, to
provide as follows:
"Participant" means a key employee, non-employee director or
consultant of the Corporation or a Subsidiary who is selected to
participate in the Plan in accordance with Section 4.
3.
The definition of the term "Subsidiary" under Section 2 of the Plan is
hereby amended, as of the date of adoption of this Amendment, to add the
following new sentence to the end thereof:
Notwithstanding the foregoing, for purposes of applying Section 422 of
the Code to Options intended by the Administrator to be Incentive Stock
Options, "Subsidiary" means a corporation that is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) of the
Corporation.
4.
Section 4 of the Plan is hereby amended in its entirety, as of the date
of adoption of this Amendment, to provide as follows:
4. Participation. Participants in the Plan shall be limited to
those key employees, non-employee directors and consultants of the
Corporation and its Subsidiaries who have been notified in writing by
the Administrator that they have been selected to participate in the
Plan. Only Participants who are key employees of the
<PAGE> 2
Corporation or a Subsidiary shall be eligible for the grant of Incentive Stock
Options under the Plan.
5.
Sections 6 of the Plan is hereby amended in its entirety, as of the
date of adoption of this Amendment, to provide as follows:
6. Maximum Shares Available. The maximum aggregate number of
shares available to be granted under the Plan is 257,572 shares of
Common Stock, and such shares shall be reserved for Options granted
under the Plan (subject to adjustment as provided in Section 10(h)).
6.
Section 10(h) of the Plan is hereby amended in its entirety, as of the
date of adoption of this Amendment, to provide as follows:
(h) Adjustments. The aggregate number and/or class of shares
which may be available for the grant of Options and the number, class
of and/or option price of shares subject to outstanding Options shall
be adjusted by the Administrator to reflect a change in the
capitalization of the Corporation resulting from a stock dividend or
split, and may be adjusted by the Administrator to reflect a change in
the capitalization of the Corporation resulting from a merger,
consolidation, acquisition, separation (including a spin-off or
spin-out), reorganization or liquidation; provided that the number of
shares subject to any Option shall always be a whole number.
Notwithstanding the foregoing, the issuance by the Corporation of
shares of any class or securities convertible into shares of any class,
for cash or property, or for labor or services, either upon direct sale
or upon exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Corporation convertible into
such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the shares authorized for
issuance under Section 4 or the shares subject to outstanding Options.
IN WITNESS WHEREOF, the undersigned authorized officer of the
Corporation certifies that the Board adopted this Amendment Number One on April
20, 2000.
/s/ Ernie L. Danner
--------------------------------------
Name: Ernie L. Danner
--------------------------------
Title: Executive Vice President
--------------------------------
<PAGE> 1
EXHIBIT 10.4
AMENDMENT NUMBER TWO
TO THE
UNIVERSAL COMPRESSION HOLDINGS, INC.
INCENTIVE STOCK OPTION PLAN
WHEREAS, Universal Compression Holdings, Inc., a Delaware corporation
(the "Corporation"), previously adopted the Universal Compression Holdings, Inc.
Incentive Stock Option Plan (the "Plan");
WHEREAS, Section 17 of the Plan reserves to the Corporation the right
to amend the Plan by action of its Board of Directors (the "Board"); and
WHEREAS, the Corporation desires to amend the Plan in certain respects.
NOW, THEREFORE, pursuant to the power of amendment reserved in Section
17 of the Plan, the Board amends the Plan as follows:
1.
Section 7 of the Plan is hereby amended, as of the date of adoption of
this Amendment, to add the following new sentence to the end thereof:
No Participant in any calendar year shall be granted an Option to
purchase more than 100,000 shares of Common Stock (subject to
adjustment as provided in Section 10(h)).
2.
Section 10(c) of the Plan is hereby amended in its entirety, as of the
date of adoption of this Amendment, to provide as follows:
(c) Exercise of Option. Unless otherwise set forth in the
written agreement evidencing the Option, each 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%
Notwithstanding the foregoing, if the written agreement evidencing an
Option so provides, the Option shall become immediately exercisable
upon: (i) a public offering of Common Stock of the Corporation; (ii)
the acquisition by any Person, other than an Affiliate of Castle Harlan
Partners III, L.P., of fifty one percent (51%) or more of the Common
Stock of the Corporation; or (iii) a sale of all or substantially all
of the assets of the Corporation.
<PAGE> 2
3.
Section 10(d) of the Plan is hereby amended in its entirety, as of the
date of adoption of this Amendment, to provide as follows:
(d) Payment of Option Price Upon Exercise. The purchase price
of the shares of Common Stock as to which an Option shall be exercised
shall be paid to the Corporation at the time of exercise: (i) in cash;
(ii) with the consent of the Board, by delivery of a promissory note to
the Corporation payable over a three (3) year period and bearing
interest at the prime rate; (iii) with the consent of the
Administrator, by delivery of shares of Common Stock owned by the
Participant having a Fair Market Value (as defined and determined by
Section 2 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) with the consent of the Administrator, by cancellation of
a portion of the Option as determined by the Administrator.
4.
Section 10(e) of the Plan is hereby amended in its entirety, as of the
date of adoption of this Amendment, to provide as follows:
(e) Termination of Employment. Unless otherwise set forth in
the written agreement evidencing the Option, (i) in the event the
employment of a Participant terminates on account of death, Disability
or retirement after age 65, (A) the Options that have been granted to
such Participant and that are exercisable as of the date of the
Participant's termination of employment may be exercised by such
Participant, or his representative, within three (3) months after
termination of employment and shall then terminate, and (B) the Options
that have been granted to such Participant and that are not exercisable
as of the date of the Participant's termination of employment shall
terminate as of such date; (ii) in the event the employment of a
Participant terminates for Cause, or a Participant voluntarily resigns
his or her employment, the Options granted to such Participant, whether
or not exercisable as of the date of the Participant's termination of
employment, shall terminate on the date of termination; and (iii) in
the event the employment of a Participant terminates for any reason
other than death, Disability, retirement after age 65, Cause, or
voluntary resignation, (A) the Options that have been granted to such
Participant and that are exercisable as of the date of the
Participant's termination of employment may be exercised by such
Participant, or his representative, within thirty (30) days after
termination of employment and shall then terminate, and (B) the Options
that have been granted to such Participant and that are not exercisable
as of the date of the Participant's termination of employment shall
terminate as of such date.
-2-
<PAGE> 3
5.
Section 10(h) of the Plan is hereby amended in its entirety, as of the
date of adoption of this Amendment, to provide as follows:
The aggregate number and/or class of shares which may be available for
the grant of Options, the annual grant cap described in Section 7, and
the number, class of and/or option price of shares subject to
outstanding Options shall be adjusted by the Administrator to reflect a
change in the capitalization of the Corporation resulting from a stock
dividend or split, and may be adjusted by the Administrator to reflect
a change in the capitalization of the Corporation resulting from a
merger, consolidation, acquisition, separation (including a spin-off or
spin-out), reorganization or liquidation; provided that the number of
shares subject to any Option shall always be a whole number.
Notwithstanding the foregoing, the issuance by the Corporation of
shares of any class or securities convertible into shares of any class,
for cash or property, or for labor or services, either upon direct sale
or upon exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Corporation convertible into
such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the shares authorized for
issuance under Section 4 or the shares subject to outstanding Options.
6.
Section 10(k) of the Plan is hereby amended, as of the date of adoption
of this Amendment, to add the following new sentence to the end thereof:
In addition, in the event the Stockholders Agreement terminates,
certificates representing the shares of Common Stock issued pursuant to
the Option may be issued omitting that portion of the restrictive
legend stating that such shares are subject to the Stockholders
Agreement and the availability of a copy of such agreement.
IN WITNESS WHEREOF, the undersigned authorized officer of the
Corporation certifies that the Board adopted this Amendment Number Two on May
15, 2000.
/s/ Ernie L. Danner
--------------------------------------
Name: Ernie L. Danner
--------------------------------
Title: Executive Vice President
--------------------------------
<PAGE> 1
EXHIBIT 10.12
MASTER TRANSACTION AGREEMENT
This Master Transaction Agreement (this "Agreement"),
effective as of this 5th day of April, 2000, is made and entered into by and
among Castle Harlan, Inc., a Delaware corporation ("CHI"), Castle Harlan
Partners III, L.P., a Delaware limited partnership ("CHP III" and, together with
CHI, "CHP"), and Universal Compression Holdings, Inc., a Delaware corporation
(the "Company").
RECITALS:
WHEREAS, the Company and certain of its subsidiaries entered
into a Stock Purchase Agreement dated as of December 18, 1997, providing for the
purchase by the Company, through a subsidiary, of all of the outstanding stock
of Tidewater Compression Service, Inc. (the "Acquisition"); and
WHEREAS, in connection with the Acquisition, CHI, CHP III and
the Company, among others, entered into a number of agreements; and
WHEREAS, the Company desires to offer shares of its common
stock, par value $.01 per share (the "Common Stock"), to the public in an
initial public offering (the "Offering") and, in connection with the Offering,
CHP and the Company desire to amend, modify or terminate certain of the
agreements between them and to evidence the other arrangements described herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
Section 1. Termination of Agreements. The parties agree that, effective upon the
closing of the Offering (the "Closing"), each of the following agreements shall
be terminated and shall be of no further force and effect, except as specfically
noted below:
(a) the Management Agreement dated as of February 20, 1998 by
and among the Company, CHI and Universal Compression, Inc. (a
subsidiary of the Company) (the "Management Agreement"), except with
respect to the indemnification provisions contained in Section 7 of the
Management Agreement shall continue in full force and effect and
subject to payment pursuant to Section 2 hereof; and
(b) the Voting Agreement by and among the Company, CHI and
Spectrum Energy Partners, LP.
Each of CHI and CHP III agrees to execute or cause the
execution of appropriate instruments of termination as the Company may request
with respect to the termination of the foregoing agreements.
Section 2. Amendment of Agreements. The parties agree to amend
the following agreements as described below:
<PAGE> 2
(a) the Voting Agreement dated as of February 20, 1998 by and
among the Company, CHP and certain stockholders of the Company shall be
amended as set forth in the First Amendment to Voting Agreement, the
form of which is attached hereto as Exhibit A;
(b) effective as of the Closing, each of Stephen Snider, Ernie
Danner and Newton Schnoor, shall be released as parties to the Voting
Trust Agreement dated as of February 20, 1998 by and among the Company,
certain of its stockholders and John K. Castle, as Voting Trustee, as
set forth in the Release of Parties to Voting Trust Agreement, the form
of which is attached hereto as Exhibit B; and
(c) effective as of the Closing, each of the Stockholders (as
such term is defined in the Voting Trust Agreement referred to in this
subsection (c)) other than John Peter LaBorde, John Tracy LaBorde,
Cliffe Floyd LaBorde, Gary Lee LaBorde, John Peter LaBorde, Jr. and
Mary Adrienne LaBorde Parsons (each of whom shall remain a party to
such Voting Trust Agreement), shall be released as parties to the
Voting Trust Agreement dated as of December 1, 1998 by and among the
Company, certain of its stockholders and John K. Castle, as Voting
Trustee, as set forth in the Release of Parties to Voting Trust
Agreement, the form of which is attached hereto as Exhibit C.
Section 3. Payment to CHP. In consideration of the early
termination of the Management Agreement (other than Section 7 thereof), within
three business days following the Closing, the Company shall (i) pay to CHI
$3,000,000 by wire transfer of immediately available funds and (ii) issue to CHI
the number of shares (the "Payment Shares") of the Company's Common Stock equal
to 3,000,000 divided by the initial public offering price per share of the
Common Stock in the Offering.
CHI acknowledges that the Payment Shares have not been, and
will not be, registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities law ("Blue Sky laws"), by reason of a
specific exemption from the registration provisions of the Securities Act and
the applicable Blue Sky laws and that any certificate representing the Payment
Shares will contain a restrictive legend to such effect. CHI further
acknowledges that, as such, the Payment Shares are characterized as "restricted
securities" under the Securities Act and that under the Securities Act and
applicable regulations, such Payment Shares may be resold without registration
under the Securities Act only in certain limited circumstances. In this
connection, CHI represents that it is familiar with Rule 144 promulgated under
the Securities Act, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.
Section 4. Nomination of Directors.
(a) Following the Closing, at any annual meeting of
stockholders of the Company for which the term of any of the three
directors of the Company affiliated with CHP expire (or in the event of
their earlier death or resignation), the Company agrees that it shall
nominate an individual designated by CHP (the "CHP Designee") to serve
in such
2
<PAGE> 3
individual's applicable class of the Company's Board of Directors for a
term ending on the third annual meeting following the meeting at which
such director was elected, such that CHP shall have the right to
designate an aggregate of three nominees for the Company's Board of
Directors; provided that, in the judgment of the Company's Board of
Directors, the applicable CHP Designee is reasonably qualified to serve
as a director; and provided further that following the Closing, Samuel
Urcis shall not be considered a CHP Designee. The Company further
agrees that following the Closing (i) if requested by CHP, it shall
increase the size of its Board of Directors to permit the initial
nomination of the third CHP Designee to Class C of the Company's Board
of Directors, which vacancy shall be filled by the Board at such time
as CHP may direct and which CHP Designee shall hold office for a term
expiring at the annual meeting of stockholders at which the term for
Class C directors expires and (ii) in any proxy statement of the
Company covering the election of a CHP Designee, the Company shall
recommend to its stockholders that they vote to elect such CHP
Designee.
(b) The obligations set forth in Section 4(a) above shall
terminate in the event that CHP and its affiliates collectively own
beneficially for purposes of Section 13(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), less than 15% of the
Company's outstanding Common Stock as evidenced by filings under the
Exchange Act.
(c) The parties agree that no directors' fees or other
compensation shall be payable by the Company to the CHP Designees by
reason of their service as members of the Board of Directors of the
Company or on any committee thereof, other than reimbursement for
reasonable out-of-pocket expenses incurred in connection with
attendance at meetings of the Board of Directors or any such committee.
Section 5. Release of Stock Certificates.
(a) Upon execution of this Agreement, each of CHI and CHP III
agrees to return or cause to be returned to the Company any
certificates representing shares of Common Stock, Non-Voting Common
Stock or Preferred Stock subject to the Voting Trust Agreements that
have been repurchased by the Company.
(b) Upon the Closing, each of CHI and CHP III agrees to return
or cause to be returned to the Company, for return to the appropriate
holders, all other certificates representing shares of Common Stock,
Non-Voting Common Stock or Preferred Stock held by parties released
from the various Voting Trust Agreements, as described in Section 2
hereof.
Section 6. Actions Effective Upon the Closing. Except as
otherwise set forth herein, the parties hereto intend that all actions to be
taken hereunder that are to be effective upon the Closing shall be taken
concurrently, and the completion of each such action, including the Closing, is
conditioned upon the completion of all such actions.
3
<PAGE> 4
Section 7. Reimbursement of Expenses. At or prior to the
Closing, CHP will submit to the Company for reimbursement receipts with respect
to all expenses incurred by it or its affiliates that are subject to
reimbursement under the Management Agreement as of the Closing. The Company
shall reimburse these expenses promptly following the Closing; provided that
there shall be no future reimbursement by the Company of expenses under the
Management Agreement other than those so submitted.
Section 8. Further Assurances. Each of the parties hereto
agrees to take all actions necessary, subject to any fiduciary duties of such
party, to effectuate the purposes and intent hereof and to permit the
fulfillment of the terms hereof and the taking of the actions contemplated
hereby.
Section 9. Term. In the event that the Closing shall not have
occurred on or before December 31, 2000, this Agreement shall terminate and be
of no further force and effect.
Section 10. Binding Effect. This Agreement shall inure to the
benefit of and shall bind the predecessors, successors, assigns, representatives
and beneficiaries of the parties, and each of them.
Section 11. Entire Agreement; Amendment. This Agreement and
the exhibit hereto constitute a single integrated contract expressing the entire
agreement of the parties hereto with respect to the subject matter hereof. All
prior discussions and negotiations between the parties, whether oral or written,
concerning the matters addressed in this Agreement shall be superseded by this
Agreement. Any amendment, modification, or supplement to this Agreement must be
in writing and signed by the parties hereto.
Section 12. Severability. In the event that any provision of
this Agreement should be held to be void, voidable or unenforceable, the
remaining provisions hereof shall remain in full force and effect.
Section 13. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which shall together constitute one and the same instrument.
Section 14. Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE SUBSTANTIVE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAW RULES.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written.
CASTLE HARLAN, INC.
By: John K. Castle
--------------------------------
Name: John K. Castle
--------------------------
Title:
-------------------------
CASTLE HARLAN PARTNERS III, L.P.
BY: CASTLE HARLAN, INC.,
ITS INVESTMENT MANAGER
By: John K. Castle
--------------------------------
Name: John K. Castle
--------------------------
Title:
-------------------------
UNIVERSAL COMPRESSION HOLDINGS, INC.
By: /s/ Ernie L. Danner
--------------------------------------
Name: Ernie L. Danner
--------------------------------
Title: Executive Vice President
-------------------------------
<PAGE> 1
EXHIBIT 10.14
FINDERS AND CONSULTING TERMINATION AGREEMENT
This Finders and Consulting Termination Agreement (this
"Agreement"), effective as of this 5th day of April, 2000, is made and entered
into by and among Samuel Urcis, an individual resident of the State of
California, S. Urcis & Company, a California corporation ("UrcisCo"), Universal
Compression, Inc., a Texas corporation ("UCI"), and Universal Compression
Holdings, Inc., a Delaware corporation (the "Company").
RECITALS:
WHEREAS, in consideration for finders' services rendered by
Mr. Urcis and UrcisCo in connection with the acquisition by the Company of all
of the outstanding stock of Tidewater Compression Service, Inc., the parties
hereto entered into a Finders and Consulting Agreement dated as of February 20,
1998 (the "Consulting Agreement") pursuant to which (i) Mr. Urcis was elected a
director of the Company and appointed Chairman of the Company's Executive
Committee, (ii) Mr. Urcis was paid a finder's fee of $1,750,000, $1,100,000 of
which was used to purchase shares of the Company's stock, (iii) Mr. Urcis was
granted options to purchase an additional 5,957 shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), (iv) Mr. Urcis and UrcisCo
agreed to perform consulting services for the Company for a period of five years
and (v) UCI agreed to pay to UrcisCo a consulting fee of $150,000 per year
during the term of the Consulting Agreement; and
WHEREAS, Section 5(b) of the Consulting Agreement provides
that the Consulting Agreement shall be terminated upon termination of the
Management Agreement dated as of February 20, 1998 between Castle Harlan, Inc.,
the Company and UCI (the "Management Agreement"); and
WHEREAS, the Company desires to offer shares of its Common
Stock, to the public in an initial public offering (the "Offering") and, in
connection with the Offering, the Management Agreement will be terminated
pursuant to that certain Master Transaction Agreement dated as of April 5, 2000;
and
WHEREAS, in connection with the termination of the Management
Agreement, the parties hereto desire to terminate the Consulting Agreement on
the terms and subject to the conditions set forth herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
Section 1. Termination of Consulting Agreement. The parties
agree that, effective upon and subject to the closing of the Offering (the
"Closing"), the Consulting Agreement shall hereby terminate and shall be of no
further force and effect. Mr. Urcis and UrcisCo agree to execute or cause the
execution of any appropriate instruments of termination as the Company or UCI
may request to further evidence the termination of the Consulting Agreement.
<PAGE> 2
Section 2. (a) Payment to Mr. Urcis. In consideration of the
termination of the Consulting Agreement and in lieu of any other amounts that
may be due under the Consulting Agreement, within three business days following
the Closing, the Company shall (i) pay to Mr. Urcis $150,000 by wire transfer of
immediately available funds and (ii) issue to Mr. Urcis the number of shares
(the "Payment Shares") of the Company's Common Stock equal to 150,000 divided by
the initial public offering price per share of the Common Stock in the Offering.
(b) Restricted Securities. Mr. Urcis acknowledges that the
Payment Shares have not been, and will not be, registered under the Securities
Act of 1933, as amended (the "Securities Act") or any state securities law
("Blue Sky law"), by reason of a specific exemption from the registration
provisions of the Securities Act and the applicable Blue Sky laws and that any
certificate representing the Payment Shares will contain a restrictive legend to
such effect. Mr. Urcis further acknowledges that, as such, the Payment Shares
are characterized as "restricted securities" under the Securities Act and that
under the Securities Act and applicable regulations such Payment Shares may be
resold without registration under the Securities Act only in certain limited
circumstances. In this connection, Mr. Urcis represents that he is familiar with
Rule 144 promulgated under the Securities Act, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
Section 3. Further Assurances. Each of the parties hereto
agrees to take all actions necessary to effectuate the purposes and intent
hereof and to permit the fulfillment of the terms hereof and the taking of the
actions contemplated hereby.
Section 4. Term. In the event that the Closing shall not have
occurred on or before December 31, 2000, this Agreement shall terminate and be
of no further force and effect.
Section 5. Binding Effect. This Agreement shall inure to the
benefit of and shall bind the predecessors, successors, assigns, representatives
and beneficiaries of the parties, and each of them.
Section 6. Entire Agreement; Amendment. This Agreement
expresses the entire agreement of the parties hereto with respect to the subject
matter hereof. All prior discussions and negotiations between the parties,
whether oral or written, concerning the matters addressed in this Agreement
shall be superseded by this Agreement. Any amendment, modification, or
supplement to this Agreement must be in writing and signed by the parties
hereto.
Section 7. Severability. In the event that any provision of
this Agreement should be held to be void, voidable or unenforceable, the
remaining provisions hereof shall remain in full force and effect.
Section 8. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
shall together constitute one and the same instrument.
2
<PAGE> 3
Section 9. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE SUBSTANTIVE LAWS OF THE STATE
OF NEW YORK, WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAW RULES.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
/s/ Samuel Urcis
-----------------------------------------
Samuel Urcis
S. URCIS & COMPANY
By: /s/ Samuel Urcis
--------------------------------------
Name: Samuel Urcis
--------------------------------
Title:
--------------------------------
UNIVERSAL COMPRESSION, INC.
By: /s/ Ernie L. Danner
--------------------------------------
Name: Ernie L. Danner
--------------------------------
Title: Executive Vice President
--------------------------------
UNIVERSAL COMPRESSION HOLDINGS, INC.
By: /s/ Ernie L. Danner
--------------------------------------
Name: Ernie L. Danner
--------------------------------
Title: Executive Vice President
--------------------------------
4
<PAGE> 1
EXHIBIT 10.19
REGISTRATION RIGHTS AGREEMENT
INSTRUMENT OF ACCESSION
The undersigned, Energy Spectrum Partners LP ("Energy"), as a condition
precedent to becoming the owner or holder of record of seventeen thousand two
hundred one (17,201) shares of Common Stock, par value $0.01 per share, of
Universal Compression Holdings, Inc., a Delaware corporation ("Holdings"), and
sixty eight thousand eight hundred four (68,804) shares of Preferred Stock, par
value $0.01 per share, of Holdings, hereby agrees to become a stockholder, party
to and bound by that certain Registration Rights Agreement, dated as of February
20, 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 Registration Rights 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.
ENERGY SPECTRUM PARTNERS LP
By: Energy Spectrum Capital LP,
its general partner
By: Energy Spectrum LLC,
its general partner
By: /s/ Leland B. White
-----------------------------------
Name: Leland B. White
Title: Vice President
Address For Notice:
c/o Energy Spectrum Partners LP
5956 Sherry Lane
Suite 900
Dallas, Texas 75225
Date: April 28, 2000
Acknowledged and agreed to this 28th day of April, 2000.
UNIVERSAL COMPRESSION HOLDINGS, INC.
By: /s/ Ernie L. Danner
------------------------------
Ernie L. Danner
Executive Vice President
<PAGE> 1
EXHIBIT 10.22
STOCKHOLDERS AGREEMENT
AMENDED AND RESTATED
INSTRUMENT OF ACCESSION
This AMENDED AND RESTATED INSTRUMENT OF ACCESSION (the "Instrument of
Accession"), is executed by Energy Spectrum Partners LP, a Delaware limited
partnership ("Energy"), and Universal Compression Holdings, Inc., a Delaware
corporation ("Holdings").
RECITALS
As of April 28, 2000 (the "Effective Date"), Energy executed and
delivered an Instrument of Accession (the "Original Instrument of Accession") as
a condition precedent to becoming the owner or holder of record of seventeen
thousand two hundred and one (17,201) shares of Common Stock, par value $0.01
per share, of Holdings and sixty eight thousand eight hundred and four (68,804)
shares of Preferred Stock, par value $0.01 per share, of Holdings.
Energy and Holdings hereby agree that the Original Instrument of
Accession is hereby amended and restated in its entirety as follows:
As of the Effective Date, Energy agrees to become a stockholder, party
to and bound by that certain Stockholders Agreement, dated as of February 20,
1998, by and among Holdings and certain stockholders of Holdings (the
"Stockholders Agreement"). In connection therewith, if Holdings shall not have
consummated a public offering of equity securities that are registered under the
Securities Act of 1933, as amended, prior to or on August 31, 2000, Holdings
hereby grants to Energy, from and after August 31, 2000, upon the terms and
conditions as set forth herein, the following Board of Directors observer rights
(the "Board Observer Rights"):
Energy 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 Energy 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. Energy 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
<PAGE> 2
to take any action by written consent in lieu of a meeting of its Board
of Directors, Holdings shall give written notice thereof to Energy
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 Observer Rights are exclusive to Energy
and are thereby not assignable by Energy under any circumstances. The
Board Observer Rights shall terminate concurrently with, and upon the
same terms and conditions, as the Board of Directors observer rights
set forth in Section 8.8 of the Stockholders Agreement.
This Amended and Restated Instrument of Accession shall be effective as
of the Effective Date and, except for the Board Observer Rights, shall be an
integral part of the Stockholders Agreement as of the Effective Date immediately
upon execution by the undersigned parties.
[Signature page follows.]
<PAGE> 3
IN WITNESS WHEREOF, this AMENDED AND RESTATED INSTRUMENT OF ACCESSION
has been duly executed by or on behalf of the undersigned parties as of this
22nd day of May, 2000.
ENERGY SPECTRUM PARTNERS LP
By: Energy Spectrum Capital LP,
its general partner
By: Energy Spectrum LLC
its general partner
By: /s/ LELAND B. WHITE
------------------------------------------
Name: Leland B. White
Title: Vice President
Address For Notice:
c/o Energy Spectrum Partners LP
5956 Sherry Lane
Suite 900
Dallas, Texas 75225
UNIVERSAL COMPRESSION HOLDINGS,
INC.
By: /s/ ERNIE L. DANNER
------------------------------------------
Name: Ernie L. Danner
Title: Executive Vice President
<PAGE> 1
EXHIBIT 10.30
STOCK OPTION AGREEMENT AND CONSENT TO AMENDMENT
THIS STOCK OPTION AGREEMENT AND CONSENT TO AMENDMENT, executed this
____ day of May, 2000, but effective as of April 20, 2000, by and between
UNIVERSAL COMPRESSION HOLDINGS, INC., a Delaware corporation ("Holdings") and
__________________ (the "Employee"), who is an Employee of Universal
Compression, Inc. ("Universal"), a wholly-owned subsidiary of Holdings.
WHEREAS, Holdings previously granted to the Employee, effective
____________, 1998, an option (the "Prior Option") to purchase ______ shares of
Holdings Common Stock, $.01 par value per share, (the "Common Stock") at $50 per
share pursuant to the Universal Compression Holdings, Inc. Incentive Stock
Option Plan (the "Plan");
WHEREAS, the terms and conditions of the Prior Option are set forth in
a stock option agreement dated ____________, 1998, (the "Prior Option
Agreement");
WHEREAS, pursuant to the terms of the Plan and in connection with the
proposed initial public offering of Common Stock, and a related change in
capitalization of Holdings if such offering is consummated, the Board of
Directors of Holdings (the "Board") may equitably adjust outstanding stock
options;
WHEREAS, the parties desire to amend the provisions of the Prior Option
Agreement regarding termination of employment, mode of exercise and
anti-dilution;
WHEREAS, effective April 20, 2000, Holdings amended Section 10 of the
Plan to modify the anti-dilution provision;
WHEREAS, Holdings proposes to amend, effective May 15, 2000, Section 10
of the Plan to modify the option price payment provision of such Section;
WHEREAS, Holdings has granted to the Employee an option to purchase
_______ shares of Common Stock at $________ per share (the "Exercise Price"),
pursuant to the terms and conditions of this Agreement and Consent in
consideration for services to Universal and the Employee's agreement and consent
to the amendment of the Prior Option Agreement and the Plan; and
WHEREAS, pursuant to Employee's execution of this Agreement and
Consent, the Employee agrees and consents to the amendment of the Prior Option
Agreement and Section 10 of the Plan;
<PAGE> 2
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties agree as follows:
I.
PRIOR OPTION AGREEMENT AMENDMENT
1. Sections 2(b)(ii) and (iii) of the Prior Option Agreement are
amended to provide as follows:
(ii) Termination of Employment Without Cause. In the
event Universal terminates Employee's employment without Cause (as
defined in the Plan), the Option shall terminate as of the date of
Employee's termination of employment except for the portion of the
Option which is exercisable as of the date of termination of
employment, which shall terminate 30 days following the date of such
termination of employment.
(iii) Termination of Employment for Cause or
Voluntary Resignation. In the event the Employee's employment with
Universal shall terminate for Cause (as defined in the Plan), or the
Employee voluntarily resigns his or her employment with Universal, the
Option, whether or not exercisable as of the date of termination of
employment, shall terminate in its entirety on the date of termination.
2. Section 4 of the Prior Option Agreement is amended to provide as
follows:
4. 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 Employee, such aggregate Exercise Price may be paid: (i)
in cash; (ii) with the consent of the Board of Directors of Holdings
(the "Board"), which consent may be given or withheld in its sole
discretion, by delivery of a promissory note to Holdings payable over a
three (3) year period and bearing interest at the prime rate; (iii)
with the consent of the Administrator of the Plan, which consent may be
given or withheld in its sole discretion, by delivery of shares of
Common Stock owned by the Employee having a Fair Market Value (as
determined by Section 7 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) with the consent of the Administrator of
the Plan, which consent may be given or withheld in its sole
discretion, by cancellation of a portion of the Option as determined by
the Administrator of the Plan.
2
<PAGE> 3
3. Section 8 of the Prior Option Agreement is amended to provide as
follows:
8. ADJUSTMENT. The number, class of and/or Exercise Price of
shares subject to the Option shall be adjusted by the Administrator of
the Plan to reflect a change in the capitalization of Holdings
resulting from a stock dividend or split, and may be adjusted by the
Administrator of the Plan to reflect a change in the capitalization of
Holdings resulting from a merger, consolidation, acquisition,
separation (including a spin-off or spin-out), reorganization or
liquidation; provided that the number of shares subject to the Option
shall always be a whole number. Notwithstanding the foregoing, the
issuance by Holdings of shares of any class or securities convertible
into shares of any class, for cash or property, or for labor or
services, either upon direct sale or upon exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or
obligations of Holdings convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to the shares subject to the Option.
II.
EMPLOYEE CONSENT TO PLAN AMENDMENT
1. The Employee hereby agrees and consents to the April 20, 2000
amendment to Section 10(h) of the Plan and the May 15, 2000 amendment to Section
10(d) of the Plan and the application of such Plan Sections, as amended, to the
Prior Option, the Option and any other options granted to the Employee under the
Plan.
2. As amended, Section 10(d) of the Plan will provide as follows:
(d) Payment of Option Price Upon Exercise. The purchase price
of the shares of Common Stock as to which an Option shall be exercised
shall be paid to the Corporation at the time of exercise: (i) in cash;
(ii) with the consent of the Board, by delivery of a promissory note to
the Corporation payable over a three (3) year period and bearing
interest at the prime rate; (iii) with the consent of the
Administrator, by delivery of shares of Common Stock owned by the
Participant having a Fair Market Value (as defined and determined by
Section 2 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) with the consent of the Administrator, by cancellation of
a portion of the Option as determined by the Administrator.
3. As amended, Section 10(h) of the Plan provides as follows:
(h) Adjustments. The aggregate number and/or class of shares
which may be available for the grant of Options and the number, class
of and/or option price of shares subject to outstanding Options shall
be adjusted by the Administrator to reflect a change in the
capitalization of the Corporation resulting from a stock dividend or
split, and may be adjusted by the Administrator to reflect
3
<PAGE> 4
a change in the capitalization of the Corporation resulting from a
merger, consolidation, acquisition, separation (including a spin-off or
spin-out), reorganization or liquidation; provided that the number of
shares subject to any Option shall always be a whole number.
Notwithstanding the foregoing, the issuance by the Corporation of
shares of any class or securities convertible into shares of any class,
for cash or property, or for labor or services, either upon direct sale
or upon exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Corporation convertible into
such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the shares authorized for
issuance under Section 4 or the shares subject to outstanding Options.
III.
NEW OPTION GRANT
1. GRANT OF NEW OPTION. Holdings grants to the Employee an option (the
"Option") to purchase _______ shares of Common Stock at $______ per share
effective as of April 20, 2000. The Option shall expire on December 31, 2000
unless on or before such date (a) the Employee executes this Agreement and
Consent and (b) there is an initial public offering of Common Stock. If both (a)
and (b) occur on or before December 31, 2000, the Option shall expire at 12:00
midnight on April 19, 2010, unless sooner terminated under the provisions
hereof. This Option is granted under the Plan, as amended April 20, 2000, a copy
of which is attached hereto as Exhibit "A" and is incorporated herein by
reference, and shall constitute an Incentive Stock Option under Section 422 of
the Internal Revenue Code of 1986, as amended, (the "Code") to the extent
permissible under Section 422(d) of the Code, and otherwise shall be a
Non-qualified Stock Option. All capitalized terms not otherwise defined in this
Agreement and Consent shall have the respective meaning of such terms as defined
in the Plan.
2. OPTION TERMS AND CONDITIONS.
(a) Exercise of Option. The Option shall become exercisable based on
the same vesting schedule and dates as set forth in Section 2(a) of the Prior
Option Agreement; provided, however, the Option shall become immediately
exercisable (except as provided in this sentence below) upon (i) a public
offering of Common Stock of Holdings, (ii) the acquisition by any Person, other
than an Affiliate of Castle Harlan Partners III, L.P. (as defined in the Plan)
of fifty-one percent (51%) or more of the Common Stock of Holdings, or (iii) a
sale of all or substantially all of the assets of Holdings; provided further
that, notwithstanding the foregoing, in no event may the Option be exercisable
prior to the later of: (x) the Employee's execution of this Agreement and
Consent and (y) an initial public offering of Common Stock, and if neither of
such events occurs on or before December 31, 2000, this Option shall terminate
as provided in Section 1 above.
(b) Termination of Employment.
(i) Termination due to Death, Disability or Retirement. In the
event the Employee's employment with Universal terminates on account of death,
Disability (as defined in
4
<PAGE> 5
the Plan) or retirement after age 65, the Option shall terminate as of the date
of Employee's termination of employment, except for the portion of the Option
which is exercisable as of the date of termination of employment, which shall
terminate three months following the date of Employee's death, disability or
retirement after age 65.
(ii) Termination of Employment Without Cause. In the event
Universal terminates Employee's employment without Cause (as defined in the
Plan), the Option shall terminate as of the date of Employee's termination of
employment except for the portion of the Option which is exercisable as of the
date of termination of employment, which shall terminate 30 days following the
date of such termination of employment.
(iii) Termination of Employment for Cause or Voluntary
Resignation. In the event the Employee's employment with Universal shall
terminate for Cause (as defined in the Plan), or the Employee voluntarily
resigns his or her employment with Universal, the Option, whether or not
exercisable as of the date of termination of employment, shall terminate in its
entirety on the date of termination.
3. NON-TRANSFERABILITY. No Option granted hereby and no right arising
thereunder shall be transferable other than by will or by the laws of descent
and distribution. During the lifetime of the Employee, the Option shall be
exercisable only by the Employee. If the Option is exercisable at the date of
the Employee's death and is transferred by will or by the laws of descent and
distribution, the Option shall be exercisable in accordance with the terms of
such Option by the executor or administrator, as the case may be, of the
Employee's estate for a period of three (3) months after the date of the
Employee's death and shall then terminate.
4. 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 Employee, such aggregate
Exercise Price may be paid: (i) in cash; (ii) with the consent of the Board,
which consent may be given or withheld in its sole discretion, by delivery of a
promissory note to Holdings payable over a three (3) year period and bearing
interest at the prime rate; (iii) with the consent of the Administrator of the
Plan, which consent may be given or withheld in its sole discretion, by delivery
of shares of Common Stock owned by the Employee having a Fair Market Value (as
determined by Section 5 below) equal in amount to the aggregate Exercise Price
of the Option being exercised; (iv) by any combination of (i), (ii) and (iii);
or (v) with the consent of the Administrator of the Plan, which consent may be
given or withheld in its sole discretion, by cancellation of a portion of the
Option as determined by the Administrator of the Plan.
5. FAIR MARKET VALUE OF COMMON STOCK. The "Fair Market Value" of the
Common Stock on any day shall be determined by the Board as follows: (i) if the
Common Stock is listed on a national securities exchange or quoted through the
NASDAQ National Market System, the Fair Market Value 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 Fair Market
5
<PAGE> 6
Value 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 Fair Market Value 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 Fair Market Value as may be determined by the Board or
the Administrator of the Plan, there being no obligation to make such
determination.
6. STOCK CERTIFICATES. 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, AS MAY BE AMENDED, 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."
In the event that the shares of Common Stock issued pursuant to the
Option are (i) registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to an effective registration statement which
complies with the then applicable regulations, rules and procedures and
practices of the Securities and Exchange Commission, and are registered and/or
qualified in accordance with any applicable state laws, regulations, rules and
administrative procedures practices, or (ii) transferred pursuant to an
exemption from registration under the Securities Act and, at the request of
Holdings, Holdings has received an executed legal opinion, satisfactory to its
counsel, as to the availability of and compliance with such exemption and that
such shares need not bear the restrictive legend stating that such shares have
not been registered under the Securities Act, Holdings may issue new
certificates representing such shares omitting that portion of such restrictive
legend.
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 February 20, 1998, among Holdings and the partners named
on the signature pages thereto, as amended from time to time (the "Stockholders
Agreement"). At the request of Holdings, the Employee shall become a party to
the Stockholders Agreement prior to the issuance of any shares under this
Agreement and Consent.
In the event the Stockholders Agreement terminates, certificates
representing the shares of Common Stock issued pursuant to the Option may be
issued omitting that portion of the
6
<PAGE> 7
restrictive legend stating that such shares are subject to the Stockholders
Agreement and the availability of a copy of such agreement.
7. 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 Employee, 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 Employee (or any person acting under
Section 3 above) 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 Employee or such other person to purchase any
shares.
8. BUYBACK RIGHT. Upon any termination of the employment of the
Employee prior to a public offering of Common Stock, Holdings or its designee
may at its option purchase all Common Stock acquired upon any exercise of the
Option then held by the Employee for a purchase price equal to the determined
value of such stock at the time of purchase. For purposes of this Section 8,
"determined value" shall mean the determined value of the shares of Common Stock
being purchased by Holdings pursuant to this Section 8, such value to be
determined annually as of March 31 of each year by a nationally recognized
investment banking or appraisal firm selected by Holdings. This valuation will
serve as the determined value for the shares until the next valuation unless the
Board determines that a significant change in Holdings performance or prospects
requires a revaluation of the shares.
The purchase by Holdings pursuant to this Section 8 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.
9. NO RIGHTS AS STOCKHOLDER 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 Employee is recorded
as the holder of such shares on the records of Holdings.
7
<PAGE> 8
10. NO RIGHTS WITH RESPECT TO CONTINUANCE OF EMPLOYMENT. Neither the
grant of the Option nor any action taken with respect thereto shall be construed
as giving the Employee the right to be retained in the employ of Universal or
any subsidiary or affiliate, nor shall it interfere in any way with the right of
Universal or any such subsidiary or affiliate to terminate any Employee's
employment at any time for any reason, or for no reason at all.
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 and Consent; (ii) deducting
the amount of any such withholding taxes from any other amount then or
thereafter payable to the Employee; or (iii) requiring the Employee, 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 and Consent shall be governed and
construed in accordance with the laws of the State of Delaware applicable to
contract made and to be performed entirely within such state.
13. COUNTERPARTS. This Agreement and Consent 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 and Consent to produce or account for more than
one such counterpart.
14. 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:
8
<PAGE> 9
(i) if to Holdings, at:
Universal Compression Holdings, Inc.
4440 Brittmoore Road
Houston, Texas 77041-8004
Attention: Richard FitzGerald, C.F.O.
Telecopier No.: (713) 466-6720
with a copy to:
Universal Compression, Inc.
4440 Brittmoore Road
Houston, Texas 77041-8004
Attention: Valerie L. Banner, General Counsel
Telecopier No.: (713) 466-6720
(ii) if to Employee, to him or her at:
Universal Compression, Inc.
4440 Brittmoore Road
Houston, Texas 77041-8004
15. HEADINGS. The headings in this Agreement and Consent are for
convenience of reference only and shall not in any manner define or limit the
scope or intent of any provisions of this Agreement and Consent.
16. SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement and Consent, 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
and Consent shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
17. SPECIFIC PERFORMANCE. Each of the parties hereto acknowledges and
agrees that in the event of any breach of this Agreement and Consent, 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 and Consent 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.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement and Consent effective as of the day and
year first above mentioned.
9
<PAGE> 10
EMPLOYEE
By:
-----------------------------------------
[NAME OF EMPLOYEE]
UNIVERSAL COMPRESSION HOLDINGS, INC.
By:
-----------------------------------------
Stephen A. Snider
President and Chief Executive Officer
10
<PAGE> 1
EXHIBIT 10.39
SECOND AMENDMENT
SECOND AMENDMENT TO THE CREDIT AGREEMENT (this "Amendment"),
dated as of April 14, 2000, among UNIVERSAL COMPRESSION HOLDINGS, INC.
("Holdings"), UNIVERSAL COMPRESSION, INC. (the "Borrower"), various lenders
party to the Credit Agreement referred to below (the "Banks") and BANKERS TRUST
COMPANY, as Agent (the "Agent"). All capitalized terms used herein and not
otherwise defined herein shall have the respective meanings provided such terms
in the Credit Agreement referred to below.
WITNESSETH:
WHEREAS, Holdings, the Borrower, the Banks and the Agent are
parties to a Credit Agreement, dated as of February 20, 1998 (as amended,
modified or supplemented to, but not including, the date hereof, the "Credit
Agreement");
WHEREAS, Holdings and the Borrower have requested that the
Banks waive certain provisions of the Credit Agreement as herein provided and
the Banks have agreed to such waivers to the extent provided herein; and
WHEREAS, the parties hereto wish to amend the Credit Agreement
as herein provided;
NOW, THEREFORE, it is agreed:
1. Section 9.05 of the Credit Agreement is hereby amended by
(x) deleting the text "and" appearing at the end of clause (x) of said Section,
(y) deleting the period at the end of clause (xi) of said Section and inserting
the text "; and" in lieu thereof and (z) inserting the following new clause
(xii) at the end of said Section.
"(xii) the Borrower and its Subsidiaries may effect Permitted
Section 9.02(viii) Acquisitions in accordance with the requirements of
Section 9.02(viii)."
2. Pursuant to Section 9.14 of the Credit Agreement, and
subject to the provisions of Section 9.02(viii) of the Credit Agreement, the
Banks party hereto hereby authorize:
(i) the acquisition of 100% of the capital stock of Spectrum
Rotary Compression Inc. by the Borrower as described in the Form S-1
Registration Statement filed by Holdings with the Securities and
Exchange Commission on April 5, 2000, provided that, within 60 days
after the closing of such acquisition, Holdings and the Borrower shall
cause Spectrum Rotary Compression Inc. to either (x) merge into the
Borrower or any Subsidiary Guarantor or (y) execute and deliver to the
Agent, (I) a counterpart of the Subsidiaries Guaranty in the form of
Exhibit I to the Credit Agreement, (II) counterparts of the Pledge
Agreement and Security Agreement and (III) an officer's certificate,
- 1 -
<PAGE> 2
together with Exhibits A, B and C thereto, in the form of Exhibit F to
the Credit Agreement; and
(ii) the formation of Universal Compression de Mexico SA de CV
and a second entity, both Wholly-Owned Subsidiaries of the Borrower
organized under the laws of Mexico, in connection with the sale and/or
leasing, operations and servicing of compressors in Mexico.
In addition, the Banks hereby waive the provision of Section 9.14 requiring
prior written consent of the Required Banks solely inasmuch as such provision
relates to the acquisition and/or formation of the new Subsidiaries described
above in this paragraph 2.
3. In order to induce the Banks to enter into this Amendment,
Holdings and the Borrower hereby represent and warrant that (i) no Default or
Event of Default exists on the Second Amendment Effective Date (as defined
below), both before and after giving effect to this Amendment, and (y) on the
Second Amendment Effective Date, and both before and after giving effect to this
Amendment, all representations and warranties contained in the Credit Agreement
and in the other Credit Documents are true and correct in all material respects
as though such representations and warranties were made on the Second Amendment
Effective Date (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 date).
4. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision (or of
any provision beyond the specific waivers granted herein with respect to such
provision) of the Credit Agreement or any other Credit Document.
5. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A complete set
of counterparts shall be delivered to the Borrower and the Agent.
6. THIS AMENDMENT 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.
7. This Amendment shall become effective on the date (the
"Second Amendment Effective Date") when Holdings, the Borrower and the Required
Banks shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Agent at the Notice Office.
8. From and after the Second Amendment Effective Date, all
references in the Credit Agreement and each of the other Credit Documents to the
Credit Agreement shall be deemed to be references to the Credit Agreement as
amended hereby.
* * *
- 2 -
<PAGE> 3
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
UNIVERSAL COMPRESSION HOLDINGS, INC.
By: /s/ RICHARD W. FITZGERALD
------------------------------------------
Name: Richard W. FitzGerald
Title: Senior Vice President and
Chief Financial Officer
UNIVERSAL COMPRESSION, INC.
By: /s/ RICHARD W. FITZGERALD
------------------------------------------
Name: Richard W. FitzGerald
Title: Senior Vice President and
Chief Financial Officer
BANKERS TRUST COMPANY,
Individually and as the Agent
By: /s/ MARCUS M. TARKINGTON
------------------------------------------
Name: Marcus H. Tarkington
Title: Director
[BANK OF SCOTLAND
By: /s/ ANNIE GLYNN
------------------------------------------
Name: Annie Glynn
Title: Senior Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/
------------------------------------------
Name:
Title: Senior Vice President
- 3 -
<PAGE> 4
BANK ONE, LOUISIANA, N.A. AS SUCCESSOR TO
FIRST NATIONAL BANK OF COMMERCE
By: /s/ J. CHARLES FREEL, JR.
------------------------------------------
Name: J. Charles Freel, Jr.
Title: First Vice President
FIRST UNION NATIONAL BANK
By: /s/ ROBERT R. WETTEROFF
------------------------------------------
Name: Robert R. Wetteroff
Title: Senior Vice President
ABN AMRO BANK N.V.
By: /s/ DEANNA BRELAND
------------------------------------------
Name: Deanna Breland
Title: Vice President
By: /s/ FRANK R. RUSSO, JR.
------------------------------------------
Name: Frank R. Russo, Jr.
Title: Vice President
BANQUE PARIBAS
By: /s/ MARIAN LIVINGSTON
------------------------------------------
Name: Marian Livingston
Title: Vice President
By: /s/ BETSY JOCHER
------------------------------------------
Name: Betsy Jocher
Title: Vice President
- 4 -
<PAGE> 5
WELLS FARGO BANK (TEXAS)
NATIONAL ASSOCIATION
By: /s/ SPENCER N. SMITH
------------------------------------------
Name: Spencer N. Smith
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ RICHARD P. DEGREY
------------------------------------------
Name: Richard P. DeGrey
Title: Vice President
SOCIETE GENERALE,
SOUTHWEST AGENCY
By: /s/ MARK A. COX
------------------------------------------
Name: Mark A. Cox
Title: Director
THE BANK OF NOVA SCOTIA]
By: /s/ F.C.H. ASHBY
------------------------------------------
Name: F.C.H. Ashby
Title: Senior Manager Loan Operation
FLEET NATIONAL BANK
By: /s/ PAULINE SO
------------------------------------------
Name: Pauline So
Title: Assistant Vice President
INDOSUEZ CAPITAL FUNDING IIA, LIMITED
By: INDOSUEZ CAPITAL AS PORTFOLIO ADVISOR
By: /s/ MELISSA MARANO
------------------------------------------
Name: Melissa Marano
Title: Vice President
VAN KAMPEN SENIOR INCOME TRUST
By: /s/ DARVIN D. PIERCE
------------------------------------------
Name: Darvin D. Pierce
Title: Vice President
- 5 -
<PAGE> 1
EXHIBIT 10.41
PARTICIPATION AGREEMENT
among
UNIVERSAL COMPRESSION, INC.
as Lessee
UNIVERSAL COMPRESSION HOLDINGS, INC.
as Guarantor
WILMINGTON TRUST COMPANY,
not in its individual capacity but as Trustee of
UNIVERSAL COMPRESSION TRUST (2000-1)
under the Trust Agreement dated as of May __, 2000,
as Lessor
WILMINGTON TRUST COMPANY,
in its individual capacity,
as Trust Company
DEUTSCHE BANK AG, NEW YORK BRANCH and the
financial institutions listed on the signature pages
hereof
or that may hereafter become party hereto,
as Certificate Holders
BANKERS TRUST COMPANY
as Administrative Agent
BANKERS TRUST COMPANY
as Collateral Agent
and
the other financial institutions listed
on the signature pages hereof or that may
hereafter become party hereto as Lenders
May __, 2000
--------------------------------
UNIVERSAL COMPRESSION, INC.
NATURAL GAS COMPRESSOR EQUIPMENT
FINANCING FACILITY
--------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions and Usage....................................................................................2
2. Representations and Warranties...........................................................................2
2.1. Lessee Representations and Warranties...........................................................2
2.2. Further Lessee Representations and Warranties...................................................4
2.3. Guarantor Representations and Warranties........................................................5
2.4. Lessor Representations and Warranties For Benefit of All Parties...............................12
2.5. Lessor Representations and Warranties For Benefit of Lenders, Certificate Holders, the
Administrative Agent and the Collateral Agent..................................................13
2.6. Further Lessor Representations and Warranties For Benefit of Lenders, Certificate
Holders, the Administrative Agent and the Collateral Agent.....................................14
2.7. Trust Company Representations and Warranties...................................................14
2.8. Warranty Disclaimers...........................................................................16
3. Conditions Precedent....................................................................................17
3.1. Lessor Conditions..............................................................................17
(a) Conditions Precedent to the Closing Date..............................................17
(b) Conditions Precedent to each Funding Date.............................................18
(c) Lessor Conditions to the Funding Date for each Sale/Leaseback.........................20
(d) Lessor Conditions to the First Funding Date for an Item of Equipment to be
Assembled.............................................................................20
(e) Lessor Conditions to each Funding Date for an Item of Equipment to be Assembled.......20
(f) Lessor Conditions for Final Funding Date for an Assembled Item of Equipment...........21
3.2. Lender Conditions..............................................................................21
(a) Lender Conditions on the Closing Date.................................................21
(b) Lender Conditions for each Funding Date...............................................22
3.3. Certificate Holders Conditions.................................................................23
(a) Certificate Holder Conditions on the Closing Date.....................................23
(b) Certificate Holder Conditions for each Funding Date...................................24
4. Commitments.............................................................................................25
4.1. Certificate Holder Commitments.................................................................25
4.2. Lender Commitment..............................................................................25
4.3. Lessor Commitment to Purchase..................................................................26
4.4. Lessor Commitment to Reimburse Component Costs.................................................26
4.5. Lessor and Administrative Agent Acceptance of Equipment........................................26
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.6. Lease Agreement Supplements....................................................................26
4.7. Rights in Equipment............................................................................26
4.8. Funding Dates..................................................................................26
5. Selection of Lease Payment Period.......................................................................27
6. Default Purchase Options and Cure Rights................................................................27
6.1. Right to Cure Certain Lease Events of Default..................................................27
6.2. Certificate Holders Default Purchase Option....................................................28
7. Security................................................................................................29
7.1. Security Interest..............................................................................29
7.2. Further Assurances.............................................................................30
7.3. Termination....................................................................................31
7.4. Other Security.................................................................................31
7.5. Power of Attorney..............................................................................31
7.6. Assignment of Rights...........................................................................32
7.7. Transfer of the Collateral by the Collateral Agent.............................................32
7.8. No Segregation of Monies; No Interest..........................................................32
7.9. Distribution of Moneys.........................................................................32
(a) Scheduled and End of Term Payments........................................................32
(b) Partial Prepayments.......................................................................33
7.10. Payments after a Loan Event of Default.........................................................33
7.11. Application of Certain Other Payments..........................................................34
7.12. Other Payments.................................................................................34
7.13. Retention of Amounts by the Collateral Agent...................................................34
7.14. Conflicts......................................................................................34
8. Guaranty................................................................................................34
9. Covenants...............................................................................................36
9.1. Lessor Covenants...............................................................................36
9.2. Trust Company Covenants........................................................................38
9.3. Certificate Holders Covenants..................................................................38
9.4. Lender and Collateral Agent Covenant...........................................................39
9.5. Lessee and Guarantor Covenants.................................................................39
(a) Information Covenants.................................................................39
(b) Books, Records and Inspections........................................................41
(c) Compliance with Statutes, etc.........................................................41
(d) Compliance with Environmental Laws....................................................41
(e) ERISA.................................................................................42
(f) Performance of Obligations............................................................44
(g) Payment of Taxes......................................................................44
(h) Liens.................................................................................44
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
(i) Consolidation, Merger, Purchase or Sale of Assets, etc................................46
(j) Dividends.............................................................................49
(k) Indebtedness..........................................................................50
(l) Transactions with Affiliates..........................................................51
(m) Consolidated Adjusted EBITDAR to Total Interest Expense...............................52
(n) Maximum Leverage Ratio................................................................53
(o) Maximum Senior Secured Leverage Ratio.................................................54
(p) Business..............................................................................56
(q) Public Utility Holding Company........................................................56
(r) Special Purpose Corporation...........................................................57
(s) Corporate Existence, etc..............................................................58
(t) Punctual Payment......................................................................59
(u) Perfection and Maintenance of Security Interest.......................................59
(v) Default and Cross Default on Material Debt............................................59
(w) Change in Corporate Offices...........................................................59
(x) Use of ERISA Assets...................................................................59
(y) Payment of Administrative Fee.........................................................59
9.6. Covenant of Lenders, Lessor, the Administrative Agent, Collateral Agent, Trust Company
and Certificate Holders........................................................................61
10. Indemnities.............................................................................................62
10.1. Lessee General Indemnification.................................................................62
10.2. Exceptions to Lessee's General Indemnification.................................................64
10.3. Tax Indemnity..................................................................................65
10.3.1. General Indemnity.....................................................................65
10.3.2. Exceptions to Tax Indemnity...........................................................65
10.3.3. Payment of Taxes......................................................................66
10.3.4. Tax Filings...........................................................................67
10.3.5. Withholdings..........................................................................67
10.3.6. Tax Contests..........................................................................68
10.3.7. Tax Indemnification for Loan Recharacterization.......................................70
10.3.8. Special Tax Indemnity.................................................................71
10.4. Increased Costs, Illegality, etc...............................................................71
10.5. Lessee Indemnity...............................................................................73
10.6. Survival.......................................................................................73
11. Administrative Agent and Collateral Agent...............................................................73
11.1. Authorization and Action of Administrative Agent...............................................73
11.2. Delegation of Duties...........................................................................75
11.3. Agent's Reliance, etc..........................................................................75
11.4. Administrative Agent, Collateral Agent and Affiliates..........................................75
11.5. Lender and Certificate Holder Credit Decision..................................................75
11.6. Indemnification................................................................................76
11.7. Successor Administrative Agent and Collateral Agent; Termination of Agency.....................77
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
11.8. Registration of Notes and Certificates.........................................................77
11.9. Administrative Agency Fee......................................................................77
12. Miscellaneous...........................................................................................78
12.1. Expenses.......................................................................................78
12.2. Amendments.....................................................................................78
12.3. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL.........................79
12.4. Notices........................................................................................80
12.5. Interests in the Equipment.....................................................................81
12.6. Descriptive Headings, etc......................................................................82
12.7. Benefit of Agreement; Assignment...............................................................82
12.8. Execution and Effectiveness....................................................................85
12.9. Confidentiality................................................................................85
12.10. Survival.......................................................................................85
12.11. Severability...................................................................................85
12.12. No Broker......................................................................................85
12.13. Performance by Lenders and Certificate Holders; Replacement of Lenders; Replacement of
Certificate Holders............................................................................86
12.14. Limited Recourse Against Certificate Holders and Trust Company.................................87
12.15. Concerning Lessor..............................................................................87
12.16. Currency Indemnity.............................................................................88
12.17. Consent and Agreement of Lessee and Guarantor..................................................88
</TABLE>
(iv)
<PAGE> 6
EXHIBITS AND SCHEDULES
SCHEDULE 1 Description of Equipment
SCHEDULE 2 Pricing Grid
SCHEDULE 3 Lender Commitments
SCHEDULE 4 Lenders' and Certificate Holders' Notice Addresses, Payment
Instructions and Responsible Officers
SCHEDULE 5 Liens
SCHEDULE 6 Indebtedness
SCHEDULE 7 Subsidiaries
SCHEDULE 8 Insurance
SCHEDULE 9 ERISA Plans
EXHIBIT A [Form of] Bill of Sale and Receipt
EXHIBIT B-1 [Form of] Certificate of Sale/Leaseback Equipment Relating to
Lease Agreement Supplement No. __
EXHIBIT B-2 [Form of] Certificate of Equipment for Items of Equipment to
Be Assembled Relating to Lease Supplement No. __
EXHIBIT C [Form of] Funding Notice and Instructions re Funds on Funding
Date
EXHIBIT D [Form of] Completion Certificate
(v)
<PAGE> 7
This PARTICIPATION AGREEMENT, dated as of May __, 2000 (together with all
amendments and supplements hereto, this "Agreement") is among UNIVERSAL
COMPRESSION, INC., a Texas corporation (together with its successors and
permitted assigns, "Lessee"), UNIVERSAL COMPRESSION HOLDINGS, INC., a Delaware
corporation (together with its successors and permitted assigns, "Guarantor"),
WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual
capacity but solely as Trustee of UNIVERSAL COMPRESSION TRUST (2000-1) under the
Trust Agreement dated as of May __, 2000 (the "Lessor") and in its individual
capacity, but only where so specified (together with its successors and
permitted assigns, "Trust Company"), DEUTSCHE BANK AG, NEW YORK BRANCH, and the
financial institutions listed on the signature pages hereof or that may
thereafter become party hereto as Certificate Holders (each a "Certificate
Holder" and collectively the "Certificate Holders"), BANKERS TRUST COMPANY, as
Administrative Agent (in such capacity, together with its successors and
permitted assigns in such capacity, the "Administrative Agent") and BANKERS
TRUST COMPANY, as Collateral Agent (in such capacity, together with its
successors and permitted assigns in such capacity, the "Collateral Agent") and
each of the financial institutions listed on the signature pages hereof or that
may hereafter become party hereto as lenders (the "Lenders").
W I T N E S S E T H:
WHEREAS, Lessor has agreed to acquire certain natural gas compressor
equipment from Lessee and pursuant to the Assembly Agency Agreement of even date
herewith between Lessor and Lessee (the "Assembly Agency Agreement"), Lessee and
Lessor have agreed that Lessee will act as Assembly Agent and supervise the
acquisition, construction and assembly of additional natural gas compressor
equipment on behalf of Lessor;
WHEREAS, Lessor has agreed to lease to Lessee such natural gas compressor
equipment pursuant to a Master Equipment Lease Agreement of even date herewith
between Lessee and Lessor (the "Lease Agreement");
WHEREAS, Lenders have agreed to make a loan or loans to Lessor subject to
the conditions, restrictions and limitations in this Agreement and in the Loan
Agreement dated as of May ___, 2000, among Lessor, the Lenders, the Collateral
Agent and the Administrative Agent (the "Loan Agreement"), for the purpose of
financing Lessor's acquisition of the natural gas compressor equipment to be
leased under the Lease Agreement;
WHEREAS, Lessee is a subsidiary of Guarantor, and to induce Lessor to lease
the natural gas compressor equipment to Lessee and to induce Lenders to make a
loan or loans to Lessor, Guarantor has agreed to guarantee certain of Lessee's
obligations under the Operative Documents;
WHEREAS, to induce Lenders to make a loan or loans to Lessor, Lessor has
agreed to provide Collateral Agent on behalf of Lenders certain security in
accordance with the terms of the Loan Agreement;
<PAGE> 8
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, the parties hereto agree as follows:
1. Definitions and Usage.
Unless the context otherwise requires, capitalized terms used herein and
not otherwise defined herein shall have the meanings set forth or referred to in
Appendix A.
2. Representations and Warranties.
2.1. Lessee Representations and Warranties. Lessee hereby represents and
warrants as of the date hereof and on each Funding Date for the benefit of each
other party hereto that:
(a) Lessee (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 Lessee's ability to perform its
obligations under the Operative Documents or on the business, operations,
property, assets, liabilities, condition (financial or otherwise) or prospects
of Guarantor and its Subsidiaries taken as a whole.
(b) Lessee has the corporate power and authority to execute, deliver and
perform the terms and provisions of each of the Operative Documents to which it
is party and has taken all necessary corporate action to authorize the
execution, delivery and performance by it of each of such Operative Documents.
Lessee has duly executed and delivered each of the Operative Documents to which
it is party, and each of such Operative 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).
(c) Neither the leasing of the Equipment, the execution, delivery or
performance by Lessee of the Operative 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 (other than Permitted Liens) upon any of the property or
assets of Lessee pursuant to the terms of any indenture, mortgage, deed of
1trust, credit agreement or loan agreement, or any other material agreement,
contract or instrument, to which Lessee is a party or by which it or any of its
property
-2-
<PAGE> 9
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 Lessee.
(d) No order, consent, approval, license, authorization or validation of,
or filing, recording or registration with (other than the filing of the Lessee
Financing Statements and except as have otherwise been obtained or made on or
prior to the Closing 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 by Lessee of any
Operative Document to which it is a party or (ii) the legality, validity,
binding effect or enforceability against Lessee of any such Operative Document.
(e) There is no action, suit or other proceeding pending or, to the best
knowledge of Lessee's, threatened, (i) with respect to the Revolver or the
transaction contemplated herein 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 Lessee and its
Subsidiaries taken as a whole.
(f) No Lease Default has occurred and is continuing.
(g) All representations and warranties of Lessee (or its predecessors in
interest) set forth in the other Operative 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 each Funding Date as 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.
(h) Lessee's chief executive office is located at 4440 Brittmoore Road,
Houston, Texas 77041 and its principal place of business is located at
[ ].(1)
(i) Tax Registration. The transaction contemplated hereby (i) is not
required to be registered pursuant to Code Section 6111 or any regulation
promulgated thereunder or (ii) was properly and timely registered in accordance
with Code Section 6111 and any regulations promulgated thereunder and the
correct registration number was provided to the parties hereto.
2.2. Further Lessee Representations and Warranties. Lessee hereby
represents and warrants as of each Funding Date for the benefit of each other
party hereto that:
(a) For each Item of Equipment sold by Lessee to Lessor, immediately prior
to giving effect to the sale thereof to Lessor, Lessee has good and marketable
title to such Item of Equipment.
- ------------------------
1 SRZ to provide.
-3-
<PAGE> 10
(b) For each Component sold by Lessee to Lessor or purchased by Lessee on
behalf of Lessor in accordance with the Assembly Agency Agreement, at the time
of such sale or purchase and on the Funding Date for such Component, Lessor has
good and marketable title to such Component.
(c) On the last Funding Date for the reimbursement of the Component Costs
for an Item of Equipment assembled by Lessee on behalf of Lessor in accordance
with the Assembly Agency Agreement, Lessor has good and marketable title to such
Item of Equipment.
(d) There are no Liens other than Permitted Liens and Lessor Liens on any
Item of Equipment, any Component, the proceeds of any Item of Equipment or
Component or the insurance required under the Lease Agreement.
(e) Each Item of Equipment is personal property and not a fixture attached
to realty under Applicable Law, and each Item of Equipment has permanently
affixed thereto the serial number or other identification number set forth
therefor on the Lease Agreement Supplement for such Item.
(f) For each Item of Equipment, Lessor and the Collateral Agent shall be
entitled to all of the rights and benefits and priorities provided to a holder
of a perfected first priority Lien under Applicable Law, and on each Funding
Date, all recordations and filings shall have been accomplished in each
jurisdiction as may be required by law to establish and perfect Lessor's and the
Collateral Agent's respective rights in and to such Lessee Collateral or Lessor
Collateral, as the case may be, and any giving of notice or any other action to
such end required by Applicable Law has been given or taken.
(g) The provisions of this Agreement are effective to create in favor of
the Collateral Agent for the benefit of the Lenders a legal, valid and
enforceable security interest in all right, title and interest in the Lessor
Collateral, and the filing of the financing statements executed by Lessor as
debtor with the Secretary of State for the state of Delaware perfects such
security interest in the Lessor Collateral, subject to no Liens other than
Permitted Liens and Lessor Liens and the Collateral Agent shall be entitled to
all of the rights, benefits, and priorities provided to a holder of liens of
such type under Applicable Law.
(h) Lessee has delivered to Lessor a true, correct and complete Certificate
of Equipment for each Item of Equipment.
(i) With respect to Items of Equipment assembled by Lessee on behalf of
Lessor pursuant to the Assembly Agency Agreement, payment in full has been made
by or on behalf of Lessee or Lessor to the vendor of the natural gas engine, the
compressor and the air cooler for such Item of Equipment.
(j) Each Item of Equipment sold by Lessee to Lessor (other than Items for
which Lessee has delivered to Lessor and the Administrative Agent at least five
(5) Business Days prior to such funding an Appraisal confirming that the fair
market value of such Item is
-4-
<PAGE> 11
greater that or equal to the Acquisition Cost therefor) at the time of such sale
shall have a Date of Manufacture or a Date of Overhaul no earlier than five (5)
years prior to such Funding Date.
(k) Each Item of Equipment bears a plaque stating "This Equipment is leased
by Universal Compression, Inc. from Universal Compression Trust (2000-1) and is
subject to a security interest in favor of Bankers Trust Company for the benefit
of the Lenders to Universal Compression Trust (2000-1)".
(l) Each Item of Equipment, other than Items of Equipment made subject to
the Lease Agreement prior to such Funding Date, is in proper working order.
(m) No Event of Loss or event which with the passage of time would become
an Event of Loss has occurred with respect to any Item of Equipment or any
Component funded on such Funding Date.
(n) As of the Closing Date, and as of each Funding Date, (i) no Item of
Equipment is intended by Lessee to be "equipment used in farming operations" or
"mobile goods" as such terms are used in Sections 9-401 and 9-103(3),
respectively of the New York Uniform Commercial Code or any correlative
provision of any other applicable state's Uniform Commercial Code and, (ii) no
Item of Equipment shall be "goods covered by a certificate of title issued under
a statute of this state or of another jurisdiction under the law of which
indication of a security interest on the certificate is required as a condition
of perfection" within the meaning of Section 9-103 of the New York Uniform
Commercial Code or any correlative provision of any other applicable state's
Uniform Commercial Code.
2.3. Guarantor Representations and Warranties. Guarantor hereby represents
and warrants as of the date hereof and on each Funding Date for the benefit of
each party hereto that:
(a) Guarantor (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 Guarantor and its Subsidiaries taken as a whole.
(b) Guarantor has the corporate power and authority to execute, deliver and
perform the terms and provisions of each of the Operative Documents to which it
is party and has taken all necessary corporate action to authorize the
execution, delivery and performance by it of each of such Operative Documents.
Guarantor has duly executed and delivered each of the Operative Documents to
which it is party, and each of such Operative 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,
-5-
<PAGE> 12
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).
(c) Neither the execution, delivery or performance by Guarantor of the
Operative 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
(other than Permitted Liens) upon any of the property or assets of Guarantor 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 Guarantor or any of its Subsidiaries 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 Guarantor or any of its Subsidiaries.
(d) No order, consent, approval, license, authorization or validation of,
or filing, recording or registration with (except as have otherwise been
obtained or made on or prior to the Closing 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 by Guarantor of any Operative Document to which it is a
party or (ii) the legality, validity, binding effect or enforceability against
Guarantor of any such Operative Document.
(e) The audited consolidated balance sheets of Guarantor and its
Subsidiaries for the fiscal years ended on March 31, 1999 and March 31, 2000 and
the related statements of income, cash flows and shareholders' equity of
Guarantor and its Subsidiaries for the fiscal years ended on such dates, which
annual financial statements have been examined by Deloitte & Touche LLP,
certified public accountants, who delivered an unqualified opinion with respect
thereto and copies of which have heretofore been delivered to each Lender,
Certificate Holder and the Administrative Agent, present fairly in all material
respects the financial position of Guarantor and its Subsidiaries at the date of
such balance sheets and the results of the operations of Guarantor and its
Subsidiaries for the periods covered thereby. 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 Guarantor and its Subsidiaries as of March 31, 2000, in each case
after giving effect to the Guarantor IPO, the Repurchase and the transactions
contemplated by the Operative Documents, copies of which have been furnished to
the Lenders, the Certificate Holders and the Administrative Agent prior to the
date hereof, present fairly in all material respects the pro forma consolidated
financial position of Guarantor and its Subsidiaries as of March 31, 2000. After
giving effect to the Guarantor IPO, the Repurchase, the Revolver and the
transactions contemplated by the Operative Documents, since March 31, 2000,
there has been no material adverse change in the business, operations, property,
assets, liabilities, condition (financial or otherwise) or prospects of Lessee
or of Guarantors and its Subsidiaries taken as a whole.
-6-
<PAGE> 13
(f) On and as of the Closing Date and after giving effect to the Guarantor
IPO, the Repurchase, the Revolver and the transactions contemplated by the
Operative Documents and to all Indebtedness (including any Loans) being incurred
or assumed and Liens created by Lessee and Guarantor in connection therewith (i)
the sum of the assets, at a fair valuation, of each of Lessee on a stand-alone
basis and of Guarantor and its Subsidiaries taken as a whole will exceed its
debts; (ii) each of Lessee on a stand-alone basis and Guarantor 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 Lessee on a stand-alone basis and
Guarantor and its Subsidiaries taken as a whole will have sufficient capital
with which to conduct its business. For purposes of this Section 2.3(f), "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.
(g) Except as fully disclosed in the financial statements delivered
pursuant to Section 2.3(e) or the Operative Documents, there are as of the date
hereof no liabilities or obligations with respect to Guarantor or any of its
Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether or not due) which, either individually or in aggregate,
could reasonably be expected to be material to Lessee or to Guarantor and its
Subsidiaries taken as a whole. As of the date hereof, neither Guarantor nor
Lessee knows of any basis for the assertion against it or any of its
Subsidiaries of any liability or obligation of any nature whatsoever that is not
fully disclosed in the financial statements delivered pursuant to Section 2.3(e)
or the Operative Documents which, either individually or in the aggregate, could
reasonably be expected to be material to the Lessee or to Guarantor and its
Subsidiaries taken as a whole.
(h) On and as of the date hereof, the Projections delivered to the
Administrative Agent, the Certificate Holders and the Lenders prior to the date
hereof 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 Guarantor or Lessee to be misleading in any
material respect or which fail to take into account material information known
to Guarantor or Lessee regarding the matters reported therein. On the date
hereof, Guarantor and Lessee believe that the Projections are reasonable and
attainable, it being recognized by Lessor and the Lenders, 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.
(i) There is no action, suit or other proceeding now pending or, to the
best knowledge of Guarantor, threatened (i) with respect to the Guarantor IPO,
the Repurchase, the Revolver or the transaction contemplated herein or (ii) that
could reasonably be expected to
-7-
<PAGE> 14
materially and adversely affect the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of Guarantor and
its Subsidiaries taken as a whole.
(j) All factual information (taken as a whole) furnished by Guarantor in
writing to the Administrative Agent (including, without limitation, all
information contained in the Operative Documents) for purposes of or in
connection with this Participation Agreement, or any transaction contemplated
herein or therein is, and all other such factual information (taken as a whole)
hereafter furnished by Guarantor in writing to the Administrative Agent, Lessor
or any Lender 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.
(k) Guarantor 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 Guarantor and/or any of its Subsidiaries. The
Returns accurately reflect all material liability for taxes of Guarantor and its
Subsidiaries for the periods covered thereby. Guarantor 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 GAAP. Except as disclosed in the financial statements referred to in
Section 2.3(e), as of the date hereof, there is no action, suit, proceeding,
investigation, audit, or claim now pending or, to the knowledge of Guarantor and
Lessee, threatened by any authority regarding any taxes relating to Guarantor or
any of its Subsidiaries. As of the Closing Date, neither Guarantor 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 Guarantor or any of
its Subsidiaries or is aware of any agreement or waiver extending any statute of
limitations relating to the payment or collection of other taxes of Guarantor or
any of its Subsidiaries. None of Guarantor or any of its Subsidiaries has
provided, with respect to itself or property held by it, any consent under
Section 341 of the Code.
(l) Except as set forth on Schedule 9, 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 Guarantor and Lessee, 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
-8-
<PAGE> 15
of Section 412 of the Code or Section 303 or 304 of ERISA; to the best knowledge
of Guarantor and the Lessee, 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 Guarantor nor any Subsidiary of Guarantor 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 Guarantor or any Subsidiary of Guarantor 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 Guarantor and the Lessee, expected or threatened; to the best knowledge of
Guarantor, using actuarial assumptions and computation methods consistent with
Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of
Guarantor 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 funding, would not
exceed $50,000; no lien imposed under the Code or ERISA on the assets of
Guarantor or any Subsidiary of Guarantor or any ERISA Affiliate exists or is
likely to arise on account of any Plan; and Guarantor and its Subsidiaries may
cease contributions to or terminate any employee benefit plan maintained by any
of them without incurring any material liability.
(m) 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 Guarantor 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 Guarantor's
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.
(n) All representations and warranties of Guarantor (or its predecessors in
interest) set forth in the other Operative 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 each Funding Date as 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.
(o) Guarantor 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
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<PAGE> 16
property reflected in the balance sheets referred to in Section 2.3(e) (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) Permitted
Guarantor Liens.
(p) On the Closing Date and after giving effect to the transactions
contemplated hereby, (i) the authorized capital stock of Guarantor shall consist
of (a) 200,000,000 shares of common stock, $.01 par value per share, of which
12,707,769 shares shall be issued and 12,695,861 shall be outstanding, (b)
50,000,000 shares of Series A preferred stock, none of which shall be issued and
outstanding and (c) 6,000 shares of Class A non-voting common stock, $.01 par
value per share, none of which shall be issued and outstanding and (ii) the
authorized capital stock of Lessee 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
Guarantor. All such outstanding shares of common stock have been duly and
validly issued, are fully paid and nonassessable and are free of preemptive
rights. Neither Guarantor nor Lessee 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 issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its capital stock.
(q) As of the date hereof, Guarantor has no Subsidiaries other than those
Subsidiaries listed on Schedule 7 hereto. Schedule 7 correctly sets forth, as of
the Closing Date, the percentage ownership (direct and indirect) of Lessee in
each class of capital stock of each of its Subsidiaries and also identifies the
direct owner thereof.
(r) Each of Guarantor 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
Lessee's or Guarantor's ability to perform its obligations under the Operative
Documents or on the business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of Guarantor and its
Subsidiaries taken as a whole.
(s) Neither Guarantor 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.
(t) Neither Guarantor 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.
(u) Guarantor and each of its Subsidiaries have complied in all material
respects with, and are in compliance in all material respects with, all
applicable Environmental
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Laws and the requirements of any permits issued under such Environmental Laws.
There are no pending, past or threatened Environmental Claims against Guarantor
or any of its Subsidiaries (including any such claim arising out of the
ownership or operation by Guarantor or any of its Subsidiaries of any Real
Property no longer owned by Guarantor or any of its Subsidiaries) or any Real
Property owned or operated by Guarantor or any of its Subsidiaries. There are no
facts, circumstances, conditions or occurrences with respect to any Real
Property owned or operated by Guarantor or any of its Subsidiaries or any
business or operations of Guarantor or any of its Subsidiaries (including any
Real Property formerly owned or operated by Guarantor or any of its Subsidiaries
but no longer owned by Guarantor 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 Guarantor or any of its Subsidiaries or any Real
Property owned or operated by Guarantor or any of its Subsidiaries, or (ii) to
cause any Real Property owned or operated by Guarantor or any of its
Subsidiaries to be subject to any restrictions on the ownership, occupancy or
transferability of such Real Property by Guarantor or any of its Subsidiaries
under any applicable Environmental Law.
(v) 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
Guarantor 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 Guarantor or any of
its Subsidiaries.
(w) Notwithstanding anything to the contrary in this Section 2.3(v), the
representations made in this Section 2.3 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
a material adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of Guarantor and
its Subsidiaries taken as a whole.
(x) Neither Guarantor nor any of its Subsidiaries is engaged in any unfair
labor practice that could reasonably be expected to have a material adverse
effect on Guarantor and its Subsidiaries taken as a whole. There is (i) no
unfair labor practice complaint pending against Guarantor or any of its
Subsidiaries or, to the best knowledge of Guarantor or Lessee, 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 Guarantor or any
of its Subsidiaries or, to the best knowledge of Guarantor or Lessee, threatened
against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending
against Guarantor or any of its Subsidiaries or, to the best knowledge of
Guarantor or Lessee, threatened against Guarantor or any of its Subsidiaries and
(iii) to the best knowledge of Guarantor or Lessee, no union representation
question existing with respect to the employees of Guarantor 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 Guarantor and its Subsidiaries taken as a whole.
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(y) Each of Guarantor 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 Guarantor and its Subsidiaries taken as a whole.
(z) Schedule 6 sets forth a true and complete list of all Indebtedness
(including Contingent Obligations) of Guarantor and its Subsidiaries as of the
date hereof and which is to remain outstanding after such date (excluding the
Loans and the Lessee 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.
(aa) 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 Guarantor IPO and the Repurchase, in each
case, 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 Guarantor
IPO or the Repurchase. Additionally, there does not exist any judgment, order or
injunction prohibiting or imposing material adverse conditions upon the
Guarantor IPO or the Repurchase. All actions taken by Guarantor pursuant to or
in furtherance of the Guarantor IPO or the Repurchase, as the case may be, have
been taken in compliance with the Revolver and all applicable laws except to the
extent consented to by the administrative agent thereto.
(bb) Schedule 8 sets forth a true and complete listing of all insurance
maintained by Guarantor and its Subsidiaries as of the date hereof, and with the
amounts insured (and any deductibles) set forth therein.
2.4. Lessor Representations and Warranties For Benefit of All Parties.
Lessor hereby represents and warrants as of the date hereof and on each Funding
Date for the benefit of each party hereto that:
(a) Lessor is a trustee acting on behalf of a trust duly established and
validly existing under the laws of the State of Delaware, has full power,
authority and legal right under such laws to execute, deliver and perform its
obligations under the Operative Documents to which it is a party.
(b) The leasing and financing of the Equipment, the execution and delivery
of the Operative Documents and the other related instruments, documents and
agreements to which it is a party, and the compliance by Lessor with the terms
hereof and thereof and the payments and performance by Lessor of any of its
obligations hereunder and thereunder (i) have been duly
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<PAGE> 19
and legally authorized by all necessary action on the part of Lessor, (ii) are
not in contravention of, and will not result in a violation or breach of, any of
the terms of Lessor's declaration of trust and related trust instruments, and
(iii) will not violate or constitute a breach of any provision of law, any order
of any court or other agency of government, or any indenture, agreement or other
instrument to which Lessor is a party, or by or under which Lessor or any of
Lessor's property is bound, or be in conflict with, result in a breach of, or
constitute (with due notice and/or lapse of time) a default under any such
indenture, agreement or instrument, or result in the creation or imposition of
any Lien, other than Permitted Liens, upon any of Lessor's property or assets
and (iv) will not require, on the part of Lessor, the consent or approval of,
the giving of notice to, the registration with, or the taking of any other
action in respect of, any United States federal, state or local governmental or
public commission, board, authority or agency except for filings, if any, made
pursuant to any notice reporting requirement applicable to it.
(c) Each Operative Document to which it is a party has been executed by the
duly authorized officer or officers of Lessor and delivered to the other parties
thereto and constitutes, or when executed by the duly authorized officer or
officers of Lessor and delivered to the other parties thereto, will constitute,
the legal, valid and binding obligation of Lessor, enforceable in accordance
with its terms except as limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights from time to time in effect and by general principles of
equity including those applicable to the enforceability of the remedy of
specific performance.
(d) There is no action, suit or other proceeding now pending or, to
Lessor's knowledge, threatened, against or affecting Lessor, in any court or
before any regulatory commission, board or other administrative governmental
agency (i) which will materially and adversely affect the interest of Lessee in
any Item of Equipment or any Operative Document, or the interest of the
Collateral Agent in any such Item or any Operative 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 Lessor.
(e) There is no tax, levy, impost, deduction, charge or withholding which
may be imposed on or asserted against the Lessor Collateral or any part thereof
or any interest therein, or against any Lender, the Administrative Agent or the
Collateral Agent under the laws of the State of ____ either (i) on or by virtue
of the execution or delivery of Operative Documents or any other document
contemplated thereby, or (ii) on any payment to be made by Lessor pursuant to
the Loan Documents or any other document contemplated thereby to which Lessor is
a party.
(f) Lessor has no indebtedness or other liabilities, whether contingent or
otherwise, other than its obligations under and as contemplated by the Operative
Documents.
(g) No Loan Default or Loan Event of Default not caused by a Lease Default
or Lease Event of Default has occurred and is continuing.
2.5. Lessor Representations and Warranties For Benefit of Lenders,
Certificate Holders, the Administrative Agent and the Collateral Agent. Lessor
hereby represents and
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<PAGE> 20
warrants as of the date hereof and on each Funding Date for the benefit of each
Lender, each Certificate Holder, the Administrative Agent and the Collateral
Agent that:
(a) No Lease Default or Lease Event of Default of which it has knowledge
has occurred and is continuing.
(b) Lessor's chief executive office and principal place of business is
located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware
and Lessor's records with respect to the transactions contemplated by the
Operative Documents are located at such address.
(c) Lessor is duly qualified and is authorized to do business and is in
good standing in each jurisdiction where 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 Lessor's ability to
perform its obligations or exercise its rights under the Operative Documents or
on the business, property, assets, liabilities, condition (financial or
otherwise) or prospects of Lessor.
2.6. Further Lessor Representations and Warranties For Benefit of Lenders,
Certificate Holders, the Administrative Agent and the Collateral Agent. Lessor
hereby represents and warrants as of each Funding Date for the benefit of each
Lender, each Certificate Holder, the Administrative Agent and the Collateral
Agent (and with respect to Section 2.6(a), Lessee) that:
(a) After giving effect to each Bill of Sale therefor, Lessor has good and
marketable title to each Item of Equipment (including the parts and components
thereof) and the Lessor Collateral is free and clear of all Liens other than
Permitted Liens.
(b) The provisions of this Agreement and the Loan Agreement are effective
to create in favor of Collateral Agent for the benefit of the Lenders a legal,
valid and enforceable security interest in all right, title and interest of the
Lessor in the Lessor Collateral, and the filing of the financing statements
executed by Lessor as debtor and filed with the Secretary of State for the state
of Delaware perfect such security interest in the Lessor Collateral, subject to
no Liens other than Permitted Liens and the Collateral Agent shall be entitled
to all of the rights, benefits, and priorities provided to a holder of liens of
such type under Applicable Law.
2.7. Trust Company Representations and Warranties. Trust Company hereby
represents and warrants as of the date hereof, and each Funding Date for the
benefit of each of the parties hereto that:
(a) Trust Company is a Delaware banking corporation, duly organized,
validly existing and in good standing under the laws of the state of Delaware,
and has full power, authority and legal right under such laws to execute,
deliver and perform its obligations under this Agreement and the Trust
Agreement.
(b) Each of the Trust Agreement and (to the extent of the covenants,
agreements, representations and warranties of Trust Company in its individual
capacity contained
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<PAGE> 21
herein) this Agreement has been duly executed and delivered by Trust Company,
and (assuming due authorization, execution and delivery of the Trust Agreement
by Certificate Holders) the Trust Agreement and (to the extent of the covenants,
agreements, representations and warranties of Trust Company in its individual
capacity contained herein) this Agreement constitute a legal, valid and binding
obligation of Trust Company, enforceable against Trust Company in accordance
with its terms.
(c) Neither the execution or delivery by Trust Company of the Trust
Agreement or this Agreement nor the performance by Trust Company of its
obligations hereunder or thereunder (i) conflicts or will conflict with or
violate in any respect any applicable United States federal law governing the
banking or trust powers of Trust Company or any [jurisdiction] law applicable to
or binding upon Trust Company or any of its Affiliates, or any of their
respective properties, (ii) conflicts or will conflict with or violate Trust
Company's articles of association or by-laws, (iii) conflicts or will conflict
with, or contravene, violate or result in a breach of, any indenture, mortgage,
loan agreement, lease or any other material agreement or material instrument to
which Trust Company or any of its Affiliates is a party or by which any of their
respective properties is bound, (iv) results or will result in the creation or
imposition of any Lien (other than Permitted Liens) on the Lessor Collateral, or
(v) requires or will require, on the part of Trust Company or any Affiliate of
Trust Company, the consent or approval of, the giving of notice to, the
registration with, or the taking of any other action in respect of, any
Governmental Entity governing the banking or trust powers of Trust Company,
except for filings, if any, made pursuant to any notice reporting requirement
applicable to it; provided that no representation is made as to any laws, rules
or regulations applicable to the particular nature of the Lessor Collateral or
the use thereof.
(d) Trust Company is not in breach of any covenants or agreements made by
it in the Trust Agreement or by it in its individual capacity in this Agreement.
(e) Trust Company's chief executive office is located at
[________________], and Trust Company's records with respect to the transactions
contemplated by the Operative Documents are located at such address.
(f) There is no action, suit or other proceeding now pending or, to Trust
Company's knowledge, threatened, against or affecting Trust Company, in any
court or before any regulatory commission, board or other administrative
governmental agency (i) which will materially and adversely affect the rights of
any other party hereto in any Operative Document or the right, title or interest
of Lessor to any Item of Equipment, or the interest of the Collateral Agent in
any Item of Equipment or any other Lessor Collateral 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 Trust Company.
(g) Trust Company has not assigned or transferred any of its right, title
or interest in or under the Operative Documents except in accordance therewith.
(h) No Loan Event of Default attributable to Trust Company has occurred and
is continuing.
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<PAGE> 22
(i) There are no Lessor Liens attributable to Trust Company on the Trust
Estate or any part thereof, and the execution, delivery and performance by Trust
Company of the Operative Documents to which it is a party will not subject the
Trust Estate to any Lessor Liens attributable to it.
(j) Except for Taxes based upon the income of any Person, there are no
Taxes payable by Trust Company in Delaware in connection with the execution,
delivery, consummation or recordation of the Operative Documents, upon or with
respect to the Trust Estate, or in connection with the consummation of the
transactions contemplated hereby or by the other Operative Documents solely
because the principal place of business of the Trust Company is in Delaware
(k) Neither the Trust Company nor any Person authorized by it to act on its
behalf has offered or sold any interest in the Trust Estate or the Certificates,
or in any similar security relating to the transaction contemplated by the
Operative Documents, or in any security the offering of which for the purposes
of the Securities Act would be deemed to be part of the same offering as the
offering thereof, or solicited any offer to acquire any of the same from, any
Person other than the parties hereto.
(l) Trust Company is not an "investment company" or a company "controlled"
by an "investment company," within the meaning of the Investment Company Act of
1940, as amended.
2.8. Warranty Disclaimers. EACH OF LESSOR, EACH CERTIFICATE HOLDER, EACH
LENDER, THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT AS APPLICABLE DEMISE,
LEASE AND FINANCE THE ITEMS OF EQUIPMENT HEREUNDER AS-IS AND WHERE-IS WITH ALL
FAULTS IF ANY AND IN WHATEVER CONDITION THEY MAY BE IN AND EXPRESSLY DISCLAIMS
AND MAKES NO REPRESENTATION OR WARRANTY, EITHER EXPRESSED OR IMPLIED, AS TO THE
DESIGN, CONDITION, QUALITY, CAPACITY, MERCHANTABILITY, DURABILITY, SUITABILITY
OR ITS FITNESS FOR ANY PARTICULAR PURPOSE, OR QUALIFICATION FOR ANY PARTICULAR
TRADE OR ANY OTHER MATTER CONCERNING, THE ITEMS OF EQUIPMENT. LESSEE HEREBY
WAIVES ANY CLAIM (INCLUDING ANY CLAIM BASED ON STRICT OR ABSOLUTE LIABILITY IN
TORT OR INFRINGEMENT) IT MIGHT HAVE AGAINST LESSOR, ANY CERTIFICATE HOLDER, ANY
LENDER, THE TRUST COMPANY, THE ADMINISTRATIVE AGENT OR COLLATERAL AGENT FOR ANY
LOSS, DAMAGE (INCLUDING INCIDENTAL OR CONSEQUENTIAL DAMAGE) OR EXPENSE CAUSED BY
ANY ITEM OF EQUIPMENT EXCEPT TO THE EXTENT CAUSED BY SUCH PARTY'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OR BY LESSEE'S LOSS OF USE THEREOF FOR ANY
REASON WHATSOEVER. LESSOR HEREBY WAIVES ANY CLAIM (INCLUDING ANY CLAIM BASED ON
STRICT OR ABSOLUTE LIABILITY IN TORT OR INFRINGEMENT) IT MIGHT HAVE AGAINST ANY
CERTIFICATE HOLDER, ANY LENDER, THE TRUST COMPANY, THE ADMINISTRATIVE AGENT OR
COLLATERAL AGENT FOR ANY LOSS, DAMAGE (INCLUDING INCIDENTAL OR CONSEQUENTIAL
DAMAGE) OR EXPENSE CAUSED BY ANY ITEM OF EQUIPMENT EXCEPT TO THE EXTENT
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<PAGE> 23
CAUSED BY SUCH PARTY'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OR BY LESSOR'S
LOSS OF USE THEREOF FOR ANY REASON WHATSOEVER.
3. Conditions Precedent.
3.1. Lessor Conditions.
(a) Conditions Precedent to the Closing Date. Lessor shall have no
obligation to acquire any Item of Equipment and subject it to the Lease
Agreement unless on the Closing Date each of the following conditions are
fulfilled:
(i) Lessor shall have received this Agreement, the Lease Agreement, the
Assembly Agency Agreement, the Loan Agreement and the Trust Agreement, and
the Administrative Agent shall have received the Administrative Agent Fee
Letter, in each case duly authorized, executed and delivered by each other
party thereto.
(ii) Lessor shall have received from Lessee, in form and substance
satisfactory to Lessor, resolutions of the boards of directors of Lessee or
other written evidence of appropriate corporate action, and the certificate
of incorporation and by-laws, each certified as of the Closing Date by the
secretary of Lessee, duly authorizing the execution, delivery and performance
of this Agreement, the Lease Agreement, the Assembly Agency Agreement and
each other document to be delivered in connection therewith to which it is a
party, together with an incumbency certificate as to the person or persons
authorized to execute and deliver such documents on behalf of Lessee.
(iii) Lessor shall have received from Guarantor, in form and substance
satisfactory to Lessor, resolutions of the boards of directors of Guarantor
or other written evidence of appropriate corporate action, and the
certificate of incorporation and by-laws, each certified by the secretary of
Guarantor as of the Closing Date, duly authorizing the execution, delivery
and performance of the Participation Agreement and each other document to be
delivered in connection therewith to which it is a party, together with an
incumbency certificate as to the person or persons authorized to execute and
deliver such documents on behalf of Guarantor.
(iv) Lessor shall have received written opinions of Schulte Roth & Zabel
LLP, counsel to Lessee and Guarantor, dated the Closing Date and addressed to
Lessor, each Lender, each Certificate Holder, the Administrative Agent and
the Collateral Agent in form attached hereto as Exhibit E-1.
(v) Lessor shall have received a written opinion of Valerie Banner, Esq.,
in-house counsel to Lessee and Guarantor, dated the Closing Date and
addressed to Lessor, each Lender, each Certificate Holder, the Administrative
Agent and the Collateral Agent in form attached hereto as Exhibit E-2.
(vi) Lessee shall have delivered good standing certificates dated within
five (5) days of the Closing Date from the state in which the Lessee is
incorporated and Guarantor
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<PAGE> 24
shall have delivered a good standing certificate dated within five (5) days
of the Closing Date from the state in which Guarantor is incorporated.
(vii) The Administrative Agent and Lessor shall have received an Appraisal
for all equipment sold by Lessee to Lessor on the Closing Date.
(viii) The Administrative Agent shall have received the administrative fee
due on the Closing Date described in Section 11.9 and all other fees set
forth in the [Commitment Letter].
(b) Conditions Precedent to each Funding Date. In addition to the
conditions in Section 3.1(a), Lessor shall have no obligation to purchase any
Component or acquire any Item of Equipment and lease it back to Lessee on a
Funding Date (including on the Closing Date if applicable) unless on such
Funding Date the following conditions are fulfilled:
(i) There shall exist no Lease Default or Lease Event of Default and all
representations and warranties of Lessee and Guarantor contained herein and
in the other Operative Documents shall be true and correct in all material
respects with the same effect as though such representations and warranties
had been made on and as of such Funding Date except to the extent made as of
an earlier date.
(ii) Such Item of Equipment conforms to the requirements set forth in
Schedule 1 hereto.
(iii) Such Component or Item of Equipment is free of all Liens other than
Permitted Liens and Lessor Liens.
(iv) The Acquisition Cost of such Component or such Item of Equipment when
added to the total Acquisition Cost of all Items of Equipment theretofore
financed hereunder and all Equipment to be financed on the same Funding Date,
is less than or equal to the Maximum Acquisition Cost.
(v) Lessor and the Administrative Agent shall have received at least three
(3) Business Days prior to the date the Funding Notice for such funding is
due, a Certificate of Equipment with respect to such Component or Item, duly
executed by the Lessee.
(vi) All licenses, registrations, permits, consents and approvals required
by Applicable Laws or by any Governmental Entity (A) in connection with
Lessor's rights and interests in such Item of Equipment to the extent such
licenses, registrations, permits, consents or approvals are required because
of the nature of the Equipment and (B) in connection with the delivery,
acquisition, assembly, use and operation of such Item of Equipment shall have
been obtained to the satisfaction of Lessor.
(vii) Lessee shall have paid all of the reasonable costs and expenses
incurred by Trust Company, Lessor, Deutsche Bank as Lender and Certificate
Holder, the Administrative Agent and the Collateral Agent (including
attorneys' fees), and required to be paid by Lessee under the Operative
Documents (including those in relation to the
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negotiation, preparation and execution of the Operative Documents to be
executed and delivered on or before such Funding Date) and all fees and
amounts due on or before such Funding Date, including those set forth in the
Administrative Agent Fee Letter, in each case invoiced at least one day prior
to such Funding Date.
(viii) Lessor shall have received the proceeds of the Loans contemplated by
the relevant Funding Notice.
(ix) Lessor shall have received from the Certificate Holders an amount
equal to the aggregate Equity Components of such Components and/or Items of
Equipment.
(x) The Administrative Agent shall have received at least three (3) LIBOR
Banking Days before the Funding Date a Funding Notice executed and delivered
by Lessee.
(xi) Lessor, Certificate Holders, the Administrative Agent and the
Collateral Agent shall have received an insurance certificate in form and
substance satisfactory to the Administrative Agent confirming that such Item
of Equipment is insured in accordance with the provisions of Section 20 of
the Lease Agreement.
(xii) Lessee shall have delivered to the Administrative Agent and Lessor a
Lease Agreement Supplement for such Component or Item of Equipment.
(xiii) Lessee shall have executed and delivered to the Administrative Agent
copies of the Lessee Financing Statements for such Components or Items of
Equipment with evidence reasonably acceptable to Lessor that such have been
recorded in the state in which such Item of Equipment is located and, if the
law of such state requires financing statements to be filed in one or more
local jurisdictions within such state, in such local jurisdiction.
(xiv) At any time prior to such Funding Date, Lessor shall have received
opinions of special counsel to Lessee addressed to the Administrative Agent,
the Collateral Agent, and the Lenders in form and substance reasonably
satisfactory to Lessor and the Administrative Agent with respect to the
perfection of the interests of Lessor in Equipment located in the state in
which such Item is located.
(xv) The Administrative Agent and Lessor shall have received at any time
prior to such Funding Date lien searches reasonably acceptable to them in
form and substance in the name of Lessee and Guarantor searching the Uniform
Commercial Code records of, with respect to Guarantor, the state of Texas,
and with respect to Lessee, each state in which an Item of Equipment, and in
states that require filings in local jurisdictions in order to perfect a
security interest in an Item of Equipment, each such local jurisdiction, each
indicating that, after the filing of those UCC release or termination
statements, if any, executed and delivered by Lessee and all other relevant
Persons to the Lessor and the Administrative Agent on or before the Closing
Date, the representations set forth in
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Sections 2.2(d) and 2.3(o) will be accurate and complete in all respects to
the extent determinable from such searches.
(xvi) Lessor shall have received such other confirmatory assignments,
conveyances, financing and continuation statements, transfer endorsements,
powers of attorney, notes, reports and other assurances or instruments other
than estoppel certificates or other agreements, certificates or other
documents to be delivered by any Sublessee or other Person (other than an
Affiliate of Lessee) in possession of any Item of Equipment and take such
further actions which Lessor may reasonably request to perfect, preserve or
protect Lessor's security interest granted hereunder or which Lessor
reasonably deems necessary or advisable in order to obtain the full benefits
of the Liens created or intended to be created under the Lease Agreement, in
form and substance satisfactory to Lessor, as Lessor may reasonably request
in writing at least five (5) Business Days before such Funding Date.
(c) Lessor Conditions to the Funding Date for each Sale/Leaseback. In
addition to the conditions in Section 3.1(a) and (b), for each Item of Equipment
Lessee proposes to sell to Lessor, Lessor shall have no obligation to acquire
such Item of Equipment and lease it back to Lessee on a Funding Date (including
the Closing Date if applicable) unless Lessee shall have executed and delivered
to Lessor a Bill of Sale for such Item.
(d) Lessor Conditions to the First Funding Date for an Item of Equipment to
be Assembled. In addition to the conditions in Section 3.1(a) and (b), for each
Item of Equipment to be assembled by Lessee for Lessor pursuant to the Assembly
Agency Agreement, Lessor shall have no obligation to reimburse Lessee for the
cost of any Component for such Item of Equipment and lease it back to Lessee
unless Lessee shall have delivered to Lessor and the Administrative Agent at
least twenty (20) days prior to such first Funding Date, a Budget for such Item
reasonably acceptable to Lessor and the Administrative Agent.
(e) Lessor Conditions to each Funding Date for an Item of Equipment to be
Assembled. In addition to the conditions in Section 3.1(a), (b) and (d), for
each Item of Equipment to be assembled by Lessee for Lessor pursuant to the
Assembly Agency Agreement, Lessor shall have no obligation to reimburse Lessee
for the cost of any Component for such Item of Equipment and lease it back to
Lessee unless on the Funding Date (including the Closing Date if applicable) for
such reimbursement the following conditions are fulfilled:
(i) The amount to be reimbursed for each Component is, subject to the
Budget Parameters, equal to or less than the amount set forth in the Budget
for such Item of Equipment.
(ii) For each Component that is a natural gas engine, compressor or air
cooler, Lessee shall have delivered to Lessor at least three (3) Business
Days prior to the date the Funding Notice is due for such Funding Date a Bill
of Sale, invoice or purchase order evidencing Lessor's ownership of such
Component in form and substance reasonably satisfactory to Lessor.
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(iii) Lessee shall have executed and delivered to Lessor a Certificate of
Equipment for Items of Equipment to be assembled in the form of Exhibit B-2
for such Item at least ten (10) days before such Funding Date.
(iv) After the initial Funding Date, Lessee shall have delivered to Lessor
an amended and restated Lease Agreement Supplement for such Item, which
amended and restated Lease Agreement Supplement shall include the total
Acquisition Cost and Casualty Loss Value for such Item as of such Funding
Date.
(f) Lessor Conditions for Final Funding Date for an Assembled Item of
Equipment. In addition to the conditions in Section 3.1(a), (b), (d) and (e),
for each Item to be assembled by Lessee for Lessor pursuant to the Assembly
Agency Agreement, Lessor shall have no obligation to reimburse Lessee for the
remaining cost of any Component for such Item of Equipment and lease it back to
Lessee unless on the Funding Date for such final reimbursement Lessee shall have
delivered to Lessor a Completion Certificate for such Item of Equipment in the
form of Exhibit D.
Each leasing of an Item of Equipment by Lessee hereunder shall constitute a
representation and warranty by Lessee as of the date such leasing commences that
the conditions contained in Section 3.1 have been satisfied.
3.2. Lender Conditions.
(a) Lender Conditions on the Closing Date. No Lender shall have any
obligation to make a Loan for the reimbursement of the cost of any Component or
the acquisition of any Item of Equipment hereunder unless on the Closing Date
each of the following conditions are fulfilled:
(i) Such Lender shall have received original counterparts (unless otherwise
specified) in each case duly authorized, executed and delivered by each other
party thereto in form and substance satisfactory to such Lender and in full
force and effect of this Agreement, the Loan Agreement and its Note and
copies of the Trust Agreement, the Lease Agreement, and the Assembly Agency
Agreement.
(ii) Such Lender shall have received from Trust Company, in form and
substance satisfactory to such Lender, the certificate of incorporation and
by-laws, each certified as of the Closing Date by the secretary of Trust
Company, duly authorizing the execution, delivery and performance of this
Agreement, the Lease Agreement, the Assembly Agency Agreement and each other
document to be delivered in connection therewith to which it is a party,
together with an incumbency certificate as to the person or persons
authorized to execute and deliver such documents on behalf of Trust Company.
(iii) Such Lender shall have received written opinions of counsel to Lessor
and Trust Company dated the Closing Date and addressed to each Lender, each
Certificate
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Holder, the Administrative Agent, and the Collateral Agent, in the form
attached hereto as Exhibit E-3.
(b) Lender Conditions for each Funding Date. No Lender shall have any
obligation to make a Loan for the reimbursement of the cost of any Component or
the acquisition of any Item of Equipment hereunder unless on the Funding Date
therefor each of the following conditions are fulfilled:
(i) The conditions precedent to Lessor's obligation to lease such Item of
Equipment in accordance with the terms hereof (except for the condition
precedent set forth in Section 3.1(b)(viii)) shall have been satisfied,
without waiver or modification (except as consented to by Majority Lenders),
and such Lender shall have received copies of all documents and opinions with
respect thereto.
(ii) Such Lender shall have received, in each case duly authorized,
executed and delivered by each other party thereto in form and substance
satisfactory to such Lender and in full force and effect, copies of the
Lessor Financing Statements for such Item of Equipment with evidence
reasonably acceptable to Lessor that such have been recorded in the state in
which such Item of Equipment is located and, if the law of such state
requires financing statements to be filed in local jurisdictions within such
state, in such local jurisdiction and, in a timely manner, the Funding Notice
for such Funding Date.
(iii) There shall exist no Loan Default or Loan Event of Default and all
representations and warranties of Lessor contained herein and in the other
Operative Documents shall be true and correct with the same effect as though
such representations and warranties had been made on and as of such Funding
Date except to the extent made as of an earlier date.
(iv) On and as of the Funding Date, after giving effect to the Loan to be
made on such date, the aggregate of the original principal amounts of all
Loans made by such Lender do not exceed such Lender's Lender Commitment.
(v) At any time prior to such Funding Date, Lender shall have received
opinions of counsel addressed to the Administrative Agent, the Collateral
Agent, and the Lenders in form and substance reasonably satisfactory to the
Administrative Agent with respect to the perfection of its interest in
Equipment in the state in which such Item of Equipment is located.
(vi) Each Lender shall have received such other confirmatory assignments,
conveyances, financing and continuation statements, transfer endorsements,
powers of attorney, notes, reports and other assurances or instruments other
than estoppel certificates or other agreements, certificates or other
documents to be delivered by any Sublessee or other Person (other than an
Affiliate of Lessee) in possession of any Item of Equipment and take such
further actions which Majority Lenders may reasonably request to perfect,
preserve or protect the Collateral Agent's security interest granted
hereunder or which Majority Lenders reasonably deem necessary or advisable in
order to obtain the
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full benefits of the Liens created or intended to be created hereunder, in
form and substance satisfactory to Majority Lenders as Majority Lenders may
reasonably request in writing at least five (5) Business Days before such
Funding Date.
Each borrowing by Lessor under the Loan Agreement shall constitute a
representation and warranty by Lessor as of the date of the Funding Date for
such borrowing such that the conditions contained in this Section 3.2 have been
satisfied.
3.3. Certificate Holders Conditions
(a) Certificate Holder Conditions on the Closing Date. No Certificate
Holder shall have any obligation to make an Equity Contribution for the
reimbursement of the cost of any Component or the acquisition of any Item of
Equipment hereunder unless on the Closing Date each of the following conditions
are fulfilled:
(i) Such Certificate Holder shall have original counterparts (unless
otherwise specified) in each case duly authorized, executed and delivered by
each other party thereto in full force and effect of this Agreement, the
Trust Agreement and its Certificate and the copies of the Loan Agreement, the
Lease Agreement, the Assembly Agency Agreement and the Notes.
(ii) Such Certificate Holder shall have received from Trust Company, in
form and substance satisfactory to such Certificate Holder, the certificate
of incorporation and by-laws, each certified as of the Closing Date by the
secretary of Trust Company, duly authorizing the execution, delivery and
performance of this Agreement, the Lease Agreement, the Assembly Agency
Agreement and each other document to be delivered in connection therewith to
which it is a party, together with an incumbency certificate as to the person
or persons authorized to execute and deliver such documents on behalf of
Trust Company.
(iii) Such Certificate Holder shall have received written opinions of
counsel to Lessor and Trust Company dated the Closing Date and addressed to
each Lender, each Certificate Holder, the Administrative Agent and the
Collateral Agent, in the form attached hereto as Exhibit E-3.
(b) Certificate Holder Conditions for each Funding Date. No Certificate
Holder shall have any obligation to make an Equity Contribution for the
reimbursement of the cost of any Component or the acquisition of any Item of
Equipment hereunder unless on the Funding Date therefor each of the following
conditions are fulfilled:
(i) The conditions precedent to Lessor's obligation to lease such Item of
Equipment in accordance with the terms hereof (except for the condition
precedent set forth in Section 3.1(b)(ix)) shall have been satisfied, without
waiver or modification (except as consented to by Majority Certificate
Holders), and such Certificate Holder shall have received copies of all
documents and opinions with respect thereto and any
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other evidence of satisfaction of such conditions as Certificate Holder may
reasonably request.
(ii) There shall exist no Loan Default or Loan Event of Default (other than
a Loan Default or Loan Event of Default resulting from any act or omission by
such Certificate Holder) and all representations and warranties of Trust
Company contained herein and in the other Operative Documents shall be true
and correct with the same effect as though such representations and
warranties had been made on and as of such Funding Date.(2)
(iii) On and as of the Funding Date, after giving effect to the Equity
Contributions to be made on such date, the aggregate of all Equity
Contributions made by such Certificate Holder does not exceed such
Certificate Holder's Certificate Holder Commitment.
4. Commitments.
4.1. Certificate Holder Commitments. Subject to and upon the terms and
conditions set forth in Section 3 herein set forth for the benefit of
Certificate Holders and Lessor, each Certificate Holder agrees to make multiple
equity contributions to Lessor during the Commitment Period in an aggregate
amount up to the amount of its Certificate Holder's Commitment (each such
contribution, an "Equity Contribution"). The aggregate of the Equity
Contributions to be made on any Funding Date shall be equal to three (3) percent
of the total Acquisition Costs funded on such date. Each party hereto agrees
that, except as provided below, no Certificate Holder shall be required to make
any Equity Contribution hereunder in an amount in excess of its Pro Rata Share
of the Equity Components to be funded on any Funding Date. Each Certificate
Holder's obligation hereunder is several, such that the failure of any
Certificate Holder to make an Equity Contribution or satisfy any other
obligation shall not relieve any other Certificate Holder of its obligations
hereunder, and if any Certificate Holder shall fail to make an Equity
Contribution hereunder each other Certificate Holder shall make an additional
Equity Contribution in an amount equal to its Pro Rata Share of the Equity
Contribution that was to have been made by the defaulting Certificate Holder,
provided that the maximum aggregate amount of Equity Contributions that any
Certificate Holder shall be obligated to make shall not exceed its Certificate
Holder Commitment. Any Equity Contribution made by another Certificate Holder of
a portion of an Equity Contribution to have been made by a defaulting
Certificate Holder shall not relieve such defaulting Certificate Holder of its
obligations hereunder. If the conditions to the obligations of any Certificate
Holder specified in Section 3.3 have not been fulfilled or waived by it on or
before the last day of the Commitment Period, such Certificate Holder shall be
relieved of all further obligations to make new Equity Contributions under the
Operative Documents after the last day of the Commitment Period.
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(2) Open business issue (Lessee taking risk of Trust Company default).
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4.2. Lender Commitment. Subject to and upon the terms and conditions set
forth in Section 3 for the benefit of Lenders, each Lender agrees to make
multiple, non-revolving loans to Lessor during the Commitment Period in an
aggregate principal amount up to the amount of its Lender Commitment (each such
advance, a "Loan"). The aggregate of all Loans to be made by Lenders on each
Funding Date shall be in an amount of at least $4,850,000 (except the last Loans
funded prior to the termination of the Commitment Period, which Loans shall not
be subject to a minimum) and shall be equal to 97 percent of the total
Acquisition Costs funded on such date. Each party hereto agrees that, except as
provided below, no Lender shall be required to make any Loan hereunder in an
amount in excess of its Pro Rata Share of the Debt Components to be funded on
any Funding Date. Each Lender's obligation hereunder is several, such that the
failure of any Lender to make a Loan or satisfy any other obligation shall not
relieve any other Lender of its obligations hereunder, and if any Lender shall
fail to make a Loan hereunder each other Lender shall make an additional Loan in
an amount equal to its Pro Rata Share of the Loan that was to have been made by
the defaulting Lender, provided that the maximum aggregate amount of Loans that
any Lender shall be obligated to make shall not exceed its Lender Commitment.
Any Loan made by another Lender of a portion of a Loan to have been made by a
defaulting Lender shall not relieve such defaulting Lender of its obligations
hereunder. If the conditions to the obligations of any Lender specified in
Section 3.2 have not been fulfilled or waived by it on or before the last day of
the Commitment Period, such Lender shall be relieved of all further obligations
to make new Loans under the Operative Documents after the last day of the
Commitment Period. Nothing in this Section 4.2 shall operate to relieve Lessor,
Lessee or Guarantor from their respective obligations under the Operative
Documents or to waive any Lender's rights against Lessor, Lessee or Guarantor.
4.3. Lessor Commitment to Purchase. Subject to and upon the terms and
conditions herein set forth for the benefit of Lessor, Lessee may sell to Lessor
during the Commitment Period and in such event Lessor agrees to buy for the
Acquisition Cost thereof and lease back to Lessee on the Funding Date therefor
certain natural gas compressor equipment. The natural gas compressor equipment
to be sold by Lessee to Lessor pursuant to this Agreement shall include only
natural gas compressor equipment of the type(s) described on Schedule 1 hereto
or as may be specifically approved by Lessor, the Majority Certificate Holders
and the Majority Lenders, provided that the aggregate of the Acquisition Costs
of all Items of Equipment purchased by Lessor from Lessee and all Items of
Equipment assembled by Lessee on behalf of Lessor in accordance with the
Assembly Agency Agreement shall not exceed the Maximum Acquisition Cost.
4.4. Lessor Commitment to Reimburse Component Costs. Subject to and upon
the terms and conditions set forth herein and in the Assembly Agency Agreement
for the benefit of Lessor, Lessor shall reimburse Lessee for the Acquisition
Cost of each Item of Equipment assembled by Lessee on behalf of Lessor in
accordance with the Assembly Agency Agreement, provided the aggregate of such
Acquisition Costs of all Items of Equipment and the Items of Equipment purchased
by Lessor from Lessee shall not exceed the Maximum Acquisition Cost.
4.5. Lessor and Administrative Agent Acceptance of Equipment. Lessor and
Administrative Agent shall be deemed to have found acceptable each Item of
Equipment identified on the Certificate of Equipment therefor in accordance with
Section 3.1(b)(ii) and each
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Budget delivered in accordance with Section 3.1(d) unless Lessor or
Administrative Agent shall have reasonably objected to such Item of Equipment or
Budget in a written notice to Lessee at least four (4) LIBOR Banking Days prior
to the proposed Funding Date for such Item.(3)
4.6. Lease Agreement Supplements. Upon the sale and leaseback of an Item of
Equipment in accordance with Section 4.3 or upon acquisition by Lessor of an
Item of Equipment or a Component thereof in accordance with the Assembly Agency
Agreement Lessee shall execute and deliver to Lessor a Lease Agreement
Supplement for such Item of Equipment or Component which Lease Agreement
Supplement upon satisfaction of the conditions precedent in Section 3.1 shall
thereafter be executed by Lessor and a signed counterpart provided to Lessee.
Upon execution and delivery by Lessee of such Lease Agreement Supplement, such
Item of Equipment or Component shall automatically become in accordance with
this Section 4.6 subject to the Lease Agreement and an "Item of Equipment"
thereunder.
4.7. Rights in Equipment. Upon the execution and delivery by Lessee of
Lease Agreement Supplement relating to an Item of Equipment and satisfaction of
the other applicable conditions precedent set forth in Section 3, Lessor shall
have good and marketable title to such Item of Equipment subject only to
Permitted Liens and Lessor Liens and shall be obligated to pay or reimburse
Lessee in full for the Acquisition Cost of such Item of Equipment in accordance
with the provisions of this Agreement and the Assembly Agency Agreement,
provided that nothing in this Section 4.7 shall affect in any manner the
respective rights and obligations of Lessor and Lessee under the Lease Agreement
or shall reduce or diminish any claim or remedy for damages which Lessor or
Lessee might assert for any breach or violation of the terms of the Lease
Agreement or of this Agreement.
4.8. Funding Dates. From time to time on any Funding Date, and in any event
no later than the last date of the Interim Term, Lessee may request payment from
Lessor of amounts owed by Lessor to Lessee in connection with the sale and
leaseback of Items of Equipment in accordance with the terms hereof and of the
Lease Agreement and in accordance with Lessor's reimbursement obligations
hereunder and under the Assembly Agency Agreement. The Funding Notices delivered
by Lessee for any Funding Date other than the last Funding Date shall in the
aggregate request payment in an amount at least equal to $5,000,000, the last
Funding Date not being subject to a minimum, and shall specify the proposed
Funding Date. Lessee may request payment or reimbursement of Acquisition Costs
in an aggregate amount not to exceed the excess of the Maximum Acquisition Cost
over the aggregate Acquisition Costs of all Items of Equipment previously leased
by Lessor. Lessee represents and agrees that all payments for which
reimbursement will be so requested by it will represent amounts which have been
incurred or paid by Lessee on its own account or as agent for Lessor under the
Assembly Agency Agreement and for which it has not received and will not receive
any commission, allowance, rebate or other profit. If the conditions in Section
3.1 are satisfied or waived and the Lenders and
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(3) Open business issue.
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Certificate Holders make available to Lessor the funds necessary to pay or
reimburse Acquisition Costs on or before 2:00 p.m. (New York time) on a Business
Day, Lessor shall make available to Lessee on the same Business Day the amount
of Acquisition Costs to be paid or reimbursed to Lessee in immediately available
funds. If such funds are not available until after 2:00 p.m. (New York time) on
a Business Day, Lessor shall make available to Lessee on the next succeeding
Business Day the amount of the Acquisition Costs to be paid or reimbursed in
immediately available funds; provided, however, the Funding Date shall be deemed
to be the previous Business Day on which the funding was to have occurred.
Payment of amounts on account of the Acquisition Cost of Items of Equipment
shall be made by wire transfer to the account of the Lessee identified on the
signature page hereto (or such other bank or account maintained in the United
States as Lessee shall designate in writing to Lessor, each Certificate Holder,
each Lender and Administrative Agent no later than 11:00 a.m. (New York time) on
the Business Day preceding the Funding Date).
4.9 Adjustment of Acquisition Cost. If the Appraisal due six (6) Business
Days before the Basic Term Commencement Date in accordance with Section 14 of
the Lease shows a fair market value of any Item of Equipment, as of the date of
such Appraisal, in excess of the Acquisition Cost of such Item, then, subject to
satisfaction of the conditions in Section 3, Lessor shall pay to Lessee on the
Basic Term Commencement Date as a supplement to the Acquisition Cost paid under
Section 4.3 or the reimbursement amount paid under Section 4.4 for such Item of
Equipment (and the Certificate Holders and Lenders will make Equity
Contributions and Loans, respectively, on a pro rata basis in accordance with,
and subject to, their Commitments) in the amount of such excess. In the event
that any such payment is made, and as a condition thereto, Lessee shall deliver
to Lessor an amended and restated Lease Agreement Supplement reflecting the
Acquisition Cost for such Item, as supplemented.
5. Selection of Lease Payment Period.
Provided no Event of Default shall have occurred and is continuing, Lessee
shall at least three (3) LIBOR Banking Days prior to each Funding Date and each
Payment Date deliver to the Administrative Agent written notice of its election
to have both the Equity Rate and the Debt Rate for all Loans and Equity
Contributions for the Lease Payment Period following such Payment Date be based
on one-month, two-month or three-month LIBOR provided that (a) there shall be no
more than [_____] different Lease Payment Periods at any one time, (b)
commencing with the Basic Term Commencement Date and thereafter throughout the
Term, all Loans shall have the same Lease Payment Periods and (c) Lessee shall
not make an election that would cause the new Payment Date resulting from such
election to be later than the last day of the Basic Term. If Lessee fails to
provide such notice of election, Lessee shall be deemed to have elected a
one-month LIBOR based Equity Rate and Debt Rate. At any time while a Lease Event
of Default exists, the Equity Rate and Debt Rate after each Payment Date shall
be based on one-month LIBOR.
6. Default Purchase Options and Cure Rights.
6.1. Right to Cure Certain Lease Events of Default. If Lessee shall fail to
make any Lease Payment or Availability Fee due on any Payment Date when the same
shall have become
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due, and if such failure of Lessee to make such Lease Payment or Availability
Fee shall not constitute the third consecutive such failure, then Lessor, any
Lender, Lenders, Certificate Holder or Certificate Holders (the "Curing Party")
may (but is not obligated to) pay to the Collateral Agent for the benefit of the
Lenders, at any time prior to the earlier of the expiration of ten (10) Business
Days after the Curing Party shall have received notice from the Administrative
Agent of the failure of Lessee to make such Lease Payment or Availability Fee,
an amount equal to the principal of and interest on the Notes then due by reason
of the failure of Lessee to pay such Lease Payment or Availability Fee
(otherwise than by declaration of acceleration) on such Payment Date, and such
payment by the Curing Party shall be deemed to have cured any Loan Event of
Default which arose or would have arisen from such failure of Lessee.
If Lessee shall fail to make any payment of Supplemental Payment when the
same shall become due or otherwise fail to perform any obligation other than the
payment of a Lease Payment under the Lease or any other Operative Document,
which failure can be cured by the payment of money, then a Curing Party may (but
is not obligated to) make such payment or perform such obligation through the
payment of money at any time prior to the expiration of ten (10) Business Days
after such Curing Party shall have received notice of the occurrence of any such
failure, and such payment or performance by such Curing Party shall be deemed to
have cured any Loan Event of Default which arose or would have arise from such
failure of Lessee.
Upon such payment or performance by a Curing Party who is a Lender or a
Certificate Holder, such Curing Party shall (to the extent of such payment made
by it and the costs and expenses incurred in connection with such payments and
performance thereof together with interest thereon) be subrogated to the rights
of, in the case of a Curing Party who is a Lender, the other Lenders and, in the
case of a Curing Party who is a Certificate Holder, the other Certificate
Holders, to receive from Lessee the Lease Payment or Supplemental Payment, as
the case may be, paid by such Curing Party. If the Collateral Agent shall
thereafter receive from Lessee such Lease Payment, Availability Fee or
Supplemental Payment, the Collateral Agent shall forthwith remit such payment to
such Curing Party in reimbursement for the funds so advanced by it.
Until the expiration of the period during which the Curing Party shall be
entitled to exercise rights under paragraph (a) or (b) of this Section 6.1 with
respect to any failure by Lessee referred to therein, neither the Administrative
Agent, the Collateral Agent nor any Lender shall take or commence any action it
would otherwise be entitled to take or commence under the Operative Documents as
a result of such failure by Lessee.
6.2. Certificate Holders Default Purchase Option. For so long as a Lease
Event of Default has occurred and is continuing and Lenders have accelerated the
Loans or are seeking to exercise substantial remedies under the Lease Agreement
with respect to their interest in the Equipment, each Certificate Holder
(individually or, if more than one Certificate Holder wishes to exercise the
right, together with all such Certificate Holders) shall have the right, and is
hereby granted the option (the "Certificate Holders Option") to purchase, or at
the option of such Certificate Holder, to designate a third party to purchase,
from all but not less than all of the Lenders and each Lender hereby agrees to
sell to such Certificate Holder or its designee all but not less than all of its
right, title and interest in the Loans and the Notes, at a purchase price equal
to the aggregate of all amounts then owing to such Lender under the Operative
Documents plus
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any costs incurred in connection with the sale, including but not limited to
Breakage Costs and attorneys fees (the "Purchase Option Price") and to assign
all of such Lender's rights, remedies and security interests with respect to the
Loans and Notes under the Operative Documents to such purchasing Certificate
Holder or Certificate Holders or its designee or their designees. In order to
exercise the Certificate Holders Option, each such Certificate Holder shall
deliver to each Lender, each other Certificate Holder and the Collateral Agent
irrevocable written notice of such election (the "Option Notice") and shall pay
the Purchase Option Price (or in the case of more than one Certificate Holder
has given notice of its election to exercise the Certificate Holders Option, its
pro rata share (in relation to the aggregate of its Equity Contributions and the
aggregate Equity Contributions of all Certificate Holders exercising such
option) of the Purchase Option Price) in immediately available funds on or
before the second Business Day after delivery of the Option Notice in accordance
herewith. Each Lender agrees that any participation, assignment, sale or other
transfer of all or any part of its interest in the Loan or any Note shall be
subject to the Certificate Holders Option and Lender and the Collateral Agent
agree that they will not take any action with respect to the Equipment during
the period after Lender and the Collateral Agent receive the Option Notice and
prior to the third Business Day thereafter without the consent of the
Certificate Holders.
7. Security.
7.1. Security Interest. For valuable consideration, and to secure the due
payment and performance of all principal of, interest on the Loans, the Loan
Availability Fee and any interest due thereon, Breakage Costs, if any, and all
indebtedness and other liabilities and obligations, whether now existing or
hereafter arising (including any obligations to indemnify, reimburse or pay
costs and/or expenses) of Lessor to Lenders, the Administrative Agent and the
Collateral Agent arising out of or in any way connected with the Operative
Documents and all instruments, agreements and documents executed, issued and
delivered pursuant thereto (collectively, the "Secured Obligations"), Lessor
hereby assigns, conveys, mortgages, pledges, hypothecates, transfers and sets
over to the Collateral Agent, and its successors and assigns, and grants to the
Collateral Agent, and its successors and permitted assigns, a first Lien on and
security interest in the rights, title and interest of Lessor now held or
hereafter acquired in and to the following, except for Excepted Payments with
respect thereto (collectively, the "Lessor Collateral"):
(a) the Items of Equipment;
(b) all Subleases pertaining to the Items of Equipment;
(c) any Bill of Sale and all warranties (including, without limitation,
warranties of title, merchantability, fitness for a particular purpose, quality
and freedom from defects) and rights of recourse against manufacturers,
assemblers, sellers and others in connection with the Items of Equipment;
(d) this Agreement, the Lease Agreement, the Security Documents and all
Lease Payments, Availability Fees and Supplemental Payments payable under the
Lease Agreement and all other sums payable thereunder;
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(e) all accounts, contract rights, general intangibles and all other
property rights of any nature whatsoever arising out of or in connection with
the Lease Agreement or the Items of Equipment, including, without limitation,
Lease Payments, Availability Fees, Supplemental Payments and Lessee Collateral
and any other payments due and to become due under the Lease Agreement and the
Subleases whether as repayments, reimbursements, contractual obligations,
indemnities, damages or otherwise;
(f) all claims, rights, powers, or privileges and remedies of Lessor under
the Lease Agreement;
(g) all rights of Lessor under this Agreement and the Lease Agreement to
make determinations to exercise any election (including, but not limited to,
election of remedies) or option or to give or receive any notice, consent,
waiver or approval, together with full power and authority to demand, receive,
enforce, collect or receipt for any of the foregoing or any property which is
the subject of this Agreement or the Lease Agreement, to enforce or execute any
checks, or other instruments or orders, to file any claims and to take any
action which (in the opinion of the Collateral Agent) may be necessary or
advisable in connection with any of the foregoing; provided, however, the
Collateral Agent agrees for the benefit of Lessor that so long as no Loan Event
of Default has occurred and is continuing, it will not exercise any of the
rights assigned to it under clauses (f) and (g) of this Section 7, other than
the right to receive amounts due under the Lease Agreement and Section 9 of this
Agreement, without the prior written consent of Lessor;
(h) all moneys now or hereafter paid or required to be paid to Lenders
pursuant to any Operative Document; and
(i) all proceeds of Lessor Collateral including, without limitation, all
rentals, income and profits in respect of the Items of Equipment, whether under
the Lease Agreement or otherwise, all credits granted by any manufacturer or
vendor with respect to the return of any Item of Equipment and the proceeds of
any insurance payable with respect to the Items of Equipment.
7.2. Further Assurances. For each Item of Equipment, Lessor will, at
Lessee's expense, make, execute, endorse, acknowledge, file and/or deliver to
the Collateral Agent from time to time such confirmatory assignments,
conveyances, financing and continuation statements, transfer endorsements,
powers of attorney, replacement notes, reports and other assurances or
instruments and take such further actions which the Administrative Agent may
reasonably request to perfect, preserve or protect the Collateral Agent's
security interest granted hereunder or which the Collateral Agent deems
necessary or advisable in order to obtain the full benefits of the Liens created
or intended to be created hereunder, and will take such other actions reasonably
requested by the Collateral Agent to effectuate the intent of the Operative
Documents. To the extent permitted by Applicable Law, Lessor authorizes the
Collateral Agent to file any such financing and continuation statements without
the signature of Lessor and Lessor will pay all applicable filing fees and
related expenses.
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7.3. Termination. Upon the full and final discharge and satisfaction (i) of
Lessor's obligations with respect to all amounts owed under the Operative
Documents, (ii) with respect to amounts owed under Sections 2.7.1 and 2.7.2 of
the Loan Agreement in relation to the loss or sale of any Item of Equipment and
(iii) with respect to any Item of Equipment replaced in accordance with Section
13 of the Lease Agreement, unless in the case of clauses (ii) or (iii) a Lease
Event of Default shall have occurred and be continuing the obligation to
purchase such Item of Equipment, the provisions of this Section 7 shall
terminate with respect to all Lessor Collateral or such Items of Equipment (as
applicable) and all right, title and interest of the Collateral Agent in and to
all Lessor Collateral or such Items of Equipment (as applicable) and the
proceeds thereof shall revert to Lessor. Following payment or substitution in
accordance with the foregoing sentence, Lessor's obligations to Lenders, the
Administrative Agent and the Collateral Agent in and to all Items of Equipment
or such Items of Equipment (as applicable) shall revert to Lessor. If such
discharge and satisfaction or substitution in clause (ii) or (iii) of Section 13
of the Lease Agreement shall be made during the occurrence and continuance of a
Lease Event of Default, the foregoing discharge shall be made only following
satisfaction of all of Lessee's obligations under Section 24 of the Lease
Agreement. The Collateral Agent shall, at Lessor's expense, execute and deliver
any evidence of such release as Lessor may reasonably require and furnish to the
Collateral Agent.
7.4. Other Security. To the extent that the obligations of Lessor under any
Operative Document are now or hereafter secured by property other than Lessor
Collateral or by the guarantee, endorsement or property of any other Person,
then the Collateral Agent shall have the right in its sole discretion to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Collateral Agent's rights
and remedies hereunder.
7.5. Power of Attorney. Lessor irrevocably authorizes the Collateral Agent
and does hereby make, constitute and appoint the Collateral Agent and any
officer of the Collateral Agent, with full power of substitution, as Lessor's
true and lawful attorney-in-fact, with power, in its own name or in the name of
Lessor, to endorse any notes, checks, drafts, money orders, or other instruments
of payment (including payments payable under or in respect of any policy of
insurance) in respect of Lessor Collateral that may come into possession of the
Collateral Agent; to sign and endorse any invoice, freight or express bill, bill
of lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts, and other documents
relating to Lessor Collateral; to pay or discharge Taxes, Liens, security
interests or other encumbrances at any time levied or placed on or threatened
against Lessor Collateral; to demand, collect, receipt for, compromise, settle
and sue for monies due in respect of Lessor Collateral; and generally, to do, at
the Collateral Agent's option and at Lessor's expense, at any time, or from time
to time, all acts and things which the Collateral Agent deems necessary to
protect, preserve and realize upon Lessor Collateral and the Collateral Agent's
security interests therein and in order to effect the intent of the Operative
Documents all as fully and effectually as Lessor might or could do; and Lessor
hereby ratifies all that said attorney shall lawfully do or cause to be done by
virtue hereof. This power of attorney shall be coupled with an interest and
irrevocable for the term of this Agreement and thereafter as long as any of the
obligations of Lessor under any Operative Document shall be outstanding. The
powers conferred on the Collateral Agent hereunder are solely to protect its
interest in Lessor Collateral and shall
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not impose any duty upon the Collateral Agent to exercise any such powers. The
Collateral Agent shall be accountable only for amounts that it actually receives
as a result of the exercise of such powers and neither it nor any of its
officers, directors or employees shall be responsible to Lessor for any act or
failure to act, except for its own gross negligence or willful misconduct.
7.6. Assignment of Rights. Lessor agrees that the assignments herein are
irrevocable and it will not, while said assignment is in effect or thereafter
until Lessor has received from the Collateral Agent notice of the termination
thereof, take any action as Lessor under the Lease Agreement or otherwise which
is inconsistent with this Agreement or make any other assignment, designation or
direction inconsistent herewith and that any assignment, designation or
direction inconsistent herewith shall be void. Lessor and the Collateral Agent
agree that the following are, without limitation, rights, powers, privileges,
options, and benefits exclusively assigned by Lessor hereunder: (i) the right to
make claim for, receive, collect and receipt for (and to apply the same to the
payment of the principal of, Breakage Costs, if any, and interest on the Notes)
all rents, income, revenues, issues, profits, insurance proceeds, condemnation
awards, payments of Casualty Loss Value and other sums payable or receivable
under this Agreement and the Lease Agreement or pursuant hereto or thereto, (ii)
the right to make all waivers and agreements, to give and receive all notices
and other instruments in its capacity as Lessor under the Operative Documents
and to take all action upon the happening of Lease Event of Default, including
the commencement, conduct and consummation of proceedings at law or in equity as
shall be permitted under any provision of the Lease Agreement or by law, and
(iii) the right to do all other things which Lessor is or may become entitled to
do under the Lease Agreement.
7.7. Transfer of the Collateral by the Collateral Agent. The Collateral
Agent or any Lender may be a transferee of Lessor Collateral or of any part
thereof or of any interest therein at any sale thereof, whether pursuant to
foreclosure or power of sale or otherwise hereunder, and may apply upon the
transfer price the indebtedness secured hereby owing to such transfer, to the
extent of such transferee's distributive share of the transfer price to the
extent permitted by Applicable Law. Any such transferee shall, upon any such
transfer, acquire title to the properties so transferred, free of the Lien of
this Agreement.
7.8. No Segregation of Monies; No Interest. Any monies paid to or retained
by the Collateral Agent pursuant to any provision hereof and not then required
to be distributed to any party as provided in this Section 7 need not be
segregated in any manner except to the extent required by law, and may be
deposited under such general conditions as may be prescribed by law, without
interest.
7.9. Distribution of Moneys. Except as may be otherwise provided in this
Section 7 and for so long as no Loan Event of Default has occurred and is
continuing, all moneys received by the Collateral Agent shall be applied in
accordance with this Section 7.9:
(a) Scheduled and End of Term Payments. Provided no Loan Event of Default
has occurred and is continuing, moneys received by the Collateral Agent
constituting Lease Payments or any end of term payment under Sections 28 or 29
of the Lease Agreement, Loan Availability Fees or Supplemental Payments under
the Lease Agreement other than constituting
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Casualty Loss Value or proceeds of a sale under Section 28.5 of the Lease
Agreement (including the payment of interest on any such overdue amount), shall
be applied:
First, to each Lender on a pari passu basis in accordance with clauses
first through fifth of Section 2.8 of the Loan and Security Agreement;
Second, to each Lender on a pari passu basis so much of such funds as shall
be required to pay in full any principal amount then due on the Loans;
Third, to each other Lessor Indemnified Person on a pari passu basis, all
amounts then due such Person hereunder; and
Fourth, the balance, if any, of such payment remaining thereafter shall be
distributed to Lessor for disposition according to the terms of the Operative
Documents.
(b) Partial Prepayments. Provided no Loan Event of Default has occurred and
is continuing, moneys received by the Collateral Agent constituting Casualty
Loss Value (including any insurance proceeds or condemnation awards in respect
of the subject Event of Loss which are payable to the Collateral Agent pursuant
to the provisions of the Lease Agreement) and constituting proceeds of the sale
of any Item of Equipment pursuant to Section 28.5 of the Lease Agreement shall
be applied on the date received:
First, to each Lender on a pari passu basis in accordance with clauses
first through fifth of Section 2.8 of the Loan and Security Agreement;
Second, to each Lender and to Lessor on a pari passu basis (based on the
aggregate of the outstanding principal balance of each Lender's Notes and the
Equity Component less any amounts previously distributed to Lessor under this
Section 5A.9(b)) so much of such funds as shall be required to pay in full
any principal amount then due on the Loans; and
Third, the balance, if any, of such payment remaining thereafter shall be
distributed to Borrower for disposition according to the terms of the
Operative Documents.
7.10. Payments after a Loan Event of Default. All payments received and all
amounts held or realized by the Collateral Agent (including any amounts realized
by the Collateral Agent from the exercise of any remedies) after any Loan Event
of Default, and all payments or amounts then held or thereafter received by the
Collateral Agent hereunder or under the Operative Documents, shall, so long as
such Loan Event of Default continues and shall not have been waived in writing
by Majority Lenders, be applied on the date received:
First, so much of such payments or amounts held or realized by the
Collateral Agent as shall be required to reimburse the Collateral Agent for
any expenses not reimbursed by Lessor in connection with the collection or
distribution of such amounts held or realized by the Collateral Agent or in
connection with the expenses incurred in enforcing its remedies hereunder and
preserving Lessor Collateral including, without
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limitation, those expenses contemplated under Section 9.1 of this Agreement,
shall be retained by the Collateral Agent;
Second, to each Lender on a pari passu basis in accordance with clauses
first through sixth of Section 2.8 of the Loan and Security Agreement;
Third, to each other Lessor Indemnified Person on a pari passu basis, all
amounts then owed such Person hereunder; and
Fourth, the balance, if any, of such payments or amounts remaining
thereafter shall be distributed to Lessor for disposition according to the
terms of the Operative Documents.
7.11. Application of Certain Other Payments. Any payments received by any
Lender for which provision as to the application thereof is made in the
Operative Documents but not elsewhere in this Agreement shall be applied
forthwith to the purpose for which such payment was made in accordance with the
terms of the Operative Documents.
7.12. Other Payments. Except as otherwise provided in Sections 7.9 and
7.10, (a) any payments received by the Collateral Agent for which no provision
as to the application thereof is made in the Operative Documents, or elsewhere
in this Section 7, and (b) all payments received and amounts realized by the
Collateral Agent with respect to Lessor Collateral (including, without
limitation, all amounts realized upon the sale, release or other disposition of
Lessor Collateral upon foreclosure of this Agreement), to the extent received or
realized at any time after payment in full of the amounts set forth in clauses
first through sixth of Section 2.8 of the Loan and Security Agreement for each
Lender shall be paid to Lessor or its designee.
7.13. Retention of Amounts by the Collateral Agent. If at the time of
receipt by the Collateral Agent of any payment or amount which would otherwise
be distributable to Lessor, there shall have occurred and be continuing a Loan
Default or a Loan Event of Default, the Collateral Agent shall not distribute
any such amount to Lessor or its designee and shall hold it as security for
Lessor's obligations to Lenders under the Operative Documents until such time as
there shall not be continuing such Loan Default or Loan Event of Default.
7.14. Conflicts. If any provision of this Section 7 conflicts with any
provision contained in any other Operative Document, such provision contained in
this Section 7 shall prevail.
8. Guaranty.
For the benefit of each other party hereto (each a "Guaranty Party"),
guarantor irrevocably and unconditionally guarantees the full and prompt payment
when due (whether by acceleration or otherwise) of Lease Payments, Availability
Fees, Supplemental Payments and any interest due thereon and of all obligations
and liabilities (including, without limitation, indemnities, fees and interest
thereon) of Lessee now existing or hereafter incurred under, arising out of or
in connection with this Agreement or any other Operative Document and the due
performance and compliance with the terms of the Lease Agreement and the
Operative
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Documents by Lessee (all such payments, interest, obligations and liabilities,
collectively, the "Guaranteed Obligations"). All payments by Guarantor under
this guaranty shall be made on the same basis as payments by Lessee under the
Operative Documents. Guarantor hereby waives notice of acceptance of this
guaranty and notice of any liability to which it may apply, and waives
presentment, demand of payment, protest, notice of dishonor or nonpayment of any
such liability, suit or taking of other action by an Guaranty Party against, and
any other notice to, any party liable theron (including such Guarantor or any
other guarantor). Any Guaranty Party may at any time and from time to time
without the consent of, or notice to Guarantor, without incurring responsibility
to Guarantor and without impairing or releasing the obligations of Guarantor
hereunder, upon or without any terms or conditions and in whole or in part:
(a) change the manner, place or terms of payment of, and/or change or
extend the time of payment of, renew or alter, any of the Guaranteed Obliations,
any security therefor, or any liability incurred directly or indirectly in
respect therof, and the guaranty herein made shall apply to the Guaranteed
Obligations as so changed, extended, renewed or altered;
(b) sell, exchange, release, 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 securing, the Guaranteed Obligations or any
liabilite is (including any of those hereunder) incurred directly or indirectly
in respect thereof or hereof, and/or any offset there against;
(c) exercise or refrain from exercising any rights against Lessee or others
or otherwise act or refrain from acting;
(d) 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;
(e) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of Lessee to any Guaranty Party regardless of what
liabilities or liabilities of Lessee remain unpaid; and/or
(f) consent to or waive any breach of, or any act, omission or default
under, any of the Operative Documents or otherwise amend, modify or supplement
any of the Operative Documents or any of such other instruments or agreements.
The obligations of Guarantor under this Section 8 are 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 ocurrence whatsoever, including,without limitation (i)
any action or inaction by any Guaranty Party; or (ii) any invalidity,
irregularity or unenforceability of all or part of the Guaranteed Obligations or
of any security therefor. The obligations under this Section 8 are primary
obligations of Guarantor. If and to the extent that Guarantor makes any payment
to any Guaranty Party or to any other Person pursuant to or in respect of this
Section 8, any claim which Guarantor may have against Lessee
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by reason thereof shall be subject and subordinate to the prior payment in full
of the Guaranteed Obligations.
The obligations under this Section 8 are continuing and all liabilities to
which they apply or may apply under the terms hereof shall be conclusively
presumed to have been created in reliance hereon. No failure or delay on the
part of any Guaranty Party in exercising any right, power or privilege hereunder
and no course of dealing between Guarantor, any Guaranty Party or the holder of
any Note or Certificate shall operate as a waiver thereof; nor shall 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. The rights, powers and remedies herein expressly provided are
cumulative and not exclusive of any rights, powers and remedies which any
Guaranty Party or the holder of any Note or Certificate would otherwise have. No
notice to or demand on Guarantor in any case shall entitle Guarantor to any
other further notice or demand in similar or other circumstances or constitute a
waiver of the rights of any Guaranty Party or the holder of any Note or
Certificate to any other or further action in any circumstances without notice
or demand.
The guaranty shall continue to be effective, or be reinstated, as the case
may be, if at any time payment, or any part thereof, or of any of the Guaranteed
Obligations is rescinded or must otherwise be restored or returned by the
Guaranty Parties upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of Lessee or Guarantor, or upon or as a result of the appointment
of a receiver, intervenor, or conservator of, or trustee or similar officer for,
Lessee Guarantor or any substantial part of its property, all as though such
payment or principal or interest or otherwise and whether by Lessee or others
(including Guarantor), with respect to any of the Guaranteed Obligations shall
if the statute of limitations in favor of Guarantor against any Guaranty Party
or the holder of any Note or Certificate shall have commenced to run, toll to
the extent permitted by Applicable Law the running of such statute of
limitations, and if the period of such statute of limitations shall have
expired, prevent the operation of such statute of limitations.
9. Covenants.
9.1. Lessor Covenants.Lessor covenants for the benefit of each other party
hereto (unless each shall have otherwise waived in writing compliance herewith)
during the term of this Agreement as follows:
(a) It shall take all actions as are required to keep the representations
and warranties made by it in Section 2.5 (except, in the case of clause (b) of
Section 2.5, if the location of such office shall change, Lessor shall provide
each other party hereto with not less than ten (10) days' prior written notice
of such change), true and correct in all material respects (but without regard
to the date when such representations and warranties were made or are expressed
to be effective) until such time as all of the obligations secured hereby have
been paid in full.
(b) It shall obtain and maintain, or cause to be obtained or maintained, in
full force and effect, any authorization, approval, license, or consent of any
governmental or judicial authority including those which may be or become
necessary in order for Lenders, the Collateral
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Agent, Lessee and Certificate Holders to obtain the full benefits of this
Agreement and all rights and remedies granted or to be granted herein.
(c) The proceeds of each Loan shall be used solely to finance Lessor's
acquisitions of Items of Equipment in accordance with the terms of this
Agreement and the Assembly Agency Agreement and for costs related to such
transactions. 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 will violate or be inconsistent with the provisions of
Regulation T, U or X of the Board of Governors of the Federal Reserve System.
(d) It shall comply in all material respects with all Applicable Laws,
rules, regulations and orders of any jurisdiction, such compliance to include
paying when due all Taxes imposed upon it or upon its property by any
Governmental Entity except to the extent contested in good faith and for which
adequate reserves have been segregated.
(e) It shall promptly take, and maintain the effectiveness of, all action
of the type referred to in clause (b) of Section 2.4 or otherwise that may, from
time to time, be necessary or appropriate under Applicable Law in connection
with the performance by Lessor of its obligations under the Operative Documents,
or the taking of any action hereby or thereby contemplated, or necessary for the
legality, validity, binding effect or enforceability of the Operative Documents,
or for the making of any payment or the transfer or remittance of any funds by
Lessor under the Operative Documents.
(f) It shall duly pay and discharge (i) immediately upon the attachment
thereof all Liens other than Permitted Liens on any Lessor Collateral, (ii) as
and when due, all of its indebtedness and others obligations before the time
that any Lien attaches unless and only to the extent that any such amounts are
not yet due and payable or the validity thereof is being contested in good faith
by appropriate proceedings so long as such proceedings do not involve any
material danger of the sale, forfeiture or loss of the Items of Equipment or any
interest therein and Lessor maintains appropriate reserves with respect thereto
or has made adequate provision for the payment thereof, in accordance with
generally accepted accounting principles and approved by the Majority Lenders
and (iii) all Taxes imposed upon or against it or its property or assets, or
upon any property leased by it, prior to the date on which penalties attach
thereto.
(g) It shall keep at all times books of record and account in which full,
true and correct entries will be made of all dealings or transactions in
relation to its business and affairs, and provide or cause to be provided
adequate protection against loss or damage to such books of record and account.
(h) It shall not operate in a manner that would result in an actual,
constructive or substantive consolidation with Certificate Holders, any other
Person other than Lessee, and in such connection Lessor shall observe all trust
formalities, maintain records separately and independently from those of
Certificate Holders or other Person and enter into any transactions with
Certificate Holders only on an arm's-length contractual basis.
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(i) It shall not without the consent of all Lenders (i) enter into any
business other than its acquisition, leasing, financing and sale of the
Equipment, (ii) create, incur, assume or permit to exist any Indebtedness,
except as expressly permitted by this Agreement, (iii) enter into, or be a party
to, any transaction with any Person, except the transactions set forth in the
Operative Documents and as expressly permitted thereby, or (iv) make any
investment in, guarantee the obligations of, or make or advance money to any
Person, through the direct or indirect lending of money, holding of securities
or otherwise except the transactions set forth in the Operative Documents and as
expressly permitted thereby.
(j) It shall not wind up, liquidate or dissolve its affairs or enter into
any transaction of merger or consolidation, or convey, sell, lease
(substantially as a whole), or otherwise dispose of (whether in one or in a
series of transactions) its assets except as expressly permitted by this
Agreement.
(k) It shall notify Lessee of any Loan Event of Default except any such
Loan Event of Default caused by or related to a Lease Event of Default.
(l) It shall not claim ownership of any Item of Equipment on any Federal,
state, local or foreign tax return or filing.
9.2. Trust Company Covenants. Trust Company covenants and agrees for the
benefit of each other party hereto (unless each party shall have otherwise
waived in writing compliance herewith) during the term of this Agreement as
follows:
(a) It shall perform all of its obligations set forth in the Trust
Agreement and shall not amend, modify, consent to any change to the terms or
otherwise alter the Trust Agreement in any manner without the consent of each of
the other parties hereto.
(b) It shall not, so long as no Lease Event of Default has occurred and is
continuing, take or cause to be taken any action contrary to Lessee's or any
Sublessee's right to quiet enjoyment of, and the continuing possession, use and
operation of, the Equipment during the Term.
(c) It shall (i) not cause or permit to exist any Lien attributable to it
with respect to the Items of Equipment or any other portion of the Trust Estate
other than Permitted Liens, (ii) promptly, at its own expense, take such action
as may be necessary duly to discharge any Lien attributable to it, and (iii)
make restitution to the Trust Estate for any actual diminution of the assets of
the Trust Estate resulting from any Liens attributable to it.
(d) It shall not change the location of its principal office to a location
outside of Wilmington, Delaware without providing at least ten (10) days advance
written notice thereof.
9.3. Certificate Holders Covenants. Each Certificate Holder covenants and
agrees for the benefit of each party hereto (unless each party hereto shall have
otherwise waived in writing compliance herewith) during the term of this
Agreement as follows:
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(a) It shall maintain its existence as a corporation in good standing under
the laws of the state or country of its organization.
(b) It shall perform all of its obligations set forth in the Trust
Agreement and shall not amend, modify, consent to any change to the terms or
otherwise alter the Trust Agreement in any manner without the consent of Lessee,
Guarantor, Administrative Agent, Collateral Agent, Majority Lenders and Majority
Certificate Holders.
(c) It shall not, so long as no Lease Event of Default has occurred and is
continuing or the Lease Agreement has not otherwise been terminated, take or
cause to be taken any action contrary to Lessee's or any Sublessee's right to
quiet enjoyment of, and the continuing possession, use and operation of, the
Equipment during the Term of the Lease Agreement.
(d) It shall (i) not cause or permit to exist any Lien attributable to it
with respect to the Items of Equipment or any other portion of the Trust Estate
other than Permitted Liens, (ii) promptly, at its own expense, take such action
as may be necessary duly to discharge any Lien attributable to it, and (iii)
make restitution to the Trust Estate for any actual diminution of the assets of
the Trust Estate resulting from any Liens attributable to it.
9.4. Lender and Collateral Agent Covenant. Each Lender and the Collateral
Agent hereby covenants and agrees, for the benefit of Lessor and Lessee, that so
long as no Lease Event of Default has occurred and is continuing or the Lease
Agreement has not otherwise been terminated, it shall not take or cause to be
taken any action contrary to Lessee's or any Sublessee's right to quiet
enjoyment of, and the continuing possession, use and operation of, the Equipment
during the Term.
9.5. Lessee and Guarantor Covenants. Each of Guarantor and Lessee, as
applicable, covenants and agrees for the benefit of Lessor, Certificate Holders,
each Lender, the Administrative Agent and the Collateral Agent (unless each such
Person shall otherwise waive in writing compliance herewith) that on the Closing
Date therefor and thereafter during the remaining term of this Agreement as
follows:
(a) Information Covenants. Guarantor will furnish to the Administrative
Agent:
(i) Monthly Reports. Within 45 days after the end of each fiscal month of
Guarantor, the consolidated balance sheets of Guarantor and its Subsidiaries
on a consolidated basis and Lessee 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.
(ii) Quarterly Financial Statements. Within 45 days after the close of the
first three quarterly accounting periods in each fiscal year of Guarantor,
the consolidated balance sheets of Guarantor and its Subsidiaries on a
consolidated basis and Lessee and
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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 Guarantor, subject
to normal year-end audit adjustments.
(iii) Annual Financial Statements. Within 105 days after the close of each
fiscal year of Guarantor, the consolidated balance sheets of Guarantor and
its Subsidiaries on a consolidated basis and Lessee 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 Guarantor, by Deloitte & Touche LLP or such other
independent certified public accountants of recognized national standing
reasonably acceptable to the Administrative Agent, and in the case of the
other financial statements, certified by the chief financial officer of
Guarantor, together with a report of such accounting firm stating that in the
course of its regular audit of the financial statements of Guarantor and its
Subsidiaries, which audit was conducted in accordance with generally accepted
auditing standards, such accounting firm obtained no knowledge of any Lease
Default, Lease Event of Default, Loan Default or Loan Event of Default which
has occurred and is continuing or, if in the opinion of such accounting firm
such a Lease Default, Lease Event of Default, Loan Default or Loan Event of
Default has occurred and is continuing, a statement as to the nature thereof.
(iv) Management Letters. Promptly after Guarantor' or any of its
Subsidiaries' receipt thereof, a copy of any "management letter" addressed to
the board of directors of Guarantor or such Subsidiary from its certified
public accountants and any internal control memoranda relating thereto.
(v) Budgets. No later than the first day of each fiscal year of Guarantor,
a budget in form satisfactory to the Majority Lenders (including budgeted
statements of income and sources and uses of cash and balance sheets)
prepared by Guarantor for each of the twelve months of such fiscal year
prepared in detail, accompanied by a statement of the Chief Financial Officer
of Guarantor to the effect that, to the best of his knowledge, the budget is
a reasonable estimate for the period covered thereby.
(vi) Certificates of Responsible Officer. At the time of the delivery of
the financial statements provided for in Sections 9.5(a)(ii) and 9.5(a)(iii),
a certificate of a Responsible Officer of Guarantor to the effect that, to
the best of such officer's knowledge, no Lease Default or Lease Event of
Default has occurred and is continuing or, if any Lease Default or Lease
Event of Default has occurred and is continuing, specifying the nature and
extent thereof, which certificate shall set forth in reasonable detail the
calculations required to establish whether the Borrower was in compliance
with the provisions
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of Sections 9.5(k), (m), (n) and (o), inclusive, at the end of such fiscal
quarter or year, as the case may be.
(vii) Notice of Default or Litigation. Promptly, and in any event within
three Business Days after a Responsible Officer of Guarantor or Lessee
obtains knowledge thereof, notice of (i) the occurrence of any event which
constitutes a Lease Default or Lease Event of Default and (ii) any litigation
or governmental investigation or proceeding pending (x) against Guarantor 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 Guarantor or any of its
Subsidiaries or (y) with respect to the Guarantor IPO, the Repurchase, the
Revolver or any Operative Document.
(viii) Other Information. From time to time, such other information or
documents (financial or otherwise) with respect to Guarantor or its
Subsidiaries as any Lender or Certificate Holder may reasonably request.
(b) Books, Records and Inspections. Guarantor 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. Guarantor will, and will cause each of
its Subsidiaries to, permit upon two Business Days' prior notice officers and
designated representatives of the Administrative Agent or the Majority Lenders
to visit and inspect, under guidance of officers of Guarantor or such
Subsidiary, any of the properties of Guarantor or such Subsidiary, and to
examine the books of account of Guarantor or such Subsidiary and discuss the
affairs, finances and accounts of Guarantor 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
Administrative Agent or the Majority Lenders 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. Guarantor will, and will
cause each of its Subsidiaries to, permit officers and designated
representatives of the Administrative Agent to conduct, at Guarantor's expense,
an annual audit of the accounts receivable and inventories of Guarantor and its
Subsidiaries.
(c) Compliance with Statutes, etc. Guarantor 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 Guarantor and its Subsidiaries taken as a whole.
(d) Compliance with Environmental Laws. (i) Guarantor 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 Guarantor or any of its Subsidiaries (except
such noncompliances as could not, individually or
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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 Guarantor 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 Guarantor 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 Guarantor 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 required
in connection with the operation, use and maintenance of the business or
operations of Guarantor or any of its Subsidiaries.
(ii) At the written request of the Administrative Agent, the Majority
Lenders or the Majority Certificate Holders, which request shall specify in
reasonable detail the basis therefor, at any time and from time to time,
Guarantor will provide, at Guarantor's sole cost and expense, an environmental
site assessment report concerning any Real Property owned or operated by
Guarantor and its Subsidiaries, prepared by an environmental consulting firm
reasonably satisfactory to the Administrative 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 23 of the Lease Agreement or
Section 6.1 of the Loan Agreement; (ii) the Lenders or Certificate Holders
receive notice under Section 9.5(d) of any event for which notice is required to
be delivered for any such Real Property or any business or operations of
Guarantor or any of its Subsidiaries; or (iii) a Lease Default or a Lease Event
of Default then exists. If Guarantor or Lessee fails to provide the same within
ninety (90) days after such request was made, the Administrative Agent may order
the same, the cost of which shall be borne by Lessee, and Guarantor and Lessee
shall grant and hereby grant to the Administrative Agent, the Lenders, the
Certificate Holders and their agents access to such Real Property and
specifically grant the Administrative Agent, the Lenders and the Certificate
Holders an irrevocable non-exclusive license to undertake such an assessment,
all at Guarantor's expense.
[(e) ERISA. As soon as possible and, in any event, within ten (10) business
days after Guarantor, any Subsidiary of Guarantor or any ERISA Affiliate knows
or has reason to know of the occurrence of any of the following, Guarantor will
deliver to each of the Lenders a certificate of the chief financial officer of
Guarantor setting forth the full details as to such occurrence and the action,
if any, that Guarantor, 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 Guarantor, 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 Guarantor has
previously delivered to the Lenders 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
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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 reasonably 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 Guarantor or any
Subsidiary of Guarantor 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 Guarantor or any Subsidiary
of Guarantor 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 as required by Section
601 of ERISA) or any Plan or any Foreign Pension Plan in addition to the
liability that existed on the Effective Date pursuant to any such plan or plans.
Guarantor will deliver to each of the Lenders 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. Guarantor will also deliver to each of the
Lenders 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 Lenders 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
Guarantor, any Subsidiary of Guarantor or any ERISA Affiliate with respect to
any Plan or Foreign Pension Plan shall be delivered to the Lenders 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 Guarantor, the
Subsidiary or the ERISA Affiliate, as applicable.(4)
- ----------
(4) Under ERISA review.
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(f) Performance of Obligations. Guarantor 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
aggregate, reasonably be expected to have a material adverse effect on the
business, operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of Guarantor and its Subsidiaries taken as a whole.
(g) Payment of Taxes. Guarantor 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 Guarantor 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 GAAP.
(h) Liens. Guarantor 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 Guarantor
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 Guarantor 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 6.5(h) shall not
prevent the creation, incurrence, assumption or existence of the following
(Liens described below are herein referred to as "Permitted Guarantor 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 Guarantor or any of its
Subsidiaries imposed by law, which were incurred in the ordinary course of
business and do not secure Indebtedness 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 Guarantor's or such
Subsidiary's property or assets or materially impair the use thereof in the
operation of the business of Guarantor's 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 Closing Date which are listed, and the
property subject thereto described, in Schedule 5, but only to the respective
date, if any, set forth in such Schedule 5 for the removal and termination of
any such Liens, plus renewals and extensions of such Liens to the extent set
forth on Schedule 5, provided that (x) the aggregate principal amount of the
Indebtedness, if any, secured by such Liens does not
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<PAGE> 51
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 Guarantor or any of its Subsidiaries;
(iv) Permitted Encumbrances;
(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 Guarantor and its
Subsidiaries taken as a whole;
(vii) Liens (including precautionary UCC filings) upon assets of Lessee or
its Subsidiaries subject to Capitalized Lease Obligations to the extent
permitted by Section 9.5(k)(v) and the other provisions of this Agreement,
provided that (x) such Liens secure only the payment of such Capitalized
Lease Obligations and (y) the Liens do not encumber any other asset of
Guarantor or any Subsidiary of Guarantor;
(viii) Liens placed upon inventory, equipment or other property acquired,
constructed or held by Lessee or any of its Subsidiaries in the ordinary
course of business to secure Indebtedness incurred to finance the
acquisition, construction or improvement thereof, provided that (x) the
aggregate outstanding principal amount of all Indebtedness secured by the
Liens permitted by this clause (viii) and the Indebtedness permitted by
Section 9.5(k)(v) shall not at any time exceed $15,000,000 and (y) such Liens
do not encumber any other asset of Lessee 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 Guarantor and its Subsidiaries taken as a whole;
(x) Liens on assets of a Foreign Subsidiary of Lessee securing Indebtedness
permitted to be incurred by such Foreign Subsidiary under this Agreement;
(xi) Liens arising out of judgments or awards in respect of which Guarantor
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
Guarantor 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
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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 $5,000,000; and
(xiv) Liens securing Indebtedness permitted pursuant to Section
9.5(k)(xvii).
(i) Consolidation, Merger, Purchase or Sale of Assets, etc. Guarantor 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
foregoing 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 Lessee and its Subsidiaries shall be permitted
to the extent not in violation of Section 9.07 of the Revolver;
(ii) each of Lessee 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 Lessee;
(iii) investments may be made to the extent permitted by Section 9.05 of
the Revolver;
(iv) each of Lessee and its Subsidiaries may lease (as lessee) real or
personal property to the extent permitted by Section 9.5(k) (so long as any
such lease does not create a Capitalized Lease Obligation except to the
extent permitted by Section 9.5(k));
(v) each of Lessee and its Subsidiaries may make sales or Leases of
inventory or equipment in the ordinary course of business;
(vi) any Subsidiary of Lessee may be merged or consolidated with or into
Lessee or any other Wholly-Owned Domestic Subsidiary of Lessee 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
Lessee or any other Wholly-Owned Domestic Subsidiary of Lessee;
(vii) the transactions contemplated herein (including all sales of assets
during the Interim Term) shall be permitted;
(viii) each of Lessee 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 the merger with the Lessee or a Subsidiary of the Lessee
or by stock purchase (any such acquisition permitted
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by this clause (viii), a "Permitted Acquisition"), so long as (i) no Lease
Default, Lease Event of Default, Loan Default or Loan Event of Default then
exists or would result therefrom, (ii) each of the representations and
warranties contained in Sections 2.1 and 2.2 of this Participation Agreement
shall be true and correct in all material respects both before and after
giving effect to such Permitted Acquisition, (iii) any Liens or Indebtedness
assumed or issued in connection with such acquisition are otherwise permitted
under Section 9.5(h) or 9.5(k), as the case may be, (iv) the only
consideration paid by Lessee or any Subsidiary in connection with any
Permitted Acquisition consists solely of cash, common stock of Guarantor
and/or Qualified Preferred Stock of Guarantor and its Subsidiaries would have
been in compliance with the financial covenants set forth in Section 9.5(m)
through 9.5(o), inclusive, for the Test Period then most recently ended prior
to the date of the consummation of such Permitted 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
satisfactory to the Administrative Agent) as if such Permitted 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
throughout, such Test Period), (vi) the sum of (A) the aggregate cash
consideration paid in connection with all Permitted Acquisitions (including,
without limitation, any earn-out, non-compete or deferred compensation
arrangements, the aggregate principal amount of any Indebtedness assumed in
connection therewith and the fair market value of any capital stock of
Guarantor issued in connection therewith) shall not exceed (I) $75,000,000
for any single transaction (or series of related transactions), (II) in the
event such consideration consists of cash and assumed Indebtedness (including
Capitalized Leased Obligations), $10,000,000 in any fiscal year (and
$50,000,000 in the aggregate) (excluding any portion of such consideration
which is treated as, or involves the acquisition of assets which is treated
as, a Capital Expenditure under Section 9.07 of the Revolver), and (z) to the
extent that such consideration consists solely of common stock of Guarantor
and/or Qualified Preferred Stock of Guarantor, $150,000,000, (vii) the
incurrence, issuance or assumption of Operating Lease Obligations are
permitted under Section 9.5(h)(vii), (viii) after giving effect to any
Permitted Acquisition, the Unutilized Commitment (as defined in the Revolver)
is at least $5,000,000, and (ix) the assets or Person acquired pursuant to
each such Permitted Acquisition are employed or engaged, as the case may be,
in a Permitted Business;
(ix) any Foreign Subsidiary may be merged with and into, or be dissolved or
liquidated into, or transfer any of its assets to, any Foreign Subsidiary or
Foreign Join Venture so long as at least 65% of the total combined voting
power of all classes of capital stock of all first-tier Foreign Subsidiaries
and all of the capital stock owned by Guarantor or any of its Subsidiaries of
any first-tier Foreign Joint Venture is pledged pursuant to the Pledge
Agreement (unless, (A) in the case of Foreign Subsidiaries, the
Administrative Agent reasonably determines that such pledge shall result in
regulatory or economic disadvantages and (B) additionally, in the case of
Foreign Joint Ventures, the organizational documents thereof prohibit such
Pledge)
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(x) the assets of any Foreign Subsidiary or Foreign Joint Venture may be
transferred to Lessee or any of its Domestic Subsidiaries and any Foreign
Subsidiary or Foreign Joint Venture may be merged with and into, or be
dissolved or liquidated into, Lessee or any of its Domestic Subsidiaries so
long as Lessee or such Domestic Subsidiary is the surviving corporation of
any such merger, dissolution or liquidation;
(xi) Lessee or any of its Domestic Subsidiaries may transfer to one or more
Foreign Subsidiaries or Foreign Joint Venture those assets theretofore
transferred to Lessee or such Domestic Subsidiary by a Foreign Subsidiary or
Foreign Joint Venture (whether by merger, liquidation, dissolution or
otherwise) pursuant to clause (x) of this Section 9.5(i);
(xii) each of Lessee and its Subsidiaries may enter into sale and leaseback
transactions with respect to their inventory, equipment and Real Property, in
which Lessee or any of its Subsidiaries acts as seller of the inventory,
equipment or Real Property that is the subject of the transaction, so long as
(v) no Lease Default, Lease Event of Default, Loan Default or Loan Event of
Default then exists or would result therefrom, (w) each such sale and
leaseback transaction is in an arm's-length transaction and Lessee or the
respective Subsidiary receives at least fair market value (as determined in
good faith by Lessee or such Subsidiary, as the case may be), (x) the total
consideration received by Lessee or such Subsidiary is 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(b)
of the Revolver and (z) the Capitalized Lease Obligations and/or Operating
Lease Obligations are otherwise permitted under this Agreement;
(xiii) so long as (x) no Lease Default, Lease Event of Default, Loan
Default or Loan Event of Default then exists or would result therefrom and
(y) Lessee shall be in compliance with the financial covenants contained in
Sections 9.5(m) through 9.5(o), inclusive, with such covenants to be
calculated on a pro forma basis, Lessee may, and may permit its Subsidiaries
to, exchange (for reasonably equivalent value, a portion thereof which may
include cash) any inventory, equipment and other assets (each such
transaction an "Asset Swap"), provided that (A) the sum of (1) the total
value of all assets to be swapped in any fiscal year of Lessee and (2) the
total value of assets sold in accordance with Section 9.5(i)(xiv) in such
fiscal year shall not exceed in the aggregate 10% of the total value of all
assets of Lessee and its Subsidiaries as of the end of the most recently
ended fiscal year, (B) that the disposition and acquisition of the subject
inventory, equipment or other assets occur within 60 days of one another and
(C) that any such cash proceeds received by Lessee 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(b) of the Revolver;
(xiv) each of Lessee and its Subsidiaries may sell assets, so long as (v)
no Lease Default, Lease Event of Default, Loan Default or Loan Event of
Default then exists or would result therefrom, (w) each sale is in an arm's
length transaction and Lessee or the respective Subsidiary receives at least
fair market value (as determined in good faith by
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<PAGE> 55
Lessee or such Subsidiary, as the case may be), (x) the total consideration
received by Lessee 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(b)
of the Revolver 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 9.5(i)(xiii) in any fiscal year of Lessee
does not exceed 10% of the total value of all assets of Lessee and its
Subsidiaries as of the end of the most recently ended fiscal year of Lessee;
and
(xv) any of Guarantor and its Subsidiaries may enter into agreements to
effectuate any transaction otherwise prohibited by this Section 9.5(i) so
long as the consummation of any such agreement is conditioned upon obtaining
the consent of the Majority Lenders or repaying the Obligations in full
(other than obligations under Sections 10.4 and 12.1).
(j) Dividends. Guarantor shall not, and will not permit any of its
Subsidiaries to, authorize, declare or pay any Dividends with respect to
Guarantor or any of its Subsidiaries, except that:
(i) (x) any Domestic Subsidiary of Lessee may pay Dividends to Lessee or
any Wholly-Owned Subsidiary of Lessee and (y) any Foreign Subsidiary of
Lessee may pay Dividends so long as any such Dividends paid by a Foreign
Subsidiary of Lessee that is not a Wholly-Owned Subsidiary are paid on a pro
rata basis to such Foreign Subsidiary's shareholders generally (based on the
relative holdings of the equity interest or interests in the Foreign
Subsidiary paying such Dividends and taking into account the relative
preferences, if any, of the various classes of equity interests in such
Foreign Subsidiary);
(ii) so long as there shall exist no Lease Default or Lease Event of
Default (both before and after giving effect to the payment thereof) Lessee
may pay cash Dividends to Guarantor, so long as such proceeds are promptly
used by Guarantor to pay (x) corporate overhead costs, directors' fees and
other expenses (including, without limitation, the fees and expenses
permitted pursuant to Section 9.5(l)(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 Lessee pursuant to Section 9.05(vi)
of the Revolver (without reduction for any writedowns or write-offs thereof),
shall not during any fiscal year of Lessee 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 Guarantor (provided that any refund
shall be promptly returned by Guarantor to Lessee); and
(iii) so long as there shall exist no Lease Default or Lease Event of
Default (both before and after giving effect to the payment thereof) Lessee
may pay cash Dividends to Guarantor so long as the proceeds thereof are
immediately used by Guarantor to purchase shares of common stock or options
to purchase shares of common stock of Guarantor held by former employees of
Lessee following the termination of their employment by Lessee 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
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<PAGE> 56
by Lessee under life insurance policies maintained with respect to such
employee or (y) to the extent not funded as described in preceding clause
(x), not during any fiscal year of Lessee exceed $3,000,000.
(k) Indebtedness. Guarantor 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
Operative Documents;
(ii) Existing Indebtedness outstanding on the Closing Date and listed on
Schedule 6, without giving effect to any subsequent extensions, renewal or
refinancing thereof except to the extent set forth on Schedule 6, 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;
(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 Lessee or any of its Subsidiaries or in
connection with judgments that do not result in a Lease Default or Lease
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 $5,000,000;
(iv) Indebtedness under Interest Rate Protection Agreements on terms
acceptable to the Administrative Agent;
(v) Indebtedness evidenced by Capitalized Lease Obligations to the extent
permitted pursuant to Section 9.07 of the Revolver, provided that in no event
shall the aggregate principal amount of Capitalized Lease Obligations and
Purchase Money Indebtedness permitted by this clause (v) exceed $15,000,000
at any time outstanding;
(vi) Indebtedness of Lessee and the Guarantor evidenced by Lessee Senior
Discount Notes outstanding on the Closing Date (and guarantees thereof) plus
the amount of interest on such Lessee Senior Discount Notes paid in kind or
through accretion or capitalization;
(vii) accrued expenses and current trade accounts payable incurred in the
ordinary course of business and unsecured guarantees of Lessee or any of its
Subsidiaries of such trade accounts payable, and obligations under trade
letters of credit incurred by Lessee 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 Lessee or such Subsidiary;
(viii) Indebtedness of Lessee under any Other Hedging Agreement which is
entered into to protect Lessee against fluctuations in currency values so
long as such Other Hedging Agreements are for bona fide business purposes and
are not speculative;
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<PAGE> 57
(ix) Indebtedness of Lessee not to exceed $3,000,000 at any time
outstanding and secured by insurance cancellation premiums relating to
insurance maintained by Lessee in the ordinary course of business;
(x) intercompany Indebtedness among Lessee and its Subsidiaries to the
extent permitted by Section 9.05 of the Revolver;
(xi) (A) unsecured guarantees by Guarantor of Indebtedness, Operating Lease
Obligations or other obligations of its Domestic Subsidiaries that are
permitted to be incurred hereunder and (B) guarantees by Foreign Subsidiaries
of Indebtedness, Operating Lease Obligations or other obligations of other
Foreign Subsidiaries of the Borrower that are permitted to be incurred
hereunder;
(xii) Indebtedness of any Foreign Subsidiary of Lessee the proceeds of
which Indebtedness are used for such Foreign Subsidiary's and/or its Foreign
Subsidiaries' working capital and general corporate purposes (the "Foreign
Subsidiary Indebtedness");
(xiii) Indebtedness consisting of Capitalized Lease Obligations, Purchase
Money Indebtedness or other Indebtedness which does not constitute debt for
borrower money of a Subsidiary acquired pursuant to a Permitted Acquisition
(or such Indebtedness assumed at the time of a Permitted Acquisition of an
asset securing such Indebtedness), provided that such Indebtedness was not
incurred in connection with, or in anticipation or contemplation of, such
Permitted Acquisition;
(xiv) Indebtedness of Lessee 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 $17,500,000 (such amount to
be reduced by the aggregate principal amount of all outstanding Letters of
Credit issued under the Revolver); and
(xv) Indebtedness of Lessee and its Subsidiaries to the extent not
permitted by the foregoing clauses of this Section 9.5(k) not to exceed
$20,000,000 in aggregate principal amount at any time outstanding.
(l) Transactions with Affiliates. Guarantor 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 Guarantor or any of its Subsidiaries, other than in the ordinary
course of business and on terms and conditions substantially as favorable to
Guarantor or such Subsidiary as would reasonably be obtained by Guarantor 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 9.5(j), (ii) loans may be made and other transactions
may be entered into by Guarantor and its Subsidiaries to the extent permitted by
Section 9.05 of the Revolver, (iii) customary fees may be paid to directors of
Guarantor and its Subsidiaries, (iv) options to purchase common stock of
Guarantor may be granted to officers and directors of Guarantor and its
Subsidiaries in the ordinary course of business, (v) Guarantor and its
Subsidiaries may enter into employment arrangements with their
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<PAGE> 58
respective officers in the ordinary course of business and (vii) Guarantor or
its Subsidiaries may pay directors' fees to the directors of Guarantor 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 Guarantor 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.
(m) Consolidated EBITDAR to Total Interest Expense. Guarantor will not
permit the ratio of (i) Consolidated EBITDAR to (ii) the sum of Total Interest
Expense plus all lease expenses for such Test Period associated with the
transaction contemplated herein 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:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
June 30, 2000 ____:1.00
September 30, 2000 ____:1.00
December 31, 2000 ____:1.00
March 31, 2001 ____:1.00
June 30, 2001 ____:1.00
September 30, 2001 ____:1.00
December 31, 2001 ____:1.00
March 31, 2002 ____:1.00
June 30, 2002 ____:1.00
September 30, 2002 ____:1.00
December 31, 2002 ____:1.00
March 31, 2003 ____:1.00
June 30, 2003 ____:1.00
September 30, 2003 ____:1.00
December 31, 2003 ____:1.00
March 31, 2004 ____:1.00
June 30, 2004 and the last day of each ____:1.00.
fiscal quarter thereafter
</TABLE>
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<PAGE> 59
(n) Maximum Leverage Ratio. Guarantor will not permit the Leverage Ratio at
any time during a period set forth below to be greater than the ratio set forth
opposite such period below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Date hereof ____:1.00
Through and including June 30, 2000
July 1, 2000 ____:1.00
Through and including September 30, 2000
October 1, 2000 ____:1.00
Through and including December 31, 2000
January 1, 2001 ____:1.00
Through and including March 31, 2001
April 1, 2001 ____:1.00
Through and including June 30, 2001
July 1, 2001 ____:1.00
Through and including September 30, 2001
October 1, 2001 ____:1.00
Through and including December 31, 2001
January 1, 2002 ____:1.00
Through and including March 31, 2002
April 1, 2002 ____:1.00
Through and including June 30, 2002
July 1, 2002 ____:1.00
Through and including September 30, 2002
October 1, 2002 ____:1.00
Through and including December 31, 2002
January 1, 2003 ____:1.00
Through and including March 31, 2003
April 1, 2003 ____:1.00
Through and including June 30, 2003
</TABLE>
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<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
July 1, 2003 ____:1.00
Through and including September 30, 2003
October 1, 2003 ____:1.00
Through and including December 31, 2003
January 1, 2004 ____:1.00
Through and including March 31, 2004
April 1, 2004 ____:1.00
Through and including June 30, 2004
July 1, 2004 ____:1.00
Through and including September 30, 2004
October 1, 2004 ____:1.00
Through and including December 31, 2004
January 1, 2005 ____:1.00.
Through and including March 31, 2005
</TABLE>
(o) Maximum Senior Secured Leverage Ratio. Guarantor will not permit the
Senior Secured Leverage Ratio at any time during a period set forth below to be
greater than the ratio set forth opposite such period below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Date hereof ____:1.00
Through and including June 30, 2000
July 1, 2000 ____:1.00
Through and including September 30, 2000
October 1, 2000 ____:1.00
Through and including December 31, 2000
January 1, 2001 ____:1.00
Through and including March 31, 2001
April 1, 2001 ____:1.00
Through and including June 30, 2001
July 1, 2001 ____:1.00
Through and including September 30, 2001
</TABLE>
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<PAGE> 61
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
October 1, 2001 ____:1.00
Through and including December 31, 2001
January 1, 2002 ____:1.00
Through and including March 31, 2002
April 1, 2002 ____:1.00
Through and including June 30, 2002
July 1, 2002 ____:1.00
Through and including September 30, 2002
October 1, 2002 ____:1.00
Through and including December 31, 2002
January 1, 2003 ____:1.00
Through and including March 31, 2003
April 1, 2003 ____:1.00
Through and including June 30, 2003
July 1, 2003 ____:1.00
Through and including September 30, 2003
October 1, 2003 ____:1.00
Through and including December 31, 2003
January 1, 2004 ____:1.00
Through and including March 31, 2004
April 1, 2004 ____:1.00
Through and including June 30, 2004
July 1, 2004 ____:1.00
Through and including September 30, 2004
October 1, 2004 ____:1.00
Through and including December 31, 2004
January 1, 2005 ____:1.00.
Through and including March 31, 2005
</TABLE>
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<PAGE> 62
(p) Business. Guarantor will not, and will not permit any of its
Subsidiaries to, engage (directly or indirectly) in any business, taken as a
whole, that is substantially different from the business in which Guarantor or
such Subsidiary is engaged on the date hereof.
(q) Advances, Investments and Loans. Guarantor 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
receivable, trade receivables, prepaid expenses and similar items owing to
any of them, if created or acquired in the ordinary course of business;
(ii) Lessee and its Subsidiaries may acquire and hold cash and Cash
Equivalents;
(iii) non-cash consideration received by Guarantor or any of its
Subsidiaries in connection with any asset sale to the extent permitted by
Section 9.02;
(iv) Lessee 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) Lessee and its Subsidiaries may make payroll advances in the ordinary
course of business;
(vi) so long as no Lease Default or Lease Event of Default then exists
(both before and after giving effect to the payment thereof), Lessee may make
loans to Guarantor to enable Guarantor to pay the amounts described in
Sections 9.5(j)(ii) and 9.5(j)(iii), in an aggregate amount not to exceed in
any fiscal year $1,000,000 less any amounts paid pursuant to Sections
9.5(j)(ii) and 9.5(j)(iii) during such fiscal year;
(vii) Lessee and its Subsidiaries may hold the investments held by them on
the Closing Date and as set forth on Schedule IX in the Revolver;
(viii) Lessee and its Subsidiaries may enter into, invest in and make loans
and advances to (x) corporations, associations, partnerships, business trusts
and other business entities organized in the United States, any State thereof
or Canada which would not, after the respective investment, be a Subsidiary
of Guarantor (each a "Domestic Joint Venture"), provided that (i) neither
Guarantor 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 and (ii) the
net aggregate amount of all such investments and loans in Domestic Joint
Ventures shall at
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<PAGE> 63
no time exceed $10,000,000 in any fiscal year of Lessee (and $25,000,000 in the
aggregate);
(ix) Guarantor 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) Lessee may enter into Interest Protection Agreements or Other Hedging
Agreements to the extent permitted by Section 9.5(k)(iv) and (ix);
(xi) Lessee may make intercompany loans and advances between or among one
another (collectively, "Intercompany Loans") or equity investments, so long
as (x) 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 and (y) the net aggregate
amount of all such investments in Subsidiary Guarantors which are not Wholly
Owned Subsidiaries of Lessee shall not exceed $20,000,000 in any fiscal year
of Lessee (and $60,000,000 in the aggregate);
(xii) Lessee and its Subsidiaries may effect Permitted Acquisitions in
accordance with the requirements of Section 9.5(i)(viii); and
(xiii) Lessee and its Subsidiaries may enter into, invest in (including by
transferring assets) and make loans and advances to (x) Foreign Joint
Ventures and (y) Foreign Subsidiaries, provided that (i) neither Guarantor
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 Foreign Joint Venture or
Foreign Subsidiary and (ii) the net aggregate amount of all such investments
and loans in Foreign Joint Ventures and Foreign Subsidiaries shall at no time
exceed $20,000,000 (using the fair market value of property other than cash)
in any fiscal year of Lessee (and $60,000,000 in the aggregate); provided
that no more than $30,000,000 in the aggregate shall be invested in Foreign
Joint Venture and Foreign Subsidiaries located or operating in Restricted
Countries (it being understood that, for purposes of this clause (xiii), the
amounts set forth above in this clause (xiii) shall be net of cash payments
of principal in the case of loans and cash equity returns (whether as a
dividend or redemption) in the case of equity investments, in each case which
are received from a non-U.S. Person constituting a joint venture existing on
the Closing Date and which is listed on Schedule IX of the Revolver).
(r) Capital Expenditures. (i) Guarantor will not, and will not permit any
of its Subsidiaries to, make any Capital Expenditures, except that (A) Lessee
and its Subsidiaries may make Capital Expenditures in its fiscal year ending
March 31, 2001 and March 31, 2002 and (B) during any fiscal year of Lessee set
forth below, Lessee and its Subsidiaries may make Capital Expenditures so long
as the aggregate amount of such Capital Expenditures does not exceed in any such
fiscal year, the amount set forth opposite such fiscal year below:
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<PAGE> 64
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
March 31, 2003 $ 125,000,000
March 31, 2004 $ 80,000,000
March 31, 2005 $ 80,000,000
</TABLE>
(ii) In addition to the foregoing, to the extent that the amount of Capital
Expenditures made by Lessee and its Subsidiaries during any fiscal year of
Lessee set forth in the table in clause (i)(B) of this Section 9.5(r)
(exclusive, however, of Capital Expenditures made pursuant to Sections
9.5(r)(iii), (iv) and (v)) is less than the amount applicable to the respective
fiscal year as set forth in such table (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 (i)(B) above in the following fiscal year; provided that the
aggregate amount expended on Capital Expenditures in any fiscal year set forth
in such table shall not exceed 125% of the amount permitted to be made in such
fiscal year as set forth in clause (i)(B) of this Section 9.5(r).
(iii) In addition to the foregoing, the amount of Net Sale Proceeds
received by Lessee or any of its Subsidiaries from any Asset Sale, or sale of
assets permitted pursuant to Section 9.5(i)(vii), may be reinvested in
replacement assets within 18 months following the date of such Asset Sale or
sale of assets to the extent such Net Sale Proceeds are not required to be
applied pursuant to Section 4.02(b) of the Revolver, and, to the extent so
reinvested, shall not count as Capital Expenditures for purposes of determining
compliance with clauses (a) and (b) of this Section 9.5(r).
(iv) In addition to the foregoing, Lessee and its Subsidiaries may make
Capital Expenditures with the proceeds of any issuance of equity by Guarantor.
(v) In addition to the foregoing, Lessee and its Subsidiaries may make
Capital Expenditures in an amount equal to the amount by which Consolidated
EBITDA for any fiscal year of Lessee exceeded Consolidated EBITDA for such
fiscal year as set forth in the Projections.
(vi) Notwithstanding anything above in this Section 9.5(r) to the contrary,
in no event may Lessee or any of its Subsidiaries make Capital Expenditures
pursuant to any single transaction (or series of related transactions) which
exceeds $75,000,000 (subject to any additional restrictions or limitations set
forth in Section 9.5(i)(viii)).
(s) Public Utility Holding Company. Guarantor will not, and will not permit
any of its Subsidiaries to directly or indirectly own, control or hold with
power to vote and "voting security" of an "electric utility company" or a "gas
utility company" or a "holding company" holding any "voting security" of either
the foregoing, as such terms are defined in the Public Utility Holding Company
Act of 1935.
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<PAGE> 65
(t) Special Purpose Corporation. (i) Guarantor shall not engage in any
business activities other than the ownership of the capital stock of Lessee, the
issuance of Qualified Preferred Stock, and the execution, delivery and
performance of the Operative Documents and the Revolver. In no event shall
Guarantor be permitted to incur or suffer to exist any Indebtedness on, or
create or suffer to exist any Liens on, its assets; provided that Guarantor may
engage in any necessary activity with respect to (A) the maintenance of its
corporate or trust existence and compliance with applicable law, (B) 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 (C) entering into, performing its obligations and exercising
its rights under the Operative Documents, the Revolver and the other agreements
permitted by the Operative Documents to which it is a party.
(ii) Guarantor shall have no Subsidiaries other than Lessee and Lessee's
Subsidiaries.
(u) Corporate Existence, etc. Each of Lessee and Guarantor shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence, rights and powers and its power and authority to
perform its obligations under the Operative Documents, including, without
limitation, any necessary qualification or licensing in any foreign
jurisdiction, except where the failure to be so qualified would not have a
material adverse effect.
(v) End of Fiscal Years; Fiscal Quarters. Guarantor 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.
(w) Punctual Payment. Lessee shall duly and punctually pay or cause to be
paid all Lease Payments, Supplemental Payments, Availability Fees, and all other
fees and other amounts from time to time owing by it hereunder and under the
other Operative Documents, all in accordance with the terms of this Agreement
and the other Operative Documents.
(x) Perfection and Maintenance of Security Interest. Lessee, at its
expense, shall, as soon as possible, but in any event no later than the 10th day
after any request, make, execute, endorse, acknowledge, file and/or deliver to
Collateral Agent from time to time such confirmatory assignments, conveyances,
financing and continuation statements, transfer endorsements, powers of
attorney, notes, reports and other assurances or instruments and take such
further actions which Administrative Agent may reasonably request to perfect,
preserve or protect Collateral Agent's or Lessor's security interest in the
Collateral granted in the Lease Agreement and herein, or which Administrative
Agent reasonably deems necessary or advisable to obtain the full benefits of the
Liens created or intended to be created therein and herein.
(y) Default and Cross Default on Material Debt. Lessee agrees that if a
Lease Default or a Lease Event of Default shall occur, or if Lessee or any of
its Subsidiaries (i) fails to make (whether as primary obligor or as guarantor
or other surety) any principal payment of or
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<PAGE> 66
interest or premium, if any, on any Indebtedness (other than the obligations
under the Operative Documents) beyond any period of grace provided with respect
thereto (not to exceed 30 days), provided that the aggregate amount of all
Indebtedness as to which such a payment default shall occur and be continuing is
equal to or exceeds $10,000,000, or (ii) fails to duly observe, perform or
comply with any agreement with any Person or any term or condition of any
instrument, if such failure, either individually or in the aggregate, shall have
caused or shall have the ability to cause the acceleration of the payment in
Indebtedness with an aggregate face amount which is equal to exceeds
$10,000,000, Lessee shall promptly notify the Administrative Agent thereof.
(z) Change in Corporate Offices. Each of Lessee and Guarantor shall provide
the Collateral Agent, the Administrative Agent, each Certificate Holder and each
Lender thirty (30) days advance written notice of any change in the location of
its executive offices, principal place of business or any change in the States
in which it does business, or change of its name.
(aa) Use of ERISA Assets. At no time shall Guarantor or Lessee use or
attempt to use any assets which would be deemed to be "plan assets" under the
"plan asset regulations" promulgated pursuant to ERISA to satisfy any or all
obligations under the Operative Documents.
(bb) Payment of Administrative Fee. During the term of this Agreement,
Lessee shall pay, or cause to be paid, all of the fees set forth in the
Administrative Agent Fee Letter.
(cc) Maintenance of Property; Insurance. (i) Guarantor will, and will cause
each of its Subsidiaries to, (A) keep all property necessary to the business of
Guarantor and its Subsidiaries taken as a whole in reasonably good working order
and condition, (B) 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 (C) furnish to the Administrative Agent, the Majority
Lenders or the Majority Certificate Holders, upon written request, full
information as to the insurance carried. At any time that Guarantor or any
Subsidiary of Guarantor fails to maintain insurance (other than property or
business interruption insurance) at the levels maintained on the Closing Date,
Guarantor will, or will cause one of its Subsidiaries to, notify the
Administrative Agent, the Majority Lenders and the Majority Certificate Holders
in writing within three (3) Business Days thereof and, if thereafter notified by
the Majority Lenders and the Majority Certificate Holders to do so, Guarantor 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, Guarantor and Lessee will at
all times cause property and business interruption insurance of the type
maintained on the Closing Date to be maintained (with the same scope of coverage
as on the Closing Date) at levels which are at least as great as the respective
amounts maintained on the Closing Date.
(ii) Guarantor 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 Guarantor and/or its Subsidiaries) (A)
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), (B) shall state that
such insurance
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<PAGE> 67
policies shall not be canceled or revised without 30 days' prior written notice
thereof by the respective insurer to the Collateral Agent, (C) shall provide
that the respective insurers irrevocably waive any and all rights of subrogation
with respect to the Collateral Agent and the Lenders, (D) shall, except in the
case of public liability insurance, workers' compensation and cargo insurance,
provide that any losses shall be payable notwithstanding (I) any act or neglect
of Guarantor or any of its Subsidiaries, (II) 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,
(III) any foreclosure or other proceeding relating to the insured properties or
(IV) any change in the title to or ownership or possession of the insured
properties and (E) shall be deposited with the Collateral Agent. If Guarantor or
any of its Subsidiaries shall fail to insure its property in accordance with
this Section 9.5(cc)(ii), or if Guarantor 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 (10) Business Days' prior notice to Lessee, to procure such insurance and
Lessee agrees to reimburse the Collateral Agent for all costs and expenses of
procuring such insurance.
(iii) The foregoing requirements of this Section 9.5(cc) shall not apply to
any equipment or inventory of Guarantor and its Subsidiaries which is subject to
an Equipment Financing Transaction, so long as Guarantor and its Subsidiaries
are in material compliance with any similar requirements imposed by the terms of
such Equipment Financing Transaction.
(dd) Corporate Franchises. Guarantor 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 9.5(dd)
shall prevent (i) transactions in accordance with Section 9.5(i) or (ii) the
withdrawal by Guarantor 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 Guarantor and its Subsidiaries taken as a whole.
(dd) Tax Registration. The transaction contemplated hereby (i) is not
required to be registered pursuant to Code Section 6111 or any regulation
promulgated thereunder or (ii) was properly and timely registered in accordance
with Code Section 6111 and any regulations promulgated thereunder and the
correct registration number was provided to the parties hereto provided, that
the parties hereto agree to provide Lessee, at Lessee's written request, with
any information not deemed confidential by such Person that is necessary for
Lessee to so register the transaction.
9.6. Covenant of Lenders, Lessor, the Administrative Agent, Collateral
Agent, Trust Company and Certificate Holders. If Lessor, Lender, the
Administrative Agent, the Collateral Agent, Trust Company or any Certificate
Holder is not a U.S. Person, it shall provide, to Lessee and to any other party
making payments to it under the Operative Documents, on the initial Funding Date
(or, if later at the time it becomes Lessor, Lender, Administrative Agent,
Collateral Agent or Certificate Holder hereunder, as the case may be) and at
such times as may be
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<PAGE> 68
necessary thereafter under Applicable Law as in effect on the Closing Date
(including Treasury regulations promulgated under Section 1441 of the Code
presently scheduled as of the Closing Date to go into effect on January 1, 2001)
and at such other times as shall be reasonably requested by Lessee or any other
party making payments to it under the Operative Documents, a fully completed
Internal Revenue Service Form W-8 or successor form (including an Internal
Revenue Service Form W-8 as specified in Treasury Regulations section
1.1441-4(a) presently scheduled as of the Closing Date to go into effect on
January 1, 2001) upon which Lessee or such other party can rely establishing
that all payments to each such Person under the Operative Documents can be made
free and clear of any requirement to withhold any federal income tax therefrom;
provided, however, that each such Person shall not be required to provide such
forms if, solely as a result of a change after the Closing Date in Applicable
Law as in effect on the Closing Date (or such later date) (but not including as
a change for this purpose, the coming into effect of Treasury Regulations
Section 1.1441-4(a) in the form scheduled as of the Closing Date to go into
effect on January 1, 2001 including any changes made thereto prior to coming
into effect that do not alter the substantive effect or application of such
forms referenced in such regulations), such Person is not legally entitled to
deliver such form. In the event of a failure to provide any form as required
under this Section 9.6 by any Lender, Lessor, the Administrative Agent, the
Collateral Agent, Trust Company, or any Certificate Holder, the relevant party
shall be entitled to withhold from any payment made pursuant to the Operative
Documents to such Person the appropriate amount of federal income tax,
notwithstanding the provisions of the Operative Documents to the contrary and
provided further, that Lessee shall not have any indemnity obligation to such
Person pursuant to Section 10.3.5 hereof to the extent related to such failure.
10. Indemnities.
10.1. Lessee General Indemnification. Lessee hereby assumes liability for,
and does hereby agree to indemnify, protect, save, defend, and hold harmless
each Lessee Indemnified Person on an After-Tax Basis, from and against any and
all obligations, fees, liabilities, losses, damages, penalties, claims, demands,
actions, suits, judgments and related costs and expenses, including reasonable
legal fees and expenses, of every kind and nature whatsoever, imposed on,
incurred by, or asserted against such Lessee Indemnified Person (collectively,
"Losses"), which relates in any way to or arises in any way out of (a) the
manufacture, construction, ordering, transfer, acceptance or rejection,
ownership, transfer of ownership, titling or re-titling, registration or
re-registration, delivery, leasing, subleasing, possession, use, operation,
maintenance, storage, removal, redelivery, repossession, mortgaging, granting of
any interest in, transfer of title to, acquisition, sale or other application or
disposition, disposition of licensing, documentation, of any Item of Equipment,
or any part thereof, including, without limitation, any of such as may arise
from (i) loss or damage to any property or death or injury to any Persons, (ii)
patent or latent defects in any Items of Equipment (whether or not discoverable
by Lessee or any Lessee Indemnified Person), (iii) any claims based on strict
liability in tort or negligence, (iv) any claims related to the release of any
substance into the environment and (v) any claims based on patent, trademark,
trade name or copyright infringement, or (b) the Operative Documents or the
transactions contemplated hereby or thereby, or (c) any failure on the part of
Lessee or Guarantor to perform or comply with any Applicable Law, any of the
terms of any Operative Document to which it is a party or any
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instrument referred to or contemplated hereby or thereby or the nonconformity of
any Equipment with Applicable Law, or (d) reliance on any representation or
warranty made or deemed made by Lessee or Guarantor or any of their respective
officers under or in connection with any Operative Document which shall have
been false or incorrect in any material respect when made or deemed made or
delivered, or (e) any repayment to Lessee by the Lessor, Administrative Agent,
Collateral Agent, any Certificate Holder or any Lender of any amount previously
distributed hereunder which amount the Administrative Agent, Collateral Agent or
any Lender is required to repay, or (f) any investigation, litigation or
proceeding related to any Operative Document or the use of proceeds of Loans or
Equity Contributions or the ownership of the Notes or Certificates or in respect
of the Lease Agreement, or (g) the failure to vest or maintain vested in Lessor
and Collateral Agent or to transfer to Lessor or Collateral Agent an undivided
security interest in the Lessee Collateral or the Lessor Collateral,
respectively, including collections free and clear of Liens to the extent
required by the Operative Documents. Lessee shall be subrogated to an Lessee
Indemnified Person's rights in any matter with respect to which Lessee has
actually reimbursed such Lessee Indemnified Person for amounts expended by it or
has actually paid such amounts directly pursuant to this Section 10.1. In case
any claim, action, suit or proceeding is made or brought against any Lessee
Indemnified Person in connection with any claim indemnified against hereunder,
Lessee Indemnified Person will, promptly after receipt of notice of such claim
or the commencement of such action, suit or proceeding, notify Lessee thereof,
enclosing a copy of all papers served upon such Lessee Indemnified Person, but
failure to give such notice or to enclose such papers shall not relieve Lessee
from any liability hereunder unless such failure materially and adversely
affects Lessee's defense of such claim resulting in a material increase in
liability of Lessee in respect of such claim or preventing it from reducing
liability therefor, in which case Lessee shall not be required to indemnify such
Lessee Indemnified Person for the amount by which such liability was increased
or not reduced for failure to give such notice. Provided no Lease Event of
Default has occurred, Lessee will be entitled to participate in, and assume the
defense of, such claim, action, suit or proceeding, or cause the same to be
resisted or defended by counsel selected by Lessee and reasonably acceptable to
Lessor; provided that such claim, action, suit or proceeding does not involve
material risk of loss or forfeiture of title to the Equipment (unless Lessee
shall have posted a bond or other security satisfactory to Lessor in respect of
such risk) or any material risk of civil or criminal penalty being assessed
against any Lessee Indemnified Person and, upon such Lessee Indemnified Person's
request, Lessee will at its expense, resist and defend such claim, action, suit
or proceeding, or cause the same to be resisted or defended by counsel selected
by Lessee and reasonably acceptable to Lessor. After notice from Lessee to such
Lessee Indemnified Person of Lessee's election to so assume the defense of such
claim, action, suit or proceeding, Lessee will not be liable to such Lessee
Indemnified Person for any costs and expenses of any settlement of such claim,
action, suit or proceeding effected by such Lessee Indemnified Person without
the prior written consent of Lessee (which consent will not be unreasonably
withheld). Such Lessee Indemnified Person may participate at its own expense in
any such claim, action, suit or proceeding controlled by Lessee pursuant hereto;
provided such participation does not, in the opinion of independent counsel
appointed by Lessee, interfere with such control) and such participation will
not constitute a waiver of the indemnification provided in this Section 10. In
the event of any failure by Lessee to satisfy its obligations under this Section
10.1, Lessee shall pay all reasonable costs and expenses (including, without
limitation, attorney's fees and
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expenses) incurred by such Lessee Indemnified Person in connection with such
action, suit or proceeding. Additionally, if outside counsel to such Lessee
Indemnified Person determines that a conflict of interest exists between such
Lessee Indemnified Person and Lessee regarding any Loss indemnified hereunder,
Lessee agrees to pay the reasonable fees and expenses of separate counsel for
and as selected by such Lessee Indemnified Person. The provisions of this
Section 10.1, and the obligations of Lessee under this Section 10.1, shall apply
from the date of the execution of any of this Agreement notwithstanding that the
Term may not have commenced with respect to any Item of Equipment, and shall
survive and continue in full force and effect notwithstanding the expiration or
earlier termination of this Agreement, the Lease Agreement or any other
Operative Document in whole or in part, including the expiration of termination
of the Term with respect to any Item of Equipment, and are expressly made for
the benefit of, and shall be enforceable by, each Lessee Indemnified Person.
10.2. Exceptions to Lessee's General Indemnification. Notwithstanding the
terms of Section 10.1, Lessee shall not be required to indemnify any Lessee
Indemnified Person under Section 10.1 for any of the following: (i) any Loss to
the extent resulting from the willful misconduct or gross negligence of such
Lessee Indemnified Person (it being understood that Lessee shall be required to
indemnify an Lessee Indemnified Person even if the ordinary (but not gross)
negligence of such Lessee Indemnified Person caused or contributed to such
Loss), (ii) any Loss resulting from Lessor Liens attributable to such Lessee
Indemnified Person, (iii) any Loss to the extent attributable to acts or events
occurring after the end of the Term, if any, so long as no Lease Event of
Default shall have occurred and be continuing and the Equipment has either been
purchased or redelivered in accordance with the terms of Section 6.1, 28.2,
28.3, 28.4 or 28.5 of the Lease Agreement, (iv) any Loss (other than a Loss
arising from a Loan Event of Default attributable to a Lease Event of Default)
arising from a breach by such Lessee Indemnified Person of any agreement entered
into in connection with the assignment or participation of any interest of such
Lessee Indemnified Person under the Lease Agreement or the other Operative
Documents, (v) any Loss to the extent arising or resulting from the failure of
such Lessee Indemnified Person to comply with laws applicable to banks or their
affiliates generally or the failure of such Lessee Indemnified Person to file
any material notice, report, filing or other document required by any
Governmental Entity regulating banks or their affiliates in connection with such
Lessee Indemnified Person's execution of, and participation in the transactions
contemplated by, the Operative Documents except to the extent resulting from the
acts or omissions or any Lessee or Guarantor, (vi) any other expense or Loss to
the extent expressly provided under any of the Operative Documents to be paid or
borne by such Lessee Indemnified Person at its own expense, (vii) any Loss to
the extent resulting from the offer, sale, disposition or transfer by such
Lessee Indemnified Person of all or part of its interest in the Operative
Documents, other than a Loss arising after the occurrence of a Lease Event of
Default, (viii) any Loss that is a Tax, (ix) any Loss to the extent resulting
from any business, transaction or other activity in which such Lessee
Indemnified Person is engaged, which has no relation to the transactions
contemplated hereby or by any of the Operative Documents, (x) any Loss resulting
from a Loan Event of Default not attributable to a Lease Event of Default, (xi)
any Loss which is an ordinary and usual operating or overhead expense of such
Lessee Indemnified Person except expenses incurred relating to an Lease Event of
Default and (xii) any Loss arising under ERISA or Section 4975 of the Code (i)
as a result of Loans or funds advanced by the Lenders or
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Certificate Holders being deemed to be "plan assets" under the "plan asset
regulations" promulgated pursuant to ERISA or (ii) as a result of a violation of
Section 406(b) of ERISA or Section 4975(c)(1) (E) or (F) of the Code by Lenders
or Certificate Holders. Section 10.1.1 shall be construed as an indemnity only
and not a guaranty of residual value of the Items.
10.3. Tax Indemnity.
10.3.1. General Indemnity. Subject to the other provisions of this
Section 10.3, Lessee agrees to pay, defend and indemnify and hold Lessor, Trust
Company, Lenders, the Administrative Agent, Collateral Agent and Certificate
Holders and their respective Affiliates, successors and assigns (including any
consolidated or combined group of which any such Person is a member) (each a
"Tax Indemnitee") harmless on an After-Tax Basis from any and all Federal,
state, local and foreign taxes, fees, withholdings, levies, imposts, duties,
assessments, penalties and charges of any kind and nature whatsoever, together
with any penalties, fines or interest thereon (herein called "Taxes") howsoever
imposed, whether levied or imposed upon or asserted against a Tax Indemnitee,
Lessee, any Item of Equipment, or any part thereof, by any federal, state or
local government or taxing authority in the United States, or by any taxing
authority of a foreign country or subdivision thereof, upon or with respect to
(a) the Items of Equipment, any Item of Equipment or any part thereof, (b) the
manufacture, construction, ordering, transfer, ownership, transfer of ownership,
titling or re-titling, registration or re-registration, delivery, leasing,
subleasing, possession, use, operation, maintenance, storage, removal, return,
mortgaging, granting of any interest in, transfers of title to, acquisition,
sale or other disposition of licensing, documentation, repossession, sale or
other acquisition or disposition of the Items of Equipment, any Item of
Equipment or any part thereof, (c) the revenues, rent, receipts or earnings
arising from any Item of Equipment or any part thereof, (d) any Operative
Document, (e) any Lease Payment, Availability Fee or Supplemental Payment or any
payment made to a Lender by Lessor, Lessee, Certificate Holders or Trust Company
pursuant to the Operative Documents, or (f) otherwise in respect of the
Operative Documents or any thereof or any transaction or transactions
contemplated hereby or thereby.
10.3.2. Exceptions to Tax Indemnity. Notwithstanding anything to the
contrary in Section 10.3.1, the following shall be excluded from the indemnity
provided under Section 10.3.1: (a) Taxes (other than Taxes that are, or are in
the nature of, sales, use, rental, value added, transfer or property taxes) that
are imposed on a Tax Indemnitee by the United States federal government that are
based on or measured by the gross or net income or gross or net receipts, taxes
based on capital gains and minimum taxes and any and all withholding Taxes
(which, for the avoidance of doubt, are dealt with in Section 10.3.5 hereof) of
such Person; provided, that this clause (a) shall not be interpreted to prevent
a payment from being made hereunder on an After-Tax Basis if such payment is
otherwise required to be so made; (b) Taxes (other than Taxes that are, or are
in the nature of, sales, use, rental, value added, transfer or property taxes)
that are imposed on any Tax Indemnitee (other than Lessor or the Trust) by any
state, local or foreign jurisdiction or taxing authority within any state or
local or foreign jurisdiction and that are net income taxes, or are franchise
taxes, any gross income or gross receipts taxes imposed in lieu of a net income
tax, taxes based on capital gains and minimum taxes and any and all withholding
Taxes (which, for the avoidance of doubt, are dealt with in Section 10.3.5
hereof) of such Person; provided that such Taxes shall not be excluded under
this
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clause (b) to the extent such Taxes would have been imposed had the location,
possession or use of any Equipment in, the location or the operation of Lessee,
Lessor or Guarantor in, or Lessor's, Lessee's or Guarantor's making payments
under the Operative Documents from, the jurisdiction imposing such Taxes been
the sole connection between such Tax Indemnitee and the jurisdiction imposing
such Taxes, unless, however, such Tax Indemnitee would have been subject to tax
in such jurisdiction absent the transactions contemplated by the Operative
Documents; provided further, that this clause (b) shall not be interpreted to
prevent a payment from being made on an After-Tax Basis if such payment is
otherwise required to be so made; (c) provided that all amounts due from Lessee
under the Operative Documents have been paid, any Tax to the extent it relates
to any act, event or omission that occurs after the termination of the Lease
Agreement and, if required, redelivery or sale of an Item of Equipment in
accordance with the terms of the Lease Agreement (but not any Tax that is
imposed with respect to such termination, redelivery or sale or to any period
prior to such termination, redelivery or sale); (d) any Taxes which are imposed
on a Tax Indemnitee as a result of the gross negligence or willful misconduct of
such Tax Indemnitee itself, as determined by a court of competent jurisdiction
(as opposed to gross negligence or willful misconduct imputed to such Tax
Indemnitee), but not Taxes imposed as a result of ordinary negligence of such
Tax Indemnitee; (e) Taxes imposed on, or increased (under Applicable Law in
effect on the date of the transfer) as a result of a voluntary transfer by the
Tax Indemnitee or any transfer as a result of the bankruptcy of such Tax
Indemnitee not caused by a an Event of Default under Section 23(a) of the Lease
Agreement of any Item of Equipment or interest therein or any interest in or
arising under any Operative Document or any transactions contemplated thereby
other than any such transfer required by law or by the Operative Document,
occurring pursuant to the exercise of remedies during the continuance of a Lease
Event of Default or requested by Lessee; (f) with respect to Lessor or the
Trust; any Tax that results from or would not have been imposed but for the
breach or inaccuracy of any representation set forth in Section 2.4 or 2.7
hereof, as the case may be; (g) any Tax to the extent resulting in whole or in
part from the failure of any Tax Indemnitee to file a return that is proper and
timely unless such failure results from the failure of Lessee to perform its
obligations under Section 7.3.4 hereof; and (h) any Tax that results from or
would not have imposed but for the failure of any Tax Indemnitee, at Lessee's
sole cost, to provide any form, certificate or other document reasonably
requested by, prepared by and timely provided to such Tax Indemnitee by Lessee,
legally able to be provided by such Tax Indemnitee and necessary to avoid the
imposition of such Tax provided that such Tax Indemnitee reasonably determines
that to so provide such form, certificate or other document would have no
adverse effect on it.
10.3.3. Payment of Taxes. Subject to the terms of Section 10.3.6,
Lessee agrees to pay or cause to be paid all Taxes indemnified pursuant to
Section 10.3.1 directly to the taxing authorities where feasible and otherwise
to the Tax Indemnitee, as appropriate, and Lessee shall at its own expense, upon
such Tax Indemnitee's reasonable request, furnish to such Tax Indemnitee copies
of official receipts or other reasonably satisfactory evidence of such payment.
In the case of Taxes for which no contest is conducted pursuant to Section
10.3.6 and which Lessee pays directly to the taxing authorities, Lessee shall
pay such Taxes prior to the latest time permitted by the relevant taxing
authority for timely payment. In the case of Taxes for which a Lessee reimburses
a Tax Indemnitee, Lessee shall do so within thirty (30) days after receipt by
Lessee of demand by such Tax Indemnitee describing in reasonable detail the
nature of the Tax
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and the basis for the demand (including without limitation the computation of
the amount payable), accompanied by receipts or other reasonable evidence of
payment of the Tax in respect of such demand. In the case of Taxes for which a
contest is conducted pursuant to Section 10.3.6 Lessee agrees to pay such Taxes
or reimburse such Tax Indemnitee for such Taxes, to the extent not previously
paid or reimbursed pursuant to Section 10.3.1, prior to the latest time
permitted by the relevant taxing authority for timely payment after conclusion
of all contests hereunder.
At Lessee's written request, the amount of any indemnification payment by
Lessee pursuant to Section 10.3.1 shall be verified and certified by the
independent public accounting firm regularly engaged by such Tax Indemnitee. The
fees and expenses of such independent public accounting firm shall be paid by
Lessee unless such verification shall result in an adjustment in Lessee's favor
of five percent (5%) or more of the payment as computed by the Tax Indemnitee,
in which case such fee shall be paid by the Tax Indemnitee.
10.3.4. Tax Filings. Lessee shall be responsible for preparing and
filing any real and personal property or ad valorem tax returns in respect of
the Equipment. In the case of any other report, statement or tax return that
shall be required to be made with respect to any Taxes which are indemnified by
Lessee pursuant to Section 10.3.1, Lessee, at its sole cost and expense, shall
notify the relevant Tax Indemnitee of such requirement and (except if such Tax
Indemnitee notifies Lessee that such Tax Indemnitee intends to prepare and file
such report or return) (a) to the extent required or permitted by and consistent
with filing requirements in the applicable jurisdiction, make and file in
Lessee's name such return, statement or report and (b) in the case of any other
such return, statement or report required to be made in the name of such Tax
Indemnitee, advise such Tax Indemnitee of such fact and prepare such return,
statement or report for filing by such Tax Indemnitee or, where such return,
statement or report shall be required to reflect items in addition to any
obligations of Lessee under or arising out of Section 10.3.1, provide such Tax
Indemnitee at Lessee's expense with information sufficient to permit such
return, statement or report to be properly made with respect to any obligations
of Lessee under or arising out of Section 10.3.1. Such Tax Indemnitee shall,
upon Lessee's request and at Lessee's expense, provide any data not deemed
confidential by such Tax Indemnitee maintained by such Tax Indemnitee (and not
otherwise available to or within the control of Lessee) with respect to the
Equipment which Lessee may reasonably require to prepare any required Tax
returns or reports.
10.3.5. Withholdings. As between Lessee on one hand, and Lessor,
Certificate Holders, Administrative Agent, the Collateral Agent, and each Lender
(each a "Withholding Party") on the other hand, Lessee shall be responsible for,
and Lessee shall indemnify and hold harmless each Withholding Party on an After
Tax Basis against, any obligation for United States or foreign withholding taxes
or similar levies, imposts, charges, fees, deductions or withholdings
(collectively, "Withholdings") imposed in respect of any part of the Lease
Payments or Availability Fees payable by such Lessee to Lessor, any amounts
payable by Lessor to Certificate Holders, the interest payable on the Notes, the
Loan Availability Fees or with respect to any other payments under the Operative
Documents (all such payments being referred to herein as "Exempt Payments" to be
made without deduction, withholding or set off) (and, if any Withholding Party
receives a demand for such payment from any taxing authority or a Withholding is
otherwise required with respect to any Exempt Payment, Lessee shall discharge
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such demand on behalf of such Withholding Party); provided, however, that the
obligation of Lessee under this Section 10.3.5 shall not apply to any
Withholdings that would not have been imposed but for such Withholding Party's
failure to comply with Section 9.6.
If a Tax Indemnitee or a Withholding Party or any Affiliate with whom such
Tax Indemnitee or a Withholding Party files a consolidated tax return (or
equivalent) subsequently receives the benefit in any country of a tax credit,
deduction or other allowance or reduction resulting from Taxes or Losses with
respect to which it or an Affiliate has received a payment of an indemnity
amount from Lessee under Section 10.1 or 10.3, such Person will pay to Lessee
such part of that benefit as in the sole discretion of such Person will leave it
(after such payment) in a position no more and no less favorable than it would
have been in if no additional payment had been required to be paid, provided
always that (i) such Person will determine in its sole discretion, exercised in
good faith, the amount and allocation of any such benefit and of the date on
which it is received and of any After-Tax Basis calculation required with
respect to payments to or from it, (ii) such Person will have the absolute
discretion as to the order and manner in which it employs or claims tax credits
and allowances available to it and (iii) such Person will not be obliged to
disclose to Lessee any information regarding its tax affairs or tax
computations.
10.3.6. Tax Contests. If a claim is made in writing against any Tax
Indemnitee for any Taxes which Lessee is required to pay or indemnify against
pursuant to Section 10.3.1, such Tax Indemnitee shall promptly notify Lessee in
writing, provided that, without prejudice to any rights or claims for damages
Lessee may have as a result of such failure, the failure to so notify Lessee
will not reduce Lessee's obligation under Section 10.3 except if such failure
precludes the contest of such claim. Subject to the next sentence, if requested
by Lessee in writing within 30 days after receipt by Lessee of a notice
described in the preceding sentence, such Tax Indemnitee and, if required or
appropriate to prosecute such contest, any other Tax Indemnitee, shall permit
such Lessee, to contest in the name of Lessee, and if such contest by such
Lessee in the name of such Lessee is not permissible or allowed, shall, at the
request of Lessee, permit such Lessee to contest in the name of the Tax
Indemnitee and, if such contest by Lessee in the name of the Tax Indemnitee is
not permissible or allowed, shall, at the request of Lessee diligently contest
in good faith (including pursuing all administrative and judicial appeals) the
validity, applicability or amount of such Taxes in appropriate administrative or
judicial proceedings; provided that (1) prior to taking such action Lessee shall
have agreed to pay and shall have provided an undertaking reasonably acceptable
to such Tax Indemnitee with respect thereto or shall have paid each Tax
Indemnitee that is engaged in such contest in a satisfactory manner for all
out-of-pocket costs and expenses which such Tax Indemnitee may incur in
connection with contesting such claim, including, without limitation, all
reasonable legal and accountant's fees and disbursements and costs of
administrative and judicial proceedings, and the amount of any interest or
penalties which may be payable as a result of contesting such claim, (2) if such
contest is to be initiated by the payment of, and the claiming of a refund for,
such Taxes (such election to be within the sole discretion of Lessee), Lessee
shall have advanced such Tax Indemnitee sufficient funds (on an interest-free
basis and on an After-Tax Basis) to make such payment, (3) any action to be
taken will not result in a material risk of sale, forfeiture or loss of the
Lessor's title to, or the Lessor's or Collateral Agent's interest in, any Item
of Equipment unless Lessee shall have made provision against such risk in a
manner acceptable to such Tax Indemnitee in its sole discretion, (4) such Tax
Indemnitee shall not have determined, based on an
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opinion of such Tax Indemnitee's counsel, that such action is reasonably likely
to result in adverse consequences to the future tax liability of such Tax
Indemnitee not indemnified to such Tax Indemnitee's satisfaction and (5) Lessee
shall have delivered to such Tax Indemnitee a written acknowledgment of its
liability hereunder for such Taxes, provided that such acknowledgment shall not
be binding on such Lessee if the contest of such Taxes is resolved through a
written opinion of an adjudicator stating a basis for such resolution that
demonstrates Lessee has no liability to such Tax Indemnitee hereunder for such
Taxes and provided further, that such Lessee shall have no right to contest in
the name of a Tax Indemnitee, and such Tax Indemnitee shall itself contest, if
the contest involves issues with respect to which Lessee would not be required
to indemnify such Tax Indemnitee hereunder and which cannot be severed by
reasonable efforts of such Tax Indemnitee from all issues with respect to which
Lessee would be liable hereunder or the severance of which would adversely
affect the position of such Tax Indemnitee, and in any such contest such Tax
Indemnitee may in its sole discretion select the forum for such contest and
determine the manner in which such contest shall be conducted, but shall consult
with Lessee and its counsel in good faith with respect to such Lessee's
interests with respect to contest. If a claim for Taxes is made in writing
against any Tax Indemnitee and such Tax Indemnitee complies with its obligations
under this Section 10.3.6, Lessee and such Tax Indemnitee shall, for purposes of
determining the amount, if any, payable to such Tax Indemnitee under Section
10.3, be bound by the results of any contest under this Section 10.3.6 (or by
the final written assessment by the relevant taxing authority, if Lessee elect
not to contest under this Section 10.3.6) as to the amount of Tax due to the
relevant taxing jurisdiction, the validity and applicability of such Tax, and
any stated reason as to the basis for the imposition of such Tax contained in
the final determination with respect to such contest. If any Tax Indemnitee
shall determine in its sole discretion that it has either obtained a refund of
or been granted a credit, deduction or other allowance or reduction against
Taxes for which Lessee is not obligated to indemnify such Tax Indemnitee
hereunder for amounts corresponding to all or any part of any Taxes which Lessee
shall have paid to any Tax Indemnitee or for which Lessee shall have reimbursed
any Tax Indemnitee hereunder, such Tax Indemnitee shall, provided that no Event
of Default shall have occurred and be continuing, pay to Lessee an amount which
is equal to the sum of the amount of such refund or credit, deduction or other
allowance or reduction, plus any interest received (or credited against Taxes
for which Lessee is not obligated to indemnify such Tax Indemnitee hereunder) on
such refund fairly attributable to any Taxes paid by such Lessee or with funds
provided by Lessee prior to the receipt of such refund, reduced by any Taxes
incurred by such Tax Indemnitee by reason of the receipt or accrual of such
refund and interest, and increased by any tax benefit realized by Tax Indemnitee
as a result of any payment by such Tax Indemnitee made pursuant to this sentence
so as to return such Tax Indemnitee to the same net after-tax position it would
have been in if the Taxes so refunded or credited had not been imposed; provided
further that a Tax Indemnitee shall not be obligated to pay any Lessee an amount
in excess of all amounts of Taxes (and additional amounts described in Section
10.3) previously paid by Lessee pursuant to Section 10.3 to such Tax Indemnitee,
provided further, however, that such Tax Indemnitee shall pay any amounts that
it is not required to pay to Lessee solely by reason of the foregoing proviso at
such time as Lessee shall have made any additional payments to such Indemnitee
pursuant to Section 10.3 hereof equal to such amounts, and if an Event of
Default shall have occurred and be continuing, such Tax Indemnitee shall have
the option of applying the amount otherwise due any Lessee pursuant to this
sentence against Lessee
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obligations under any Operative Document or of holding such amount as security
for Lessee full performance of such obligations until the earlier of (i) the
Maturity Date of all Loans or (ii) the curing of such Event of Default, after
which such Tax Indemnitee shall pay such amount to Lessee. Any Tax Indemnitee
shall be entitled to settle any claim that is the subject of a contest hereunder
without the consent of the Lessee provided that, in so doing, such Tax
Indemnitee shall waive any rights to indemnification by the Lessee with respect
to such settled claim and any other claim the contest of which would be
precluded as a result of such settlement hereunder and shall repay to Lessee any
amounts advanced to pay such contested Taxes with interest actually received in
respect thereof and release any undertaking required hereunder.
10.3.7. Tax Indemnification for Loan Recharacterization. Each Tax
Indemnitee has entered into the transactions contemplated by the Operative
Documents on the assumption that the Loans are properly characterized for
Federal, State and local income tax purposes as debt (the "Assumed
Characterization"). If for any reason (and notwithstanding anything to the
contrary contained in the Operative Documents and without regard to Section
10.3.2 hereof), any Tax Indemnitee shall suffer any adverse Federal, State or
local income tax consequences as a result of any challenge to the Assumed
Characterization (a "Tax Loss"), Lessee will pay to such Tax Indemnitee an
amount sufficient to reimburse such Tax Indemnitee, on an After-Tax Basis, for
the additional Federal, State and local income taxes payable by (or not
refundable to) such Tax Indemnitee from time to time as a result of such Tax
Loss plus all interest, penalties, fines and additions to tax payable by such
Tax Indemnitee as a result of such Tax Loss. If, subsequent to such Tax
Indemnitee's receipt of any indemnity pursuant to this Section 10.3.7, such Tax
Indemnitee shall actually realize any Federal, State or local income tax savings
that would not have been realized but for such Tax Loss (as determined by such
Tax Indemnitee in its sole discretion), then, provided no Lease Event of Default
shall have occurred and be continuing and provided that Lessee shall have agreed
to indemnify such Tax Indemnitee in a manner satisfactory to such Tax Indemnitee
for any loss or disallowance of such income tax savings, such Tax Indemnitee
shall pay to the Lessee an amount equal to the sum of (x) such Federal, State
and local income tax savings and (y) the amount of any Federal, State or local
income tax savings actually realized by such Tax Indemnitee as the result of any
payment made pursuant to this sentence (as determined by such Tax Indemnitee in
its sole discretion); provided, however, that sum shall not exceed the excess of
the amounts previously paid by Lessee to such Tax Indemnitee pursuant to this
Section 10.3.7 over the amounts previously paid by such Tax Indemnitee to Lessee
pursuant to this Section 10.3.7 with respect to such Tax Loss, with the
remainder of such sum to be carried forward and applied as an offset against
future indemnity payments owed by Lessee to such Tax Indemnitee pursuant to this
Section 10.3.7. In connection with the foregoing, such Tax Indemnitee shall
provide written notice to Lessee of any claim for indemnification under this
Section 10.3.7. Any such claim shall be subject to the contest provisions of
Section 10.3.6 and the verification procedure set forth in Section 10.3.3. Any
payments due to such Tax Indemnitee pursuant to this Section 10.3.7 shall be
paid no later than the date that such Tax Indemnitee shall become obligated to
pay the additional Federal, State or local income taxes resulting from the Tax
Loss, and any payments due to Lessee pursuant to this Section 10.3.7 shall be
paid, provided no Lease Event of Default shall have occurred and be continuing,
within thirty (30) days after the date that such Tax Indemnitee shall realize
the Federal, State or local income tax savings.
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10.3.8. Special Tax Indemnity. The Lessee shall pay and assume all
liability for, and does hereby agree to indemnify any Tax Indemnitee,
Indemnitee, and, in each case, their accountants, lawyers, and other advisors on
an After Tax Basis for any tax, addition to tax, penalty, or other cost as a
result of the breach, inaccuracy or incorrectness of the representation found in
Section [2.1(i)].
10.4. Increased Costs, Illegality, etc. (a) In the event that any Lender or
any Certificate Holder 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 Administrative Agent):
(i) 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 LIBOR Rate; or
(ii) at any time, that such Lender or Certificate Holder shall incur
increased costs or reductions in the amounts received or receivable hereunder
with respect to any Loan or Equity Contribution 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 Lender or any Certificate Holder of the
principal of or interest on the Notes, any payment due on the Certificates or
any other amounts payable to any Lender or any Certificate Holder hereunder
(except for changes in the rate of tax on, or determined by reference to, the
net income or profits of such Lender or such Certificate Holder 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 LIBOR Rate and/or (y) other circumstances
since the date of this Agreement affecting such Lender or such Certificate
Holder or the interbank Eurodollar market or the position of such Lender or
such Certificate Holder in such market; or
(iii) at any time, that the making or continuance of any Loan or Equity
Contribution has been made (x) unlawful by any law or governmental rule,
regulation or order, (y) impossible by compliance by any Lender or any
Certificate Holder 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 Lender or such Certificate Holder (or the
Administrative Agent, in the case of clause (i) above) shall promptly give
notice (by telephone promptly confirmed in writing) to Lessor and Lessee and,
except in the case of clause (i) above, to the Administrative Agent of such
determination (which notice the Administrative Agent shall promptly transmit to
each of the other Lenders and/or each of the other Certificate Holders, as the
case may be).
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Thereafter (x) in the case of clause (i) above, new Loans and Equity
Contributions shall no longer be available until such time as the Administrative
Agent notifies Lessor, Lessee, the Lenders and the Certificate Holders that the
circumstances giving rise to such notice by the Administrative Agent no longer
exist, and any Funding Notice given by Lessee with respect to Loans and Equity
Contributions which have not yet been incurred (including by way of conversion)
shall be deemed rescinded by Lessee, (y) in the case of clause (ii) above,
Lessee shall pay to such Lender or such Certificate Holder, within fifteen (15)
days of such Lender's or such Certificate Holder'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 Lender or such Certificate
Holder reasonably shall determine) as shall be required to compensate such
Lender or Certificate Holder 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 Lender or such Certificate Holder, showing in
reasonable detail the basis for the calculation thereof, submitted to Lessee by
such Lender or such Certificate Holder shall, absent manifest error, be final
and conclusive and binding on all the parties hereto) and (z) in the case of
clause (iii) above, Lessee shall take one of the actions specified in Section
10.4(b) as promptly as possible and, in any event, within the time period
required by law.
(b) At any time that any Loan or Equity Contribution is affected by the
circumstances described in Section 10.4(a)(ii) or (iii), Lessee may (and in the
case of a Loan or Equity Contribution affected by the circumstances described in
Section 10.4(a)(iii) shall) either (x) if the affected Loan or Equity
Contribution is then being made initially, by giving the Administrative Agent
telephonic notice (confirmed in writing) on the same date that Lessee was
notified by the affected Lender, the affected Certificate Holder or the
Administrative Agent pursuant to Section 7.4(a)(ii) or (iii) or (y) if the
affected Loan is then outstanding or the Equity Contribution is not then repaid,
upon at least three LIBOR Banking Days' written notice to the Administrative
Agent, require the affected Lender or the affected Certificate Holder to convert
such Loan into an Alternate Rate Loan or the Equity Rate of the Equity
Contribution to an Alternate Rate-based rate, provided that, if more than one
Lender or Certificate Holder is affected at any time, then all affected Lenders
and affected Certificate Holders must be treated the same pursuant to this
Section 10.4(b).
(c) If at any time after the date of this Agreement any Lender or any
Certificate Holder 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 Lender or
such Certificate Holder or any corporation controlling such Lender or such
Certificate Holder based on the existence of such Lender Commitment or such
Certificate Holder Committee, respectively, hereunder or its obligations
hereunder, then Lessee shall pay to such Lender or such Certificate Holder, upon
its written demand therefor, such additional amounts as shall be required to
compensate such Lender or such Certificate Holder or such other corporation for
the increased cost to such Lender or such Certificate Holder or such other
corporation or the reduction in the rate of return to such Lender or such
Certificate Holder or such other corporation as a result of such increase of
capital. In determining such additional amounts, each Lender and each
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Certificate Holder will act reasonably and in good faith and will use averaging
and attribution methods which are reasonable, provided that such Lender's or
such Certificate Holder's determination of compensation owing under this Section
10.4(c) shall, absent manifest error, be final and conclusive and binding on all
the parties hereto. Each Lender and each Certificate Holder, upon determining
that any additional amounts will be payable pursuant to this Section 10.4(c),
will give prompt written notice thereof to Lessee, which notice shall show in
reasonable detail the basis for calculation of such additional amounts.
10.5. Lessee Indemnity. Lessee hereby assumes liability for, and does
hereby agree to indemnify, protect, save, defend, and hold harmless Lessor on an
After-Tax Basis from and against any and all Losses and each Tax Indemnitee
against any and all amounts owed by Lessor under the Loan Agreement to the
extent that there is a Lease Payment corresponding to the Loan payment for which
the indemnity is claimed under Section 10.2 hereof.
10.6. Survival. All obligations provided for in this Section 10 shall
survive the resignation or removal of the Administrative Agent or Collateral
Agent under Section 11.7, the sale of any Item of Equipment, any termination of
the Lease Agreement, the termination of this Agreement, and the payment in full
of the Notes and Certificates.
11. Administrative Agent and Collateral Agent.
11.1. Authorization and Action of Administrative Agent. (a) Lenders and
Certificate Holders hereby appoint and authorize Administrative Agent to take
such action as agent on their behalf and to exercise such powers under this
Agreement and the other Operative Documents as are delegated to Administrative
Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. The Administrative Agent shall act solely as
agents for the Lenders and Certificate Holders and does not assume nor shall be
deemed to assume any obligation or relationship of trust or agency with any of
Lessee, Lessor, Guarantor or any of their successors or assigns. As to any
matters not expressly provided for by a Operative Document (including
enforcement or collection of the Notes or Certificates), the Administrative
Agent shall not be required nor authorized to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Majority Lenders and the Majority Certificate Holders, and such instructions
shall be binding upon Lenders and Certificate Holders; provided, however, the
Administrative Agent shall not be required to take any action which exposes it
to personal liability or which is contrary to any Operative Document or
Applicable Law. The Administrative Agent agrees to give to Lenders and the
Certificate Holders prompt notice of each notice given to it by Lessor or Lessee
pursuant to the terms of this Agreement; provided, however, the Administrative
Agent shall not be deemed to have any notice of a Loan Default or Loan Event of
Default unless it has received notice of such from another party hereto. The
Administrative Agent may, with the prior consent of the Majority Lenders or the
Majority Certificate Holders, as the case may be, agree to any waiver or
amendment of the Operative Documents (other than Operative Documents to which
such Person is a party) on behalf of Lenders or the Certificate Holders;
provided, however, Administrative Agent will not, without the prior consent of
all Lenders and all Certificate Holders, agree to any waiver or amendment that
would (i) postpone the time or times for payment of any Availability Fee or any
amount payable under this
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Agreement or the Lease Agreement, or (ii) reduce the Lease Payment payable under
this Agreement or the Lease Agreement, or the principal amount of any Lender
Commitment or Certificate Holder Commitment. Administrative Agent will not,
without the prior consent of all Lenders, agree to any waiver or amendment that
would, prior to the payment in full of the Secured Obligations, release all or
substantially all of the Lessor Collateral from the Lien created by the Loan
Documents, other than in accordance with the terms thereof and the other
Operative Document. The Administrative Agent shall pursue its remedies under the
Loan Documents following a Loan Event of Default in accordance with the
instructions of the Majority Lenders. The appointment and authority of the
Administrative Agent hereunder shall terminate upon the indefeasible payment in
full of all amounts owed Lenders, the Administrative Agent and the Collateral
Agent under the Operative Documents.
(b) Lenders hereby appoint and authorize the Collateral Agent to take such
action as agent on their behalf and to exercise such powers under this Agreement
and the other Operative Documents as are delegated to the Collateral Agent by
the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. The Collateral Agent shall act solely as agents for the
Lenders and does not assume nor shall be deemed to assume any obligation or
relationship of trust or agency with any of Lessee, Lessor, Certificate Holders,
Guarantor or any of their successors or assigns. As to any matters not expressly
provided for by a Operative Document (including enforcement or collection of the
Notes), the Collateral Agent shall not be required nor authorized to exercise
any discretion or take any action, but shall be required to act or to refrain
from acting (and shall be fully protected in so acting or refraining from
acting) upon the instructions of the Majority Lenders, and such instructions
shall be binding upon Lenders; provided, however, the Collateral Agent shall not
be required to take any action which exposes it to personal liability or which
is contrary to any Operative Document or Applicable Law. The Collateral Agent
agrees to give to Lenders prompt notice of each notice given to it by Lessor or
Lessee pursuant to the terms of this Agreement; provided however, the Collateral
Agent shall not be deemed to have any notice of a Loan Default or Loan Event of
Default unless it has received notice of such from another party hereto. The
Collateral Agent may, with the prior consent of the Majority Lenders, agree to
any waiver or amendment of the Operative Documents (other than Operative
Documents to which a Lender or Lenders are a party) on behalf of Lenders;
provided, however, Collateral Agent will not, without the prior consent of all
Lenders, agree to any waiver or amendment that would (i) postpone the time or
times for payment of any Availability Fee or any amount payable under this
Agreement or the Lease Agreement, or (ii) reduce the Lease Payment payable under
this Agreement or the Lease Agreement, or the principal amount of any Lender
Commitment. The Collateral Agent will not, without the prior consent of all
Lenders, agree to any waiver or amendment that would, prior to the payment in
full of the Secured Obligations, release all or substantially all of the Lessor
Collateral from the Lien created by the Loan Documents, other than in accordance
with the terms thereof and the other Operative Document. The Collateral Agent
shall pursue its remedies under the Loan Documents following a Loan Event of
Default in accordance with the instructions of the Majority Lenders. The
appointment and authority of the Collateral Agent hereunder shall terminate upon
the indefeasible payment in full of all amounts owed Lenders, the Administrative
Agent and the Collateral Agent under the Operative Documents.
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11.2. Delegation of Duties. The Administrative Agent and the Collateral
Agent may execute any of their duties under these Operative Documents through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Neither the Administrative
Agent nor the Collateral Agent shall be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.
11.3. Agent's Reliance, etc. Neither the Administrative Agent nor the
Collateral Agent nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or omitted by it or them under or
in connection with any Operative Document, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, each of the Administrative Agent and the Collateral Agent (i) may
consult with legal counsel (including counsel for Lessee), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted in good faith by it in accordance with the advice of
such counsel, accountants or experts, (ii) makes no warranty or representation
to Lenders (or to Certificate Holders in the case of the Administrative Agent)
and shall not be responsible to Lenders (and to Certificate Holders, in the case
of the Administrative Agent) for any statements, warranties or representations
made in or in connection with any Operative Document, (iii) shall not have any
duty to ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions of any Operative Document on the part of
Lessee or Lessor or to inspect the property (including the books and records) of
Lessee or Lessor, (iv) shall not be responsible to Lenders (or to Certificate
Holders, in the case of the Administrative Agent) for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of any
Operative Document or any other instrument or document furnished pursuant
thereto, and (v) shall incur no liability under or in respect of any Operative
Document by acting upon any notice, consent, certificate or other instrument or
writing (which may be by fax, telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties.
11.4. Administrative Agent, Collateral Agent and Affiliates. With respect
to any Lender Commitment or Certificate Holder Commitment made by it, any Loans
or Equity Contributions made by it, any Note issued to it or any Certificate
held by it, each of the Administrative Agent and the Collateral Agent shall have
the same rights and powers under each Operative Document as any other Lender or
Certificate Holder as the case may be and may exercise the same as though it
were not an agent hereunder. The Administrative Agent and the Collateral Agent
and their respective Affiliates may accept deposits from, lend money to, act as
trustee under indentures of, and generally engage in any kind of business with,
Lessor, Lessee or Guarantor, any of their Affiliates and any Person who may do
business with or own securities of Lessor, Lessee or Guarantor or any such
Affiliate, all as if the Administrative Agent and the Collateral Agent were not
an agent hereunder and without any duty to account therefor to Lenders or
Certificate Holders.
11.5. Lender and Certificate Holder Credit Decision. Each Lender and each
Certificate Holder acknowledges that it has, independently and without reliance
upon the Administrative Agent or, in the case of the Lenders, the Collateral
Agent, and based on the financial statements of Lessor and Guarantor and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement.
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Each Lender and each Certificate Holder also acknowledges that it will,
independently and without reliance upon the Administrative Agent or the
Collateral Agent, as the case may be and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Operative Documents.
11.6. Indemnification. (a) Each Lender agrees to indemnify the
Administrative Agent and the Collateral Agent, (to the extent not reimbursed by
Lessor or Lessee) ratably according to its Pro Rata Share, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the
Administrative Agent or the Collateral Agent in any way relating or arising out
of any Operative Document or any action taken or omitted by the Administrative
Agent or the Collateral Agent under any Operative Document in their capacities
as agents for Lenders; provided that Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the
Administrative Agent's or the Collateral Agent's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender agrees to reimburse
the Administrative Agent and the Collateral Agent ratably according to its Pro
Rata Share promptly upon demand for out-of-pocket expenses (including counsel
fees) incurred by the Administrative Agent or the Collateral Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
any Operative Document in their capacities as agents for Lenders, to the extent
that the Administrative Agent or the Collateral Agent is not reimbursed for such
expenses by Lessor or Lessee. Lessee's indemnity obligations shall not be
reduced by this Section 11.6(a).
(b) Each Certificate Holder agrees to indemnify the Administrative Agent,
(to the extent not reimbursed by Lessor or Lessee) ratably according to its Pro
Rata Share, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Administrative Agent in any way relating or arising out of
any Operative Document or any action taken or omitted by the Administrative
Agent under any Operative Document in its capacity as agent for Certificate
Holders; provided that Certificate Holders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the
Administrative Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Certificate Holder agrees to reimburse the
Administrative Agent ratably according to its Pro Rata Share promptly upon
demand for out-of-pocket expenses (including counsel fees) incurred by the
Administrative Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, any Operative Document in its capacity as
agent for Certificate Holders, to the extent that the Administrative Agent is
not reimbursed for such expenses by Lessor or Lessee. Lessee's indemnity
obligations shall not be reduced by this Section 11.6(b).
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11.7. Successor Administrative Agent and Collateral Agent; Termination of
Agency. The Administrative Agent and the Collateral Agent may resign at any time
by giving at least fifteen (15) days written notice thereof to Lenders, Lessor
and Lessee, and in the case of the Administrative Agent, also to the Certificate
Holders, and the Administrative Agent and Collateral Agent may be removed at any
time with or without cause by the Majority Lenders. Upon any resignation or
removal of the Administrative Agent or Collateral Agent, the Majority Lenders
shall have the right with the consent of Lessee (such consent not to be
unreasonably withheld or delayed) to appoint a successor Administrative Agent
who shall be reasonably acceptable to the Lessee (it being understood and agreed
that any non-defaulting Lender is deemed to be acceptable to the Lessee). If no
successor Administrative Agent or Collateral Agent shall have been so appointed
by the Majority Lenders within 30 days after any such resignation of removal,
the retiring Administrative Agent or the Collateral Agent may, on behalf of
Lenders and the Certificate Holders, as applicable, appoint a successor
Administrative Agent or Collateral Agent which shall be a commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $100,000,000. Upon the
acceptance of any appointment as the Administrative Agent or the Collateral
Agent hereunder by a predecessor Administrative Agent or Collateral Agent, such
successor Administrative Agent or Collateral Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring the Administrative Agent or Collateral Agent, and the obligations under
each Operative Document. Any Administrative Agent or Collateral Agent resigning
in accordance with this Section 11.7 shall retain the benefits of Section 11 as
to any actions taken or omitted to be taken by it while it was the
Administrative Agent or Collateral Agent.
11.8. Registration of Notes and Certificates. The Administrative Agent
shall preserve registration books identifying each Lender's and Certificate
Holder's interest in the Notes and Certificates, respectively, and a list of the
names and addresses of the holders of the Notes and of the Certificates, which
register and list shall be available to Lessor, Lessee, Certificate Holders and
Lenders or their respective representatives for inspection (the "Register").
Ownership of the Notes and the Certificates shall be proved by the Note register
and the Certificate register kept by the Administrative Agent. No transfer by
any holder of a Note or Certificate or any portion thereof shall be effective
unless and until such transfer is made upon the registration books maintained by
the Administrative Agent. Prior to due presentment for registration of transfer
of any Note or Certificate, the Administrative Agent, Lessee and Lessor shall
deem and treat the Person in whose name any Note or Certificate is registered as
the absolute owner of such Note or Certificate for the purpose of receiving
payment of Availability Fees, principal of, and Breakage Costs, if any, and
interest on such Note and for all other purposes whatsoever, whether or not such
Note is overdue, and neither the Administrative Agent nor Lessor shall be
affected by any notice to the contrary.
11.9. Administrative Agency Fee. Lessee agrees to pay to the Administrative
Agent in advance on the Closing Date and on each anniversary of the Closing Date
during the Term an annual administrative fee of $35,000.
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12. Miscellaneous.
12.1. Expenses. Lessee agrees to pay within ten (10) Business Days of
written notice thereof the reasonable fees and expenses (initial and ongoing) of
Trust Company for serving as Lessor and shall reimburse Trust Company, Lessor,
Deutsche Bank as a Lender and a Certificate Holder, the Administrative Agent and
Collateral Agent for all of their respective reasonable costs and expenses
(including, without limitation, reasonable counsel fees and disbursements) in
connection with the preparation, execution and delivery of the Operative
Documents and the issuance of the Notes and Certificates and the consummation of
the transactions contemplated thereby. Lessee agrees to pay the reasonable fees
and disbursements of special counsel to Lessor and special counsel to the
Administrative Agent and Collateral Agent in connection with any amendments,
waivers or consents requested by Lessor, Lessee or Guarantor under any Operative
Document. Upon the occurrence and during the continuance of any Lease Event of
Default, Lessee agrees to pay or reimburse each Lender, each Certificate Holder,
Lessor, the Administrative Agent and the Collateral Agent for reasonable costs
and expenses of counsel and of financial advisors as shall have been selected by
such Lender, Certificate Holder, Lessor, Administrative Agent or Collateral
Agent to assist them in connection with such Lease Events of Default.
12.2. Amendments. (a) Neither this Agreement nor any other Operative
Document nor any terms hereof or thereof may be amended, supplemented, waived or
modified without the written agreement and consent of all parties thereto and
Lessee, provided that where the consent of the Lenders or the Certificate
Holders is required, such consent (except as provided below) may be given by the
Majority Lenders or the Majority Certificate Holders, as the case may be, and
any such consent shall be binding on all other Lenders or Certificate Holders,
provided further that no such amendment, modification, waiver or supplement
shall, (i) without the consent of each Lender (A) extend the final scheduled
maturity of any Loan or Note, or reduce the rate or extend the time of payment
of interest thereon or Loan Availability Fees (except (x) in connection with the
waiver of applicability of any post-default increase in interest rates and (y)
that any amendment or modification that is not agreed to by each Lender directly
affected thereby to the financial definitions in this Agreement shall not
constitute a reduction in the rate of interest or fees for purposes of this
clause (A), notwithstanding the fact that such amendment or modification would
otherwise actually result in such a reduction, so long as the primary purpose
(as determined in good faith by Lessee and the Administrative Agent) of the
respective amendment or modification was not to decrease the pricing pursuant to
this Agreement and the other Operative Document), or reduce the principal amount
thereof (except to the extent repaid in cash), (B) release all or substantially
all of the Lessor Collateral (except as expressly provided herein) or (C) reduce
the percentage specified in the definition of Majority Lenders (it being
understood that, with the consent of the Majority Lenders, additional extensions
of credit pursuant to this Agreement may be included in the determination of the
Majority Lenders on substantially the same basis as the extensions of Lender's
Commitments are included on the Closing Date), (ii) without the consent of each
Certificate Holder, (A) extend the final scheduled repayment of any Equity
Contribution, or reduce the rate or extend the time of payment of Equity Return
or Availability Fees (except (x) in connection with the waiver of applicability
of any post-default increase in interest rates and (y) that any amendment or
modification that is not agreed to by each Certificate Holder directly affected
thereby to the
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financial definitions in this Agreement shall not constitute a reduction in the
Equity Rate or Availability Fees for purposes of this clause (A),
notwithstanding the fact that such amendment or modification would otherwise
actually result in such a reduction, so long as the primary purpose (as
determined in good faith by Lessee and the Administrative Agent) of the
respective amendment or modification was not to decrease the pricing pursuant to
this Agreement and the other Operative Documents), or reduce the Equity
Contribution thereof (except to the extent repaid in cash), (B) release all or
substantially all of Lessor's interest in the Equipment (except as expressly
provided herein or in the Lease Agreement) or (C) reduce the percentage
specified in the definition of the Majority Certificate Holders (it being
understood that, with the consent of the Majority Certificate Holders,
additional contributions of equity pursuant to this Agreement may be included in
the determination of the Majority Certificate Holders on substantially the same
basis as the contributions of Certificate Holders' Commitments are included on
the date hereof), (iii) without the consent of each Lender and Certificate
Holder (A) amend, modify or waive any provision of this Section 12.2 (it being
understood that, with the consent of the Majority Lenders or the Majority
Certificate Holders, additional extensions of credit or contributions of equity,
respectively, pursuant to this Agreement or the Loan Agreement may be included
under this Agreement to provide the Lenders or Certificate Holders with
customary similar or additional rights of consent or (B) consent to the
assignment or transfer by Lessee or Lessor of any of its rights and obligations
under the Operative Documents, (iv) without the consent of the Lenders or
Certificate Holders directly affected thereby, (A) increase any Lender's Lender
Commitment or any Certificate Holder's Certificate Holder Commitment (it being
understood that waivers or modifications of conditions precedent, covenants,
Loan Defaults or Loan Events of Default or of a mandatory reduction in the
Lender Commitment or Certificate Holder Commitment shall not constitute an
increase of the Lender Commitment of any Lender or the Certificate Holder
Commitment of any Certificate Holder, (v) without the consent of the
Administrative Agent, amend, modify or waive any provision relating to the
rights or obligations of the Administrative Agent or (vi) without the consent of
the Collateral Agent, amend, modify or waive any provision relating to the
rights or obligations of the Collateral Agent.
(b) If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement or any other Operative
Document, the consent of the Majority Lenders or Majority Certificate Holders is
required and is obtained but the consent of one or more of other Lenders or
Certificate Holders whose consent is required is not obtained, then Lessee shall
have the right to replace each such non-consenting Lender, Lenders, Certificate
Holder or Certificate Holders (so long as all non-consenting Lenders or
Certificate Holders are so replaced) with one or more Replacement Lenders or
Replacement Certificate Holders, as the case may be, pursuant to Section 12.14
so long as at the time of such replacement, each such Replacement Lender or
Replacement Certificate Holder consents to the proposed change, waiver,
discharge or termination, provided that Lessee shall not have the right to
replace a Lender or a Certificate Holder solely as a result of the exercise of
such Lender's or Certificate Holder's rights when the consent of each of the
Lenders or Certificate Holders is required.
12.3. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY
TRIAL. (a) THIS AGREEMENT AND THE OTHER OPERATIVE DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER
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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 OPERATIVE DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE 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 LESSEE, GUARANTOR AND
LESSOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH OF
LESSEE, GUARANTOR AND LESSOR 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 IT AT ITS ADDRESS SET FORTH IN SECTION 12.4, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
ANY PARTY UNDER THIS AGREEMENT, TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST LESSEE,
GUARANTOR OR LESSOR IN ANY OTHER JURISDICTION.
(b) EACH OF LESSEE, GUARANTOR AND LESSOR 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 OPERATIVE 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 OPERATIVE DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
12.4. Notices. All notifications, notices, demands, requests and other
communications herein provided for or made pursuant hereto shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered via courier to the
addresses listed below. 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 Administrative Agent,
Lessor and Lessee shall not be effective until received by the Administrative
Agent, Lessor or Lessee, as the case may be. The initial address of the parties
hereto are as follows:
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to Lessee: Universal Compression, Inc.
[______________]
Attention: [______________]
Telephone: [______________]
Telefax: [______________]
to Guarantor: Universal Compression Holdings, Inc.
[______________]
Attention: [______________]
Telephone: [______________]
Telefax: [______________]
Lessor and Trust Company [___________________________]
[________________]
Attention: [______________]
Telephone: [______________]
Telefax: [______________]
Certificate Holders and Lenders: [See Schedule 4 hereto]
Administrative Agent: Bankers Trust Company
[______________]
Attention: [______________]
Telephone: [______________]
Telefax: [______________]
With a copy of all notices and documents delivered in accordance with the Lease
Agreement or Sections 3.1(b)(v), 3.1(b)(xi), 3.1(b)(xiii), 3.2(c), 3.2(d),
3.2(e)(ii), 3.2(e)(iii) or 3.2(f) hereof to:
Deutsche Banc Alex Brown
31 West 52nd Street
New York, NY 10019
Attention: Director, Corporate Finance
Leasing
Telephone: (212) 469-7393
Telefax: (212) 469-7398
Collateral Agent: Bankers Trust Company
[_______________]
Attention: [______________]
Telephone: [______________]
Telecopy: [______________]
12.5. Interests in the Equipment. The parties hereto intend that (a) for
financial accounting purposes with respect to Lessee, Lessor will be treated as
the owner and the lessor of
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each Item of Equipment and Lessee will be treated as the lessee of each Item of
Equipment and (b) for all federal, state and local income tax purposes, state
sales, use and other transaction tax purposes, (i) the Operative Documents will
be treated as a financing arrangement, (ii) Lessor will be deemed a lender
making loans to Lessee in an amount equal to the sum of the aggregate of the
Equity Components for each Item of Equipment and the outstanding principal
amount of the Loans and (iii) Lessee will be treated as the owner of each Item
of Equipment and will be entitled to all tax benefits ordinarily available to an
owner of equipment like the Equipment for such tax purposes. Lessor shall take
no action inconsistent with the intention of the parties set forth in clause
(b)(iii) of this Section 12.5. Notwithstanding the intentions of the parties
expressed herein, each party hereto acknowledges and agrees that no other party
has made representations or warranties to such party concerning the tax,
accounting or legal characteristics of the Operative Documents and that such
party has obtained and relied upon and agree that they will obtain and rely upon
such tax, accounting and legal advice from their own accountants and counsel
concerning the Operative Documents as they deems appropriate.
12.6. Descriptive Headings, etc. The descriptive headings used in this
Agreement are for convenience only and shall not be deemed to affect the meaning
or construction of any provision hereof.
12.7. Benefit of Agreement; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns and in particular any holder from time to time
of any Note. Subject to the following proviso, neither Lessor, Lessee nor any
Certificate Holder or Lender without the prior written consent of each other
party hereto, may assign any or all of its rights or obligations hereunder or
under any other Operative Document to which it is a party; provided, however,
(i) Lessor may at any time transfer or assign any or all of its rights or
obligations hereunder in accordance with the provisions of Section 7 of the
Trust Agreement;
(ii) Any Lender or Certificate Holder may transfer, assign or grant
participations in its rights in the Operative Documents; provided, however,
such Lender shall remain a "Lender" or Certificate Holder a "Certificate
Holder" for all purposes hereunder (and may not transfer or assign all or any
portion of its Commitments hereunder except as provided in clause (iii) below)
and the transferee, assignee or participant, as the case may be, shall not
constitute a "Lender" or a "Certificate Holder" hereunder and, provided
further, that no Lender or Certificate Holder 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 Operative Document
except to the extent such amendment or waiver would (A) extend the final
scheduled maturity of any Loan or due date of any repayment of Equity
Contribution which such participant is participating, or reduce the rate or
extend the time of payment of interest, Equity Return 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 Loan Default or Loan 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
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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), (B) consent to the assignment or transfer by Lessor or Lessee
of any of its rights and obligations under the Operative Documents or (C)
release all or substantially all of the Collateral under all of the Security
Documents (except as expressly provided in the Operative Documents) securing
the Loans in which such participant is participating. In the case of any such
participation, the participant shall not have any rights under any Operative
Documents (the participant's rights against such Lender or Certificate Holder
in respect of such participation to be those set forth in the agreement
executed by such Lender or Certificate Holder in favor of the participant
relating thereto) and all amounts payable by Lessor and Lessee under the
Operative Documents shall be determined as if such Lender or Certificate
Holder had not sold such participation;
(iii) Notwithstanding the foregoing, any Lender or Certificate Holder (or
any Lender or Certificate Holder together with one or more other Lenders or
Certificate Holders) may (A) assign all or a portion of its Lender Commitment
or Certificate Holder Commitment and related outstanding obligations hereunder
to (x) its parent company and/or any affiliate of such Lender or Certificate
Holder which is at least 50% owned by such Lender or Certificate Holder or its
parent company or to one or more Lenders or Certificate Holders or (y) in the
case of any Lender or Certificate Holder 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 Lender or Certificate Holder or by an Affiliate of
such investment advisor or (B) assign all, or if less than all, a portion
equal to at least $5,000,000 in the aggregate for the assigning Lender or
assigning Lenders, or $1,000,000 in the aggregate for the assigning
Certificate Holder or Certificate Holders of such Lender or Certificate Holder
Commitment and related outstanding obligations hereunder or under the Loan
Agreement 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 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 Lender or Certificate Holder, and in the case
of a Lender the Loan Agreement as a Lender by execution of an Assignment and
Assumption Agreement, provided that (x) at such time Schedule 3 shall be
deemed modified to reflect the Lender Commitment of such new Lender or
Certificate Holder Commitment of the new Certificate Holder and of the
existing Lenders and Certificate Holders, (y) new Notes or Certificates will
be issued, at Lessee's expense, to such new Lender or Certificate Holder and
to the assigning Lender or Certificate Holder upon the request of such Person,
such new Notes or Certificates to be in conformity with the requirements of
Section 2.3 of the Loan Agreement or Section [__] of the Trust Agreement
respectively (with appropriate modifications) to the extent needed to reflect
the revised Lender Commitments or Certificate Holder Commitment, (z) the
consent of the Administrative Agent, Lessee and Lessor shall be required in
connection with any assignment to an Eligible Transferee pursuant to clause
(B) above (which consents shall not be unreasonably withheld), provided that
the consent of Lessor shall not be required at any time that a Loan Event of
Default has occurred and is continuing and the consent of Lessee shall not be
required at any time that a Lease Event
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of Default has occurred and is continuing, and the consent of the
Administrative Agent shall be required in connection with any assignment of
all or a portion of any Commitment, (y) the Administrative Agent shall receive
for its own account at the time of each such assignment, from the assigning or
assignee Lender or Certificate Holder, the payment of a non-refundable
assignment fee of $3,500 and (z) promptly after such assignment, Lessor and
Lessee shall have received from the Administrative 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
12.7, the assigning Lender or Certificate Holder shall be relieved of its
obligations hereunder with respect to its assigned Lender Commitments or
Certificate Holder Commitments. At the time of each assignment pursuant to
this Section 12.7 to a Person which is not already a Lender or Certificate
Holder hereunder and which is not a U.S. Person (as such term is defined in
Section 7701(a)(30) of the Code) for Federal income tax purposes, the
respective assignee Lender or Certificate Holder shall, to the extent legally
entitled to do so, provide to Lessor and Lessee in the case of a Lender or
Certificate Holder Commitment described in Section 9.6 of the Participation
Agreement, the forms described in such Section 9.6 of the Participation
Agreement, as the case may be. To the extent that an assignment of all or any
portion of a Lender's Lender Commitments or a Certificate Holder's Certificate
Holder Commitment and related outstanding obligations would, at the time of
such assignment, result in additional increased costs under Sections 10.3 and
10.4 from those that would have been incurred by the respective assigning
Lender or Certificate Holder prior to such assignment, then Lessee shall not
be obligated to pay such incremental additional increased costs (although
Lessee shall be obligated to pay any other increased costs of the type
described above resulting from changes after the date of the respective
assignment);
(iv) Any Certificate Holder may at any time transfer or assign any or all
of its rights or obligations hereunder in accordance with this Section 12.7 of
this Agreement and as provided in Section 11.10 of the Trust Agreement; and
(v) each Lender may transfer or assign any or all of its interest or
obligations hereunder or in the Loan Documents in accordance with Section 7.6
of the Loan Agreement and shall provide written notice to the Administrative
Agent of any assignment or participation by such Lender of any interest it may
have under any Loan Document. In the case of any participations, other than to
which Guarantor otherwise consents, the right of any such participant to
indemnification or other amounts under Section 12 shall be limited to amounts
which would have been due had no such participation been granted.
Notwithstanding any other provision in this Agreement or in the Loan
Agreement, any Lender and any Certificate Holder may at any time create a
security interest in, or pledge, all or any portion of its rights under and
interest in any of the Loan Documents in favor of any Federal Reserve Bank in
accordance with Regulation A of the Federal Reserve Board or U.S. Treasury
Regulation 31 CFR 203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under Applicable Law.
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12.8. Execution and Effectiveness. This Agreement may be executed in
multiple counterparts, each of which shall be regarded as an original and all of
which shall constitute a single instrument and shall become effective on the
Closing Date when each of the parties hereto shall have signed a copy hereof
(whether the same or different copies).
12.9. Confidentiality. Each of Lessor, Trust Company, each of Certificate
Holder, each Lender, the Administrative Agent and the Collateral Agent agrees
that it will not disclose without Lessee's consent any financial or other
information, excluding such financial or other information that is publicly
available, furnished by Lessee or Guarantor or obtained as a result of any
inspection of the Equipment; such material will not be disseminated except (i)
to the parties hereto, any rating agency, any prospective permitted assignees or
prospective purchasers of the Equipment or their respective officers, directors,
employees, agents, auditors, attorneys and professional consultants who (other
than the rating agencies), agree in writing for the benefit of Lessee and
Guarantor to be bound by the provisions of this Section 12.9 and for proper
reasons consistent with the purposes for which this information is furnished,
need access to such information, (ii) to potential successors and assigns
permitted under Section 12.9 that agree in writing for the benefit of Lessee and
Guarantor to be bound by the provisions of this Section 12.9 and (iii) to such
other parties to whom Lessor, Trust Company, any Certificate Holder, any Lender,
the Administrative Agent or the Collateral Agent may have a duty or legal
obligation of disclosure, including, without limitation, any Governmental Entity
having jurisdiction over Lessor, Trust Company, any Certificate Holder, any
Lender, the Administrative Agent or the Collateral Agent. This confidentiality
provision will survive the expiration or early termination of this Agreement. No
breach of the foregoing covenants by Lessor, any Lender or any other Person,
shall affect or impair the obligations of Lessee and Guarantor to pay Lessor,
Lenders or any other Person any amounts due under the Operative Documents.
12.10. Survival. Each of the representations, warranties, terms, covenants,
agreements and conditions contained in this Agreement shall specifically survive
the execution and delivery of this Agreement and the other Operative Documents
and the making of the Loans and Equity Contributions and shall, unless otherwise
expressly provided therein, continue in full force and effect until the
Availability Fees, Loan Availability Fees, the Loans, together with interest
thereon, the Equity Contribution and the Equity Return and all other sums
payable hereunder or thereunder have been indefeasibly paid in full.
12.11. Severability. The provisions of this Agreement are severable, and if
any section or provision shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision of this Agreement in any jurisdiction.
12.12. No Broker. Each party hereto hereby represents and warrants to the
other parties that no broker other than Deutsche Bank Securities, Inc. (whose
fees shall be paid solely by Lessee) brought about the transactions contemplated
hereby and each party hereby agrees to indemnify (the "Indemnifying Party") and
hold each other party harmless from, any and all other liabilities and costs
(including, without limitation, costs of counsel) to any Person claiming
brokerage commissions or finder's fees as a result of any agreement with the
Indemnifying Party.
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12.13. Performance by Lenders and Certificate Holders; Replacement of
Lenders; Replacement of Certificate Holders.
(a) (x) If any Lender becomes a defaulting lender or otherwise defaults in
its obligations to make Loans, (y) upon the occurrence of an event giving rise
to the operation of Section 10.4 with respect to any Lender which results in
such Lender charging to Lessee increased costs in excess of those being
generally charged by the Lenders or (z) as provided in Section 12.13(c) (below)
in the case of certain refusals by a Lender to consent to certain proposed
changes, waivers, discharges or terminations with respect to this Agreement
which have been approved by the Majority Lenders, Lessee shall have the right,
if no Lease Default or Lease Event of Default then exists, to replace such
Lender (the "Replaced Lender") with one or more other Eligible Transferee or
Transferees, none of whom shall constitute a Defaulting Lender at the time of
such replacement (the "Replacement Lender") reasonably acceptable to the
Administrative Agent, provided that (i) at the time of any replacement pursuant
to this Section 12.13, the Replacement Lender shall enter into one or more
assignments pursuant to Section 12 (and with all fees payable pursuant to this
Section 12.13 to be paid by the Replacement Lender) pursuant to which the
Replacement Lender shall acquire all of the Lender Available Commitment and
outstanding Loans and Notes of the Replaced Lender and, in connection therewith,
shall pay to the Replaced Lender 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 and Notes of the Replaced Lender, together with all then
unpaid interest with respect thereto at such time and (B) an amount equal to all
accrued, but theretofore unpaid, fees owing to the Replaced Lender and (ii) all
obligations of Lessee owing to the Replaced Lender (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 Lender concurrently with such replacement. Upon the execution
of the respective assignment agreements, the payment of amounts referred to in
clauses (i) and (ii) above and, if so requested by the Replacement Lender,
delivery to the Replacement Lender of the appropriate Note or Notes executed by
Lessor, the Replacement Lender shall become a Lender hereunder and the other
Operative Documents thereunder and the Replaced Lender shall cease to constitute
a Lender hereunder, except with respect to indemnification provisions under the
Operative Documents, which shall survive as to such Replaced Lender (and to give
effect to the replacement of a defaulting lender with one or more non-defaulting
lenders).
(b) (x) If any Certificate Holder becomes a defaulting Certificate Holder
or otherwise defaults in its obligations to make an Equity Contribution, (y)
upon the occurrence of an event giving rise to the operation of Section 10.4
with respect to any Certificate Holder which results in such Certificate Holder
charging to Lessee increased costs in excess of those being generally charged by
the Certificate Holders in their capacity as lenders in other similar
transactions or (z) as provided in Section 12.2(c) in the case of certain
refusals by a Certificate Holder to consent to certain proposed changes,
waivers, discharges or terminations with respect to this Agreement which have
been approved by the Majority Lenders or the Certificate Holders, as the case
may be, Lessee shall have the right, if no Lease Default or Lease Event of
Default then exists, to replace such Certificate Holder (the "Replaced
Certificate Holder") with one or more other Eligible Transferees, none of whom
shall constitute a defaulting Certificate Holder at the time of such replacement
(collectively, the "Replacement Certificate Holders") reasonably acceptable to
the Administrative Agent, provided that (i) at the time of any replacement
pursuant
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to this Section 12.13, the Replacement Certificate Holder shall enter into one
or more assignments pursuant to Section 12.7 (and with all fees payable pursuant
to this Section 12.13 to be paid by the Replacement Certificate Holder) pursuant
to which the Replacement Certificate Holder shall assume the Replaced
Certificate Holder's Available Commitment and shall acquire the rights with
respect to outstanding Equity Contributions of the Replaced Certificate Holder
and, in connection therewith, shall pay to the Replaced Certificate Holder in
respect thereof an amount equal to the sum of (A) an amount equal to the amount
of the Equity Contribution, and all accrued Equity Rate return on all
outstanding Equity Contributions of the Replaced Certificate Holder, and (B) an
amount equal to all accrued, but theretofore unpaid, fees owing to the Replaced
Certificate Holder and (ii) all obligations of Lessee owing to the Replaced
Certificate Holder (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 Certificate Holder
concurrently with such replacement. Upon the execution of the respective
assignment agreements, the payment of amounts referred to in clauses (i) and
(ii) above, the Replacement Certificate Holder shall become a Certificate Holder
hereunder and under the other Operative Documents and the Replaced Certificate
Holder shall cease to constitute a Certificate Holder hereunder, except with
respect to indemnification provisions under the Operative Documents, which shall
survive as to such Replaced Certificate Holder (and to give effect to the
replacement of a defaulting Certificate Holder with one or more non-defaulting
Certificate Holder).
12.14. Limited Recourse Against Certificate Holders and Trust Company.
Without impairing any of the other rights, powers, privileges, liens or security
interests of the Administrative Agent, any Lender or the Collateral Agent
pursuant to the Loan Documents, except for the Trust Company's or Certificate
Holders's gross negligence, willful misconduct, misrepresentations or fraud and
as expressly provided in this Agreement or any other Loan Document, and subject
to the proviso below, Lenders agree that as between them and the Trust Company
and Certificate Holders, no recourse shall be had with respect to this Agreement
or such other Loan Documents against the Trust Company or Certificate Holders,
or any officer, director, employee, agent or Affiliate thereof for amounts owed
by Lessor under the Loan Documents; and neither the Trust Company nor
Certificate Holders, nor any officer, director, employee, agent or Affiliate
thereof shall have any personal liability for any amounts owed by Lessor under
the Loan Documents; provided, however, that nothing contained in this Section
12.14 or elsewhere shall be construed to (i) prevent recourse to and the
enforcement against the Lessor Collateral of all liabilities, obligations and
undertakings contained in the Loan Documents, (ii) limit, restrict, or impair
the right of the Majority Lenders to accelerate the maturity of the Loan upon
the occurrence of a Loan Event of Default, (iii) prevent the bringing of an
action or obtaining a judgment against Lessor or against the Trust Company or
Certificate Holders for any breach of any of its representations, warranties or
covenants under any of the Operative Documents, or (iv) prevent the bringing of
an action or obtaining of a judgment to foreclose the lien of this Agreement or
Security Documents or otherwise realize upon the Lessor Collateral or the sums
due or to become due under the Lease Agreement or the other Loan Documents to
which any such Person is a party.
12.15. Concerning Lessor. Trust Company is entering into this Lease
Agreement solely in its capacity as Trustee under the Trust Agreement and not in
its individual capacity
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(except as expressly stated herein) and in no case shall Trust Company (or any
entity acting as successor Trustee under the Trust Agreement) be personally
liable for or on account of any of the statements, representations, warranties,
covenants or obligations stated to be those of Lessor hereunder; provided,
however, that Trust Company (or any such successor Trustee) shall be personally
liable hereunder for Trust Company Liabilities.
12.16. Currency Indemnity. The obligations of Lessor, Lessee and Guarantor
to make payment in Dollars of any amounts due hereunder or under any Operative
Document shall not be discharged or satisfied by any tender, or any recovery
pursuant to any judgment, which is expressed in or converted into any currency
other than Dollars, except to the extent such tender or recovery shall result in
the actual receipt by the party entitled thereto of the full amount of Dollars
expressed to be payable in respect of any such obligations. The obligations of
Lessor, Lessee and Guarantor to make payment in Dollars as aforesaid shall be
enforceable as an alternative or additional cause of action for the purpose of
recovery in Dollars of the amount, if any, by which such actual receipt shall
fall short of the full amount of Dollars expressed to be payable in respect of
any such obligations, and shall not be affected by judgment being obtained for
any other sums due under this Agreement.
12.17. Consent and Agreement of Lessee and Guarantor. Lessee and Guarantor
hereby consent to the assignment set forth in Section 7. Lessor and the
Collateral Agent hereby instruct, and Lessee and Guarantor agree, that until
further notified by the Collateral Agent, Lessee, Guarantor and Lessor shall pay
all amounts payable under the Operative Documents other than Excepted Payments
to the account of the Collateral Agent or as Collateral Agent or Majority
Lenders may otherwise designate in a written notice to Lessee, Guarantor and
Lessor. If there is any disagreement between the Administrative Agent and Lessor
as to whether any amount is an Excepted Payment, Lessor, Lessee and Guarantor
shall abide by the Administrative Agent's determination with respect to such
amount.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the date first above written.
UNIVERSAL COMPRESSION, INC.,
as Lessee
By
----------------------------------------
Name
Title
UNIVERSAL COMPRESSION HOLDINGS, INC.,
as Guarantor
By
----------------------------------------
Name
Title
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Trustee of Universal
Compression Trust (2000-1) under the
Trust Agreement dated as of May __,
2000, as Lessor
By
----------------------------------------
Name
Title
WILMINGTON TRUST COMPANY,
in its individual capacity,
as Trust Company
By
----------------------------------------
Name
Title
DEUTSCHE BANK AG, NEW YORK BRANCH,
as Certificate Holder
By
----------------------------------------
Name
Title
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[ ],
as Certificate Holder
By
----------------------------------------
Name
Title
BANKERS TRUST COMPANY,
as Administrative Agent
By
----------------------------------------
Name
Title
BANKERS TRUST COMPANY,
as Collateral Agent
By
----------------------------------------
Name
Title
[Lender]
By
----------------------------------------
Name
Title
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SCHEDULE 1
DESCRIPTION OF EQUIPMENT
1. Standard Universal Compression 1200 HP Rental Compressor Package with:
a) Caterpillar 3516 TALE 1400 RPM natural gas engine
b) Ariel JGE4-3 compressor, three stage w/ (2) 15-1/4 & 9-3/4 & 6 cylinders
Acquisition Cost: $[__________]
2. Standard Universal Compression 850 HP Rental Compressor Package with:
a) Caterpillar 3512 TALE 1400 RPM natural gas engine
b) Ariel JGT2-2 compressor, two stage w/ 12-1/2 & 7-1/4 cylinders
Acquisition Cost: $[__________]
3. Standard Universal Compression 1550 HP Rental Compressor Package with:
a) Waukesha L-7044 natural gas engine
b) Ariel JGK4-3 compressor, three stage w/ (2) 15-3/4 & 9-3/4 & 6-1/2
cylinders
Acquisition Cost: $[__________]
4. Standard Universal Compression 750 HP Rental Compressor Package with:
a) Caterpillar 3512 TALE 1200 RPM natural gas engine
b) Ariel AR321 Screw Compressor w/ Gear
Acquisition Cost: $[__________]
5. Any other Item of Equipment as Lessor and Majority Lenders may agree to
include.
Each package includes Air-X-Changer coolers, accessories (e.g., Piping,
vessels, panels & skid materials) and labor.
<PAGE> 98
SCHEDULE 2
PRICING GRID
<TABLE>
<CAPTION>
Guarantor
Leverage Ratio(1) Equity Margin LIBOR Availability Fee Rate
- ----------------- ------------- ------- ---------------------
<S> <C> <C> <C>
>5.5:1.0 250bps 275bps 50bps
>5.0:1.0<=5.5:1.0 250bps 250bps 50bps
>4.5:1.0<=5.0:1.0 250bps 225bps 50bps
>4.0:1.0<=4.5:1.0 250bps 200bps 50bps
>3.5:1.0<=4.0:1.0 225bps 175bps 37.5bps
<=3.5:1.0 200bps 150bps 37.5bps
</TABLE>
- --------------------
1 For each Applicable Margin Period, the Leverage Ratio on the Test Date for
such Applicable Margin Period.
"Applicable Margin Period" means each period which shall commence on a date
on which the financial statements are delivered pursuant to Section
9.5(a)(ii) or (ii), as the case may be, and which shall end on the earlier
of (a) the date of the actual delivery of the next financial statements
pursuant to Section 9.5(a)(ii) or (iii), as the case may be, and (b) the
latest date on which the next financial statements are required to be
delivered pursuant to such Sections, provided that the first Applicable
Margin Period shall commence on the Closing Date.
"Test Date" means, with respect to any Applicable Margin Period, the last
day of the most recent fiscal quarter of the Guarantor ended prior to the
first day of such Applicable Margin Period.
<PAGE> 99
SCHEDULE 3
MAXIMUM ACQUISITION COST
$200,000,000
LENDER COMMITMENTS
Aggregate Lender Commitments: $194,000,000
<TABLE>
<CAPTION>
Lender Lender Commitment ($)
- ------ ---------------------
<S> <C>
1.
2.
3.
4.
</TABLE>
CERTIFICATE HOLDER COMMITMENTS
Aggregate Certificate Holder Commitments: $6,000,000
<TABLE>
<CAPTION>
Certificate Holder Certificate Holder Commitment ($)
- ------------------ ---------------------------------
<S> <C>
1. Deutsche Bank, AG, New York Branch
2.
3.
4.
</TABLE>
<PAGE> 100
SCHEDULE 4
LENDERS' AND CERTIFICATE HOLDERS'
NOTICE ADDRESSES, PAYMENT
INSTRUCTIONS AND RESPONSIBLE OFFICERS
Notices and payments shall be sent to each Lender and each Certificate Holder
in accordance with the following unless a Lender or a Certificate Holder
provides written notice otherwise to the Administrative Agent, the
Collateral Agent and Lessee.
[TO COME]
<PAGE> 101
SCHEDULE 5
LIENS
<PAGE> 102
SCHEDULE 6
INDEBTEDNESS
<PAGE> 103
SCHEDULE 7
SUBSIDIARIES
<TABLE>
<CAPTION>
Name State of Incorporation Shareholder(s) Percent Ownership
- ---- ---------------------- -------------- -----------------
<S> <C> <C> <C>
</TABLE>
<PAGE> 104
SCHEDULE 8
INSURANCE
<PAGE> 105
SCHEDULE 9
ERISA PLANS
<PAGE> 106
EXHIBIT A
[FORM OF]
BILL OF SALE AND RECEIPT
Wilmington Trust Company
as Trustee of Universal Compression Trust (2000-1) under the Trust Agreement
dated as of May __, 2000
Ladies and Gentlemen:
We refer to the Participation Agreement, dated as of May __, 2000 (together
with all schedules and exhibits thereto, the "Agreement") relating to the
transfer by us to you of all rights, title and interest in certain Equipment.
Terms used and not otherwise defined herein shall have the respective meaning
given thereto in Appendix A to the Agreement.
We hereby grant, bargain, sell, convey, transfer and set over unto you,
your successors and assigns, all of our right and interest in and to the Items
of Equipment, as more specifically described in Schedule 1 hereto (herein
collectively called the "Items of Equipment").
We hereby warrant and represent to you and your successors and assigns that
we have good and marketable legal and beneficial title to, and good and lawful
right to sell, the Items of Equipment, that the Items of Equipment are free and
clear of any and all claims, liens, security interests and other encumbrances of
any kind or nature whatsoever other than Permitted Liens and that upon the
delivery of this Bill of Sale to you, you will have received all rights, title
and interests in the Items of Equipment free and clear of any and all claims,
liens, security interests and other encumbrances of any kind or nature
whatsoever other than Permitted Liens and Lessor Liens. We covenant that we will
defend your interest in the Items of Equipment against the claims and demands of
all persons and will indemnify and hold harmless you and your successors and
assigns from and against any and all losses, damages and expenses, including
reasonable attorneys' fees, incurred by such, resulting from or relating to the
breach by us of any representations or warranties contained herein.
Possession of the Items of Equipment is being retained by us by virtue of a
sale to you and a leaseback of an interest in the Items of Equipment from you.
This Bill of Sale is made and given in good faith and not for the purpose of
defrauding creditors or purchasers.
The undersigned hereby transfers, grants, sells, and assigns to Lessor, its
successors and assigns, all of its rights and interest in and on to the various
agreements, contracts, warranties, purchase orders and requisitions relating to
the purchase, procurement, design and assembly of each Item of Equipment.
Notwithstanding the foregoing assignment, Lessor shall not be deemed to have
assumed any liability to any equipment vendor by virtue of the foregoing
transfer (or anything contained in the Participation Agreement or the other
Operative Documents), Lessor's only obligation with respect to any Item of
Equipment hereunder being to lease such Item to Lessee in accordance with the
terms of the Operative Documents.
<PAGE> 107
EXHIBIT A
Page 2
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be duly executed
in its name by its duly authorized officer and its corporate seal to be affixed
hereto this ____th day of ___, 200[_].
UNIVERSAL COMPRESSION, INC.
By:
-------------------------------------
Name:
Title:
<PAGE> 108
EXHIBIT B-1
[FORM OF] CERTIFICATE OF SALE/LEASEBACK
EQUIPMENT RELATING TO
LEASE AGREEMENT SUPPLEMENT NO. ___
This Certificate of Equipment is executed pursuant to, and
incorporates by reference all of the terms, conditions and provisions of, the
Participation Agreement ("Participation Agreement"), dated as of May __, 2000,
among Universal Compression, Inc. ("Lessee"), Universal Compression Holdings,
Inc., Wilmington Trust Company, a Delaware banking corporation, not in its
individual capacity but solely as Trustee of Universal Compression Trust
(2000-1) and in its individual capacity, but only where so specified,
Certificate Holders and Lenders from time to time party thereto, Bankers Trust
Company, as Administrative Agent, and Bankers Trust Company, as Collateral
Agent. Capitalized terms not otherwise defined herein have the meanings given in
Appendix A to the Participation Agreement.
Lessee hereby certifies that:
(i) each Item of Equipment described in the form of Lease Agreement
Supplement delivered herewith and attached hereto has been selected by,
delivered to, inspected by, accepted by and purchased by it, and is free
and clear of all Liens other than Permitted Liens and Lessor Liens (if any)
and the information contained on such Lease Agreement Supplement is true
and correct; and
(ii) attached hereto as Schedule 1 are the estimates of fair market
value and Residual Value for each Item of Equipment described in the Lease
Agreement Supplement delivered herewith, as set forth in an Appraisal dated
[___________].
Dated:
UNIVERSAL COMPRESSION, INC.
By:
---------------------------------
Name:
Title:
<PAGE> 109
EXHIBIT B-1
Page 2
ACKNOWLEDGED AND EQUIPMENT APPROVED/REJECTED BY:
Wilmington Trust Company not in its
individual capacity but solely as Trustee of
Universal Compression Trust (2000-1) under
Trust Agreement dated as of May __, 2000
as Lessor
By:
-----------------------------
Name:
Title:
<PAGE> 110
SCHEDULE 1
TO EXHIBIT B-1
Serial Number of Item to Be Assembled: [__________]
- Estimated date of completion
- Components for which costs are being reimbursed:
<TABLE>
<CAPTION>
Manufacturer
Type Serial Number Acquisition Cost ($)
- ---- ------------- --------------------
<S> <C> <C>
</TABLE>
<PAGE> 111
EXHIBIT B-2
[FORM OF] CERTIFICATE OF EQUIPMENT
FOR ITEMS OF EQUIPMENT TO BE ASSEMBLED
RELATING TO LEASE SUPPLEMENT NO. ___
This Certificate of Equipment for Items of Equipment to be Assembled
pursuant to the Assemble Agency Agreement is executed pursuant to, and
incorporates by reference all of the terms, conditions and provisions of,
the Participation Agreement ("Participation Agreement"), dated as of May
__, 2000 among Universal Compression, Inc. ("Lessee"), Universal
Compression Holdings, Inc., Wilmington Trust Company, not in its individual
capacity but solely as Trustee of Universal Compression Trust (2000-1) and
in its individual capacity, but only where so specified, Lenders and
Certificate Holders from time to time party thereto, Bankers Trust Company,
as Administrative Agent, and Bankers Trust Company, as Collateral Agent.
Capitalized terms not otherwise defined herein have the meanings given in
Appendix A to the Participation Agreement.
Lessee hereby certifies that:
1. For each Item of Equipment to be assembled,
(a) each Item of Equipment described in the form of Lease
Agreement Supplement, delivered herewith and attached hereto
is free and clear of all Liens other than Permitted Liens
and Lessor Liens (if any) and the information contained on
such Lease Agreement Supplement is true and correct; and
(b) the information about the Components set forth on Schedule 1
hereto is true and correct.
2. The funding requested in the Funding Notice dated the date hereof
shall be to reimburse Lessee for monies paid to the vendors of natural gas
engines, compressors or air coolers or for monies paid or obligations
incurred by Lessee with respect to the labor expenses or other parts and
expenses necessary to assemble the Items of Equipment.
<PAGE> 112
EXHIBIT B-2
Page 2
Dated:
UNIVERSAL COMPRESSION, INC.
By:
------------------------------------
Name:
Title:
ACKNOWLEDGED AND EQUIPMENT APPROVED/REJECTED BY:
Wilmington Trust Company not in its
individual capacity but solely as Trustee of
Universal Compression Trust (2000-1) under
the Trust Agreement dated as of May __, 2000
as Lessor
By:
----------------------------------------------
Name:
Title:
<PAGE> 113
EXHIBIT C
[FORM OF] FUNDING NOTICE AND
INSTRUCTIONS RE FUNDS ON FUNDING DATE
Reference is made to the Participation Agreement ("Participation
Agreement") dated as of May __, 2000 among Universal Compression, Inc.,
Universal Compression Holding, Inc., Wilmington Trust Company, not in its
individual capacity but solely as Trustee of Universal Compression Trust
(2000-1) and in its individual capacity, but only where so specified, Lenders
and Certificate Holders from time to time party thereto, Bankers Trust Company,
as Administrative Agent and Bankers Trust Company, as Collateral Agent
("Collateral Agent"). Capitalized terms used and not otherwise defined herein
shall have the meanings assigned to them in Appendix A to the Participation
Agreement.
1. Universal Compression Inc. (the "Lessee") hereby gives irrevocable
notice to each other party hereto that:
(a) on [___________], a [LIBOR Banking Day], (the "Proposed Funding Date")
we propose to transfer or seek reimbursement with respect to and lease
from Lessor the Equipment identified on Lease Agreement Supplement No.
[___] in accordance with the terms of the Participation Agreement and
Lease Agreement;
(b) the aggregate Acquisition Costs for such Equipment is $[__________];
(c) Lessee requests (i) each Certificate Holder to deposit the amount set
forth therefor on Schedule 1 hereto which in the aggregate is
$[___________] (the "Equity Amount") into [__________] (the
"Collateral Agent Account") before 12:00 noon (New York City time) on
the Proposed Funding Date and (ii) each Lender to make Loans in the
amounts specified on Schedule 1 in the aggregate amount of
$[______________] (the "Debt Amount") and to deposit, or cause to be
deposited, such amounts into the Collateral Agent Account before 12:00
noon (New York City time) on the Proposed Funding Date;
(d) Lessee has selected a [___] month Lease Payment Period in accordance
with Section 5 of the Participating Agreement; and
(e) upon deposit into the Collateral Agent Account of the entire Equity
Amount and the Debt Amount, such proceeds should be wire transferred
to [_________________].
2. Lessee hereby represents and warrants as of the date hereof for the
benefit of each party to the Participation Agreement that:
(a) this Funding Notice complies with all the limitations and conditions
set forth in Section 3.1 of the Participation Agreement;
(b) No Lease Default or Lease Event of Default has occurred; and
<PAGE> 114
EXHIBIT C
Page 2
(c) the representations and warranties of Lessee and Guarantor set forth
in Sections 2.1, 2.2 and 2.3 of the Participation Agreement are true
and correct in all material respects as of the date hereof and shall
continue to be true and correct on the Proposed Funding Date,
requested hereby, except to the extent that such representations and
warranties relate solely to an earlier date, in which case such
representations and warranties were true and correct as of such date;
3. The Persons parties to these Instructions hereby inform and instruct the
Collateral Agent as follows:
(a) On the Proposed Funding Date:
(i) Upon satisfaction of the conditions precedent set forth in
Sections 3.1 and 3.3 of the Participation Agreement, each of the
undersigned Certificate Holders shall deposit into the Collateral Agent
Account its Pro Rata Share of the Equity Amount as set forth in Schedule
1 hereto;
(ii) Upon satisfaction of the conditions precedent set forth in
Sections 3.1 and 3.2 of the Participation Agreement each of the
undersigned Lenders shall deposit into the Trust Account its Pro Rata
Share of the Debt Amount as set forth in Schedule 1 hereto; and
(iii) Upon deposit into the Trust Account of all amounts referenced
in clauses (i) and (ii) above and oral instruction from the
Administrative Agent, the Trustee shall release to Lessee from the Trust
Account US $[__________] (the "Acquisition Amount") by wire transfer to
Lessee's account at as described in paragraph 1(g) above.
(b) If you do not receive all of the funds or the instructions
referenced in clause 2(a) by 2:00 p.m. (New York time) on the Proposed
Funding Date, you shall invest such funds until the next Business Day in
accordance with the instructions of the Certificate Holder and Lender that
deposited such funds.
(c) If you do not receive all of the funds or the instruction referenced
in clause 2(a) by 2:00 p.m. (New York time) on the next Business Day after
the Proposed Funding Date you shall return the amounts deposited by the
Certificate Holders and Lenders by wire transfer to the accounts identified
therefor in Schedule 1 hereto.
4. In the event that the closing of the transaction and the transfer of the
Acquisition Amount does not occur by 2:00 p.m. (New York City time) on or before
the next Business Day after the Proposed Funding Date, Lessee agrees for the
benefit of each Person a party hereto that has complied with its obligations
under the Participation Agreement in respect of such closing that it shall
indemnify such Person and hold such Person harmless from any loss (but not lost
profits), cost or expense which such Person may sustain or incur as a result of
such Person having made arrangements in the London Interbank market or otherwise
to fund the Equity
<PAGE> 115
EXHIBIT C
Page 3
Amount or the Debt Amount, including any Breakage Costs net of any amounts
earned by such Person or investments made in accordance with Section 2(a)(iv).
5. Sections 12.3, 12.7, 12.8., 12.11, 12.12 and 12.17 of the Participation
Agreement are incorporated herein by reference mutatis mutandis.
By executing these instructions, the Certificate Holders hereby instruct
Lessor to execute, deliver and perform these instructions in accordance
herewith.
UNIVERSAL COMPRESSION, INC.,
as Lessee
By:
---------------------------------
Name:
Title:
DEUTSCHE BANK AG, NEW YORK BRANCH,
as Certificate Holder
By:
---------------------------------
Name:
Title:
[ ],
as Certificate Holder
By:
---------------------------------
Name:
Title:
<PAGE> 116
EXHIBIT C
Page 4
[LENDERS]
BANKERS TRUST COMPANY, as
Administrative Agent
By:
---------------------------------
Name:
Title:
BANKERS TRUST COMPANY, as
Collateral Agent
By:
---------------------------------
Name:
Title:
<PAGE> 117
EXHIBIT C
Page 5
So Agreed
WILMINGTON TRUST COMPANY, as
Trustee of Universal Compression
Trust (2000-1) under the Trust
Agreement dated as of May __, 2000
By:
---------------------------------
Name:
Title:
<PAGE> 118
SCHEDULE 1
TO EXHIBIT C
<TABLE>
<CAPTION>
Pro Rata Share
of Equity Amount
Certificate Holder ($) Account Information
- ------------------ ---------------- -------------------
<S> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
Pro Rata Share
of Debt Amount
Lender ($) Account Information
- ------ -------------- -------------------
<S> <C> <C>
</TABLE>
<PAGE> 119
EXHIBIT D
[FORM OF] COMPLETION CERTIFICATE
Reference is made to the Participation Agreement ("Participation
Agreement") dated as of May __, 2000 among Universal Compression, Inc. (the
"Lessee"), Universal Compression Holding, Inc., Wilmington Trust Company, not in
its individual capacity but solely as Trustee of Universal Compression Trust
(2000-1) and in its individual capacity, but only where so specified, the
Lenders and Certificate Holders from time to time party thereto, Bankers Trust
Company, as Administrative Agent, and Bankers Trust Company, as Collateral
Agent. Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in Appendix A to the Participation Agreement.
Lessee, in its capacity as Assembly Agent under the Assembly Agency
Agreement, dated as of May __, 2000 between Lessee and Lessor hereby certifies,
with respect to each Item of Equipment listed on Schedule 1 attached hereto,
that:
(a) the acquisition, construction and assembly of such Item of Equipment
was financed with the proceeds of funds advanced by or on behalf of
Lessor;
(b) such Item of Equipment (i) is fully operational, (ii) has been
completed in accordance with its design specifications, and (iii) is
in compliance with all governmental and environmental regulations;
(c) such Item is free and clear of all liens, encumbrances, and rights of
others (other than Permitted Liens); and
(d) included on Schedule 1 attached hereto are the estimates of fair
market value and Residual Value for each such Item of Equipment.
The undersigned hereby transfers, grants, sells, and assigns to
Lessor, its successors and assigns, all of its rights and interest in and on to
the various agreements, contracts, warranties, purchase orders and requisitions
relating to the purchase, procurement, design and assembly of each Item of
Equipment. Notwithstanding the foregoing assignment, Lessor shall not be deemed
to have assumed any liability to any equipment vendor by virtue of the foregoing
transfer (or anything contained in the Participation Agreement or the other
Operative Documents), Lessor's only obligation with respect to any Item of
Equipment hereunder being to finance such Item and permit Lessee to use such
Item in accordance with the terms of the Operative Documents.
<PAGE> 120
EXHIBIT D
Page 2
IN WITNESS WHEREOF, LESSEE has caused this Completion Certificate to be
executed in its name this ______ day of ________, 2000.
UNIVERSAL COMPRESSION, INC.
as Lessee and Assembly Agent
By:
-----------------------------------
Name:
Title:
<PAGE> 121
APPENDIX A
UNIVERSAL COMPRESSION, INC.
NATURAL GAS COMPRESSOR EQUIPMENT
FINANCING FACILITY
The definitions stated herein shall equally apply to both the
singular and plural forms of the terms defined. Any agreement defined or
referred to below means such agreement as amended, supplemented or modified from
time to time, and includes all exhibits, supplements and appendices thereto. Any
Person defined or referred to below include its successors, permitted
transferees and assigns. The word "including," when used below or in any
Operative Document, is deemed to be followed by "without limitation," whether or
not such words appear.
"Acquisition Cost" of each Item of Equipment means an amount
equal to the sum of (a) (i) with respect to an Item of Equipment to be assembled
by Lessee on behalf of Lessor in accordance with the Assembly Agency Agreement,
the sum of the aggregate of the actual costs incurred and paid by Lessee on
behalf of Lessor for each Component of such Item or (ii) with respect to an Item
of Equipment purchased by Lessor from Lessee, the amount set forth on Schedule 1
to the Participation Agreement for such type of Item, plus (b) all sales and
excise taxes paid by Lessor on or with respect to the acquisition of such Item
except to the extent Lessee is not required to pay or indemnify with respect to
such Tax under Section 10.3 of the Participation Agreement.
"Adjusted Consolidated Net Income" for any period means
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 means
Consolidated Current Assets (but excluding therefrom all cash and Cash
Equivalents) less Consolidated Current Liabilities.
"Administrative Agent" means Bankers Trust Company.
"Administrative Agent Fee Letter" means the letter agreement
dated May __, 2000 between Lessee and the Administrative Agent.
"Affected Person" means each of the Lenders and each of the
Certificate Holders.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person. For purposes of
<PAGE> 122
this definition, "control" of a Person means the power, directly or indirectly,
to direct or cause direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
"After-Tax Basis" means in respect of an amount (the "base
amount") with respect to a Person, the base amount supplemented by a future
payment, if necessary, to such Person such that, after reduction for the net
amount of all Taxes (taking into account credits, offsets, deductions or other
benefits actually realized or to be realized by such Person or its Affiliates in
respect of such base amount and such Taxes in the taxable year in which the base
amount is to be paid), if any, imposed on such Person (calculated at the then
maximum marginal rates generally applicable to such Person) in respect of the
sum of the base amount and such future payment shall be equal to the base
amount.
"Alternate Rate" means a variable rate equal to the greater of
(a) the sum of the Federal Funds Rate from time to time in effect and 0.5% and
(b) the rate of interest from time to time announced by Deutsche Bank AG, New
York Branch at its principal office in New York, New York from time to time as
its "prime commercial lending rate" (which rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any customer,
and Deutsche Bank AG, New York Branch may make commercial loans or other loans
at rates of interest at, above or below such reference rate), with any per diem
determination based on a 364 or 365 day year, as the case may be.
"Applicable Debt Margin" means the debt margin set forth on
Schedule 2 to the Participation Agreement.
"Applicable Equity Margin" means the equity margin set forth
on Schedule 2.
"Applicable Law" means, with respect to any Person or Item of
Equipment, all existing and future laws, rules, guidelines, regulations
(including proposed, temporary and final income tax regulations), statutes,
treaties, codes, ordinances, permits, certificates, orders and licenses of and
interpretations by any Governmental Entity and judgments, decrees, injunctions,
writs, or orders of any court, arbitrator or other administrative, judicial, or
quasi-judicial tribunal or agency of competent jurisdiction applicable to such
Person of Item of Equipment.
"Appraisal" means, with respect to and Item of Equipment, an
appraisal prepared by the Appraiser at Lessee's expense of such Item of
Equipment conducted by, or in the presence of, the Appraiser, that (i) confirms
that the estimated Equipment Cost for such Item of Equipment is equal to or less
than such Item's fair market value as of a date within fourteen (14) days of the
date the appraisal is delivered to the Administrative Agent and (ii) estimates
the Residual Value, which appraisal shall be based upon a physical inspection to
the extent reasonably deemed necessary by the Appraiser.
"Appraiser" means American Appraisal Associates, Inc., or an
independent expert selected by Lessee and acceptable to the Lessor, the Majority
Certificate Holders, and the Majority Lenders.
-2-
<PAGE> 123
"Assembly Agency Agreement" means the Assembly Agency
Agreement, dated as of May ___, 2000, between Lessee and Lessor.
"Assembly Agent" means Lessee as Assembly Agent under the
Assembly Agency Agreement.
"Assembly Period" means with respect to each Item of
Equipment, the period which begins on the first Funding Date related to such
Item of Equipment and ends on the earlier of (i) the date of issuance of a
Completion Certificate with respect to such Item of Equipment and (ii) the Basic
Term Commencement Date.
"Asset Sale" means any sale, transfer or other disposition by
Guarantor or any of its Subsidiaries to any Person (including by-way-of
redemption by such Person) other than to Guarantor or a Wholly-Owned Subsidiary
of Guarantor 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 the Revolver and (ii) sales of assets which
individually, or together with related sales, do not exceed $500,000 per sale.
"Asset Swap" has the meaning set forth in Section 9.5(h)(xiii)
of the Participation Agreement.
"Assignee" means the Collateral Agent and its successors and
permitted assigns.
"Assignment and Assumption Agreement" for a Lender means the
Assignment and Assumption Agreement substantially in the form of Exhibit B to
the Loan Agreement and for a Certificate Holder means the Assignment and
Assumption Agreement substantially in the form of Exhibit [___] to the Trust
Agreement.
"Assumed Characterization" has the meaning provided in Section
7.3.7 of the Participation Agreement.
"Availability Fee" means the fee payable to Lessor pursuant to
Section 7.3 of the Lease Agreement.
"Availability Fee Rate" means, at any time, the rate then
applicable set forth as such in Schedule 2 to the Participation Agreement
expressed as an annual percentage rate calculated to the seventh decimal place
on an actual/360-day basis.
"Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy" as now or hereafter in effect or any successor thereto.
"Basic Term" means the period consisting of forty-two (42)
months commencing on the Basic Term Commencement Date and terminating on the
Payment Date that occurs in the last month of such forty-two (42) month period.
"Basic Term Commencement Date" means [November __, 2001].
-3-
<PAGE> 124
"Bill of Sale" means a Bill of Sale in the form of Exhibit A
to the Participation Agreement to be executed and delivered by Lessee for each
Item of Equipment sold by Lessee to Lessor.
"Borrower" means the Lessor in its capacity as borrower under
the Loan Agreement.
"Breakage Costs" means any amount or amounts as shall
compensate a Lender or Certificate Holder for any reasonable loss (excluding
loss of profit), expense or liabilities incurred after using good faith and
reasonable efforts to minimize such loss, cost or expense by a Lender or
Certificate Holder as a result of a prepayment by Lessor of principal, interest,
Equity Return or Equity Component pursuant to the terms of the Operative
Documents or as a result of a funding that does not occur on a date specified
therefor in a Funding Notice. The amount of the loss, expense or liabilities
shall be determined by the Person seeking such, and notice thereof shall be
provided to Lessee in the form of a certificate of such Person stating that the
calculations set forth therein are in accordance with the terms of the
Participation Agreement and setting forth in reasonable detail the basis for
such calculations, such certificate being conclusive and binding for all
purposes absent manifest error.
"Budget" means with respect of each Item of Equipment to be
assembled by Lessee on behalf of Lessor pursuant to the Assembly Agency
Agreement the budget prepared and certified by the Lessee (a) identifying the
serial number for such Item, (b) describing by type, manufacturer and model
number each of the natural gas engine, compression and air cooler to be included
in such Item (c) setting forth the Lessee's estimates of (i) the cost of each
Component for such Item, and (ii) the fair market value and Residual Value of
such Item upon completion and (d) the estimated completion date.
"Budget Parameters" means for each Component ten (10) percent
above or below the estimated cost for such Component in the Budget therefor
provided that the aggregate of the actual costs of all Components for any Item
of Equipment shall not exceed the aggregate of the estimated costs of all
Components of such Item of Equipment in the Budget therefor delivered to Lessor
in accordance with Section 3.1(d)(i) of the Participation Agreement.
"Business Day" means any day other than a day on which banking
institutions in the State of New York are authorized by law to close.
"Capital Expenditures" means, 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 means 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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"Casualty Loss Value" of each Item of Equipment means the
amount set forth as such in the Lease Agreement Supplement for such Item.
"Casualty Loss Value Payment Date" for each Item of Equipment
for which an Event of Loss occurs means the Payment Date following the last date
on which the Lessee is to give notice of such Event of Loss in accordance with
Section 19.2 of the Lease Agreement.
"Certificate" has the meaning set forth in Section III of the
Trust Agreement.
"Certificate Holder Available Commitment" means, at any time
during the Commitment Period, for each Certificate Holder the amount equal to
the excess, if any, of such Certificate Holder's Certificate Holder Commitment
less the aggregate of Equity Contributions previously made by such Certificate
Holder; provided that no repayment of any amount to a Certificate Holder shall
increase its Certificate Holder Available Commitment.
"Certificate Holder Commitment" means for each Certificate
Holder the Dollar amount set forth in Schedule 3 to the Participation Agreement
below the term "Certificate Holder Commitment".
"Certificate Holders" means Deutsche Bank AG, New York Branch
and any other Eligible Transferees who from time to time become party to the
Participation Agreement and Trust Agreement as Certificate Holders in accordance
with the terms thereof.
"Certificate Holders Option" has the meaning set forth in
Section 6.2 of the Participation Agreement.
"Certificate of Equipment" means (a) for Items of Equipment to
be sold and leased back, a certificate by Lessee executed by a Responsible
Officer in the form of Exhibit B-1 to the Participation Agreement or (b) for
Items of Equipment to be assembled by Lessee on behalf of Lessor in accordance
with the Assembly Agency Agreement, a certificate by Lessee executed by a
Responsible Officer in the form of Exhibit B-2 to the Participation Agreement.
"Change of Control" means (a) 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 Guarantor (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 Guarantor 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 Guarantor or (b) Lessee shall cease to be a direct
Wholly-Owned Subsidiary of Guarantor or (c) a "Change of Control" or similar
event shall occur under the Lessee Senior Note Documents.
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"Closing Date" means the first Funding Date, which shall be a
date during the period from the date of the Participation Agreement through June
30, 2000, and which is mutually agreeable to the parties to the Participation
Agreement.
"Code" means the Internal Revenue Code of 1986, as the same
may be amended from time to time, or any comparable successor law.
"Collateral" means the Lessee Collateral and Lessor
Collateral.
"Collateral Agent" means Bankers Trust Company.
"Commitment Period" means the period commencing on the date of
the Participation Agreement and ending on the Basic Term Commencement Date.
"Completion Certificate" means, with respect to an Item of
Equipment which has been successfully completed a certificate in the form of
Exhibit D to the Participation Agreement delivered by Lessee to Lessor
representing and warranting that such Item of Equipment (a) is fully
operational, (b) has been completed in accordance with its design
specifications, (c) is in compliance with all governmental and environmental
regulations, and (d) is free of all Liens other than Permitted Liens and Lessor
Liens.
"Component" means for each Item of Equipment to be assembled
by Lessee on behalf of Lessor pursuant to the Assembly Agency Agreement each of
the (i) natural gas engine, (ii) compressor, (iii) air cooler, (iv) labor
expenses and (v) all other additional parts and expenses necessary to assemble
such Item of Equipment.
"Consolidated Adjusted EBITDAR" means Consolidated EBITDAR for
any period, adjusted by subtracting therefrom any management fees attributable
to such period pursuant to the CH Management Agreement.
"Consolidated Current Assets" means, at any time, the
consolidated current assets of Guarantor and its Consolidated Subsidiaries.
"Consolidated Current Liabilities" means, at any time, the
consolidated current liabilities of Guarantor and its Consolidated Subsidiaries
at such time, but excluding the current portion of and accrued but unpaid
interest on any Indebtedness under Revolver and any other long-term Indebtedness
which would otherwise be included therein.
"Consolidated Debt" means, 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 Guarantor and its Consolidated Subsidiaries.
"Consolidated EBIT" means, for any period, the Consolidated
Net Income of Guarantor and its Consolidated Subsidiaries, before Consolidated
Net Interest Expense and
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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.
"Consolidated EBITDAR" means, for any period, Consolidated
EBIT, adjusted by adding thereto the amount of all amortization of intangibles,
depreciation and rental expense that were deducted in arriving at Consolidated
EBIT for such period.
"Consolidated Net Income" means, for any period, net after tax
income of Guarantor and its Consolidated Subsidiaries.
"Consolidated Net Interest Expense" means, for any period, the
total consolidated interest expense of Guarantor 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 Guarantors and its Consolidated Subsidiaries representing
the interest factor for such period, in each case net of the total consolidated
cash interest income of Guarantor and its Consolidated Subsidiaries for such
period.
"Consolidated Subsidiaries" means, 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" means, 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, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (d) otherwise to assure or hold
harmless the holder of 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.
"Curing Party" has the meaning set forth in Section 6.1 of the
Participation Agreement.
"Date of Manufacture" with respect to any Item of Equipment,
means the date the manufacturer or vendor thereof sold as new the oldest of the
(a) compressor, (b) natural gas engine and (c) air cooler installed on such Item
of Equipment.
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"Date of Overhaul" with respect to any Item of Equipment,
means the date Lessee or its designee completes [a complete overhaul] of such
Item of Equipment.
"Debt Component" for each Item of Equipment means the dollar
amount of the Acquisition Cost financed by Lenders on the Acceptance Date
therefor, which shall equal 97% of the Acquisition Cost for such Item.
"Debt Rate" for any Lease Payment Period means an interest
rate per annum equal to (a) the one (1), two (2) or three (3) month LIBOR Rate,
as elected for such Lease Payment Period by Lessee pursuant to Section 5 of the
Participation Agreement, plus (b) the Applicable Debt Margin.
"Deficiency" has the meaning set forth in Section 29.1 of the
Lease Agreement.
"Dividend" with respect to any Person means 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 Closing 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 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 Closing 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.
"Dollar" means freely transferable, lawful money of the United
States.
"EBITDA Ratio" means, on any date, the ratio of Consolidated
EBIT to Consolidated Interest Expense for the four consecutive fiscal quarters
of Guarantor most recently ended prior to such date.
"Eligible Transferee" means and includes a commercial bank,
financial institution or other "accredited investor" (as defined in Regulation D
of the Securities Act) other than any such Person that is directly involved in a
Permitted Business.
"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" means 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.
Section 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Safe Drinking
Water Act, 42 U.S.C. Section 3803 et seq.; the Oil Pollution Act of 1990, 33
U.S.C. Section 2701 et seq.; the Emergency Planning and the Community
Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Hazardous
Material Transportation Act, 49 U.S.C. Section 1801 et seq.; the Occupational
Safety and Health Act, 29 U.S.C. Section 651 et seq.; and any state and local or
foreign counterparts or equivalents, in each case as amended from time to time.
"Equipment" means the equipment described on the Schedule of
Equipment attached to each consecutively numbered Lease Agreement Supplement now
or hereafter made a part of the Lease Agreement together with any tangible
Components thereof, regardless of whether such Equipment has been fully
assembled and all related appliances, parts, accessories, appurtenances,
accessions, additions, improvements, replacements and other equipment or
components of any nature from time to time incorporated or installed therein.
"Equipment Financing Transactions" means any Capitalized
Lease, Operating Lease, Purchase Money Indebtedness, and any sale-leaseback or
other transactions consummated in connection therewith creating Capitalized
Lease Obligations, Operating Lease Obligations or Purchase Money Indebtedness.
"Equity Component" for each Item of Equipment means the
difference between the Acquisition Cost and the Debt Component therefor.
"Equity Contribution" has the meaning set forth in Section 4.1
of the Participation Agreement.
"Equity Rate" for any Lease Payment Period means an interest
rate per annum equal to (a) the one (1), two (2) or three (3) month LIBOR Rate,
as elected for such Lease Payment Period by Lessee pursuant to Section 4A of the
Participation Agreement, plus (b) the Applicable Equity Margin.
"Equity Return" means the amounts paid by Lessor in accordance
with clause (b) of Section 7.1 and clause (b) of Section 7.2 of the Lease
Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
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"ERISA Affiliate" means each person (as defined in Section
3(9) of ERISA) which together with Guarantor or any Subsidiary of Guarantor
would be deemed to be a "single employer" within the meaning of Section 414(b),
(c), (m) or (o) of the Code.
"ERISA Group" means any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with any Subsidiary, are
treated as a single employer under Section 414 of the Internal Revenue Code.
"Event of Loss" with respect to any Item of Equipment means
(a) the loss of such Item of Equipment or any substantial part thereof, or (b)
the loss of the use of such Item of Equipment due to theft or disappearance for
a period in excess of 45 days during the Term, or existing at the expiration or
earlier termination of the Term, or (c) the destruction, damage beyond repair,
or rendition of such Item of Equipment or any substantial part thereof
permanently unfit for normal use for any reason whatsoever, or (d) the
condemnation, confiscation, seizure, or requisition of use or title to such Item
of Equipment or any substantial part thereof by any Governmental Entity under
the power of eminent domain or otherwise beyond the earlier of fifteen (15) days
and the end of the Basic Term.
"Excepted Payments" means (a) indemnity payments paid or
payable in favor of Trust Company, Certificate Holders, Lenders, Administrative
Agent or Collateral Agent, or their successors or assigns, directors, officers,
employees, affiliates and agents under the Operative Documents, (b) proceeds of
public liability insurance (or government indemnities in lieu thereof) payable
to Trust Company, Certificate Holders, Lenders, Administrative Agent or
Collateral Agent either pursuant to the Lease Agreement or the Participation
Agreement (which shall include proceeds of any self-insurance by Lessee) or
maintained by Lessee, Trust Company, Lessor, Certificate Holders, Lenders,
Administrative Agent or Collateral Agent and not required to be maintained under
the Lease Agreement, (c) costs or expenses paid or payable by Lessee to, or for
the benefit of, Trust Company, Certificate Holders, Lenders, Administrative
Agent or Collateral Agent, (d) all rights of, and payments to, Certificate
Holders under and pursuant to the Trust Agreement after all of the Lessor's
obligations to make all other payments pursuant to the Operative Documents have
been satisfied, (e) where any amount payable to Trust Company, Certificate
Holders, Lenders, Administrative Agent or Collateral Agent is expressed to be
payable on an After-Tax Basis, the increment to the underlying payment
obligation arising by virtue of the operation of the definition of "After-Tax
Basis," (f) any payments in respect of interest to the extent attributable to
payments referred to in clauses (a) through (e) above and otherwise required to
be paid thereon, (g) all rights to receive the amounts referred to in clauses
(a) through (f) above, and (h) the proceeds of enforcement of any right to
receive the proceeds of any amount referred to in clauses (a) through (f) above.
"Exempt Payments" has the meaning set forth in Section 10.3.5
of the Participation Agreement.
"Existing Indebtedness" has the meaning set forth in Section
2.3(z) of the Participation Agreement.
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"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of one percent) equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if such rate is not so
published for any day which is a Business Day, the average of the quotations at
approximately 11:00 a.m. (New York time) for such day on such transactions
received by Agent from three federal funds brokers of recognized standing
selected by Agent.
"Financing Statements" means the Lessee Financing Statements
and the Lessor Financing Statements.
"Foreign Pension Plan" means any plan, fund (including,
without limitation, any superannuation fund) or other similar program
established or maintained outside the United States of America by Guarantor or
any one or more of its Subsidiaries primarily for the benefit of employees of
Guarantor 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" means 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.
"Funding Date" means the date proposed by Lessee in the
Funding Notice for payment or reimbursement by Lessor in connection with the
sale and leaseback and/or assembly of Items of Equipment, provided each such
date shall be on or before the Basic Term Commencement Date and shall be that
same calendar date each month; provided, however, (a) if any such calendar date
is not a LIBOR Banking Day, then the Funding Date shall be the next LIBOR
Banking Day; and provided, further however, that if the next LIBOR Banking Day
shall occur in the next calendar month, then the Funding Date shall be the
preceding LIBOR Banking Day, and (b) if there is no such corresponding date in
any calendar month, then the Funding Date shall be the last LIBOR Banking Day in
such calendar month..
"Funding Notice" means a Funding Notice and Instructions Re
Funds On Funding Date, in the form of Exhibit C to the Participation Agreement.
"GAAP" means generally accepted accounting principles in the
United States of America in effect from time to time.
"Governmental Entity" means any Federal, state, municipal or
other governmental department, commission, board, bureau, agency, central bank
or instrumentality or any court, in each case whether of the United States or
any foreign country.
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"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Indebtedness
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness (whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (b)
entered into for the purpose of assuring in any other manner the holder of such
Indebtedness of the payment thereof or to protect such holder against loss in
respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Guaranteed Obligations" has the meaning set forth in Section
8 of the Participation Agreement.
"Guarantor" means Universal Compression Holdings, Inc., a
Delaware corporation.
"Guarantor IPO" means the Qualified Public Equity Offering
described in Section 5.16(a) of the Revolver.
"Guaranty Party" has the meaning set forth in Section 8 of the
Participation Agreement.
"Hazardous Materials" means (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.
"Indebtedness" means, as to any Person, without duplication,
(a) all indebtedness (including principal, interest, fees and charges) of such
Person for borrowed money or for the deferred purchase price of property or
services, (b) 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, (c) all Indebtedness of the types described in clause
(a), (b), (d), (e), (f) or (g) 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), (d) Capitalized Lease Obligations, (e) 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-
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pay and similar obligations, (f) all Contingent Obligations of such Person and
(g) 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.
"Indemnifying Party" has the meaning set forth in Section
12.12 of the Participation Agreement.
"Interest Rate Protection Agreement" means any interest rate
swap agreement, interest rate cap agreement, interest collar agreement, interest
rate hedging agreement or other similar agreement or arrangement.
"Interim Rent" has the meaning set forth in Section 7.1 of the
Lease Agreement.
"Interim Term" for each Item of Equipment means the period
commencing on the first Funding Date for such Item and ending on the Basic Term
Commencement Date.
"Item of Equipment" or "Item" means any of the items of
Equipment (including any tangible Components thereof regardless of whether such
Item has been fully assembled) separately identified on any of the Schedules of
Equipment attached to the Lease Agreement Supplements now or hereafter made a
part of the Lease Agreement other than those Items purchased pursuant to Section
28 of the Lease Agreement or for which Casualty Loss Value was paid pursuant to
Section 19.2 of the Lease Agreement.
"Lease Agreement" means the Master Equipment Lease Agreement
dated as of May ___, 2000 between Lessee and Lessor and each Lease Agreement
Supplement.
"Lease Agreement Supplement" means a Lease Agreement
Supplement and Security Grant substantially in the form attached to the Lease
Agreement as Exhibit A, to be executed by Lessor and the Lessee.
"Lease Default" means any event, action or condition which
with notice or lapse of time or both would constitute a Lease Event of Default.
"Lease Event of Default" has the meaning set forth in Section
23 of the Lease Agreement.
"Lease Payment" means the amount payable during the Interim
Term pursuant to Section 7.1 of the Lease Agreement, during the Basic Term
pursuant to Section 7.2 of the Lease Agreement, any Deficiency, any end of term
rent adjustment payable in accordance with Section 29.2 of the Lease Agreement
and any payments due under Sections 28.2, 28.4 or 28.5 of the Lease Agreement.
"Lease Payment Period" for each Item of Equipment means (a)
for the Interim Term of such Item, each period for which a payment of Lease
Payment is to be made for such Item during the Interim Term as set forth in
Section 7.1 of the Lease Agreement, and (b) for the
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Basic Term of such Item, each period for which a payment of Lease Payment is to
be made for such Item during the Basic Term thereof as set forth in Section 7.2
of the Lease Agreement.
"Lender Available Commitment" means, at any time during the
Commitment Period, for each Lender an amount equal to the excess, if any, of
such Lender's Lender Commitment less the aggregate of the initial principal
balances of all Loans previously made by such Lender; provided that no repayment
to a Lender of any amount shall increase its Lender Available Commitment.
"Lender Commitment" for each Lender means the Dollar amount
set forth in Schedule 3 to the Participation Agreement below the term "Lender
Commitment."
"Lenders" means [_______] and any other Eligible Transferee
who from time to time becomes a party to the Participation Agreement and Loan
Agreement as a Lender in accordance with the terms thereof and those financial
institutions who are identified in the Participation Agreement and the Loan
Agreement as "Lenders."
"Lessee" means Universal Compression, Inc., a Texas
corporation.
"Lessee Collateral" has the meaning set forth in Section 9 of
the Lease Agreement.
"Lessee Financing Statement" means the financing statements
and any supplement or amendment thereto in form and substance reasonably
acceptable to Lessor and the Administrative Agent appropriately completed and
executed by Lessee for filing in each jurisdiction necessary or desirable (as
reasonably determined by Agent or Lessor) to perfect Lessor's interest in the
Lessee Collateral to the extent the Lease Agreement is a security agreement.
"Lessee Indemnified Person" means each Lessor Indemnified
Person and Lessor, its successors and assigns and each of their respective
Affiliates, officers, directors, employees, beneficiaries, stockholders, agents
and servants.
"Lessee Senior Discount Notes" means the Lessee's 9 7/8%
Senior Discount Notes due 2008, issued pursuant to the Lessee Senior Discount
Note Indenture.
"Lessor" means Wilmington Trust Company, a national banking
association not in its individual capacity but solely as Trustee of Universal
Compression Trust (2000-1).
"Lessor Collateral" has the meaning set forth in Section 7.1
of the Participation Agreement.
"Lessor Financing Statements" means financing statements in
form and substance reasonably acceptable to the Administrative Agent and
appropriately completed and executed by Lessor for filing in each jurisdiction
necessary or desirable (as reasonably determined by the Administrative Agent) to
perfect a security interest in favor of the Collateral Agent in the Lessor
Collateral.
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"Lessor Indemnified Person" means each of Trust Company, Each
Certificate Holder, each Lender, the Administrative Agent and the Collateral
Agent, their successors and assigns and each of their respective Affiliates,
officers, directors, employees, beneficiaries, stockholders, agents and
servants.
"Lessor Lien" means any Lien on or against any Item of
Equipment, the Lease Agreement, or Lessor's interest therein arising as a result
of (a) any claim against Lessor, any Certificate Holder, any Lender, the
Administrative Agent or the Collateral Agent not resulting from the transactions
contemplated by the Operative Documents, (b) any act or omission of Lessor, any
Certificate Holder, any Lender, the Administrative Agent or the Collateral Agent
which is not required or expressly permitted by the Operative Documents or is in
violation of any of the terms of the Operative Documents, (c) any claim against
Lessor, any Certificate Holder, any Lender, Administrative Agent or the
Collateral Agent with respect to Taxes or obligations of such Person against
which Lessee is not required to indemnify such Person pursuant to the
Participation Agreement or the other Operative Documents or (d) any claim
against Lessor, any Certificate Holder, any Lender, the Administrative Agent or
the Collateral Agent arising out of any transfer by Lessor, any Certificate
Holder, any Lender, the Administrative Agent or the Collateral Agent of all or
any portion of the interest of such Person in any Item or the Operative
Documents other than the transfer of interest in or possession of such Item by
such Person pursuant to and in accordance with the Operative Documents or
pursuant to the exercise of any remedy set forth in the Operative Documents.
"Leverage Ratio" means, at any time, the ratio of (i)
Consolidated Debt at such time to (ii) Consolidated EBITDAR for the Test Period
then most recently ended.
"Liability Insurance" has the meaning set forth in Section 20
of the Lease Agreement.
"LIBOR" means, in relation to any period, the rate for
deposits in Dollars for that period which appears on the Telerate Page 3750 as
of 11:00 a.m. London time on the second LIBOR Banking Day before the first day
of the relevant period; provided that if such rate does not appear on the
Telerate Screen Page 3750, LIBOR shall mean the rate determined by Bankers Trust
as its rate (each such determination, absent demonstrable error or bad faith, to
be conclusive and binding on all parties hereto and their assignees) at which
deposits for the relevant period in Dollars are being, have been, or would be
offered or quoted by Bankers Trust to major banks in the applicable interbank
market for Eurodollar deposits at or about 11:00 a.m. (New York time) on such
day.
"LIBOR Banking Day" means any day other than a day on which
banking institutions in New York, New York or London, England are authorized by
law to close.
"LIBOR Rate" for any period means an interest rate per annum
equal to the sum of a fraction expressed as a percentage to the seventh decimal
place the numerator of which is LIBOR for the relevant period and the
denominator of which is equal to 100% minus the Eurodollar Reserve Percentage
for such period with any daily determination based on a 360-day year.
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"Lien" means liens, mortgages, encumbrances, pledges, charges
and security interests of any kind.
"Loan" has the meaning set forth in Section 2.1 of the Loan
Agreement.
"Loan Agreement" means the Loan Agreement, dated as of May
___, 2000, among Wilmington Trust Company, the Administrative Agent, the
Collateral Agent and the Lenders.
"Loan Availability Fee" means the commitment fee payable by
Borrower to Lenders pursuant to Section 2.5.3 of the Loan Agreement.
"Loan Default" means an event, which with the giving of notice
or lapse of time or both, would become a Loan Event of Default.
"Loan Documents" means the Loan Agreement, the Security
Documents and the Notes.
"Loan Event of Default" has the meaning set forth in Section
7.1 of the Loan Agreement.
"Loss, Damages and Destruction" has the meaning set forth in
Section 19 of the Lease Agreement.
"Losses" has the meaning provided in Section 10.1 of the
Participation Agreement.
"Majority Certificate Holders" means non-defaulting
Certificate Holders the sum of whose outstanding Equity Contributions (or, in
the event there are no outstanding Equity Contributions, the sum of whose
Certificate Holder Commitments) represent an amount greater than fifty percent
of the total aggregate Equity Contributions (or Certificate Holder Commitments).
"Majority Lenders" means non-defaulting Lenders the sum of
whose outstanding Loans (or, in the event there are no outstanding Loans, the
sum of whose Lender Commitments) represent an amount greater than fifty percent
of the aggregate outstanding principal balances of the Loans (or Lender
Commitments).
"Material Plan" means, at any time, a Plan or Plans having
aggregate Unfunded Liabilities in excess of $25,000,000.
"Maturity Date" for each Loan means the earlier of (a) the
last day of the Term for the Items of Equipment financed with the proceeds of
such Loan and (b) the date on which such Loan becomes due and payable under the
Loan Agreement.
"Maximum Acquisition Cost" means $200,000,000.
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"Maximum Lessee Risk Amount" for any Item of Equipment on any
date of determination means an amount obtained by multiplying (a) the percentage
set forth as the "Maximum Lessee Risk Percentage" in the Lease Agreement
Supplement for such Item (which percentage will be the maximum amount permitted
in order to allow Lessee to get off balance sheet treatment for the leased
Equipment (approximately 89%)) by (b) the Acquisition Cost for such Item.
"Maximum Lessor Risk Amount" for any Item of Equipment on any
date of determination means an amount obtained by multiplying (a) the percentage
set forth as "Maximum Lessor Risk Percentage" in the Lease Agreement Supplement
for such Item (which percentage will be 100% less the Maximum Lessee Risk
Amount) by (b) the Acquisition Cost for such Item.
"Multiemployer Plan" means, at any time, a multiemployer plan
within the meaning of Section 4001(a)(3) of ERISA either (a) to which any member
of the ERISA Group is then making or accruing an obligation to make
contributions or (b) has at any time within the preceding five plan years been
maintained, or contributed to, by any Person who was at such time a member of
the ERISA Group for employees of any Person who was at such time a member of the
ERISA Group.
"Net Proceeds of Sale" means with respect to each Item of
Equipment sold by Lessor to a third party pursuant to Section 28.3 of the Lease
Agreement, the net amount of the proceeds of sale of such Item, after deducting
from the gross proceeds of such sale (a) all sales taxes and other taxes as may
be applicable to the sale or transfer of such Item, (b) all fees, costs and
expenses of such sale reasonably incurred by Lessor or Lessee and (c) any other
amounts for which, if not paid, Lessor would be liable as a result of such sale
or which, if not paid, would constitute a Lien on such Item.
"Net Sale Proceeds" means 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 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 Revolver) which is secured by the respective assets which were sold), and
the taxes paid or payable by Guarantors' consolidated group as a result of such
sale and appropriate amounts to be provided by Guarantors 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 Guarantors 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 in the Revolver).
"Non-Completion Date" has the meaning set forth in Section
28.5 of the Lease Agreement.
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"Non-U.S. Person" means any Person that is not a U.S. Person.
"Note" has the meaning set forth in Section 2.3 of the Loan
Agreement.
"Notice of Substitution" has the meaning set forth in Section
13(b) of the Lease Agreement.
"Operative Documents" means the Participation Agreement, the
Loan Agreement, the Notes, the Assembly Agency Agreement, all Bills of Sale, the
Funding Notices, the Lease Agreement, all Lease Agreement Supplements, the Trust
Agreement, the Administrative Agent Fee Letter and the Security Documents and in
each case, all exhibits and supplements thereto, in each case as amended and
modified from time to time.
"Option Notice" has the meaning set forth in Section 6.2 of
the Participation Agreement.
"Optional Alteration" has the meaning set forth in Section 12
of the Lease Agreement.
"Other Hedging Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect against the fluctuations in currency values.
"Outstanding Debt Amount" with respect to each Item of
Equipment means the Debt Component therefor less the aggregate of the following
amounts to the extent paid in accordance with the Operative Documents: (i) all
payments paid to Lenders on account of Casualty Loss Value or pursuant to
Section 28.4 or 28.5 of the Lease Agreement used to reduce the principal amount
owing with Notes and (ii) all Deficiency payments and all payments made by the
Lessee to Lessor in accordance with Section 29.2 of the Lease Agreement with
respect to such Item.
"Overdue Rate" means the Debt Rate at the time in effect plus
two (2) percent (200 basis points).
"Participation Agreement" means the Participation Agreement
dated as of May __, 2000 among Lessee, Guarantor, Lessor, Trust Company,
Certificate Holders, Lenders, the Administrative Agent and the Collateral Agent.
"Payment Date" for each Item of Equipment and for each Loan
and Equity Contribution made to finance such Item of Equipment, means the
calendar date corresponding to the Closing Date in the last month of the Lease
Payment Period elected by Lessee for such Item as of the Closing Date and
thereafter the calendar date corresponding to the Closing Date in the last month
of each Lease Payment Period thereafter elected by Lessee for such Item in
accordance with Section 5 of the Participation Agreement; provided, however, (a)
if any such calendar date is not a LIBOR Banking Day, then the Payment Date
shall be the next LIBOR Banking Day; and provided, further however, that if the
next LIBOR Banking Day shall occur in the next calendar month, then the Payment
Date shall be the preceding LIBOR Banking Day, and
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(b) if there is no such corresponding date in any calendar month, then the
Payment Date shall be the last LIBOR Banking Day in such calendar month.
"Payment Date Option Amount" has the meaning set forth in
Section 28.4 of the Lease Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Acquisition" has the meaning set forth in Section
9.5(i)(viii) of the Participation Agreement.
"Permitted Business" means the business in which Lessee is
engaged on the date of the Participation Agreement and reasonable extensions
thereof.
"Permitted Encumbrance" means, 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.
"Permitted Guarantor Liens" has the meaning set forth in
Section 9.5 of the Participation Agreement.
"Permitted Investors" means (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 Lenders.
"Permitted Liens" means, as to any Item of Equipment (a) the
respective rights and interests of the parties under the Operative Documents as
provided in the Operative Documents (including any Lien created pursuant to or
expressly permitted by the terms of the Operative Documents), (b) Liens for
Taxes that either are not yet due and payable or are being contested in good
faith, (c) any Sublease, (d) Liens arising by operation of law, materialmen's,
mechanics', workers', repairmen's, employees', carriers', warehousemen's and
other like Liens in connection with any alterations, modifications or
replacements to the extent permitted by Sections 12 and 13 of the Lease
Agreement for amounts that are not more than thirty (30) days past due or are
being diligently contested in good faith by appropriate proceedings, so long as
such proceedings satisfy the conditions for contest proceedings set forth in
Section 10 of the Participation Agreement, (e) Liens arising out of judgments or
awards with respect to which appeals or other proceedings for review are being
prosecuted in good faith and for the payment of which adequate reserves have
been provided as required by GAAP or other appropriate provisions have been
made, and (f) Liens created by Lessee with the written consent of Lessor and any
Assignee.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint stock company,
trust, trustee(s) of a trust,
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unincorporated organization, or government or Governmental Entity, agency or
political subdivision thereof.
"Plan" means 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) Guarantor or a Subsidiary of Guarantor or an ERISA
Affiliate, and each such plan for the five year period immediately following the
latest date on which Guarantor, or a Subsidiary of Guarantor or an ERISA
Affiliate maintained, contributed to or had an obligation to contribute to such
plan.
"Pro Rata Share" means, with respect to a Lender or a
Certificate Holder and the making of a Loan or Equity Contribution, the ratio of
such Lender's Lender Available Commitment to the aggregate of all Lender
Available Commitments or such Certificate Holder's Certificate Holder Available
Commitment to the aggregate of all Certificate Holder Available Commitments at
the time available and with respect to the payment of indemnified amounts under
Section 10 of the Participation Agreement the ratio of such Lender's outstanding
principal balance under its Loans to the aggregate outstanding principal balance
of all Loans or such Certificate Holder's outstanding Equity Contributions to
the aggregate of all outstanding Equity Contributions.
"Projections" means the projections prepared by Lessee in
connection with the Guarantor IPO, the Repurchase, the Revolver and the
transaction contemplated by the Operative Documents, dated May __, 2000 and
furnished to the Administrative Agent, the Lessor, the Certificate Holders and
the Lenders prior to the Closing Date.
"Property Insurance" has the meaning set forth in Section 20
of the Lease Agreement.
"Prospects" means, at any time, results of future operations
which are reasonably foreseeable based upon the facts and circumstances in
existence at such time.
"Purchase Money Indebtedness" means Indebtedness, the proceeds
of which are used to finance the acquisition, construction or improvement of
inventory, equipment or other property in the ordinary course of business.
"Purchase Option Amount" has the meaning set forth in Section
28.2 of the Lease Agreement.
"Purchase Option Price" has the meaning set forth in Section 5
of the Participation Agreement.
"Qualified Preferred Stock" means the preferred stock of
Guarantor 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 preferred stock of Guarantor outstanding on
the Closing Date, (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
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those) set forth in the preferred stock of Guarantor outstanding on the Closing
Date and (iv) are otherwise reasonably satisfactory to the Administrative Agent.
"Real Property" of any Person means all the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Redelivery Location" means, with respect to any Item of
Equipment that is to be returned by Lessee to Lessor, a location or locations
within the United States designated by Lessor; provided that the total number of
Redelivery Locations shall not exceed four (4) locations.
"Register" has the meaning set forth in Section 11.8 of the
Participation Agreement.
"Related Note" means, with respect to any Loan, the Note
therefor, and with respect to any Item of Equipment, any Note or Notes issued by
Lessor to finance or refinance in whole or in part the Debt Component of the
Acquisition Cost therefor.
"Remarketing Period" has the meaning set forth in Section
28.3.1 of the Lease Agreement.
"Replaced Certificate Holder" has the meaning set forth in
Section 12.13 of the Participation Agreement.
"Replaced Lender" has the meaning set forth in Section 12.13
of the Participation Agreement.
"Replacement Certificate Holder" has the meaning set forth in
Section 12.13 of the Participation Agreement.
"Replacement Equipment" has the meaning provided in Section
13(a) of the Lease Agreement.
"Replacement Lender" has the meaning set forth in Section
12.13 of the Participation Agreement.
"Reportable Event" means 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.
"Repurchase" means the use of the proceeds of the Guarantor
IPO to redeem certain of Guarantor's outstanding indebtedness.
"Repurchase Documents" means and include all agreements
governing, or relating to, the Repurchase and the Guarantor IPO.
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"Required Alteration" has the meaning set forth in Section 12
of the Lease Agreement.
"Required Lenders" means non-defaulting Lenders under the
Revolver, the sum of whose outstanding 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 the adjusted total commitment (or after the
termination thereof, the sum of the then total outstanding revolving loans of
non-defaulting lenders, and the aggregate adjusted percentages of all
non-defaulting lenders of the total outstanding swingline loans and letter of
credit outstandings at such time).
"Residual Value" means, for any Item of Equipment, the nominal
dollar value as of the last day of the Basic Term estimated by the Appraiser of
such Item.
"Responsible Officer" means, with respect to any Person, the
chief executive officer, the president, the chief financial officer, the chief
operating officer, the treasurer or the vice president for financial or legal
affairs of such Person.
"Returns" has the meaning set forth in Section 2.3(k) of the
Participation Agreement.
"Revolver" means the Revolving Credit Facility dated as of May
__, 2000, between the Lessee, Deutsche Bank AG, New York Branch as
Administrative Agent (as defined therein) and the lenders that become a party
thereto, and if such agreement is no longer in effect, any other credit
agreement or loan agreement which provides Lessee directly or indirectly, with a
primary source of working capital borrowings and if no such credit agreement or
loan agreement is in effect, then such last credit agreement or loan agreement
as in effect immediately prior to its termination or expiration.
"Secured Obligations" has the meaning set forth in Section 7.1
of the Participation Agreement.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Security Documents" means the Participation Agreement, Lease
Agreement, Lease Agreement Supplements, Lessee Financing Statements and Lessor
Financing Statements.
"Senior Debt" means, with respect to any Person, such Person's
senior, unsecured, long-term debt.
"Senior Secured Consolidated Debt" means all Consolidated Debt
(including any Foreign Subsidiary Indebtedness) which is secured by any of the
assets of Guarantor and its Subsidiaries and which is not by its terms
contractually subordinated to any other Indebtedness of Guarantor and its
Subsidiaries.
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"Senior Secured Leverage Ratio" means, at any time, the ratio
of (i) the sum of (without duplication) (x) Senior Secured Consolidated Debt at
such time plus (y) an amount equal to the residual guaranty value (as determined
by the Administrative Agent acting in its reasonable discretion) in respect of
Operating Lease Obligations at such time to (ii) Consolidated EBITDAR for the
Test Period then most recently ended.
"Significant Subsidiary" means, as to any Person, all
Subsidiaries of such Person other than any Foreign Subsidiary whose assets
represent less than 10% of the total value of all assets owned by such Person
and its Subsidiaries.
"Sublease" has the meaning set forth in Section 17.1 of the
Lease Agreement.
"Sublessee" has the meaning set forth in Section 17.1 of the
Lease Agreement.
"Subsidiary" shall mean, as to any Person, (a) 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 (b) 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.
"Supplemental Payments" means all amounts, liabilities and
obligations which Lessee assumes or agrees to pay under the Operative Documents
to Lessor, any Affected Person or any other Person, including payments of
Casualty Loss Value, increased costs, Taxes and indemnities, but excluding Lease
Payments and Availability Fees.
"Tax Indemnitee" has the meaning set forth in Section 10.3.1
of the Participation Agreement.
"Tax Loss" has the meaning provided in Section 10.3.7 of the
Participation Agreement.
"Taxes" has the meaning set forth in Section 10.3.1 of the
Participation Agreement.
"Term" for each Item of Equipment means the period from and
including the first Funding Date therefor and ending on the Termination Date
therefor.
"Termination Date" for each Item of Equipment means the
earliest of (a) the last day of the Basic Term, or (b) if the Lessee exercises
its early transfer option pursuant to Section 28.4 of the Lease Agreement, the
applicable Payment Date so elected by such Lessee, (c) if Lessee is obligated to
purchase such Item in accordance with Section 28.5 of the Lease Agreement, the
first Business Day after the Non-Completion Date and (d) if such Item suffers an
Event of Loss, the Casualty Loss Value Payment Date therefor.
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"Test Period" means each period of four consecutive fiscal
quarters of Guarantor then last ended (in each case taken as one accounting
period).
"Total Interest Expense" means, for any period, the total
consolidated interest expense (net of interest income) of Guarantor 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 and (y) the amortization of original issue discounts (exclusive of any
pay-in-kind interest on the Lessee Senior Discount Notes) shall (in each case)
be excluded from Total Interest Expense to the extent same would otherwise have
been included therein.
"Trust" means the trust created by the Trust Agreement.
"Trust Agreement" means that certain Trust Agreement by and
between Trust Company and the Certificate Holders, dated as of May __, 2000.
"Trust Company" means Wilmington Trust Company, a Delaware
banking corporation, in its individual capacity.
"Trust Company Liabilities" has the meaning set forth in
Section 6.11 of the Trust Agreement.
"Trust Estate" means all of the estate, right, title and
interest of Lessor, solely in its capacity as Owner Trustee under the Trust
Agreement, and as Lessor in and to the Participation Agreement and the Lease
Agreement and all documents related hereto and to the Equipment, and all
proceeds thereof, including, without limitation, all Lease Payment, Availability
Fees, insurance proceeds and Supplemental Payments, but excluding any Excepted
Payments.
"Trustee" has the meaning set forth in the preamble to the
Trust Agreement.
"UCC" means the Uniform Commercial Code, as in effect in any
applicable jurisdiction.
"Unfunded Current Liability" of any Plan means 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).
"U.S. Person" has the meaning set forth in Section 7701(a)(30)
of the Code.
"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.
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"Wholly-Owned Subsidiary" means, as to any Person, (a) 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 (b) 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.
"Withholding Party" has the meaning set forth in Section
10.3.5 of the Participation Agreement.
"Withholdings" has the meaning provided in Section 10.3.5 of
the Participation Agreement.
When used in any Operative Document the words "this
Agreement", "herein", "hereunder", "hereof" or other like words mean and include
such Operative Document and each amendment and supplement thereto, and with
respect to the Lease Agreement, each Lease Agreement Supplement. All references
to sections, schedules and exhibits in any Operative Document are to sections,
schedules and exhibits in or to such Operative Document unless otherwise
specified.
Unless otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with United States generally accepted accounting principles as in
effect from time to time, applied on a basis consistent (except for changes
concurred in by Guarantor's independent public accountants) with the then most
recent audited consolidated financial statements of Guarantor and its
Consolidated Subsidiaries provided that, if either (i) Guarantor notifies
Administrative Agent that Guarantor wishes to eliminate the effect of any change
in generally accepted accounting principles on the operation of any covenant
contained in the Participation Agreement or (ii) the Administrative Agent
notifies Guarantor that it wishes to effect such an elimination, then
Guarantor's compliance with such covenant shall be determined on the basis of
generally accepted accounting principles in effect immediately before the
relevant change in generally accepted accounting principles becomes effective,
until either (A) such notice is withdrawn by the party giving such notice or (B)
such covenant is amended in a manner satisfactory to Guarantor and the
Administrative Agent to reflect such change in generally accepted accounting
principles. All words importing any gender shall be deemed to include the other
gender. All references to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute referred
to. Unless otherwise specified, references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments, modifications
and supplements thereto.
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EXHIBIT 10.42
MASTER EQUIPMENT LEASE AGREEMENT
between
WILMINGTON TRUST COMPANY,
Not In Its Individual Capacity but solely as Trustee of
UNIVERSAL COMPRESSION TRUST (2000-1)
under the Trust Agreement dated as of May __, 2000,
as Lessor
and
UNIVERSAL COMPRESSION, INC.,
as Lessee
Dated as of May ___, 2000
------------------------------
UNIVERSAL COMPRESSION, INC.
NATURAL GAS COMPRESSOR
Equipment Financing Facility
------------------------------
TO THE EXTENT, IF ANY, THAT THIS DOCUMENT CONSTITUTES
CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE,
NO SECURITY INTEREST IN THIS DOCUMENT MAY BE CREATED
THROUGH THE TRANSFER AND POSSESSION OF ANY
COUNTERPART OTHER THAN COUNTERPART NO. 1.
COUNTERPART NO.___ OF ___ SERIALLY NUMBERED
MANUALLY EXECUTED COUNTERPARTS.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
1. Definitions..............................................................................................1
2. Agreement for Leasing of Equipment; Quiet Enjoyment......................................................1
3. Conditions Precedent.....................................................................................1
4. Delivery, Acceptance and Leasing of Equipment............................................................1
5. Term.....................................................................................................2
6. Return of Equipment......................................................................................2
6.1 Redelivery......................................................................................2
6.2 Storage.........................................................................................3
6.3 Timely Redelivery; Deemed Purchase Option.......................................................3
6.4 Specific Performance............................................................................3
7. Payments.................................................................................................4
7.1 Interim Rent Payment............................................................................4
7.2 Basic Rent Payment..............................................................................4
7.3 Availability Fee................................................................................4
7.4 Supplemental Payments...........................................................................4
7.5 Method of Payment...............................................................................4
7.6 Notification of Lease Payments..................................................................5
7.7 Business Day Convention.........................................................................5
7.8 Prepayments Limited.............................................................................5
8. Net Lease Agreement......................................................................................5
9. Grant of Security Interest; Equipment to be and Remain Personal Property.................................6
10. Use of Equipment; Compliance with Laws...................................................................7
11. Maintenance and Repair of Equipment......................................................................8
12. Alterations..............................................................................................9
13. Substitutions of Equipment...............................................................................9
14. Appraisals..............................................................................................11
15. Identification Marks....................................................................................11
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
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<S> <C>
16. Inspection..............................................................................................11
17. Assignment and Leasing..................................................................................12
17.1 By Lessee......................................................................................12
17.2 Registration...................................................................................13
18. Liens...................................................................................................13
19. Loss, Damage or Destruction.............................................................................13
19.1 Risk of Loss, Damage or Destruction............................................................13
19.2 Payment of Casualty Loss Value Upon an Event of Loss...........................................14
19.3 Application of Payments Not Relating to an Event of Loss.......................................14
20. Insurance...............................................................................................15
21. NO LESSOR WARRANTIES....................................................................................16
22. Assignment of Manufacturer Warranties...................................................................16
23. Events of Default.......................................................................................16
24. Remedies Upon Default...................................................................................18
25. Lessor's Right to Perform for Lessee....................................................................20
26. Late Charges............................................................................................20
27. Notices.................................................................................................20
28. Lessee's Renewal, Transfer and Early Termination Options; Purchase Obligation...........................20
28.1 Renewal Option.................................................................................20
28.2 Lessee's End of Term Purchase Option...........................................................20
28.3 Third Party Sale of Equipment..................................................................21
28.3.1 Remarketing Obligations...............................................................21
28.3.2 Notice to Return Possession of Equipment..............................................21
28.3.3 Sale of Equipment to Third Party Buyer................................................22
28.4 Lessee's Early Purchase Option.................................................................22
28.5 Non Completion Purchase Obligation.............................................................22
29. End of Term Lease Payment Adjustment....................................................................23
29.1 Third Party Sale of Equipment..................................................................23
29.2 Lessee Payment.................................................................................23
30. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL..................................24
31. Miscellaneous...........................................................................................25
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
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<S> <C>
32. Concerning Lessor.......................................................................................25
33. Execution and Effectiveness.............................................................................25
</TABLE>
EXHIBIT A.........[Form of] Lease Agreement Supplement and Security Grant
EXHIBIT B.........[Form of] Notice of Substitution
(iii)
<PAGE> 5
MASTER EQUIPMENT LEASE AGREEMENT dated as of May ____, 2000 (herein, as
amended, supplemented and otherwise modified from time to time, called this
"Lease Agreement"), between WILMINGTON TRUST COMPANY, a Delaware banking
corporation not in its individual capacity, but solely as Trustee of UNIVERSAL
COMPRESSION TRUST (2000-1) under the Trust Agreement (the "Trust Agreement"),
dated as of May __, 2000 (together with its successors and assigns, "Lessor")
and UNIVERSAL COMPRESSION inc., a Texas corporation (together with its
successors and assigns, "Lessee").
In consideration of the mutual covenants and agreements set forth
herein and in the Participation Agreement dated as of May __, 2000 (the
"Participation Agreement") among Lessor, Lessee, Bankers Trust Company as
Administrative Agent ("Administrative Agent"), Bankers Trust Company as
Collateral Agent ("Collateral Agent"), Deutsche Bank AG, New York Branch, and
the other financial institutions that may become party thereto, as Certificate
Holders ("Certificate Holders"), and the Lenders named therein or that may
become party thereto ("Lenders"), the parties hereto agree as follows:
1. Definitions. Unless the context otherwise requires, capitalized
terms used herein and not otherwise defined herein shall have meanings set forth
or referred to in Appendix A to the Participation Agreement which Appendix A
also contains the rules of usage that shall apply hereto.
2. Agreement for Leasing of Equipment; Quiet Enjoyment. Subject to, and
upon all of the terms and conditions of this Lease Agreement, Lessor hereby
agrees to lease to Lessee and Lessee hereby agrees to lease from Lessor the
Items of Equipment for the Term. Lessor agrees that so long as no Lease Event of
Default has occurred and is continuing, it shall not take or cause to be taken
or authorize any Person to take any action (except for the creation of the Liens
created by operation of the Operative Documents), contrary to or interfering
with Lessee's or any Sublessee's right to peaceful possession, use and quiet
enjoyment of each Item of Equipment without any interference, hindrance,
ejection or molestation whatsoever; provided, however, nothing in this Section 2
shall prevent Lessor and its Assignees from exercising their inspection rights
in accordance with Section 16. Additionally, during the Term with respect to
each Item of Equipment, unless a Lease Event of Default shall exist and Lessee's
rights to use such Item of Equipment shall have been terminated pursuant to the
terms of this Lease Agreement, Lessee shall, except to the extent otherwise
expressly provided in the Operative Documents, be entitled to (a) receive,
enjoy, distribute and otherwise dispose of the income, royalties, payments,
recoveries and other proceeds with respect to (or included as a part of) such
Item without the consent or joinder of Lessor and (b) otherwise utilize,
license, consign, substitute and maintain such Item in a manner consistent with
the provisions of the Operative Documents including, without limitation, of
Sections 5, 10, 11, 12, 13, 17 and 22.
3. Conditions Precedent. Lessor shall have no obligation to lease any
Item of Equipment to Lessee unless each of the conditions set forth in Section 3
of the Participation Agreement are fulfilled to the satisfaction of, or waived
by, Lessor.
4. Delivery, Acceptance and Leasing of Equipment. Lessor shall not be
liable to Lessee for any failure or delay in the delivery of any Item of
Equipment to Lessee. Forthwith
<PAGE> 6
upon delivery of each Item of Equipment to Lessee, Lessee shall evidence its
acceptance of such Item of Equipment hereunder and of the condition of such Item
of Equipment by, executing and delivering to Lessor a Lease Agreement Supplement
for such Item, dated the first Funding Date of such Item. THE EXECUTION BY
LESSOR AND LESSEE OF A LEASE AGREEMENT SUPPLEMENT FOR AN ITEM OF EQUIPMENT SHALL
(a) EVIDENCE THAT SUCH ITEM IS LEASED UNDER, AND IS SUBJECT TO ALL OF THE TERMS,
PROVISIONS AND CONDITIONS OF, THIS LEASE AGREEMENT, AND (b) CONSTITUTE LESSEE'S
UNCONDITIONAL AND IRREVOCABLE ACCEPTANCE OF SUCH ITEM FOR ALL PURPOSES OF THIS
LEASE AGREEMENT.
5. Term. The Interim Term (if any) for each Item of Equipment shall
commence on the first Funding Date thereof, and, unless this Lease Agreement is
sooner terminated with respect to such Item of Equipment or all Items of
Equipment pursuant to the provisions hereof, shall end on the Basic Term
Commencement Date. The Basic Term for each Item of Equipment shall commence on
the Basic Term Commencement Date and, unless this Lease Agreement is sooner
terminated with respect to such Item of Equipment or all Items of Equipment
pursuant to the provisions hereof, shall end on the last day of such Basic Term.
6. Return of Equipment.
6.1 Redelivery. Upon the expiration or earlier termination of
the Term with respect to each Item of Equipment (unless Lessee has exercised its
transfer option with respect thereto pursuant to Section 28.2 or 28.4; or a
third party sale thereof acceptable to Lessor is consummated on the Termination
Date with respect thereto pursuant to Section 28.3 or Lessee is required to
purchase an Item of Equipment pursuant to Section 28.5), Lessee will, at its
expense, dismantle (to the extent necessary to ship such Item of Equipment),
surrender and deliver possession of each Item of Equipment to Lessor at the
Redelivery Location with a certificate executed by a Responsible Officer of
Lessee certifying that such Item of Equipment is in the condition required
hereunder, a copy of an inventory list for each Item and all then current plans,
specifications and operating, maintenance, and repair manuals and logs relating
to each Item that have been prepared or received by Lessee, and with respect to
any Item of Equipment which qualifies for or is subject to any manufacturer's
maintenance, repair or warranty policy, (i) if such manufacturer is Lessee or an
affiliate thereof Lessee shall cause such manufacturer to deliver to Lessor a
statement or certificate that has been signed by an authorized representative of
the manufacturer attesting to the availability of such maintenance, repair or
warranty policy and (ii) if the manufacturer is not Lessee nor an affiliate of
Lessee and generally provides its customers upon request a statement or
certificate attesting to the availability of such maintenance, repair or
warranty policy, then Lessee shall utilize its reasonable best efforts to obtain
from such manufacturer such a statement or certificate. At the time of such
return to Lessor, each Item of Equipment (and each part or component thereof)
shall (a) meet the original design specifications and operating standards of
such Item, (b) be in as good operating condition, state of repair and appearance
as when delivered to Lessee hereunder, and shall not have been subjected to
excess wear and tear; provided, that ordinary wear and tear as a result of
normal and customary usage is excepted; and provided, further that "ordinary
wear and tear" as used herein shall not be construed as permitting any material
broken, damaged or missing items or components of any Item of Equipment, and (c)
be in the condition required by Section 11 and with respect to any Item of
Equipment that qualifies for or is subject to any manufacturer's maintenance,
repair or
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<PAGE> 7
warranty policy, such Item shall have been maintained and repaired in a manner
consistent with such policy, (d) have no missing or damaged components such that
its value, utility or remaining useful life will be reduced, (e) comply with all
laws and rules referred to in Sections 10 and 11, (f) have attached or affixed
thereto any addition, modification or improvement considered an accession
thereto as provided in Section 12 and (g) have had removed therefrom in a
workmanlike manner, (i) at Lessor's option, any addition, modification or
improvement which, as provided in Section 12, is owned by Lessee, and (ii) any
insignia or marking permitted pursuant to Section 9, and each Item of Equipment
(and each part or component thereof), shall be free and clear of all Liens,
other than Lessor Liens. All operating licenses and agreements pertinent to the
operation of each Item of Equipment, (other than non-transferable licenses to
use software), that are capable of being transferred, shall be fully
transferable upon the expiration of the Term to Lessor or its designee. Lessee
shall transfer any such transferable license or agreement upon return of the
Item of Equipment at Lessee's cost and expense. Each Item of Equipment that
qualifies for or is subject to any manufacturer's maintenance, repair or
warranty policy must be properly deinstalled in a manner consistent with such
policy and in such a way that the Item remains eligible for or subject to such
policy, as appropriate, and Lessee shall provide a certificate from a
Responsible Officer certifying that each Item of Equipment was deinstalled in a
manner consistent with such policy and remains eligible for or subject to such
policy, as appropriate. Upon deinstallation, each Item of Equipment shall be
secured properly for air or overland or other suitable transport. Each Item of
Equipment shall be delivered in the manner in which is customary for such Item
of Equipment. Lessee shall at its own expense, make repairs necessary to restore
each Item of Equipment to the condition required by this Section 6.1 prior to
redelivery hereunder. Upon redelivery, Lessee shall provide any additional
documentation reasonably requested by Lessor, at Lessor's cost, relating to the
redelivery of or Lessor's interest in each Item of Equipment.
6.2 Storage. For the purpose of delivering possession of any
Item of Equipment to Lessor as above required, Lessee shall at its own cost,
expense and risk cause each such Item of Equipment to be insured in accordance
with Section 20 and stored at the Redelivery Location identified therefor by
Lessor at the risk of Lessee without charge to Lessor for insurance, rent or
storage until all such Items of Equipment have been sold, leased or otherwise
disposed of by Lessor; provided, however, Lessee's obligations under this
Section 6.2 shall terminate with respect to each Item of Equipment one (1) year
after delivery of such Item to the Redelivery Location in the condition required
by Section 6.1; provided further that if Lessor sells the Equipment after the
Redelivery Date, Lessor shall reimburse Lessee for its reasonable out-of-pocket
costs and expenses incurred under this Section 6.2 to the extent that the
proceeds of any such sale exceed the aggregate of (a) the amounts owed by Lessor
to Lenders under the Participation Agreement and Loan Agreement, (b) the amount
equal to the aggregate daily Equity Component for all Items of Equipment
multiplied by the Equity Rate (calculated at the Overdue Rate) for each day
after the Termination Date until such subsequent sale, and (c) the expenses
incurred by Lessor in remarketing and selling the Equipment.
6.3 Timely Redelivery; Deemed Purchase Option. If Lessee has
not timely satisfied the obligations and conditions set forth in Section 6.1
with respect to the redelivery of each and every Item of Equipment, then Lessee
shall be deemed to have exercised the purchase
-3-
<PAGE> 8
option set forth in Section 28.2 hereof and Lessee shall pay to Lessor the
Purchase Option Amount with respect to all Items of Equipment.
6.4 Specific Performance. The provisions of this Section 6 are
of the essence of this Lease Agreement, and the parties hereto agree that,
Lessor shall be entitled to specific performance of the covenants of Lessee set
forth in this Section 6.
7. Payments.
7.1 Interim Rent Payment. Lessee hereby agrees to pay Lessor a
Lease Payment for each Item of Equipment in arrears on each Payment Date for
such Item during the Interim Term therefor, in an amount equal to the sum of (a)
an amount calculated by multiplying the Outstanding Debt Amount for such Item on
each day by the Debt Rate and (b) an amount calculated by multiplying the Equity
Component for such Item on each day by the Equity Rate, amounts due on a Payment
Date under this Section 7.1 being calculated for the number of days elapsed
since the immediately preceding Payment Date, or in the case of the first Lease
Payment for such Item, the first Funding Date therefor ("Interim Rent").
7.2 Basic Rent Payment. Lessee hereby agrees to pay Lessor a
Lease Payment for each Item of Equipment in arrears on each Payment Date during
the Basic Term therefor, in an amount equal to the sum of (a) an amount
calculated by multiplying the Outstanding Debt Amount for such Item on each day
by the Debt Rate, (b) an amount calculated by multiplying the Equity Component
for such Item on each day by the Equity Rate, amounts due on a Payment Date
under this Section 7.2 being calculated for the number of days elapsed since the
immediately preceding Payment Date, or in the case of the first Lease Payment
for such Item, the first Funding Date therefor.
7.3 Availability Fee. Lessee shall pay to Lessor on each
Payment Date during the Commitment Period and on the Basic Term Commencement
Date an availability fee ("Availability Fee"), which fee shall be calculated for
each day during the Commitment Period that has elapsed since the immediate
preceding Payment Date or, in the case of the first Payment Date, the date of
the Participation Agreement, as follows:
AFR X AAC X 1/360
where:
AFR = Availability Fee Rate for such date; and
AAC = Aggregate of the Certificate Holder Available
Commitments and the Lender Available
Commitments as of such date.
7.4 Supplemental Payments. Each Supplemental Payment shall be
due and Lessee agrees to pay to Lessor, or to whoever shall be entitled thereto
as expressly provided herein, all Supplemental Payments which are due from
Lessee, when such payments are specified
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<PAGE> 9
to be paid pursuant to the terms of the Operative Documents, or if not so
specified, within five (5) Business Days of written demand therefor.
7.5 Method of Payment. All payments of Lease Payments and
Supplemental Payments and Availability Fees required to be made by Lessee to
Lessor (or, in the case of Supplemental Payments, any other Person entitled
thereto) shall be made in immediately available funds no later than [12:00 noon]
(New York time) on the date due to such account as shall be designated by Lessor
or such Assignee. Subject to the security assignment and the obligations of
Lessee with respect thereto in Section 9.7 of the Participation Agreement, all
payments of Lease Payments required to be made by Lessee to Lessor hereunder
shall be paid at the address or bank account as Lessor may hereafter designate
in writing to Lessee no less than three (3) Business Day before the date such
payments are due.
7.6 Notification of Lease Payments. At least two (2) Business
Days before each Payment Date, Lessor or its designee shall advise Lessee of the
total amount due on such Payment Date. No failure on the part of Administrative
Agent to provide a notice under this Section 7.6 shall release Lessee of any
obligation to make a payment in accordance herewith; provided, however, no Lease
Default shall occur and no interest at the Overdue Rate shall accrue with
respect to any non-payment of such amount until the later of the date such
payment is due and the date two (2) Business Days after such notice is given.
7.7 Business Day Convention. Unless otherwise provided herein,
any Lease Payment due in accordance with the terms hereof which is due on a date
which is not a LIBOR Banking Day shall be payable on the next succeeding LIBOR
Banking Day, unless such date falls in the next succeeding calendar month, in
which case such amounts shall be due on the immediately preceding LIBOR Banking
Day; and any other payment due in accordance with the terms herewith on a date
which is not a Business Day shall be payable on the next succeeding Business
Day.
7.8 Prepayments Limited. Except as may otherwise be provided
in this Lease Agreement, no Lease Payments or portion thereof may be prepaid.
8. Net Lease Agreement. This Lease Agreement is a net lease agreement.
Lessee acknowledges and agrees that its obligations hereunder, including,
without limitation, its obligations to pay Lease Payments, Availability Fees and
all Supplemental Payments payable hereunder, shall be unconditional and
irrevocable under any and all circumstances, shall not be subject to
cancellation, termination, modification or repudiation by Lessee, and shall be
paid and performed by Lessee (with respect to payments under Sections 28.2,
28.4, 28.5 and 29 and Availability Fees, without notice or demand and with
respect to Lease Payment amounts based on the Equity Rate and the Debt Rate,
without demand) and without any abatement, reduction, diminution, setoff,
defense (other than prior payment), counterclaim or recoupment whatsoever,
including, without limitation, any abatement, reduction, diminution, setoff,
defense (other than prior payment), counterclaim, withholding or recoupment due
or alleged to be due to, or by reason of, any past, present or future claims
which Lessee may have against Lessor, Certificate Holders, Trust Company, any
Assignee, any Lender, sublessee or assignee of Lessee, any manufacturer or
supplier of any Item of Equipment or any part thereof, or any other Person for
-5-
<PAGE> 10
any reason whatsoever, or any defect in any Item of Equipment or any part
thereof, or the condition, design, operation or fitness for use thereof, any
damage to, or any loss or destruction of, any Item of Equipment or any part
thereof, or any Liens or rights of others with respect to any Item of Equipment
or any part thereof, or any default or failure to pay by any sublessee or
assignee of Lessee, or any prohibition or interruption of or other restriction
against Lessee's use, operation, possession, maintenance, insurance, improvement
or return of any Item of Equipment thereof, for any reason whatsoever, or any
interference with such use, operation or possession by any Person, or any
default by Lessor in the performance of any of its obligations herein contained,
or any other indebtedness or liability, howsoever and whenever arising, of
Lessor, any Certificate Holders, Trust Company, any Assignee, any Lender, any
sublessee or assignee of Lessee, any other Person, or by reason of insolvency,
bankruptcy or similar proceedings by or against Lessor, Trust Company, any
Certificate Holders, any Assignee, any Lender, Lessee, any sublessee or assignee
of Lessee, or any other Person, or for any other reason whatsoever, whether
similar or dissimilar to any of the foregoing, any present or future law to the
contrary notwithstanding; it being the intention of the parties hereto that all
Lease Payments, Availability Fees and Supplemental Payments payable by Lessee
hereunder shall continue to be payable in all events and in the manner and at
the times herein provided, unless the obligation to pay the same shall be
terminated pursuant to the express provisions of this Lease Agreement; provided,
however if Lessee is required to make a payment to Lessor under Section 28 or 29
or an indemnity payment to a Certificate Holder pursuant to Section 10 of the
Participation Agreement and Lessee shall have previously incurred expenses in
the discharge of any Lessor Lien attributable to such Certificate Holder then
Lessee shall be entitled to deduct from the portion required to be paid to such
Certificate Holder of amounts due under Section 28 or 29 or payment of
indemnity, as the case may be, an amount sufficient to reimburse Lessee the cost
of discharging such Lessor Lien. Nothing contained in this Section 8 shall (a)
affect any claim, action or right that Lessee may have against Lessor or any
other Person, including pursuant to Section 2 nor (b) be considered as (i) a
guaranty of the fair market value or useful life of any Item upon the
commencement, expiration or termination of the Term with respect to an Item,
(ii) a prohibition of assertion of any claim against any manufacturer, supplier,
dealer, vendor, contractor, subcontractor or installer with respect to any Item
or any part thereof or (iii) a waiver by Lessee of any of its express rights
under any of the Operative Documents or of its right to assert and sue upon any
claims it may have against any Person in one or more separate actions.
9. Grant of Security Interest; Equipment to be and Remain Personal
Property. This Lease Agreement is a financing agreement intended as security.
Lessee hereby grants, bargains, assigns, transfers, conveys and pledges to
Lessor a security interest in and Lien upon all of its rights, title and
interest in, to and under the Equipment, the Subleases and Lessee's interest in
each manufacturer's, vendor's or dealer's warranty for the Equipment, and all
proceeds thereof (the "Lessee Collateral") as collateral security for the
payment and performance by Lessee of obligations owed to Lessor under the
Operative Documents. For each Item of Equipment, Lessee will, at its own
expense, make, execute, endorse, acknowledge, file and/or deliver to Lessor from
time to time such confirmatory assignments, conveyances, financing and
continuation statements, transfer endorsements, powers of attorney, notes,
reports and other assurances or instruments and take such further actions which
Lessor may reasonably request to perfect, preserve or protect Lessor's security
interest granted hereunder or which Lessor reasonably deems necessary or
-6-
<PAGE> 11
advisable in order to obtain the full benefits of the Liens created or intended
to be created hereunder, and will take such other actions reasonably requested
by Lessor to effectuate the intent of the Operative Documents. To the extent
permitted by Applicable Law, Lessee authorizes Lessor to file any such financing
and continuation statements without the signature of Lessee. Lessee will pay all
applicable filing fees and related expenses incurred in accordance with this
Section 9. Within the six-month period preceding the fifth anniversary1 of the
filing of any UCC personal property financing statements, Lessee will provide to
Lessor continuation statements with respect to the UCC financing statements
filed in connection herewith, will file the same in accordance with Applicable
Law, and promptly upon such filing will provide Lessor with written evidence
thereof.
Lessee irrevocably authorizes Lessor and does hereby make,
constitute and appoint Lessor and any officer of Lessor, with full power of
substitution, as Lessee's true and lawful attorney-in-fact, with power, in its
own name or in the name of Lessee, to endorse any notes, checks, drafts, money
orders, or other instruments of payment (including payments payable under or in
respect of any policy of insurance) in respect of Lessee Collateral that may
come into possession of Lessor; to sign and endorse any invoice, freight or
express bill, bill of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notices in connection with accounts, and
other documents relating to Lessee Collateral; to pay or discharge Taxes, Liens,
security interests or other encumbrances at any time levied or placed on or
threatened against Lessee Collateral; to demand, collect, receipt for,
compromise, settle and sue for moneys due in respect of Lessee Collateral; and
generally, to do, at Lessor's option and at Lessee's expense, at any time, or
from time to time, all acts and things which Lessor deems necessary to protect,
preserve and realize upon Lessee's Collateral and Lessor's security interests
therein and in order to effect the intent of the Operative Documents all as
fully and effectually as Lessee might or could do; and Lessee hereby ratifies
all that said attorney shall lawfully do or cause to be done by virtue hereof,
provided, however Lessor agrees not to exercise and such power unless a Lease
Event of Default has occurred and is continuing. This power of attorney shall be
coupled with an interest and irrevocable for the term of this Agreement and
thereafter as long as any of the obligations of Lessee under any Operative
Documents shall be outstanding. The powers conferred on Lessor hereunder are
solely to protect its interest in Lessee Collateral and shall not impose any
duty upon Lessor to exercise any such powers. Lessor shall be accountable only
for amounts that it actually receives as a result of the exercise of such powers
and neither it nor any of its officers, directors or employees shall be
responsible to Lessee for any act or failure to act, except for its own gross
negligence or willful misconduct.
It is the intention and understanding of both Lessor and
Lessee, and Lessee shall take all such actions as may be required to assure,
that the Equipment shall be and at all times remain personal property,
notwithstanding the manner in which the Equipment may be attached or affixed to
realty.
- -----------------
(1) Open issue re: end of term security.
-7-
<PAGE> 12
10. Use of Equipment; Compliance with Laws. Lessee agrees that each
Item of Equipment will be used and operated in compliance with any and all
insurance policy terms, conditions and provisions referenced in the Operative
Documents and in all material respects with all statutes, laws, ordinances,
rules and regulations of any federal, national, state or local governmental
body, agency or authority applicable to the use and operation of such Item of
Equipment, including, without limitation, environmental, noise and pollution
laws (including notifications and reports), and that each Item of Equipment will
be used and operated solely in the manner for which it was intended and in
accordance with the license or certificate, if any, provided by the manufacturer
thereof. Lessee agrees that no Item of Equipment shall be used by Lessee other
than in the subleasing of such Item to Lessee's customers and no Item of
Equipment shall be used or located at a location or outside of the contiguous
United States. Lessee shall use reasonable precautions to prevent loss or damage
to each Item of Equipment from fire and other hazards. Lessee shall not permit
any Item of Equipment to be moved from its location as of the initial Funding
Date therefor unless it has, at its own expense, made, executed, endorsed,
acknowledged, filed and/or delivered to Lessor such confirmatory assignments,
conveyances, financing and continuation statements, transfer endorsements,
powers of attorney, notes, reports or other assurances or instruments other than
estoppel certificates or other agreements, certificates or other documents to be
delivered by any Sublessee or other Person (other than an Affiliate of Lessee)
in possession of such Item of Equipment and has taken any actions necessary to
perfect, preserve and protect Lessor's security interest in such Item of
Equipment. Lessee shall not permit any Item of Equipment to be used in any
unlawful trade or in any manner that would violate any law that would expose
such Item of Equipment to penalty, forfeiture or capture. Lessee shall not
attach or incorporate any Item of Equipment to or in any other item of equipment
or other personal property or to or in any real property in a manner that could
give rise to the assertion of any Lien on such Item of Equipment by reason of
such attachment or the assertion of a claim that such Item of Equipment has
become a fixture and is subject to a Lien in favor of a third party. Lessee
shall comply in all material respects with environmental laws and maintain
liability insurance as required pursuant to the Operative Documents for all
Equipment.
11. Maintenance and Repair of Equipment. Lessee, at its sole cost and
expense, shall maintain (or caused to be maintained) each Item of Equipment (i)
in a manner consistent with such Lessee's maintenance practices applicable to
its other equipment of the same or similar type as such Item, so as to keep each
Item in good condition (ordinary wear and tear excepted), (ii) in all material
respects in compliance with Applicable Law, (iii) in compliance with the
manufacturer's maintenance standards and procedures and (iv) in all respects in
compliance with the insurance applicable to such Items of Equipment and subject,
however, to the provisions of Section 19 with respect to Loss, Damage or
Destruction; Lessee shall comply in all material respects with environmental
laws and maintain liability insurance as required pursuant to the Operative
Documents for all Equipment. Lessee agrees to prepare and deliver to Lessor and
any Assignee within a reasonable time prior to the required date of filing (or,
to the extent permissible, file on behalf of Lessor and any Assignee) any and
all reports (other than income tax returns) to be filed by Lessor or any
Assignee with any federal, national, state or other regulatory authority by
reason of the ownership by Lessor or any Assignee of any Item of Equipment or
the leasing thereof to Lessee to the extent any such reports are required
because of the nature of the Equipment. Lessee agrees to maintain all records,
logs and other materials required by any
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<PAGE> 13
Governmental Entity having jurisdiction over any Item of Equipment or Lessee, to
be maintained in respect of such Item of Equipment. Lessee hereby waives any
right now or hereafter conferred by law to make repairs on the Equipment at the
expense of Lessor.
12. Alterations. In case any Item of Equipment (or any equipment, part
or appliance therein) is required to be altered, added to, replaced or modified
in order to comply with any insurance policies required pursuant to this Lease
Agreement or Applicable Law ("Required Alteration") pursuant to Sections 10 or
11, Lessee agrees to make such Required Alteration at its own expense and the
same shall, without further act, immediately be and become the property of, and
title shall vest in, Lessor free and clear of all Liens other than Lessor Liens
and Permitted Liens and subject to the terms of this Lease Agreement. Lessee may
make any optional renovation, improvement, addition, or alteration to any Item
of Equipment ("Optional Alteration") provided that with respect to each Item of
Equipment such Optional Alteration does not impair the value, use or remaining
useful life of such Item of Equipment. In the event an Optional Alteration is
readily removable without impairing the value, use or remaining useful life of
the Item of Equipment, and is not a part, item of equipment or appliance which
replaces any part, item of equipment or appliance originally incorporated or
installed in or attached to such Item of Equipment on the first Funding Date
therefor or any part, item of equipment or appliance in replacement of or
substitution for any such original part, item of equipment or appliance, any
such Optional Alteration shall be and remain the property of Lessee. To the
extent such Optional Alteration is not readily removable without impairing the
value, use or remaining useful life of an Item of Equipment to which such
Optional Alteration has been made, or is a part, item of equipment or appliance
which replaces any part, item of equipment or appliance originally incorporated
or installed in or attached to such Item of Equipment on the first Funding Date
therefor or any part, item of equipment or appliance in replacement of or
substitution for any such original part, item of equipment or appliance, the
same shall, without further act, immediately be and become the property of, and
title shall vest in, Lessor free and clear of all Liens other than Lessor Liens
and Permitted Liens and shall be subject to the terms of this Lease Agreement.
Any parts installed or replacements made by any Lessee upon any Item of
Equipment pursuant to its obligation to maintain and keep the Equipment in good
and serviceable operating condition and repair under Section 11 shall be
considered accessions to such Item of Equipment and ownership thereof or
security interest therein shall be immediately vested in Lessor. Except as
required or permitted by the provisions of this Section 12, Lessee shall not
modify an Item of Equipment without the prior written authority and approval of
Lessor.
13. Substitutions of Equipment.
(a) Notwithstanding any provision of any Operative Document to
the contrary and subject to the provisions of this Section 13, Lessee may at any
time, so long as no Lease Event of Default has occurred and is continuing
hereunder, substitute equipment of the type described in Schedule 1 of the
Participation Agreement ("Replacement Equipment") that (i) as of the date Lessee
delivers the Notice of Substitution defined below in Section 13(b) (the
"Substitute Date") has a Date of Manufacture or a Date of Overhaul no earlier
than two (2) years prior to the Substitution Date, (ii) is not subject to any
Liens other than Permitted Liens or Lessor Liens and (iii) has a fair market
value as of the Substitution Date and an estimated Residual
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Value equal to, or in excess of, the Casualty Loss Value and the Residual Value,
respectively, of the Item of Equipment that Lessee has elected to replace (the
"Replaced Equipment"); provided, however, the condition in clause (i) need not
be satisfied if (A) Lessee shall have delivered to Lessor and the Administrative
Agent with the Notice of Substitution an Appraisal confirming satisfaction of
the condition in clause (iii) or (B) as of the Substitution Date, the aggregate
Acquisition Costs for all Replacement Equipment that does not satisfy clause (i)
or for which no Appraisal has been delivered in accordance with clause (A) does
not exceed $1,500,000.
(b) On the first Business Day of each week after Lessee has,
in the immediately prior calendar week, substituted Replacement Equipment for
Replaced Equipment, Lessee shall provide Lessor with written notice thereof
("Notice of Substitution") in the form of Exhibit B hereto which Notice of
Substitution shall have attached thereto one or more Bills of Sale representing
the transfer from Lessee to, and for the benefit of, Lessor, for a purchase
price equal to the Casualty Loss Value of the Replaced Equipment, of all right,
title and interest of Lessee in such Replacement Equipment. Upon substitution of
an Item of Equipment under this Section 13 all rights and interests of Lessor in
such Replaced Equipment shall automatically cease and vest in Lessee. Lessor
will at the request and cost of Lessee furnish to or at the direction of Lessee,
a bill of sale without recourse or warranty (except as to the absence of Lessor
Liens) and otherwise in form and substance reasonably satisfactory to Lessee and
Lessor, evidencing the transfer to or at the direction of Lessee, all of
Lessor's right, title and interest in and to such Replaced Item(s), "as-is",
"where-is". The purchase price for such Replacement Equipment shall be deemed
paid by Lessor by virtue of its reconveyance to Lessee of the Replaced Equipment
and no further action shall be required between Lessee and Lessor to convey the
Replacement Equipment to Lessor and convey the Replaced Equipment to Lessee,
provided that Lessor shall execute any documents reasonably requested by Lessee
(at Lessee's sole cost and expense) to evidence the release of any Liens created
pursuant to the Operative Documents with respect to such replaced Equipment.
Upon the occurrence of such events, Replacement Equipment shall be deemed to be
Equipment as of the date of the related Notice of Substitution for all purposes
set forth in this Lease Agreement and the other Operative Documents and that the
Acquisition Cost and Casualty Loss Value for such Replacement Equipment shall be
equal to the Acquisition Cost and Casualty Loss Value for such Replaced
Equipment.
(c) In the event that, upon its receipt of a Notice of
Substitution and the related Bills of Sale for any Replacement Equipment, Lessor
shall reasonably challenge whether the fair market value or Residual Value of
said Replacement Equipment is equal to, or in excess of, the Casualty Loss Value
or Residual Value, respectively, of the Replaced Equipment, Lessee shall either
within thirty (30) days of Lessor's demand (i) revise the previously delivered
Notice of Substitution and related Bills of Sale so as to replace or supplement
said Replacement Equipment with other or additional Replacement Equipment that
Lessor reasonably believes has a fair market value and Residual Value equal to,
or in excess of, the Casualty Loss Value and Residual Value, respectively, of
the Replaced Equipment, or (ii) within thirty (30) days of Lessor's demand,
provide Lessor with an Appraisal confirming that the fair market value and
Residual Value of the Replacement Equipment is equal to or greater than the
Casualty Loss Value and Residual Value, respectively, of the Replaced Equipment.
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14. Appraisals.
(a) During the Interim Term, Lessee shall at its expense cause
to be delivered to Lessor an Appraisal of each Item of Equipment for which no
Appraisal has been previously delivered upon the earliest of: (i) on the date
six (6) months after the last previous Appraisal Date (or, if no Appraisal Date
has occurred, after the Closing Date), (ii) if after the last previous Appraisal
Date (or, if no Appraisal Date has occurred, six (6) months after the Closing
Date), Items of Equipment with an aggregate Acquisition Cost in excess of
twenty-five million dollars ($25,000,000) have been made subject to this Lease
Agreement for which no Appraisal has been previously delivered, on the date of
the Lease Agreement Supplement for the Item of Equipment that caused such
twenty-five million dollars ($25,000,000) threshold to be exceeded, (iii) on the
day six (6) Business Days prior to the Basic Term Commencement Date, and (iv) if
after the last previous Appraisal Date (or, if no Appraisal Date has occurred,
after the Closing Date), Replacement Equipment for which no Appraisal has been
previously delivered and which has aggregate Acquisition Costs in excess of 10%
of the aggregate Casualty Loss Value for all Equipment then subject to this
Lease Agreement shall have been substituted for Items of Equipment, on the date
of the Substitution Notice for the Item of Replacement Equipment that caused
such 10% threshold to be exceeded.
(b) During the Basic Term, Lessee shall at its own expense
cause an Appraisal of each item of Replacement Equipment for which no Appraisal
has been previously delivered each time the aggregate Acquisition Costs of all
Replacement Equipment for which no Appraisal has been delivered hereunder
exceeds ten (10) per cent of the aggregate Acquisition Costs for all Equipment
then subject to this Lease Agreement. Such Appraisal shall be delivered to
Lessor within ten (10) days of the date of the Substitution Notice for the
Replacement Equipment that caused such ten (10) percent threshold to be
exceeded.
(c) If any Appraisal states that the estimated fair market
value or Residual Value of an Item of Equipment is less than the Casualty Loss
Value or the Residual Value, respectively, for such Item of Equipment, Lessee
shall within thirty (30) days of the date of such Appraisal at its expense cause
such Item of Equipment to be replaced or supplemented in accordance with Section
13 with one or more Items of Replacement Equipment that meets the requirements
of Section 13(a).
15. Identification Marks. Lessee shall keep and maintain, plainly,
distinctly and conspicuously affixed to each Item, a plaque with the words
"OWNED BY UNIVERSAL COMPRESSION TRUST (2000-1) AND SUBJECT TO A SECURITY
INTEREST IN FAVOR OF BANKERS TRUST COMPANY AS COLLATERAL AGENT FOR LENDERS TO
UNIVERSAL COMPRESSION TRUST (2000-1)" or other appropriate words designated by
Lessor, with appropriate changes thereof and additions thereto as from time to
time may be required by law in order to protect Lessor's and any Assignee's
interests in such Item. Lessee shall not allow the name of any Person, to be
placed upon any Item of Equipment as a designation that might be interpreted as
indicating a claim of ownership thereto or a security interest therein by any
Person other than Lessor or any Assignee.
16. Inspection. Lessee shall permit Lessor (and any designee or
authorized representatives thereof) to make inquiries of Lessee (and Lessee
shall respond to such inquiries) with
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<PAGE> 16
respect to matters relevant to the Equipment and to inspect any Item of
Equipment, at such Person's expense (unless there is a Lease Event of Default
continuing, in which event such inspection shall be at the expense of Lessee),
including the cost and expense for such Person's transportation to and from any
site on which an Item is located, and under conditions reasonably acceptable to
Lessee, and Lessee will make available the books and records of Lessee related
thereto and make copies and extracts therefrom, and will make available officers
and the independent public accountants of Lessee with respect to such matters,
all upon reasonable notice and at such reasonable times during normal business
hours and as may be reasonably requested.
17. Assignment and Leasing.
17.1 By Lessee. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
SECTION 17.1, LESSEE SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR,
LEASE ANY ITEM OF EQUIPMENT OR ASSIGN, TRANSFER OR ENCUMBER ITS RIGHTS,
INTERESTS OR OBLIGATIONS HEREUNDER. ANY ATTEMPTED LEASE IN VIOLATION HEREOF AND
ANY ASSIGNMENT, TRANSFER OR ENCUMBERING BY LESSEE OF ITS RIGHTS, INTERESTS OR
OBLIGATIONS HEREUNDER SHALL BE NULL AND VOID. So long as no Lease Event of
Default shall have occurred and be continuing, Lessee may, without the consent
of Lessor, sublease one or more Items of Equipment to any other Person (a
"Sublessee"); provided that such Items of Equipment (whether one or more) are
maintained in the contiguous United States (other than Louisiana); and provided
further, that any sublease entered into pursuant to this Section 17.1 shall
satisfy each of the following conditions (a "Sublease"):
(a) such Sublease shall automatically expire on or before the
expiration of the Term;
(b) such Sublease shall be in writing; shall identify the Item
of Equipment by manufacturer, model and serial number; shall expressly prohibit
any further assignment, sublease or transfer of any rights or interests in the
Equipment; and any Sublease that is extended or made after the first Funding
Date for the Equipment subject thereto shall state that it is subject and
subordinated to this Lease Agreement as follows: "THIS LEASE AGREEMENT AND
LESSEE'S RIGHTS AND INTERESTS HEREUNDER ARE SUBJECT AND SUBORDINATE TO UNIVERSAL
COMPRESSION TRUST (2000-1)'S INTERESTS IN THE [EQUIPMENT] UNDER THE MASTER
EQUIPMENT LEASE AGREEMENT BETWEEN UNIVERSAL COMPRESSION TRUST (2000-1) AND
UNIVERSAL COMPRESSION, INC.";
(c) such Sublease shall not contain a purchase option in favor
of the Sublessee or any other provision pursuant to which the Sublessee may
obtain record or beneficial title to the Equipment leased thereunder from
Lessee, unless, upon the exercise of such purchase option, Lessee substitutes
new Equipment hereunder in accordance with Section 13;
(d) such Sublease shall prohibit the Sublessee from making any
alterations or modifications to the Equipment that would violate this Lease
Agreement;
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<PAGE> 17
(e) such Sublease shall require the Sublessee to maintain the
Equipment in accordance with Sections 10 and 11 and to engage in activities with
the Equipment in a manner consistent with the Equipment's intended purpose and
in accordance with the Equipment's specifications; and
(f) Lessee shall not, without Lessor's prior written consent,
permit or consent to any renewal or extension of a Sublease at any time when a
Lease Event of Default has occurred and is continuing.
Upon request by Lessor or the Administrative Agent, Lessee shall promptly
deliver to Lessor and the Administrative Agent copies of any sublease of an Item
of Equipment (including any Sublease), or (y) a schedule of all subleases of the
Equipment, including Subleases certified by a Responsible Officer of Lessee. No
such leasing by Lessee will reduce any of the obligations of Lessee hereunder or
the rights of Lessor (and any Assignee) hereunder, and all of the obligations of
Lessee hereunder shall be and remain primary and shall continue in full force
and effect as the obligations of a principal and not of a guarantor or surety.
17.2 Registration. This Lease Agreement is a registered
instrument. The Administrative Agent shall establish and maintain registration
books in which it will register, and register any assignment effected in
compliance with Section 12.7 of the Participation Agreement of Lessor's interest
in this Lease Agreement or any portion thereof and which identifies each
registered holder of any interest of Lessor in this Lease Agreement or any
portion thereof. Except for the interests of the Collateral Agent pursuant to
the Operative Documents, no transfer by Lessor of any interest in this Lease
Agreement shall be effective unless and until such transfer is made upon the
registration books maintained by the Administrative Agent.
18. Liens. Lessee shall not directly or indirectly create, incur,
assume or suffer to exist any Lien on or with respect to (a) any Item of
Equipment or any part thereof or Lessor's interest therein or proceeds thereof,
(b) any insurances required hereunder or (c) this Lease Agreement or any of
Lessor's interests hereunder, except Permitted Liens and Lessor Liens. Lessee,
at its own expense, will promptly pay, satisfy and otherwise take such actions
as may be necessary to keep this Lease Agreement and each Item of Equipment free
and clear of, and to duly discharge or eliminate or bond in a manner
satisfactory to Lessor and each Assignee, any Lien other than Permitted Liens
and Lessor Liens if the same shall arise at any time. Lessee will notify Lessor
and each Assignee in writing promptly upon a Responsible Officer of Lessee
obtaining knowledge of any Tax or other Lien other than Permitted Liens and
Lessor Liens that shall attach to the Equipment or any Item of Equipment, and of
the full particulars thereof.
19. Loss, Damage or Destruction.
19.1 Risk of Loss, Damage or Destruction. Lessee hereby
assumes all risk of loss, damage, theft, taking, destruction, confiscation,
requisition or commandeering, partial or complete, of or to each Item of
Equipment ("Loss, Damage or Destruction"), however caused or occasioned except
for Loss, Damage or Destruction caused by the gross negligence or willful
misconduct of Lessor, such risk to be borne by Lessee with respect to each Item
of Equipment from the date of this Lease Agreement, and continuing until such
Item of Equipment has been
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<PAGE> 18
returned to Lessor in accordance with the provisions of Section 6, the rights
and interests in which have been transferred to Lessee in accordance with the
provisions of Section 28.2, 28.4, or 28.5 or has been sold in accordance with
Section 28.3.
19.2 Payment of Casualty Loss Value Upon an Event of Loss. If
an Event of Loss occurs with respect to an Item of Equipment during the Term
thereof, Lessee (a) shall give Lessor and each Assignee prompt written notice of
such loss and of Lessee's election pursuant to clause (b) below and (b) shall
(i) replace such Item within sixty (60) days of such notice subject to and in
accordance with Section 13 or (ii) pay to Lessor on the corresponding Casualty
Loss Value Payment Date the sum of (A) all unpaid Lease Payments due and payable
for such Item of Equipment (which Lease Payments shall accrue until the Casualty
Loss Value Payment Date therefor notwithstanding the date of the Event of Loss),
plus (B) the Casualty Loss Value, plus (C) Breakage Costs, plus (D) all other
Supplemental Payments due for such Item of Equipment as of the date of payment
of the amounts specified in the foregoing clauses (A) and (B). Any payments
received at any time by Lessor or by Lessee from any insurer or other party as a
result of the occurrence of such Event of Loss of an Item of Equipment will be
applied in reduction of Lessee's obligation to pay the foregoing amounts, if not
already paid by Lessee, or, if already paid by Lessee, will be applied to
reimburse Lessee for its payment of such amount, unless a Lease Event of Default
shall have occurred and be continuing in which event any such payments received
by Lessor or by Lessee shall be paid to and applied by the Collateral Agent in
accordance with the priority of payments established under Section 7 of the
Participation Agreement. In the event that any payments received by Lessor,
Assignee, Administrative Agent or Collateral Agent referred to in the
immediately preceding sentence with respect to any Item of Equipment exceed any
amounts due and owing by Lessee to Lessor under the Operative Documents, then,
provided there are no amounts due and owing by Lessee under the Operative
Documents and no Lease Event of Default shall have occurred and be continuing,
such excess shall forthwith be paid by Lessor or its Assignee, as the case may
be, to Lessee. Upon payment in full of such Casualty Loss Value, Lease Payments
and Supplemental Payments, (a) the Lessee's obligations hereunder with respect
to such Item of Equipment (other than those expressly stated to survive the
termination of this Lease Agreement) shall terminate, and (b) all rights and
interests of Lessor in such Item of Equipment shall automatically cease and vest
in Lessee. Lessor will at the request and cost of Lessee furnish to or at the
direction of Lessee, a bill of sale without recourse or warranty (except as to
the absence of Lessor Liens) and otherwise in form and substance reasonably
satisfactory to Lessee and Lessor, evidencing the transfer to or at the
direction of Lessee, all of Lessor's right, title and interest in and to such
Item(s), "as-is, where-is". Following any such transfer, Lessee will be
subrogated to all claims of Lessor, if any, against third parties to the extent
the same relate to physical damage to or loss of the transferred Item which was
the subject of such Event of Loss.
19.3 Application of Payments Not Relating to an Event of Loss.
Any payments (including, without limitation, insurance proceeds) received at any
time by Lessor or Lessee from any Governmental Entity or other party with
respect to any loss or damage to any Item or Items of Equipment not constituting
an Event of Loss, will, subject to the last sentence of Section 20, be applied
directly in payment of repairs or for replacement of property in accordance with
the provisions of Sections 11 and 12, if not already paid by Lessee, or if
already paid by Lessee and no Lease Event of Default shall have occurred and be
continuing, shall be applied to reimburse
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<PAGE> 19
Lessee for such payment, and any balance remaining after compliance with the
provisions of said Sections with respect to such loss or damage shall be
retained by Lessee. If any Lease Event of Default shall have occurred and be
continuing, all payments hereunder shall be paid to Lessor or its Assignee in
accordance with Section 19.2.
20. Insurance. Lessee will cause to be carried and maintained, at its
sole expense, with respect to each Item of Equipment at all times during the
Term thereof and for the geographic area in which such Item is at any time
located and until such Item of Equipment has been returned to Lessor pursuant to
Section 6, the rights and interests therein have been transferred to Lessee
pursuant to Section 28.2, 28.4 or 28.5 or sold to a third party pursuant to
Section 28.3 [physical damage insurance (including theft and collision
insurance) insuring against risks of physical loss or damage to the Equipment
("Property Insurance") in an amount no less than [110]% of the aggregate
Casualty Loss Value for all Items of Equipment per occurrence except for
Lessee's customary sublimits for certain perils, and] insurance against
liability for bodily injury, death and property damage resulting from the use
and operation of the Equipment (including sudden and accidental environmental
pollution coverage) ("Liability Insurance") of the types and amounts of coverage
equal to or greater than the insurance coverage Lessee carries on any other
similar equipment owned or leased by Lessee, but in no event providing less than
$50,000,000 of coverage per occurrence. The insurance coverage described in the
preceding sentence shall have deductibles no greater than those applicable to
insurance on similar equipment owned or leased by Lessee or with respect to
general liability or third party coverage shall have deductibles no greater than
$250,000. [Such Property Insurance policy or policies will name Lessee, Lessor
and Assignee as the loss payees.] Such Liability Insurance policy or policies
will name Lessee Indemnified Person as an additional insured. All such policies
will provide that the insurers waive any claim for premiums and any right of
subrogation or setoff against Lessee Indemnified Parties and that the same may
not be invalidated against any Lessee Indemnified Person by reason of any
violation of a condition or breach of warranty of the policies or the
application therefor by Lessee, that the policies may be canceled or materially
altered or reduced in coverage by the insurer only after no less than ten (10)
days' prior written notice from Lessee's insurance broker to Lessor and
Administrative Agent, and that the insurer will give written notice to Lessor
and Administrative Agent in the event of nonpayment of premium by Lessee when
due. The policies of insurance required under this Section 20 for Lessee shall
be valid and enforceable policies issued by insurers having an A.M. Best Company
rating of "A-" or better or otherwise acceptable to the Administrative Agent and
shall provide coverage with respect to incidents occurring anywhere in the
United States. In the event that any of such Liability Insurance policies for an
Item of Equipment shall now or hereafter provide coverage on a "claims-made"
basis, Lessee shall continue to maintain such policies in effect for a period of
not less than three (3) years after the expiration of the Term of the last Item
of Equipment financed hereunder. Upon the execution of each Lease Agreement
Supplement and thereafter not less than three (3) days prior to the expiration
dates of any expiring policies required under this Section 20, Lessee shall
furnish Lessor and the Administrative Agent with certificates of the replacement
insurance coverage required by this Section 20. During the Term, unless a Lease
Event of Default has occurred and be continuing, all proceeds of Property
Insurance on account of any damage to or destruction to the Equipment in an
amount less than $1,000,000 shall be paid over to Lessee or as it may direct and
any such proceeds equal to or greater than $1,000,000
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<PAGE> 20
shall be paid over to Lessor and Lessor shall, upon the written instructions of
Lessee, (a) apply such proceeds against Lessee's payment obligations under
clause (b)(ii) of Section 19.2 or (b) if Lessee elects to replace all or part of
such Equipment pursuant to clause (b)(i) of Section 19.2 reimburse in whole or
in part Lessee or direct payment directly to the vendor for the replacement cost
of such Equipment with any excess remaining to be paid to Lessee, provided,
however, that in the event that a Lease Event of Default shall have occurred and
be continuing such proceeds shall be paid to the Administrative Agent for
application to Lessee's obligations under Section 24.
21. NO LESSOR WARRANTIES. LESSOR HEREBY LEASES THE EQUIPMENT FOR LESSEE
AS-IS WHERE-IS, WITH ALL FAULTS, IF ANY, AND IN WHATEVER CONDITION IT MAY BE IN,
AND EXPRESSLY DISCLAIMS AND MAKES NO REPRESENTATION OR WARRANTY, EITHER
EXPRESSED OR IMPLIED, AS TO THE DESIGN, CONDITION, QUALITY, CAPACITY,
MERCHANTABILITY, DURABILITY, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE
OF, OR ANY OTHER MATTER CONCERNING, THE EQUIPMENT. LESSEE HEREBY WAIVES ANY
CLAIM (INCLUDING ANY CLAIM BASED ON STRICT OR ABSOLUTE LIABILITY IN TORT OR
INFRINGEMENT) IT MIGHT HAVE AGAINST LESSOR OR ANY CERTIFICATE HOLDER FOR ANY
LOSS, DAMAGE (INCLUDING INCIDENTAL OR CONSEQUENTIAL DAMAGE) OR EXPENSE CAUSED BY
THE EQUIPMENT OR BY LESSEE'S LOSS OF USE THEREOF FOR ANY REASON WHATSOEVER,
INCLUDING COMPLIANCE WITH ENVIRONMENTAL LAWS (WHICH ITEMS OF EQUIPMENT, LESSEE
ACKNOWLEDGES, WERE SELECTED BY LESSEE ON THE BASIS OF ITS OWN JUDGMENT WITHOUT
RELIANCE ON ANY STATEMENTS, REPRESENTATIONS, GUARANTIES OR WARRANTIES MADE BY
LESSOR).
22. Assignment of Manufacturer Warranties. So long and only so long as
a Lease Event of Default shall not have occurred and be continuing, and so long
and only so long as an Item of Equipment shall be subject to this Lease
Agreement and Lessee shall be entitled to possession of such Item hereunder,
Lessor authorizes Lessee, at Lessee's expense, to assert for Lessee's account,
and assigns to Lessee all rights and powers of Lessor under any manufacturer's,
vendor's or dealer's warranty on the Equipment or any part thereof and Lessor
agrees to use reasonable efforts at Lessee's expense to assist Lessee in
obtaining the benefits of such warranties; provided, however, that Lessee shall
indemnify, protect, save, defend and hold harmless Lessor from and against any
and all claims, and all costs, expenses, damages, losses and liabilities
incurred or suffered by Lessor in connection therewith, as a result of, or
incident to, any action by Lessee pursuant to the foregoing authorization.
23. Events of Default. The occurrence of any of the following specified
events (whatever the reason for such Lease Event of Default and whether such
event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body) shall constitute a "Lease Event of Default":
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(a) Lessee shall fail to make any Lease Payment, pay any
Availability Fee or pay any amounts under Sections 28.2, 28.4, 28.5 and 29 on
the date the same is due and payable and such failure shall continue unremedied
for three (3) or more Business Days; or
(b) Lessee shall fail to observe or perform any of the
covenants, agreements or obligations of Lessee set forth in Sections 6, 10, 17.1
or 20 of this Lease Agreement or Section 12.1 of the Participation Agreement
other than those identified in clause (a) above, and such failure shall continue
unremedied for ten (10) or more Business Days after receipt by Lessee of written
notice thereof from Lessor or Assignee; or
(c) Lessee or Guarantor shall fail to perform or observe any
other covenant, condition, or agreement to be performed or observed by it under
any Operative Document (other than those identified in clauses (a) and (b)
above), and such failure shall continue unremedied for a period of thirty (30)
days after receipt by Lessee of written notice thereof from Lessor or Assignee;
or
(d) any representation or warranty made by Lessee or Guarantor
in any of the Operative Documents, or in any certificate delivered pursuant
thereto, shall prove to be untrue in any material respect on the date of which
made; or
(e) Lessee or any of its Significant Subsidiaries shall (i)
default in any payment of any Indebtedness 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 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 have caused, such Indebtedness to become due prior to its stated
maturity, or (iii) any Indebtedness of Lessee 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 Lease Default or Lease Event of Default under this Section 23 unless the
aggregate principal amount of all Indebtedness as described in preceding clauses
(i) through (iii), inclusive, is at least $3,000,000 or
(f) At any time after the execution and delivery thereof, the
Participation Agreement ceases to be in full force and effect or Guarantor
denies or disaffirms it obligations thereunder; or
(g) Lessee or any of its Significant Subsidiaries shall
commence a voluntary case concerning itself under the Bankruptcy Code; or an
involuntary case is commenced against Lessee 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 Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of Lessee or any of its Significant
Subsidiaries, or Lessee 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 Lessee or any of its
Significant Subsidiaries, or there is
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commenced against Lessee or any of its Significant Subsidiaries any such
proceeding which remains undismissed for a period of 60 days, or Lessee 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 Lessee 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 Lessee or any of its
Significant Subsidiaries makes a general assignment for the benefit of
creditors; or any corporate action is taken by Lessee or any of its Significant
Subsidiaries for the purpose of effecting any of the foregoing; or
(h) One or more judgments or decrees shall have been entered
against Lessee involving in the aggregate for Lessee and its Significant
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 $3,000,000 or
(i) At any time after the execution and delivery thereof, any
of the Operative Documents shall cease to be in full force and effect, or shall
cease to give the Lessor 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 Lessee Collateral (other than Lessee Collateral with
a value not to exceed $1,000,000)), or the Collateral Agent and the Lenders the
Liens, rights, powers and privileges purported to be created thereby (including,
without limitation, a perfected security interest in, and Lien on, all of Lessor
Collateral (other than Lessor Collateral with a value not to exceed $1,000,000))
in each case superior to and prior to the rights of all third Persons (except as
permitted herein), and subject to no other Liens other than Permitted Liens; or
(j) A Change of Control shall occur.
24. Remedies Upon Default. Upon the occurrence of any Lease Event of
Default and at any time thereafter so long as the same shall be continuing,
Lessor may (except in the case of a Lease Event of Default of the type described
in Section 23(g), in which case Lessor shall be deemed automatically without
further act to have elected the remedy set forth in clause (d) below) exercise
one or more of the following remedies, to the extent permitted by Applicable
Law, as Lessor in its sole discretion shall elect:
(a) Lessor may terminate or cancel this Lease Agreement,
without prejudice to any other remedies of Lessor hereunder, with respect to all
or any Item of Equipment, and whether or not this Lease Agreement has been so
terminated, may enter the premises of Lessee, subject to Lessee's normal safety
and security concerns, including standard confidentiality requirements, or any
other party to take immediate possession of the Equipment and remove all or any
Item of Equipment by summary proceedings or otherwise, or may cause Lessee, at
Lessee's expense, to store, maintain, surrender and deliver possession of the
Equipment or such Item in the same manner as provided in Section 6;
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(b) Lessor may hold, keep idle or lease to others any Item of
Equipment, as Lessor in its sole discretion may determine, free and clear of any
rights of Lessee, except that Lessee's obligation to pay Lease Payments for any
Lease Payment Periods commencing after Lessee shall have been deprived of
possession pursuant to this Section 24 shall be reduced by the net proceeds, if
any, received by Lessor from leasing the Equipment or such Item to any Person
other than Lessee for the same Lease Payment Periods or any portion thereof;
(c) Lessor may sell the Equipment or any Item of Equipment at
public or private sale as Lessor may determine, free and clear of any rights of
Lessee, and Lessee shall pay to Lessor, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Lease Payments due for the
Equipment or Item(s) so sold for any Lease Payment Period commencing after the
date on which such sale occurs), the sum of (i) all unpaid Lease Payments
payable for each Item of Equipment for all Lease Payment Periods through the
date on which such sale occurs, plus (ii) an amount equal to the excess, if any,
of (x) the Casualty Loss Value of the Item(s) of Equipment so sold over (y) the
net proceeds of such sale, plus interest at the rate specified in Section 25 on
the amount of such excess from the Payment Date until the date of actual
payment, plus (iii) all unpaid Supplemental Payments due with respect to each
Item of Equipment so sold, plus (iv) any unpaid Availability Fee;
(d) whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under subsection (a) or (b)
above with respect to any Item(s) of Equipment, Lessor, by written notice to
Lessee specifying a payment date, may demand that Lessee pay to Lessor, and
Lessee shall pay to Lessor, on the payment date specified in such notice, as
liquidated damages for loss of a bargain and not as a penalty (in lieu of the
Lease Payment due for any Item(s) of Equipment for any Lease Payment Period
commencing after the payment date specified in such notice and in lieu of the
exercise by Lessor of its remedies under subsection (b) above in the case of a
re-lease of such Item(s) or under subsection (c) above with respect to a sale of
such Item(s)), the sum of (i) all unpaid Lease Payments payable for such Item(s)
for all Lease Payment Periods through the payment date specified in such notice,
plus (ii) all unpaid Supplemental Payments due with respect to such Item(s) as
of the payment date specified in such notice, plus (iii) an amount equal to any
Breakage Costs owed or paid by Lessor to Lenders in respect of the Notes or
incurred by any Certificate Holder, plus (iv) an amount, with respect to each
such Item, equal to the Casualty Loss Value of such Item(s), plus any accrued
and unpaid Availability Fee; provided, however, upon payment in full by Lessee
within ten (10) days of demand of all amounts due under this Section 24(c),
Lessor will at the request and cost of Lessee furnish to or at the direction of
Lessee a bill of sale, without recourse or warranty (except as to the absence of
Lessor Liens), and otherwise in form and substance reasonably satisfactory to
Lessee and Lessor evidencing the transfer to or at the direction of Lessee, all
of Lessor's right, title and interest in and to such Item(s), "as-is, where-is";
and
(e) Lessor may exercise any other right or remedy which may be
available to it under applicable law or proceed by appropriate court action to
enforce the terms hereof or to recover damages for the breach hereof and
terminate this Lease Agreement. In addition, Lessee shall be liable for all
costs and expenses, including reasonable attorney's fees and expenses, incurred
by Lessor, Collateral Agent, Administrative Agent or any Assignee by reason of
the occurrence of any Lease Event of Default or the exercise of Lessor's
remedies with respect
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<PAGE> 24
thereto, including all reasonable costs and expenses incurred in connection with
the return of the Equipment in accordance with Section 6 or in placing the
Equipment in the condition required by said Section.
Except as otherwise expressly provided above, no remedy referred to in this
Section 24 is intended to be exclusive, but each shall be cumulative and in
addition to any other remedy referred to above or otherwise available to Lessor
at law or in equity; and the exercise or beginning of exercise by Lessor of any
one or more of such remedies shall not constitute the exclusive election of such
remedies and shall not preclude the simultaneous or later exercise by Lessor of
any or all of such other remedies. No express or implied waiver by Lessor of any
Lease Event of Default shall in any way be, or be construed to be, a waiver of
any future or subsequent Lease Event of Default. To the extent permitted by
applicable law, Lessee hereby waives any rights now or hereafter conferred by
statute or otherwise which may require Lessor to sell, lease or otherwise use
the Equipment in mitigation of Lessor's damages as set forth in this Section 24
or which may otherwise limit or modify any of Lessor's rights and remedies in
this Section 24.
25. Lessor's Right to Perform for Lessee. If Lessee fails to make any
Supplemental Payment required to be made by it hereunder or fails to perform or
comply with any of its agreements contained herein, Lessor may (but shall not be
obligated) itself, after notice to Lessee, make such payment or perform or
comply with such agreement, and the amount of such payment and the amount of the
reasonable expenses of Lessor incurred in connection with such payment or the
performance of or compliance with such agreement, as the case may be, together
with interest thereon at the rate specified in Section 26, shall, if not paid by
Lessee to Lessor on demand, be deemed a Supplemental Payment hereunder;
provided, however, that no such payment, performance or compliance by Lessor
shall be deemed to cure any Lease Event of Default hereunder.
26. Late Charges. Lessee shall pay to Lessor, upon demand, to the
extent permitted by applicable law, interest on any installment of a Lease
Payment or Availability Fee not paid when due, and on any Supplemental Payment
or other amount payable under this Lease Agreement which is not paid when due,
for any period for which any of the same is overdue (without regard to any grace
period) at a rate equal to the lesser of (a) the Overdue Rate and (b) the
maximum rate of interest permitted by law.
27. Notices. Lessee shall deliver to the Assignee and the
Administrative Agent a copy of each notice to be delivered by Lessee hereunder.
All notices provided for or required under the terms and provisions hereof shall
be given in accordance with Section 12.4 of the Participation Agreement.
28. Lessee's Renewal, Transfer and Early Termination Options; Purchase
Obligation.
28.1 Renewal Option. If no Lease Event of Default shall have
occurred and be continuing, Lessee has not elected to purchase (or deemed to
purchase) the Equipment under Section 28.2 and this Lease Agreement shall not
have been earlier terminated, Lessee may request to renew the Lease Agreement
with respect to all but not less than all Items of Equipment then subject to
this Lease Agreement by providing to the Administrative Agent and Lessor a
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<PAGE> 25
written notice of request to renew within six (6) months prior to the end of the
Basic Term. In its sole discretion, Lessor shall determine on or before the date
three (3) months prior to the end of the Basic Term whether to renew and extend
the leasing of the Equipment on terms and conditions acceptable to Lessee and
Lessor.
28.2 Lessee's End of Term Purchase Option. On the Termination
Date, if this Lease Agreement shall not have been earlier terminated, Lessee or
its designee shall be entitled, at its option, to acquire all, but not less than
all, of Lessor's rights and interests in all, but not less than all, of the
Items of Equipment for an amount (the "Purchase Option Amount"), with respect to
all Items of Equipment, payable in immediately available funds, equal to the sum
without duplication of (i) the aggregate of the Casualty Loss Value of all Items
of Equipment, plus (ii) the Lease Payments due and payable for such Items of
Equipment on the Termination Date, plus (iii) any Supplemental Payments then due
and owing to any Person. Upon payment in full of all amounts due upon the
exercise of Lessee's option under this Section 28.2, Lessor will, at the request
and cost of Lessee, transfer to or at the direction of Lessee, without recourse
or warranty (except as to the absence of Lessor Liens), all of Lessor's right,
title and interest in and to such Item(s), "as-is, where-is" and at the cost and
request of Lessee, furnish to or at the direction of Lessee, a bill of sale
without recourse or warranty (except as to Lessor Liens) in form and substance
reasonably satisfactory to Lessee and Lessor, evidencing such transfer. If
Lessee does not intend to exercise such purchase option, Lessee shall give
written notice to Lessor to such effect in accordance with Section 28.3.2. If
Lessee fails to give such written notice to Lessor, such failure shall
constitute an election and a binding obligation of Lessee to exercise the
purchase option hereunder and to pay Lessor the Purchase Option Amount with
respect thereto on the Termination Date.
28.3 Third Party Sale of Equipment.
28.3.1 Remarketing Obligations. In the event that Lessee does
not exercise its option to acquire Lessor's rights and interests in all the
Equipment pursuant to Section 28.2, then Lessee shall have the obligation during
the last 180 days of the Basic Term, if applicable (the "Remarketing Period"),
to solicit bona fide bids for not less than all Items of Equipment from
prospective purchasers who are financially capable of purchasing such Items of
Equipment for cash on an "as-is", "where-is" basis, without recourse or
warranty. Any bid received by Lessee prior to the end of the Remarketing Period
shall be promptly communicated to Lessor and Administrative Agent in writing,
setting forth the amount of such bid and the name and address of the person or
entity submitting such bid. Notwithstanding the foregoing, Lessor shall have the
right, but not the obligation, to seek bids for the Equipment during the
Remarketing Period and Lessee shall grant Lessor and Administrative Agent or
their respective designees access to the Equipment upon reasonable notice and
during normal business hours to facilitate the exercising of such right.
28.3.2 Notice to Return Possession of Equipment. So long as no
Lease Default or Lease Event of Default shall have occurred, Lessee shall have
the option, exercisable by giving Lessor irrevocable written notice not less
than 180 days and not more than 270 days prior to the Termination Date, to
return possession of all Items of Equipment then subject to this Lease Agreement
to Lessor on the Termination Date. In the event Lessee fails to deliver the
notice
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<PAGE> 26
described in (and within the time period prescribed in) the preceding
sentence, Lessee shall be deemed to have elected the Purchase Option and shall
proceed to purchase the Equipment in accordance with Section 28.2. If at any
time after Lessee gives written notice of its intention to return possession of
the Equipment to Lessor and on or prior to the Termination Date a Lease Default
or a Lease Event of Default shall occur, then Lessee's notice to return
possession of the Equipment shall be deemed automatically revoked and Lessee
shall be deemed to have elected the purchase option in Section 28.2.
28.3.3 Sale of Equipment to Third Party Buyer. On the
Termination Date, provided that all the conditions set forth in Sections 28.3.1,
28.3.2 and in clauses (a) and (b) below have been met, Lessor shall sell (or
cause to be sold) all Items of Equipment, for cash to the bidder, if any, who
shall have submitted the highest bid during the Remarketing Period on an
"as-is", "where-is" basis and without recourse or warranty, and upon receipt by
Lessor of the sales price, Lessor shall instruct Lessee to deliver and Lessee
shall deliver the Equipment to such bidder; provided, that (a) any such sale to
a third party shall be consummated, and the sales price for the Equipment shall
have been paid to Lessor in immediately available funds, on or before the
Termination Date; and (b) Lessor shall not be obligated to sell such Equipment
if the Net Proceeds of Sale of all, but not less than all, the Equipment are
less than the aggregate Maximum Lessor Risk Amount applicable to all, but not
less than all, the Equipment as of the Termination Date. Upon payment in full of
all amounts due upon a sale under this Section 28, Lessor will, so long as no
Lease Event of Default shall have occurred and be continuing, at the request and
cost of the bidder, transfer to or at the direction of the bidder, without
recourse or warranty (except as to the absence of Lessor Liens), all of Lessor's
right, title and interest in and to such Item(s), "as-is", "where-is" and at the
cost and request of the bidder, furnish to or at the direction of Lessee, a bill
of sale without recourse or warranty (except as to Lessor Liens) and otherwise
in form and substance reasonably satisfactory to the bidder and Lessor,
evidencing such transfer.
28.4 Lessee's Early Purchase Option. Provided this Lease
Agreement shall not have been earlier terminated, Lessee shall be entitled, at
its option, on any Payment Date to acquire all but not less than all of Lessor's
rights and interests, in all, but not less than all, Item(s) of Equipment leased
hereunder, and, upon written notice to Lessor, as hereinafter provided, for an
amount (the "Payment Date Option Amount"), with respect to each Item of
Equipment acquired payable in immediately available funds, equal to the sum of
(i) the Casualty Loss Value of such Item of Equipment, plus (ii) the Lease
Payments due and payable for such Item of Equipment on such Payment Date, plus
(iii) the amount of Breakage Costs, plus (iv) any Supplemental Payments then due
and owing to any Person. Upon payment in full of all amounts due upon the
exercise of Lessee's option under this Section 28.4, Lessor will, at the request
and cost of Lessee, transfer to or at the direction of Lessee, without recourse
or warranty (except as to the absence of Lessor Liens), all of Lessor's right,
title and interest in and to such Item(s), "as-is", "where-is" and, at the
request and cost of Lessee, furnish to or at the direction of Lessee, a bill of
sale without recourse or warranty (except as to the absence of Lessor Liens) and
otherwise in form and substance reasonably satisfactory to Lessee and Lessor,
evidencing such transfer. If Lessee intends to exercise said early transfer
option, Lessee shall give written notice to Lessor to such effect not less than
thirty (30) days prior to the Payment Date on which such option will be
exercised. If Lessee gives such written notice to Lessor, such notice shall
constitute a binding obliga-
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<PAGE> 27
tion of Lessee to pay Lessor the Payment Date Option Amount with respect to each
Item of Equipment subject to such notice on the applicable Payment Date.
28.5 Non Completion Purchase Obligation. Notwithstanding any
other provision of this Lease Agreement or any other Operative Document, in the
event that a Completion Certificate has not been delivered to Lessor with
respect to an Item of Equipment on or before the date (the "Non-Completion
Date"), that is the earlier of (i) 6 months after the commencement of the
Assembly Period for such Item of Equipment, and (ii) the Basic Term Commencement
Date, Lessee shall be obligated to purchase Lessor's rights in and to such Item
of Equipment on the first Business Day after the Non-Completion Date for an
amount equal to the Casualty Loss Value for such Item of Equipment plus all
accrued and unpaid interest as of the date of payment and Breakage Costs. Lessee
shall pay all such amounts in immediately available funds on the first Business
Day after the Non-Completion Date. Nothing contained in this Section 28.5 shall
be deemed to extend the Assembly Period. Upon payment in full of all such
amounts, and so long as no Event of Default has occurred and is continuing
hereunder, Lessor shall terminate the Lease Agreement with respect to such Item
of Equipment and shall convey all of its right, title and interest in and to
such Item of Equipment, "as is," "where is", without recourse or warranty
(except as to the absence of Lessor Liens), to Lessee, and Lessee shall have no
further obligation under this Lease Agreement or the other Operative Documents
with respect to such Item of Equipment except those obligations expressly stated
to survive the termination of this Lease Agreement or any other Operative
Document.
29. End of Term Lease Payment Adjustment.
29.1 Third Party Sale of Equipment. This Section 29.1 shall
apply only if a sale of the Items of Equipment to a third party pursuant to
Section 28.3 has been consummated on the Termination Date. If the Net Proceeds
of Sale of such Items of Equipment are less than the aggregate Casualty Loss
Value as of the Termination Date, Lessee shall, on the Termination Date, pay to
Lessor as an end of term Lease Payment adjustment, in immediately available
funds, an amount equal to such deficiency (a "Deficiency") as an adjustment to
the Lease Payment payable under this Lease Agreement for such Items of Equipment
plus the Lease Payment due and payable for such Item(s) of Equipment on the
Termination Date, plus any Supplemental Payments then due and owing to Lessor
hereunder; provided, however, that if no Lease Event of Default or Lease
Default, shall have occurred and be continuing hereunder, the amount of the
Deficiency payable by Lessee with respect to such Items of Equipment shall not
exceed the aggregate Maximum Lessee Risk Amount. If the Net Proceeds of Sale of
such Items of Equipment exceed the aggregate Casualty Loss Value of such Items
of Equipment and if Lessee shall have paid Lessor on or before the Termination
Date the Lease Payment due and payable for such Items of Equipment on the
Termination Date, plus all Supplemental Payments then due and owing with respect
to such Items of Equipment, Lessor shall pay to such Lessee an amount equal to
such excess as an adjustment to the Lease Payment payable under this Lease
Agreement for such Items of Equipment.
29.2 Lessee Payment. If a sale of any Item of Equipment either
to Lessee pursuant to Section 28.2 or 28.4 or to a third party pursuant to
Section 28.3 has not been consummated on the Termination Date with respect
thereto for any reason, then Lessee shall, on the
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<PAGE> 28
Termination Date pay to Lessor as an end of term Lease Payment adjustment, in
immediately available funds, as an adjustment to the Lease Payment payable under
this Lease Agreement for each Item that has not been sold pursuant to Section
28.2, 28.3, or 28.4, an amount equal, without duplication to the Lease Payment
due and payable for such Item of Equipment on the Termination Date, plus all
Supplemental Payments then due and owing with respect to such Item(s) plus (a)
the Maximum Lessee Risk Amount of all of such Items, if (i) on the Termination
Date no Lease Event of Default or Lease Default shall have occurred and be
continuing hereunder, and (ii) all Items of Equipment then subject to this Lease
Agreement have been returned to Lessor on the Termination Date in the condition
and at the locations required by Section 6, and (iii) this Lease Agreement shall
not have been terminated prior to the Termination Date or (b) the aggregate
Casualty Loss Value as of the Termination Date of all of such Items, if (1) on
the Termination Date a Lease Event of Default or Lease Default shall have
occurred and be continuing hereunder, or (2) any Item of Equipment then subject
to this Lease Agreement shall not have been returned to Lessor on the
Termination Date in the condition and at the locations required by Section 6, or
(3) this Lease Agreement shall have been terminated prior to the Termination
Date; provided, however, if Lessee pays all amounts due in accordance with this
clause (b) on or prior to the Termination Date, Lessor will at the cost of
Lessee transfer to or at the direction of Lessee, without recourse or warranty
(except as to the absence of Lessor Liens), all of Lessor's right, title and
interest in and to such Item(s), "as-is", "where-is" and at the cost of Lessee
furnish to or at the direction of Lessee, if Lessee shall so request, a bill of
sale without recourse or warranty (except as to the absence of Lessor Liens) and
otherwise in form and substance reasonably satisfactory to Lessee and Lessor,
evidencing such transfer. Lessee shall remain liable for the payment of, and
upon the consummation by Lessor of the sale of any Item(s) of Equipment on or
after the Termination Date thereof, Lessee shall pay, or reimburse Lessor for
the payment of, all applicable sales, excise or other Taxes imposed as a result
of such sale, other than gross or net income taxes attributable to such sale,
and such obligation shall survive the termination of this Lease Agreement.
30. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY
TRIAL. (a) THIS LEASE AGREEMENT 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 LEASE AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR
OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION
AND DELIVERY OF THIS LEASE AGREEMENT, LESSEE HEREBY IRREVOCABLY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. LESSEE HEREBY IRREVOCABLY DESIGNATES,
APPOINTS AND EMPOWERS CT CORPORATION SYSTEM, WITH OFFICES ON THE DATE HEREOF AT
111 EIGHTH AVENUE, NEW YORK 10011 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
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<PAGE> 29
AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, LESSEE 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 LEASE AGREEMENT.
LESSEE 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 LESSEE AT ITS
ADDRESS SET FORTH IN SECTION 12.4 OF THIS PARTICIPATION AGREEMENT, SUCH SERVICE
TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF LESSOR UNDER THIS LEASE AGREEMENT, 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) LESSEE 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 LEASE 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 LEASE AGREEMENT HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS LEASE AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
31. Miscellaneous. Any provision of this Lease 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 or diminishing Lessor's rights under 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.
To the extent permitted by applicable law, Lessee hereby waives any provision of
law which renders any provision of this Lease Agreement prohibited or
unenforceable in any respect. No term or provision of this Lease Agreement may
be amended, altered, waived, discharged or terminated except in accordance with
Section 12.2 of the Participation Agreement. A waiver on any one occasion shall
not be construed as a waiver on a future occasion. Except as provided in Section
12.7 of the Participation Agreement, neither Lessee nor Lessor shall assign or
transfer its interests in this Lease Agreement. All of the covenants, conditions
and obligations contained in this Lease Agreement shall be binding upon and
shall inure to the benefit of the respective successors and assigns of Lessor
and (subject to the restrictions of Sections 17.1 and 17.2) Lessee. This Lease
Agreement and the other Operative Documents, and each related instrument,
document, agreement and certificate, collectively constitute the complete and
exclusive statement of the terms of the agreement between Lessor and Lessee with
respect to the acquisition and leas-
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<PAGE> 30
ing of the Equipment, and cancel and supersede any and all prior oral or written
understandings with respect thereto.
32. Concerning Lessor. Trust Company is entering into this Lease
Agreement solely in its capacity as Trustee under the Trust Agreement and not in
its individual capacity and in no case shall Trust Company (or any entity acting
as successor Trustee under the Trust Agreement) be personally liable for or on
account of any of the statements, representations, warranties, covenants or
obligations stated to be those of Lessor hereunder.
33. Execution and Effectiveness. This Lease Agreement may be executed
in any number of identical counterparts, any set of which signed by all parties
hereto shall be deemed to constitute a complete, executed original for all
purposes and shall become effective when each of the parties hereto and each of
the parties to the Participation Agreement and Loan Agreement have executed and
delivered this Lease Agreement, the Participation Agreement and the Loan
Agreement.
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<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this Lease Agreement
to be duly executed by their duly authorized representatives as of the date
first above written.
WILMINGTON TRUST COMPANY, not in its
individual capacity, but solely as
Trustee of Universal Compression Trust
(2000-1) under the Trust Agreement dated
as of May __, 2000, as Lessor
By:
---------------------------------------
Name:
Title:
UNIVERSAL COMPRESSION, INC.,
as Lessee
By:
---------------------------------------
Name:
Title:
COUNTERPART NO. _______ OF _______ SERIALLY NUMBERED MANUALLY EXECUTED
COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS DOCUMENT CONSTITUTES CHATTEL
PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT
MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN
COUNTERPART NO. 1.
<PAGE> 32
EXHIBIT A TO
LEASE AGREEMENT
[FORM OF]
LEASE AGREEMENT SUPPLEMENT AND SECURITY GRANT NO.
This Lease Agreement Supplement (this "Supplement") is
executed pursuant to, and incorporates by reference all of the terms, conditions
and provisions of, the Master Equipment Lease Agreement dated as of May __,
2000, between the undersigned Wilmington Trust Company, not in its individual
capacity but solely as Trustee of the Universal Compression Trust (2000-1) under
the Trust Agreement dated as of May __, 2000 ("Lessor") and Universal
Compression, Inc. ("Lessee") (herein, as amended and supplemented from time to
time, called the "Lease Agreement"). All capitalized terms used herein which are
not defined herein shall have the meaning given to such terms in the Lease
Agreement.
A. SUPPLEMENT
Lessee hereby (a) acknowledges and certifies that each Item of
Equipment described below or on any Schedule attached hereto (each, an "Item"
and collectively, the "Equipment") has been selected by, delivered to Lessee,
and is located at the location set forth below, and as between Lessor and
Lessee, each Item identified as assembled is of a size, design, capacity and
manufacture acceptable to and suitable for Lessee's purposes, has been installed
to Lessee's satisfaction, and is in good working order, repair and condition and
(b) unconditionally and irrevocably accepts each Item under the Lease Agreement
on the date hereof. Lessor and Lessee hereby agree that each Item described
below or on any Schedule attached hereto is hereby leased by Lessor under and
subject to all of the terms, conditions and provisions of the Lease Agreement
that the lease term of each such Item commences on the date hereof and that such
date is the first Funding Date thereof and that the Acquisition Cost, Interim
Term, Maximum Lessee Risk, Maximum Lessor Risk, and Casualty Loss Values for all
Items of Equipment covered by this Lease Agreement Supplement are as set forth
below. Lessee hereby agrees to pay the Lease Payment for all Items covered by
this Lease Agreement Supplement in the amounts and at the times specified in
Section 7 of the Lease Agreement and as specified below, reaffirms its
acknowledgments and agreements in the Lease Agreement and certifies that its
representations and warranties set forth in Section 2 of the Participation
Agreement and in any related certificate delivered to Lessor are true and
correct on the date hereof.
1. Description of Item(s) of Equipment (include make,
model and serial number and whether such Item is
completely assembled and the estimated date assembly
will be completed): See Schedule 1 attached hereto.
2. Location: See Schedule 1 attached hereto.
3. Acquisition Cost: See Schedule 1 attached hereto
<PAGE> 33
4. Casualty Loss Value: See Schedule 1 attached hereto
5. Interim Term: commencing on date hereof ("Funding Date")
and ending on October __, 2001.
6. Certain Values:
a. Maximum Lessee Risk Percentage: ____%
b. Maximum Lessor Risk Percentage: ____%
B. GRANT OF SECURITY INTEREST
The Lease Agreement and this Supplement constitute a financing
agreement intended as security. In consideration of the agreements contained
therein and in the Operative Documents, Lessee hereby grants, bargains, assigns,
transfers, conveys and pledges to Lessor a security interest in and Lien upon
its interest in the Equipment, and its interests in the Subleases related to
such Items of Equipment, each manufacturer's, vendor's or dealer's warranty on
the Equipment or any component thereof and all proceeds thereof as collateral
security for the payment and performance by Lessee of Lessee's obligations as
Lessee under the Operative Documents.
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<PAGE> 34
Dated: ____________, ____.
WILMINGTON TRUST COMPANY, not in its
individual capacity, but solely as
Trustee of Universal Compression Trust
(2000-1) under the Trust Agreement dated
as of May __, 2000,
Lessor
By:
---------------------------------------
Name:
Title:
UNIVERSAL COMPRESSION, INC.
Lessee
By:
--------------------------------------
Name:
Title:
-3-
<PAGE> 35
Schedule 1 to
Lease Agreement Supplement
FORM OF
SCHEDULE OF EQUIPMENT
TO LEASE AGREEMENT SUPPLEMENT NO. ___
<TABLE>
<CAPTION>
TYPE OF LOCATION MODEL SERIAL ASSEMBLED ESTIMATED DATE HP ACQUISITION COST AND CASUALTY
EQUIPMENT (ADDRESS & MANUFACTURER NUMBER NUMBER Y/N OF COMPLETION LOSS VALUE
COUNTY) $
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 36
EXHIBIT B
to Lease Agreement
[FORM OF] NOTICE OF SUBSTITUTION
[Date]
Universal Compression, Inc. ("Lessee") hereby gives Wilmington
Trust Company as Trustee of the Universal Compression Trust (2000-1) ("Lessor")
notice that as of the date hereof Lessee has substituted the following Equipment
in accordance with Section 13 of the Master Equipment Lease Agreement ("Lease
Agreement") dated as of May __, 2000 between Lessor and Lessee:
Replaced Equipment:
<TABLE>
<CAPTION>
Lease Estimated
Supplement Type of Model Serial Casualty Residual
No. Equipment Manufacturer Number Number Loss Value Value
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
Replacement Equipment:
<TABLE>
<CAPTION>
Fair Estimated
Type of Model Serial Value Residual
Location Equipment Manufacturer Number Number Market Value
(address & county
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
Universal Compression, Inc.
Lessee
------------------------------
By:
Title:
<PAGE> 1
EXHIBIT 10.43
LOAN AGREEMENT
among
WILMINGTON TRUST COMPANY,
Not In Its Individual Capacity but
solely as Trustee of
UNIVERSAL COMPRESSION TRUST (2000-1)
under the Trust Agreement
Dated as of May __, 2000
as Borrower
BANKERS TRUST COMPANY
as Administrative Agent
BANKERS TRUST COMPANY
as Collateral Agent
and
THE LENDERS PARTY HERETO
as Lenders
Dated as of May __, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. INTERPRETATION............................................................1
1.1. Headings....................................................1
1.2. Time........................................................1
1.3. Construction................................................1
1.4. Entire Agreement............................................1
1.5. Calculation of Interest, Fees, etc..........................1
1.6. Other Interpretive Provisions...............................1
2. THE CREDITS...............................................................2
2.1. Lender Commitment...........................................2
2.2. Payment to Borrower.........................................2
2.3. Notes.......................................................2
2.4. Payments....................................................2
2.4.1. Principal..........................................2
2.4.2. Interest...........................................3
2.4.3. Loan Availability Fee..............................3
2.4.4. Overdue Rate.......................................3
2.4.5. Payment Instructions...............................3
2.4.6. Business Day Convention............................4
2.4.7. Ratable Partial Prepayments........................4
2.5. Prepayments Limited.........................................4
2.6. Mandatory Prepayments.......................................4
2.6.1. Event of Loss......................................4
2.6.2. Non-Completion of Equipment........................4
2.6.3. Sale of Items of Equipment.........................5
2.6.4. Other Termination of Lease Agreement...............5
2.7. Application of Prepayments..................................5
3. CONDITIONS PRECEDENT......................................................5
3.1. Conditions of Term Loans....................................5
4. AFFIRMATIVE COVENANTS.....................................................6
4.1. Obligations.................................................6
4.2. Enforcement.................................................6
4.3. Defense.....................................................6
4.4. No Commingling of Funds.....................................6
4.5. Lessor Collateral...........................................6
4.6. Financial Information.......................................6
4.7. Inspection..................................................7
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
5. NEGATIVE COVENANTS........................................................7
5.1. Limitation on Liens.........................................7
5.2. Change of Name or Principal Office..........................7
5.3. No Amendments...............................................7
5.4. No Waiver of Default........................................7
6. EVENTS OF DEFAULT.........................................................7
6.1. Loan Events of Default......................................7
6.1.1. Non-Payment........................................8
6.1.2. Misleading Statements..............................8
6.1.3. Breaches of Other Operative Documents..............8
6.1.4. Insolvency Events..................................8
6.1.5. Monetary Judgments.................................9
6.1.6. Non-Monetary Judgments.............................9
6.1.7. Termination of the Trust...........................9
6.1.8. Cross Default......................................9
6.1.9. Investment Company.................................9
6.2. Remedies of Lenders.........................................9
6.2.1. Rights in Collateral...............................9
6.2.2. Acceleration.......................................9
6.2.3. Delivery of Documents; Taking Possession of
Collateral........................................10
6.2.4. Possession of Collateral..........................10
6.2.5. Sale of Collateral................................11
6.2.6. Discharge.........................................11
6.2.7. Appointment of Receiver...........................11
6.2.8. Redemption........................................12
6.2.9. Rights Cumulative; No Waiver......................12
6.2.10. Termination of Proceedings........................12
6.3. Rights Not Exclusive.......................................13
7. MISCELLANEOUS............................................................13
7.1. Amendment or Waiver........................................13
7.2. Notices....................................................13
7.3. No Waiver; Cumulative Remedies.............................13
7.4. Payments Set Aside.........................................13
7.5. Assignments................................................13
7.6. Set-off....................................................14
7.7. Execution and Effectiveness................................14
7.8. Severability...............................................14
7.9. Acknowledgments............................................14
7.10. Concerning Lessor..........................................14
7.11. Further Assurances.........................................15
7.12. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER
OF JURY TRIAL..............................................15
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.13. Survival of Agreement......................................16
7.14. Domicile of Loans..........................................16
</TABLE>
EXHIBIT A [Form of] Note
(iii)
<PAGE> 5
THIS LOAN AGREEMENT (this "Agreement") is entered into as of
May __, 2000 among WILMINGTON TRUST COMPANY, not in its individual capacity but
solely as Trustee of Universal Compression Trust (2000-1) under the Trust
Agreement dated as of May __, 2000, as Borrower ("Borrower"), the several
lenders from time to time parties to this Agreement (collectively, the
"Lenders"), BANKERS TRUST COMPANY, as Collateral Agent ("Collateral Agent") and
BANKERS TRUST COMPANY, as Administrative Agent for the Lenders ("Administrative
Agent"). Capitalized terms used but not otherwise defined in this Agreement
shall have the respective meaning given to such terms in Appendix A attached to
the Participation Agreement dated as of May __, 2000 (the "Participation
Agreement") among the Borrower, the Lenders, the Administrative Agent, the
Collateral Agent and the other parties thereto.
W I T N E S S E T H :
Borrower, Administrative Agent, Collateral Agent and Lenders
have agreed to enter into this Agreement pursuant to the terms and conditions of
the Participation Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, the parties hereto agree as follows:
1. INTERPRETATION
1.1. Headings. Headings in this Agreement are for convenience
of reference only and are not part of the substance hereof.
1.2. Time. All references in this Agreement to a time of day
shall mean the time in New York City unless otherwise indicated.
1.3. Construction. This Agreement is the result of
arm's-length negotiations among, and has been reviewed by, each party hereto and
its counsel. Accordingly, this Agreement shall be deemed to be the product of
each of the parties hereto, and no ambiguity shall be construed in favor of or
against any party.
1.4. Entire Agreement. This Agreement and each of the other
Operative Documents, taken together, constitute and contain the entire agreement
of the parties hereto and supersede any and all prior agreements, negotiations,
correspondence, understandings and communications among the parties, whether
written or oral, respecting the subject matter hereof.
1.5. Calculation of Interest, Fees, etc. All calculations of
interest, fees and other amounts under this Agreement for any period shall
include the first day of such period and exclude the last day of such period.
1.6. Other Interpretive Provisions. References in this
Agreement to "Sections," "Schedules" and "Exhibits" are to sections, schedules
and exhibits herein and hereto unless otherwise indicated.
<PAGE> 6
2. THE CREDITS
2.1. Lender Commitment. Subject to and upon the terms and
conditions set forth in this Agreement and the Participation Agreement during
the Commitment Period, each Lender agrees to make multiple, non-revolving loans
in accordance with Section 4.2 of the Participation Agreement, to Borrower in an
aggregate principal amount up to the amount of its Lender Commitment (each such
advance, a "Loan").
2.2. Payment to Borrower. The closing for each Loan shall
occur on a Funding Date. If the conditions precedent to a Lender's obligation to
make a Loan (as set forth in Section 3.2 of the Participation Agreement) are
satisfied or waived on or before 2:00 p.m. (New York time) on a Business Day,
each Lender shall make available to Borrower on the same Business Day the amount
of the Loan in immediately available funds. If the conditions precedent to a
Lender's obligation to make a Loan (as set forth in Section 3.2 of the
Participation Agreement) are not satisfied or waived until after 2:00 p.m. (New
York time) on a Business Day, each Lender shall make available to Borrower on
the next succeeding Business Day the amount of the Loan in immediately available
funds; provided, however, the Funding Date shall be deemed to be the previous
Business Day on which the funding was to have occurred. Amounts advanced by each
Lender hereunder shall be made by wire transfer on behalf of Borrower to Lessee
in immediately available funds at such bank or account maintained in the United
States as Lessee shall designate in writing to Administrative Agent no later
than 11:00 a.m. (New York) time on the Business Day preceding the proposed
Funding Date.
2.3. Notes. (a) All of the Loans made by each Lender shall be
evidenced by a single promissory note of Borrower in substantially the form of
Exhibit A hereto with the blanks and payment amounts appropriately completed in
conformity herewith (each, a "Note").
(b) The Note issued to each Lender shall (i) be executed by
Borrower, (ii) be payable to such Lender or registered assigns and be dated the
Closing Date, (iii) be in a stated principal amount equal to the Lender
Commitment of such Lender and be payable in the principal amount of the Loans
evidenced thereby, (iv) mature on the Maturity Date, (v) bear interest as
provided in the appropriate clause of Section 2.5.2, as the case may be, (vi) be
subject to mandatory repayment as provided in Section 2.7 and (vii) be entitled
to the benefits of this Agreement and the other Operative Documents.
(c) Each Lender 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 Borrower's obligations in respect of such Loans.
2.4. Payments.
2.4.1. Principal. Unless otherwise required to be
paid earlier under Section 2.7 or 7.2, the principal amount of the Loans shall
be payable on the Maturity Date.
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<PAGE> 7
2.4.2. Interest. Borrower agrees to pay to each
Lender on each Payment Date for a Loan interest in respect of the unpaid
principal amount of such Loan from the date the proceeds thereof are disbursed
to Borrower in accordance with Section 2.2 until the date on which such Loan
(together with accrued and unpaid interest thereon) is repaid in full (whether
on the Maturity Date, by acceleration or otherwise) at the Debt Rate calculated
for each day elapsed since the immediately preceding Payment Date, or in the
case of the first Payment Date for such Loan, since the Funding Date therefor as
follows:
DR x P x 1/D
where,
DR = the Debt Rate for such day;
P = the unpaid principal balance of such Loan
on such day; and
D = 360 or, to the extent the Debt Rate is
based on the Alternate Rate, 365 or 366
days, as applicable.
2.4.3. Loan Availability Fee. Borrower hereby agrees
to pay each Lender on each Payment Date and on the Basic Term Commencement Date
an availability fee ("Loan Availability Fee") during the Commitment Period,
which fee shall be calculated for each day elapsed since the immediately
preceding Payment Date, or in the case of the first Payment Date hereunder,
since the date of the Participation Agreement as follows:
AFR x LAC x 1/360
where,
AFR = Availability Fee Rate for such date; and
LAC = such Lender's Lender Available Commitment
as of such date.
2.4.4. Overdue Rate. Borrower shall pay to each
Lender interest on any part of the principal amount of such Lender's Loans and
interest thereon, if any, Loan Availability Fees and any other amount payable by
Borrower hereunder or under the Participation Agreement which shall not be paid
in full when due (whether at stated maturity, by acceleration or otherwise) on
demand for the period commencing on the due date thereof until the same is paid
in full at the Overdue Rate.
2.4.5. Payment Instructions. All payments to any
Lender hereunder or under the other Operative Documents shall be made without
defense, set-off or counterclaim to the Collateral Agent no later than [12:00
Noon] (New York time) on the date when due and shall be made in lawful money of
the United States of America in immediately available funds to such account of
the Collateral Agent as the Collateral Agent may designate in a written notice
to Borrower, Lessee and Guarantor or such account as the Majority Lenders may
designate in a written notice to Borrower, Lessee and Guarantor. All payments
received after [12:00 Noon]
-3-
<PAGE> 8
(New York time) shall be deemed received on the next Business Day. The
Administrative Agent shall determine the Lease Payment, Debt Rate, the Equity
Rate, the Availability Fee Rate, the Overdue Rate, if any, the interest and
principal, if any, due on the Loans, the Equity Return, the Availability Fee,
the Equity Availability Fee and Loan Availability Fee to be due on each Payment
Date and shall advise Borrower, Lessee and each Lender of such amounts owed with
respect thereto at least two (2) Business Days before such Payment Date. No
failure on the part of Administrative Agent to provide a notice under this
Section 2.4.5 shall release Borrower of any obligation to make a payment in
accordance herewith, provided however, no Loan Default shall occur and no
interest at the Overdue Rate shall accrue with respect to the non-payment of any
such payment until the later of the date such payment is due and the date two
(2) Business Days after such notice is given.
2.4.6. Business Day Convention. Unless otherwise
provided herein, any payment of principal or interest or Loan Availability fee
due in accordance with the terms hereof which is due on a date which is not a
LIBOR Banking Day shall be payable on the next succeeding LIBOR Banking Day,
unless such date falls in the next succeeding calendar month, in which case such
amounts shall be due on the immediately preceding LIBOR Banking Day and any
other payment due in accordance with the terms hereof which is due on a date
which is not a Business Day shall be payable on the next succeeding Business
Day.
2.4.7. Ratable Partial Prepayments. If the
Administrative Agent, the Collateral Agent or any Lender, whether by setoff or
otherwise, has payment made to it with respect to any portion of amounts owing
to it under the Operative Documents (other than Excepted Payments) in a greater
proportion than that received by the other parties, the party receiving the
greater proportion agrees, promptly upon demand, to purchase for cash without
recourse or warranty a portion of the amounts owing such other party under the
Operative Documents so that after such purchase each party will hold its ratable
proportion of the amounts owed Lenders under the Operative Documents; provided,
however, that if all or any portion of such excess amount is thereafter
recovered from such party, such purchase shall be rescinded and the purchase
price restored to the extent of such recovery, but without interest.
2.5. Prepayments Limited. No partial prepayment of the Loan
may be made except to the extent and in the manner expressly permitted by this
Agreement.
2.6. Mandatory Prepayments.
2.6.1. Event of Loss. In the event an Item of
Equipment shall suffer an Event of Loss and Lessee does not replace such Item in
accordance with clause (a) of Section 19.2 of the Lease Agreement, then on the
Casualty Loss Value Payment Date for such Item or Items Borrower shall prepay
and apply, and there shall become due and payable on the Casualty Loss Value
Payment Date for such Item, a principal amount of the Related Notes equal to the
Debt Component with respect to such Item of Equipment and all accrued and unpaid
interest thereon and related Breakage Cost, if any.
2.6.2. Non-Completion of Equipment. In the event
Lessee is obligated to purchase from Borrower any Item of Equipment in
accordance with Section 28.5 of the Lease
-4-
<PAGE> 9
Agreement, then on the first Business Day after the Non-Completion Date
therefor, Borrower shall prepay and apply, and there shall become due and
payable on such date, a principal amount of the Related Notes equal to the Debt
Component of such Item of Equipment all accrued and unpaid interest thereon and
related Breakage Costs, if any.
2.6.3. Sale of Items of Equipment. In the event that
Lessee exercises its option to acquire Borrower's rights and interests to and in
the Equipment pursuant to Section 28.4 of the Lease Agreement, on the Payment
Date on which such option is to be exercised, Borrower shall prepay and apply,
and there shall become due and payable on such Payment Date the entire principal
amount of the Notes, all accrued and unpaid interest thereon and related
Breakage Costs, if any.
2.6.4. Other Termination of Lease Agreement. If the
Lease Agreement is terminated with respect to any Item of Equipment on any date
other than the Termination Date therefor, Borrower shall prepay and apply, and
there shall become due and payable on such date a principal amount of the
Related Notes equal to the Debt Component of such Item of Equipment, all accrued
and unpaid interest thereon and related Breakage Costs, if any.
2.7. Application of Prepayments. The amount of any prepayment
received by any Lender pursuant to Section 2.6 shall be applied (i) first, to
the payment of Breakage Costs, if any, (ii) second, to the payment of interest
calculated at the Overdue Rate on all amounts owed to such Lender under the
Operative Documents and past due, if any, calculated from the dates due, to the
date of such prepayment, (iii) third, to the payment of accrued but unpaid Loan
Availability Fees and interest on all Loans made by Lender then due, if any, as
of the date of such prepayment, (iv) fourth, to the payment of any other amounts
then due to such Lender under the Operative Documents for accrued Taxes,
increased costs under Section 10 of the Participation Agreement and any other
amounts then due other than principal, and (v) fifth, to the payment of all
principal amounts then due to such Lender.1 No prepayment received by a Lender
shall increase such Lender's Lender Commitment.
3. CONDITIONS PRECEDENT
3.1. Conditions of Term Loans. The obligation of each Lender
to make its Loan hereunder is subject to the conditions precedent set forth in
Section 3.2 of the Participation Agreement.
- ------------
(1) Open issue
-5-
<PAGE> 10
4. AFFIRMATIVE COVENANTS
So long as any Loan or other Obligation shall remain unpaid or
unsatisfied:
4.1. Obligations. Borrower will faithfully abide by, perform
and discharge each and every obligation, covenant and agreement to be performed
by Borrower under the Operative Documents to which it is a party, and neither
the Administrative Agent nor the Collateral Agent shall not be responsible for
any of such obligations, covenants or agreements under any circumstances.
4.2. Enforcement. At the request of the Administrative Agent,
Borrower will use its reasonable efforts to enforce or secure the performance of
each and every obligation, covenant, condition and agreement contained in the
Lease Agreement to be performed by Lessee.
4.3. Defense. Borrower, at the reasonable request of the
Collateral Agent, will appear in and defend every action or proceeding arising
under, growing out of or in any manner connected with the Lease Agreement or the
obligations, duties or liabilities thereunder of Borrower and Lessee.
4.4. No Commingling of Funds. If at any time during a Loan
Default or Loan Event of Default Borrower should receive any amounts payable by
Lessee under the Lease Agreement, or by Guarantor under the Participation
Agreement, or any other proceeds for or with respect to Lessor Collateral, it
will hold such amounts in trust for the Collateral Agent and not commingle such
amounts with any other amounts belonging to or held by Borrower, advise the
Collateral Agent of such receipt and promptly forward such amounts directly to
the Collateral Agent.
4.5. Lessor Collateral. Upon the occurrence and continuance of
any Loan Event of Default, Borrower will immediately upon receipt of all checks,
drafts, cash or other remittances in payment of any of its accounts, contract
rights or general intangible constituting part of Lessor Collateral, or in
payment for any Lessor Collateral sold, transferred, leased or otherwise
disposed of, or in payment or on account of its accounts, contracts, contract
rights, notes, drafts, acceptances, general intangibles, choses in action and
all other forms of obligation relating to any of Lessor Collateral so sold,
transferred or otherwise disposed of, deliver any such items to the Collateral
Agent accompanied by a remittance report in form supplied or approved by the
Collateral Agent, such items to be delivered to the Collateral Agent in the same
form received, endorsed or otherwise assigned by such Borrower where necessary
to permit collection of items and, regardless of the form of such endorsement,
Borrower hereby waives presentment, demand, notice of dishonor, protest and
notice of protest.
4.6. Financial Information. Borrower shall furnish to Lenders
or cause to be furnished to Lenders, as the case may be (i) the documents,
certificates and financial statements to be provided by Lessee pursuant to
Section 9.5 of the Participation Agreement, at the times set forth therein; (ii)
such other information regarding the condition or operations, financial or
otherwise, of Lessee, Guarantor or the Lessor Collateral as the Majority Lenders
may from time to time reasonably request and which Lessee or Guarantor is
obligated to provide to Borrower
-6-
<PAGE> 11
under the terms of the Operative Documents; (iii) upon notice thereof, notice of
the existence of any Lease Default or Lease Event of Default; (iv) promptly upon
receipt, copies of all notices, lists or other written information received by
Borrower from Lessee pursuant to the Operative Documents; and (v) promptly upon
receipt by Borrower, copies of all notices, communications documents and
agreements relating to the Lessor Collateral.
4.7. Inspection. It shall allow or cause to allow any Person
acting on behalf of any Lender, the Administrative Agent or the Collateral Agent
(i) exercise on its behalf the inspection and examination rights set forth in
Section 16 of the Lease Agreement and in Section 9.5(b) of the Participation
Agreement and (ii) to visit, inspect and examine its books of record and
accounts of Borrower and to discuss with Borrower its affairs, finances and
accounts, in each case at such times and as often as any Lender, the
Administrative Agent or the Collateral Agent may reasonably request.
5. NEGATIVE COVENANTS
So long as any Loan or other obligation of Borrower to Lenders
shall remain unpaid or unsatisfied:
5.1. Limitation on Liens. Borrower shall not directly or
indirectly, make, create, incur, assume or suffer to exist any Lien (other than
Permitted Liens and Liens contemplated by the Operative Documents) upon or with
respect to any part of its property, assets or revenues whether now owned or
hereafter acquired, or assign or otherwise convey or encumber any existing or
future right to receive any income or payments (other than Permitted Liens and
Liens contemplated by the Operative Documents).
5.2. Change of Name or Principal Office. Borrower shall not
change its name, its principal place of business or its chief executive office
(as the last two phrases are used in the Uniform Commercial Code) without the
prior written consent of Administrative Agent which consent is not to be
unreasonably withheld.
5.3. No Amendments. It shall not amend, modify, consent to any
change to the terms or otherwise alter any of the Operative Documents in any
manner without the consent of the Majority Lenders.
5.4. No Waiver of Default. It shall not waive any Lease
Default or Lease Event of Default or breach any of its obligations under the
Lease Agreement without the consent of the Majority Lenders, and shall enforce
all of its rights under the Lease Agreement.
6. EVENTS OF DEFAULT
6.1. Loan Events of Default. The occurrence of any of the
following specified events (whatever the reason for such Loan Event of Default
and whether such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall constitute a "Loan Event of Default";
-7-
<PAGE> 12
6.1.1. Non-Payment. Borrower fails to pay, (i) when and
as required to be paid herein, any amount of principal or interest of any Loan
or any Loan Availability Fee and such amount remains unpaid for three (3) or
more Business Days after the same is due and payable or (ii) any other fee or
any other amount payable hereunder or under the Participation Agreement and
default shall continue for ten (10) or more Business Days after receipt by
Borrower of written notice thereof from the Administrative Agent or any Lender;
or
6.1.2. Misleading Statements. Any representation or
warranty by Borrower made in any of the Operative Documents or in any
certificate delivered pursuant thereto shall prove to be untrue in any material
respect on the date as of which made; or
6.1.3. Breaches of Other Operative Documents. Borrower
fails to perform or observe any other covenant, condition or agreement required
to be performed or observed by Borrower by the terms of this Agreement or any
other Operative Document (other than those identified in Section 6.1.1. above)
and such failure shall continue unremedied for a period of thirty (30) days
after receipt by Borrower of written notice thereof from the Administrative
Agent or any Lender; or
6.1.4. Insolvency Events. (i) Borrower shall consent to
the appointment of or the taking of possession by a receiver, agent or
liquidator of itself or of a substantial part of its property, or Borrower shall
admit in writing its inability to pay its debts generally as they become due, or
does not pay its debts generally as they become due or shall make a general
assignment for the benefit of creditors, or Borrower shall file a voluntary
petition in bankruptcy or a voluntary petition or an answer seeking
reorganization, liquidation or other relief in a case under any bankruptcy laws
or other insolvency laws (as in effect at such time) or an answer admitting the
material allegations of a petition filed against it, or Borrower shall seek
relief by voluntary petition, answer or consent, under the provisions of any
other bankruptcy or other similar law providing for the reorganization or
winding-up of corporations (as in effect at such time) or Borrower shall seek an
agreement, composition, extension or adjustment with its creditors under such
laws, or Borrower shall adopt a resolution authorizing action in furtherance of
any of the foregoing and the petition is not controverted within 10 days; or
(ii) an order, judgment or decree shall be entered by any court of competent
jurisdiction (A) appointing, without the consent of Borrower, a receiver,
trustee or liquidator of such person or of any substantial part of its property,
or (B) sequestering any substantial part of the property of Borrower, or (C)
granting any other relief in respect of Borrower as a debtor under any
bankruptcy laws or other insolvency laws (as in effect at such time), and in
each case any such order, judgment or decree of appointment or sequestration
shall remain in force undismissed, unstayed and unvacated for a period of 60
days after the date of entry thereof; or (iii) a petition against Borrower in a
case under any bankruptcy laws or other insolvency laws (as in effect at such
time) is filed and not withdrawn or dismissed within 60 days thereafter, or if,
under the provisions of any law providing for reorganization or winding-up of
corporations which may apply to Borrower, any court of competent jurisdiction
assumes jurisdiction, custody or control of such person or of any substantial
part of its property and such jurisdiction, custody or control remains in force
unrelinquished, unstayed and unterminated for a period of 60 days; or
-8-
<PAGE> 13
6.1.5. Monetary Judgments. One or more non-interlocutory
judgments, non-interlocutory orders, decrees or arbitration awards is entered
against Borrower involving in the aggregate a liability (to the extent not
covered by independent third-party insurance as to which the insurer does not
dispute coverage) as to any single or related series of transactions, incidents
or conditions, of $2,500,000 or more, and the same shall remain unsatisfied,
unvacated and unstayed pending appeal for a period of 30 days after the entry
thereof, or any action shall be legally taken by a judgment creditor to levy
upon assets or properties of Borrower to enforce any such judgment; or
6.1.6. Non-Monetary Judgments. Any non-monetary judgment,
order or decree is entered against Borrower which does or would reasonably be
expected to have a material adverse effect with respect to Borrower, and there
shall be any period of 30 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect, or any action shall be legally taken by a judgment creditor to levy
upon assets or properties of Borrower to enforce any such judgment; or
6.1.7. Termination of the Trust. The Trust created
pursuant to the Trust Agreement shall have been terminated; or
6.1.8. Cross Default. A Lease Event of Default shall have
occurred and be continuing; or
6.1.9. Investment Company. Borrower shall become an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended or the arrangements contemplated by the Operative Documents shall
require registration as an "investment company" within the meaning of such Act.
6.2. Remedies of Lenders.
6.2.1. Rights in Collateral. If a Loan Event of Default
shall have occurred and be continuing, then and in every such case the
Administrative Agent shall, upon written request by the Majority Lenders,
subject to Lessee's right of quiet enjoyment pursuant to Section 2 of the Lease
Agreement, exercise any or all of the rights and powers and pursue any and all
of the remedies pursuant to this Section 6.2.1, any and all remedies under the
other Security Documents, and any and all remedies available to a secured party
under the UCC or any other provision or law and, in the event such Loan Event of
Default is related to a Lease Event of Default, subject to Lessee's rights to
purchase the Items of Equipment pursuant to Section 24 of the Lease Agreement,
may take possession of all or any part of Lessor Collateral and may exclude
Borrower, and, subject to the terms of the Lease Agreement and any related
Sublease, Lessee, any sublessee and all Persons claiming under any of them
wholly or partly therefrom; provided, however, the Collateral Agent shall not
sell or re-lease the Equipment for a period of thirty (30) days after such Event
of Default during which time any Certificate Holder, the Administrative Agent,
the Collateral Agent and any Lender may remarket the Equipment.
6.2.2. Acceleration. If a Loan Event of Default referred
to in Section 6.1.4 shall have occurred or a Lease Event of Default of the type
referred to in clause (g) of
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<PAGE> 14
Section 23 of the Lease Agreement thereof shall have occurred, then and in
every such case the accrued Loan Availability Fees, the unpaid principal of each
Loan, together with interest accrued but unpaid thereon, Breakage Costs, if any,
and all other amounts due to each Lender shall, unless such Lender shall
otherwise direct, immediately and without further act become due and payable by
Borrower to such Lender, without presentment, demand, protest or notice, all of
which are hereby waived. If any other Loan Event of Default shall have occurred
and be continuing, then and in every such case, the Administrative Agent shall,
upon written request by the Majority Lenders, by written notice or notice to
Borrower, declare all accrued Loan Availability Fees and all Loans to be due and
payable, whereupon the accrued Loan Availability Fees and unpaid principal of
the Loans then outstanding, together with accrued but unpaid interest thereon,
Breakage Costs, if any, and all other amounts due from Borrower to Lenders,
shall immediately and without further act become due and payable by Borrower to
Lenders without presentment, demand, protest or other notice, all of which are
hereby waived.
6.2.3. Delivery of Documents; Taking Possession of
Collateral. Upon the occurrence of a Loan Event of Default, at the request of
the Collateral Agent, Borrower shall promptly execute and deliver to the
Collateral Agent such instruments of title and other documents as the Collateral
Agent may deem necessary or advisable to enable the Collateral Agent or a
representative designated by the Collateral Agent, at such time or times and
place or places as the Collateral Agent may specify, to obtain possession of all
or any part of Lessor Collateral to whose possession the Collateral Agent shall
at the time be entitled hereunder. If Borrower shall for any reason fail to
execute and deliver such instruments and documents after the request by the
Collateral Agent, the Collateral Agent may (a) obtain a judgment conferring on
the Collateral Agent the right to immediate possession and requiring Borrower to
execute and deliver such instruments and documents to the Collateral Agent, to
the entry of which judgment Borrower hereby specifically consents, and (b)
pursue all or part of such Lessor Collateral wherever it may be found and may
enter any of the premises of Lessee or Borrower wherever such Lessor Collateral
may be or is purported to be and search for such Lessor Collateral and take
possession of and remove such Lessor Collateral. All expenses of obtaining such
judgment or of pursuing, searching for and taking such property shall, until
paid, be secured by the Lien of this Agreement.
6.2.4. Possession of Collateral. Subject to the proviso
in Section 6.2.1, upon taking of possession pursuant hereto, the Collateral
Agent or a representative designated by the Collateral Agent may, from time to
time, at the expense of Borrower, make all such expenditures for maintenance,
insurance, repairs, replacements and alterations to any of Lessor Collateral, as
it may deem appropriate and commercially reasonable. In such case, the
Collateral Agent or a representative of the Collateral Agent shall have the
right (but not the obligation) to maintain, use, operate, store, lease, control
or manage Lessor Collateral and to carry on the business and to exercise all
rights and powers of Borrower relating to Lessor Collateral, as the Collateral
Agent shall deem best, including the right to enter into any and all such
agreements with respect to the maintenance, use, operation, storage, leasing,
control, management or disposition of Lessor Collateral or any part thereof as
the Collateral Agent may determine; and the Collateral Agent shall be entitled
to collect and receive directly all tolls, rents (including Lease Payments,
Availability Fees and Supplemental Payments), revenues, issues, income, products
and profits of Lessor Collateral and every part thereof, without prejudice,
however, to
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<PAGE> 15
the right of Lenders or the Collateral Agent under any provision of this
Agreement to collect and receive all cash held by, or required to be deposited
with, Borrower hereunder. Such tolls, rents (including Lease Payments,
Availability Fees and Supplemental Payments), revenues, issues, income, products
and profits shall be applied to pay the expenses of the use, operation, storage,
leasing, control, management or disposition of Lessor Collateral and of
conducting the business thereof, and of all maintenance, repairs, replacements,
alterations, additions and improvements, and to make all payments which the
Collateral Agent may be required or may elect to make, if any, for taxes,
assessments, insurance or other proper charges upon Lessor Collateral or any
part thereof (including the employment of engineers and accountants to examine,
inspect and make reports upon the properties and books and records of Borrower
or Lessee), and all other payments which the Collateral Agent may be required or
authorized to make under any provision of this Agreement, as well as just and
reasonable compensation for the services of the Collateral Agent, and of all
Persons properly engaged and employed by the Collateral Agent.
6.2.5. Sale of Collateral. Subject to the proviso in
Section 6.2.1, in addition, the Collateral Agent may sell, assign, transfer and
deliver the whole, or from time to time to the extent permitted by law, any part
of Lessor Collateral or any interest therein, at any private sale or public
auction with or without demand, advertisement or notice (except as herein
required or as may be required by law) of the date, time and place of sale and
any adjustment thereof for cash or credit or other property for immediate or
future delivery and for such price or prices and on such terms as the Collateral
Agent may determine, or as may be required by law. It is agreed that ten (10)
Business Days' notice to Borrower of the date, time and place (and terms, in the
case of a private sale) of any proposed sale by the Collateral Agent of Lessor
Collateral or any part thereof or interest therein is reasonable. Each of the
Collateral Agent and any Lender may be a purchaser of Lessor Collateral or any
part thereof or any interest therein at any sale thereof, whether pursuant to
foreclosure or power of sale or otherwise. The Collateral Agent may apply
against the purchase price therefor all or part of the amount then due under the
Notes secured by such Lessor Collateral. The Collateral Agent shall, upon any
such purchase, acquire good title to the property so purchased, to the extent
permitted by Applicable Law, free of all rights of redemption.
6.2.6. Discharge. Upon any sale of Lessor Collateral or
any part thereof or interest therein, whether pursuant to foreclosure or power
of sale or otherwise, the receipt of the purchase money by the official making
the sale by judicial proceeding or by the Collateral Agent shall be sufficient
discharge to the purchaser for the purchase money and neither such official nor
such purchaser shall be obliged to see to the application thereof.
6.2.7. Appointment of Receiver. If a Loan Event of
Default shall have occurred and be continuing, the Collateral Agent shall, as a
matter of right, be entitled to appoint a receiver or trustee or representative
(who may be the Collateral Agent or any successor or nominee thereof, or any
Lender appointed by the Collateral Agent) for all or any part of Lessor
Collateral, whether such receivership or agency or representation be incidental
to a proposed sale of Lessor Collateral or the taking of possession thereof, the
exercise of remedies under this Agreement or the Lease Agreement or otherwise,
and Borrower hereby consents to the appointment of such a receiver, trustee or
representative. Any receiver, trustee or representative appointed for all or any
part of Lessor Collateral shall be entitled to exercise all rights of the
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<PAGE> 16
Collateral Agent under this Agreement and the other Operative Documents to the
extent provided in such appointment and shall be entitled to exercise all the
powers and pursue all the remedies of the Collateral Agent hereunder with
respect to Lessor Collateral.
6.2.8. Redemption. Any sale of Lessor Collateral or any
part thereof or any interest therein, whether pursuant to foreclosure or power
of sale or otherwise hereunder, shall forever be a perpetual bar against
Borrower, after the expiration of the period, if any, during which Borrower
shall have the benefit of redemption laws which may not be waived pursuant to
Section 6.2.5. Subject to the provisions of this Agreement, Borrower covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any appraisement, valuation, stay or extension law wherever
enacted, nor at any time hereafter in force, in order to prevent or hinder the
enforcement of this Agreement or the execution of any power granted herein to
Lenders or the Collateral Agent, or the absolute sale of Lessor Collateral, or
any part thereof, or the possession thereof by any transfer at any sale under
this Section 6.2; and Borrower for itself and all who may claim under it, so far
as it or any of them now or thereafter lawfully do so, waives all right to have
Lessor Collateral marshaled upon any foreclosure hereof, and agrees that any
court having jurisdiction to foreclose this Agreement may order the sale of
Lessor Collateral as an entirety.
6.2.9. Rights Cumulative; No Waiver. Each and every
right, power and remedy herein given to Lenders and the Collateral Agent
specifically or otherwise in this Agreement shall be cumulative and shall be in
addition to every other right, power and remedy herein specifically given or now
or hereafter existing at law, 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 and as often and in such order as may be deemed
expedient by the Majority Lenders or the Collateral Agent, and the exercise or
the beginning of the exercise of any power or remedy shall not be construed to
be a waiver of the right to exercise at the same time or thereafter any other
right, power or remedy. No delay or omission by the Administrative Agent, any
Lender or the Collateral Agent in the exercise of any right, remedy or power or
in the pursuance of any remedy shall impair any such right, power or remedy or
be construed to be a waiver of any default on the part of Borrower, Lessee or
Guarantor or to be an acquiescence therein.
6.2.10. Termination of Proceedings. If the Administrative
Agent, the Lenders or the Collateral Agent shall have instituted any proceeding
to enforce any right, power or remedy under this Agreement by foreclosure, entry
or otherwise, and such proceedings shall have been discontinued or abandoned for
any reason or shall have been determined adversely to the Administrative Agent,
the Lenders or the Collateral Agent, then and in every such case Borrower, the
Administrative Agent, the Lenders, the Collateral Agent, Lessee and Guarantor
shall, subject to any binding determination in such proceeding, be restored to
their former positions and rights hereunder with respect to Lessor Collateral,
and all rights, remedies and powers of the Administrative Agent, the Lenders and
the Collateral Agent shall continue as if no such proceedings had been
instituted.
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<PAGE> 17
6.3. Rights Not Exclusive. The rights provided for in this
Agreement and the other Operative Documents are cumulative and are not exclusive
of any other rights, powers, privileges or remedies provided by law or in
equity, or under any other instrument, document or agreement now existing or
hereafter arising. No failure or delay of the Administrative Agent, the
Collateral Agent or any Lender in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. No waiver of any provision of this
Agreement or any other Operative Document or consent to any departure by
Borrower therefrom shall in any event be effective unless the same shall be
permitted by Section 7.1, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice to
or demand on Borrower in any case shall entitle Borrower to any other or further
notice or demand in similar or other circumstances.
7. MISCELLANEOUS
7.1. Amendment or Waiver. Neither this Agreement nor any other
Loan Document nor any term hereof or thereof may be changed, amended, waived,
discharged or terminated except in accordance with Section 12.2 of the
Participation Agreement.
7.2. Notices. Unless otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon the
respective parties to this Agreement shall be given in accordance with Section
12.4 of the Participation Agreement.
7.3. No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Administrative Agent or any
Lender, any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege.
7.4. Payments Set Aside. To the extent that Borrower makes a
payment to the Administrative Agent, the Collateral Agent or Lenders, or the
Administrative Agent, the Collateral Agent or Lenders exercise their right of
set-off, and such payment or the proceeds of such set-off or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by the
Administrative Agent, the Collateral Agent or such Lender in its discretion) to
be repaid to a trustee, receiver or any other party, in connection with any
event of the type described in Section 6.1.4 or otherwise, then (a) to the
extent of such recovery the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred, and (b) each Lender
severally agrees to pay to the Administrative Agent or the Collateral Agent,
upon demand its Pro Rata Share of any amount so recovered from or repaid by the
Administrative Agent or the Collateral Agent.
7.5. Assignments. 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, neither Borrower nor any
Lender may assign or transfer any of its rights,
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<PAGE> 18
obligations or interest hereunder except in accordance with Section 12.7 of the
Participation Agreement.
7.6. Set-off. In addition to any rights and remedies of
Lenders provided by Applicable Law, if a Loan Event of Default exists or the
Loans have been accelerated, each Lender is authorized at any time and from time
to time, without prior notice to Borrower, any such notice being waived by
Borrower to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held by, and other indebtedness at any time owing by, such Lender to or for
the credit or the account of Borrower against any and all Obligations owing to
such Lender, now or hereafter existing, irrespective of whether or not the
Administrative Agent or such Lender shall have made demand under this Agreement
or any other Operative Document and although such Obligations may be contingent
or unmatured. Each Lender agrees promptly to notify Borrower and the
Administrative Agent after any such set-off and application made by such Lender;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application.
7.7. Execution and Effectiveness. This Agreement may be
executed in any number of identical counterparts, any set of which signed by all
parties hereto shall be deemed to constitute a complete, executed original for
all purposes and shall become effective when each of the parties hereto and each
of the parties to the Participation Agreement and Lease Agreement have executed
and delivered this Agreement, the Participation Agreement and the Lease
Agreement.
7.8. Severability. Any provision of this Agreement that 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. To the extent permitted
by Applicable Law, the parties hereto hereby waive any provision of law that
renders any provisions hereof prohibited or unenforceable in any respect.
7.9. Acknowledgments. Borrower hereby acknowledges that:
(a) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to Borrower arising out of or in connection
with this Agreement or any of the other Operative Documents, and the
relationship between the Administrative Agent, the Collateral Agent and Lenders,
on one hand, and Borrower, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(b) no joint venture is created hereby or by the other
Operative Documents or otherwise exists by virtue of the transactions
contemplated hereby among Lenders or among Borrower and Lenders.
7.10. Concerning Lessor. Trust Company is entering into this
Agreement solely in its capacity as Trustee under the Trust Agreement and not in
its individual capacity and in no
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<PAGE> 19
case shall Trust Company (or any entity acting as successor Trustee under the
Trust Agreement) be personally liable for or on account of any of the
statements, representations, warranties, covenants or obligations stated to be
those of Lessor hereunder.
7.11. Further Assurances. Borrower agrees to do such further
acts and things and to execute and deliver to the Administrative Agent or
Collateral Agent such additional assignments, agreements, powers and
instruments, as the Administrative Agent may require or deem advisable to carry
into effect the purposes of this Agreement and the other Operative Documents or
to better assure and confirm unto the Administrative Agent and Lenders their
respective rights, powers and remedies hereunder.
7.12. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER
OF JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER LOAN 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 LOAN DOCUMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES
FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. 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 BORROWER
AT ITS ADDRESS SET FORTH IN SECTION 12.4 OF THE PARTICIPATION AGREEMENT, SUCH
SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR COLLATERAL AGENT UNDER THIS
AGREEMENT, ANY LENDER 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) 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
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<PAGE> 20
OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
7.13. Survival of Agreement. All covenants, agreements,
representations and warranties made by Borrower in the Participation Agreement
and in the certificates or other instruments prepared or delivered in connection
with or pursuant to the Participation Agreement, this Agreement or any other
Operative Document shall be considered to have been relied upon by Lenders and
shall survive the making by Lenders of the Loans, and the execution and delivery
to Lenders of the Notes evidencing such Loans, regardless of any investigation
made by Lenders or on their behalf, and shall continue in full force and effect
as long as the principal of or any accrued interest on any Loan or any fee or
any other amount payable under this Agreement or any other Operative Document is
outstanding and unpaid.
7.14. Domicile of Loans. Each Lender may transfer and carry
its Loans at, to or for the account of any lending office, Subsidiary or
Affiliate of such Lender.
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<PAGE> 21
WHEREFORE, the parties hereto have caused this Agreement to be
duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
WILMINGTON TRUST COMPANY,
not in its individual
capacity, but solely
as Trustee of
UNIVERSAL COMPRESSION
TRUST (2000-1) under
the Trust Agreement,
dated as of May __,
2000, as Borrower
By:
-----------------------------------
Name:
Title:
BANKERS TRUST COMPANY
as Administrative Agent
By:
Name:
-----------------------------------
Title:
BANKERS TRUST COMPANY
as Collateral Agent
By:
-----------------------------------
Name:
Title:
[LENDERS]
By:
-----------------------------------
Name:
Title:
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<PAGE> 22
Exhibit A
[FORM OF] NOTE
NOTE
$_________ New York, New York
[_______________]
FOR VALUE RECEIVED, the undersigned, Wilmington Trust Company,
not in its individual capacity but solely as Trustee of Universal Compression
Trust (2000-1) under a Trust Agreement dated as of [_______________] the
"Borrower"), PROMISES TO PAY TO [ ], a [ ] organized under the laws of [ ] (the
"Lender"), or its registered assigns if not earlier accelerated, on the Maturity
Date (as defined in Appendix A to the Participation Agreement (the
"Participation Agreement") dated as of May __, 2000 among Universal Compression,
Inc., (the "Lessee"), Universal Compression Holdings, Inc., Borrower, Wilmington
Trust Company, in its individual capacity, but only where so specified, the
certificate holders from time to time party thereto, Bankers Trust Company, as
Administrative Agent, Bankers Trust Company, as Collateral Agent and the lenders
from time to time party thereto as such place as the Lender designates on
Schedule 4 to the Participation Agreement or as Lender may from time to time
designate, the principal sum of _____________________________ United States
Dollars (U.S. $_____________) or, if less, the aggregate unpaid principal amount
of the Loans made by the Lender to the Borrower pursuant to the Loan Agreement
(as defined in Appendix A), in lawful money of the United States and in
immediately available funds. Interest on the unpaid principal balance
outstanding herewith from time to time shall be payable as stated in the Loan
Agreement and, if not earlier accelerated in accordance with the terms of the
Loan Agreement shall be payable on each Payment Date (as defined in Appendix A).
Capitalized terms used but not otherwise defined in this Note
shall have the respective meaning given to such terms in Appendix A to the
Participation Agreement.
The Borrower may make prepayments on this Note only as
provided in the Loan Agreement.
This is one of the Notes referred to in the Loan Agreement and
is entitled to the benefits of the provisions of the Loan Agreement and the
security provided by the Loan Documents therein.
Upon the occurrence of a Loan Event of Default, the principal
hereof and accrued interest hereon may be declared to be and shall thereupon
become forthwith due and payable, together with all other amounts owing or
payable under the Loan Agreement or under any other Operative Document, all as
provided in said Loan Agreement.
<PAGE> 23
Exhibit A
Page 2
In the event any sum payable hereunder is not paid when due
(by acceleration or otherwise), such sum shall bear interest at the Overdue Rate
in accordance with Section 2.5.4 of the Loan Agreement.
This Note is subject to the repayment and prepayment
provisions set forth in Section 2.7 of the Loan Agreement.
The Borrower waives presentment, demand, protest or notice of
any kind in connection with this Note.
Should the indebtedness represented by this Note or any part
thereof be collected at law or in equity or in bankruptcy, receivership or other
court proceeding or should this Note be placed in the hands of attorneys for
collection after default, Borrower, and any other Person who may be liable
hereunder in any capacity, agree to pay, on demand, in addition to the principal
hereof, accrued interest hereon and all other amounts owing or payable under the
Loan Agreement or under any other Operative Document, all costs of collecting or
attempting to collect this Note, including attorneys' fees and reasonable
expenses (including those incurred in connection with any appeal).
This Note is issued as a registered Note. Borrower may deem
and treat the Person in whose name this Note is registered on the register held
by the Administrative Agent or its agent as the absolute owner hereof (whether
or not this Note shall be overdue) for the purpose of paying payments of
principal, the Breakage Costs, if applicable, and interest and for all other
purposes, and Borrower and Lender shall not be affected by any notice to the
contrary. This Note may be transferred or assigned only in accordance with the
provisions of the Participation Agreement.
Lender shall have recourse for all liabilities and obligations
arising under this Note, the Loan Agreement and the other Operative Documents to
the extent of such collateral, if any, as may secure Borrower's obligations and
liabilities under this Note, the Loan Agreement and the other Operative
Documents.
Neither this Note nor the Loan Agreement shall require the
payment or permit the collection of interest in excess of the maximum permitted
by law. If any such excess of interest is provided for, or shall be adjudicated
to be so provided for, herein or in the Loan Agreement, Borrower shall not be
obligated to pay such interest in excess of the maximum amount permitted by law,
and the right to demand the payment of any such excess shall be and is hereby
waived. This provision shall control any other provision of this Note or the
Loan and Security Agreement.
<PAGE> 24
Exhibit A
Page 3
This Note shall be governed by and construed in accordance
with the laws of the State of New York.
Wilmington Trust Company, not in its
individual capacity but solely as
Trustee of UNIVERSAL COMPRESSION
TRUST (2000-1) under the Trust
Agreement, dated as of
[---------------]
By:
-----------------------------------
Name:
Title:
<PAGE> 25
Exhibit A
Page 4
Endorsement
[Date]
Lenders hereby consent to the release of Wilmington Trust
Company, not in its individual capacity but solely as Trustee of Universal
Compression Trust (2000-1) under the Trust Agreement, dated as of May __, 2000
from its obligations and liabilities to Lender as "Borrower" under the Loan
Agreement and the foregoing Note.
[LENDER]
By:
-----------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.44
This ASSEMBLY AGENCY AGREEMENT, dated as of May __, 2000 (as amended,
supplemented or otherwise modified from time to time, this "Agreement"), between
[NAME OF TRUST COMPANY], a _____________, not in its individual capacity, but
solely as Trustee of Universal Trust (2000-1) under the Trust Agreement dated
May __, 2000 (the "Trustee"), and UNIVERSAL COMPRESSION, INC., a Texas
corporation ("Universal").
PRELIMINARY STATEMENT
A. Universal has entered and will enter into various contracts in its
individual capacity and not as agent for Trustee ("Buyer") for the purchase,
delivery, construction and successful assembly of each Item of Equipment (each a
"Contract" and collectively, the "Contracts").
B. Pursuant and subject to the terms and conditions of the
Participation Agreement, dated as of the date hereof among Universal, Universal
Compression Holdings, Inc., [Trust Company], not in its individual capacity but
as Trustee of Universal Trust (2000-1), [Trust Company] in its individual
capacity, Deutsche Bank and the other financial institution that may become
party thereto, as Certificate Holders, Bankers Trust Company, as Administrative
Agent and Collateral Agent, and the Lenders named therein or that may become a
party thereto (the "Participation Agreement"), Universal will collaterally
assign its rights under the Contracts to Trustee to secure Universal's
obligations hereunder.
C. Subject to the terms and conditions hereof, Trustee desires to
appoint Universal as Trustee's sole and exclusive agent for the delivery,
construction and assembly of all aspects of the Equipment in accordance with
design specifications and all Applicable Laws and Universal desires, for the
benefit of Trustee, to purchase, take delivery of, construct and assemble the
Equipment in each case in accordance with the terms herein set forth.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Defined Terms; Rules of Usage. Capitalized terms used but
not otherwise defined in this Agreement shall have the respective meanings
specified in Appendix A to the Participation Agreement, which Appendix A is made
a part hereof by this reference, and the rules of interpretation set forth in
such Appendix A shall apply to this Agreement.
ARTICLE II.
APPOINTMENT OF UNIVERSAL
SECTION 2.1. Appointment of Universal. (a) Pursuant to and subject to
the terms and conditions set forth herein and in the Participation Agreement and
the other Operative Documents,
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during the Assembly Period, Trustee hereby irrevocably designates and appoints
Universal as its exclusive agent for the following purposes and expressly
authorizes Universal, or any agent or contractor of Universal, and, subject to
Article VI, Universal agrees, for the benefit of Trustee, whether or not a Lease
Event of Default has occurred or is continuing, to take all action necessary or
desirable for the performance and satisfaction of all of Universal's obligations
hereunder, including, without limitation:
(i) to acquire and successfully assemble each Item of Equipment
under and in accordance with the terms of the Contracts, and in
connection therewith to exercise all rights of Trustee
concerning supervision and inspection under the Contracts in
such manner to ensure that each Item of Equipment will be
constructed, assembled, completed and delivered to Trustee (or
its designee) in accordance with the Contracts;
(ii) to approve or disapprove in a timely manner of all materials
delivered under the Contracts and all plans and specifications
as Universal shall deem to be in the best interests of Trustee;
(iii) to attend shop tests of each Item of Equipment;
(iv) to be present at and attend the Appraisals;
(v) to agree to any amendment, modification or change in the
Contracts, any part of an Item of Equipment or any plans and
specifications for an Item of Equipment, as Universal deems in
its sole discretion to be necessary for the completion of each
of the Items of Equipment; provided, that (x) no such amendment
or modification shall reasonably be anticipated to --------
cause the continuation of the construction and assembly of the
Equipment to be completed after the last day of the Interim Term
and (y) the aggregate effect of any amendment or modification,
when taken together with any previous or contemporaneous
amendments or modifications, will not have a material adverse
effect on the fair market value, Residual Value or utility of
the Item of Equipment upon completion;
(vi) in the event Trustee shall be required to accept the Item of
Equipment in accordance with the terms of the Operative
Documents, to exercise all rights of acceptance of Trustee (or
its designee) thereunder;
(vii) to exercise any and all rights of termination or cancellation of
any Contract and in the event of any such cancellation or
termination to take such action in respect of such cancellation;
(viii) to take all such other actions with respect to the Items of
Equipment or the Contracts as Universal shall deem to be in the
best interests of Trustee and of Universal; provided that in no
event shall Universal institute any litigation for or on behalf
of Trustee;
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(ix) to perform all engineering work and all design and supervisory
functions relating to the construction and assembly of each
Items of Equipment;
(x) to obtain all necessary permits, authorizations, registrations,
consents, approvals, waivers, variances, orders, judgments,
licenses, filings, notice to and declaration of any Governmental
Entity reasonably required under Applicable Law (including
environmental laws), in connection with the purchase, delivery,
construction and assembly of each Item of Equipment in
accordance with the Contracts and the Operative Documents;
(xi) to maintain all books and records with respect to the purchase,
delivery, construction, assembly and operation and management of
the Items of Equipment; and
(xii) to perform any other acts necessary in connection with the
identification, construction, assembly and testing of each Item
of Equipment in accordance with the Contracts.
(b) Neither Universal nor any of its Affiliates or agents shall enter
into any contract as agent for Trustee of which would impose any liability or
obligation on Trustee.
(c) Universal shall comply with all obligations of the buyer or user of
service under the Contracts in order to maintain the Contracts in full force and
effect so as to preserve fully the rights of Trustee and Universal thereunder;
(d) Subject to the terms and conditions of this Agreement and the other
Operative Documents, Universal shall have sole management and control over the
construction means, methods, sequences and procedures with respect to the
permanent construction and assembly of each Item of Equipment.
SECTION 2.2. Acceptance. Subject to the terms hereof, Universal hereby
unconditionally and irrevocably accepts the designation and appointment as agent
to Trustee in accordance with the terms hereof.
SECTION 2.3. Term. This Agreement shall commence on the date hereof and
shall terminate on the first to occur of:
(i) payment by Universal of the Payment Date Option Amount
pursuant to Section 28.4 of the Lease Agreement; and
(ii) the Basic Term Commencement Date.
Notwithstanding anything contained herein to the contrary, Universal's
obligations under this Agreement shall automatically terminate upon the
termination of this Agreement pursuant to this Section 2.3, other than those
obligations which by the terms of the Operative Documents survive such
termination.
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SECTION 2.4. Construction Documents; Assignment of Construction
Documents. Universal may execute any of its duties under this Agreement by or
through agents, contractors, employees or attorneys-in-fact. Buyer shall enter
into such agreements in its individual capacity and not as agent for Trustee in
addition to the Contracts, which it deems necessary or desirable for the
purchase, delivery, design, construction, assembly, testing and performance of
the Equipment and performance of all other duties described in Section 2.1
hereof (the "Construction Documents"); provided, however, that no such
delegation shall limit or reduce in any way Universal's duties and obligations
under this Agreement. As security for its obligations hereunder, the Buyer
agrees to assign Trustee all of the Buyer's rights under and interest in such
Construction Documents.
SECTION 2.5. Covenants of Universal. Universal hereby covenants and
agrees that it will:
(a) use commercially reasonable efforts to cause construction of the
Equipment to be pursued diligently and without undue interruption in accordance
with the Contracts and the other Construction Documents and, to render the
Equipment fully operational in accordance with the design specification, in
compliance in all material respects with Applicable Laws; and
(b) maintain adequate records with respect to the application of all
amounts reimbursed to Universal by Trustee or paid directly by Trustee to
manufacturers and vendors of Equipment under the Participation Agreement.
ARTICLE III.
PAYMENT OF FUNDS
SECTION 3.1. Reimbursement of Construction Costs (a) Universal may
request reimbursement of Acquisition Costs in accordance with Section 4.6 of the
Participation Agreement.
ARTICLE IV.
MISCELLANEOUS
SECTION 4.1. Notices. All notices, consents, directions, approvals,
instructions, requests, demands and other communications required or permitted
by the terms hereof to be given to any Person shall be given in writing in the
manner provided in, shall be sent to the respective addresses set forth in, and
the effectiveness thereof shall be governed by the provisions of, Section 9.4 of
the Participation Agreement.
SECTION 4.2. Successors and Assigns This Agreement shall be binding
upon and inure to the benefit of Trustee, Universal and their respective legal
representatives, successors and permitted assigns. Universal shall not assign
its rights or obligations hereunder without the prior written consent of Trustee
and the Administrative Agent.
SECTION 4.3. Governing Law, Jurisdiction and Venue; Waiver of Jury.
This Agreement and the rights and obligations of the parties hereunder and under
the Notes shall be
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construed in accordance with, and be governed by, the law of the State of New
York. The parties hereto hereby agree that all actions or proceedings initiated
by any party hereto arising directly or indirectly out of this Agreement or the
other Operative Documents may be litigated in the Supreme Court of the State of
New York located in New York City or the District Court of the United States
District Court for the Southern District of New York. Each party hereto hereby
expressly submits and consents in advance to such jurisdiction and venue in any
action or proceeding commenced by any party hereto in any of such courts, agrees
that jurisdiction and venue is proper in such courts, and hereby waives personal
service of the summons and complaint, or other process or papers issued therein,
and agrees that such service of the summons and complaint may be made by
registered mail, return receipt requested, addressed to the party hereto being
served at the address for such party set forth in Section 9.4 of the
participation agreement. Universal and Trustee irrevocably designates and
appoints CT Corporation, with offices on the date hereof at [633 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 action or proceeding hereunder. If for any reason, such designee, appointee
and agent shall cease to be available to act as such, Universal and Trustee
agree to designate a new designee, appointee and agent in New York City on terms
and for the purposes of this provision satisfactory to administrative agent.
Each party hereto waives any claim that New York City or the Southern District
of New York is an inconvenient forum or an improper forum based on lack of
venue. The choice of forum set forth herein shall not be deemed to preclude the
enforcement by Trustee of any judgment in any other appropriate jurisdiction.
Trustee hereby waives trial by jury in any judicial proceeding involving
directly or indirectly, any matter in any way arising out of, related to, or
connected with this Agreement or the other Operative Documents.
SECTION 4.4. Counterparts This Agreement may be executed in any number
of separate counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same agreement.
SECTION 4.5. 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.
SECTION 4.6. Headings and Table of Contents. The headings and table of
contents contained in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Assembly Agency
Agreement to be duly executed and delivered by their duly authorized
representatives as of the day first above written.
[NAME OF TRUST COMPANY],
not in its individual capacity, but solely
as Trustee of Universal Trust (2000-1) under
the Trust Agreement dated as of May __,
2000, as Trustee,
By:
------------------------------------------
Name:
Title:
UNIVERSAL COMPRESSION, INC.
By:
------------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.45
================================================================================
TRUST AGREEMENT
(Universal Compression Trust 2000-1)
Dated May ___, 2000
between
THE PERSONS LISTED ON SCHEDULE I
HERETO OR THAT MAY BECOME PARTY HERETO,
as Certificate Holders,
and
[NAME OF TRUST COMPANY],
not in its individual
capacity except as expressly stated
herein, but solely as Trustee
================================================================================
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS AND INTERPRETATION...........................................................................1
SECTION 1.1. Definitions; Rules of Usage................................................................1
ARTICLE II
THE TRUST ESTATE.........................................................................................1
SECTION 2.1. Appointment, Authorization and Direction to Trustee........................................1
SECTION 2.2. Declaration and Purpose....................................................................2
SECTION 2.3. No Business Trust Formed...................................................................2
SECTION 2.4. Domicile and Resident Agent of the Trust...................................................3
SECTION 2.5. Title of Trust Property....................................................................3
ARTICLE III
CERTIFICATES.............................................................................................3
SECTION 3.1. Certificates; Procedure for Investment.....................................................3
SECTION 3.2. Scheduled Return of Investment.............................................................3
SECTION 3.3. Equity Return..............................................................................3
SECTION 3.4. Availability Fees..........................................................................3
SECTION 3.5. Payment by Trustee.........................................................................3
SECTION 3.6. Overdue Rate...............................................................................4
SECTION 3.7. Lease Event of Default.....................................................................4
SECTION 3.8. Payment from Trust Estate Only.............................................................4
SECTION 3.9. Registration, Transfers, Exchanges and Cancellation of Certificates.......................4
SECTION 3.10. Mutilated, Destroyed, Lost or Stolen Certificate...........................................6
ARTICLE IV
COLLECTIONS AND DISTRIBUTIONS............................................................................7
SECTION 4.1. Non-Default Payments.......................................................................7
SECTION 4.2. Payments after a Lease Event of Default....................................................7
SECTION 4.3. Application of Certain Other Payments......................................................7
SECTION 4.4. Effect of Sales by Trustee.................................................................8
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ARTICLE V
CERTAIN PROVISIONS RESPECTING TRUSTEE....................................................................8
SECTION 5.1. Acceptance of Trusts and Duties............................................................8
SECTION 5.2. Limitation of Power........................................................................8
SECTION 5.3. Action Upon Instructions...................................................................8
SECTION 5.4. Certain Duties and Responsibilities of Trustee.............................................9
SECTION 5.5. Certain Rights of Trustee..................................................................9
SECTION 5.6. NO REPRESENTATIONS OR WARRANTIES AS TO THE EQUIPMENT OR DOCUMENTS.........................11
SECTION 5.7. Status of Moneys Received.................................................................12
SECTION 5.8. Permitted Activities......................................................................12
SECTION 5.9. Resignation or Removal of Trustee.........................................................12
SECTION 5.10. Estate and Rights of Successor Trustee....................................................13
SECTION 5.11. Merger or Consolidation of Trustee........................................................13
SECTION 5.12. Co-Trustees...............................................................................13
SECTION 5.13. Doing Business in Other Jurisdictions.....................................................14
SECTION 5.14. Creditors.................................................................................14
SECTION 5.15. Operations................................................................................14
ARTICLE VI
TERMINATION OF AND AMENDMENTS TO TRUST..................................................................15
SECTION 6.1. Termination...............................................................................15
SECTION 6.2. Distribution of Trust Estate Upon Termination.............................................16
SECTION 6.3. Amendments................................................................................16
SECTION 6.4. Bankruptcy of a Certificate Holder........................................................16
SECTION 6.5. Transfers shall not Terminate Trust Agreement.............................................16
ARTICLE VII
MISCELLANEOUS...........................................................................................17
SECTION 7.1. Compensation..............................................................................17
SECTION 7.2. Notices 17
SECTION 7.3. Severability..............................................................................17
SECTION 7.4. Tax Reports...............................................................................17
SECTION 7.5. Headings..................................................................................17
SECTION 7.6. Successors and Assigns....................................................................17
SECTION 7.7. Only Written Waivers......................................................................17
SECTION 7.8. Counterparts..............................................................................18
SECTION 7.9. Rights in Trust Agreement.................................................................18
SECTION 7.10. Identification of Trust...................................................................18
SECTION 7.11. Agreement Not to Petition.................................................................18
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SECTION 7.12. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL....................18
SCHEDULE 1 CERTIFICATE HOLDERS; COMMITMENTS
EXHIBIT A FORM OF CERTIFICATE
</TABLE>
(iii)
<PAGE> 5
This Trust Agreement (Universal Compression Trust 2000-1)
(this "Trust Agreement") dated as of May ___, 2000 is among each of the Persons
listed on Schedule I hereto together with any permitted successor or assign each
a "Certificate Holder" and collectively, the "Certificate Holders", and [Name of
Trust Company], [a __________ banking corporation], not in its individual
capacity except as expressly provided herein but solely as trustee hereunder,
and any institution that shall act as a successor trustee in accordance with the
terms of Section 5.10 ("Trustee"); and in its individual capacity ("Trust
Company").
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. Definitions; Rules of Usage. Capitalized terms
used but not otherwise defined in this Trust Agreement shall have the respective
meanings specified in Appendix A to the Participation Agreement, dated as of May
__, 2000, among Universal Compression, Inc., a ("Lessee"), Universal Compression
Holdings, Inc. ("Guarantor"), Trustee, Trust Company, the Certificate Holders,
Bankers Trust Company, as Administrative Agent (the "Administrative Agent") and
Bankers Trust Company, as Collateral Agent (the "Collateral Agent") and each of
the financial institutions listed on the signature pages thereto that may
thereafter become party thereto as Lenders (the "Lenders"), and the rules of
interpretation set forth in such Appendix A shall apply hereto.
ARTICLE II
THE TRUST ESTATE
SECTION 2.1. Appointment, Authorization and Direction to
Trustee. The Certificate Holders hereby request that Trust Company act as
trustee of the trust created hereunder (the "Trust"), appoint Trust Company as
Trustee hereunder and authorize and direct Trustee, subject to confirmation by
the Certificate Holders of the satisfaction or waiver of all appropriate
conditions set forth in the Participation Agreement, to:
(a) enter into, execute and deliver on the Closing Date and
from time to time thereafter the Operative Documents to which Trustee is to
become a party on such respective dates, including the Participation Agreement,
the Lease Agreement, the Lease Agreement Supplements, the Loan Agreement, the
Notes, the Assembly Agency Agreement and the Financing Statements; and
(b) enter into, execute and deliver on the Closing Date the
Certificates in a manner and subject to the terms and conditions provided herein
and in each of the other Operative Documents;
and to do all such things and take all such actions as may be necessary or
convenient to consummate the transactions contemplated by the Operative
Documents and to perform the terms
<PAGE> 6
and conditions of this Trust Agreement, all as contemplated herein or in the
documents referred to herein.
Each of the Certificate Holders by making its monies available
on the Closing Date pursuant to Section 4.1 of the Participation Agreement,
agrees that such act shall constitute, without further act, authorization and
direction by such Certificate Holders, to Trustee to take the actions specified
in this Section 2.1.
SECTION 2.2. Declaration and Purpose.
(a) Trustee hereby declares, undertakes and agrees that it
will and does receive, take and hold all estate, right, title and interest of
the Trust in and to the Trust Estate for the use and benefit of the Certificate
Holders.
(b) The purpose of the Trust is (i) to utilize the proceeds of
the Equity Contributions made available to Trustee by the Certificate Holders
pursuant to Section 4.1 of the Participation Agreement and this Trust Agreement
together with the Loans made available to Trustee by the Lenders pursuant to the
Loan Agreement for the purposes of acquiring the Equipment in accordance with
the terms and subject to the conditions of the Participation Agreement, the
Lease Agreement and the other Operative Documents; (ii) to hold title to the
Equipment and lease the Equipment to Lessee pursuant to the Lease Agreement;
(iii) to preserve the interest of Trustee (as trustee under this Trust
Agreement) in the Trust Estate for the benefit of the Certificate Holders and
engage in activities ancillary and incidental thereto as set forth in the
Operative Documents; (iv) to issue the Certificates to the Certificate Holders
evidencing the Equity Contributions made available to Trustee, (v) to accept the
security including the Lessee Collateral to be executed or provided in its favor
for the benefit of the Trustee, (vi) to enter into the Loan Agreement and, in
connection therewith, execute and deliver the Notes, (vii) to exercise all
remedies available to Trustee or the Certificate Holders under the Operative
Documents; and (viii) to enter into any agreements or to perform any action
incidental to any of the foregoing.
(c) The powers of the Trust are limited in accordance with
Section 9.2 of the Participation Agreement.
SECTION 2.3. No Business Trust Formed. THE TRUST IS NOT A
BUSINESS TRUST. THE SOLE PURPOSE OF THE TRUST IS TO ACQUIRE AND HOLD TITLE TO
THE TRUST ESTATE AND TO COLLECT AND CONSERVE THE VALUE THEREOF, SUBJECT TO THE
RIGHTS AND BENEFITS OF THE CERTIFICATE HOLDERS, EXCEPT AS EXPRESSLY PROVIDED IN
THE OPERATIVE DOCUMENTS, TRUSTEE MAY NOT TRANSACT BUSINESS OF ANY KIND WITH
RESPECT TO THE TRUST ESTATE, NOR SHALL THIS TRUST AGREEMENT BE DEEMED TO BE, OR
CREATE OR EVIDENCE THE EXISTENCE OF, A CORPORATION DE FACTO OR DE JURE, OR A
MASSACHUSETTS TRUST OR DELAWARE BUSINESS TRUST, OR ANY OTHER TYPE OF BUSINESS
TRUST, ASSOCIATION OR JOINT VENTURE AMONG TRUSTEE, THE CERTIFICATE HOLDERS OR
BETWEEN ANY TWO OF THEM.
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SECTION 2.4. Domicile and Resident Agent of the Trust. The
domicile of the Trust will be located at [_______________________]. All bank
accounts of Trustee related to its duties hereunder will be located in the State
of [______________].
SECTION 2.5. Title of Trust Property. Legal title to all the
Trust Estate shall be vested at all times in Trustee. The Certificate Holders
shall have no title to or any other interest in specific property in the Trust
Estate; instead, each of the Certificate Holders shall only have a right to
receive payments hereunder with respect to their respective interests.
ARTICLE III
CERTIFICATES
SECTION 3.1. Certificates; Procedure for Investment. The
investment made by each Certificate Holder in the Trust Estate and its undivided
interest in the Trust shall be evidenced by a certificate executed by Trustee,
which shall be substantially in the form of Exhibit A hereto (each, a
"Certificate"), each with appropriate insertions, issued by Trustee in the name
of such Certificate Holder and in an amount equal to the Certificate Holder
Commitment of such Certificate Holder. Each Certificate shall (i) be dated the
date of issuance thereof, and (ii) subject to Section 5.1 of the Participation
Agreement, bear yield on the allocable, unpaid Certificate Holder Amount from
time to time outstanding at the Equity Rate.
SECTION 3.2. Scheduled Return of Investment. Subject to the
other Operative Documents, each Certificate Holder shall be entitled to receive
on the Casualty Loss Value Payment Date of an Item of Equipment or on the date
an Item of Equipment is sold by Trustee, its Pro Rata Share of the Equity
Component of such Item of Equipment and on the Termination Date of an Item of
Equipment its Pro Rata Share of any Deficiency then due under the Lease
Agreement net of any amounts due the Lenders.
SECTION 3.3. Equity Return. (a) Each Certificate Holder shall
be entitled during the Term to a return on the aggregate amount of its unrepaid
Equity Contributions (such unpaid amounts, its "Certificate Holder Amount")
calculated at the Equity Rate, in accordance with the Lease Agreement and the
Participation Agreement.
(b) Equity Return on each Certificate shall be payable in
arrears on each Payment Date.
SECTION 3.4. Availability Fees. Each Certificate Holder shall
be entitled during the Commitment Period to an availability fee on the amount of
its Certificate Holder Available Commitment calculated at the Availability Fee
Rate in accordance with the Lease Agreement and Participation Agreement.
SECTION 3.5. Payment by Trustee. Subject to Article IV and the
other Operative Documents, Trustee shall, from the Trust Estate, return (a) to
each Certificate Holder, on a Pro Rata Basis based (a) on each Payment Date, the
monies received by Trustee constituting Equity Return (or part thereof) accrued
to such date and Availability Fees (net of any Lender
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Availability Date), (b) on the Casualty Loss Value Payment of an Item of
Equipment or on the date an Item of Equipment is sold by Trustee, the monies
received by Trustee constituting Casualty Loss Value (or part thereof) or sale
proceeds of such Item of Equipment and (c) on the Termination Date, the monies
received by Trustee constituting a Deficiency payment (or part thereof). Each
payment received by a Certificate Holder in accordance with clause (b) or (c)
above shall reduce its Certificate Holder Amount by the amount of such payment.
SECTION 3.6. Overdue Rate. If all or a portion of the
Certificate Holder Amount represented by, or accrued Equity Return on, the
Certificates or all or part of a Certificate Holder's Availability Fee shall not
be paid when due (whether at the stated maturity, by acceleration or otherwise),
such overdue amount shall, without limiting the rights of the Certificate
Holders under any Operative Document, bear interest at the Overdue Rate in
effect from time to time, in each case, from the due date until the date paid
(after as well as before judgment).
SECTION 3.7. Lease Event of Default. Upon the occurrence and
continuation of a Lease Event of Default, pursuant to which a termination
payment as set forth in Section 24(d) of the Lease Agreement has become due and
payable automatically or with the consent, or at the request, of the
Administrative Agent, such Certificate Holder Amounts evidenced by the
Certificates (with accrued Equity Return thereon) and all other amounts owing to
the Certificate Holders by Trustee under this Trust Agreement, the Certificates
and the other Operative Documents shall immediately become due and payable.
SECTION 3.8. Payment from Trust Estate Only. All payments to
be made by Trustee in respect of the Certificates and this Trust Agreement shall
be made only from the income and proceeds from the Trust Estate and only to the
extent that Trustee shall have received sufficient income or proceeds from the
Trust Estate to make such payments in accordance with the terms of Article IV.
The Certificate Holders agree that they will look solely to the income and
proceeds from the Trust Estate to the extent available for distribution to them
as herein provided, and that Trustee is not nor shall it be liable in its
individual capacity to any Certificate Holder for any amount payable hereunder
or under the Certificates except as provided in Section 5.5(c). Notwithstanding
the foregoing, it is expressly understood and agreed that nothing in this
Section 3.8 shall be deemed to (i) release Trustee from liability for its
fraudulent actions or willful misconduct, or (ii) limit or affect the
obligations of the Trust Company in accordance with the express terms of any
Operative Document creating a recourse obligation of the Trust Company.
SECTION 3.9. Registration, Transfers, Exchanges and
Cancellation of Certificates.
(a) The Administrative Agent shall maintain a register of all
Certificates in accordance with Section 11.8 of the Participation Agreement and
any transfer of interests in a Certificate shall be subject to Sections 11.8 and
12.7 of the Participation Agreement. Subject to Section 12.7 of the
Participation Agreement, a Certificate Holder that intends to transfer a
Certificate, or to exchange Certificate(s) for different denominations shall
surrender such Certificate(s) to Trustee, and shall provide notification of such
surrender to the Administrative
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<PAGE> 9
Agent, together with a written request from such Certificate Holder for the
issuance of one or more new Certificates. Such request shall specify the
denomination or denominations of such new Certificate(s) and, in the case of a
surrender for registration of transfer, the name and address of the Person in
whose name such new Certificate(s) are to be registered. Promptly upon receipt
of such documents by Trustee, Trustee shall execute and deliver to such
Certificate Holder new Certificate(s) in the same aggregate original Certificate
Holder Commitment, and dated the same date, as such surrendered Certificate(s).
Such new Certificate(s) shall be in such denomination or denominations and
registered in such name or names as shall be specified in the written request
from such Certificate Holder. Each Certificate so surrendered shall be
accompanied by a written instrument of transfer duly executed by the Certificate
Holder of such Certificate or its attorney duly authorized in writing. Upon
request, the Trustee shall advise the transferor and transferee Certificate
Holder of: (i) the Certificate Holder Amount and Equity Return on the
Certificate so surrendered that were paid to any holder thereof at any time
before the delivery of the new Certificate; (ii) Equity Return allocable to such
new Certificate on the basis of the respective original Certificate Holder
Amount thereof; and (iii) the date to which Equity Return on the surrendered
Certificate had been paid to any holder thereof at the time of such delivery.
All Certificates issued upon any registration of transfer or exchange of
Certificates shall be valid obligations of Trustee, and shall be entitled to the
same security and benefits under this Trust Agreement as the Certificates
surrendered upon such registration of transfer or exchange. No transfer of any
Certificate shall be valid unless and until such transfer is registered on the
register maintained by the Administrative Agent pursuant to Section 11.8 of the
Participation Agreement.
(b) The Trustee shall record in its records the date and
amount of all funds made by a Certificate Holder pursuant to Section 4.1 of the
Participation Agreement and the date and amount of each repayment of any
Certificate Holder Amount to such Certificate Holder; provided, that, failure by
the Trustee to make any such recording or any error therein shall not affect the
obligations of Trustee hereunder or under any Certificate in respect of the
amounts evidenced thereby or the obligations of Lessee under this Agreement or
under the Lease Agreement with respect to the payment of Lease Payments,
Availability Fees and Supplemental Payments; and provided, further, that, in no
event shall the failure of Trustee to make any such endorsement or any error
therein obligate Trustee to pay any amounts in excess of the Certificate Holder
Amount, plus Equity Return on the unpaid Certificate Holder Amount.
(c) Each Certificate surrendered to Trustee pursuant to this
Section 3.9 or Section 3.10 hereof shall be canceled by Trustee, and no
Certificate shall be issued in lieu thereof except as expressly permitted by
this Section 3.9 or Section 3.10 hereof.
(d) Each Certificate delivered to a Certificate Holder
pursuant to this Section 3.9 or Sections 3.1 or 3.10 of this Trust Agreement
shall be issued without registration of such Certificate under the Securities
Act, as amended, or under any state securities or "blue sky" law, and without
qualification of this Trust Agreement under the Trust Indenture Act of 1939, as
amended. All Certificates issued hereunder shall bear a legend that shall read
substantially as follows:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES
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OR "BLUE SKY" LAW, AND MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE
IN VIOLATION OF SUCH ACT OR LAWS.
(e) If the Trust Company shall acquire any of the
Certificates, such acquisition shall not operate as a redemption of, or the
satisfaction of, such Certificates unless and until the same shall be delivered
to Trustee for cancellation pursuant to this Trust Agreement.
(f) No service charge shall be made for the issuance of
Certificates pursuant to this Section 3.9 or Sections 3.1 or 3.10 of this Trust
Agreement, but Trustee may require from the person requesting the transfer of
such Certificates pursuant to this Section 3.9 or Section 3.10 hereof payment of
a sum sufficient to reimburse Trustee for, or to provide sufficient funds for,
the payment of any tax or other governmental charge in connection therewith or
any charges and expenses connected with such tax or other governmental charge
paid or payable by Trustee. Any Certificate Holder transferring its Certificates
shall also pay or cause the transferee to pay the costs and expenses (including
reasonable counsel fees) incurred by Trustee in connection with such transfer.
SECTION 3.10. Mutilated, Destroyed, Lost or Stolen
Certificate.
(a) If any Certificate shall become mutilated, destroyed, lost
or stolen, Trustee shall, upon the written request of the appropriate
Certificate Holder, execute and deliver in replacement thereof and at no charge
to Certificate Holder, a new Certificate in the same form, evidencing the same
interest and dated the same date as the Certificate so mutilated, destroyed,
lost or stolen. If the Certificate being replaced has become mutilated, such
Certificate shall be surrendered to Trustee and a photocopy thereof shall be
furnished to Lessee by Trustee. If the Certificate being replaced has been
destroyed, lost or stolen, the Certificate Holder requesting a replacement
Certificate shall furnish to Trustee and Lessee such reasonable security or
indemnity as may be required by each of them to save them harmless if
Certificate Holder has not furnished them satisfactory evidence of the
destruction, loss or theft of the Certificate; provided that if the Certificate
being replaced is registered in the name of an original Certificate Holder then
the affidavit of a Responsible Officer of such Certificate Holder in form
reasonably satisfactory to Trustee and Lessee, setting forth the fact of
destruction, loss or theft and of ownership of the Certificate at the time
thereof shall be satisfactory evidence and no security or indemnity shall be
required other than the written agreement of such Person, in form reasonably
satisfactory to Trustee, to indemnify and hold harmless Trustee and Lessee from
all risks resulting from the authentication and delivery of a substitute
Certificate. Each Certificate Holder requesting replacement hereunder shall be
responsible for all stamp taxes relating to such replacement.
(b) Any duplicate Certificate issued pursuant to this Section
3.10 shall constitute complete and indefeasible evidence of ownership of such
Certificate, as if originally issued, whether or not the destroyed, lost or
stolen Certificate shall be found at any time.
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ARTICLE IV
COLLECTIONS AND DISTRIBUTIONS
The following provisions shall govern the receipt,
distribution and application of all income and proceeds from the Trust Estate:
SECTION 4.1. Non-Default Payments. Provided no Lease Event of
Default has occurred and is continuing and subject to Section 7 of the
Participation Agreement, moneys received by Trustee constituting Lease Payments
or any end of term payment under Section 28 or 29 of the Lease Agreement,
Availability Fees or Supplemental Payments under the Lease Agreement other than
constituting Casualty Loss Value or proceeds of a sale under Section 28.5 of the
Lease Agreement (including the payment of interest on any such overdue amount),
shall be applied on the date received on a pari passu basis in accordance with
each Certificate Holder's Pro Rata Share:
(i) first, to the payment of Breakage Costs, if any, (ii)
second, to the payment of accrued but unpaid Availability Fees and Equity Return
on the Certificate Holder Amount of such Certificate Holder at the Overdue Rate
if any, to the date of such payment then due hereunder, (iii) third, to the
payment of accrued but unpaid Availability Fees and Equity Return at the Equity
Rate on the Certificate Holder Amount of such Certificate Holder, if any, to the
date of such repayment then due under the Operative Documents, (iv) fourth, to
the payment of any other amounts then due to such Certificate Holder under the
Operative Documents for accrued Taxes, increased costs under Section 10 of the
Participation Agreement and any other amounts then due other than the
Certificate Holder Amount, (v) fifth, to the payment of the Certificate Holder
Amount and (vi) sixth, any amounts remaining, subject to any amounts owed Lessee
under the Lease, to the Certificate Holders.
SECTION 4.2. Payments after a Lease Event of Default. All
payments received and all amounts held or realized by Trustee (including any
amounts realized by Trustee from the exercise of any remedies) after any Lease
Event of Default, and all payments or amounts then held or thereafter received
by Trustee hereunder or under the Operative Documents, shall, so long as such
Lease Event of Default continues and shall not have been waived in writing by
the Majority Lenders, be paid on the date received (i) first, so much of such
payments or amounts held or realized by Trustee as shall be required to
reimburse Trustee for any expenses not reimbursed by Lessee in connection with
the collection or distribution of such amounts held or realized by Trustee or in
connection with the expenses incurred in enforcing its remedies hereunder and
preserving Lessee Collateral including, without limitation, those expenses
contemplated under Section 9.1 of the Participation Agreement, shall be retained
by Trustee and (ii) to each Certificate Holder in accordance with Section 4.1.
SECTION 4.3. Application of Certain Other Payments. Any
payments received by any Certificate Holder for which provision as to the
application thereof is made in the Operative Documents but not elsewhere in this
Trust Agreement shall be applied forthwith to the purpose for which such payment
was made in accordance with the terms of the Operative Documents.
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SECTION 4.4. Effect of Sales by Trustee. Any sale of all or
any part of the Trust Estate by Trustee permitted hereunder and under the other
Operative Documents shall bind the Certificate Holders and shall be effective
for the benefit of the purchasers thereof and their respective successors and
assigns to divest and transfer all right, title and interest vested in Trustee
and the Certificate Holders hereunder in the property so sold, and no purchaser
shall be required to inquire as to compliance by Trustee with any of the terms
hereof or to see to the application of any purchase money therefor.
ARTICLE V
CERTAIN PROVISIONS RESPECTING TRUSTEE
SECTION 5.1. Acceptance of Trusts and Duties. Trust Company
accepts the trusts hereby created and agrees to perform the same as Trustee as
herein expressed and, as such, agrees to receive and disburse all moneys
constituting part of the Trust Estate in accordance with the terms hereof.
SECTION 5.2. Limitation of Power. Trustee shall have no power,
right, duty or authority to manage, control, possess, use, sell, lease, dispose
of or otherwise deal with the Equipment or any other property at any time
constituting a part of the Trust Estate, or otherwise to take or refrain from
taking any action under or in connection with the Operative Documents, except
(a) to execute and deliver the Operative Documents to which Trustee is to be a
party, (b) to exercise and carry out or cause to be exercised and carried out
the rights, duties and obligations of Trustee hereunder and under the Operative
Documents, (c) to receive, collect and distribute and deal with the sums due
under the Participation Agreement, the Lease Agreement, this Trust Agreement or
other Operative Documents, and the proceeds thereof as provided in the
Participation Agreement, the Lease Agreement, this Trust Agreement or other
Operative Documents (to the extent not payable directly to Certificate Holders
by Lessee and the other Operative Documents), and (d) subject to Section 6.2 of
the Participation Agreement, as expressly provided in written instructions from
the Administrative Agent given pursuant to Section 5.3 of this Trust Agreement.
Other than as expressly provided in this Trust Agreement, Trustee shall not have
the authority to make management decisions relating to the Trust Estate and may
take only ministerial actions without the consent of the Administrative Agent.
SECTION 5.3. Action Upon Instructions. Subject to the terms of
Sections 5.4, 5.5 and 8.1 of this Trust Agreement and the Operative Documents,
upon the written instructions at any time and from time to time of the
Administrative Agent with the Majority Certificate Holder's written consent
(provided no Loan Event of Default has occurred and is continuing) or, if the
obligations owing to the Lenders have been satisfied in full, the Majority
Certificate Holders, the Trustee shall take such of the following actions as may
be specified in such instructions:
(a) give such notice or direction or exercise such right or
power under the Lease Agreement, as shall be specified in such instructions;
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(b) approve as satisfactory to it all matters required by the
terms of any Operative Document to be satisfactory to Trustee;
(c) after the expiration of the Term, unless Lessee shall have
purchased all Items of Equipment in accordance with the Lease Agreement, convey
all of Trustee's right, title and interest in and to the Equipment for such
amount, on such terms and to such purchaser or purchasers as shall be designated
in such instructions, or otherwise lease or dispose of the Equipment, on such
terms as shall be designated in such instructions; and
(d) any other action as specified in writing.
SECTION 5.4. Certain Duties and Responsibilities of Trustee.
Trustee undertakes to perform such duties and only such duties
as are specifically set forth herein and in the other Operative Documents, and
no implied covenants or obligations shall be read into this Trust Agreement
against Trustee. Trustee agrees that it shall not, nor shall it have a duty to,
manage, control, use, sell, maintain, insure, register, lease, operate, modify,
dispose of or otherwise deal with the Equipment or any other part of the Trust
Estate in any manner whatsoever, except as required by the terms of the
Operative Documents and as otherwise provided herein.
SECTION 5.5. Certain Rights of Trustee. Except as otherwise
provided in Section 5.4 of this Trust Agreement:
(a) Trustee may rely and shall be protected in acting or
refraining from acting upon any signature, resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order or other
paper or document reasonably believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request, direction or authorization by any party
hereto or to any other Operative Document shall be sufficiently evidenced by a
request, direction or authorization in writing, delivered to Trustee and signed
in the name of such party by the president, any vice president, the treasurer or
the secretary of such party, as the case may be, and any resolution of the Board
of Directors or committee thereof of such party shall be sufficiently evidenced
by a copy of such resolution certified by the secretary or an assistant
secretary of such party, as the case may be, to have been duly adopted and to be
in full force and effect on the date of such certification, and delivered to
Trustee;
(c) whenever in the administration of this Trust Agreement
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, Trustee may in good faith
rely upon a certificate in writing, delivered to Trustee and signed by the
president, any vice president, any assistant vice president, any managing
director, the treasurer, any assistant treasurer, the secretary or any assistant
secretary of a Certificate Holder or the Administrative Agent;
(d) Trustee may exercise its powers and perform its duties by
or through such attorneys, agents and servants as it shall appoint; and it shall
be entitled to the advice of counsel
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and shall be protected by the advice of such counsel in anything done or omitted
to be done in accordance with such advice (provided that such advice pertains to
such matters as Trustee may reasonably presume to be within the scope of such
counsel's area of expertise);
(e) Trustee shall not be under any obligation to exercise any
of the rights or powers vested in it by this Trust Agreement at the request or
direction of the Majority Certificate Holders or the Administrative Agent,
unless Trustee shall have received reasonable security or indemnity against the
costs, expenses (including reasonable fees and expenses of its legal counsel)
and liabilities which may be incurred by it in compliance with such request or
direction;
(f) provided no Responsible Officer has Actual Knowledge of
the inaccuracy thereof, Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent or other paper
or document, but Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled to examine the books and records of Lessee related to the Equipment to
reasonably determine whether Lessee is in compliance with the terms and
conditions of the Lease Agreement and to examine the Equipment by agent or
attorney, all upon the terms and conditions contained in the Participation
Agreement, the Lease Agreement and the other Operative Documents;
(g) without limiting the generality of Section 5.4, Trustee
shall not have any duty (i) to see to any recording or filing of the Operative
Documents or any Uniform Commercial Code financing statements or to see to the
continuation or maintenance of any such recording or filing, (ii) to see to any
insurance on the Equipment or to effect or maintain any such insurance, whether
or not Lessee shall be in default with respect thereto, other than to promptly
forward to the Certificate Holders copies of all certificates, reports and other
written information which it receives from Lessee pursuant to the requirements
of the Lease Agreement, the Participation Agreement and other Operative
Documents (unless the Certificate Holders are to receive such certificates,
reports and other written information directly from Lessee or the Administrative
Agent), (iii) subject to Section 6.1(f) of the Participation Agreement to see to
the payment or discharge of any tax, assessment or other governmental charge or
any Lien owing with respect to, assessed or levied against any part of the Trust
Estate, (iv) to confirm or verify any financial statements of Lessee, or (v) to
inspect the Equipment or ascertain or inquire as to the performance or
observance of any of Lessee's covenants under the Operative Documents;
(h) No provision hereof shall be construed to relieve Trust
Company in its individual capacity or Trustee of liability for its gross
negligence or willful misconduct or its negligence in the receiving, handling or
disbursing of funds, it being understood that, without limiting the foregoing:
(i) Trust Company shall not be liable for any error of
judgment made in good faith by a Responsible Officer of Trustee, unless
it shall be proved that Trust Company was grossly negligent;
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(ii) Trust Company shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Administrative Agent pursuant to the express
provisions hereof;
(iii) no provision hereof shall require Trust Company to
expend or risk its own funds in the performance of any of its duties
hereunder or under any of the other Operative Documents, or in the
exercise of any of its rights or powers;
(iv) Trust Company shall not be personally responsible for the
due execution hereof by any Certificate Holders;
(v) except as expressly provided in this Trust Agreement, in
accepting the Trust created hereby, Trustee acts solely as trustee and
not in its individual capacity, and all persons having any claim
against Trustee by reason of the transactions contemplated by this
Trust Agreement shall, other than as expressly provided in this Trust
Agreement and the other Operative Documents, look solely to the Trust
Estate for payment or satisfaction thereof; and
(vi) Trust Company shall be liable for (A) any taxes on, with
respect to or measured by any amounts paid to it as compensation for
services or otherwise under the Operative Documents, (B) acts or
omissions not related to the transactions contemplated by the Operative
Documents, and (C) the inaccuracy of representations and warranties
made by Trust Company in the Participation Agreement, the Lease
Agreement or any certificate or document delivered pursuant thereto.
(i) Trustee shall not be required to take any action hereunder
or under the Operative Documents, nor shall any other provision of this Trust
Agreement or any Operative Document be deemed to impose a duty on Trustee to
take any action, if Trustee shall determine, or shall have been advised by
counsel, that such action is likely to result in personal liability or is
contrary to Applicable Law or the Operative Documents; and
(j) Whether or not therein expressly so provided, every
provision of this Trust Agreement relating to the conduct or affecting the
liability of or affording protection to Trust Company or Trustee shall be
subject to the provisions of this Section 5.5.
SECTION 5.6. NO REPRESENTATIONS OR WARRANTIES AS TO THE
EQUIPMENT OR DOCUMENTS. NEITHER TRUSTEE NOR TRUST COMPANY IS A BUILDER,
DEVELOPER OR MANUFACTURER OF THE EQUIPMENT OR A DEALER IN SIMILAR SITES AND
NEITHER OF THEM HAS INSPECTED THE EQUIPMENT PRIOR TO DELIVERY TO AND ACCEPTANCE
BY LESSEE. NEITHER TRUSTEE NOR TRUST COMPANY HAS MADE NOR DOES EITHER OF THEM
MAKE (A) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO ANY
ENVIRONMENTAL MATTER OR CONDITION, VALUE, DESIGN, OPERATION, CONDITION, QUALITY,
DURABILITY, SUITABILITY, MERCHANTABILITY OR FITNESS FOR USE OR FITNESS FOR A
PARTICULAR PURPOSE, ABSENCE OF LATENT OR OTHER DEFECTS WHETHER OR NOT
DISCOVERABLE, ABSENCE OF
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ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, OR ANY OTHER WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT, OR AS TO TITLE
THERETO, OR (B) ANY REPRESENTATION OR WARRANTY AS TO THE VALIDITY, LEGALITY OR
ENFORCEABILITY OF THE OPERATIVE DOCUMENTS (OTHER THAN AS TO THIS TRUST AGREEMENT
AGAINST TRUST COMPANY), OR AS TO THE CORRECTNESS OF ANY STATEMENT CONTAINED IN
ANY THEREOF, EXCEPT AS SET FORTH IN SECTIONS 2.4, 2.5, 2.6, 2.7, 6.1 AND 6.2 OF
THE PARTICIPATION AGREEMENT.
SECTION 5.7. Status of Moneys Received. All moneys received by
Trustee under or pursuant to any provision of this Trust Agreement shall
constitute trust funds for the purpose for which they were paid or are held, but
need not be segregated in any manner from any other moneys and may be deposited
by Trustee under such conditions as may be prescribed or permitted by Applicable
Laws for trust funds, or, may be invested at the direction of the Majority
Certificate Holders.
SECTION 5.8. Permitted Activities. Trust Company or any
corporation in or with which Trust Company may be interested or affiliated or
any officer or director of any such corporation may acquire and hold
Certificates hereunder (subject to the restrictions of Section 5.4 of the
Participation Agreement), and have commercial relations and otherwise deal with
Lessee or with any other corporation having relations with Lessee to the full
extent permitted by Applicable Law.
SECTION 5.9. Resignation or Removal of Trustee. Trustee or any
successor thereto may resign at any time without cause by giving at least sixty
(60) days' prior written notice to each Certificate Holder, the Administrative
Agent and Lessee, and the Administrative Agent with the Majority Certificate
Holders' written consent (provided no Loan Event of Default has occurred and is
continuing) or, if the obligations owing to the Lenders have been satisfied in
full, the Majority Certificate Holders may at any time remove Trustee without
cause by an instrument in writing delivered to Trustee, Lessee, each Certificate
Holder and Administrative Agent, such resignation or removal to be effective on
the date on which a successor trustee is appointed hereunder. The Majority
Certificate Holders and the Administrative Agent may, at any time upon 30 days'
prior written notice to Trust Company and Lessee by an instrument in writing,
appoint a successor trustee, provided, however, that a successor trustee shall
be a bank, trust company or association organized under the laws of the United
States of America or any state thereof, shall have a combined capital and
surplus of at least $500,000,000 and shall have agreed to act as Trustee, and
provided further that any successor trustee shall be subject to approval by
Lessee, which approval shall not be unreasonably withheld or delayed (except
that, if a Lease Event of Default shall have occurred and be continuing, Lessee
shall have no right to approve a successor trustee). If the Majority Certificate
Holders and the Administrative Agent shall not have appointed a successor
trustee within thirty (30) days after the giving of notice of such resignation
or removal, Trustee may apply to any court of competent jurisdiction to appoint
a successor trustee to act until such time, if any, as a successor or successors
shall have been appointed by the Majority Certificate Holders and the
Administrative Agent as above provided. Any successor trustee so appointed by
such court shall immediately and without further act be superseded by a
successor trustee appointed by the Majority Certificate Holders and the
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Administrative Agent within one (1) year from the date of the appointment by
such court. In the event such a successor trustee shall be appointed, a Bill of
Sale evidencing the transfer of the interest in the Equipment to and a written
instrument evidencing the assumption of the obligations under the Loan Agreement
by the successor trustee as Trustee, along with any additional documentation
required (including Financing Statements) shall be executed. Such documents
shall be held by the successor trustee and shall be provided to the other
parties to the Operative Documents upon request.
SECTION 5.10. Estate and Rights of Successor Trustee. Any
successor trustee shall execute and deliver to the predecessor Trustee an
instrument accepting such appointment, and thereupon each successor trustee,
without further act, shall become vested with all the estates, properties,
rights, powers, duties, trusts and obligations of the predecessor trustee in the
trusts hereunder with like effect as if originally named as Trustee herein, but
nevertheless upon the written request of such successor trustee, such
predecessor trustee shall execute and deliver an instrument transferring to such
successor trustee, upon the trusts herein expressed, all the estates,
properties, rights, powers and trusts of such predecessor trustee, and such
predecessor trustee shall duly assign, transfer, deliver and pay over to such
successor trustee any property or moneys then held by such predecessor trustee
upon the trusts herein expressed.
SECTION 5.11. Merger or Consolidation of Trustee. Any
corporation into which Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which Trustee shall be a party, or any corporation to which substantially all of
the corporate trust business of Trustee may be transferred, shall be a successor
trustee under this Trust Agreement without further act. In the event such a
successor trustee shall be formed, a Bill of Sale evidencing the transfer of the
interest in the Equipment to and a written instrument evidencing the assumption
of the obligations under the Loan and Security Agreement by such successor
trustee, as Trustee, along with any additional documentation required (including
Financing Statements). Such documents shall be held by the successor trustee and
shall be provided to Lessee upon request.
SECTION 5.12. Co-Trustees. At any time, for the purpose of
meeting any legal requirements of any jurisdiction in connection with the
transactions contemplated by this Trust Agreement, Trustee shall have the power,
and shall execute and deliver all instruments, to appoint one or more Persons
approved by the Administrative Agent with the Majority Certificate Holders'
written consent (provided no Loan Event of Default has occurred and is
continuing) or, if the obligations owing to the Lenders have been satisfied in
full, the Majority Certificate Holders, to act as co-trustee, or co-trustees,
jointly with Trustee, or separate trustee or separate trustees, of all or any
part of the Trust Estate, and to vest in such Person or Persons, in such
capacity, such title to the Trust Estate or any part thereof, and such rights,
powers, duties, trusts or obligations as the Administrative Agent with the
Majority Certificate Holders' written consent (provided no Loan Event of Default
has occurred and is continuing) or, if the obligations owing to the Lenders have
been satisfied in full, the Majority Certificate Holders and Trustee may
consider necessary or desirable. The Administrative Agent and Lessee hereby
agree that any employee of the Trust Company shall be acceptable, without any
further consent hereunder, as Co-Trustee. If the Majority Certificate Holders,
the Administrative Agent and (if no Lease Default or Lease Event of Default has
occurred and is continuing) Lessee shall not have joined in
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such appointment within fifteen (15) days after the receipt by them of a request
to do so, Trustee alone shall have power to make such appointment. Trustee shall
not be liable for any act or omission of any co-trustee or separate trustee
appointed under this Section 5.12.
SECTION 5.13. Doing Business in Other Jurisdictions.
Notwithstanding anything contained herein to the contrary, Trustee shall not be
required to take any action in any jurisdiction, other than in the State of
[ ] and other than in any other jurisdiction in which Trustee is
authorized to do business, if solely as a result of such action, even after the
appointment of a co-trustee pursuant to Section 5.12 hereof, (i) the taking of
such action would require the consent, approval, authorization or order of or
the giving of notice to, or the registration with or the taking of any other
action in respect of, any Governmental Authority of any jurisdiction, other than
the State of [ ] or any other jurisdiction in which Trustee is authorized
to do business; (ii) Trustee would incur any fee, tax or other governmental
charge under the laws of any jurisdiction or any political subdivision thereof
in existence on the date hereof, other than the State of [ ] or any
other jurisdiction in which Trustee is authorized to do business; or (iii)
Trustee would become subject to personal jurisdiction in any jurisdiction, other
than the State of [ ] or any other jurisdiction in which Trustee is
authorized to do business, for causes of action arising from acts unrelated to
the consummation of the transactions contemplated by the Operative Documents by
Trustee; provided, that if pursuant to this Section 5.13 Trustee shall not be
required to take an action, Trustee shall promptly appoint an additional trustee
pursuant to Section 5.12 hereof to proceed with such action.
SECTION 5.14. Creditors. No creditor of any Certificate Holder
shall have any claim against the Trust Estate for obligations of such
Certificate Holder.]
SECTION 5.15. Operations. The operations of Trustee will be
conducted in accordance with the following standards:
(a) Trustee will act solely in its own name or through any
co-trustee or other agents selected in accordance with this Trust Agreement;
(b) Trustee's funds and assets, including all bank accounts,
shall at all times be maintained separately from those of the Certificate
Holders or any Affiliate of any Certificate Holder;
(c) Trustee shall maintain complete and correct books and
records of account and shall prepare, or cause to be prepared, financial
statements in accordance with generally accepted accounting principles
separately stating Trustee's income, assets and liabilities and disclosing in
each case that such items are separate from those of any of the Certificate
Holders or any of their Affiliates, which financial statements are and will be
subject to audit by independent accountants; to the extent such statements are
consolidated with the financial statements of any of the Certificate Holders,
such consolidated statements will contain notations noting the separate legal
existence and the separate financial condition of Trustee;
(d) Trustee shall conduct its business at its office and will
use stationery and other business forms of Trustee and not those of the
Certificate Holders or any of their Affiliates,
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and will use its best efforts to avoid the appearance (A) of conducting business
on behalf of the Certificate Holders or any Affiliate thereof or (B) that the
assets in the Trust Estate are available to pay the creditors of the Certificate
Holders or any Affiliate thereof;
(e) Trustee's on-going fees and expenses shall be paid by
Lessee pursuant to Section 9.1 of the Participation Agreement;
(f) Trustee shall not hold itself out as being liable for the
debts of the Certificate Holders or any Affiliate thereof;
(g) Trustee shall not engage in any transaction with the
Certificate Holders or any Affiliate thereof, except as required by, provided in
or permitted by, this Trust Agreement or the Operative Documents;
(h) the Certificate Holders shall exercise their discretion
hereunder in an arm's-length manner;
(i) to the extent any consultant, independent contractor or
agent of Trustee is also an employee, consultant, independent contractor or
agent of the Certificate Holders or the Administrative Agent, Trustee, the
Certificate Holders and the Administrative Agent shall allocate among themselves
on a reasonable basis the services and attendant salaries of shared employees,
consultants, independent contractor and agents;
(j) all legal formalities of Trustee will be observed and
maintained;
(k) Trustee shall not guarantee any indebtedness of the
Certificate Holders; and
(l) Trustee shall not institute proceedings to have itself
adjudicated as bankrupt or insolvent, or consent to or acquiesce in the
institution of bankruptcy or insolvency proceedings against it, or seek or
consent to or acquiesce in the entry of any order for relief or the appointment
of a receiver, trustee or other similar official for it or for any substantial
part of its property, or seek liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or make any general assignment for the benefit of its creditors.
ARTICLE VI
TERMINATION OF AND AMENDMENTS TO TRUST
SECTION 6.1. Termination. The Trust created and provided for
hereby shall cease and be terminated in any one of the following events,
whichever shall first occur:
(a) if the Certificate Holders shall by notice in writing to
Trustee and Lessee revoke and terminate the Trust on and as of a date stated in
such notice, which date shall not be less than ten (10) nor more than thirty
(30) days from the date of mailing such notice, then on the
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date specified in such notice, the Trust created and provided for hereby shall
cease and terminate, provided, however, that this Trust shall not be subject to
revocation or termination by the Certificate Holders prior to the payment in
full and discharge of all indebtedness due and payable under the Loan Agreement,
and the termination of the Operative Documents and the release of the Liens
granted thereby; or
(b) the sale or other final disposition by Trustee of all
property constituting the Trust Estate and the final disposition by Trustee of
all moneys or other property or proceeds constituting part of the Trust Estate
in accordance with the terms hereof and with the other Operative Documents; or
(c) 110 years after the date hereof.
SECTION 6.2. Distribution of Trust Estate Upon Termination.
Upon any termination of this Trust pursuant to the provisions of Section 6.1 of
this Trust Agreement, Trustee shall convey the Trust Estate to such purchaser or
purchasers thereof or other Person entitled thereto and for such amount and on
such terms as shall be specified in written instructions from the Administrative
Agent with the Majority Certificate Holders' written consent (provided no Loan
Event of Default has occurred and is continuing) or, if the obligations owing to
the Lenders have been satisfied in full, the Majority Certificate Holders
delivered to Trustee prior to the date of termination; provided, that (a) if at
the time of any termination the Lease Agreement remains in force and effect,
then the Trust Estate shall be, subject to the Lease Agreement, sold as a unit
and not in parcels, and (b) in the event such written instructions are not
delivered to Trustee on or before the date of termination, Trustee shall
transfer title to the Trust Estate at the direction of the Administrative Agent
with the Majority Certificate Holders' written consent (provided no Loan Event
of Default has occurred and is continuing) or, if the obligations owing to the
Lenders have been satisfied in full, the Majority Certificate Holders. Upon
making such transfer or sale, Trustee shall be entitled to immediate receipt of
any sums due and owing to Trustee for expenses (including reasonable attorneys'
fees and expenses) incurred pursuant hereto or as compensation for services
rendered hereunder and not theretofore paid, and Trustee shall be discharged and
free of any further liability hereunder, subject to Section 5.5(c) of this Trust
Agreement.
SECTION 6.3. Amendments. This Trust Agreement and the terms
herein may only be amended, supplemented, waived or modified in accordance with
Section 12.2 of the Participation Agreement.
SECTION 6.4. Bankruptcy of a Certificate Holder. The
bankruptcy, insolvency or other similar incapacity of any Certificate Holder
shall not (i) operate to terminate this Trust Agreement, (ii) entitle the
Certificate Holder's legal representatives to claim an accounting or to take any
action in any court for a partition or winding up of the Trust Estate or (iii)
otherwise affect the rights, obligations and liabilities of the parties hereto.
SECTION 6.5. Transfers shall not Terminate Trust Agreement. No
transfer, by operation of law or otherwise, of any right, title or interest of
any Certificate Holder in and to the Trust Estate shall operate to terminate
this Trust Agreement or the Trust created hereunder or
-16-
<PAGE> 21
entitle any successors or transferees of any Certificate Holder to an accounting
or to the transfer of legal title to any part of the estate.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Compensation. Trustee shall receive reasonable
compensation for its services hereunder from Lessee and shall be reimbursed by
Lessee for Trustee's reasonable fees and expenses (including the disbursements
and reasonable fees of counsel in accordance with Section 12.1 of the
Participation Agreement). Trustee's fees shall be separately agreed upon by
Lessee and Trustee. If a Lease Event of Default exists and Trustee shall be
required pursuant to the provisions of this Trust Agreement to take any action
in connection therewith, the Certificate Holders shall reimburse it for expenses
it may incur in relation to taking such action (in accordance with the Operative
Documents) (including the disbursements and reasonable fees of counsel to the
extent not reimbursed by Lessee).
SECTION 7.2. Notices. Unless otherwise provided herein, all
notices, requests, demands, consents, instructions or other communications to or
upon the respective parties to this Agreement shall be given in accordance with
Section 12.1 of the Participation Agreement.
SECTION 7.3. Severability. Any provision of this Trust
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition on
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provisions in any other jurisdiction.
SECTION 7.4. Tax Reports. In the event any tax report or tax
return is required to be made by Trustee with respect to the Trust Estate and
Lessee is not required to prepare and file the same pursuant to the
Participation Agreement or the Lease Agreement, each Certificate Holder will
prepare such tax report or return in respect of its interest in the Trust Estate
and deliver a copy thereof to Trustee. Trustee agrees to forward promptly to
each Certificate Holder any communications with respect to taxes pertaining to
the Trust Estate which are received by Trustee from tax authorities or from
Lessee, along with any other information reasonably requested by a Certificate
Holder as being necessary in order to complete such return.
SECTION 7.5. Headings. The headings of the various Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 7.6. Successors and Assigns. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the parties hereto and their respective successors and assigns.
SECTION 7.7. Only Written Waivers. No term or provision of
this Trust Agreement may be changed, waived, discharged or terminated orally,
but only by an instrument in writing signed by the party or other person against
whom enforcement of the change, waiver,
-17-
<PAGE> 22
discharge or termination is sought; and any waiver of the terms hereof shall be
effective only in the specific instance and for the specific purpose given and
only so long as such waiver is not inconsistent with the Operative Documents.
SECTION 7.8. Counterparts. This instrument may be
simultaneously executed in any number of counterparts, each of which when so
executed shall be deemed to be an original, and such counterparts together shall
constitute and be one and the same instrument.
SECTION 7.9. Rights in Trust Agreement. Except as expressly
provided to the contrary in the Operative Documents, nothing in this Trust
Agreement, whether express or implied, shall be construed to give any Person
other than Trust Company, Trustee, and each Certificate Holder and their
respective successors and assigns, any right, remedy or claim under or in
respect of this Trust Agreement.
SECTION 7.10. Identification of Trust. The Trust created
hereunder may for convenience be referred to as the Universal Compression Trust
(2000-1).
SECTION 7.11. Agreement Not to Petition. Each of Trustee, the
Trust Company, and each Certificate Holder agrees that, until at least 367 days
after the Trust has been terminated in accordance with Article VII, it shall not
file, or join in the filing of, a petition against Trustee under any bankruptcy,
reorganization, arrangement, insolvency, liquidation or other similar law
(including the Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise
join in the commencement of any proceedings against Trustee under any Bankruptcy
Law.
SECTION 7.12. GOVERNING LAW; SUBMISSION TO JURISDICTION;
VENUE; WAIVER OF JURY TRIAL. (a) THIS TRUST AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE STATE OF [_______]. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT MAY BE BROUGHT IN
THE COURTS OF THE STATE 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
TRUST COMPANY, TRUSTEE AND EACH CERTIFICATE HOLDER HEREBY IRREVOCABLY ACCEPTS
FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. EACH OF TRUST COMPANY, TRUSTEE AND EACH
CERTIFICATE HOLDER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS
ADDRESS SET FORTH IN SECTION 12.4 OF THE PARTICIPATION AGREEMENT, SUCH SERVICE
TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF ANY PARTY UNDER THIS TRUST AGREEMENT, TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
-18-
<PAGE> 23
OTHERWISE PROCEED AGAINST LESSEE, GUARANTOR OR LESSOR IN ANY OTHER JURISDICTION.
(b) EACH OF TRUST COMPANY, TRUSTEE AND EACH CERTIFICATE HOLDER
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 TRUST AGREEMENT OR ANY OTHER OPERATIVE 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 TRUST 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 OPERATIVE
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
[SIGNATURE PAGES FOLLOW]
-19-
<PAGE> 24
IN WITNESS WHEREOF, the Certificate Holders and Trustee have
caused this Trust Agreement to be duly executed as of the day and year first
above written.
TRUSTEE: [NAME OF TRUST COMPANY], not in its
individual capacity, except as set forth
herein, but solely as Trustee
By:
-------------------------------------
Name:
Title:
<PAGE> 25
CERTIFICATE HOLDERS: [__________________________]
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
<PAGE> 26
EXHIBIT A
to Trust Agreement
FORM OF MASTER CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR "BLUE SKY" LAW, AND MAY NOT
BE TRANSFERRED, SOLD OR OFFERED FOR SALE IN VIOLATION OF SUCH ACT OR LAWS.
--------------------------
CERTIFICATE
Evidencing an interest in the
Trust Estate, as defined below.
Number [ ] Dated ____________, 2000
Certificate Holder Amount: $_________
THIS CERTIFIES THAT __________________________________ (the
"Certificate Holder") is the registered owner of a______________________Dollars
($_________) Certificate, or, if less the aggregate unpaid Certificate Holder
Amount, evidencing an interest in the Trust Estate created pursuant to (and
defined in) that certain Trust Agreement, dated ___________, 2000, (the "Trust
Agreement") among the Persons listed on Schedule I thereto, as Certificate
Holders and [TRUST COMPANY], [a __________ banking corporation], as Trustee,
which creates the trust identified above. To the extent not otherwise defined
herein, capitalized terms used herein shall have the meanings assigned to such
terms in the Participation Agreement (as defined in the Trust Agreement), unless
the context otherwise requires. This Certificate is being delivered pursuant to,
is entitled to the benefits of, and is subject to the terms, provisions and
conditions of, the Trust Agreement, to which Trust Agreement the holder of this
Certificate by virtue of its acceptance hereof assents and by which such holder
is bound.
This Certificate entitles the registered owner hereof to the
payment of a sum equal to the aggregate unpaid Certificate Holder Amount hereof,
together with the Equity Return on said Certificate Holder Amount remaining
unpaid from time to time from the date of this Certificate until payment hereof
is made or duly provided. All payments of the Certificate Holder Amount hereof
and Equity Return thereon shall be due and payable in such amounts and at the
times provided in the Trust Agreement.
A-1
<PAGE> 27
EXHIBIT A
to Trust Agreement
Interest on any overdue Certificate Holder Amount and to the
extent permitted by Applicable Law, Equity Return thereon shall be paid from the
due date thereof at the Overdue Rate.
All payments of Certificate Holder Amount and other amounts
hereunder to be made by Trustee shall be made only from the income and proceeds
from the Trust Estate and only to the extent that Trustee shall have sufficient
income or proceeds from the Trust Estate to make such payments in accordance
with the terms of Articles III and IV of the Trust Agreement. Each holder
hereof, by its acceptance of this Certificate, agrees: (i) that it will look
solely to the income and proceeds from the Trust Estate to the extent available
for distribution to the holder hereof; and (ii) that in any action or proceeding
brought on this Certificate or on the indebtedness evidenced hereby, no
deficiency or other monetary judgment shall be sought or obtained against
Trustee by reason of the ownership of this Certificate, except as is necessary
to enforce the rights and remedies of such holder under the Trust Agreement and
the other Operative Documents (including, but not by way of limitation,
foreclosure by the Lenders on the Lessor Collateral or other collateral
security), in which event any such judgment shall be enforceable against Trustee
only to the extent of the interest of Trustee in the Trust Estate and any such
judgment shall not be enforceable by execution or by a Lien on any of the assets
of Trustee or Trust Company other than the interest of Trustee in the Trust
Estate.
All Certificate Holder Amounts of and Equity Return on this
Certificate shall be payable in immediately available funds as provided in
Article IV of the Trust Agreement.
There shall be maintained a register for the purpose of
registering transfers and exchanges of Certificates, at the offices of the
Administrative Agent, or at the office of any successor trustee.
Each holder of this Certificate, by its acceptance hereof,
agrees that each payment received by such holder hereunder on account of the
Certificate Holder Amount of or Equity Return on this Certificate shall be
applied in the manner set forth in Article IV of the Trust Agreement.
This Certificate is one of the Certificates referred to in the
Trust Agreement that have been delivered pursuant to the terms of the Trust
Agreement. Reference is hereby made to the Trust Agreement and the other
Operative Documents for a statement of: (i) the rights of the holder of, and the
nature and extent of the security for, this Certificate; (ii) the rights of the
holders of, and the nature and extent of the security for, the other
Certificates; and (iii) the terms, rights and conditions of the trusts created
by the Trust Agreement.
This Certificate is not subject to prepayment except as
provided in the Trust Agreement, the Lease Agreement and the Participation
Agreement.
This Certificate is a registered Certificate and is
transferable, as provided in the Trust Agreement, only upon surrender of this
Certificate for registration and transfer duly accompanied by a written
instrument of transfer duly executed by the registered holder hereof or his
attorney duly authorized in writing. Prior to due registration of transfer of
this Certificate,
A-2
<PAGE> 28
EXHIBIT A
to Trust Agreement
Trustee may treat the Person in whose name this Certificate is
registered as the owner hereof for the purpose of receiving payments of the
Certificate Holder Amount and Equity Return hereunder and under the Trust
Agreement and for all other purposes whatsoever, whether or not this Certificate
be overdue, and Trustee shall not be affected by notice to the contrary.
[remainder of page intentionally left blank]
A-3
<PAGE> 29
IN WITNESS WHEREOF, Trustee has caused this Certificate to be
executed in its corporate name by its duly authorized officer as of the date
hereof.
[NAME OF TRUST COMPANY], not in its
individual capacity, except as set forth
herein, but solely as Trustee
By:
-------------------------------------
Name:
Title:
This Certificate is one of the
Certificates referred to in the
within-mentioned Trust Agreement.
<PAGE> 1
EXHIBIT 10.46
================================================================================
CREDIT AGREEMENT
among
UNIVERSAL COMPRESSION HOLDINGS, INC.,
UNIVERSAL COMPRESSION, INC.,
VARIOUS LENDERS,
DEUTSCHE BANK SECURITIES INC.,
AS LEAD ARRANGER
and
BANKERS TRUST COMPANY,
as ADMINISTRATIVE AGENT
----------------------------------
Dated as of May __, 2000
----------------------------------
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
Page
----
TABLE OF CONTENTS
<S> <C>
SECTION 1. Amount and Terms of Credit........................................1
1.01 The Commitments................................................1
1.02 Minimum Amount of Each Borrowing...............................2
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...................................................9
1.12 Change of Lending Office.......................................9
1.13 Replacement of Lenders........................................10
SECTION 2. Letters of Credit................................................11
2.01 Letters of Credit.............................................11
2.02 Minimum Stated Amount.........................................12
2.03 Letter of Credit Requests.....................................12
2.04 Letter of Credit Participations...............................13
2.05 Agreement to Repay Letter of Credit Drawings..................14
2.06 Increased Costs...............................................15
SECTION 3. Commitment Commission; Fees; Reductions of Commitment............16
3.01 Fees..........................................................16
3.02 Voluntary Termination of Unutilized Commitments...............17
3.03 Mandatory Reduction of Commitments............................17
SECTION 4. Prepayments; Payments; Taxes.....................................17
4.01 Voluntary Prepayments.........................................17
4.02 Mandatory Repayments and Commitment Reductions................18
4.03 Method and Place of Payment...................................19
4.04 Net Payments..................................................20
SECTION 5. Conditions Precedent to Effectiveness............................22
5.01 Execution of Agreement; Notes.................................22
5.02 Officer's Certificate.........................................22
5.03 Opinions of Counsel...........................................22
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
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 Consummation of the Synthetic Lease Financing.................23
5.07 Refinancing...................................................24
5.08 Pledge Agreement..............................................25
5.09 Security Agreement............................................25
5.10 Subsidiaries Guaranty.........................................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; Insurance Certificate........................27
5.16 Financial Statements; Pro Forma Financial Statements;
Financial Projections......................................27
5.17 Consummation of the Repurchase................................27
SECTION 6. Conditions Precedent to All Credit Events........................27
6.01 No Default; Representations and Warranties...................28
6.02 Notice of Borrowing; Letter of Credit Request................28
SECTION 7. Representations, Warranties and Agreements.......................28
7.01 Corporate and Other Status....................................28
7.02 Corporate and Other Power and Authority.......................29
7.03 No Violation..................................................29
7.04 Governmental Approvals........................................29
7.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; Projections; etc..............................29
7.06 Litigation....................................................31
7.07 True and Complete Disclosure..................................31
7.08 Use of Proceeds; Margin Regulations...........................31
7.09 Tax Returns and Payments......................................31
7.10 Compliance with ERISA.........................................32
7.11 The Security Documents........................................33
7.12 Representations and Warranties in Documents...................33
7.13 Properties....................................................33
7.14 Capitalization................................................34
7.15 Subsidiaries..................................................34
7.16 Compliance with Statutes, etc.................................34
7.17 Investment Company Act........................................34
7.18 Public Utility Holding Company Act............................34
7.19 Environmental Matters.........................................34
7.20 Labor Relations...............................................35
7.21 Patents, Licenses, Franchises and Formulas....................36
7.22 Indebtedness..................................................36
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
7.23 Synthetic Lease Financing.....................................36
7.24 Holdings IPO and Repurchase...................................36
7.25 Insurance.....................................................37
SECTION 8. Affirmative Covenants............................................37
8.01 Information Covenants.........................................37
8.02 Books, Records and Inspections................................39
8.03 Maintenance of Property; Insurance............................40
8.04 Corporate Franchises..........................................41
8.05 Compliance with Statutes, etc.................................41
8.06 Compliance with Environmental Laws............................41
8.07 ERISA.........................................................42
8.08 End of Fiscal Years; Fiscal Quarters..........................43
8.09 Performance of Obligations....................................43
8.10 Payment of Taxes..............................................43
8.11 Additional Security; Further Assurances.......................43
8.12 Foreign Subsidiaries Security.................................44
SECTION 9. Negative Covenants...............................................45
9.01 Liens.........................................................45
9.02 Consolidation, Merger, Purchase or Sale of Assets, etc........47
9.03 Dividends.....................................................51
9.04 Indebtedness..................................................52
9.05 Advances, Investments and Loans...............................53
9.06 Transactions with Affiliates..................................55
9.07 Capital Expenditures..........................................56
9.08 Consolidated EBITDAR to Total Interest Expense................57
9.09 Maximum Leverage Ratio........................................58
9.10 Maximum Senior Secured Leverage Ratio.........................59
9.11 Limitation on Voluntary Payments and Modifications of
Indebtedness; Modifications of Certificate of
Incorporation, By-Laws and Certain Other Agreements; etc...61
9.12 Limitation on Certain Restrictions on Subsidiaries............61
9.13 Limitation on Issuance of Capital Stock.......................61
9.14 Business......................................................62
9.15 Limitation on Creation of Subsidiaries and Entering into
Partnerships and Joint Ventures............................62
9.16 Special Purpose Corporation...................................62
SECTION 10. Events of Default...............................................63
10.01 Payments.....................................................63
10.02 Representations, etc. .......................................63
10.03 Covenants....................................................63
10.04 Default Under Other Agreements...............................63
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<S> <C>
10.05 Bankruptcy, etc..............................................64
10.06 ERISA........................................................64
10.07 Security Documents...........................................65
10.08 Subsidiaries Guaranty........................................65
10.09 Judgments....................................................65
10.10 Change of Control............................................65
SECTION 11. Definitions and Accounting Terms................................66
11.01 Defined Terms................................................66
SECTION 12. The Administrative Agent........................................88
12.01 Appointment..................................................88
12.02 Nature of Duties.............................................88
12.03 Lack of Reliance on the Administrative Agent.................88
12.04 Certain Rights of the Administrative Agent...................89
12.05 Reliance.....................................................89
12.06 Indemnification..............................................89
12.07 The Administrative Agent in its Individual Capacity..........90
12.08 Holders......................................................90
12.09 Resignation by the Administrative Agent......................90
SECTION 13. Miscellaneous...................................................91
13.01 Payment of Expenses, etc.....................................91
13.02 Right of Setoff..............................................92
13.03 Notices......................................................92
13.04 Benefit of Agreement; Assignments; Participations............92
13.05 No Waiver; Remedies Cumulative...............................94
13.06 Payments Pro Rata............................................94
13.07 Calculations; Computations; Accounting Terms.................95
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL.................................................96
13.09 Counterparts.................................................97
13.10 Effectiveness................................................97
13.11 Headings Descriptive.........................................97
13.12 Amendment or Waiver..........................................97
13.13 Survival.....................................................98
13.14 Domicile of Loans............................................98
13.15 Limitation on Additional Amounts, etc........................99
13.16 Register.....................................................99
13.17 Confidentiality.............................................100
SECTION 14. Holdings Guaranty..............................................100
14.01 Guaranty....................................................100
14.02 Bankruptcy..................................................101
</TABLE>
(iv)
<PAGE> 6
<TABLE>
<S> <C>
14.03 Nature of Liability.........................................101
14.04 Independent Obligation......................................101
14.05 Authorization...............................................102
14.06 Reliance....................................................102
14.07 Subordination...............................................103
14.08 Waiver......................................................103
14.09 Nature of Liability.........................................104
</TABLE>
SCHEDULE I Commitments
SCHEDULE II ERISA
SCHEDULE III Subsidiaries
SCHEDULE IV Existing Indebtedness
SCHEDULE V Insurance
SCHEDULE VI Existing Liens
SCHEDULE VII Indebtedness to be Refinanced
SCHEDULE VIII Lender Addresses
SCHEDULE IX Existing Investments
SCHEDULE X Existing Letters of Credit
EXHIBIT A Form of Notice of Borrowing
EXHIBIT B-1 Form of Note
EXHIBIT B-2 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 Intercompany Note
(v)
<PAGE> 7
CREDIT AGREEMENT, dated as of May __, 2000, among UNIVERSAL
COMPRESSION HOLDINGS, INC., a Delaware corporation ("Holdings"), UNIVERSAL
COMPRESSION, INC., a Texas Corporation (the "Borrower"), the Lenders party
hereto from time to time, DEUTSCHE BANK SECURITIES INC., as Lead Arranger and
BANKERS TRUST COMPANY, as Administrative 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 Lenders are willing to make available to the Borrower the credit
facility 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 Lender with a Commitment severally agrees, at
any time and from time to time on and after the Effective Date and prior to the
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 Lender at any time outstanding
that aggregate principal amount which, when added to the product of (x) such
Lender'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 Commitment of such
Lender at such time and (iv) shall not exceed for all Lenders 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 with the incurrence of, the
respective incurrence of Revolving Loans) then outstanding, equals the Total
Commitment at such time.
(b) 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 Effective 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
<PAGE> 8
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 Lenders then
outstanding and the Letter of Credit Outstandings at such time, an amount equal
to the Adjusted Total Commitment at such time (after giving effect to any
reductions to the Adjusted Total Commitment on such date) and (iv) shall not
exceed in aggregate principal amount at any time outstanding the Maximum
Swingline Amount.
(c) On any Business Day, BTCo may, in its sole discretion,
give notice to the Lenders 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
Lenders with a Commitment (without giving effect to any termination thereof
pursuant to the last paragraph of Section 10) pro rata based on each Lender's
Adjusted Percentage (determined before giving effect to any termination of the
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 Lender 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 Commitment or
the Adjusted Total 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 Lender
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 Lenders to share in such Swingline Loans ratably based upon their
respective Adjusted Percentages (determined before giving effect to any
termination of the 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 Lender 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.
1.02 Minimum Amount of Each Borrowing. The aggregate principal
amount of each Borrowing of Revolving Loans shall not be less than $1,000,000
and, if greater, shall be in
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an integral multiple of $100,000; provided that Mandatory Borrowings shall be
made in the amounts required by Section 1.01(c). 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 Administrative 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 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 Administrative Agent shall promptly give each Lender notice of such proposed
Borrowing, of such Lender'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(c), 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(c).
(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 Administrative 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
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of Mandatory Borrowings, not later than 12:00 Noon (New York time) on the date
specified in Section 1.01(c)), each Lender 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 Administrative Agent, and the Administrative Agent
will make available to the Borrower at the Payment Office the aggregate of the
amounts so made available by the Lenders. Unless the Administrative Agent shall
have been notified by any Lender prior to the date of Borrowing that such Lender
does not intend to make available to the Administrative Agent such Lender's
portion of any Borrowing to be made on such date, the Administrative Agent may
assume that such Lender has made such amount available to the Administrative
Agent on such date of Borrowing and the Administrative 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 Administrative
Agent by such Lender, the Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender. If such Lender does not pay
such corresponding amount forthwith upon the Administrative Agent's demand
therefor, the Administrative Agent shall promptly notify the Borrower and the
Borrower shall immediately pay such corresponding amount to the Administrative
Agent. The Administrative Agent shall also be entitled to recover on demand from
such Lender 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 Administrative Agent to the Borrower until the date such
corresponding amount is recovered by the Administrative Agent, at a rate per
annum equal to (i) if recovered from such Lender, 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 Lender from its obligation to
make Loans hereunder or to prejudice any rights which the Borrower may have
against any Lender as a result of any failure by such Lender 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 Lender shall be evidenced (i) if
Revolving 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 "Revolving Note" and, collectively,
the "Revolving Notes") and (ii) if Swingline 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 (the "Swingline
Note").
(b) The Revolving Note issued to each Lender shall (i) be
executed by the Borrower, (ii) be payable to the order of such Lender and be
dated the Effective Date, (iii) be in a stated principal amount equal to the
Commitment of such Lender and be payable in the principal amount of the
Revolving Loans evidenced thereby, (iv) mature on the 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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(c) 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 Effective
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.
(d) Each Lender 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 Effective Date, all or a
portion equal to at least $1,000,000 of the outstanding principal amount of such
Loans made pursuant to one or more Borrowings of one or more Types of Loans into
a Borrowing 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 $1,000,000, (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
Administrative 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 Administrative Agent shall give
each Lender 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 Revolving Loans
under this Agreement shall be incurred from the Lenders pro rata on the basis of
their Commitments; provided that all Borrowings of Revolving Loans made pursuant
to a Mandatory Borrowing shall be incurred from the Lenders pro rata on the
basis of their Adjusted Percentages. It is understood that no Lender shall be
responsible for any default by any other Lender of its obligation to make Loans
hereunder and that each Lender shall be obligated to make the Loans provided to
be made by it hereunder, regardless of the failure of any other Lender 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
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annum which shall be equal to the sum of the Applicable Base Rate Margin plus
the Base Rate in effect from time to time.
(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 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 Administrative
Agent shall determine the Eurodollar Rate for each Interest Period applicable to
Eurodollar Loans and shall promptly notify the Borrower and the Lenders 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 prior to 12:00 Noon (New York time) 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 Administrative 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 Lenders, 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;
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(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;
(v) no Interest Period may be selected at any time when a
Default or Event of Default is then in existence; and
(vi) no Interest Period in respect of any Borrowing shall be
selected which extends beyond the Maturity Date.
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 Lender 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 Administrative 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 Lender 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
Lender 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 Lender
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
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<PAGE> 14
and/or (y) other circumstances since the date of this Agreement
affecting such Lender or the interbank Eurodollar market or the
position of such Lender 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 Lender
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 Lender (or the Administrative 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)
above, to the Administrative Agent of such determination (which notice the
Administrative Agent shall promptly transmit to each of the other Lenders).
Thereafter (x) in the case of clause (i) above, Eurodollar Loans shall no longer
be available until such time as the Administrative Agent notifies the Borrower
and the Lenders that the circumstances giving rise to such notice by the
Administrative 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 Lender, within 15 days of such Lender'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 Lender reasonably shall determine)
as shall be required to compensate such Lender 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 Lender, showing in
reasonable detail the basis for the calculation thereof, submitted to the
Borrower by such Lender 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 Administrative
Agent telephonic notice (confirmed in writing) on the same date that the
Borrower was notified by the affected Lender or the Administrative 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
Administrative Agent, require the affected Lender to convert such Eurodollar
Loan into a Base Rate Loan, provided that, if more than one Lender is affected
at any time, then all affected Lenders must be treated the same pursuant to this
Section 1.10(b).
(c) If at any time after the date of this Agreement any Lender
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
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<PAGE> 15
required or expected to be maintained by such Lender or any corporation
controlling such Lender based on the existence of such Lender's Commitments
hereunder or its obligations hereunder, then the Borrower shall pay to such
Lender, upon its written demand therefor, such additional amounts as shall be
required to compensate such Lender or such other corporation for the increased
cost to such Lender or such other corporation or the reduction in the rate of
return to such Lender or such other corporation as a result of such increase of
capital. In determining such additional amounts, each Lender will act reasonably
and in good faith and will use averaging and attribution methods which are
reasonable, provided that such Lender'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 Lender, 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 Lender,
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 Lender to fund its Eurodollar Loans
but excluding loss of anticipated profits) which such Lender may sustain: (i) if
for any reason (other than a default by such Lender or the Administrative 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 Lender or (y) any election made pursuant
to Section 1.10(b). Calculation of all amounts payable to each Lender under
clause (ii) of the immediately preceding sentence shall be made as if such
Lender (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 Lender 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 Lender 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
Lender, it will, if requested by the Borrower, use reasonable
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<PAGE> 16
efforts (subject to overall policy considerations of such Lender) 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 Lender 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 Lender provided in Sections
1.10, 2.06 and 4.04.
1.13 Replacement of Lenders. (x) If any Lender becomes a
Defaulting Lender 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 Lender which results in such Lender charging to
the Borrower increased costs in excess of those being generally charged by the
Lenders or (z) as provided in Section 13.12(b) in the case of certain refusals
by a Lender to consent to certain proposed changes, waivers, discharges or
terminations with respect to this Agreement which have been approved by the
Required Lenders, the Borrower shall have the right, if no Default or Event of
Default then exists, to replace such Lender (the "Replaced Lender") with one or
more other Eligible Transferee or Transferees, none of whom shall constitute a
Defaulting Lender at the time of such replacement (collectively, the
"Replacement Lender") reasonably acceptable to the Administrative Agent,
provided that (i) at the time of any replacement pursuant to this Section 1.13,
the Replacement Lender 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 Lender) pursuant to which
the Replacement Lender shall acquire all of the Commitments and outstanding
Loans of, and participations in Letters of Credit by, the Replaced Lender and,
in connection therewith, shall pay to (x) the Replaced Lender 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 of the Replaced Lender, (B) an amount
equal to all Unpaid Drawings that have been funded by (and not reimbursed to)
such Replaced Lender, 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 Lender pursuant to Section 3.01 and (y) BTCo
an amount equal to such Replaced Lender'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 Lender) of any
Unpaid Drawing (which at such time remains an Unpaid Drawing) to the extent such
amount was not theretofore funded by such Replaced Lender, and (ii) all
obligations of the Borrower owing to the Replaced Lender (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 Lender 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 Lender, delivery to the Replacement Lender of the appropriate Note
or Notes executed by the Borrower, (x) the Replacement Lender shall become a
Lender hereunder and the Replaced Lender shall cease to constitute a Lender
hereunder, except with respect to indemnification provisions under this
Agreement, which shall survive as to such Replaced Lender and (y) the Adjusted
Percentages of the Lenders shall be automatically adjusted at such time to give
effect to such replacement (and to give effect to the replacement of a
Defaulting Lender with one or more Non-Defaulting Lenders).
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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 Effective Date and prior to the 10th
day preceding the 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 or an
Alternate Currency 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 trade letter of credit in
Dollars or an Alternate Currency and in a form customarily used by BTCo or in
such other form as has been approved by BTCo (each such trade 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 Effective Date and prior to the 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 buyers 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 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 Lender 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) $15,000,000 or (y) when added to the aggregate principal
amount of all Revolving Loans made by Non-Defaulting Lenders and Swingline Loans
then outstanding, an amount equal to the Adjusted Total Commitment at such time,
(ii) no Letter of Credit denominated in an Alternate Currency shall be issued if
the Stated Amount of such
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Letter of Credit, (x) 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, such Letter of Credit) at such time in respect of all other outstanding
Letters of Credit denominated in an Alternate Currency, would exceed $13,500,000
unless the Administrative Agent consents in writing prior to the issuance
thereof, and (y) when added to the aggregate principal amount of all Revolving
Loans made by Non-Defaulting Lenders and Swingline Loans and Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, such Letter of Credit) at such time, would exceed an
amount equal to 95% of the Adjusted Total Commitment at such time and (iii) 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 24 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 10 days prior to the Maturity Date, on terms acceptable
to BTCo) and (B) in the case of Trade Letters of Credit, the date which occurs
24 months after the date of issuance thereof and (y) the date which is 10 days
prior to the Maturity Date.
(d) Schedule X contains a description of all letters of credit
issued by BTCo pursuant to the Existing Credit Agreement and which are to remain
outstanding on the Effective Date. Each such letter of credit, including any
extension thereof (each an "Existing Letter of Credit") shall constitute a
"Letter of Credit" for all purposes of this Agreement. Each Existing Letter of
Credit shall be deemed issued for purposes of Sections 2.04(a), 3.01(b) and
3.01(c) on the Effective 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 Administrative Agent and BTCo at least two Business Days' (or 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 Lenders
before it issues a Letter of Credit that one or more of the conditions specified
in Section 5 are not satisfied on the Effective 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 or amendment to any Standby Letter of Credit, BTCo shall promptly
notify the Borrower and each Lender, in writing of such issuance or amendment
and, if requested by a Lender, BTCo shall provide such Lender with copies of any
such issuance or amendment. In the case of Trade Letters of Credit, BTCo shall
promptly notify the Lenders of the aggregate Stated Amount of same as of the
close of business on the last Business Day of the preceding week.
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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 Lender other than BTCo (each such Lender, 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
amendment and 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 Commitments or Adjusted Percentages
of the Lenders pursuant to Section 1.13 or 13.04 or as a result of a Lender
Default, it is hereby agreed that, with 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 Lender or of all Lenders with
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 Lenders 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 the final, non-appealable decision of a court of competent
jurisdiction) shall not create for BTCo any resulting liability to the Borrower
or any Lender.
(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 Administrative
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
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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) 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;
(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 Administrative 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 in Dollars (in an
amount equal to the Dollar Equivalent of any payments or disbursements in
respect of Letters of Credit denominated in an Alternate Currency determined on
the date of such payment or disbursement) 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 (using the Dollar Equivalent of any Letters
of Credit denominated in an Alternate Currency determined on the date of such
payment or disbursement), 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, 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
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<PAGE> 21
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 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 Lender (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 substantially conform to the terms of the
Letter of Credit or any nonapplication or misapplication by the beneficiary or
any transferee 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 (as determined by the
final, non-appealable decision of a court of competent jurisdiction).
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 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
Administrative Agent), the Borrower shall pay to BTCo or such Participant such
additional amount or amounts as will compensate such Lender 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
certificate shall be sent by BTCo or such Participant to the Administrative
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
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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
Administrative Agent for distribution to each Non-Defaulting Lender a commitment
commission (the "Commitment Commission") for the period from the Effective Date
to and including the Maturity Date (or such earlier date as the Total Commitment
shall have been terminated), computed at a rate for each day equal to (i) 0.375%
per annum on the daily average Unutilized Commitment of such Non-Defaulting
Lender at any time when the Leverage Ratio shall be less than or equal to
4.5:1.0 and (ii) 0.50% per annum on the daily average Unutilized Commitment of
such Non-Defaulting Lender at any time when the Leverage Ratio shall be greater
than 4.5:1.0. Accrued Commitment Commission shall be due and payable quarterly
in arrears on each Quarterly Payment Date and on the Maturity Date or such
earlier date upon which the Total Commitment is terminated.
(b) The Borrower agrees to pay to the Administrative Agent for
distribution to each Non-Defaulting Lender (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 on the daily average
Stated Amount of such Letter of Credit. Accrued Letter of Credit Fees shall be
due and payable quarterly in arrears on each Quarterly Payment Date and on the
first day after the termination of the Total Commitment upon which no Letters of
Credit remain outstanding.
(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
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<PAGE> 23
to the greater of (A) the Applicable Eurodollar Rate Margin for Revolving Loans
maintained as Eurodollar Loans multiplied by the daily average Stated Amount of
such Trade Letter of Credit and (B) $500. Except as otherwise provided in the
proviso to the immediately preceding sentence, accrued Facing Fees shall be due
and payable quarterly in arrears on each Quarterly Payment Date and upon the
first day after the termination of the Total Commitment upon which no Letters of
Credit remain outstanding.
(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 Administrative Agent, for
its own account, such other fees as have been agreed to in writing by the
Borrower and the Administrative Agent.
3.02 Voluntary Termination of Unutilized Commitments. Upon at
least two Business Days' prior notice to the Administrative Agent at its Notice
Office (which notice the Administrative Agent shall promptly transmit to each of
the Lenders), the Borrower shall have the right, at any time or from time to
time, without premium or penalty, to terminate the Total Unutilized Commitment,
in whole or in part, in integral multiples of $1,000,000 in the case of partial
reductions to the Total Unutilized Commitment, provided that (i) each such
reduction shall apply proportionately to permanently reduce the Commitment of
each Lender and (ii) the reduction to the Total Unutilized Commitment shall in
no case be in an amount which would cause the Commitment of any Lender to be
reduced (as required by preceding clause (i)) by an amount which exceeds the
remainder of (x) the Unutilized Commitment of such Lender as in effect
immediately before giving effect to such reduction minus (y) such Lender'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 Commitment of each Lender) shall terminate in its entirety
on June 30, 2000 unless the Effective Date has occurred on or before such date.
(b) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Commitment (and the Commitment of each
Lender) shall terminate in its entirety on the Maturity Date.
(c) Each reduction to the Total Commitment pursuant to this
Section 3.03 (or pursuant to Section 4.02) shall be applied proportionately to
reduce the Commitment of each Lender.
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 Administrative Agent prior to 12:00 Noon (New York time) at its
Notice Office (x) at least one Business Day's prior written
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notice (or telephonic notice promptly confirmed in writing) of its intent to
prepay Eurodollar Loans, whether 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 Administrative Agent shall promptly transmit to
each of the Lenders; (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
$1,000,000, 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 Borrowing shall, except as provided in clause (v)
below, be applied pro rata among such Loans; and (v) 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
Lender.
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 Lenders, Swingline Loans and the Letter
of Credit Outstandings exceeds the Adjusted Total 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 Lenders 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 Lenders, the
aggregate amount of the Letter of Credit Outstandings exceeds the Adjusted Total
Commitment as then in effect, the Borrower shall pay to the Administrative 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 Lenders hereunder
in a cash collateral account to be established by the Administrative Agent.
(ii) On any day on which the aggregate outstanding principal
amount of the Revolving Loans made by any Defaulting Lender exceeds the
Commitment of such Defaulting Lender, the Borrower shall prepay principal of
Revolving Loans of such Defaulting Lender 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 the fifth Business Day
after each date after the Effective Date upon which Holdings or any of its
Subsidiaries consummates any Asset Sale, the Total Commitment shall be
permanently reduced by an amount equal to 100% of the Net Sale Proceeds
therefrom in accordance with the requirements of Section 4.02(c), provided that
the Total Commitment shall not be required to be so reduced by any Net Sale
Proceeds received by Holdings or any of its Subsidiaries in connection with any
Asset Sale within such five Business
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Days to the extent the Borrower has delivered a Reinvestment Notice to the
Administrative Agent on or prior to such date stating that such Net Sale
Proceeds shall be reinvested or shall be committed to be reinvested (a
"Reinvestment Election") in equipment or other assets useful in a Permitted
Business (including capital stock or other equity interests of a Person engaged
in such business) (each a "Reinvestment Asset" and collectively, the
"Reinvestment Assets") within 18 months following the date of receipt of such
Net Sale Proceeds and provided further, that if all or any portion of such Net
Sale Proceeds referred to in the preceding proviso are not so used within the
18-month period following the date of the receipt of such Net Sale Proceeds,
such remaining portion shall be applied on the last day of such period as a
permanent reduction of the Total Commitment as provided above in this Section
4.02(b) without regard to the immediately preceding proviso. The Borrower may
exercise its Reinvestment Election (within the parameters specified in the
preceding sentence) with respect to an Asset Sale if (x) no Default or Event of
Default exists and (y) the Borrower delivers a Reinvestment Notice to the
Administrative Agent within three Business Days following the date of the
consummation of the respective Asset Sale, with such Reinvestment Election being
effective with respect to the Net Sale Proceeds of such Asset Sale equal to the
Anticipated Reinvestment Amount specified in such Reinvestment Notice.
(c) With respect to each repayment of Loans required by this
Section 4.02, the Borrower may designate the Types of Loans which are to be
repaid and, in the case of Eurodollar Loans, the specific Borrowing or
Borrowings 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 made pursuant to
such Borrowing with Interest Periods ending on such date of required repayment
and all Base Rate Loans made pursuant to such Borrowing 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 $1,000,000, 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 Administrative Agent shall, subject to
the above, make such designation in its sole discretion.
(d) 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 shall be repaid in full on the Maturity Date.
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 Administrative Agent for the account of the Lender or
Lenders 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 Administrative 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.
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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 Lender pursuant to the laws of the jurisdiction in which it is organized or
in which the principal office or applicable lending office of such Lender 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 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 Administrative 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 Administrative Agent. The Borrower agrees to
indemnify and hold harmless each Lender, and reimburse such Lender upon its
written request, for the amount of any Taxes so levied or imposed and paid by
such Lender.
(b) Each Lender 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 Administrative Agent on or
prior to the Effective Date, or in the case of a Lender that is an assignee or
transferee of an interest under this Agreement pursuant to Section 1.13 or 13.04
(unless the respective Lender was already a Lender hereunder immediately prior
to such assignment or transfer) on the date of such assignment or transfer to
such Lender, (i) two accurate and complete original signed copies of Internal
Revenue Service Form W-8ECI or W-8BEN (with respect to a complete exemption from
withholding tax under an income tax treaty) (or successor forms) certifying to
such Lender'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 Lender is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form W-8BEN (with respect to a complete exemption from withholding tax
under an income tax treaty) or W-8ECI 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-8BEN (with respect to the
portfolio interest exception) (or successor form) certifying to such Lender'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 Lender 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 Administrative Agent
two new accurate and complete original signed copies of Internal Revenue
Service Form W-8ECI or W-8BEN (with respect to a complete exemption
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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 Administrative Agent of its inability to deliver any such Form
or Certificate. Such Lender 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 Lender that is not a
Lender hereunder on the Effective Date, a change after the date such Lender
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
Lender 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 Lender 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 Lender in respect of income or similar taxes
imposed by the United States if (I) such Lender 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 Lender 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 Lender in
the 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 Lender and such Lender 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
Lender shall pay to the Borrower an amount that the Lender shall, in its sole
discretion, determine is equal to the net benefit, after tax, which was obtained
by the Lender in such year as a consequence of such Tax Benefit; provided,
however, that (i) any Lender may determine, in its sole discretion consistent
with the policies of such Lender, whether to seek a Tax Benefit; (ii) any Taxes
that are imposed on a Lender as a result of a disallowance or reduction
(including through the expiration of any tax credit carryover or carryback of
such Lender that otherwise would not have expired) of any Tax Benefit with
respect to which such Lender 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
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obligated to indemnify such Lender pursuant to this Section 4.04 without any
exclusions or defenses; and (iii) nothing in this Section 4.04(c) shall require
the Lender to disclose any confidential information to the Borrower (including,
without limitation, its tax returns).
SECTION 5. Conditions Precedent to Effectiveness. The
obligation of each Lender to make Loans, and the obligation of BTCo to issue
Letters of Credit, on and after the Effective Date, are 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
Effective Date, there shall have been delivered to the Administrative Agent for
the account of each of the Lenders the appropriate 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 Effective Date, the
Administrative Agent shall have received a certificate dated the Effective 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, 5.12, 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 Administrative Agent or any
Lender).
5.03 Opinions of Counsel. On the Effective Date, the
Administrative Agent shall have received (i) from Schulte Roth & Zabel LLP,
counsel to each Credit Party, an opinion addressed to the Administrative Agent
and each of the Lenders and dated the Effective Date covering the matters set
forth in Exhibit E and such other matters incident to the transaction
contemplated herein as the Administrative Agent may request and (ii) from local
counsel to the Borrower satisfactory to the Administrative Agent, opinions each
of which shall be in form and substance satisfactory to the Administrative Agent
and the Required Lenders 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 Administrative Agent may
reasonably request.
5.04 Corporate Documents; Proceedings; etc. (a) On the
Effective Date, the Administrative Agent shall have received a certificate,
dated the Effective Date, signed by the President or any 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
Administrative Agent.
(b) On the Effective 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 Administrative Agent and the Required Lenders, and the
Administrative 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 Administrative Agent
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reasonably may have requested in connection therewith, such documents and papers
where appropriate 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 Effective Date, there shall have been delivered to the
Administrative 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 the Effective 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
Administrative Agent and the Required Lenders and shall be in full force and
effect on the Effective Date.
5.06 Consummation of the Synthetic Lease Financing; etc. (a)
On the Effective Date, the Synthetic Lease Financing shall have been consummated
in all material respects in accordance with the Synthetic Lease Financing
Documents and all applicable laws, and each of the conditions precedent to the
consummation of the Synthetic Lease Financing shall have been satisfied and not
waived in any material respect except with the consent of the Administrative
Agent and the Required Lenders (which consent shall not be unreasonably
withheld).
(b) On or prior to the Effective Date, (i) the Borrower shall
have consummated a consent solicitation (the "Borrower Senior Discount Notes
Consent Solicitation") with respect to the outstanding Borrower Senior Discount
Notes, pursuant to which consents shall be solicited from the holders of the
Borrower Senior Discount Notes to permit the Borrower and its Subsidiaries to
enter into the Synthetic Lease Financing, (ii) the Borrower shall have received
sufficient consents to authorize the execution and delivery of the Synthetic
Lease Financing Documents, which consents shall be in form and substance
reasonably satisfactory to the
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Administrative Agent, and (iii) the Administrative Agent shall be reasonably
satisfied that the Borrower Senior Discount Notes Consent Solicitation shall
have been consummated in accordance with all applicable laws.
(c) On or prior to the Effective Date, there shall have been
delivered to the Administrative Agent true and correct copies of the Synthetic
Lease Financing Documents, and all of the terms and conditions of the Synthetic
Lease Financing Documents shall be reasonably satisfactory in form and substance
to the Administrative Agent and the Required Lenders.
5.07 Refinancing. (a) On or prior to the Effective Date, the
total commitment 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
(including the Existing Letters of Credit) shall have been terminated,
incorporated hereunder as Letters of Credit as contemplated by Section 2.01(d)
or supported by a back-stop Letter of Credit issued hereunder 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 Effective 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 Administrative 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 Administrative Agent,
which releases shall be in form and substance reasonably satisfactory to the
Administrative 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 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 Administrative 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 Administrative Agent shall have received evidence, in
form and substance reasonably satisfactory to it, that the matters set forth in
this Section 5.07 have been satisfied as of the Effective Date.
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5.08 Pledge Agreement. On the Effective 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.
5.09 Security Agreement. On the Effective 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.
5.10 Subsidiaries Guaranty. On the Effective Date, each
Subsidiary Guarantor shall have duly authorized, executed and delivered the
Subsidiaries Guaranty in the form of Exhibit I (as amended, modified or
supplemented from time to time, the "Subsidiaries Guaranty"), and the
Subsidiaries Guaranty shall be in full force and effect.
5.11 Consent Letter. On the Effective Date, the Administrative
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 Effective Date, nothing
shall have occurred since March 31, 2000 (and the Lenders shall not have become
aware of any facts or conditions not previously known) which the Administrative
Agent or the Required Lenders shall determine has, or could reasonably be
expected to have, a material adverse effect on the rights or remedies of the
Administrative Agent or the Lenders, or on the ability of any Credit Party to
perform its Obligations to the Administrative Agent and the Lenders 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 Effective Date, all necessary
governmental (domestic and foreign) and material third party approvals in
connection with the Holdings IPO, the Repurchase, the Synthetic Lease Financing
and the other 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 Holdings IPO, the
Repurchase, the Synthetic Lease Financing 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 Holdings IPO, the
Repurchase, the Synthetic Lease Financing, the other transactions contemplated
by the Credit Documents or the making of the Loans.
(c) On the Effective 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 Administrative Agent in
its reasonable discretion.
5.13 Litigation. On the Effective 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 Holdings IPO, the Repurchase or the Synthetic Lease Financing or
which the Administrative Agent or the Required Lenders shall determine could
reasonably be expected to have a materially adverse effect on the Holdings IPO,
the Repurchase or the Synthetic Lease Financing 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 Effective Date, the Borrower shall have
paid to the Administrative Agent and the Lenders all costs, fees and expenses
(including, without limitation, the reasonable legal fees and expenses of the
Administrative Agent's counsel and local counsel) payable to the Administrative
Agent and the Lenders to the extent then due.
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5.15 Solvency Letter; Insurance Certificate. On the Effective
Date, the Borrower shall cause to be delivered to the Administrative Agent (i) a
solvency certificate signed by the Chief Financial Officer of the Borrower, in
form and substance satisfactory to the Required Lenders, setting forth the
conclusion that, after giving effect to the Holdings IPO, the Repurchase, the
Synthetic Lease Financing 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 and (ii) 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
Administrative Agent and the Required Lenders and naming the Collateral 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 Administrative Agent.
5.16 Financial Statements; Pro Forma Financial Statements;
Financial Projections. On or prior to the Effective Date, the Administrative
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 Administrative Agent and the Required Lenders.
5.17 Consummation of the Holdings IPO and the Repurchase. (a)
On or prior to the Effective Date, (i) Holdings shall have consummated a
Qualified Public Equity Offering of the capital stock of Holdings and shall have
received gross cash proceeds in a minimum aggregate principal amount equal to
$100,000,000 from such Qualified Public Equity Offering and (ii) Holdings and
its Subsidiaries shall have utilized the proceeds of the Qualified Public Equity
Offering described in clause (i) above to defease, redeem or otherwise retire
(the "Repurchase"), on terms and conditions reasonably satisfactory to the
Administrative Agent, all of the outstanding Holdings Senior Discount Notes in
accordance with the applicable provisions of the Holdings Senior Note Documents.
The Repurchase shall have been consummated in accordance with the Repurchase
Documents and all applicable laws, and each of the conditions precedent to the
consummation of the Repurchase shall have been satisfied and not waived in any
material respect except with the consent of the Administrative Agent and the
Required Lenders (which consent shall not be unreasonably withheld or delayed).
(b) On or prior to the Effective Date, there shall have been
delivered to the Administrative Agent true and correct copies of the Repurchase
Documents, and all of the terms and conditions of the Repurchase Documents shall
be reasonably satisfactory in form and substance to the Administrative Agent and
the Required Lenders.
SECTION 6. Conditions Precedent to All Credit Events. The
obligation of each Lender to make Loans (excluding Mandatory Borrowings which
shall be made as provided in Section 1.01(c)), 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:
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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 Administrative 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
Administrative 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 shall
constitute a representation and warranty by Holdings and the Borrower to the
Administrative Agent and each of the Lenders that all the conditions specified
in Section 5 (with respect to Credit Events on the Effective Date) and in this
Section 6 (with respect to Credit Events on and after the Effective 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 Administrative Agent at the Notice Office for the account of each of the
Lenders and, except for the Notes, in sufficient counterparts or copies for each
of the Lenders and shall be in form and substance reasonably satisfactory to the
Administrative Agent and the Required Lenders.
SECTION 7. Representations, Warranties and Agreements. In
order to induce the Lenders 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 Holdings IPO, the Repurchase
and the Synthetic Lease Financing, 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 Effective 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 Effective Date and in all material respects on the date of each
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).
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
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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
performance 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
Effective 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) The audited consolidated balance sheets of
Holdings and its Subsidiaries for the fiscal years ended on March 31, 1999 and
March 31, 2000 and the related statements of income, cash flows and
shareholders' equity of Holdings and its Subsidiaries for the fiscal years ended
on such dates, which annual financial statements have been examined by Deloitte
& Touche LLP, certified public accountants, who delivered an unqualified opinion
with respect thereto and copies of which have heretofore been delivered to each
Lender, present fairly in all material respects the financial position of
Holdings and its Subsidiaries at the date of such balance sheets and the results
of the operations of Holdings and its Subsidiaries for the periods covered
thereby.
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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 March 31, 2000, in each case after giving effect to the Holdings IPO, the
Repurchase and the Synthetic Lease Financing, copies of which have been
furnished to the Lenders prior to the Effective Date, present fairly in all
material respects the pro forma consolidated financial position of Holdings and
its Subsidiaries as of March 31, 2000. After giving effect to the Holdings IPO,
the Repurchase and the Synthetic Lease Financing, since March 31, 2000, 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 Effective Date and after giving effect to
the Holdings IPO, the Repurchase and the Synthetic Lease Financing 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
Effective Date no liabilities 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 individually 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 Effective Date, neither Holdings
nor the Borrower knows of any basis for the assertion against it or any of its
Subsidiaries of any liability or obligation 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 Effective Date, the Projections delivered
to the Administrative Agent and the Lenders prior to the Effective 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
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be misleading in any material respect or which fail to take into account
material information known to Holdings or the Borrower regarding the matters
reported therein. On the Effective Date, Holdings and the Borrower believe that
the Projections are reasonable and attainable, it being recognized by the
Lenders, 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 Holdings IPO, the Repurchase, the Synthetic Lease Financing
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
Administrative 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 Administrative Agent or any Lender 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 Loans shall be used by the Borrower for the Borrower's general corporate and
working capital purposes.
(b) No part of the proceeds of any Loan or the purpose of any
issuance of any Letter of Credit 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 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 Effective 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 Effective Date, neither Holdings nor any
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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 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.
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(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.
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 Effective 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
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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 Effective Date and after giving
effect to the transactions contemplated hereby (including the Holdings IPO), (i)
the authorized capital stock of Holdings shall consist of (a) 200,000,000 shares
of common stock, $.01 par value per share, of which 12,707,769 shares shall be
issued and 12,695,861 shall be outstanding, (b) 50,000,000 shares of Series A
preferred stock, none of which shall be issued and outstanding and (c) 6,000
shares of Class A non-voting common stock, $.01 par value per share, none of
which 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 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 Effective Date, the Borrower has
no Subsidiaries other than those Subsidiaries listed on Schedule III hereto.
Schedule III correctly sets forth, as of the Effective Date, the percentage
ownership (direct and indirect) of the Borrower in each class of capital stock
of each of its Subsidiaries and also identifies the direct owner thereof.
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
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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
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.
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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 IV sets forth a true and complete
list of all Indebtedness (including Contingent Obligations) of Holdings and its
Subsidiaries as of the Effective Date and which is to remain outstanding after
such date (excluding the Loans, the Letters of Credit 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 Synthetic Lease Financing. 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
Synthetic Lease Financing 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 Synthetic Lease Financing. Additionally, there does not
exist any judgment, order or injunction prohibiting or imposing material adverse
conditions upon the Synthetic Lease Financing, 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 Synthetic Lease Financing have been taken in compliance with
the Documents and all applicable laws except to the extent consented to by the
Administrative Agent and the Required Lenders pursuant to Section 5.06(a).
7.24 Holdings IPO and Repurchase. 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
Holdings IPO and the Repurchase, in each case, 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 Holdings IPO or the Repurchase. Additionally, there
does not exist any judgment, order or injunction prohibiting or imposing
material adverse conditions upon the Holdings IPO or the Repurchase. All actions
taken by each Credit Party pursuant to or in furtherance of the Holdings IPO or
the Repurchase, as the case may be, have been taken in compliance with the
Documents and all applicable laws except to the extent consented to by the
Administrative Agent and the Required Lenders pursuant to Section 5.17(a).
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7.25 Insurance. Schedule V sets forth a true and complete
listing of all insurance maintained by Holdings and its Subsidiaries as of the
Effective Date, and with the amounts insured (and any deductibles) set forth
therein.
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 Commitment 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
Lender:
(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 105 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 Administrative 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.
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(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 Lenders (including
budgeted statements of income and sources and uses of cash and balance sheets)
prepared by Holdings for each of the twelve months of such fiscal year prepared
in detail, accompanied by a 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.
(f) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Sections 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
set forth in reasonable detail the calculations required to establish whether
the Borrower was in compliance with the provisions of Sections 4.02(b), 9.04,
9.05 and 9.07 through 9.10 (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.
(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 Holdings IPO, the Repurchase, the Synthetic Lease
Financing 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
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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 Administrative 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
and Holdings' or such Subsidiary's response thereto. In addition, Holdings will
provide the Administrative 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 Lenders.
(j) Annual Meetings with Lenders. At a date to be mutually
agreed upon between the Administrative Agent and the Borrower, Holdings shall
hold a meeting with all of the Lenders 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 Lender 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 Administrative Agent or
the Required Lenders to visit and inspect, under guidance of officers of
Holdings or such Subsidiary, 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 Administrative Agent or the Required Lenders
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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 Administrative 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 Administrative Agent
or the Required Lenders, 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 Effective Date, Holdings will, or will cause one
of its Subsidiaries to, notify the Administrative Agent and the Required Lenders
in writing within three Business Days thereof and, if thereafter notified by the
Required Lenders 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 Effective Date
to be maintained (with the same scope of coverage as on the Effective Date) at
levels which are at least as great as the respective amounts maintained on the
Effective 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) 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 Subsidiaries
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.
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(c) The foregoing requirements of this Section 8.03 shall not
apply to any equipment or inventory of Holdings and its Subsidiaries which is
subject to an Equipment Financing Transaction, so long as Holdings and its
Subsidiaries are in material compliance with any similar requirements imposed by
the terms of such Equipment Financing Transaction.
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 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 Administrative Agent or the
Required Lenders, 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 Administrative
Agent, indicating the presence or absence of Hazardous Materials and the
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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 Lenders 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
Administrative 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
Administrative Agent and the Lenders and their agents access to such Real
Property and specifically grant the Administrative Agent and the Lenders an
irrevocable non-exclusive license to undertake 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 Lenders 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 Lenders 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 reasonably 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
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plan (as defined in Section 3(1) of ERISA) that provides benefits to retired
employees or other former employees (other than as required by Section 601 of
ERISA) or any Plan or any Foreign Pension Plan in addition to the liability that
existed on the Effective Date pursuant to any such plan or plans. Holdings will
deliver to each of the Lenders 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 Lenders 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 Lenders 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 Lenders 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
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.
8.10 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/or
Subsidiaries Guaranty as required by Section 9.15, and as may be reasonably
requested from time to time by the Administrative Agent or the Required Lenders
(collectively, the "Additional Security Documents"). All such security interests
shall be granted pursuant to documentation reasonably satisfactory in form and
substance to the Administrative Agent and shall constitute valid and
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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.
(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
statements, 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
Administrative Agent and the Lenders 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 Administrative 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 (30 days in connection with compliance with Section
9.15) after such action is either requested to be taken by the Administrative
Agent or the Required Lenders 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.
(d) Notwithstanding anything to the contrary contained in this
Section 8.11, no Domestic Subsidiary of the Borrower which is not a Wholly-Owned
Subsidiary and which is acquired pursuant to an acquisition otherwise permitted
hereunder shall be required to enter into Additional Security Documents to the
extent, and only to the extent, the terms of any Indebtedness of such Subsidiary
at the time of such acquisition prohibits the entering into of the Additional
Security Documents by such Subsidiary (it being understood that at such time
when such prohibition shall no longer be effective, such Subsidiary shall enter
into Additional Security Documents as otherwise described in this Section 8.11).
8.12 Foreign Subsidiaries Security. (a) 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 Administrative Agent and the Required Lenders
does not within 120 days after a request from the Administrative Agent or the
Required Lenders deliver evidence, in form and substance satisfactory to the
Administrative Agent and the Required Lenders, 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
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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 Subsidiaries Guaranty, in any such case would
cause the undistributed 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 Subsidiaries 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 Subsidiaries 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 Subsidiaries 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 Administrative Agent and the Required Lenders,
provided that no pledge shall be required pursuant to this Section 8.12 of a
Foreign Subsidiary if the Administrative Agent has determined pursuant to
Section 9.02(ix) that such a pledge shall result in regulatory or economic
disadvantages.
(d) Notwithstanding anything to the contrary contained in this
Section 8.12, no Foreign Subsidiary of the Borrower which is not a Wholly-Owned
Subsidiary and which is acquired pursuant to an acquisition otherwise permitted
hereunder shall be required to take the actions described in clause (a) of this
Section 8.12 to the extent, and only to the extent, the terms of any
Indebtedness of such Subsidiary at the time of such acquisition prohibits the
taking of such actions by such Subsidiary (it being understood that at such time
when such prohibition shall no longer be effective, such Subsidiary shall take
such actions as otherwise described in this Section 8.12).
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 Commitment 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
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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 Indebtedness 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 VI, but
only to the respective date, if any, set forth in such Schedule VI for
the removal and termination of any such Liens, plus renewals and
extensions of such Liens to the extent set forth on Schedule VI,
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;
(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 (including precautionary UCC filings) upon assets
of the Borrower or its Subsidiaries subject to Equipment Financing
Transactions to the extent permitted by Section 9.04(v) and the other
provisions of this Agreement, provided that (x) such Liens secure only
the payment of such obligations under Equipment Financing Transactions,
(y) if such obligations constitute Operating Lease Obligations, the
Attributable Indebtedness in respect thereof shall not exceed
$170,000,000 at any time and (z) such Liens do not encumber any other
asset of Holdings or any Subsidiary of Holdings;
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(viii) Liens securing Indebtedness permitted pursuant to
Section 9.04(xv);
(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 on assets of a Foreign Subsidiary of the Borrower
securing Indebtedness permitted to be incurred by such Foreign
Subsidiary under this Agreement;
(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 $5,000,000;
(xiv) Liens securing Indebtedness permitted pursuant to
Section 9.04(xiv); and
(xv) Liens existing on property or assets acquired pursuant to
a Permitted Section 9.02(viii) Acquisition, or on property or assets of
a Subsidiary of the Borrower in existence at the time such Subsidiary
is acquired pursuant to a Permitted Section 9.02(viii) Acquisition,
provided that (x) any Indebtedness that is secured by such Liens is
otherwise permitted under Section 9.04(xiii) and (y) such Liens are not
incurred in connection with, or in contemplation or anticipation of,
any such acquisition and do not attach to any asset of Holdings or any
other asset of the Borrower or any of its Subsidiaries.
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 foregoing 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;
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(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
or leases of inventory or equipment to their customers 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) any disposition of assets required to effectuate
Equipment Finance Transactions otherwise permitted hereby shall be
permitted;
(viii) each of the Borrower and its Subsidiaries may acquire
all or substantially all of the assets of 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, through merger with
the Borrower or a Subsidiary of the Borrower or by stock purchase (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, Indebtedness or
Operating Lease Obligations 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, assumed Indebtedness (including
Capitalized Lease Obligations) and/or Operating Lease Obligations, the
issuance of unsecured Indebtedness to the extent permitted under
Section 9.04(xv), common stock of Holdings and/or Qualified Preferred
Stock of Holdings, (v) Holdings and its Subsidiaries would have been in
compliance with the financial covenants set forth in Section 9.07
through 9.10, 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
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<PAGE> 55
being satisfactory to the Administrative 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 (including
Capitalized Lease Obligations) and/or Operating Lease Obligations
incurred, issued or assumed in connection therewith had been incurred,
issued or assumed on the first day of, and had remained outstanding
throughout, such Test Period), (vi) the aggregate consideration paid in
connection with all Permitted Section 9.02(viii) Acquisitions
(including, without limitation, any earn-out, non-compete or deferred
compensation 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) shall
not exceed (x) $75,000,000 for any single transaction (or series of
related transactions), (y) in the event such consideration consists of
cash and assumed Indebtedness (including Capitalized Leased
Obligations), $10,000,000 in any fiscal year (and $50,000,000 in the
aggregate) (excluding any portion of such consideration which is
treated as, or involves the acquisition of assets which is treated as,
a Capital Expenditure under Section 9.07), and (z) to the extent that
such consideration consists solely of common stock of Holdings and/or
Qualified Preferred Stock of Holdings, $150,000,000, (vii) the
incurrence, issuance or assumption of Operating Lease Obligations, if
any, is permitted under Section 9.01(vii), (viii) after giving effect
to any Permitted Section 9.02(viii) Acquisition, the Unutilized
Commitment is at least $5,000,000, and (ix) the assets or Person
acquired pursuant to each such Permitted Section 9.02(viii) Acquisition
are employed or engaged, as the case may be, in a Permitted Business;
(ix) any Foreign Subsidiary may be merged with and into, or be
dissolved or liquidated into, or transfer any of its assets to, any
Foreign Subsidiary or Foreign Joint Venture so long as at least 65% of
the total combined voting power of all classes of capital stock of all
first-tier Foreign Subsidiaries and all of the capital stock owned by
any Credit Party of any first-tier Foreign Joint Venture is pledged
pursuant to the Pledge Agreement (unless, (x) in the case of Foreign
Subsidiaries, the Administrative Agent reasonably determines that such
pledge shall result in regulatory or economic disadvantages and (y)
additionally, in the case of Foreign Joint Ventures, the organizational
documents thereof prohibit such Pledge);
(x) the assets of any Foreign Subsidiary or Foreign Joint
Venture may be transferred to the Borrower or any of its Domestic
Subsidiaries and any Foreign Subsidiary or Foreign Joint Venture may be
merged with and into, or be dissolved or liquidated into, the Borrower
or any of its Domestic Subsidiaries so long as the Borrower or such
Domestic Subsidiary is the surviving corporation of any such merger,
dissolution or liquidation;
(xi) the Borrower or any of its Domestic Subsidiaries may
transfer to one or more Foreign Subsidiaries or Foreign Joint Venture
those assets theretofore transferred to the Borrower or such Domestic
Subsidiary by a Foreign Subsidiary or Foreign Joint Venture (whether by
merger, liquidation, dissolution or otherwise) pursuant to clause (x)
of this Section 9.02;
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<PAGE> 56
(xii) each of the Borrower and its Subsidiaries may enter into
sale and leaseback transactions with respect to their inventory,
equipment and Real Property, in which the Borrower or any of its
Subsidiaries acts as seller of the inventory, equipment or Real
Property that is the subject of the transaction, so long as (v) no
Default or Event of Default then exists or would result therefrom, (w)
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), (x) the total consideration
received by the Borrower or such Subsidiary is 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(b) and (z) the Capitalized Lease Obligations and/or
Operating Lease Obligations are otherwise permitted under this
Agreement;
(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 9.10, inclusive, with such covenants to be calculated on a pro
forma basis, the Borrower may, and may permit its Subsidiaries to,
exchange (for reasonably equivalent value, a portion thereof which may
include cash) any inventory, equipment and other assets (each such
transaction an "Asset Swap"), provided that (A) the sum of (1) the
total value of all assets to be swapped in any fiscal year of the
Borrower and (2) 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, (B)
that the disposition and acquisition of the subject inventory,
equipment or other assets occur within 60 days of one another and (C)
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(b);
(xiv) each of the Borrower and its Subsidiaries may sell
assets, 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(b) 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 Lenders or
repaying the Obligations in full (other than indemnification
obligations under Sections 1.10, 1.11, 2.06, 4.04 and 13.01) and
terminating the Commitments.
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To the extent the Required Lenders 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 Documents (and, in the event that such Collateral consists of
all of the capital stock of a Subsidiary Guarantor, such Subsidiary Guarantor,
and the assets of such Subsidiary Guarantor, shall be released from the
Subsidiaries Guaranty and the Security Documents to which it is a party), and
the Administrative 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) (x) any Subsidiary of the Borrower may pay Dividends to
the Borrower or any Wholly-Owned Subsidiary of the Borrower and (y) any
non-Wholly-Owned Subsidiary of the Borrower may pay cash Dividends to
its shareholders generally so long as the Borrower or its respective
Subsidiary which owns the equity interest in the Subsidiary paying such
Dividends receives at least its proportionate share thereof (based upon
its relative holding of the equity interest in the Subsidiary paying
such Dividends and taking into account the relative preferences, if
any, of the various classes of equity interests of such Subsidiary),
provided that no non-Wholly-Owned Subsidiary of the Borrower which is a
Subsidiary Guarantor may pay any Dividends pursuant to this clause (y)
at any time that a Default or Event of Default has occurred and is
continuing;
(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 not 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); and
(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
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employee or (y) to the extent not funded as described in preceding
clause (x), not during any fiscal year of the Borrower exceed
$3,000,000.
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 IV, without giving effect to any subsequent
extensions, renewal or refinancing thereof except to the extent set
forth on Schedule IV, 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;
(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
$5,000,000;
(iv) Indebtedness under Interest Rate Protection Agreements on
terms acceptable to the Administrative Agent;
(v) Indebtedness evidenced by Capitalized Lease Obligations
and Purchase Money Indebtedness to the extent permitted pursuant to
Section 9.07, provided that in no event shall the aggregate principal
amount of Capitalized Lease Obligations and Purchase Money Indebtedness
permitted by this clause (v) exceed $15,000,000 at any time
outstanding;
(vi) Indebtedness of the Borrower and the Subsidiary
Guarantors evidenced by the Borrower Senior Discount Notes outstanding
on the Effective Date (and guarantees thereof) plus the amount of
interest on such Borrower Senior Discount Notes paid in kind or through
accretion or capitalization;
(vii) 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;
(viii) 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 such Other Hedging
Agreements are for bona fide business purposes and are not speculative;
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(ix) 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;
(x) intercompany Indebtedness among the Borrower and its
Subsidiaries to the extent permitted by Section 9.05;
(xi) (A) unsecured guarantees by Holdings of Indebtedness,
Operating Lease Obligations or other obligations of its Domestic
Subsidiaries that are permitted to be incurred hereunder and (B)
guarantees by Foreign Subsidiaries of Indebtedness, Operating Lease
Obligations or other obligations of other Foreign Subsidiaries of the
Borrower that are permitted to be incurred hereunder;
(xii) Indebtedness of any Foreign Subsidiary of the Borrower
the proceeds of which Indebtedness are used for such Foreign
Subsidiary's and/or its Foreign Subsidiaries' working capital and
general corporate purposes ("Foreign Subsidiary Indebtedness");
(xiii) Indebtedness consisting of Capitalized Lease
Obligations, Purchase Money Indebtedness or other Indebtedness which
does not constitute debt for borrowed money of a Subsidiary acquired
pursuant to a Permitted Section 9.02(viii) Acquisition (or such
Indebtedness assumed at the time of a Permitted Section 9.02(viii)
Acquisition of an asset securing such Indebtedness), provided that such
Indebtedness was not incurred in connection with, or in anticipation or
contemplation of, such Permitted Section 9.02(viii) Acquisition;
(xiv) 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 $17,500,000 (such amount to be reduced by
the aggregate principal amount of all outstanding Letters of Credit);
and
(xv) Indebtedness of the Borrower and its Subsidiaries to the
extent not permitted by the foregoing clauses of this Section 9.04 not
to exceed $20,000,000 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 receivable, trade receivables, prepaid expenses and similar
items owing to any of them, if created or acquired in the ordinary
course of business;
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(ii) the Borrower and its Subsidiaries may acquire and hold
cash and Cash Equivalents;
(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;
(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 Sections 9.03(ii) and 9.03(iii), in an aggregate
amount not to exceed in any fiscal year $1,000,000 less any amounts
paid pursuant to Sections 9.03(ii) and 9.03(iii) during such fiscal
year;
(vii) the Borrower and its Subsidiaries may hold the
investments held by them on the Effective Date and as set forth on
Schedule IX;
(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
organized in the United States, any state thereof or Canada which would
not, after the respective investment, be a Subsidiary of Holdings (each
a "Domestic Joint Venture"), 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 [(other
than performance guarantees of any such Joint Venture's service
contracts so long as any such service contract and the performance
guaranty thereof are entered into in the ordinary course of business
and on a basis consistent with past practices)] and (ii) the net
aggregate amount of all such investments and loans in Domestic Joint
Ventures shall at no time exceed $10,000,000 in any fiscal year of the
Borrower (and $25,000,000 in the aggregate);
(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 (viii);
(xi) the Borrower and the Subsidiary Guarantors that are
Wholly-Owned Domestic Subsidiaries of the Borrower may make
intercompany loans and advances between or among one another (and
together with the intercompany loans and advances made
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pursuant to clause (xii) of this Section 9.05, 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;
(xii) the Borrower and the Subsidiary Guarantors may make
intercompany loans and advances to, or equity investments in, a
non-Wholly Owned Domestic Subsidiary that is a Subsidiary Guarantor (or
upon the making of any such equity investment the respective Person
will become such a Subsidiary Guarantor) so long as (x) 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 and (y) the net
aggregate amount of all such investments made pursuant to this clause
(xii) shall not exceed $20,000,000 in any fiscal year of the Borrower
(and $60,000,000 in the aggregate);
(xiii) the Borrower and its Subsidiaries may effect Permitted
Section 9.02(viii) Acquisitions in accordance with the requirements of
Section 9.02(viii); and
(xiv) the Borrower and its Subsidiaries may enter into, invest
in (including by transferring assets) and make loans and advances to
(x) Foreign Joint Ventures 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 Foreign Joint Venture or Foreign Subsidiary [(other than
performance guarantees of any such Foreign Joint Venture's service
contracts so long as any such service contract and the performance
guaranty thereof are entered into in the ordinary course of business
and on a basis consistent with past practices)] and (ii) the net
aggregate amount of all such investments and loans in Foreign Joint
Ventures and Foreign Subsidiaries shall at no time exceed $20,000,000
(using the fair market value of property other than cash) in any fiscal
year of the Borrower (and $60,000,000 in the aggregate); provided that
no more than $30,000,000 in the aggregate shall be invested in Foreign
Joint Venture and Foreign Subsidiaries located or operating in
Restricted Countries (it being understood that, for purposes of this
clause (xiv), the amounts set forth above in this clause (xiv) shall be
net of cash payments of principal in the case of loans and cash equity
returns (whether as a dividend or redemption) in the case of equity
investments, in each case which are received from a non-U.S. Person
constituting a Foreign Joint Venture otherwise permitted under this
Section 9.05).
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
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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 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) customary payments to the directors of Holdings and its Subsidiaries in the
ordinary course of business and (vii) 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
(i) the Borrower and its Subsidiaries may make Capital Expenditures in its
fiscal years ending March 31, 2001 and March 31, 2002 and (ii) during any fiscal
year of the Borrower set forth below, the Borrower and its Subsidiaries may make
Capital Expenditures so long as the aggregate amount of such Capital
Expenditures does not exceed in any such fiscal year, the amount set forth
opposite such fiscal year below:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ -------------
<S> <C>
March 31, 2003 $____________
March 31, 2004 $____________
March 31, 2005 $____________
</TABLE>
(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 set forth in the table in clause (a)(ii) of this
Section 9.07 (exclusive, however, of Capital Expenditures made pursuant to
Sections 9.07(c), (d) and (e)) is less than the amount applicable to the
respective fiscal year as set forth in such table (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)(ii) above in the following fiscal
year; provided that the aggregate amount expended on Capital Expenditures in any
fiscal year set forth in such table shall not exceed 125% of the amount
permitted to be made in such fiscal year as set forth in clause (a)(ii) 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, or sale of assets permitted pursuant to Section 9.02(vii), may be
reinvested in replacement assets within 18 months following the date of such
Asset Sale or sale of assets to the extent such Net Sale Proceeds are not
required to be applied pursuant to Section 4.02(b), and, to the extent so
reinvested, shall not count as Capital Expenditures for purposes of determining
compliance with clauses (a) and (b) of this Section 9.07.
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(d) In addition to the foregoing, the Borrower and its
Subsidiaries may make Capital Expenditures with the cash proceeds of any
issuance of equity by Holdings (other than the first $100,000,000 of cash
proceeds received from the Holdings IPO).
(e) In addition to the foregoing, the Borrower and its
Subsidiaries may make Capital Expenditures in an amount equal to the amount by
which Consolidated EBITDA for any fiscal year of the Borrower exceeded
Consolidated EBITDA for such fiscal year as set forth in the Projections.
(f) Notwithstanding anything above in this Section 9.07 to the
contrary, in no event may the Borrower or any of its Subsidiaries make Capital
Expenditures pursuant to any single transaction (or series of related
transactions) which exceeds $__________ (subject to any additional restrictions
or limitations set forth in Section 9.02(viii)).
9.08 Consolidated EBITDAR to Total Interest Expense. Holdings
will not permit the ratio of (i) Consolidated EBITDAR to (ii) the sum of Total
Interest Expense plus all lease expenses for such Test Period associated with
the Synthetic Leases 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:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
June 30, 2000 ____:1.00
September 30, 2000 ____:1.00
December 31, 2000 ____:1.00
March 31, 2001 ____:1.00
June 30, 2001 ____:1.00
September 30, 2001 ____:1.00
December 31, 2001 ____:1.00
March 31, 2002 ____:1.00
June 30, 2002 ____:1.00
September 30, 2002 ____:1.00
December 31, 2002 ____:1.00
March 31, 2003 ____:1.00
June 30, 2003 ____:1.00
September 30, 2003 ____:1.00
December 31, 2003 ____:1.00
March 31, 2004 ____:1.00
June 30, 2004 and the last day ____:1.00
of each fiscal quarter thereafter
</TABLE>
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<PAGE> 64
9.09 Maximum Leverage Ratio. Holdings will not permit the
Leverage Ratio at any time during a period set forth below to be greater than
the ratio set forth opposite such period below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Effective Date ____:1.00
Through and including June 30, 2000
July 1, 2000 ____:1.00
Through and including September 30, 2000
October 1, 2000 ____:1.00
Through and including December 31, 2000
January 1, 2001 ____:1.00
Through and including March 31, 2001
April 1, 2001 ____:1.00
Through and including June 30, 2001
July 1, 2001 ____:1.00
Through and including September 30, 2001
October 1, 2001 ____:1.00
Through and including December 31, 2001
January 1, 2002 ____:1.00
Through and including March 31, 2002
April 1, 2002 ____:1.00
Through and including June 30, 2002
July 1, 2002 ____:1.00
Through and including September 30, 2002
October 1, 2002 ____:1.00
Through and including December 31, 2002
January 1, 2003 ____:1.00
Through and including March 31, 2003
April 1, 2003 ____:1.00
Through and including June 30, 2003
July 1, 2003 ____:1.00
Through and including September 30, 2003
October 1, 2003 ____:1.00
Through and including December 31, 2003
January 1, 2004 ____:1.00
Through and including March 31, 2004
April 1, 2004 ____:1.00
Through and including June 30, 2004
July 1, 2004 ____:1.00
Through and including September 30, 2004
October 1, 2004 ____:1.00
Through and including December 31, 2004
January 1, 2005 ____:1.00
Through and including March 31, 2005
</TABLE>
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<PAGE> 65
9.10 Maximum Senior Secured Leverage Ratio. Holdings will not
permit the Senior Secured Leverage Ratio at any time during a period set forth
below to be greater than the ratio set forth opposite such period below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Effective Date ____:1.00
Through and including June 30, 2000
July 1, 2000 ____:1.00
Through and including September 30, 2000
October 1, 2000 ____:1.00
Through and including December 31, 2000
January 1, 2001 ____:1.00
Through and including March 31, 2001
April 1, 2001 ____:1.00
Through and including June 30, 2001
July 1, 2001 ____:1.00
Through and including September 30, 2001
</TABLE>
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<PAGE> 66
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
October 1, 2001 ____:1.00
Through and including December 31, 2001
January 1, 2002 ____:1.00
Through and including March 31, 2002
April 1, 2002 ____:1.00
Through and including June 30, 2002
July 1, 2002 ____:1.00
Through and including September 30, 2002
October 1, 2002 ____:1.00
Through and including December 31, 2002
January 1, 2003 ____:1.00
Through and including March 31, 2003
April 1, 2003 ____:1.00
Through and including June 30, 2003
July 1, 2003 ____:1.00
Through and including September 30, 2003
October 1, 2003 ____:1.00
Through and including December 31, 2003
January 1, 2004 ____:1.00
Through and including March 31, 2004
April 1, 2004 ____:1.00
Through and including June 30, 2004
July 1, 2004 ____:1.00
Through and including September 30, 2004
October 1, 2004 ____:1.00
Through and including December 31, 2004
January 1, 2005 ____:1.00
Through and including March 31, 2005
</TABLE>
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9.11 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
Borrower Senior Discount Notes (except the Borrower may redeem or repurchase up
to 35% of the Borrower Senior Discount Notes outstanding on the Effective Date,
which redemption or repurchase shall be on terms and conditions reasonably
satisfactory to the Administrative Agent), (ii) amend or modify, or permit the
amendment or modification of, any provision of the Existing Indebtedness or the
Borrower Senior Discount Notes (it being understood, however, that Holdings and
its Subsidiaries may amend or modify the Borrower Senior Discount Notes 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 Synthetic Lease
Financing Documents, (iii) make (or give any notice in respect of) any voluntary
or optional payment or prepayment of its lease obligations under the Synthetic
Lease Financing Documents or any other Equipment Financing Transaction (other
than in connection with (x) the refinancing of all obligations thereunder or (y)
the disposition of the assets relating thereto), or (iv) amend, modify or change
its Certificate of Incorporation (including, without limitation, by the filing
or modification of any certificate of designation, other than in connection with
the issuance of Qualified Preferred Stock or Disqualified Preferred Stock) 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 (iv) could not reasonably be determined
to be adverse to the Lenders.
9.12 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 Borrower Senior Note Documents and
agreements evidencing Existing Indebtedness, (vi) Foreign Subsidiary
Indebtedness, (vii) the Synthetic Lease Financing Documents, and (viii)
restrictions on the transfer of any asset subject to a Lien permitted by
Sections 9.01(vii), (x), (xiv) and (xv) so long as such restrictions only apply
to the assets subject to such Liens.
9.13 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
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<PAGE> 68
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.
9.14 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 and businesses ancillary thereto.
9.15 Limitation on Creation of Subsidiaries and Entering into
Partnerships and Joint Ventures. (a) Holdings shall not establish, create or
acquire any additional Subsidiaries provided that the Borrower and its
Wholly-Owned Subsidiaries shall be permitted to establish, create and acquire
Subsidiaries otherwise in compliance with this Agreement, so long as any such
new Subsidiary (other than a Foreign Subsidiary but subject to Section 8.12) (x)
executes and delivers to the Administrative Agent a counterpart of the
Subsidiaries Guaranty, the Pledge Agreement and the Security Agreement, (y)
takes all actions required pursuant to Section 8.11, and/or (z) executes and
delivers, or causes to be executed and delivered, to the Administrative 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 Effective 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) and (xiii).
9.16 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 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.
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<PAGE> 69
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 Administrative Agent or any Lender 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 Administrative Agent or the Required Lenders; or
10.04 Default Under Other Agreements. Holdings or any of its
Subsidiaries shall (A) (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, or (B) (i) default in any payment of any
Operating Lease Obligations beyond the period of grace, if any, provided in the
instrument or agreement under which such Operating Lease Obligations were
created or (ii) default in the observance or performance of any agreement or
condition relating to any Operating Lease Obligations 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 Operating
Lease Obligations (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
Operating Lease Obligations to become due or prepayable prior to its stated
maturity, or (iii) any Operating Lease Obligations 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 payment, 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
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<PAGE> 70
aggregate principal amount of all Indebtedness and Operating Lease Obligations
as described in preceding clauses (A) and (B) is at least $4,000,000; 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 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
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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 Lenders, 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 of any notice), shall
continue unremedied for a period of 30 days after written notice thereof to the
Borrower from the Administrative Agent or the Required Lenders; or
10.08 Subsidiaries Guaranty. At any time after the execution
and delivery thereof, (x) the Subsidiaries 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 Subsidiaries 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 Subsidiaries 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 $4,000,000; 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 Administrative Agent, upon the written request of
the Required Lenders, shall by written notice to the Borrower, take any or all
of the following actions, without prejudice to the rights of the Administrative
Agent, any Lender 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 Administrative 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 Commitment terminated,
whereupon all Commitments of each Lender shall forthwith terminate immediately
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<PAGE> 72
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 Administrative 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):
"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 Administrative 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 Administrative 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 Administrative Agent for determining
the current annual assessment payable by the Administrative 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
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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 Percentage" shall mean (x) at a time when no Lender
Default exists, for each Lender, such Lender's Percentage and (y) at a time when
a Lender Default exists (i) for each Lender that is a Defaulting Lender, zero
and (ii) for each Lender that is a Non-Defaulting Lender, the percentage
determined by dividing such Lender's Commitment at such time by the Adjusted
Total Commitment at such time, it being understood that all references herein to
Commitments and the Adjusted Total Commitment at a time when the Total
Commitment or Adjusted Total Commitment, as the case may be, has been terminated
shall be references to the Commitments or Adjusted Total Commitment, as the case
may be, in effect immediately prior to such termination, provided that (A) no
Lender's Adjusted Percentage shall change upon the occurrence of a Lender
Default from that in effect immediately prior to such Lender Default if after
giving effect to such Lender 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 Lenders plus (ii) the aggregate outstanding principal amount of
Swingline Loans plus (iii) the Letter of Credit Outstandings, exceed the
Adjusted Total Commitment; (B) the changes to the Adjusted Percentage that would
have become effective upon the occurrence of a Lender 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 Lender Default on which
the sum of (i) the aggregate outstanding principal amount of the Revolving Loans
of all Non-Defaulting Lenders 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 Commitment; and (C) if (i) a
Non-Defaulting Lender's Adjusted Percentage is changed pursuant to the preceding
clause (B) and (ii) any repayment of such Lender'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 Lender 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 Lender'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 Lender plus such Lender's new Adjusted
Percentage of the outstanding principal amount of Swingline Loans and of Letter
of Credit Outstandings equaling such Lender's Commitment at such time.
"Adjusted Total Commitment" shall mean at any time the Total
Commitment less the aggregate Commitments of all Defaulting Lenders.
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"Administrative Agent" shall mean Bankers Trust Company, in
its capacity as Administrative Agent for the Lenders hereunder, and shall
include any successor to the Administrative Agent appointed pursuant to Section
12.09.
"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.
"Agreement" shall mean this Credit Agreement, as modified,
supplemented or amended from time to time.
"Alternate Currency" shall mean such foreign currencies which
are readily convertible into Dollars and are acceptable to BTCo.
"Anticipated Reinvestment Amount" shall mean, with respect to
any Reinvestment Election, the amount specified in the Reinvestment Notice
delivered by the Borrower in connection therewith as the amount of the Net Sale
Proceeds from the related Asset Sale that the Borrower or its Subsidiaries
intend to use to purchase, construct or otherwise acquire Reinvestment Assets.
"Applicable Base Rate Margin" shall mean (i) for the period
from the Effective Date through but not including the first Start Date after the
Effective Date, 1.50% 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), (D), (E) or (F) below if, but only if, as of the Test Date
for such Start Date the applicable condition set forth in clause (A), (B), (C),
(D), (E) or (F) below, as the case may be, is met:
(A) 1.50% 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 5.50:1.00;
(B) 1.25% 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 or equal to 5.50:1.00 and greater than 5.00:1.00;
(C) 1.00% 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 or equal to 5.00:1.00 and greater than 4.50:1.00;
(D) 0.75% 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 or equal to 4.50:1.00 and greater than 4.00:1.00;
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(E) 0.50% 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 or equal to 4.00:1.00 and greater than 3.50:1.00; and
(F) 0.25% 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 or equal to 3.00:1.00.
Notwithstanding anything to the contrary above in this definition, the
Applicable Base Rate Margin shall be 1.50% 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 Effective Date through but not including the first Start Date
after the Effective Date, 2.50%, 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), (D), (E) or (F) below if, but only if, as of the
Test Date for such Start Date the applicable condition set forth in clause (A),
(B), (C), (D), (E) or (F) below, as the case may be, is met:
(A) 2.50% 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 5.50:1.00;
(B) 2.25% 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 or equal to 5.50:1.00 and greater than 5.00:1.00;
(C) 2.00% 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 or equal to 5.00:1.00 and greater than 4.50:1.00;
(D) 1.75% 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 or equal to 4.50:1.00 and greater than 4.00:1.00;
(E) 1.50% 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 or equal to 4.00:1.00 and greater than 3.50:1.00; and
(F) 1.25% 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 or equal to 3.00:1.00.
Notwithstanding anything to the contrary above in this definition, the
Applicable Eurodollar Rate Margin shall be 2.50% 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
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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, 2000].
"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), (iii), (v), (vii) and
(xii)(A) and (ii) sales of assets which individually, or together with related
sales, do not exceed $500,000 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).
"Attributable Indebtedness" shall mean, at any time, with
respect to Operating Lease Obligations (including the Synthetic Lease or any
similar lease), 85% of the aggregate Operating Lease Obligations (other than the
portion thereof attributable to interest) under the operating lease for such
Operating Lease Obligations.
"Bankruptcy Code" shall have the meaning provided in Section
10.05.
"Base Rate" at any time shall mean the highest 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 have the meaning provided in the first
paragraph of this Agreement.
"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 Discount Notes Consent Solicitation" shall
have the meaning provided in Section 5.06(b).
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"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 from
all the Lenders (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 or any successor
thereto by merger or otherwise; provided that for purposes of issuing Letters of
Credit hereunder, BTCo also shall include its affiliates, including but not
limited to Deutsche Bank AG, New York Branch.
"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, [for any period, (i)
expenditures (including, without limitation, the aggregate amount of Capital
Lease Obligations incurred during such period) made by the Borrower and its
Subsidiaries to acquire or construct fixed assets, plant and equipment
(including renewals, improvements, replacements and capitalized lease repairs)
during such period which would be reflected as additions to property, plant or
equipment on a consolidated balance sheet of the Borrower and its Subsidiaries
prepared in accordance with GAAP and (ii) acquisitions of equity interests
otherwise permitted by this Agreement.]
"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.
"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
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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 Lender,
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 (vii) investments made
by Foreign Subsidiaries in local currencies in instruments issued by or with
entities of such jurisdiction having correlative attributes to the foregoing.
"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. Section 9601 et seq.
"Change of Control" means (a)(i) 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 40% of the Voting Stock of Holdings (as determined on a fully diluted
basis and measured by voting power rather than number of shares), or (ii) the
Board of Directors of Holdings shall not consist of a majority of Continuing
Directors, 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 Borrower Senior Note Documents.
"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 Administrative 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.
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"Commitment" shall mean, for each Lender, the amount set forth
opposite such Lender's name in Schedule I hereto directly below the column
entitled "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 Lender pursuant to Section 1.13 or
13.04(b).
"Commitment Commission" shall have the meaning provided in
Section 3.01(a).
"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), the principal component of
Capitalized Lease Obligations of Holdings and its Consolidated Subsidiaries and
the Attributable Indebtedness for Operating 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.
"Consolidated EBITDAR" shall mean, for any period,
Consolidated EBIT, adjusted by adding thereto the amount of all amortization of
intangibles, depreciation and rental expense 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[, provided that
in determining Consolidated Net Income, the net income of any other Person which
is not a Subsidiary of the Borrower or is accounted for by the Borrower by the
equity method of accounting shall be included only to the extent of the payment
of cash dividends or distributions by such other Person to the Borrower or a
Subsidiary thereof during such period].
"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, and any rental expense associated with any
Operating Lease Obligations for such period, in each case net of the total
consolidated cash interest income of Holdings and its Consolidated Subsidiaries
for such period.
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"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.
"Continuing Directors" shall mean the directors of Holdings as
of the Effective Date (after giving effect to the Holdings IPO) and each other
director if such other director's nomination or election to the Board of
Directors of Holdings is recommended by a majority of the then Continuing
Directors.
"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 Subsidiaries 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 Lender" shall mean any Lender with respect to
which a Lender 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
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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 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 Repurchase
Documents, the Refinancing Documents and Synthetic Lease Financing Documents.
"Dollar Equivalent" shall mean, at any time of determination
thereof, the amount of the currency involved which could be purchased with
Dollars computed at the spot rate of exchange as quoted or utilized by the
Administrative Agent on the date of determination thereof.
"Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States.
"Domestic Joint Venture" shall have the meaning provided in
Section 9.05(viii).
"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) other than any such Person that is directly
involved in a Permitted Business.
"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
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applicable Environmental Law, and (b) any and all Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
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. Section 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Safe
Drinking Water Act, 42 U.S.C. Section 3803 et seq.; the Oil Pollution Act of
1990, 33 U.S.C. Section 2701 et seq.; the Emergency Planning and the Community
Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Hazardous
Material Transportation Act, 49 U.S.C. Section 1801 et seq.; the Occupational
Safety and Health Act, 29 U.S.C. Section 651 et seq.; and any state and local or
foreign counterparts or equivalents, in each case as amended from time to time.
"Equipment Financing Transactions" shall mean any Capitalized
Lease, Operating Lease, Purchase Money Indebtedness, and any sale-leaseback or
other transactions consummated in connection therewith creating Capitalized
Lease Obligations, Operating Lease Obligations or Purchase Money Indebtedness.
"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
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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.
"Existing Credit Agreement" shall mean the Credit Agreement,
dated as of February 20, 1998, among Holdings, the Borrower, the lending
institutions party thereto, and BTCo, as Agent (as in effect on the Effective
Date).
"Existing Indebtedness" shall have the meaning provided in
Section 7.22.
"Existing Letter of Credit" shall have the meaning provided in
Section 2.01(d).
"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 Administrative Agent from three Federal Funds
brokers of recognized standing selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to or referred
to in Section 3.01.
"Foreign Joint Venture" shall mean any Joint Venture that
involves a corporation, association, partnership, business trust or other
business entity that is incorporated under the laws of any jurisdiction other
than the United States of America, any State thereof, any territory thereof or
Canada.
"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.
"Foreign Subsidiary Indebtedness" shall have the meaning
provided in Section 9.04(xiii).
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"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 Lenders, the Administrative Agent, the Issuing Lender 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 Lender or any affiliate thereof
(even if such Lender subsequently ceases to be a Lender under this Agreement for
any reason) so long as such Lender 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 IPO" shall mean the Qualified Public Equity Offering
described in Section 5.17(a).
"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.
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"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.
"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)
Capitalized Lease Obligations, (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 VII.
"Insignificant Foreign Subsidiary" shall mean any Foreign
Subsidiary whose assets represent less than 10% of the total value of all assets
owned by the Borrower 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 L, 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.
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"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.
"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
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.
"Lender" shall mean each financial institution listed on
Schedule I, as well as any Person which becomes a "Lender" hereunder pursuant to
Section 1.13 or 13.04(b).
"Lender Default" shall mean (i) the refusal (which has not
been retracted) of a Lender 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 Lender having notified in writing the
Borrower and/or the Administrative Agent that it does not intend to comply with
its obligations under Section 1.01(a) or 1.01(c) or Section 2.
"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 (i)
Consolidated Debt at such time to (ii) Consolidated EBITDAR 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 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(c).
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"Margin Stock" shall have the meaning provided in Regulation
U.
"Maturity Date" shall mean May __, 2005.
"Maximum Swingline Amount" shall mean $10,000,000.
"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 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 Lender" shall mean and include each Lender
other than a Defaulting Lender.
"Note" shall mean 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 Administrative
Agent located at 130 Liberty Street, New York, New York 10006, Attention: Marcus
Tarkington, or such other office as the Administrative Agent may hereafter
designate in writing as such to the other parties hereto.
"Obligations" shall mean all amounts owing to the
Administrative Agent, the Collateral Agent or any Lender pursuant to the terms
of this Agreement or any other Credit Document.
"Operating Lease" shall mean, as to any Person, all leases of
inventory, equipment and Real Property which are not Capitalized Leases.
"Operating Lease Obligations" shall mean, as to any Person,
all obligations as lessee under Operating Leases (other than Capital Leases).
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"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 Administrative
Agent located at One Bankers Trust Plaza, New York, New York 10006, or such
other office as the Administrative 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 Lender at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the Commitment of such
Lender at such time and the denominator of which is the Total Commitment at such
time, provided that if the Percentage of any Lender is to be determined after
the Total Commitment has been terminated, then the Percentages of the Lenders
shall be determined immediately prior (and without giving effect) to such
termination.
"Permitted Business" shall mean the business in which the
Borrower is engaged on the Effective Date and reasonable extensions thereof.
"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 Administrative Agent in its
reasonable discretion.
"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 Administrative Agent and the
Required Lenders.
"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
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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
5.08.
"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 Holdings IPO, the Repurchase and the Synthetic
Lease Financing, dated as of ___ _, 2000 and furnished to the Lenders prior to
the Effective Date.
"Purchase Money Indebtedness" shall mean Indebtedness, the
proceeds of which are used to finance the acquisition, construction or
improvement of inventory, equipment or other property in the ordinary course of
business.
"Qualified Preferred Stock" shall mean the 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 preferred stock of Holdings outstanding prior
to the Effective Date, (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 preferred
stock of Holdings outstanding prior to the Effective Date and (iv) are otherwise
reasonably satisfactory to the Administrative 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.
"Quarterly Payment Date" shall mean the last Business Day of
each March, June, September and December occurring after the Effective Date.
"RCRA" shall mean the Resource Conservation and Recovery Act,
as the same may be amended from time to time, 42 U.S.C. Section 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.
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"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, T, U and X" shall mean Regulations D, 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.
"Reinvestment Asset" shall have the meaning provided in
Section 4.02(b).
"Reinvestment Election" shall have the meaning provided in
Section 4.02(b).
"Reinvestment Notice" shall mean a written notice signed by
the President or any Vice President of the Borrower stating that the Borrower or
its respective Subsidiary, in good faith, intends and expects to use all or a
specified portion of the Net Sale Proceeds of an Asset Sale to purchase,
construct or otherwise acquire Reinvestment Assets.
"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 Lender" shall have the meaning provided in Section
1.13.
"Replacement Lender" 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.
"Repurchase" shall have the meaning provided in Section
5.17(a).
"Repurchase Documents" shall mean and include all agreements
governing, or relating to, the Repurchase and the Holdings IPO.
"Required Lenders" shall mean Non-Defaulting Lenders, the sum
of whose outstanding 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 the Adjusted Total Commitment (or after the termination thereof, the
sum of the then total outstanding Revolving Loans of Non-Defaulting Lenders, and
the aggregate Adjusted Percentages of all Non-Defaulting Lenders of the total
outstanding Swingline Loans and Letter of Credit Outstandings at such time).
"Restricted Countries" shall mean _______.
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"Returns" shall have the meaning provided in Section 7.09.
"Revolving Loan" shall have the meaning provided in Section
1.01(a)
"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 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.
"Security Agreement" shall have the meaning provided in
Section 5.09.
"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.
"Senior Secured Consolidated Debt" shall mean all Consolidated
Debt (including any Foreign Subsidiary Indebtedness) which is secured by any of
the assets of Holdings and its Subsidiaries and which is not by its terms
contractually subordinated to any other Indebtedness of Holdings and its
Subsidiaries.
"Senior Secured Leverage Ratio" shall mean, at any time, the
ratio of (i) the sum of (without duplication) (x) Senior Secured Consolidated
Debt at such time plus (y) an amount equal to the Attributable Indebtedness in
respect of Operating Lease Obligations at such time to (ii) Consolidated EBITDAR
for the Test Period then most recently ended.
"Shareholders' Agreements" shall have the meaning provided in
Section 5.05.
"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.
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"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); provided that the "Stated Amount" of each Letter of Credit denominated in
an Alternate Currency shall be, on any date of calculation, the Dollar
Equivalent of the maximum amount available to be drawn in such Alternate
Currency thereunder (determined without regard to whether any conditions to
drawing could then be met).
"Subsidiaries Guaranty" shall have the meaning provided in
Section 5.10.
"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.
"Swingline Expiry Date" shall mean, at any time, the date
which is two Business Days prior to the Maturity Date.
"Swingline Loan" shall have the meaning provided in Section
1.01(b).
"Swingline Note" shall have the meaning provided in Section
1.05(a).
"Synthetic Lease Financing" shall mean the lease financing
transaction contemplated by the Synthetic Lease Financing Documents.
"Synthetic Lease Financing Agreement" shall mean the
Participation Agreement, dated as of May __, 2000, among the Borrower, as
lessee, Holdings, as guarantor, [Name of trust company], as trustee, Deutsche
Bank AG, New York Branch, as owner participant, and Bankers Trust Company, as
Administrative Agent.
"Synthetic Lease Financing Documents" shall mean the Synthetic
Lease Financing Agreement, the other Operative Documents (as defined in the
Synthetic Lease Financing Agreement) and all other documents executed and
delivered in connection with the Synthetic Lease Financing, as in effect on the
Effective Date and as same may be amended, modified or supplemented from time to
time in accordance with the terms hereof and thereof.
"Synthetic Lease Guaranty" shall mean the guaranty provided by
Holdings of the obligations and liabilities of the Borrower under the Synthetic
Lease Financing, which guaranty shall be unsecured and otherwise be in form and
substance satisfactory to the Administrative Agent.
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"Synthetic Leases" shall mean all lease transactions entered
into by the Borrower pursuant to the Synthetic Lease Financing Agreement and the
other Synthetic Lease Financing Documents.
"Tax Benefit" shall have the meaning provided in Section
4.04(c).
"Taxes" shall have the meaning provided in Section 4.04(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).
"Total Commitment" shall mean, at any time, the sum of the
Commitments of each of the Lenders.
"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 and (y) the amortization of original issue discounts (exclusive of any
pay-in-kind interest on the Borrower Senior Discount Notes) shall (in each case)
be excluded from Total Interest Expense to the extent same would otherwise have
been included therein.
"Trade Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"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.
"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..
"Unpaid Drawing" shall have the meaning provided for in
Section 2.05(a).
"Unutilized Commitment" with respect to any Lender, at any
time, shall mean such Lender's Commitment at such time less the sum of (i) the
aggregate outstanding principal amount
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of Revolving Loans made by such Lender and (ii) such Lender'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 Administrative Agent.
12.01 Appointment. The Lenders hereby designate Bankers Trust
Company as Administrative Agent (for purposes of this Section 12, the term
"Administrative 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 Lender hereby irrevocably authorizes,
and each holder of any Note by the acceptance of such Note shall be deemed
irrevocably to authorize, the Administrative 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 Administrative Agent by the terms
hereof and thereof and such other powers as are reasonably incidental thereto.
The Administrative 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 Administrative Agent shall not
have any duties or responsibilities except those expressly set forth in this
Agreement and the other Credit Documents. Neither the Administrative 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
Administrative Agent shall be mechanical and administrative in nature; the
Administrative Agent shall not have by reason of this Agreement or any other
Credit Document a fiduciary relationship in respect of any Lender or the holder
of any Note; and nothing in this Agreement or any other Credit Document,
expressed or implied, is intended to or shall be so construed as to impose upon
the Administrative 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 Administrative Agent.
Independently and without reliance upon the Administrative Agent, each Lender
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
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Subsidiaries and, except as expressly provided in this Agreement, the
Administrative Agent shall not have any duty or responsibility, either initially
or on a continuing basis, to provide any Lender 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 Administrative Agent shall not be responsible to any Lender 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 Administrative Agent. If the
Administrative Agent shall request instructions from the Required Lenders with
respect to any act or action (including failure to act) in connection with this
Agreement or any other Credit Document, the Administrative Agent shall be
entitled to refrain from such act or taking such action unless and until the
Administrative Agent shall have received instructions from the Required Lenders;
and the Administrative Agent shall not incur liability to any Person by reason
of so refraining. Without limiting the foregoing, no Lender or the holder of any
Note shall have any right of action whatsoever against the Administrative Agent
as a result of the Administrative Agent acting or refraining from acting
hereunder or under any other Credit Document in accordance with the instructions
of the Required Lenders.
12.05 Reliance. The Administrative 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 Administrative 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 Administrative Agent.
12.06 Indemnification. To the extent the Administrative Agent
is not reimbursed and indemnified by the Parties the Lenders will reimburse and
indemnify the Administrative Agent, in proportion to their respective
"percentages" as used in determining the Required Lenders, 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 Administrative 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 Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Administrative Agent's gross
negligence or willful misconduct.
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12.07 The Administrative 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 Administrative Agent shall have the rights
and powers specified herein for a "Lender" and may exercise the same rights and
powers as though it were not performing the duties specified herein; and the
term "Lenders," "Required Lenders," "holders of Notes" or any similar terms
shall, unless the context clearly otherwise indicates, include the
Administrative Agent in its individual capacity. The Administrative 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 Lenders.
12.08 Holders. The Administrative 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 Administrative 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 Administrative Agent. (a) The
Administrative 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 Lenders. Such
resignation shall take effect upon the appointment of a successor Administrative
Agent pursuant to clauses (b) and (c) below or as otherwise provided below.
(b) Upon any such notice of resignation, the Required Lenders
shall appoint a successor Administrative 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 Lender is deemed to be
acceptable to the Borrower).
(c) If a successor Administrative Agent shall not have been so
appointed within such 15 Business Day period, the Administrative Agent, with the
consent of the Borrower, shall then appoint a successor Administrative Agent who
shall serve as Administrative Agent hereunder or thereunder until such time, if
any, as the Lenders appoint a successor Administrative Agent as provided above.
(d) If no successor Administrative 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 Administrative Agent, the Administrative
Agent's resignation shall become effective and the Required Lenders shall
thereafter perform all the duties of the Administrative Agent hereunder and/or
under any other Credit Document until such time, if any, as the Required Lenders
appoint a successor Administrative Agent as provided above.
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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 Administrative Agent (other than any
payments due on the Effective Date, which the Borrower shall pay on such date)
all reasonable out-of-pocket costs and expenses of the Administrative Agent
(including, without limitation, the reasonable fees and disbursements of White &
Case LLP and the Administrative 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
Administrative Agent in connection with its syndication efforts with respect to
this Agreement and of the Administrative Agent and, after the occurrence and
during the continuance of an Event of Default, each of the Lenders in connection
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
Administrative Agent and, after the occurrence and during the continuance of an
Event of Default, for each of the Lenders); (ii) pay within 15 days following
written demand by the Administrative Agent (other than any payments due on the
Effective Date, which the Borrower shall pay on such date) and hold each of the
Lenders 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 Lenders 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 Lender) to pay such taxes; and (iii) indemnify the Administrative Agent and
each Lender, 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 Administrative
Agent or any Lender 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
Synthetic Lease Financing) 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
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the Administrative Agent or any Lender 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
Lender 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 Lender (including, without
limitation, by branches and agencies of such Lender 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 Lender under this
Agreement or under any of the other Credit Documents, including, without
limitation, all interests in Obligations purchased by such Lender 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 Lender shall have made any demand hereunder and although
said Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
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
Lender, at its address specified opposite its name on Schedule VIII below; and
if to the Administrative Agent, at its Notice Office; or, as to any Credit Party
or the Administrative 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
Lender, at such other address as shall be designated by such Lender in a written
notice to the Borrower and the Administrative 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 Administrative Agent and the Borrower shall not be
effective until received by the Administrative 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
Lenders and, provided further, that, although any Lender may transfer, assign or
grant participations in its rights hereunder, such Lender shall remain a
"Lender" 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 "Lender" hereunder and, provided further, that no Lender 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
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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 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 Lender in respect of such participation to be those set forth in the
agreement executed by such Lender in favor of the participant relating thereto)
and all amounts payable by the Borrower hereunder shall be determined as if such
Lender had not sold such participation.
(b) Notwithstanding the foregoing, any Lender (or any Lender
together with one or more other Lenders) 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 Lender which is at least 50% owned by such
Lender or its parent company or to one or more Lenders or (ii) in the case of
any Lender 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 Lender 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
Lender or assigning Lenders, 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 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 Lender by execution of an Assignment
and Assumption Agreement, provided that (i) at such time Schedule I shall be
deemed modified to reflect the Commitments of such new Lender and of the
existing Lenders, (ii) new Notes will be issued, at the Borrower's expense, to
such new Lender and to the assigning Lender upon the request of such new Lender
or assigning Lender, 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, (iii) the consent of the Administrative 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 Commitment, (iv) the Administrative Agent shall receive
at the time of each such assignment, from the assigning or assignee Lender, the
payment of a non-refundable assignment fee of $3,500 and (v) promptly after such
assignment, the Borrower shall have received from the Administrative Agent
notice of any such assignment,
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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 Lender 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 Lender 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 Lender shall,
to the extent legally entitled to do so, provide to the Borrower in the case of
a Lender 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 Lender'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 Lender 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
Lender from pledging its Loans and Notes hereunder to a Federal Reserve Bank in
support of borrowings made by such Lender from such Federal Reserve Bank.
13.05 No Waiver; Remedies Cumulative. No failure or delay on
the part of the Administrative Agent or any Lender 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 Administrative Agent or any Lender 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 Administrative Agent or any Lender 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 Administrative Agent or any Lender 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 Administrative 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 Lenders (other than any
Lender that has 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 Lenders 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,
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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 Lenders is
in a greater proportion than the total of such Obligation then owed and due to
such Lender bears to the total of such Obligation then owed and due to all of
the Lenders immediately prior to such receipt, then such Lender receiving such
excess payment shall purchase for cash without recourse or warranty from the
other Lenders an interest in the Obligations of the respective Party to such
Lenders in such amount as shall result in a proportional participation by all
the Lenders in such amount; provided that if all or any portion of such excess
amount is thereafter recovered from such Lender, 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 Lenders as opposed to Defaulting Lenders.
13.07 Calculations; Computations; Accounting Terms. (a) The
financial statements to be furnished to the Lenders 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 Lenders); provided that, except as otherwise specifically
provided herein, all computations and all definitions used in determining
compliance with Sections 9.07 through 9.10, 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 Lenders pursuant to Section 7.05(a) (including, in
any event, that (i) all obligations in respect of the Borrower Senior Discount
Notes shall be treated as obligations in respect of Indebtedness, (ii) all
expenses incurred in connection with the consummation of the Synthetic Lease
Financing, the Repurchase and the Borrower Senior Discount Notes Consent
Solicitation shall be ignored for purposes of such calculations and (iii) any
recharacterization, after the Effective 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 and (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.
(c) For purposes of this Agreement, the Dollar Equivalent of
(i) each Letter of Credit denominated in an Alternate Currency shall be
calculated on the date when such Letter of Credit is issued or any disbursements
thereunder are reimbursed and (ii) all outstanding Letters of Credit denominated
in an Alternate Currency shall also be calculated (x) on the second Business Day
of each month and (y) at such other times as designated by the Administrative
Agent. Such Dollar Equivalent shall remain in effect until the same is
recalculated by the Administrative Agent as provided above and notice of such
recalculation is received by the Borrower, it being
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understood that until such notice is received, the Dollar Equivalent shall be
that Dollar Equivalent as last reported to the Borrower by the Administrative
Agent. The Administrative Agent shall promptly notify the Borrower and the
Lenders of each such determination of the Dollar Equivalent.
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 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.
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(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 Administrative Agent.
13.10 Effectiveness. This Agreement shall become effective on
the date (the "Effective Date") on which (i) all of the conditions provided in
Section 5 have been satisfied or waived and (ii) Holdings, the Borrower, the
Administrative Agent and each of the Lenders shall have signed a counterpart
hereof (whether the same or different counterparts) and shall have delivered the
same to the Administrative Agent at its Notice Office or, in the case of the
Lenders, shall have given to the Administrative Agent telephonic (confirmed in
writing), written or telex notice (actually received) at such office that the
same has been signed and mailed to it. The Administrative Agent will give the
Borrower and each Lender 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 Lenders, provided that no such change, waiver, discharge or termination
shall, without the consent of each Lender (other than a Defaulting Lender) (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 Maturity Date, or reduce the rate or
extend the time of payment of interest or Fees thereon (except (x) in connection
with the waiver of applicability of any post-default increase in interest rates
and (y) that any amendment or modification that is not agreed to by each Lender
directly affected thereby to the financial definitions in this Agreement or to
Section 13.07(a) shall not constitute a reduction in the rate of interest or
fees for purposes of this clause (i), notwithstanding the fact that such
amendment or modification would otherwise actually result in such a reduction,
so long as the primary purpose (as determined in good faith by the Borrower and
the Administrative Agent) of the respective amendment or modification was not to
decrease the pricing pursuant to this Agreement), or reduce the principal amount
thereof (except to the extent repaid in cash), (ii) release all or substantially
all of the Collateral (except as expressly
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provided in the Security Documents) under all the Security Documents, (iii)
amend, modify or waive any provision of this Section 13.12 (it being understood
that, with the consent of the Required Lenders, additional extensions of credit
pursuant to this Agreement may be included under this Agreement to provide the
Lenders with customary similar or additional rights of consent), (iv) reduce the
percentage specified in the definition of Required Lenders (it being understood
that, with the consent of the Required Lenders, additional extensions of credit
pursuant to this Agreement may be included in the determination of the Required
Lenders on substantially the same basis as the extensions of 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 (w)
increase the Commitments of any Lender over the amount thereof then in effect
without the consent of such Lender (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 Lender, and that an increase in the available
portion of any Commitment of any Lender shall not constitute an increase in the
Commitment of such Lender), (x) 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, (y) without the consent of the
Administrative Agent, amend, modify or waive any provision of Section 12 as same
applies to such Administrative Agent or any other provision as same relates to
the rights or obligations of such Administrative Agent or (z) without the
consent of the Collateral Agent, amend, modify or waive any provision relating
to the rights or obligations of the Collateral Agent.
(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 Lenders is obtained but the consent of one or more of
other Lenders whose consent is required is not obtained, then the Borrower shall
have the right to replace each such non-consenting Lender or Lenders (so long as
all non-consenting Lenders are so replaced) with one or more Replacement Lenders
pursuant to Section 1.13 so long as at the time of such replacement, each such
Replacement Lender consents to the proposed change, waiver, discharge or
termination, provided that the Borrower shall not have the right to replace a
Lender solely as a result of the exercise of such Lender's rights (and the
withholding of any required consent by such Lender) 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 Lender may transfer and carry
its Loans at, to or for the account of any office, Subsidiary or Affiliate of
such Lender. 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 Lender prior to such
transfer, then the Borrower shall not be obligated to pay such increased costs
(although the Borrower shall be obligated to
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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 Lender 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 Lender incurs the respective increased costs, reduction in amounts
received or receivable or reduction in return on capital or (y) the date such
Lender 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 Lender 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 Lender 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 Lender 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 Lender 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
Administrative 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 Lenders, the Loans made
by each of the Lenders and each repayment in respect of the principal amount of
the Loans of each Lender. 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 Lender, the transfer of the Commitments of such
Lender 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 Administrative 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 Administrative
Agent on the Register only upon the acceptance by the Administrative 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 Administrative 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 Lender shall surrender the Note
evidencing such Loan, and thereupon one or more new Notes in the same aggregate
principal amount shall be issued to the assigning or transferor Lender and/or
the new Lender. The Borrower agrees to indemnify the Administrative Agent from
and against any and all losses, claims, damages and liabilities of whatsoever
nature which may be imposed on,
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asserted against or incurred by the Administrative 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 Lender 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 Lender if the Lender
or such Lender'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 Lender) 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
Lenders in writing as confidential, provided that any Lender 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 Lender, (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 Lender, (v)
to the Administrative 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 Lender, 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 Lender 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 Lender).
SECTION 14. Holdings Guaranty.
14.01 Guaranty. In order to induce the Administrative Agent,
the Collateral Agent, the Issuing Lender and the Lenders 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 Administrative Agent and/or the other Guaranteed
Creditors, or order, on demand, together with any and all expenses which may be
incurred by the Administrative Agent or the other Guaranteed Creditors in
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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 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, reorganization, arrangement, moratorium or other debtor relief
proceeding, 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.
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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
thereof, 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
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 creditors 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 liabilities 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.
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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 Administrative
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 Administrative 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 Guaranty. Prior to the transfer by
Holdings of any note or negotiable 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 subordination. 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 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 Administrative
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 extinguish 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 Administrative Agent and the Lenders
shall have no duty to advise Holdings of information known to them regarding
such circumstances or risks.
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(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
(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
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Holdings shall pay the maximum amount of the Guaranteed Obligations which would
be permissible under applicable law.
* * *
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<PAGE> 112
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, INC.
Houston, Texas 77041
Attn.: President
Tel: (713) 466-4103
Fax: (713) 466-6574
By
------------------------------------------
Title:
UNIVERSAL COMPRESSION, INC.
By
------------------------------------------
Title:
BANKERS TRUST COMPANY,
Individually and as Administrative Agent
By
------------------------------------------
Title:
<PAGE> 113
SCHEDULE I
COMMITMENTS
<TABLE>
<CAPTION>
Lender Commitment
------ ----------
<S> <C>
Bankers Trust Company --
------------
TOTAL: $ 50,000,000
</TABLE>
<PAGE> 114
SCHEDULE II
ERISA
<PAGE> 115
SCHEDULE VIII
LENDER ADDRESSES
Lender Addresses
- ------ ---------
Bankers Trust Company 130 Liberty Street
New York, New York 10006
Attn.: ___________________
Tel: (212) 250-____
Fax: (212) 250-____
<PAGE> 1
EXHIBIT 10.47
EXHIBIT H
SECURITY AGREEMENT
among
UNIVERSAL COMPRESSION HOLDINGS, INC.,
UNIVERSAL COMPRESSION, INC.,
CERTAIN OF ITS SUBSIDIARIES
and
BANKERS TRUST COMPANY,
as Collateral Agent
Dated as of May ___, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
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 ................................... 8
4.5. Maintenance of Registration ............................. 8
4.6. Future Registered Marks ................................. 8
4.7. Remedies ................................................ 8
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE V
SPECIAL PROVISIONS CONCERNING
PATENTS AND COPYRIGHTS ....................................... 9
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
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 ........................................ 11
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 ................................ 14
7.5. Remedies Cumulative .................................... 16
7.6. Discontinuance of Proceedings .......................... 16
ARTICLE VIII
INDEMNITY .................................................... 17
8.1. Indemnity .............................................. 17
8.2. Indemnity Obligations Secured by Collateral; Survival .. 18
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE IX
DEFINITIONS .................................................. 18
ARTICLE X
THE COLLATERAL AGENT ......................................... 23
10.1. Appointment ........................................... 23
10.2. Nature of Duties ...................................... 23
10.3. Lack of Reliance on the Collateral Agent .............. 24
10.4. Certain Rights of the Collateral Agent ................ 24
10.5. Reliance .............................................. 24
10.6. Indemnification ....................................... 25
10.7. The Collateral Agent in its Individual Capacity ....... 25
10.8. Holders ............................................... 25
10.9. Resignation by the Collateral Agent ................... 26
10.10. Fees and Expenses of Collateral Agent ................ 26
ARTICLE XI
MISCELLANEOUS ................................................ 26
11.1. Notices ............................................... 27
11.2. Waiver; Amendment ..................................... 27
11.3. Obligations Absolute .................................. 27
11.4. Successors and Assigns ................................ 28
11.5. Headings Descriptive .................................. 28
11.6. Severability .......................................... 28
11.7. GOVERNING LAW ......................................... 28
11.8. Assignor's Duties ..................................... 28
11.9. Termination; Release .................................. 28
11.10. Counterparts ......................................... 29
11.11. Additional Assignors .......................................... 29
</TABLE>
ANNEX A Schedule of Chief Executive Offices/Record Locations
ANNEX B Schedule of Inventory and Equipment Locations
ANNEX C Schedule of Trade, Fictitious and Other Names
ANNEX D Schedule of Marks
(iii)
<PAGE> 5
PAGE
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
(iv)
<PAGE> 6
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of May ___, 2000, 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"), Universal
Compression, Inc. (the "Borrower"), the lenders from time to time party thereto
(the "Lenders"), Deutsche Bank Securities Inc., as Lead Arranger and Bankers
Trust Company, as Administrative Agent (together with any successor
administrative agent, the "Administrative Agent"), have entered into a Credit
Agreement, dated as of May ___, 2000 (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 Lenders, the Administrative Agent and the Pledgee are
herein called the "Lender 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 Lenders or any affiliate thereof (each such Lender or affiliate, even if
the respective Lender subsequently ceases to be a Lender under the Credit
Agreement for any reason, together with such Lender's or affiliate's successors
and assigns, if any, collectively, the "Other Creditors," and together with the
Lender 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
Subsidiary 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
<PAGE> 7
EXHIBIT H
PAGE 2
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 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 (in each case, to the extent not subject to any
liens created pursuant to the Synthetic Lease Financing Documents), 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.
<PAGE> 8
EXHIBIT H
PAGE 3
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 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 such 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 each
Assignor is located at the address set forth on Annex A for such Assignor. No
Assignor will 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 each 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 such Assignor may establish in accordance with the
last sentence of this Section 2.4. All Receivables and Contract Rights of each
Assignor are, and will continue to be, maintained at, and controlled and
directed (including, without limitation, for general accounting purposes) from,
the 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
<PAGE> 9
EXHIBIT H
PAGE 4
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 each Assignor is located at one of the locations shown on
Annex B hereto. Each 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
such 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 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.
<PAGE> 10
EXHIBIT H
PAGE 5
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 such Assignor) . Upon the occurrence and during the continuance of an Event
of Default, and if the Collateral Agent so directs, each Assignor shall legend,
in form and manner reasonably satisfactory to the Collateral Agent, the
<PAGE> 11
EXHIBIT H
PAGE 6
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 any Assignor or the Collateral Agent, shall
be borne by the relevant Assignor.
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
<PAGE> 12
EXHIBIT H
PAGE 7
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. Each 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.
<PAGE> 13
EXHIBIT H
PAGE 8
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. Sections 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.
<PAGE> 14
EXHIBIT H
PAGE 9
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. Section
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
<PAGE> 15
EXHIBIT H
PAGE 10
written consent of the Collateral Agent; provided, that to the extent permitted
by the Credit Agreement, 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
<PAGE> 16
EXHIBIT H
PAGE 11
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).
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
<PAGE> 17
EXHIBIT H
PAGE 12
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
(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
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PAGE 13
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 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
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PAGE 14
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 the relevant 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.
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
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EXHIBIT H
PAGE 15
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) 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
Lender 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 Administrative Agent under the Credit Agreement and
held by it, for the equal and ratable benefit of the Lender Creditors, as cash
security for the repayment of Obligations owing to the Lender 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 Lender 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 Administrative 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 Lender Creditors, to the
Administrative Agent under the Credit Agreement for the account of the Lender
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
Administrative 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 Administrative 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
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EXHIBIT H
PAGE 16
Secondary Obligations owed to the Lender Creditors or the Other Creditors, as
the case may be. Unless it has actual knowledge (including by way of written
notice from a Lender Creditor or an Other Creditor) to the contrary, the
Administrative 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 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.
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EXHIBIT H
PAGE 17
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 "Indemnitees")
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
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
<PAGE> 23
EXHIBIT H
PAGE 18
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.
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.
"Administrative 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.
"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.
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"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.
"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
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EXHIBIT H
PAGE 20
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.
"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.
"Lender Creditor" shall have the meaning provided in the first WHEREAS
clause of this Agreement.
"Lenders" shall have the meaning provided in the first WHEREAS clause of
this Agreement.
"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 Lender Creditors now existing or hereafter incurred under, arising out of,
or in connection with the Credit Agreement and the other Credit Documents and
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PAGE 21
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.
"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.
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EXHIBIT H
PAGE 22
"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(e) of this
Agreement.
"Required Secured Creditors" shall mean (i) the Required Lenders (or, to
the extent required by Section 13.12 of the Credit Agreement, all of the
Lenders) 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.
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PAGE 23
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.
(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.
<PAGE> 29
EXHIBIT H
PAGE 24
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 each 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 each 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.
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
<PAGE> 30
EXHIBIT H
PAGE 25
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
Lenders to the Collateral Agent pursuant to the Credit Agreement, with the
effect being that the Lenders shall be responsible for indemnifying the
Collateral Agent to the extent the 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 Lenders 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 administrative
agent under one or more of such Credit Documents, the Collateral Agent shall
have the rights and powers specified therein and herein for a "Lender", or an
"Administrative 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 "Lenders," "Required Lenders," "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,
<PAGE> 31
EXHIBIT H
PAGE 26
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 Lenders. 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.
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 Administrative
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
<PAGE> 32
EXHIBIT H
PAGE 27
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 Lender Creditor, either (x) to the Administrative Agent,
at the address of the Administrative Agent specified in the Credit
Agreement or (y) at such address as such Lender 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.
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 Lender 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 Lenders 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
<PAGE> 33
EXHIBIT H
PAGE 28
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 consent 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 CF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN 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,
<PAGE> 34
EXHIBIT H
PAGE 29
"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 or otherwise released
at the direction of the Required Lenders (or all Lenders if required by Section
13.12 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) 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), or (b), it shall deliver to the Collateral Agent
a certificate signed by its senior officer stating that the release of the
respective Collateral is permitted pursuant to Section 11.9(a) or (b). 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.
(d) 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 to the Credit Agreement shall
automatically become an Assignor hereunder by executing a counterpart hereof and
delivering the same to the Collateral Agent.
<PAGE> 35
EXHIBIT H
PAGE 30
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:
[OTHER ASSIGNORS]
By
Title:
UNIVERSAL COMPRESSION, INC.
By
Title:
BANKERS TRUST COMPANY,
as Collateral Agent
By
Title:
130 Liberty Street
New York, New York 10006
Attention: [Marcus Tarkington]
<PAGE> 36
ANNEX A
to
SECURITY AGREEMENT
SCHEDULE OF CHIEF EXECUTIVE OFFICES/RECORD LOCATIONS
<PAGE> 37
ANNEX B
to
SECURITY AGREEMENT
SCHEDULE OF INVENTORY AND EQUIPMENT LOCATIONS
<PAGE> 38
ANNEX C
to
SECURITY AGREEMENT
SCHEDULE OF TRADE, FICTITIOUS AND OTHER NAMES
<PAGE> 39
ANNEX D
to
SECURITY AGREEMENT
SCHEDULE OF MARKS
<PAGE> 40
ANNEX E
to
SECURITY AGREEMENT
SCHEDULE OF LICENSE AGREEMENTS AND ASSIGNMENTS
<PAGE> 41
ANNEX F
to
SECURITY AGREEMENT
SCHEDULE OF PATENTS AND APPLICATIONS
<PAGE> 42
ANNEX G
to
SECURITY AGREEMENT
SCHEDULE OF COPYRIGHTS AND APPLICATIONS
<PAGE> 43
ANNEX H
to
SECURITY AGREEMENT
FORM OF ASSIGNMENT OF SECURITY INTEREST
IN UNITED STATES TRADEMARKS AND PATENTS
FOR GOOD AND VALUABLE CONSIDERATION, receipt and sufficiency of which are
hereby acknowledged, [Name of Assignor], a __________ ___________ (the
"Assignor") with principal offices at ____________________________, hereby
assigns and grants to Bankers Trust Company, as Collateral Agent, with principal
offices at One Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006
(the "Assignee"), a security interest in (i) all of the Assignor's right, title
and interest in and to the United States trademarks, trademark registrations and
trademark applications (the "Marks") set forth on Schedule A attached hereto,
(ii) all of the Assignor's rights, title and interest in and to the United
States patents (the "Patents") set forth on Schedule B attached hereto, in each
case together with (iii) all Proceeds (as such term is defined in the Security
Agreement referred to below) and products of the Marks and Patents, (iv) the
goodwill of the businesses with which the Marks are associated and (v) all
causes of action arising prior to or after the date hereof for infringement of
any of the Marks and Patents or unfair competition regarding the same.
THIS ASSIGNMENT is made to secure the satisfactory performance and payment
of all the Obligations of the Assignor, as such term is defined in the Security
Agreement among the Assignor, the other assignors from time to time party
thereto and the Assignee, dated as of May __, 2000 (as amended from time to
time, the "Security Agreement"). Upon the occurrence of the Termination Date (as
defined in the Security Agreement), the Assignee shall, upon such satisfaction,
execute, acknowledge, and deliver to the Assignor an instrument in writing
releasing the security interest in the Marks and Patents acquired under this
Assignment.
<PAGE> 44
ANNEX H
to
SECURITY AGREEMENT
This Assignment has been granted in conjunction with the security interest
granted to the Assignee under the Security Agreement. The rights and remedies of
the Assignee with respect to the security interest granted herein are without
prejudice to, and are in addition to those set forth in the Security Agreement,
all terms and provisions of which are incorporated herein by reference. In the
event that any provisions of this Assignment are deemed to conflict with the
Security Agreement, the provisions of the Security Agreement shall govern.
* * *
<PAGE> 45
ANNEX H
to
SECURITY AGREEMENT
IN WITNESS WHEREOF, the undersigned have executed this Assignment as of the
____ day of _________, ____.
[NAME OF ASSIGNOR], Assignor
By___________________________
Name:
Title:
BANKERS TRUST COMPANY,
as Collateral Agent, Assignee
By___________________________
Name:
Title:
<PAGE> 46
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of _________, ____, before me personally came ________
_________________ who, being by me duly sworn, did state as follows: that [s]he
is _______________ of [Name of Assignor], that [s]he is authorized to execute
the foregoing Assignment on behalf of said corporation and that [s]he did so by
authority of the [Board of Directors] of said corporation.
__________________________
Notary Public
<PAGE> 47
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of _________, ____, before me personally came ________
_____________________ who, being by me duly sworn, did state as follows: that
[s]he is __________________ of Bankers Trust Company that [s]he is authorized to
execute the foregoing Assignment on behalf of said corporation and that [s]he
did so by authority of the [Board of Directors] of said corporation.
__________________________
Notary Public
<PAGE> 48
SCHEDULE A
U.S. TRADEMARKS
<TABLE>
<CAPTION>
MARK REG. NO. REG. DATE
<S> <C> <C>
</TABLE>
<PAGE> 49
SCHEDULE B
U.S. PATENTS
<TABLE>
<CAPTION>
PATENT PATENT NO. ISSUE DATE
<S> <C> <C>
</TABLE>
<PAGE> 50
ANNEX I
to
SECURITY AGREEMENT
FORM OF ASSIGNMENT OF SECURITY INTEREST
IN UNITED STATES COPYRIGHTS
WHEREAS, [Name of Assignor], a ________________ _______________ (the
"Assignor"), having its chief executive office at ______________, ____________,
is the owner of all right, title and interest in and to the United States
copyrights and associated United States copyright registrations and applications
for registration set forth in Schedule A attached hereto;
WHEREAS, BANKERS TRUST COMPANY, as Collateral Agent, having its principal
offices at One Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006
(the "Assignee"), desires to acquire a security interest in said copyrights and
copyright registrations and applications therefor; and
WHEREAS, the Assignor is willing to assign to the Assignee, and to grant to
the Assignee, a security interest in and lien upon the copyrights and copyright
registrations and applications therefor described above.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, and subject to the terms and conditions of the Security
Agreement, dated as of May __, 2000, made by the Assignor, the other assignors
from time to time party thereto and the Assignee (as amended from time to time,
the "Security Agreement"), the Assignor hereby assigns to the Assignee, and
grants to the Assignee, a security interest in the copyrights and copyright
registrations and applications therefor set forth in Schedule A attached hereto.
This Assignment is made to secure the satisfactory performance and payment
of all the Obligations of the Assignor, as such term is defined in the Security
Agreement.
Upon the occurrence of the Termination Date (as defined in the Security
Agreement), the Assignee shall, upon such satisfaction, execute, acknowledge and
deliver to the Assignor an instrument in writing releasing the security interest
in the copyright registrations and applications thereof described above.
This Assignment has been granted in conjunction with the security interest
granted to the Assignee under the Security Agreement. The rights and remedies of
the Assignee with respect to the security interest granted herein are without
prejudice to, and are in addition to those set forth in the Security Agreement,
all terms and provisions of which are incorporated herein by reference. In the
event that any provisions of this Assignment are deemed to conflict with the
Security Agreement, the provisions of the Security Agreement shall govern.
<PAGE> 51
ANNEX I
to
SECURITY AGREEMENT
Executed at New York, New York, the __ day of _________, ____.
[NAME OF ASSIGNOR], as Assignor
By__________________________
Name:
Title:
BANKERS TRUST COMPANY, as
Collateral Agent, Assignee
By__________________________
Name:
Title:
<PAGE> 52
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of _________, ____, before me personally came ___________
_______________, who being duly sworn, did depose and say that [s]he is
___________________ of [Name of Assignor], that [s]he is authorized to execute
the foregoing Assignment on behalf of said corporation and that [s]he did so by
authority of the [Board of Directors] of said corporation.
_________________________
Notary Public
<PAGE> 53
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of _________, ____, before me personally came ________
_____________________ who, being by me duly sworn, did state as follows: that
[s]he is __________________ of Bankers Trust Company that [s]he is authorized to
execute the foregoing Assignment on behalf of said corporation and that [s]he
did so by authority of the [Board of Directors] of said corporation.
_________________________
Notary Public
<PAGE> 54
SCHEDULE A
U.S. COPYRIGHTS
<TABLE>
<CAPTION>
REGISTRATION PUBLICATION
NUMBERS DATE COPYRIGHT TITLE
<S> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 10.48
EXHIBIT G
PLEDGE AGREEMENT
PLEDGE AGREEMENT (as amended, modified or supplemented from
time to time, this "Agreement"), dated as of May ___, 2000, 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"),
Universal Compression, Inc. (the "Borrower"), the lenders from time to time
party thereto (the "Lenders"), Deutsche Bank Securities Inc., as Lead Arranger
and Bankers Trust Company, as Administrative Agent (together with any successor
administrative agent, the "Administrative Agent"), have entered into a Credit
Agreement, dated as of May ___, 2000 (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 Lenders, the Administrative Agent and the Pledgee are
herein called the "Lender 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 Lenders or any affiliate thereof (each such Lender
or affiliate, even if the respective Lender subsequently ceases to be a Lender
under the Credit Agreement for any reason, together with such Lender's or
affiliate's successors and assigns, if any, collectively, the "Other Creditors,"
and together with the Lender Creditors, the "Secured Creditors");
WHEREAS, pursuant to, and after the execution and delivery of,
the Subsidiary 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> 2
EXHIBIT G
Page 2
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 to secure:
(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 Lender 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;
<PAGE> 3
EXHIBIT G
Page 3
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
<PAGE> 4
EXHIBIT G
Page 4
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
<PAGE> 5
EXHIBIT G
Page 5
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 (as hereinafter defined), 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.
<PAGE> 6
EXHIBIT G
Page 6
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 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:
<PAGE> 7
EXHIBIT G
Page 7
(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 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
<PAGE> 8
EXHIBIT G
Page 8
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 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.
<PAGE> 9
EXHIBIT G
Page 9
(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 sufficient 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.
<PAGE> 10
EXHIBIT G
Page 10
(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, 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
<PAGE> 11
EXHIBIT G
Page 11
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 obtained 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
<PAGE> 12
EXHIBIT G
Page 12
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 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 acknowledgment, the "Partnership
Acknowledgment"), 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
<PAGE> 13
EXHIBIT G
Page 13
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 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
<PAGE> 14
EXHIBIT G
Page 14
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 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 monies 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
<PAGE> 15
EXHIBIT G
Page 15
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 overnight 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:
(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 Lender Creditor, either (x) to the
Administrative Agent, at the address of the Administrative Agent
specified in the Credit Agreement or (y) at such address as such Lender
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 Lender 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 Lenders 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.
<PAGE> 16
EXHIBIT G
Page 16
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 Pledgor 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 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 provisions 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 Acknowledgment signed by
the respective Pledged Partnerships, in each case within 15 days following the
date any such Pledged Partnership Interests are pledged hereunder.
* * * *
<PAGE> 17
EXHIBIT G
Page 17
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:
UNIVERSAL COMPRESSION, INC.,
as a Pledgor
By
Title:
[OTHER PLEDGORS],
By
Title:
Accepted and Agreed to:
BANKERS TRUST COMPANY,
as Pledgee, Collateral Agent
By
Title:
<PAGE> 18
ANNEX A
to
PLEDGE AGREEMENT
LIST OF STOCK
I. Universal Compression Holdings, Inc.
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME OF OUTSTANDING SHARES
ISSUING CORPORATION CERTIFICATE NUMBER TYPE OF SHARES NUMBER OF SHARES OF CAPITAL STOCK
------------------- ------------------ -------------- ---------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
II. Universal Compression, Inc.
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME OF OUTSTANDING SHARES
ISSUING CORPORATION CERTIFICATE NUMBER TYPE OF SHARES NUMBER OF SHARES OF CAPITAL STOCK
------------------- ------------------ -------------- ---------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 19
ANNEX B
to
PLEDGE AGREEMENT
LIST OF NOTES
I. Universal Compression Holdings, Inc.
<TABLE>
<CAPTION>
OBLIGOR PRINCIPAL AMOUNT (IF ANY) MATURITY DATE (IF ANY)
------- ------------------------- ----------------------
<S> <C> <C>
</TABLE>
II. Universal Compression, Inc.
<TABLE>
<CAPTION>
OBLIGOR PRINCIPAL AMOUNT (IF ANY) MATURITY DATE (IF ANY)
------- ------------------------- ----------------------
<S> <C> <C>
</TABLE>
<PAGE> 20
ANNEX C
to
PLEDGE AGREEMENT
PARTNERSHIP INTERESTS
I. Universal Compression Holdings, Inc.
II. Universal Compression, Inc.
<PAGE> 21
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 May __, 2000 (as
amended, modified or supplemented 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> 22
Page 2
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> 23
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 May __, 2000 (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> 24
ANNEX F
to
PLEDGE AGREEMENT
OFFICE LOCATIONS
I. Universal Compression Holdings, Inc.
4400 Brittmoore Road
Houston, Texas 77241
II. Universal Compression, Inc.,
<PAGE> 1
EXHIBIT 10.49
EXHIBIT I
FORM OF SUBSIDIARIES GUARANTY
SUBSIDIARIES GUARANTY, dated as of May ___, 2000 (as amended,
modified or supplemented from time to time, this "Guaranty"), made by each of
the undersigned guarantors (each a "Guarantor," and together with any other
entity that becomes a guarantor hereunder pursuant to Section 26 hereof, the
"Guarantors"). 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"),
Universal Compression, Inc. (the "Borrower"), the lenders from time to time
party thereto (the "Lenders"), Deutsche Bank Securities Inc., as Lead Arranger
and Bankers Trust Company, as Administrative Agent (together with any successor
administrative agent, the "Administrative Agent"), have entered into a Credit
Agreement, dated as of May ___, 2000, providing for the making of Loans to, and
the issuance of Letters of Credit for the account of, the Borrower as
contemplated therein (as amended, modified as supplemented from time to time,
the "Credit Agreement") (the Lenders, the Collateral Agent and the
Administrative Agent are herein called the "Lender 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 Lenders or any affiliate thereof (each such Lender
or affiliate, even if the respective Lender subsequently ceases to be a Lender
under the Credit Agreement for any reason, together with such Lender's or
affiliate's successors and assigns, if any, collectively, the "Other Creditors,"
and together with the Lender Creditors, the "Secured Creditors");
WHEREAS, each Guarantor is a direct or indirect Subsidiary of
the Borrower;
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 Guarantor shall have executed and delivered this Guaranty;
and
WHEREAS, each Guarantor 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 Agreement and the entering into by the
Borrower of Interest Rate Protection Agreements or Other Hedging Agreements and,
accordingly, desires to execute this Guaranty in order to satisfy the conditions
described in the preceding paragraph;
<PAGE> 2
EXHIBIT I
Page 2
NOW, THEREFORE, in consideration of the foregoing and other
benefits accruing to each Guarantor, the receipt and sufficiency of which are
hereby acknowledged, each Guarantor hereby makes the following representations
and warranties to the Secured Creditors and hereby covenants and agrees with
each Secured Creditor as follows:
1. Each Guarantor, jointly and severally, irrevocably,
absolutely and unconditionally guarantees: (i) to the Lender Creditors the full
and prompt payment when due (whether at the stated maturity, by acceleration or
otherwise) of (x) the principal of and interest on the Notes issued by, and the
Loans made to, the Borrower under the Credit Agreement, and all reimbursement
obligations and Unpaid Drawings with respect to Letters of Credit issued under
the Credit Agreement and (y) all other obligations (including obligations which,
but for the automatic stay under Section 362(a) of the Bankruptcy Code, would
become due), liabilities and indebtedness owing by the Borrower to the Lender
Creditors under the Credit Agreement or any other Credit Document to which the
Borrower is a party (including, without limitation, indemnities, Fees and
interest thereon), whether now existing or hereafter incurred under, arising out
of or in connection with the Credit Agreement or any such other Credit Document
and the due performance and compliance by the Borrower with all of the terms,
conditions and agreements contained in the Credit Agreement and such other
Credit Documents (all such principal, interest, liabilities, indebtedness and
obligations being herein collectively called the "Credit Document Obligations");
and (ii) to each Other Creditor 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), liabilities and indebtedness owing by the
Borrower under any Interest Rate Protection Agreement or Other Hedging
Agreement, whether now in existence or hereafter arising, and the due
performance and compliance by the Borrower with all of the terms, conditions and
agreements contained in the Interest Rate Protection Agreements or Other Hedging
Agreements (all such obligations, liabilities and indebtedness being herein
collectively called the "Other Obligations," and together with the Credit
Document Obligations, the "Guaranteed Obligations"). Each Guarantor understands,
agrees and confirms that the Secured Creditors may enforce this Guaranty up to
the full amount of the Guaranteed Obligations against such Guarantor without
proceeding against any other Guarantor, the Borrower, against any security for
the Guaranteed Obligations, or under any other guaranty covering all or a
portion of the Guaranteed Obligations.
2. Additionally, each Guarantor, jointly and severally,
unconditionally, absolutely and irrevocably, guarantees the payment of any and
all Guaranteed Obligations whether or not due or payable by the Borrower upon
the occurrence in respect of the Borrower of any of the events specified in
Section 10.05 of the Credit Agreement, and unconditionally, absolutely and
irrevocably, jointly and severally, promises to pay such Guaranteed Obligations
to the Secured Creditors, or order, on demand, in legal tender of the United
States. This Guaranty shall constitute a guaranty of payment, and not of
collection.
3. The liability of each Guarantor hereunder is primary,
absolute and unconditional and is exclusive and independent of any security for
or other guaranty of the indebtedness of the Borrower whether executed by such
Guarantor, any
<PAGE> 3
EXHIBIT I
Page 3
other Guarantor, any other guarantor or by any other party, and the liability of
each Guarantor hereunder shall not be affected or impaired by any circumstance
or occurrence whatsoever, including, without limitation: (a) any direction as to
application of payment by the Borrower or by any other party, (b) any other
continuing or other guaranty, undertaking or maximum liability of a guarantor or
of any other party as to the Guaranteed Obligations, (c) any payment on or in
reduction of any such other guaranty or undertaking, (d) any dissolution,
termination or increase, decrease or change in personnel by the Borrower, (e)
any payment made to any Secured Creditor on the Guaranteed Obligations which any
Secured Creditor repays the Borrower pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding, and
each Guarantor waives any right to the deferral or modification of its
obligations hereunder by reason of any such proceeding, (f) any action or
inaction by the Secured Creditors as contemplated in Section 6 hereof or (g) any
invalidity, irregularity or unenforceability of all or any part of the
Guaranteed Obligations or of any security therefor.
4. The obligations of each Guarantor hereunder are independent
of the obligations of any other Guarantor, any other guarantor or the Borrower,
and a separate action or actions may be brought and prosecuted against each
Guarantor whether or not action is brought against any other Guarantor, any
other guarantor or the Borrower and whether or not any other Guarantor, any
other guarantor or the Borrower be joined in any such action or actions. Each
Guarantor waives, to the fullest extent permitted by law, the benefits 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 each Guarantor.
5. Each Guarantor hereby waives notice of acceptance of this
Guaranty and notice of any liability to which it may apply, and waives
promptness, diligence, presentment, demand of payment, protest, notice of
dishonor or nonpayment of any such liabilities, suit or taking of other action
by the Administrative Agent or any other Secured Creditor against, and any other
notice to, any party liable thereon (including such Guarantor, any other
Guarantor, any other guarantor, the Borrower).
6. Any Secured Creditor may at any time and from time to time
without the consent of, or notice to, any Guarantor (except as shall be required
by applicable statute and cannot be waived), without incurring responsibility to
such Guarantor, without impairing or releasing the obligations of such Guarantor
hereunder, upon or without any terms or conditions and in whole or in part:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew, alter or increase, any
of the Guaranteed Obligations (including any increase or decrease in
the rate of interest thereon), any security therefor, or any liability
incurred directly or indirectly in respect thereof, 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, surrender, impair, realize
upon or otherwise deal with in any manner
<PAGE> 4
EXHIBIT I
Page 4
and in any order any property by whomsoever at any time pledged or
mortgaged to secure, or howsoever 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, any Subsidiary thereof or otherwise
act or refrain from acting;
(d) release or substitute any one or more endorsers,
Guarantors, other guarantors, the Borrower 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
creditors of the Borrower other than the Secured Creditors;
(f) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Secured Creditors
regardless of what liabilities of the Borrower remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, any of the Interest Rate Protection Agreements or Other
Hedging Agreements, the Credit Documents or any of the instruments or
agreements referred to therein, or otherwise amend, modify or
supplement any of the Interest Rate Protection Agreements or Other
Hedging Agreements, the Credit Documents or any of such other
instruments or agreements;
(h) act or fail to act in any manner referred to in this
Guaranty which may deprive such Guarantor of its right to subrogation
against the Borrower to recover full indemnity for any payments made
pursuant to this Guaranty; and/or
(i) take any other action which would, under otherwise
applicable principles of common law, give rise to a legal or equitable
discharge of such Guarantor from its liabilities under this Guaranty.
7. This Guaranty is a continuing one and all liabilities to
which it applies or may apply under the terms hereof shall be conclusively
presumed to have been created in reliance hereon. No failure or delay on the
part of any Secured Creditor in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall 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.
The rights and remedies herein expressly specified are cumulative and not
exclusive of any rights or remedies which any Secured Creditor would otherwise
have. No notice to or demand on any Guarantor in any case shall entitle such
Guarantor to any other further notice or demand in similar or other
circumstances or constitute a
<PAGE> 5
EXHIBIT I
Page 5
waiver of the rights of any Secured Creditor to any other or further action in
any circumstances without notice or demand. It is not necessary for any Secured
Creditor to inquire into the capacity or powers of the Borrower or the officers,
directors, partners or agents acting or purporting to act on its behalf, and any
indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed hereunder.
8. Any indebtedness of the Borrower now or hereafter held by
any Guarantor is hereby subordinated to the Guaranteed Obligations of the
Borrower owing to the Secured Creditors, and if the Administrative Agent or the
Collateral Agent, after the occurrence and during the continuance of an Event of
Default, so requests, shall be collected, enforced and received by such
Guarantor as trustee for the Secured Creditors and be paid over to the Secured
Creditors on account of the Guaranteed Obligations of the Borrower to the
Secured Creditors, but without affecting or impairing in any manner the
liability of such Guarantor under the other provisions of this Guaranty. Without
limiting the generality of the foregoing, each Guarantor hereby agrees with the
Secured 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.
9. (a) Each Guarantor waives any right (except as shall be
required by applicable law and cannot be waived) to require the Secured
Creditors to: (i) proceed against the Borrower, any other Guarantor, any other
guarantor of the Guaranteed Obligations or any other party; (ii) proceed against
or exhaust any security held from the Borrower, any other Guarantor, any other
guarantor of the Guaranteed Obligations or any other party; or (iii) pursue any
other remedy in the Secured Creditors' power whatsoever. Each Guarantor waives
any defense based on or arising out of any defense of the Borrower, any other
Guarantor, any other guarantor of the Guaranteed Obligations or any other party
other than payment in full of the Guaranteed Obligations, including, without
limitation, any defense based on or arising out of the disability of the
Borrower, any other Guarantor, any other guarantor of the Guaranteed Obligations
or any other party, or the 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
Secured Creditors may, at their election, foreclose on any security held by the
Administrative Agent, the Collateral Agent or the other Secured Creditors 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 Secured Creditors may
have against the Borrower or any other party, or any security, without affecting
or impairing in any way the liability of any Guarantor hereunder except to the
extent the Guaranteed Obligations have been paid in full in cash. Each Guarantor
waives any defense arising out of any such election by the Secured Creditors,
even though such election operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of such Guarantor against
the Borrower or any other party or any security.
(b) Each Guarantor waives all presentments, demands for
performance, protests and notices, including, without limitation, notices of
nonperformance, notices of protest, notices
<PAGE> 6
EXHIBIT I
Page 6
of dishonor, notices of acceptance of this Guaranty, and notices of the
existence, creation or incurring of new or additional indebtedness. Each
Guarantor 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 such Guarantor assumes and incurs
hereunder, and agrees that the Secured Creditors shall have no duty to advise
any Guarantor of information known to them regarding such circumstances or
risks.
(c) Each Guarantor hereby acknowledges and affirms that it
understands that to the extent the Guaranteed Obligations are secured by Real
Property located in the State of California, such Guarantor shall be liable for
the full amount of its liability hereunder notwithstanding foreclosure on such
Real Property by trustee sale or any other reason impairing such Guarantor's or
any Secured Creditors' right to proceed against the Borrower or any other
guarantor of the Guaranteed Obligations. In accordance with Section 2856 of the
California Civil Code, each Guarantor hereby waives:
(i) all rights of subrogation, reimbursement, indemnification,
and contribution and any other rights and defenses that are or may
become available to such Guarantor by reason of Sections 2787 to 2855,
inclusive, 2899 and 3433 of the California Civil Code;
(ii) all rights and defenses that such Guarantor may have
because the Guaranteed Obligations are secured by Real Property located
in the State of California. This means, among other things: (A) the
Secured Creditors may collect from such Guarantors without first
foreclosing on any real or personal property collateral pledged by the
Borrower or any other Credit Party; and (B) if the Secured 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 Secured Creditors may collect from such
Guarantor even if the Secured Creditors, by foreclosing on the Real
Property collateral, have destroyed any right such Guarantor may have
to collect from the Borrower. This is an unconditional and irrevocable
waiver of any rights and defenses such Guarantor may have because the
Guaranteed Obligations are secured by Real Property located in the
State of California. 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
(iii) all rights and defenses arising out of an election of
remedies by the Secured Creditors, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security
for the Guaranteed Obligations, has destroyed such Guarantor's rights
of subrogation and reimbursement against the Borrower by the operation
of Section 580d of the California Code of Civil Procedure or otherwise.
Each Guarantor 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
<PAGE> 7
EXHIBIT I
Page 7
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.
10. The Secured Creditors agree that this Guaranty may be
enforced only by the action of the Administrative Agent or the Collateral Agent
and that no other Secured Creditors shall have any right individually to seek to
enforce or to enforce this Guaranty or to realize upon the security to be
granted by the Security Documents, it being understood and agreed that such
rights and remedies may be exercised by the Administrative Agent or the
Collateral Agent or, after all the Credit Document Obligations have been paid in
full, by 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 Guaranty and the Security Documents. The Secured Creditors
further agree that this Guaranty may not be enforced against any director,
officer, employee, partner or stockholder of any Guarantor (except to the extent
such partner or stockholder is also a Guarantor hereunder).
11. In order to induce the Lenders to make Loans to, and issue
Letters of Credit for the account of, the Borrower pursuant to the Credit
Agreement, and in order to induce the Other Creditors to execute, deliver and
perform the Interest Rate Protection Agreements or Other Hedging Agreements,
each Guarantor represents, warrants and covenants that:
(a) Such Guarantor (i) is a duly organized and validly
existing corporation in good standing under the laws of the
jurisdiction of its organization, (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 conduct of its business requires such
qualification 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.
(b) Such Guarantor has the corporate power and authority to
execute, deliver and perform the terms and provisions of this Guaranty
and each other Document to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and
performance by it of this Guaranty and each such other Document. Such
Guarantor has duly executed and delivered this Guaranty and each other
Document to which it is a party, and this Guaranty and each such other
Document constitutes the legal, valid and binding obligation of such
Guarantor enforceable in accordance with its terms, except to the
extent that the enforceability hereof or 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).
(c) Neither the execution, delivery or performance by such
Guarantor of this Guaranty or any other Document to which it is a
party, nor compliance by it with the terms and provisions hereof and
thereof, will (i) contravene any provision of any
<PAGE> 8
EXHIBIT I
Page 8
applicable law, statute, rule or regulation or any applicable order,
writ, injunction or decree of any court or governmental
instrumentality, (ii) conflict with or result in any breach of any of
the terms, covenants, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien (except pursuant to the
Security Documents) upon any of the property or assets of such
Guarantor or any of its Subsidiaries pursuant to the terms of any
indenture, mortgage, deed of trust, loan agreement, credit agreement,
or any other material agreement, contract or instrument to which such
Guarantor or any of its Subsidiaries 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) violate any provision of the certificate of incorporation or
by-laws (or equivalent organizational documents) of such Guarantor or
any of its Subsidiaries.
(d) No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with (except as
have been obtained or made), or exemption by, any governmental or
public body or authority, or any subdivision thereof, is required to
authorize, or is required for, (i) the execution, delivery and
performance of this Guaranty by such Guarantor or any other Document to
which such Guarantor is a party or (ii) the legality, validity, binding
effect or enforceability of this Guaranty or any other Document to
which such Guarantor is a party.
(e) There are no actions, suits or proceedings pending or
threatened (i) with respect to this Guaranty or any other Document to
which such Guarantor is a party or (ii) with respect to such Guarantor
that could reasonably be expected to materially and adversely affect
(a) the business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of Holdings and its Subsidiaries
taken as a whole or (b) the rights or remedies of the Secured Creditors
hereunder or under the other Credit Documents to which such Guarantor
is a party or the ability of such Guarantor to perform its respective
obligations to the Secured Creditors hereunder and under the other
Credit Documents to which it is a party.
12. Each Guarantor covenants and agrees that on and after the
Effective Date and until the termination of the Total Commitment and all
Interest Rate Protection Agreements and Other Hedging Agreements, and when no
Note or Letter of Credit remains outstanding and all Guaranteed Obligations have
been paid in full, such Guarantor will comply, and will cause each of its
Subsidiaries to comply, with all of the applicable provisions, covenants and
agreements contained in Sections 8 and 9 of the Credit Agreement, and will take,
or will refrain from taking, as the case may be, all actions that are necessary
to be taken or not taken so that it is not in violation of any provision,
covenant or agreement contained in Section 8 or 9 of the Credit Agreement, and
so that no Default or Event of Default, is caused by the actions of such
Guarantor or any of its Subsidiaries.
13. The Guarantors hereby jointly and severally agree to pay
all reasonable out-of-pocket costs and expenses of each Secured Creditor in
connection with the enforcement of this Guaranty and of the Administrative Agent
in connection with any amendment, waiver or consent
<PAGE> 9
EXHIBIT I
Page 9
relating hereto (including in each case, without limitation, the reasonable fees
and disbursements of counsel employed by each Secured Creditor).
14. This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Secured Creditors
and their successors and assigns.
15. Neither this Guaranty nor any provision hereof may be
changed, waived, discharged or terminated except with the written consent of
each Guarantor directly affected thereby and with the written consent of the
Required Secured Creditors (as defined in the Security Agreement); 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 Class of Secured
Creditors (it being understood that the addition or release of any Guarantor
hereunder shall not constitute a change, waiver, discharge or termination
affecting any Guarantor other than the Guarantor so added or released). For the
purpose of this Guaranty, the term "Class" shall mean each class of Secured
Creditors, i.e., whether (x) the Lender Creditors as holders of the Credit
Document Obligations or (y) the Other Creditors as the holders of the Other
Obligations. For the purpose of this Guaranty, the term "Requisite Creditors" of
any Class shall mean (x) with respect to the Credit Document Obligations, the
Required Lenders 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 or Other Hedging Agreements.
16. Each Guarantor acknowledges that an executed (or
conformed) copy of each of the Credit Documents and Interest Rate Protection
Agreements or Other Hedging Agreements has been made available to its principal
executive officers and such officers are familiar with the contents thereof.
17. In addition to any rights now or hereafter granted under
applicable law (including, without limitation, Section 151 of the New York
Debtor and Secured Creditor Law) and not by way of limitation of any such
rights, upon the occurrence and during the continuance of an Event of Default
(such term to mean and include any "Event of Default" as defined in the Credit
Agreement or any payment default under any Interest Rate Protection Agreement or
Other Hedging Agreement continuing after any applicable grace period), each
Secured Creditor is hereby authorized, at any time or from time to time, without
notice to any Guarantor or to any other Person, any such notice being 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 Secured
Creditor to or for the credit or the account of such Guarantor, against and on
account of the obligations and liabilities of such Guarantor to such Secured
Creditor under this Guaranty, irrespective of whether or not such Secured
Creditor shall have made any demand hereunder and although said obligations,
liabilities, deposits or claims, or any of them, shall be contingent or
unmatured. Notwithstanding anything to the contrary contained in this Section
17, no Secured Creditor shall exercise any such right of set-off without the
prior consent of the Administrative Agent or the Required Secured Creditors so
long as the Guaranteed Obligations shall be secured
<PAGE> 10
EXHIBIT I
Page 10
by any Real Property located in the State of California, it being understood and
agreed, however, that this sentence is for the sole benefit of the Secured
Creditors and may be amended, modified or waived in any respect by the Required
Secured Creditors without the requirements of prior notice to or consent by any
Credit Party and does not constitute a waiver of any rights against any Credit
party or against any Collateral.
18. All notices, requests, demands or other communications
pursuant hereto shall be deemed to have been duly given or made when delivered
to the Person to which such notice, request, demand or other communication is
required or permitted to be given or made under this Guaranty, addressed to such
party at (i) in the case of any Lender Creditor, as provided in the Credit
Agreement, (ii) in the case of any Guarantor, at the address set forth opposite
such Guarantor's signature below and (iii) in the case of any Other Creditor, at
such address as such Other Creditor shall have specified in writing to the
Guarantors; or in any case at such other address as any of the Persons listed
above may hereafter notify the others in writing.
19. If claim is ever made upon any Secured 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 effected by such
payee with any such claimant (including the Borrower) then and in such event
each Guarantor agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon such Guarantor, notwithstanding any revocation
hereof or other instrument evidencing any liability of the Borrower, and such
Guarantor 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.
20. (a) THIS GUARANTY SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. Any legal action or
proceeding with respect to this Guaranty or any other Credit Document to which
any Guarantor is a party may be brought in the courts of the State of New York
or of the United States for the Southern District of New York, and, by execution
and delivery of this Guaranty, each Guarantor hereby irrevocably accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. Each Guarantor 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 Guarantor agrees to designate a new designee, appointee and
agent in New York City on the terms and for purposes of this provision
satisfactory to the Administrative Agent. Each Guarantor 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 each Guarantor at the address set forth as
<PAGE> 11
EXHIBIT I
PAge 11
described in Section 18 above, such service to become effective thirty (30) days
after such mailing. Each Guarantor hereby irrevocably waives any objection to
such service of process and further irrevocably waives and agrees not to plead
or claim in any action or proceeding commenced hereunder or under any other
Credit Documents to which such Guarantor is a party that service of process was
in any way invalid or ineffective. Nothing herein shall affect the right of the
Administrative Agent, any Creditor 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 each Guarantor in any other jurisdiction.
(b) Each Guarantor 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
Guaranty or any other Credit Document to which it is a party 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.
Each Guarantor further waives any right it may have to trial by jury in any
court or jurisdiction, including, without limitation, the jurisdictions and
courts referred to in clause (a) above.
21. In the event that all of the capital stock of one or more
Guarantors is sold or otherwise disposed of or liquidated in compliance with the
requirements of Section 9.02 of the Credit Agreement (or such sale or other
disposition has been approved in writing by the Required Secured Creditors) (or
all Lenders if required by Section 13.12 of the Credit Agreement) and the
proceeds of such sale, disposition or liquidation are applied in accordance with
the provisions of Section 4.02 of the Credit Agreement, to the extent
applicable, such Guarantor shall upon consummation of such sale or other
disposition (except to the extent that such sale or disposition is to the
Borrower or another Subsidiary thereof) be released from this Guaranty
automatically and without further action and this Guaranty shall, as to each
such Guarantor or Guarantors, terminate, and have no further force or effect (it
being understood and agreed that the sale of one or more Persons that own,
directly or indirectly, all of the capital stock of any Guarantor shall be
deemed to be a sale of such Guarantor for the purposes of this Section 21).
22. At any time a payment in respect of the Guaranteed
Obligations is made under this Guaranty, the right of contribution of each
Guarantor against each other Guarantor shall be determined as provided in the
immediately following sentence, with the right of contribution of each Guarantor
to be revised and restated as of each date on which a payment (a "Relevant
Payment") is made on the Guaranteed Obligations under this Guaranty. At any time
that a Relevant Payment is made by a Guarantor that results in the aggregate
payments made by such Guarantor in respect of the Guaranteed Obligations to and
including the date of the Relevant Payment exceeding such Guarantor's
Contribution Percentage (as defined below) of the aggregate payments made by all
Guarantors in respect of the Guaranteed Obligations to and including the date of
the Relevant Payment (such excess, the "Aggregate Excess Amount"), each such
Guarantor shall have a right of contribution against each other Guarantor who
has made payments in respect of the Guaranteed Obligations to and including the
date of the Relevant Payment in an aggregate amount less than such other
Guarantor's Contribution Percentage of the
<PAGE> 12
EXHIBIT I
Page 12
aggregate payments made to and including the date of the Relevant Payment by all
Guarantors in respect of the Guaranteed Obligations (the aggregate amount of
such deficit, the "Aggregate Deficit Amount") in an amount equal to (x) a
fraction the numerator of which is the Aggregate Excess Amount of such Guarantor
and the denominator of which is the Aggregate Excess Amount of all Guarantors
multiplied by (y) the Aggregate Deficit Amount of such other Guarantor. A
Guarantor's right of contribution pursuant to the preceding sentences shall
arise at the time of each computation, subject to adjustment to the time of any
subsequent computation; provided, that no Guarantor may take any action to
enforce such right until the Guaranteed Obligations have been irrevocably paid
in full in cash, it being expressly recognized and agreed by all parties hereto
that any Guarantor's right of contribution arising pursuant to this Section 22
against any other Guarantor shall be expressly junior and subordinate to such
other Guarantor's obligations and liabilities in respect of the Guaranteed
Obligations and any other obligations owing under this Guaranty. As used in this
Section 22: (i) each Guarantor's "Contribution Percentage" shall mean the
percentage obtained by dividing (x) the Adjusted Net Worth (as defined below) of
such Guarantor by (y) the aggregate Adjusted Net Worth of all Guarantors; (ii)
the "Adjusted Net Worth" of each Guarantor shall mean the greater of (x) the Net
Worth (as defined below) of such Guarantor and (y) zero; and (iii) the "Net
Worth" of each Guarantor shall mean the amount by which the fair salable value
of such Guarantor's assets on the date of any Relevant Payment exceeds its
existing debts and other liabilities (including contingent liabilities, but
without giving effect to any Guaranteed Obligations arising under this Guaranty)
on such date. All parties hereto recognize and agree that, except for any right
of contribution arising pursuant to this Section 22, each Guarantor who makes
any payment in respect of the Guaranteed Obligations shall have no right of
contribution or subrogation against any other Guarantor in respect of such
payment until all of the Guaranteed Obligations have been irrevocably paid in
full in cash. Each of the Guarantors recognizes and acknowledges that the rights
to contribution arising hereunder shall constitute an asset in favor of the
party entitled to such contribution. In this connection, each Guarantor has the
right to waive its contribution right against any Guarantor to the extent that
after giving effect to such waiver such Guarantor would remain solvent, in the
determination of the Required Lenders.
23. Each Guarantor and each Secured Creditor (by its
acceptance of the benefits of this Guaranty) hereby confirms that it is its
intention that this Guaranty not constitute fraudulent transfer or conveyance
for purposes of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act or
any similar Federal or state law. To effectuate the foregoing intention, each
Guarantor and each Secured Creditor (by its acceptance of the benefits of this
Guaranty) hereby irrevocably agrees that the Guaranteed Obligations guaranteed
by such Guarantor shall be limited to such amount as will, after giving effect
to such maximum amount and all other (contingent or otherwise) liabilities of
such Guarantor that are relevant under such laws, and after giving effect to any
rights to contribution pursuant to any agreement providing for an equitable
contribution among such Guarantor and the other Guarantors, result in the
Guaranteed Obligations of such Guarantor in respect of such maximum amount not
constituting a fraudulent transfer or conveyance.
<PAGE> 13
EXHIBIT I
Page 13
24. This Guaranty 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 Guarantors and the
Administrative Agent.
25. All payments made by any Guarantor hereunder will be made
without setoff, counterclaim or other defense and on the same basis as payments
are made by the Borrower under Sections 4.03 and 4.04 of the Credit Agreement.
26. It is understood and agreed that any Subsidiary of the
Borrower that is required to execute a counterpart of this Guaranty after the
date hereof pursuant to the Credit Agreement shall automatically become a
Guarantor hereunder by executing a counterpart hereof and delivering the same to
the Administrative Agent.
<PAGE> 14
EXHIBIT I
Page 14
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to
be executed and delivered as of the date first above written.
Address:
[NAMES OF SUBSIDIARY GUARANTORS],
as a Guarantor
By
Title:
Accepted and Agreed to:
BANKERS TRUST COMPANY,
as Administrative Agent
By
Title:
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES
1. UNIVERSAL COMPRESSION, INC. (TEXAS CORPORATION)
2. UNIVERSAL COMPRESSION INTERNATIONAL, INC. (DELAWARE CORPORATION)
3. UNIVERSAL COMPRESSION INTERNATIONAL, LTD. (CAYMAN CORPORATION)
4. UNIVERSAL COMPRESSION FINANCE COMPANY, LTD. (CAYMAN CORPORATION)
5. UNIVERSAL COMPRESSION OF COLOMBIA, LTD. (CAYMAN CORPORATION)
6. UNIWHALE, LTD. (CAYMAN CORPORATION) (75%)
7. UNIVERSAL COMPRESSION DE VENEZUELA UNICOM, C.A. (VENEZUELA CORPORATION)
8. UNIVERSAL COMPRESSION PTY., LTD. (AUSTRALIA CORPORATION)
9. UNIVERSAL COMPRESSION DE MEXICO, S.A. DE C.V. (MEXICO CORPORATION)
10. SPECTRUM ROTARY COMPRESSION, INC.
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to the Registration Statement of
Universal Compression Holdings, Inc., on Form S-1 of our report on the financial
statements of Universal Compression Holdings, Inc. and subsidiary for the years
ended March 31, 2000 and 1999 and for the period from December 12, 1997
(inception) through March 31, 1998 dated April 28, 2000 and our report on the
financial statements of Tidewater Compression Service, Inc. for the period from
April 1, 1997 through February 20, 1998 dated June 1, 1998, appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in
such Prospectus.
DELOITTE & TOUCHE LLP
Houston, Texas
May 22, 2000
