<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 26, 1998
TEAM, INC.
(Exact name of registrant as specified in charter)
Texas 0-9950 74-1765729
- ---------------------------- ---------------- -------------------
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
200 Hermann Drive, Alvin, Texas 77056
- ---------------------------------------- ---------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (281) 331-6154
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) On August 28, 1998, Team, Inc. ("Team") acquired all of the outstanding
capital stock of Climax Portable Machine Tools, Inc., an Oregon corporation
("Climax"). Pursuant to the terms of a Stock Purchase Agreement among Team
and Climax's Majority Shareholders (as defined herein), Team acquired
20,992 shares of Climax's common stock, representing 86.62% of the
outstanding capital stock of Climax (the "Climax Agreement"). The "Majority
Shareholders" consist of (i) R. Leroy and Paula Benham, (ii) the Climax
Portable Machine Tools, Inc. Employee Stock Ownership Plan Trust, (iii)
Phillip R. Edin, Trustee of the Phillip Edin Living Trust and (iv) Terry W.
Weigel. Team acquired the remaining 3,243 shares of the outstanding capital
stock of Climax pursuant to a series of Stock Purchase Agreements among
Team and Climax's minority shareholders (the "Minority Agreements").
Pursuant to the Climax Agreement and the Minority Agreements, Team acquired
all of the outstanding capital stock of Climax (the "Climax Shares") in
exchange for cash in the amount of $6,400,000 and 200,000 newly-issued
shares of Team's common stock, $0.30 par value per share (the "Common
Stock"). Effective August 28, 1998, Team also entered into employment
agreements with three of the Majority Shareholders, pursuant to which such
persons were granted options to purchase up to an aggregate of 50,000
shares of Common Stock at an exercise price of $4.125 per share. The amount
of consideration paid by Team to the former Climax shareholders for the
acquisition of the Climax Shares was determined as a result of arms-length
negotiations and agreement between unrelated parties.
The description contained herein of Team's acquisition of the Climax Shares
is qualified in its entirety by reference to the Climax Agreement (and the
amendments thereto), copies of which are attached hereto as Exhibits 2.1
through 2.3, the Minority Agreements, a copy of the form of agreement
is attached hereto as Exhibit 2.4, and the Press Release dated September 1,
1998 attached hereto as Exhibit 99.
In order to finance the acquisition of the Climax Shares, Team closed a
credit facility with NationsBank, N.A of Houston on August 26, 1998 in the
amount of $24,000,000. The new facility is comprised of (i) a $12,500,000
revolving loan, (ii) $9,500,000 in term loans for business acquisitions and
(iii) a $2,000,000 mortgage loan to refinance existing real estate
indebtedness. Interest rates under the new facility are adjustable
depending upon Team's cash flow and are generally more favorable than
the previously existing $10,000,000 revolving credit facility, which Team
terminated.
The description contained herein of Team's credit facility is qualified in
its entirety by reference to the Credit Agreement, a copy of which is
attached hereto as Exhibit 2.5.
(b) The assets acquired were used by Climax to design and manufacture portable,
metal cutting machine tools, and Team intends to continue such use.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
As of the date of filing of this Current Report on Form 8-K, it is
impracticable to provide the financial statements required by this Item
7(a) with respect to the acquisition of Climax. In accordance with Item
7(a)(4) of Form 8-K, such financial statements shall be filed by amendment
to this Form 8-K no later than 60 days after September 10, 1998.
2
<PAGE> 3
(b) Pro Forma Financial Information
As of the date of filing of this Current Report on Form 8-K, it is
impracticable to provide the financial information by this Item 7(b). In
accordance with Item 7(b) of Form 8-K, such financial information shall be
filed by amendment to this Form 8-K no later than 60 days after September
10, 1998.
(c) Exhibits
2.1 Stock Purchase Agreement dated as of July 3, 1998, among Team and R.
Leroy and Paula Benham, the Climax Portable Machine Tools, Inc.
Employee Stock Ownership Plan Trust, Phillip R. Edin, Trustee of the
Phillip Edin Living Trust and Terry W. Weigel. (Team hereby agrees to
furnish supplementally to the Securities and Exchange Commission,
upon request, a copy of any omitted exhibit or schedule to the
attached Exhibit, all of which omitted exhibits or schedules are
listed on page vi of the attached Exhibit.)
2.2 First Amendment to Stock Purchase Agreement dated as of July 29,
1998, among Team and R. Leroy and Paula Benham, the Climax Portable
Machine Tools, Inc. Employee Stock Ownership Plan Trust, Phillip R.
Edin, Trustee of the Phillip Edin Living Trust and Terry W. Weigel.
2.3 Second Amendment to Stock Purchase Agreement dated as of August 28,
1998, among Team and R. Leroy and Paula Benham, the Climax Portable
Machine Tools, Inc. Employee Stock Ownership Plan Trust, Phillip R.
Edin, Trustee of the Phillip Edin Living Trust and Terry W. Weigel.
2.4 Form of Stock Purchase Agreement among Team and each of the following
minority shareholders: Paul and Gladys Strait, Timothy Benham,
Elizabeth Allen, Louise Sperling, Amy Sperling, Melissa Sperling,
Sarah Sperling, Emily Sperling, Jodi Strait, and Raelyn Riedlinger.
2.5 Credit Agreement dated August 28, 1998 among Team, NationsBank, N.A.
and various Financial Institutions named in the Credit Agreement.
(Team hereby agrees to furnish supplementally to the Securities and
Exchange Commission, upon request, a copy of any omitted exhibit or
schedule to the attached Exhibit, all of which omitted exhibits or
schedules are listed on page iv of the attached Exhibit.)
99 Press Release Dated September 1, 1998.
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned herein to duly authorized.
Dated: September 10, 1998
TEAM, INC.
/s/ WILLIAM A. RYAN
------------------------------------
By: William A. Ryan
Chairman of the Board
and Chief Executive Officer
/s/ TED W. OWEN
------------------------------------
By: Ted W. Owen
Vice President,
Chief Financial Officer
and Secretary
4
<PAGE> 5
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.1 Stock Purchase Agreement dated as of July 3, 1998, among Team and R.
Leroy and Paula Benham, the Climax Portable Machine Tools, Inc.
Employee Stock Ownership Plan Trust, Phillip R. Edin, Trustee of the
Phillip Edin Living Trust and Terry W. Weigel. (Team hereby agrees to
furnish supplementally to the Securities and Exchange Commission,
upon request, a copy of any omitted exhibit or schedule to the
attached Exhibit, all of which omitted exhibits or schedules are
listed on page vi of the attached Exhibit.)
2.2 First Amendment to Stock Purchase Agreement dated as of July 29,
1998, among Team and R. Leroy and Paula Benham, the Climax Portable
Machine Tools, Inc. Employee Stock Ownership Plan Trust, Phillip R.
Edin, Trustee of the Phillip Edin Living Trust and Terry W. Weigel.
2.3 Second Amendment to Stock Purchase Agreement dated as of August 28,
1998, among Team and R. Leroy and Paula Benham, the Climax Portable
Machine Tools, Inc. Employee Stock Ownership Plan Trust, Phillip R.
Edin, Trustee of the Phillip Edin Living Trust and Terry W. Weigel.
2.4 Form of Stock Purchase Agreement among Team and each of the following
minority shareholders: Paul and Gladys Strait, Timothy Benham,
Elizabeth Allen, Louise Sperling, Amy Sperling, Melissa Sperling,
Sarah Sperling, Emily Sperling, Jodi Strait, and Raelyn Riedlinger.
2.5 Credit Agreement dated August 28, 1998 among Team, NationsBank, N.A.
and various Financial Institutions named in the Credit Agreement.
(Team hereby agrees to furnish supplementally to the Securities and
Exchange Commission, upon request, a copy of any omitted exhibit or
schedule to the attached Exhibit, all of which omitted exhibits or
schedules are listed on page iv of the attached Exhibit.)
99 Press Release Dated September 1, 1998.
</TABLE>
<PAGE> 1
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
AMONG
TEAM, INC.
AND
R. LEROY AND PAULA BENHAM,
THE CLIMAX PORTABLE MACHINE TOOLS, INC. EMPLOYEE
STOCK OWNERSHIP PLAN TRUST,
PHILLIP R. EDIN, TRUSTEE OF THE
PHILLIP EDIN LIVING TRUST,
AND TERRY W. WEIGEL
DATED AS OF
JULY 3, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Definitions..............................................................................................1
1.1. "Accredited Investor" .................................................................1
1.2. "Adverse Consequences" ................................................................1
1.3. "Affiliate" ...........................................................................2
1.4. "Affiliated Group" ....................................................................2
1.5. "Alsana"...............................................................................2
1.6. "Alsana Bonus".........................................................................2
1.7. "Alsana Documents".....................................................................2
1.8. "Alsana Litigation" ...................................................................2
1.9. "Applicable Rate" .....................................................................2
1.10. "Audit" ...............................................................................2
1.11. "Audit Report" ........................................................................2
1.12. "Audited Financial Statements" ........................................................2
1.13. "Basis" ...............................................................................3
1.14. "Cash" ................................................................................3
1.15. "Climax" ..............................................................................3
1.16. "Climax Auditor" ......................................................................3
1.17. "Climax Share" ........................................................................3
1.18. "Closing" .............................................................................3
1.19. "Closing Date" ........................................................................3
1.20. "Code" ................................................................................3
1.21. "Confidential Information" ............................................................3
1.22. "Controlled Group of Corporations" ....................................................3
1.23. "Deferred Intercompany Transaction" ...................................................3
1.24. "Delivery Date" .......................................................................3
1.25. "Disclosure Schedule" .................................................................3
1.26. "Employee Benefit Plan" ...............................................................3
1.27. "Employee Pension Benefit Plan" .......................................................3
1.28. "Employee Welfare Benefit Plan" .......................................................4
1.29. "Environmental, Health, and Safety Laws" ..............................................4
1.30. "ERISA" ...............................................................................4
1.31. "ESOP Contribution"....................................................................4
1.35. "Excess Loss Account" .................................................................4
1.36. "Extremely Hazardous Substance" .......................................................4
1.37. "Fiduciary" ...........................................................................4
1.38. "Financial Statement" .................................................................4
1.39. "GAAP" ................................................................................4
1.40. "Indemnified Party" ...................................................................5
1.41. "Indemnifying Party" ..................................................................5
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS (Cont'd.)
<TABLE>
<S> <C>
1.42. "Intellectual Property" ...............................................................5
1.43. "June 30, 1998 Audited Balance Sheet" .................................................5
1.44. "Knowledge" ...........................................................................5
1.45. "Liability" ...........................................................................5
1.46. "Most Recent Balance Sheet" ...........................................................5
1.47. "Most Recent Financial Statements" ....................................................5
1.48. "Most Recent Fiscal Month End" ........................................................5
1.49. "Most Recent Fiscal Year End" .........................................................5
1.50. "Multiemployer Plan" ..................................................................6
1.51. "Net Worth Deficit" ...................................................................6
1.52. "Net Worth Surplus" ...................................................................6
1.53. "Ordinary Course of Business" .........................................................6
1.54. "Party" ...............................................................................6
1.55. "PBGC" ................................................................................6
1.56. "Person" ..............................................................................6
1.57. "Problem Disclosures" .................................................................6
1.58. "Prohibited Transaction" ..............................................................6
1.59. "Purchase Price" ......................................................................6
1.60. "Reportable Event" ....................................................................6
1.61. "SEC" .................................................................................6
1.62. "Securities Act" ......................................................................6
1.63. "Securities Exchange Act" .............................................................6
1.64. "Security Interest" ...................................................................6
1.65. "Seller" ..............................................................................7
1.66. "Subsidiary" ..........................................................................7
1.67. "Tax" .................................................................................7
1.68. "Tax Return" ..........................................................................7
1.69. "Team's Auditor" ......................................................................7
1.70. "Team Stock" ..........................................................................7
1.71. "Third Party Claim" ...................................................................7
2. Purchase and Sale of Climax Shares.......................................................................7
2.1. Basic Transaction..............................................................................7
2.2. Purchase Price.................................................................................7
2.2.1. Purchase Price for the Benhams' Climax Shares..........................................8
2.2.2. Purchase Price for the ESOP's Climax Shares............................................8
2.2.3. Purchase Price for the Edin Trust's Climax Shares......................................9
2.2.4. Purchase Price for Weigel's Climax Shares..............................................9
2.3. The Closing...................................................................................10
2.4. Deliveries at the Closing.....................................................................10
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS (Cont'd.)
<TABLE>
<S> <C>
3. Representations and Warranties Concerning the Transaction...............................................10
3.1. Representations and Warranties of the Sellers.................................................10
3.1.1. Organization of the ESOP..............................................................10
3.1.2. Organization of the Edin Trust........................................................10
3.1.3. Authorization of Transaction..........................................................10
3.1.4. Noncontravention......................................................................11
3.1.5. Brokers' Fees.........................................................................11
3.1.6. Investment............................................................................11
3.1.7. Climax Shares.........................................................................12
3.2. Representations and Warranties of Team. .....................................................12
3.2.1. Organization of Team..................................................................12
3.2.2. Authorization of Transaction..........................................................12
3.2.3. Noncontravention......................................................................12
3.2.4. Brokers' Fees.........................................................................13
3.2.5. Investment............................................................................13
4. Preparation and Delivery of Disclosure Schedule--Team's Right to Review.................................13
5. Representations and Warranties Concerning Climax and Its Subsidiaries...................................14
5.1. Organization, Qualification, and Corporate Power..............................................14
5.2. Capitalization................................................................................14
5.3. Noncontravention..............................................................................15
5.4. Brokers' Fees.................................................................................15
5.5. Title to Assets...............................................................................15
5.6. Subsidiaries..................................................................................15
5.7. Financial Statements..........................................................................16
5.8. Events Subsequent to the date of the Most Recent Financial Statements.........................16
5.9. Undisclosed Liabilities.......................................................................19
5.10. Legal Compliance..............................................................................19
5.11. Tax Matters...................................................................................19
5.12. Real Property.................................................................................21
5.13. Intellectual Property.........................................................................24
5.14. Tangible Assets...............................................................................27
5.15. Inventory.....................................................................................27
5.16. Contracts.....................................................................................27
5.17. Notes and Accounts Receivable.................................................................29
5.18. Powers of Attorney............................................................................29
5.19. Insurance.....................................................................................29
5.20. Litigation....................................................................................30
5.21. Product Warranty..............................................................................30
5.22. Product Liability.............................................................................30
5.23. Employees.....................................................................................30
5.24. Employee Benefits.............................................................................31
</TABLE>
iii
<PAGE> 5
TABLE OF CONTENTS (Cont'd.)
<TABLE>
<S> <C>
5.25. Guaranties....................................................................................33
5.26. Environment, Health, and Safety...............................................................33
5.27. Certain Business Relationships with Climax and Its Subsidiaries...............................33
5.28. Disclosure....................................................................................34
6. Pre-Closing Covenants...................................................................................34
6.1. General.......................................................................................34
6.2. Notices and Consents..........................................................................34
6.3. Operation of Business.........................................................................34
6.4. Preservation of Business......................................................................34
6.5. Full Access...................................................................................34
6.6. Notice of Developments........................................................................35
6.7. Exclusivity...................................................................................35
6.8. Audit.........................................................................................35
6.10. Alsana Bonus..................................................................................36
7. Post-Closing Covenants..................................................................................36
7.1. General.......................................................................................36
7.2. Litigation Support............................................................................36
7.3. Transition....................................................................................37
7.4. Confidentiality...............................................................................37
7.5. Team Stock....................................................................................37
7.6. [Intentionally Deleted.]......................................................................38
7.7. June 30, 1998 Audited Balance Sheet...........................................................38
8. Conditions to Obligation to Close.......................................................................40
8.1. Conditions to Obligation of Team..............................................................40
8.2. Conditions to Obligation of the Sellers.......................................................41
9. Remedies for Breaches of This Agreement.................................................................43
9.1. Survival of Representations and Warranties....................................................43
9.2. Indemnification Provisions for Benefit of Team................................................43
9.3. Indemnification Provisions for Benefit of the Sellers.........................................45
9.4. Matters Involving Third Parties...............................................................45
9.5. Defense of Third Party Claims.................................................................45
9.6. Indemnification Payments Deemed to be Adjustments to Purchase Price...........................46
9.7. Indemnification for Certain Alsana Litigation.................................................46
9.8. Limit on Liability............................................................................46
9.9. Other Indemnification Provisions..............................................................47
9.10. Assignment of Rights Under Alsana Documents...................................................47
</TABLE>
iv
<PAGE> 6
TABLE OF CONTENTS (Cont'd.)
<TABLE>
<S> <C>
10. Termination.............................................................................................47
10.1. Termination of Agreement......................................................................47
10.2. Effect of Termination.........................................................................48
11. Miscellaneous...........................................................................................48
11.1. Press Releases and Public Announcements.......................................................48
11.2. No Third-Party Beneficiaries..................................................................49
11.3. Entire Agreement..............................................................................49
11.4. Succession and Assignment.....................................................................49
11.5. Counterparts..................................................................................49
11.6. Headings......................................................................................49
11.7. Notices.......................................................................................49
11.8. Governing Law.................................................................................51
11.9. Amendments and Waivers........................................................................51
11.10. Severability..................................................................................51
11.11. Expenses......................................................................................51
11.12. Construction..................................................................................52
11.13. Incorporation of Exhibits and Schedules.......................................................52
11.14. Specific Performance..........................................................................52
11.15. Arbitration...................................................................................52
11.15.1. Special Rules...................................................................53
11.15.2. Commencement....................................................................53
11.15.3. Three Arbitrators...............................................................53
11.15.4. Appointment of Chairman.........................................................53
11.15.5. Qualifications of Chairman......................................................53
11.15.6. Unavailability of Blue Ribbon Panelists.........................................53
11.15.7. Impartiality....................................................................53
11.15.8. Written Opinion.................................................................54
11.15.9. Framing of Issues...............................................................54
11.15.10. Discovery.......................................................................54
11.15.11. Locale..........................................................................54
11.15.12. Reservation of Rights...........................................................54
</TABLE>
v
<PAGE> 7
TABLE OF CONTENTS (Cont'd.)
LIST OF ANNEXES, SCHEDULES AND EXHIBITS:
ANNEX I - Exceptions to Representations and Warranties of the Sellers contained
in Section 3.1.
ANNEX II - Exceptions to Representations and Warranties of the Team contained in
Section 3.2.
DISCLOSURE SCHEDULE - Exceptions to Representations and Warranties of the
Sellers concerning Climax and the Subsidiaries contained in Section 5.
EXHIBIT A - Shareholder List
EXHIBIT B - Financial Statements
EXHIBIT C-1 - Employment Agreement of R. LeRoy Benham
EXHIBIT C-2 - Employment Agreement of Phillip R. Edin
EXHIBIT C-3 - Employment Agreement of Terry W. Weigel
EXHIBIT D-1 - Opinion of Counsel to the Sellers
EXHIBIT D-2 - Opinion of Counsel to the ESOP
EXHIBIT E - Opinion of Counsel to Team
EXHIBIT F - Escrow Agreement
EXHIBIT G - Adjustments to the Most Recent Balance Sheet
vi
<PAGE> 8
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT dated as of July 3, 1998 (the
"Agreement"), is entered into by and among TEAM, INC., a Texas corporation
("Team"), R. LEROY AND PAULA BENHAM, both of whom are individual residents of
the State of Oregon (the "Benhams"), THE CLIMAX PORTABLE MACHINE TOOLS, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST (the "ESOP"), which is a qualified plan
under Section 401(a) of the Code (defined below) and an exempt trust under
Section 501(a) of the Code, PHILLIP R. EDIN, TRUSTEE OF THE PHILLIP EDIN LIVING
TRUST u/t/a DATED NOVEMBER 25, 1996, a trust created under the laws of the State
of Oregon (the "Edin Trust"), and TERRY W. WEIGEL, an individual resident of the
State of Oregon ("Weigel"). The Benhams, the ESOP, the Edin Trust and Weigel are
referred to collectively herein as the "Sellers" and individually as "Seller."
Team and the Sellers are referred to collectively herein as the "Parties."
INTRODUCTION
This Agreement contemplates a transaction in which Team will purchase
from the Sellers, and the Sellers will sell to Team, all of the outstanding
capital stock that the Sellers own of Climax in return for the consideration
provided below.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
AGREEMENT
1. Definitions.
1.1. "Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
1.2. "Adverse Consequences" means the dollar amount of any and all
losses suffered by and/or to be suffered by the Party who is entitled to be
indemnified pursuant to Section 9 as the result of a breach of a representation,
warranty and/or covenant by the other Party, including all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues, penalties,
fines, costs, reasonable amounts paid in settlement, Liabilities, obligations,
Taxes, liens, losses, expenses, and fees, including court costs and reasonable
attorneys' fees and expenses, including expenses of defending and/or pursuing a
Third Party Claim, and which relate to facts or circumstances arising on or
prior to the Closing Date. The Parties shall take into account Tax benefits,
insurance proceeds (reasonably certain of receipt and utility in each case), and
the time cost of money (using the
<PAGE> 9
Applicable Rate as of the date the claim is paid as the discount rate) in
determining Adverse Consequences.
1.3. "Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
1.4. "Affiliated Group" means any affiliated group within the
meaning of Code Sec. 1504 or any similar group defined under a similar provision
of state, local or foreign law.
1.5. "Alsana" means Alsana, Inc. d/b/a Otto Tool Company, a
California corporation.
1.6. "Alsana Bonus" has the meaning set forth in Section 6.10 below.
1.7. "Alsana Documents" means the following documents: that certain
Stock Purchase Agreement, by and among Climax, Alan S. Avis, Jr., Brian E.
Rodman, Bennie G. Crisp, and Patricia L. Avis, dated September 3, 1997; that
certain Buy-Sell Agreement, by and among the same parties, also dated September
3, 1997; that certain Settlement Agreement, Release and Termination of Buy-Sell
Agreement, by and among the same parties, dated May 21, 1998; that certain
Affidavit of William Bianca, dated May 20, 1998; that certain Release by Kinetic
Systems, Inc., a California corporation, dated May 20, 1998; that certain
Agreement and Bill of Sale Regarding Gardner-Denver Air Compressor, by Alsana
and Bar Fitting & Valve Corporation, dated May 21, 1998; that certain $404,556
Promissory Note, by Climax in favor of Alan S. Avis, Jr. and Patricia L. Avis,
as community property, dated May 21, 1998; that certain $35,000 Promissory Note,
by Climax in favor of Alan S. Avis, Jr., dated May 21, 1998; that certain
$98,972.74 Promissory Note by Alsana in favor of Alan S. Avis, Jr., dated
September 5, 1997; and that certain $249,278.03 Promissory Note by Alsana in
favor of Alan S. Avis, Jr. and Patricia L. Avis as community property, dated
September 3, 1997.
1.8. "Alsana Litigation" has the meaning set forth in Section 9.8
below.
1.9. "Applicable Rate" means the corporate prime rate of interest
published from time to time in the national edition of The Wall Street Journal.
1.10. "Audit" has the meaning set forth in Section 6.10 below.
1.11. "Audit Report" has the meaning set forth in Section 6.10 below.
1.12. "Audited Financial Statements" has the meaning set forth in
Section 6.10 below.
2
<PAGE> 10
1.13. "Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms or could form the
basis for any specified consequence.
1.14. "Cash" means payment by bank cashier's check, by wire transfer
or delivery of other immediately available funds.
1.15. "Climax" means Climax Portable Machine Tools, Inc., an Oregon
corporation.
1.16. "Climax Auditor" has the meaning set forth in Section 6.8
below.
1.17. "Climax Share" means any share of the common stock, without
par value, of Climax.
1.18. "Closing" has the meaning set forth in Section 2.3 below.
1.19. "Closing Date" has the meaning set forth in Section 2.3 below.
1.20. "Code" means the Internal Revenue Code of 1986, as amended.
1.21. "Confidential Information" means any information concerning the
businesses and affairs of Climax and its Subsidiaries that is not already
generally available to the public.
1.22. "Controlled Group of Corporations" has the meaning set forth in
Code Sec. 1563.
1.23. "Deferred Intercompany Transaction" has the meaning set forth
in Treas. Reg. Section 1.1502-13.
1.24. "Delivery Date" has the meaning set forth in Section 4 below.
1.25. "Disclosure Schedule" has the meaning set forth in Section 4
below.
1.26. "Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan.
1.27. "Employee Pension Benefit Plan" has the meaning set forth in
ERISA Sec. 3(2).
3
<PAGE> 11
1.28. "Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Sec. 3(1).
1.29. "Environmental, Health, and Safety Laws" means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act of 1976, and the Occupational Safety
and Health Act of 1970, each as amended, together with all other laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof) concerning pollution or protection of the
environment, public health and safety, or employee health and safety, including
laws relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
1.30. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.31. "ESOP Contribution" has the meaning set forth in Section 6.9
below.
1.32. "Escrow Agent" means West Coast Trust Co., Inc., d/b/a West
Coast Trust.
1.33. "Escrow Agreement" means that certain Escrow Agreement in
substantially the form of Exhibit F hereto.
1.34. "Escrowed Property" has the meaning set forth in Section 2.4
below.
1.35. "Excess Loss Account" has the meaning set forth in Treas. Reg.
Section 1.1502-19.
1.36. "Extremely Hazardous Substance" has the meaning set forth in
Sec. 302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
1.37. "Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
1.38. "Financial Statement" has the meaning set forth in Section 5.7
below.
1.39. "GAAP" means United States generally accepted accounting
principles as in effect from time to time, consistently applied.
4
<PAGE> 12
1.40. "Indemnified Party" has the meaning set forth in Section 9.4
below.
1.41. "Indemnifying Party" has the meaning set forth in Section 9.4
below.
1.42. "Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
1.43. "June 30, 1998 Audited Balance Sheet" has the meaning set forth
in Section 7.7 below.
1.44. "Knowledge" means, with respect to the Sellers, the actual
knowledge of any of R. LeRoy Benham, Phillip R. Edin, and Terry W. Weigel and,
with respect to Team, the actual knowledge of any of William A. Ryan, Kenneth M.
Tholan, and Ted Owen.
1.45. "Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
1.46. "Most Recent Balance Sheet" means the balance sheet contained
within the Most Recent Financial Statements.
1.47. "Most Recent Financial Statements" has the meaning set forth in
Section 5.7 below.
1.48. "Most Recent Fiscal Month End" has the meaning set forth in
Section 5.7 below.
1.49. "Most Recent Fiscal Year End" has the meaning set forth in
Section 5.7 below.
5
<PAGE> 13
1.50. "Multiemployer Plan" has the meaning set forth in ERISA Sec.
3(37).
1.51. "Net Worth Deficit" has the meaning set forth in Section 7.7
below.
1.52. "Net Worth Surplus" has the meaning set forth in Section 7.7
below.
1.53. "Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
1.54. "Party" has the meaning set forth in the preface above.
1.55. "PBGC" means the Pension Benefit Guaranty Corporation.
1.56. "Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
1.57. "Problem Disclosures" has the meaning set forth in Section 4
below.
1.58. "Prohibited Transaction" has the meaning set forth in ERISA
Sec. 406 and Code Sec. 4975.
1.59. "Purchase Price" has the meaning set forth in Section 2.2
below.
1.60. "Reportable Event" has the meaning set forth in ERISA Sec.
4043.
1.61. "SEC" means the United States Securities and Exchange
Commission.
1.62. "Securities Act" means the Securities Act of 1933, as amended.
1.63. "Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
1.64. "Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable or
for taxes that taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.
6
<PAGE> 14
1.65. "Seller" has the meaning set forth in the preface above.
1.66. "Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient securities to elect
a majority of the directors.
1.67. "Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Sec. 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
1.68. "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
1.69. "Team's Auditor" has the meaning set forth in Section 7.7
below.
1.70. "Team Stock" means the common stock, $0.30 par value per share,
of Team that Team shall issue to certain of the Sellers in accordance with the
terms and conditions herein contained.
1.71. "Third Party Claim" has the meaning set forth in Section 9.4
below.
2. Purchase and Sale of Climax Shares.
2.1. Basic Transaction. Each Seller is the record owner of that
number of Climax Shares set forth next to such Seller's name on Exhibit A
attached hereto. At the Closing and subject to the terms and conditions of this
Agreement, Team agrees to purchase from each of the Sellers, and each of the
Sellers agrees to sell to Team, all of such Seller's Climax Shares for the
consideration specified in Section 2.2 below and as reflected by Exhibit A.
2.2. Purchase Price. Team agrees to pay to each of the Sellers at
the Closing $298.04 per Climax Share (the "Purchase Price"). At either of the
Seller's election respectively, Team shall pay the Purchase Price to the Sellers
in Cash and Team Stock as provided more fully below. The Team Stock shall be
valued at $4.00 per share for purposes of determining the number of
7
<PAGE> 15
shares of Team Stock, if any, which shall be issued in partial payment of the
Purchase Price. Any payments of Cash hereunder shall be by wire transfer in
immediately available funds.
2.2.1. Purchase Price for the Benhams' Climax Shares. The
Benhams are each owners of record of 6,355 Climax Shares and the
aggregate amount of the Purchase Price for the Climax Shares owned by
each of the Benhams is $1,894,044.20 (i.e. 6,355 X $298.04). If the
Benhams deliver their written election to Team at least five business
days prior to the Closing to receive 100,000 shares of Team Stock in
payment of $400,000 of the Purchase Price for the Benhams' Shares, Team
shall deliver to the Benhams at Closing (i) certificates for 100,000
shares of Team Stock issued in the name specified by the Benhams in
such written election (valued at $4.00 per share), and (ii) Cash for
the remainder of the Purchase Price of their Climax Shares.
Notwithstanding the foregoing, Team shall deliver to the Escrow Agent
to be held in accordance with the terms of the Escrow Agreement
property representing 15% of the Purchase Price for the Benhams' Climax
Shares (which shall consist of 15% of the Cash portion of the Purchase
Price and shares of Team Stock equal to 15% of the number of shares of
Team Stock included in the Purchase Price). If no such written election
to receive Team Stock is delivered by the Benhams to Team, Team shall
deliver the full amount of the Purchase Price for the Benhams' Climax
Shares in Cash to the Benhams at Closing, less 15% of said Purchase
Price, which Team shall deliver to the Escrow Agent to be held in
accordance with the terms of the Escrow Agreement.
2.2.2. Purchase Price for the ESOP's Climax Shares. The ESOP
is owner of record of 7,762 Climax Shares and the aggregate amount of
the Purchase Price for the ESOP's Climax Shares is $2,313,386.48. If
the ESOP delivers its written election to Team at least five business
days prior to the Closing to receive up to 289,173 shares of Team Stock
(i.e. $2,313,386 X 50% divided by $4) valued at $4 per share of the
$2,313,386 Purchase Price for the ESOP's Climax Shares, Team shall
deliver to the ESOP at the Closing certificates for that number of
shares of Team Stock, if any, specified by such written election, up to
a maximum of 289,173 shares, and shall deliver to the ESOP Cash for the
remainder of the Purchase Price for the ESOP's Climax Shares.
Notwithstanding the foregoing, Team shall deliver to the Escrow Agent
to be held in accordance with the terms of the Escrow Agreement
property representing 15% of the Purchase Price for the ESOP's Climax
Shares (which shall consist of 15% of the Cash portion of the Purchase
Price and shares of Team Stock equal to 15% of the number of shares of
Team Stock included in the Purchase Price). If the ESOP does not elect
to receive any of the Purchase Price in Team Stock, Team shall deliver
the entire amount of the Purchase Price for the ESOP's Climax Shares to
the ESOP in Cash at the Closing, less 15% of said Purchase
8
<PAGE> 16
Price, which Team shall deliver to the Escrow Agent to be held in
accordance with the terms of the Escrow Agreement.
2.2.3. Purchase Price for the Edin Trust's Climax Shares. The
Edin Trust is owner of record of 340 Climax Shares and the aggregate
amount of the Purchase Price for the Edin Trust's Climax Shares is
$101,333.60. If the Edin Trust delivers its written election to Team at
least five business days prior to the Closing to receive up to 12,666
shares of Team Stock (i.e. $101,333.60 X 50% divided by $4) valued at
$4 per share of the $101,333.60 Purchase Price for the Edin Trust's
Climax Shares, Team shall deliver to the Edin Trust at the Closing
certificates for that number of shares of Team Stock, if any, specified
by such written election, up to a maximum of 12,666 shares, and shall
deliver to the Edin Trust Cash for the remainder of the Purchase Price
for the Edin Trust's Climax Shares. Notwithstanding the foregoing, Team
shall deliver to the Escrow Agent to be held in accordance with the
terms of the Escrow Agreement property representing 15% of the Purchase
Price for the Edin Trust's Climax Shares (which shall consist of 15% of
the Cash portion of the Purchase Price and shares of Team Stock equal
to 15% of the number of shares of Team Stock included in the Purchase
Price). If the Edin Trust does not elect to receive any of the Purchase
Price in Team Stock, Team shall deliver the entire amount of the
Purchase Price for the Edin Trust's Climax Shares to the Edin Trust in
Cash at the Closing, less 15% of said Purchase Price, which Team shall
deliver to the Escrow Agent to be held in accordance with the terms of
the Escrow Agreement.
2.2.4. Purchase Price for Weigel's Climax Shares. Weigel is
owner of record of 180 Climax Shares and the aggregate amount of the
Purchase Price for Weigel's Climax Shares is $53,647.20. If Weigel
delivers his written election to Team at least five business days prior
to the Closing to receive up to 6,705 shares of Team Stock (i.e.
$53,647.20 X 50% divided by $4) valued at $4 per share of the
$53,647.20 Purchase Price for Weigel's Climax Shares, Team shall
deliver to Weigel at the Closing certificates for that number of shares
of Team Stock, if any, specified by such written election, up to a
maximum of 6,705 shares, and shall deliver to Weigel Cash for the
remainder of the Purchase Price for Weigel's Climax Shares.
Notwithstanding the foregoing, Team shall deliver to the Escrow Agent
to be held in accordance with the terms of the Escrow Agreement
property representing 15% of the Purchase Price for Weigel's Climax
Shares (which shall consist of 15% of the Cash portion of the Purchase
Price and shares of Team Stock equal to 15% of the number of shares of
Team Stock included in the Purchase Price). If Weigel does not elect to
receive any of the Purchase Price in Team Stock, Team shall deliver the
entire amount of the Purchase Price for Weigel's Climax Shares to
Weigel in Cash at the Closing, less 15% of said Purchase Price, which
Team shall deliver to the Escrow Agent to be held in accordance with
the terms of the Escrow Agreement.
9
<PAGE> 17
2.3. The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Greene &
Markley, P.C., The 1515 Building, Suite 600, 1515 S.W. Fifth Avenue, Portland,
Oregon, commencing at 9:00 a.m. local time on the second business day following
the satisfaction or waiver of all conditions to the obligations of the Parties
to consummate the transactions contemplated hereby (other than conditions with
respect to actions the respective Parties will take at the Closing itself) or
such other date as Team and the Sellers may mutually determine (the "Closing
Date"); provided, however, that the Closing Date shall be no later than August
31, 1998. Irrespective of the actual date of the Closing, the transaction shall
be deemed to have occurred for accounting purposes as of June 30, 1998.
2.4. Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to Team the various certificates, instruments, and documents referred to
in Section 8.1 below, (ii) Team will deliver to the Sellers the various
certificates, instruments, and documents referred to in Section 8.2 below, (iii)
each of the Sellers will deliver to Team stock certificates representing all of
such Seller's Climax Shares, endorsed in blank or accompanied by duly executed
assignment documents, (iv) Team will deliver to each of the Sellers the
consideration specified in Section 2.2 above, and (v) Team will deliver 15% of
the aggregate Purchase Price, as specified in Section 2.2 above (the "Escrowed
Property"), to the Escrow Agent to be held pursuant to the terms and conditions
of the Escrow Agreement.
3. Representations and Warranties Concerning the Transaction.
3.1. Representations and Warranties of the Sellers. Each Seller
severally and not jointly represents and warrants to Team that the statements
with respect to such Seller contained in this Section 3.1 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date, as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3.1.
3.1.1. Organization of the ESOP. The ESOP is a qualified plan
within the meaning of Section 401(a) of the Code and a determination
letter of such qualified status by the Internal Revenue Service has
been applied for and received.
3.1.2. Organization of the Edin Trust. The Edin Trust is a
trust duly organized and validly existing under the laws of the
jurisdiction of its organization.
3.1.3. Authorization of Transaction. Seller has the legal
power, authority and capacity to execute and deliver this Agreement and
to perform his or its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of the Seller, enforceable in
accordance with its terms and conditions, except as enforceability
10
<PAGE> 18
may be limited or affected by applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or
affecting the rights of creditors and except as enforceability may be
limited by rules of law governing specific performance, injunctive
relief or other equitable remedies. The Seller does not need to give
any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order
to consummate the transactions contemplated by this Agreement.
3.1.4. Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which the Seller is subject or, with respect to the ESOP, any
provision of its plan documents, or with respect to the Edin Trust, any
provision of its trust indenture or other organizational documents, or
(B) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under
any agreement, contract, lease, license, instrument, or other
arrangement to which the Seller is a party or by which he or it is
bound or to which any of his, her, or its assets is subject.
3.1.5. Brokers' Fees. The Seller does not have any Liability
or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which Team could become liable or obligated.
3.1.6. Investment. With respect to those Sellers who are
acquiring shares of Team Stock hereunder, such Seller (A) understands
that the Team Stock has not been, and will not be, registered under the
Securities Act, or under any state securities laws, and are being
offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (B) is acquiring the
Team Stock solely for his, her, or its own account for investment
purposes, and not with a view to the distribution thereof, (C) is a
sophisticated investor with knowledge and experience in business and
financial matters, (D) has received Team's most recent Form 10-K report
to the SEC and Proxy Statement pursuant to the Securities Exchange Act,
and all reports that Team has filed with the SEC pursuant to the
Securities Exchange Act since its most recent Form 10-K, and has had
the opportunity to obtain additional information as desired in order to
evaluate the merits and the risks inherent in holding the Team Stock,
(E) is able to bear the economic risk and lack of liquidity inherent in
holding the Team Stock, and (F), except for the ESOP, the Edin Trust
and Weigel, is an Accredited Investor.
11
<PAGE> 19
3.1.7. Climax Shares. The Seller holds of record and, except
for the ESOP, owns beneficially the number of Climax Shares set forth
next to his, hers or its name on Exhibit A, free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Security Interests,
options, warrants, purchase rights, contracts, commitments, equities,
claims, and demands. The Seller is not a party to any option, warrant,
purchase right, or other contract or commitment that could require such
Seller to sell, transfer, or otherwise dispose of any capital stock of
Climax (other than this Agreement). The Seller is not a party to any
voting trust, proxy, or other agreement or understanding with respect
to the voting of any capital stock of Climax.
3.2. Representations and Warranties of Team. Team represents and
warrants to the Sellers that the statements contained in this Section 3.2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
3.2).
3.2.1. Organization of Team. Team is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
3.2.2. Authorization of Transaction. Team has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation
of Team, enforceable in accordance with its terms and conditions,
except as enforceability may be limited or affected by applicable
bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the rights of creditors and except
as enforceability may be limited by rules of law governing specific
performance, injunctive relief or other equitable remedies. Team does
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this
Agreement.
3.2.3. Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which Team is subject or any provision of its charter or bylaws or
(B) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under
any
12
<PAGE> 20
agreement, contract, lease, license, instrument, or other arrangement
to which Team is a party or by which it is bound or to which any of its
assets is subject.
3.2.4. Brokers' Fees. Team has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
any Seller could become liable or obligated.
3.2.5. Investment. Team is not acquiring Climax Shares with a
view to or for sale in connection with any distribution thereof within
the meaning of the Securities Act.
4. Preparation and Delivery of Disclosure Schedule--Team's Right to
Review. On or before the 30th day following the date of this Agreement, the
Sellers will prepare and deliver to Team a disclosure schedule (the "Disclosure
Schedule"), which shall supply the various items specified by Section 5 hereof.
If Team does not notify the Sellers on or before the tenth (10th) day following
the date of the delivery to Team of the Disclosure Schedule (the "Delivery
Date") that it takes exception to any one or more of the disclosures contained
in the Disclosure Schedule, the Disclosure Schedule will be deemed to be
accepted by Team for purposes of this Agreement. If, however, any disclosures
("Problem Disclosures") contained in the Disclosure Schedule cause Team, acting
in its sole and absolute discretion, to determine that it may be inadvisable for
Team to proceed with the acquisition of Climax pursuant to the provisions of
this Agreement, then Team will so notify the Sellers within 10 days of the
Delivery Date and the Parties acting in good faith will attempt to agree upon a
mutually satisfactory solution to Team's concern with the Problem Disclosures.
If the Parties are unable to resolve the Problem Disclosures within 20 days
after the Delivery Date, Team acting in its sole and absolute discretion may by
written notice to the Sellers on or before the 25th day after the Delivery Date
terminate this Agreement without liability to any Party. The Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in Section 5 of this Agreement. The Sellers shall endeavor
to disclose in the Disclosure Schedule each item of information in each separate
section of the Disclosure Schedule in which such item may reasonably be required
to be disclosed. Notwithstanding the foregoing, if an item is disclosed in one
section of the Disclosure Schedule, it shall be deemed to have been disclosed in
all other sections of the Disclosure Schedule if on the face of such disclosure,
the plain meaning of the disclosure or the context in which the disclosure is
used would reasonably apply to another section of the Disclosure Schedule, and
the failure of the Sellers to disclose it in multiple sections of the Disclosure
Schedule shall not be a breach of this Agreement. Similarly, the Sellers may
disclose items in Sections of the Disclosure Schedule corresponding to a
paragraph in Section 5 of this Agreement, even if such paragraph does not
reference the Disclosure Schedule, without being in breach of this Agreement.
The disclosure of information in the Disclosure Schedule shall not be construed
as an admission that any such information is material to the Sellers or the
business or operations of the Company or its
13
<PAGE> 21
Subsidiaries. The Disclosure Schedule is qualified in its entirety by reference
to the specific provisions of this Agreement, and none of the disclosures
contained in the Disclosure Schedule are intended to constitute, and shall not
be construed as constituting, representations or warranties except as and to the
extent specifically provided in this Agreement.
5. Representations and Warranties Concerning Climax and Its Subsidiaries.
The Sellers represent and warrant to Team that the statements contained in this
Section 5 (including the information contained in the Disclosure Schedule
delivered by the Sellers to Team pursuant to Section 4 above) will be correct
and complete on the Delivery Date and will be correct and complete as of the
Closing Date as though made then and as though the Closing Date were substituted
for the Delivery Date throughout this Section 5.
5.1. Organization, Qualification, and Corporate Power. Climax and
each Subsidiary, as defined in Section 5.6, is a corporation duly organized,
validly existing, and in good standing (if applicable) under the laws of the
jurisdiction of its incorporation. Climax and each Subsidiary is duly authorized
to conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the failure to so qualify
would not have a material adverse effect. Each Climax and each Subsidiary has
full corporate power and authority and all licenses, permits, and authorizations
necessary to carry on the businesses in which it is engaged and in which it
presently proposes to engage and to own and use the properties owned and used by
it, except for such licenses, permits and authorizations the failure of which to
have will not have a material adverse effect. Section 5.1 of the Disclosure
Schedule lists the directors and officers of Climax and each Subsidiary. The
Sellers have delivered to Team correct and complete copies of the charter and
bylaws of each Climax and each Subsidiary as amended to date. The minute books
(containing the records of meetings of the stockholders, the board of directors,
and any committees of the board of directors), the stock certificate books, and
the stock record books of Climax and each Subsidiary are correct and complete in
all material respects. Neither Climax nor any Subsidiary is in default under or
in violation of any provision of its charter or bylaws.
5.2. Capitalization. The entire authorized capital stock of Climax
consists of 50,000 common shares without par value, of which 24,235 Climax
shares are issued and outstanding and no shares are held in treasury. All of the
issued and outstanding Climax Shares have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held of record by the respective
Sellers as set forth in Exhibit A. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require Climax to
issue, sell, or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Climax. There are no voting
14
<PAGE> 22
trusts, proxies, or other agreements or understandings with respect to the
voting of the capital stock of Climax.
5.3. Noncontravention. Neither the execution and the delivery of
this agreement, nor the consummation of the transactions contemplated hereby,
will in any material way (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which Climax and its
Subsidiaries are subject or any provision of the charter or bylaws of Climax and
its Subsidiaries or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
Climax and its Subsidiaries is a party or by which it is bound or to which any
of its assets is subject (or result in the imposition of any Security Interest
upon any of its assets). Climax and its Subsidiaries shall not be required to
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
5.4. Brokers' Fees. None of Climax and its Subsidiaries has any
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
5.5. Title to Assets. Except as disclosed by Section 5.5 of the
Disclosure Schedule, Climax and its Subsidiaries each have good and marketable
title to, or a valid leasehold interest in, the properties and assets used by
it, located on its premises, or shown on the Most Recent Balance Sheet or
acquired after the date thereof, free and clear of all Security Interests,
except for properties and assets acquired and/or disposed of in the Ordinary
Course of Business since the date of the Most Recent Balance Sheet.
5.6. Subsidiaries. Section 5.6 of the Disclosure Schedule sets forth
the following information with respect to each entity in which Climax owns a
material interest: (i) its correct corporate name and state of organization (ii)
the number of shares of authorized capital stock of each class of its capital
stock, (iii) the number of issued and outstanding shares of each class of its
capital stock, the names of the holders thereof, and the number of shares held
by each such holder, and (iv) the number of shares of its capital stock held in
treasury. All of the issued and outstanding shares of capital stock of the each
such Subsidiary have been duly authorized and are validly issued, fully paid,
and nonassessable. Climax holds of record and owns beneficially the number of
the outstanding shares of each Subsidiary disclosed in Section 5.6 of the
Disclosure Schedule, free and clear of any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase rights,
15
<PAGE> 23
contracts, commitments, equities, claims, and demands. There are no outstanding
or authorized options, warrants, purchase rights, conversion rights, exchange
rights, or other contracts or commitments that could require Climax or a
Subsidiary to sell, transfer, or otherwise dispose of any capital stock of a
Subsidiary or that could require a Subsidiary to issue, sell, or otherwise cause
to become outstanding any of its own capital stock. There are no outstanding
stock appreciation, phantom stock, profit participation, or similar rights with
respect to any Subsidiary. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of any capital stock of
any Subsidiary. Neither Climax nor any Subsidiary controls directly or
indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust, or other business association which is not a
Subsidiary of Climax.
5.7. Financial Statements. Attached hereto as Exhibit B are the
following financial statements (collectively, the "Financial Statements"): (i)
unaudited consolidated and consolidating balance sheets and statements of
income, changes in stockholders' equity, and cash flow as of and for the fiscal
years ended December 31, 1995, December 31, 1996, and December 31, 1997 (the
"Most Recent Fiscal Year End") for Climax and its Subsidiaries; and (ii)
unaudited consolidated and consolidating balance sheets and statements of
income, changes in stockholders' equity, and cash flow (the "Most Recent
Financial Statements") as of and for the three months ended March 31, 1998 (the
"Most Recent Fiscal Month End") for Climax and its Subsidiaries. The Financial
Statements have been prepared in the Ordinary Course of Business in accordance
with the accounting policies and procedures customarily followed by Climax and
its Subsidiaries and in accordance with GAAP in all material respects, and on a
consistent basis throughout the periods covered thereby. The Financial
Statements present fairly in all material respects the financial condition of
Climax and its Subsidiaries as of such dates and the results of operations of
Climax and its Subsidiaries for such periods; provided, however, that the Most
Recent Financial Statements lack footnotes and other presentation items.
5.8. Events Subsequent to the date of the Most Recent Financial
Statements. Except as disclosed on Section 5.8 of the Disclosure Schedule, since
the Most Recent Fiscal Month End through the date hereof, there has not been any
material adverse change in the business, financial condition, operations,
results of operations, or future prospects of any of Climax and its
Subsidiaries. Without limiting the generality of the foregoing, except as
disclosed on Section 5.8 of the Disclosure Schedule, since the Most Recent
Fiscal Month End:
5.8.1. neither Climax nor any Subsidiary has sold, leased,
transferred, or assigned any of its assets, tangible or intangible,
other than for a fair consideration in the Ordinary Course of Business;
16
<PAGE> 24
5.8.2. neither Climax nor any Subsidiary has entered into
any agreement, contract, lease or license (or series of related
agreements, contracts, leases, and licenses) either involving more than
$10,000 or outside the Ordinary Course of Business;
5.8.3. no party (including any of Climax and its
Subsidiaries) has accelerated, terminated, modified, or canceled any
agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) involving more than
$10,000 to which any of Climax and its Subsidiaries is a party or by
which any of them is bound;
5.8.4. neither Climax nor any Subsidiary has imposed any
Security Interest upon any of its assets, tangible or intangible;
5.8.5. neither Climax nor any Subsidiary has made any
capital expenditure (or series of related capital expenditures) either
involving more than $10,000 or outside the Ordinary Course of Business;
5.8.6. neither Climax nor any Subsidiary has made any
capital investment in, any loan to, or any acquisition of the
securities or assets of, any other Person (or series of related capital
investments, loans, and acquisitions) either involving more than
$10,000 or outside the Ordinary Course of Business;
5.8.7. neither Climax nor any Subsidiary has issued any
note, bond, or other debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or capitalized lease
obligation either involving more than $10,000 singly or $100,000 in the
aggregate;
5.8.8. neither Climax nor any Subsidiary has delayed or
postponed the payment of accounts payable and other Liabilities outside
the Ordinary Course of Business;
5.8.9. neither Climax nor any Subsidiary has canceled,
compromised, waived, or released any right or claim (or series of
related rights and claims) either involving more than $10,000 or
outside the Ordinary Course of Business;
5.8.10. neither Climax nor any Subsidiary has granted any
license or sublicense of any rights under or with respect to any
Intellectual Property;
5.8.11. there has been no change made or authorized in the
charter or bylaws of any of Climax and its Subsidiaries;
17
<PAGE> 25
5.8.12. neither Climax nor any Subsidiary has issued, sold,
or otherwise disposed of any of its capital stock, or granted any
options, warrants, or other rights to purchase or obtain (including
upon conversion, exchange, or exercise) any of its capital stock;
5.8.13. neither Climax nor any Subsidiary has declared, set
aside, or paid any dividend or made any distribution with respect to
its capital stock (whether in cash or in kind) or redeemed, purchased,
or otherwise acquired any of its capital stock;
5.8.14. neither Climax nor any Subsidiary has experienced any
damage, destruction, or loss (whether or not covered by insurance) to
its property;
5.8.15. neither Climax nor any Subsidiary has made any loan
to, or entered into any other transaction with, any of its directors,
officers, and employees outside the Ordinary Course of Business;
5.8.16. neither Climax nor any Subsidiary has entered into
any employment contract or collective bargaining agreement, written or
oral, or modified the terms of any existing such contract or agreement
outside the Ordinary Course of Business;
5.8.17. neither Climax nor any Subsidiary has granted any
increase in the base compensation of any of its directors, officers,
and employees outside the Ordinary Course of Business;
5.8.18. neither Climax nor any Subsidiary has adopted,
amended, modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of
any of its directors, officers, and employees (or taken any such action
with respect to any other Employee Benefit Plan) outside the Ordinary
Course of Business;
5.8.19. neither Climax nor any Subsidiary has made any other
change in employment terms for any of its directors, officers, and
employees outside the Ordinary Course of Business;
5.8.20. neither Climax nor any Subsidiary has made or pledged
to make any charitable or other capital contribution outside the
Ordinary Course of Business;
18
<PAGE> 26
5.8.21. there has not been any other occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving any of Climax and its Subsidiaries; and
5.8.22. neither Climax nor any Subsidiary has committed to
any of the foregoing.
5.9. Undisclosed Liabilities. Except as disclosed by Section 5.9 of
the Disclosure Schedule, the Sellers do not have any Knowledge that either
Climax or any Subsidiary has any Liability, except for (i) Liabilities included
in the Most Recent Balance Sheet and (ii) Liabilities which have arisen after
the Most Recent Fiscal Month End in the Ordinary Course of Business.
5.10. Legal Compliance. Except as disclosed by Section 5.10 of the
Disclosure Schedule, Climax, the Subsidiaries, and their respective predecessors
and Affiliates have complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), and no action, suit, proceeding, hearing, complaint, claim,
demand, or notice has been filed against any of them alleging any failure so to
comply. This Section 5.10 shall not apply to any representation set forth
elsewhere in this Agreement addressing compliance by Climax or any Subsidiary
with all such applicable laws as determined by the context of the
representation.
5.11. Tax Matters.
Except as disclosed by Section 5.11 of the Disclosure
Schedule, the following statements are correct and complete:
5.11.1. Climax and its Subsidiaries have each filed all Tax
Returns that it was required to file. All such Tax Returns were correct
and complete in all respects. All Taxes owed by Climax and its
Subsidiaries (whether or not shown on any Tax Return) have been paid.
Neither Climax nor any Subsidiary currently is the beneficiary of any
extension of time within which to file any Tax Return. No claim has
ever been made by an authority in a jurisdiction where any of Climax
and its Subsidiaries does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of any of Climax and its Subsidiaries
that arose in connection with any failure (or alleged failure) to pay
any Tax.
19
<PAGE> 27
5.11.2. Climax and each Subsidiary has withheld and paid all
Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
5.11.3. No Seller or director or officer of Climax or any
Subsidiary expects any taxing authority to assess any additional Taxes
for any period for which Tax Returns have been filed. There is no
dispute or claim concerning any Tax Liability of any of Climax and its
Subsidiaries either (A) claimed or raised by any authority in writing
or (B) as to which any of the Sellers has Knowledge based upon personal
contact with any agent of such authority. Section 5.11 of the
Disclosure Schedule lists all federal, state, local, and foreign income
Tax Returns filed with respect to any of Climax and its Subsidiaries
for taxable periods ended on or after December 31, 1995, indicates
those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. The Sellers have
delivered to Team correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed
against or agreed to by any of Climax and its Subsidiaries since
December 31, 1995.
5.11.4. Neither Climax or any Subsidiary has waived any
statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency.
5.11.5. Neither Climax nor any Subsidiary has filed a consent
under Code Sec. 341(f) concerning collapsible corporations. Neither
Climax nor any Subsidiary has made any payments, is obligated to make
any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Code Sec. 280G. Neither Climax nor any Subsidiary has
been a United States real property holding corporation within the
meaning of Code Sec. 897(c)(2) during the applicable period specified
in Code Sec. 897(c)(1)(A)(ii). Each of Climax and its Subsidiaries has
disclosed on its federal income Tax Returns all positions taken therein
that could give rise to a substantial understatement of federal income
Tax within the meaning of Code Sec. 6662. Neither Climax nor any
Subsidiary is a party to any Tax allocation or sharing agreement.
Neither Climax nor any Subsidiary (A) has been a member of an
Affiliated Group filing a consolidated federal income Tax Return (other
than a group the common parent of which was Climax) or (B) has any
Liability for the Taxes of any Person (other than any of Climax and its
Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
20
<PAGE> 28
5.11.6. The unpaid Taxes of Climax and its Subsidiaries (A)
did not, as of the Most Recent Fiscal Month End, exceed the reserve for
Tax Liability (rather than any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) included in
the Most Recent Balance Sheet and (B) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance
with the past custom and practice of Climax and its Subsidiaries in
filing their Tax Returns.
5.12. Real Property.
5.12.1. Section 5.12.1 of the Disclosure Schedule lists and
describes briefly all real property that any of Climax and its
Subsidiaries owns. With respect to each such parcel of owned real
property, except as described by Section 5.12.1 of the Disclosure
Schedule:
5.12.1.1. the identified owner has good and
marketable title to the parcel of real property, free and
clear of any Security Interest, easement, covenant, or other
restriction, except for installments of special assessments
not yet delinquent and recorded easements, covenants, and
other restrictions which do not materially impair the current
use, occupancy, or value, or the marketability of title, of
the property subject thereto;
5.12.1.2. there are no pending or, to the Knowledge
of Sellers, threatened condemnation proceedings, lawsuits, or
administrative actions relating to the property or other
matters affecting adversely the current use, occupancy, or
value thereof;
5.12.1.3. the legal description for the parcel
contained in the deed thereof describes such parcel fully and
adequately, the buildings and improvements are located within
the boundary lines of the described parcels of land, are not
in violation of applicable setback requirements, zoning laws,
and ordinances (and none of the properties or buildings or
improvements thereon are subject to "permitted non-conforming
use" or "permitted non-conforming structure" classifications),
and do not encroach on any easement which may burden the land,
and the land does not serve any adjoining property for any
purpose inconsistent with the use of the land, and the
property is not located within any flood plain or subject to
any similar type restriction for which any permits or licenses
necessary to the current use thereof have not been obtained;
21
<PAGE> 29
5.12.1.4. all facilities have received all
approvals of governmental authorities (including licenses and
permits) required in connection with the ownership or current
operation thereof and have been operated and maintained in
accordance with applicable laws, rules, and regulations;
5.12.1.5. there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, granting to
any party or parties the right of use or occupancy of any
portion of the parcel of real property;
5.12.1.6. there are no outstanding options or
rights of first refusal to purchase the parcel of real
property, or any portion thereof or interest therein;
5.12.1.7. there are no parties (other than Climax
and its subsidiaries) in possession of the parcel of real
property, other than tenants under any leases disclosed in
Section 5.12.1 of the Disclosure Schedule who are in
possession of space to which they are entitled;
5.12.1.8. all facilities located on the parcel of
real property are supplied with utilities and other services
necessary for the operation of such facilities as presently
used, including gas, electricity, water, telephone, sanitary
sewer, and storm sewer, all of which services are adequate in
all material respects in accordance with all applicable laws,
ordinances, rules, and regulations and are provided via public
roads or via permanent, irrevocable, appurtenant easements
benefitting the parcel of real property, unless the lack of
such access will not have a material adverse effect; and
5.12.1.9. except with respect to any unimproved
land, each parcel of real property abuts on and has direct
vehicular access to a public road, or has access to a public
road via a permanent, irrevocable, appurtenant easement
benefitting the parcel of real property, and access to the
property is provided by paved public right-of-way with
adequate curb cuts available.
5.12.2. Section 5.12.2 of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to any of
Climax and its Subsidiaries. Section 5.12.2 of the Disclosure Schedule
also identifies the leased or subleased properties for which title
insurance policies are to be procured in accordance with Section 6.8.2
below. The Sellers have delivered to Team correct and complete copies
of the leases and subleases listed in Section 5.12.2 of the Disclosure
Schedule (as amended to date). With respect to each
22
<PAGE> 30
lease and sublease listed in Section 5.12.2 of the Disclosure Schedule,
except as disclosed in Section 5.12.2 by the Disclosure Schedule:
5.12.2.1. the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect enforceable
in accordance with its terms and conditions, except as
enforceability may be limited or affected by applicable
bankruptcy, insolvency, reorganization or other laws of
general application relating to or affecting the rights of
creditors and except as enforceability may be limited by rules
of law governing specific performance, injunctive relief or
other equitable remedies;
5.12.2.2. the lease or sublease will continue to be
legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the
transactions contemplated hereby enforceable in accordance
with its terms and conditions, except as enforceability may be
limited or affected by applicable bankruptcy, insolvency,
reorganization or other laws of general application relating
to or affecting the rights of creditors and except as
enforceability may be limited by rules of law governing
specific performance, injunctive relief or other equitable
remedies;
5.12.2.3. none of Climax and its Subsidiaries nor,
to the Sellers' Knowledge, any other party to the lease or
sublease is in breach or default, and no event has occurred
which, with notice or lapse of time, would constitute a breach
or default or permit termination, modification, or
acceleration thereunder;
5.12.2.4. no party to the lease or sublease has
repudiated any material provision thereof;
5.12.2.5. there are no disputes, oral agreements,
or forbearance programs in effect as to the lease or sublease;
5.12.2.6. with respect to each sublease, the
representations and warranties set forth in subsections
5.12.2.1 through 5.12.2.5 above are true and correct with
respect to the underlying lease;
5.12.2.7. neither Climax nor any Subsidiary has
assigned, transferred, conveyed, mortgaged, deeded in trust,
or encumbered any interest in the leasehold or subleasehold;
23
<PAGE> 31
5.12.2.8. all facilities leased or subleased
thereunder have received all approvals of governmental
authorities (including licenses and permits) required in
connection with the operation thereof and have been operated
and maintained in all material respects in accordance with
applicable laws, rules, and regulations;
5.12.2.9. all facilities leased or subleased
thereunder are supplied with utilities and other services
necessary for the operation of said facilities as presently
used; and
5.12.2.10. the owner of the facility leased or
subleased has good and marketable title to the parcel of real
property, free and clear of any Security Interest, easement,
covenant, or other restriction, except for installments of
special easements not yet delinquent and recorded easements,
covenants, and other restrictions which do not impair the
current use, occupancy, or value, or the marketability of
title, of the property subject thereto.
5.13. Intellectual Property.
Except as otherwise disclosed by Section 5.13 of the
Disclosure Schedule, the following statement are correct and complete:
5.13.1. Climax and its Subsidiaries own or have the right to
use pursuant to license, sublicense, agreement, or permission all
Intellectual Property necessary for the operation of the businesses of
Climax and its Subsidiaries as presently conducted and as presently
proposed to be conducted. Each item of Intellectual Property owned or
used by any of Climax and its Subsidiaries immediately prior to the
Closing hereunder will be owned or available for use by Climax or the
Subsidiary on substantially identical terms and conditions immediately
subsequent to the Closing hereunder. Each of Climax and its
Subsidiaries has taken all necessary action to maintain and protect
each item of Intellectual Property that it owns or uses.
5.13.2. Neither Climax nor any Subsidiary has interfered
with, infringed upon, misappropriated, or otherwise come into conflict
with any Intellectual Property rights of third parties, and none of the
Sellers and the directors and officers (and employees with
responsibility for Intellectual Property matters) of Climax and its
Subsidiaries has ever received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation,
or violation (including any claim that any of Climax and its
Subsidiaries must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of any of the
Sellers, no third party
24
<PAGE> 32
has interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights of any of Climax
and its Subsidiaries.
5.13.3. Section 5.13.3 of the Disclosure Schedule identifies
each patent or registration which has been issued to any of Climax and
its Subsidiaries with respect to any of its Intellectual Property,
identifies each pending patent application or application for
registration which any of Climax and its Subsidiaries has made with
respect to any of its Intellectual Property, and identifies each
license, agreement, or other permission which any of Climax and its
Subsidiaries has granted to any third party with respect to any of its
Intellectual Property (together with any exceptions). The Sellers have
delivered to Team correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as
amended to date) and have made available to Team correct and complete
copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. Section 5.13.3 of the
Disclosure Schedule also identifies each trade name or unregistered
trademark used by any of Climax and its Subsidiaries in connection with
any of its businesses. With respect to each item of Intellectual
Property required to be identified in Section 5.13.3 of the Disclosure
Schedule:
5.13.3.1. Climax and its Subsidiaries possess all
right, title, and interest in and to the item, free and clear
of any Security Interest, license, or other restriction;
5.13.3.2. the item is not subject to any
outstanding injunction, judgment, order, decree, ruling, or
charge;
5.13.3.3. no action, suit, proceeding, hearing,
complaint, claim, or demand is pending or to the Sellers'
Knowledge is threatened which challenges the legality,
validity, enforceability, use, or ownership of the item; and
5.13.3.4. none of Climax and its Subsidiaries has
ever agreed to indemnify any Person for or against any
interference, infringement, misappropriation, or other
conflict with respect to the item.
5.13.4. Section 5.13.4 of the Disclosure Schedule identifies
each item of Intellectual Property that any third party owns and that
any of Climax and its Subsidiaries uses pursuant to license,
sublicense, agreement, or permission. The Sellers have delivered to
Team correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to each
item of Intellectual Property required to be identified in Section
5.13.4 of the Disclosure Schedule:
25
<PAGE> 33
5.13.4.1. the license, sublicense, agreement, or
permission covering the item is legal, valid, binding,
enforceable, and in full force and effect enforceable in
accordance with its terms and conditions, except as
enforceability may be limited or affected by applicable
bankruptcy, insolvency, reorganization or other laws of
general application relating to or affecting the rights of
creditors and except as enforceability may be limited by rules
of law governing specific performance, injunctive relief or
other equitable remedies;
5.13.4.2. the license, sublicense, agreement, or
permission will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
following the Closing enforceable in accordance with its terms
and conditions, except as enforceability may be limited or
affected by applicable bankruptcy, insolvency, reorganization
or other laws of general application relating to or affecting
the rights of creditors and except as enforceability may be
limited by rules of law governing specific performance,
injunctive relief or other equitable remedies;
5.13.4.3. none of Climax and its Subsidiaries nor,
to the Sellers' Knowledge, any other party to the license,
sublicense, agreement, or permission is in breach or default,
and no event has occurred which with notice or lapse of time
would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
5.13.4.4. no party to the license, sublicense,
agreement, or permission has repudiated any material provision
thereof;
5.13.4.5. with respect to each sublicense, the
representations and warranties set forth in subsections
5.13.4.1 through 5.13.4.4 above are true and correct with
respect to the underlying license;
5.13.4.6. the underlying item of Intellectual
Property is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
5.13.4.7. no action, suit, proceeding, hearing,
complaint, claim, or demand is pending or to the Sellers'
Knowledge is threatened which challenges the legality,
validity, or enforceability of the underlying item of
Intellectual Property; and
26
<PAGE> 34
5.13.4.8. neither Climax nor any Subsidiary has
granted any sublicense or similar right with respect to the
license, sublicense, agreement, or permission.
5.13.5. The Sellers have no Knowledge that Climax or any
Subsidiary will interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Intellectual Property rights of
third parties as a result of the continued operation of its business as
presently conducted.
5.13.6. None of the Sellers has any Knowledge of any new
products, inventions, procedures, or methods of manufacturing or
processing that any competitors or other third parties have developed
which reasonably could be expected to supersede or make obsolete any
product or process of any of Climax and its Subsidiaries.
5.14. Tangible Assets. Climax and its Subsidiaries own or lease all
buildings, machinery, equipment, and other tangible assets necessary for the
conduct of their businesses as presently conducted. Each such tangible asset is
free from defects (patent and latent), has been maintained in accordance with
normal industry practice, is in good operating condition and repair (subject to
normal wear and tear), and is suitable for the purposes for which it presently
is used.
5.15. Inventory. The inventory of Climax and its Subsidiaries
consists of raw materials and supplies, manufactured and purchased parts, goods
in process, and finished goods, substantially all of which is merchantable and
fit for the purpose for which it was procured or manufactured, and is carried at
its net realizable value in accordance with GAAP, after deducting the LIFO
reserve included in the Most Recent Balance Sheet as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of
Climax and its Subsidiaries.
5.16. Contracts. Section 5.16 of the Disclosure Schedule lists the
following contracts and other agreements to which any of Climax and its
Subsidiaries is a party:
5.16.1. any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing for
lease payments in excess of $10,000 per annum;
5.16.2. any agreement (or group of related agreements) for
the purchase or sale of raw materials, commodities, supplies, products,
or other personal property, or for the furnishing or receipt of
services, the performance of which will extend over a period of more
than one year, result in a loss to any of Climax and its Subsidiaries,
or involve consideration in excess of $10,000;
27
<PAGE> 35
5.16.3. any agreement concerning a partnership, joint venture
or limited liability company;
5.16.4. any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in excess of
$10,000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
5.16.5. any agreement concerning confidentiality or
noncompetition;
5.16.6. any agreement with any of the Sellers and their
Affiliates (other than Climax and its Subsidiaries);
5.16.7. any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors,
officers, and employees;
5.16.8. any collective bargaining agreement;
5.16.9. any agreement for the employment of any individual
on a full-time, part-time, consulting, or other basis providing annual
compensation in excess of $50,000 or providing severance benefits;
5.16.10. any agreement under which it has advanced or loaned
any amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
5.16.11. any agreement under which the consequences of a
default or termination could have an adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of any of Climax and its Subsidiaries; or
5.16.12. any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $10,000.
The Sellers have delivered to Team a correct and complete copy of each written
agreement listed in Section 5.16 of the Disclosure Schedule (as amended to date)
and a written summary setting forth the terms and conditions of each oral
agreement referred to in Section 5.16 of the Disclosure Schedule. With respect
to each such agreement, except as disclosed by Section 5.16 of the Disclosure
Schedule: (A) the agreement is legal, valid, binding, and in full force and
effect, enforceable in accordance with its terms and conditions, except as
enforceability may be limited
28
<PAGE> 36
or affected by applicable bankruptcy, insolvency, reorganization or other laws
of general application relating to or affecting the rights of creditors and
except as enforceability may be limited by rules of law governing specific
performance, injunctive relief or other equitable remedies; (B) the agreement
will continue to be legal, valid, binding, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby, enforceable in accordance with its terms and conditions, except as
enforceability may be limited or affected by applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the
rights of creditors and except as enforceability may be limited by rules of law
governing specific performance, injunctive relief or other equitable remedies;
(C) none of Climax and its Subsidiaries, nor to the Sellers' Knowledge, any
other party is in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (D) no party has
repudiated any provision of the agreement.
5.17. Notes and Accounts Receivable. All notes and accounts
receivable of Climax and its Subsidiaries are reflected properly on their books
and records, are valid receivables subject to no setoffs or counterclaims, are
current and collectible, and will be collected in accordance with their terms at
their recorded amounts, subject only to the reserve for bad debts included in
the Most Recent Balance Sheet as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of Climax and its
Subsidiaries.
5.18. Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of any of Climax and its Subsidiaries, other than with
respect to financing arrangements.
5.19. Insurance. Section 5.19 of the Disclosure Schedule sets forth
the following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which any of Climax and its
Subsidiaries has been a party, a named insured, or otherwise the beneficiary of
coverage at any time within the past 10 years:
5.19.1. the name, address, and telephone number of the agent;
5.19.2. the name of the insurer, the name of the
policyholder, and the name of each covered insured;
5.19.3. the policy number and the period of coverage;
29
<PAGE> 37
5.19.4. the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated
and operate) of coverage; and
5.19.5. a description of any retroactive premium adjustments
or other loss-sharing arrangements.
With respect to each such insurance policy, except as disclosed by Section 5.19
of the Disclosure Schedule: (A) the policy is legal, valid, binding,
enforceable, and in full force and effect; (B) the policy will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (C)
none of Climax and its Subsidiaries nor, to the Sellers' Knowledge, any other
party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy; and (D) no
party to the policy has repudiated any material provision thereof. Each of
Climax and its Subsidiaries has been covered during the past 10 years by
insurance in scope and amount customary and reasonable for the businesses in
which it has engaged during the aforementioned period. Section 5.19 of the
Disclosure Schedule describes any self-insurance arrangements affecting any of
Climax and its Subsidiaries.
5.20. Litigation. Section 5.20 of the Disclosure Schedule sets forth
each instance in which any of Climax and its Subsidiaries (i) is subject to any
outstanding injunction, judgment, order, decree, or ruling, or (ii) is a party
or, to the Knowledge of Sellers, is threatened to be made a party to any action,
suit, proceeding, or hearing, in or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Section 5.20 of the Disclosure Schedule could result
in any adverse change in the business, financial condition, operations, results
of operations, or future prospects of any of Climax and its Subsidiaries.
5.21. Product Warranty. Each product manufactured, sold, leased, or
delivered by any of Climax and its Subsidiaries has been in conformity in all
material respects with all applicable contractual commitments and all express
and implied warranties, and none of Climax and its Subsidiaries has any
Liability for replacement or repair thereof or other damages in connection
therewith, subject only to the reserve for product warranty claims included in
the Most Recent Balance Sheet as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of Climax and its
Subsidiaries. No product manufactured, sold, leased, or delivered by any of
Climax and its Subsidiaries is subject to any guaranty, warranty, or other
indemnity beyond the applicable standard terms and conditions of sale or lease.
30
<PAGE> 38
5.22. Product Liability. None of Climax and its Subsidiaries has any
Liability arising out of any injury to individuals or property as a result of
the ownership, possession, or use of any product manufactured, sold, leased, or
delivered by any of Climax and its Subsidiaries.
5.23. Employees. Sellers have no Knowledge that any executive, key
employee, or group of employees has any plans to terminate employment with any
of Climax and its Subsidiaries. Neither Climax nor any Subsidiary is a party to
or bound by any collective bargaining agreement, nor has any of them experienced
any strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. Neither Climax nor any Subsidiary has committed any unfair
labor practice. None of the Sellers has any Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of any of Climax and its Subsidiaries.
5.24. Employee Benefits.
5.24.1. Section 5.24 of the Disclosure Schedule lists each
Employee Benefit Plan that Climax and its Subsidiaries maintain and/or
to which Climax and any Subsidiary contributes.
5.24.1.1. Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund) complies in form
and in operation in all material respects with the applicable
requirements of ERISA, the Code, and other applicable laws.
5.24.1.2. All required reports and descriptions
(including Form 5500 Annual Reports, Summary Annual Reports,
PBGC-1's, and Summary Plan Descriptions) have been filed or
distributed appropriately with respect to each such Employee
Benefit Plan. The requirements of Part 6 of Subtitle B of
Title I of ERISA and of Code Sec. 4980B have been met with
respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
5.24.1.3. All contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit
Plan which is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing
Date which are not yet due have been paid to each such
Employee Pension Benefit Plan or accrued in accordance with
the past custom and practice of Climax and its Subsidiaries.
All premiums or other payments for all periods ending on or
before the Closing Date
31
<PAGE> 39
have been paid with respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan.
5.24.1.4. Each such Employee Benefit Plan which is
an Employee Pension Benefit Plan meets the requirements of a
"qualified plan" under Code Sec. 401(a) and has received a
favorable determination letter from the Internal Revenue
Service.
5.24.1.5. The market value of assets under each
such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan) equals or
exceeds the present value of all vested and nonvested
Liabilities thereunder determined in accordance with PBGC
methods, factors, and assumptions applicable to an Employee
Pension Benefit Plan terminating on the date for
determination.
5.24.1.6. The Sellers have delivered to Team
correct and complete copies of the plan documents and summary
plan descriptions, the most recent determination letter
received from the Internal Revenue Service, the most recent
Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which
implement each such Employee Benefit Plan.
5.24.2. With respect to each Employee Benefit Plan that any
of Climax, its Subsidiaries, and the Controlled Group of Corporations
which includes Climax and its Subsidiaries maintains or ever has
maintained or to which any of them contributes, ever has contributed,
or ever has been required to contribute:
5.24.2.1. No such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multiemployer
Plan) has been completely or partially terminated or been the
subject of a Reportable Event as to which notices would be
required to be filed with the PBGC. No proceeding by the PBGC
to terminate any such Employee Pension Benefit Plan (other
than any Multiemployer Plan) has been instituted or
threatened.
5.24.2.2. There have been no non-exempt Prohibited
Transactions with respect to any such Employee Benefit Plan.
No Fiduciary has any Liability for breach of fiduciary duty or
any other failure to act or comply in connection with the
administration or investment of the assets of any such
Employee Benefit Plan. No action, suit, proceeding, hearing,
or investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan
32
<PAGE> 40
(other than routine claims for benefits) is pending or
threatened. None of the Sellers has any Knowledge of any Basis
for any such action, suit, proceeding, hearing, or
investigation.
5.24.2.3. Neither Climax nor any Subsidiary has
incurred, and none of the Sellers has any reason to expect
that any of Climax and its Subsidiaries will incur, any
Liability to the PBGC (other than PBGC premium payments) or
otherwise under Title IV of ERISA (including any withdrawal
Liability) or under the Code with respect to any such Employee
Benefit Plan which is an Employee Pension Benefit Plan.
5.24.3. Neither Climax nor any Subsidiary, nor the other
members of the Controlled Group of Corporations that includes Climax
and its Subsidiaries contributes to, ever has contributed to, or ever
has been required to contribute to any Multiemployer Plan or has any
Liability (including withdrawal Liability) under any Multiemployer
Plan.
5.24.4. Neither Climax nor any Subsidiary maintains or ever
has maintained or contributes, ever has contributed, or ever has been
required to contribute to any Employee Welfare Benefit Plan providing
medical, health, or life insurance or other welfare-type benefits for
current or future retired or terminated employees, their spouses, or
their dependents (other than in accordance with Code Sec. 4980B).
5.25. Guaranties. Neither Climax nor any Subsidiary is a guarantor or
otherwise is liable for any Liability or obligation (including indebtedness) of
any other Person.
5.26. Environment, Health, and Safety.
5.26.1. Climax, each Subsidiary, and their respective
predecessors and Affiliates have each complied with all Environmental,
Health, and Safety Laws, and no action, suit, proceeding, hearing,
complaint, claim, demand, or notice has been filed against any of them
alleging any failure so to comply. Without limiting the generality of
the preceding sentence, Climax, each Subsidiary, and their respective
predecessors and Affiliates have obtained and been in compliance with
all of the terms and conditions of all material permits, licenses, and
other authorizations which are required under, and each has complied
with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables
which are contained in, all Environmental, Health, and Safety Laws.
33
<PAGE> 41
5.26.2. Neither Climax nor any Subsidiary nor their
respective predecessors or Affiliates has any Liability for nor has
handled or disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual to any substance or
condition, or owned or operated any property or facility in any manner
that could form the Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of Climax and its Subsidiaries giving rise to any
Liability) for damage to any site, location, or body of water (surface
or subsurface), for any illness of or personal injury to any employee
or other individual, or for any reason under any Environmental, Health,
and Safety Law.
5.27. Certain Business Relationships with Climax and Its
Subsidiaries. Except as disclosed by Section 5.27 of the Disclosure Schedule,
none of the Sellers and/or their Affiliates has been involved in any material
business arrangement or relationship with Climax and/or any Subsidiary within
the past 12 months, and none own any material asset, tangible or intangible,
which is used in the business of Climax or any Subsidiary.
5.28. Disclosure. The representations and warranties contained in
this Section 5 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 5 not misleading.
6. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
6.1. General. Each of the Parties will use his or its reasonable
best efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Section 8 below).
6.2. Notices and Consents. The Benhams will cause Climax and any
Subsidiary to give any required notices to third parties, and will cause Climax
and any Subsidiary to use its reasonable best efforts to obtain any third-party
consents, that Team reasonably may request in connection with the matters
referred to in this Agreement. Each of the Parties will (and the Benhams will
cause each of Climax and the Subsidiaries to) give any notices to, make any
filings with, and use its reasonable best efforts to obtain any required
authorizations, consents, and approvals of governments and governmental agencies
to the transaction contemplated by this Agreement.
6.3. Operation of Business. The Benhams will not cause or permit
Climax and its Subsidiaries to engage in any practice, take any action, or enter
into any transaction outside the
34
<PAGE> 42
Ordinary Course of Business. Without limiting the generality of the foregoing,
the Benhams will not cause or permit Climax and its Subsidiaries to (i) declare,
set aside, or pay any dividend or make any distribution with respect to its
capital stock or redeem, purchase, or otherwise acquire any of its capital
stock, or (ii) otherwise engage in any practice, take any action, or enter into
any transaction of the sort described in Section 5.8 above.
6.4. Preservation of Business. The Benhams will cause Climax and its
Subsidiaries to each keep its business and properties substantially intact,
including its present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers, and employees.
6.5. Full Access. The Benhams cause Climax and its Subsidiaries to
permit, representatives of Team to have full access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of Climax
and its Subsidiaries, to all premises, properties, personnel, books, records
(including Tax records), contracts, and documents of or pertaining to Climax and
its Subsidiaries.
6.6. Notice of Developments. The Benhams and the ESOP will give
prompt written notice to Team of any material adverse development causing a
breach of any of their respective representations and warranties in Section 3
and/or Section 5 above. Team will give prompt written notice to the Sellers of
any material adverse development causing a breach of any of their
representations and warranties in Section 3 above. No disclosure by any Party
which is made after the Delivery Date, shall be deemed to amend or supplement
the Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant unless such misrepresentation and/or breach is
waived in writing by the Party to whom such disclosure is made.
6.7. Exclusivity. None of the Sellers will (and the Benhams will not
cause or permit Climax and its Subsidiaries to): (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets of, any of Climax and its Subsidiaries
(including any acquisition structured as a merger, consolidation, or share
exchange) or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any Person to do or seek any of the
foregoing. None of the Sellers will vote their Climax Shares in favor of any
such acquisition structured as a merger, consolidation, or share exchange. Each
Seller will notify Team immediately if any Person makes any proposal, offer,
inquiry, or contact to them or it with respect to any of the foregoing.
35
<PAGE> 43
6.8. Audit. Sellers shall, as promptly as practicable after the date
of this Agreement, cause Climax and the Subsidiaries to cause an audit (the
"Audit") to be conducted in accordance with generally accepted auditing
standards, of the books, records, and financial statements of Climax and the
Subsidiaries as of and for each of the fiscal years ended December 31, 1996 and
December 31, 1997. The Audited Financial Statements (hereinafter defined) shall
be prepared with respect to such two years in accordance with the accounting
policies and procedures customarily followed by Climax and its Subsidiaries, so
long as such policies and procedures are in accordance with GAAP in all material
respects. As used in this Agreement, "Audited Financial Statements" shall mean
for Climax and the Subsidiaries (a) an audited consolidated balance sheet as of
December 31, 1996 and 1997, (b) an audited consolidated statement of operations
and cash flows as of the end of and for the fiscal years ended December 31, 1996
and December 31, 1997 and (c) an audited consolidated statement of changes in
stockholders equity as of the end of and for the fiscal years ended December 31,
1996 and December 31, 1997. The Audit will be conducted by Maginnis & Carey, LLP
(the "Climax Auditor"), a firm of independent certified public accountants which
has previously been engaged by Climax and which is located in Portland, Oregon.
The Seller shall cause the Climax Auditor to provide Team with the Audited
Financial Statements and with its written report ("Audit Report") with respect
to the Audit and the Audited Financial Statements promptly after the completion
thereof. The Seller shall also cause the Climax Auditor to consent to the use of
the Audited Financial Statements by Team in connection with filings with
appropriate governmental authorities, including the SEC. The fees and expenses
of such accounting firm shall be paid by Team. The Sellers agree to cause the
officers, directors, employees, accountants and attorneys of Climax and the
Subsidiaries to cooperate with Team and its respective officers, accountants and
other representatives at all reasonable times and in all material respects
during the conduct of the Audit.
6.9. ESOP Contribution. Immediately prior to the Closing, the
Benhams shall cause Climax to contribute $100,000 to the ESOP (the "ESOP
Contribution"), which shall be allocated as an employer contribution for 1998 in
addition to any amounts otherwise contributed and allocated for 1998.
6.10. Alsana Bonus. Immediately prior to the Closing, the Benhams
shall cause Climax to pay to Terry W. Weigel and Phillip R. Edin a total bonus
of $50,000 each (the "Alsana Bonus").
7. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
7.1. General. In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action
36
<PAGE> 44
(including the execution and delivery of such further instruments and documents)
as any other Party reasonably may request, all at the sole cost and expense of
the requesting Party (unless the requesting Party is entitled to indemnification
therefor under Section 9 below). The Sellers acknowledge and agree that from and
after the Closing Team will be entitled to possession of all documents, books,
records (including Tax records), agreements, and financial data of any sort
relating to Climax and its Subsidiaries; provided, however, nothing herein is
intended to waive the attorney-client privilege of any of Sellers, and from and
after the Closing Date, neither Team, Climax, or any of their respective
Affiliates, directly or indirectly, shall have access to or scrutiny over any of
the books, files, documents and records, of any of the Sellers' attorneys,
accountants, or advisers; provided further, however, that the Benhams agree to
segregate, and the Benhams agree to cause their counsel to segregate, the books,
files, documents and records of the Benhams in the Benhams' and their counsel's
possession from the books, files, documents and records of Climax and its
Subsidiaries in the Benhams' and their counsel's possession.
7.2. Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving any of Climax and its Subsidiaries, each of the
other Parties will cooperate with him or it and his or its counsel in the
contest or defense, make available their personnel, and provide such testimony
and access to their books and records as shall be necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Section 9 below).
7.3. Transition. None of the Sellers will take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of any of Climax and its
subsidiaries from maintaining the same business relationships with Climax and
its Subsidiaries after the Closing as it maintained with Climax and its
Subsidiaries prior to the Closing. Each of the Sellers will refer all customer
inquiries relating to the businesses of Climax and its Subsidiaries to Team from
and after the Closing.
7.4. Confidentiality. Each of the Sellers will treat and hold as
such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to Team or destroy, at the request and option of Team, all tangible
embodiments (and all copies) of the Confidential Information which are in his or
its possession. In the event that any of the Sellers is requested or required
(by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information,
37
<PAGE> 45
that Seller will notify Team promptly of the request or requirement so that Team
may seek an appropriate protective order or waive compliance with the provisions
of this Section 7.4. If, in the absence of a protective order or the receipt of
a waiver hereunder, any of the Sellers is, on the advice of counsel, compelled
to disclose any Confidential Information to any tribunal or else stand liable
for contempt, that Seller may disclose the Confidential Information to the
tribunal; provided, however, that the disclosing Seller shall use his or its
reasonable best efforts to obtain, at the reasonable request of Team, an order
or other assurance that confidential treatment will be accorded to such portion
of the Confidential Information required to be disclosed as Team shall
designate. The foregoing provisions shall not apply to any Confidential
Information which is generally available to the public immediately prior to the
time of disclosure.
7.5. Team Stock. Each certificate for shares of Team Stock to be
issued hereunder will be imprinted with a legend substantially in the following
form:
The shares represented by this certificate have not been
registered under the Securities Act of 1933 ("Act") or any
other securities statute, and no reoffer, sale, transfer,
pledge or other disposition thereof may be made unless the
shares are registered under the Act and any other applicable
statute, or, in the written opinion of counsel reasonably
satisfactory to the issuer, such transaction will not require
registration under the Act or any other securities statute.
Full statements of the designations, preferences, limitations
and relative rights of the shares of each class of authorized
stock of Team, the variations in the relative rights and
preferences of the shares of any series of Preferred Stock so
far as the same have been fixed and determined, and the
authority of the Board of Directors to fix and determine the
relative rights and preferences each series thereof, and of the
denial of the preemptive rights of shareholders to acquire
unissued or treasury shares of Team, are set forth in the
Articles of Incorporation of the Team, as amended, which are on
file in the Office of the Secretary of State of the State of
Texas, copies of which may be obtained without charge on
written request to Team at its principal place of business or
registered office.
7.6. [Intentionally Deleted.]
7.7. June 30, 1998 Audited Balance Sheet.
38
<PAGE> 46
7.7.1 As promptly as practical after the Closing Date, Team
shall cause a Consolidated Balance Sheet as of June 30, 1998 to be prepared for
Climax and its Subsidiaries and shall cause Deloitte & Touche, LLP ("Team's
Auditor") to audit the June 30, 1998 Balance Sheet ("June 30, 1998 Audited
Balance Sheet"). Team's Auditor shall conduct the audit of the June 30, 1998
Balance Sheet in accordance with generally accepted auditing standards. The June
30, 1998 Audited Balance Sheet shall be prepared and audited using the
accounting policies and procedures customarily followed by Climax and its
Subsidiaries, so long as such policies and procedures are in accordance with
GAAP in all material respects. Team waives and releases any claim, and shall
have no right to indemnification under Section 9 of this Agreement for a breach
of the representation in Section 5.7 above concerning the Most Recent Balance
Sheet, with respect to any item that results in an adjustment to the Purchase
Price pursuant to this Section 7.7, to the extent of such adjustment.
7.7.2 Within 30 days after receipt of the June 30, 1998
Audited Balance Sheet, either Seller shall inform Team in writing that either
the June 30, 1998 Audited Balance Sheet is acceptable or object to the June 30,
1998 Audited Balance Sheet in writing setting forth a specific description the
Seller's objections (it being agreed that the failure of a Seller to deliver
such written notice to Team within such 30-day period shall be deemed acceptance
by such Seller). If a Seller objects as provided above and if Team does not
agree with the Seller's objections, if any (it being agreed that the failure of
Team to deliver written notice to the objecting Seller of Team's disagreement
with the objecting Seller's objections within 15 days of Team's receipt of the
objecting Seller's objections shall be deemed acceptance by Team), or such
objections are not resolved on a mutually agreeable basis within 15 days after
Team's receipt of the objecting Seller's objections, any such disagreement shall
be promptly submitted to arbitration in accordance with Section 11.15 of this
Agreement; provided, however, that the neutral arbitrator shall be an
independent accounting firm agreed upon by Team's Auditor on behalf of Team and
by Climax's Auditor on behalf of the objecting Seller(s) or, if they cannot
agree on a single neutral arbitrator, a panel of three neutral arbitrators
consisting of one neutral arbitrator selected by Team's Auditor and a second
neutral arbitrator selected by Climax's Auditor, and a third neutral arbitrator
selected by the first two neutral arbitrators in accordance with Section
11.15.4. A neutral arbitrator agreed upon or selected by Team's Auditor or by
Climax's Auditor shall be a member in good standing of the American Institute of
Certified Public Accountants SEC Practice Division. The arbitrators'
determination shall be limited to whether the June 30, 1998 Audited Balance
Sheet was prepared by Climax and audited by the Team Auditor in accordance with
instructions set forth in this Section 7.7. Team shall bear one-half of the
fees, costs and expenses arising under and relating to such arbitration and each
objecting Seller shall bear a proportion of the other one-half of such fees,
costs and expenses determined by dividing the objecting Seller's number of
Climax Shares by the total number of Climax Shares of all objecting Sellers.
Team and each objecting Seller shall bear the fees, costs and expenses of his,
her or its own accountants and representatives.
39
<PAGE> 47
Upon resolution of any and all disputes concerning the June 30, 1998 Audited
Balance Sheet, the determination of the June 30, 1998 Audited Balance Sheet
shall be deemed to be final.
7.7.3 In the event that the Shareholders' Equity, as
reflected by the June 30, 1998 Audited Balance Sheet of Climax and its
Subsidiaries, is less ("Net Worth Deficit") than the Shareholders' Equity as
reflected by the Most Recent Balance Sheet (as adjusted in the manner set forth
on Exhibit G), the Purchase Price for the Climax Shares, as provided in Section
2.2 of this Agreement and as reflected by Exhibit A, shall be retroactively
reduced by the amount of such Net Worth Deficit, and the amount of such Net
Worth Deficit shall be recovered by Team out of the Escrowed Property in
accordance with each Escrow Agreement. In the event that the Shareholders'
Equity, as reflected by the June 30, 1998 Audited Balance Sheet of Climax and
its Subsidiaries, is more ("Net Worth Surplus") than the Shareholders' Equity as
reflected on the Most Recent Balance Sheet (as adjusted in the manner set forth
on Exhibit G), the Purchase Price for the Climax Shares, as provided in Section
2.2 of this Agreement and as reflected by Exhibit A, shall be retroactively
increased by the amount of the Net Worth Surplus, and within one business day,
Team shall pay to the Sellers the amount of such difference in Cash by wire
transfer of immediately available funds. The Net Worth Deficit shall be borne by
each Seller in the ratio that the number of Climax Shares held by such Seller
bears to all of the Climax Shares purchased hereunder by Team. Each Seller shall
receive that portion of the Net Worth Surplus in accordance with the ratio of
the number of Climax Shares held by such Seller bears to all of the Climax
Shares purchased hereunder by Team. Notwithstanding anything to the contrary
herein contained, the calculation of a Net Worth Deficit or Net Worth Surplus
shall (i) add back losses at Alsana to the extent such losses are attributable
to any inventory adjustments and goodwill write-off (other than normal
amortizations) at Alsana; (ii) add back any other losses at Alsana up to an
amount equal to $85,000; and (iii) recognize the effect of any losses not
attributable to the sources described in (i) at Alsana in excess of the amount
described in (ii) only for the purpose of offsetting the effect of gains shown
on the income statement related to the consolidated June 30, 1998 Audited
Balance Sheet from the operations of Climax, Climax Leasing, Inc., Climax
International II, Inc., and Climax Rental Venture LLC (i.e., excluding all
operations of Alsana) and not recognize such losses to the extent they
contribute to a Net Worth Deficit after such gains are entirely offset. All
adjustments contemplated in the immediately preceding sentence shall be made net
of their tax effect.
8. Conditions to Obligation to Close.
8.1. Conditions to Obligation of Team. The obligation of Team to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
40
<PAGE> 48
8.1.1. each of the Seller's representations and warranties
set forth in Section 3.1 and Section 5 above shall be true and correct
in all material respects at and as of the Closing Date;
8.1.2. each of the Sellers shall have performed and complied
with all of his, hers or its covenants hereunder in all material
respects through the Closing;
8.1.3. Climax and its Subsidiaries shall have procured all
of the third party consents specified in Section 6.2 above;
8.1.4. no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of Team to own Climax
Shares and to control Climax and its Subsidiaries, or (D) affect
adversely the right of any of Climax and its Subsidiaries to own its
assets and to operate its businesses (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
8.1.5. each of the Sellers shall have delivered to Team a
certificate to the effect that each of the conditions specified above
in Sections 8.1.1 through 8.1.4 is satisfied in all respects, as such
conditions apply to such Seller;
8.1.6. the Parties, Climax, and its Subsidiaries shall have
received all required authorizations, consents, and approvals, if any,
of governments and governmental agencies;
8.1.7. the relevant parties (other than Climax) shall have
entered into employment agreements in form and substance as set forth
in Exhibits C-1 through C-3 attached hereto and the same shall be in
full force and effect;
8.1.8. Team shall have received from counsel to the Benhams
an opinion in form and substance as set forth in Exhibit D-1 attached
hereto, addressed to Team, and dated as of the Closing Date;
41
<PAGE> 49
8.1.9. Team shall have received from counsel to the ESOP an
opinion in form and substance as set forth in Exhibit D-2 attached
hereto, addressed to Team, and dated as of the Closing Date;
8.1.10. Team shall have received the resignations, effective
as of the Closing, of each director and officer of Climax and its
Subsidiaries other than those whom Team shall have specified in writing
prior to the Closing;
8.1.11. Each of the Sellers and the Escrow Agent shall have
entered into a separate Escrow Agreement substantially in the form
attached to this Agreement as Exhibit F (the "Escrow Agreement"); and
8.1.12. all actions to be taken by the Sellers in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Team.
Team may waive any condition specified in this Section 8.1 if it executes a
writing so stating at or prior to the Closing.
8.2. Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
8.2.1. the representations and warranties set forth in
Section 3.2 above shall be true and correct in all material respects at
and as of the Closing Date;
8.2.2. Team shall each have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
8.2.3. no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
42
<PAGE> 50
8.2.4. Team shall have delivered to the Sellers a
certificate to the effect that each of the conditions specified above
in Sections 8.2.1 through 8.2.3 is satisfied in all respects;
8.2.5. Team and the Escrow Agent shall have entered into a
separate Escrow Agreement with each of the Sellers; and
8.2.6. the Parties shall have received all required
authorizations, consents, and approvals of governments and governmental
agencies, if any;
8.2.7. as a condition solely with respect to the ESOP,
Climax shall have contributed $100,000 to the ESOP;
8.2.8. as a condition solely with respect to the Benhams,
Team shall have entered into the Employment Agreement in form and
substance as set forth in Exhibits C-1 and the same shall be in full
force and effect;
8.2.9. as a condition solely with respect to the Edin Trust,
Team shall have entered into the Employment Agreement in form and
substance as set forth in Exhibits C-2 and the same shall be in full
force and effect;
8.2.10. as a condition solely with respect to Weigel, Team
shall have entered into the Employment Agreement in form and substance
as set forth in Exhibits C-3 and the same shall be in full force and
effect;
8.2.11. the Sellers shall have received from counsel to Team
an opinion in form and substance as set forth in Exhibit E attached
hereto, addressed to the Sellers, and dated as of the Closing Date; and
8.2.12. all actions to be taken by Team in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Sellers.
The Sellers may waive any condition specified in this Section 8.2 if they
execute a writing so stating at or prior to the Closing.
43
<PAGE> 51
9. Remedies for Breaches of This Agreement.
9.1. Survival of Representations and Warranties. All of the
representations and warranties of Team and the Benhams contained in this
Agreement shall survive the Closing hereunder (unless the damaged Party had
Knowledge of any misrepresentation or breach of the representation or warranty
at the time of Closing) and continue in full force and effect thereafter for a
period of one year, except for the representations and warranties contained in
Sections 3.1 and 3.2, Sections 5.1 through 5.6, and Section 5.11, which shall
survive the Closing hereunder and continue in full force and effect thereafter,
subject to any applicable statutes of limitations. All of the representations
and warranties of the ESOP, the Edin Trust and Weigel contained in this
Agreement, including those in Sections 3.1 and 5 above, shall survive the
Closing hereunder (unless Team had Knowledge of any misrepresentation or breach
of the representation or warranty at the time of Closing) and continue in full
force and effect for a period of one year.
9.2. Indemnification Provisions for Benefit of Team.
9.2.1. In the event the Sellers breach (or in the event any
third party alleges facts in writing that, if true, would mean the
Sellers breached) any of their representations or warranties contained
in Section 5 of this Agreement (other than representations or
warranties relating to Alsana) or covenants contained in this
Agreement, and provided that the particular representation, warranty,
or covenant survives the Closing and that Team makes a written claim
for indemnification against the Sellers pursuant to Section 11.7 below
within the applicable survival period, then the Sellers agree to
indemnify Team from and against the entirety of any Adverse
Consequences Team may suffer through and after the date of the claim
for indemnification resulting from, arising out of, relating to, in the
nature of, or caused by the breach (or alleged breach); provided,
however, that the Sellers shall not have any obligation to indemnify
Team from and against any such Adverse Consequences, resulting from,
arising out of, relating to, in the nature of, or caused by the breach
of any representation or warranty of the Sellers contained in Section 5
of this Agreement (other than representations or warranties relating to
Alsana), (i) less than $3,000 and (ii) until the aggregate of all such
claims against the Sellers for Adverse Consequences in excess of $3,000
exceeds $100,000, and then only for the amount by which such Adverse
Consequences resulting from, arising out of, relating to, in the nature
of, or caused by the breach of any representation, warranty, or
covenant of the Sellers contained in Section 5 of this Agreement (other
than representations and warranties relating to Alsana) exceeds
$100,000.
9.2.2. In the event the Sellers breach (or in the event any
third party alleges facts in writing that, if true, would mean the
Sellers breached) any of their representations or warranties contained
in Section 5 of this Agreement relating to Alsana, and provided that
the particular representation or warranty survives the Closing and that
Team makes a
44
<PAGE> 52
written claim for indemnification against the Sellers pursuant to
Section 11.7 below within the applicable survival period, then the
Sellers agree to indemnify Team from and against the entirety of any
Adverse Consequences Team may suffer through and after the date of the
claim for indemnification resulting from, arising out of, relating to,
in the nature of, or caused by the breach (or alleged breach);
provided, however, that the Sellers shall not have any obligation to
indemnify Team from and against any such Adverse Consequences,
resulting from, arising out of, relating to, in the nature of, or
caused by the breach of any representation or warranty of the Sellers
contained in Section 5 of this Agreement relating to Alsana, (i) less
than $3,000 and (ii) until the aggregate of all such claims against the
Benhams for Adverse Consequences in excess of $3,000 exceeds $100,000,
and then only for the amount by which such Adverse Consequences
resulting from, arising out of, relating to, in the nature of, or
caused by the breach of any representation or warranty of the Sellers
contained in Section 5 of this Agreement relating to Alsana exceeds
$100,000.
9.2.3. Notwithstanding anything in Section 9.2.1 or Section
9.2.2 above to the contrary, and subject to the other terms and
conditions of this Section 9, each Seller will be responsible to
indemnify Team for the entirety of any Adverse Consequences Team may
suffer as a result of any breach of his, her or its covenant in Section
2 above and his, her or its representations and warranties in Section
3.1 above concerning the transaction. Each Seller will be responsible
to indemnify Team for any Adverse Consequences Team may suffer as a
result of the breach by such Seller of any other covenant or
representation and warranty contained in Section 5 of this Agreement in
the ratio that the number of Climax Shares held by such Seller bears to
all of the Climax Shares purchased hereunder by Team.
9.3. Indemnification Provisions for Benefit of the Sellers. In the
event Team breaches (or in the event any third party alleges in writing facts
that, if true, would mean Team has breached) any of its representations,
warranties, and covenants contained herein, then Team agrees to indemnify each
of the Sellers from and against the entirety of any Adverse Consequences the
Seller may suffer through and after the date of the claim for indemnification
resulting from, arising out of, relating to, in the nature of, or caused by the
breach (or the alleged breach).
9.4. Matters Involving Third Parties. If any third party shall
notify any Party (the "Indemnified Party") with respect to any matter (a "Third
Party Claim") which may give rise to a claim for indemnification against any
other Party (the "Indemnifying Party") under this Section 9, then the
Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced.
45
<PAGE> 53
9.5. Defense of Third Party Claims. Any Indemnifying Party will have
the right to defend the Indemnified Party against the Third Party Claim with
counsel of its choice reasonably satisfactory to the Indemnified Party so long
as (A) the Indemnifying Party notifies the Indemnified Party in writing within
10 days after the Indemnified Party has given notice of the Third Party Claim
that the Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by the Third Party Claim, (B) the Indemnifying Party provides the Indemnified
Party with evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder, (C) the Third
Party Claim involves only money damages and does not seek an injunction or other
equitable relief, (D) settlement of, or an adverse judgment with respect to, the
Third Party Claim is not, in the good faith judgment of the Indemnified Party,
likely to establish a precedential custom or practice adverse to the continuing
business interests of the Indemnified Party, and (E) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently. So long
as the Indemnifying Party is conducting the defense of the Third Party Claim in
accordance with the foregoing, (A) the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in the defense of the
Third Party Claim, (B) the Indemnified Party will not consent to the entry of
any judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party (not to be withheld
unreasonably), and (C) the Indemnifying Party will not consent to the entry of
any judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (not to be withheld
unreasonably). In the event any of the aforesaid conditions in this Section 9.5
fail and/or cease to be satisfied, (A) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (B) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (C) the Indemnifying Parties will
remain responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Section 9.
9.6. Indemnification Payments Deemed to be Adjustments to Purchase
Price. All indemnification payments under this Section 9 shall be deemed
adjustments to the Purchase Price.
9.7. Indemnification for Certain Alsana Litigation. A Subsidiary of
Climax, Alsana, is currently the subject of that certain complaint for
infringement of patent, Case No. CIV S-98-0911 FCD PAN, under the style Tri Tool
Inc. v. Climax Portable Machine Tools, Inc., et al., in
46
<PAGE> 54
the United States District Court for the Eastern District of California (the
"Alsana Litigation"). Climax recently acquired its equity ownership of Alsana
under the terms and conditions of the Alsana Documents. Each Seller agrees to
indemnify Team from and against the entirety of any Adverse Consequences Team
may suffer from and after the Closing Date resulting from, arising out of,
relating to, in the nature of, or caused by the Alsana Litigation. A condition
precedent to Team's exercise of its right to seek indemnity from the Sellers for
the Alsana Litigation shall be Team's causing Climax to exercise its rights to
set-off and seek indemnity from Alan S. Avis, Jr. under the Alsana Documents.
Team shall not seek indemnity from the Sellers for the Alsana Litigation,
including for the costs and expenses incurred pursuing the rights and remedies
contemplated by the preceding sentence, until Team has used all reasonable
efforts to pursue such rights and remedies contemplated by the preceding
sentence. Team shall not, and shall cause Climax and Alsana not to, pay any
amount or amounts in settlement of or in connection with the Alsana Litigation
unless Team has a reasonable basis for concluding that all such amount or
amounts paid shall not exceed the Adverse Consequences that could result from
the Alsana Litigation. Each Seller will be responsible to Team for the indemnity
contained in this Section 9.7 in the ratio that the number of Climax Shares held
by such Seller bears to all of the Climax Shares purchased hereunder by Team.
9.8. Limit on Liability. Notwithstanding any provision contained
herein to the contrary, (i) the limit of the aggregate liability of the ESOP
under this Section 9 shall be the Purchase Price (as adjusted under Section 7.7)
for the ESOP's Climax Shares less $1,109,966; (ii) the limit of the aggregate
liability of the Edin Trust under this Section 9 shall be the Purchase Price (as
adjusted under Section 7.7) for the Edin Trust's Climax Shares less $48,620;
(iii) the limit of the aggregate liability of Weigel under this Section 9 shall
be the Purchase Price (as adjusted under Section 7.7) for Weigel's Climax Shares
less $25,740; and, (iv) the limit of the aggregate liability of the Benhams
under this Section 9 shall be the Purchase Price (as adjusted under Section 7.7)
for the Benhams' Climax Shares. A Seller shall not have any obligation to
indemnify Team from and against any Adverse Consequences resulting from, arising
out of, or relating to, in the nature of, or caused by the breach of a covenant
contained in this Agreement if such Seller is not the breaching Seller.
9.9. Other Indemnification Provisions. Team agrees that the
foregoing indemnification provisions in this Section 9 shall be the exclusive
remedy of Team for any breach of the representations, warranties, or the
covenants of any of the Sellers in this Agreement. Each of the Sellers hereby
agrees that he or it will not make any claim for indemnification against any of
Climax and its Subsidiaries by reason of the fact that he or it was a director,
officer, employee, or agent of any such entity or was serving at the request of
any such entity as a partner, trustee, director, officer, employee, or agent of
another entity (whether such claim is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses, or otherwise and
47
<PAGE> 55
whether such claim is pursuant to any statute, charter document, bylaw,
agreement, or otherwise) with respect to any action, suit, proceeding,
complaint, claim, or demand brought by Team against such Seller (whether such
action, suit, proceeding, complaint, claim, or demand is pursuant to this
Agreement, applicable law, or otherwise).
9.10. Assignment of Rights Under Alsana Documents. To the extent that
Team seeks and receives indemnity from the Sellers relating to Adverse
Consequences under Section 9.2.2 above without having first exercised and
received the benefit of Climax' and Alsana's rights of set-off and to seek
indemnity from Alan S. Avis, Jr. under the Alsana Documents, then, upon the
written request of either Seller, Team shall cause Climax and Alsana to assign
to such Seller their respective rights to set-off and to seek indemnity from
Alan S. Avis, Jr. under the Alsana Documents.
10. Termination.
10.1. Termination of Agreement. This Agreement may be terminated as
provided below:
10.1.1. Team and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
10.1.2. Team may terminate this Agreement pursuant to the
provisions of Section 4 above;
10.1.3. Team may terminate this Agreement by giving written
notice to the Sellers on or before the 10th day following the later
date to occur of the Delivery Date or the date of the delivery to Team
of the Audit Report pursuant to Section 6.8 above if it is not
reasonably satisfied with the results of its continuing business,
legal, and accounting due diligence regarding Climax and its
Subsidiaries;
10.1.4. Team may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing (A) in the event
any of the Sellers has breached any material representation, warranty,
or covenant contained in this Agreement in any material respect, Team
has notified the Sellers of the breach, and the breach has continued
without cure for a period of five days after the notice of breach or
(B) if the Closing shall not have occurred on or before August 31,
1998, by reason of the failure of any condition precedent under Section
8.1 hereof (unless the failure results primarily from Team breaching
any representation, warranty, or covenant contained in this Agreement);
and
48
<PAGE> 56
10.1.5. the Sellers may terminate this Agreement by giving
written notice to Team at any time prior to the Closing (A) in the
event Team has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, any of
the Sellers has notified Team of the breach, and the breach has
continued without cure for a period of five days after the notice of
breach or (B) if the Closing shall not have occurred on or before
August 31, 1998, by reason of the failure of any condition precedent
under Section 8.2 hereof (unless the failure results primarily from any
of the Sellers themselves breaching any representation, warranty, or
covenant contained in this Agreement).
10.2. Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10.1 above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
except for any Liability of any Party then in breach.
11. Miscellaneous.
11.1. Press Releases and Public Announcements. Sellers shall not
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of Team. Team shall,
promptly after the execution of this Agreement by the Parties, issue a press
release and make such public disclosure with respect to the Agreement as it
believes in good faith is appropriate and/or is required by applicable law or
any listing or trading agreement concerning its publicly-traded securities and
will use its reasonable best efforts to timely provide the Sellers with a copy
of such press release and public announcement.
11.2. No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
11.3. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
11.4. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of Team and the Sellers; provided, however, that Team may (i)
assign any or all of its rights and interests hereunder to a wholly-owned
subsidiary and (ii) designate a wholly-owned subsidiary to perform its
obligations hereunder (in any or all of which cases under Section 11.4(i) or
Section 11.4(ii), Team nonetheless shall remain
49
<PAGE> 57
unconditionally and absolutely responsible for the full and immediate
performance of all of its and/or its assignee's obligations hereunder).
11.5. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
11.6. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.7. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
50
<PAGE> 58
<TABLE>
<S> <C>
If to the Sellers: Copy to:
Mr. and Mrs. R. LeRoy Benham Greene & Markley, P.C.
Climax Portable Machine Tools, Inc. The 1515 Building, Suite 600
2712 E. Second Street 1515 S.W. Fifth Avenue
Newberg, Oregon 97132-8210 Portland, Oregon 97201
Tel: 503-538-2185 Attn: Mr. Ward Greene
Fax: 503-538-7600 Tel: 503-295-2668
Fax: 503-224-8434
Climax Portable Machine Tools, Inc. Stoel Rives LLP
Employee Stock Ownership Plan Trust 900 SW Fifth Avenue, Suite 2300
2712 F. Second Street Portland, Oregon 97204
Newberg, Oregon 97132-8210 Attn: Mr. Gregory Macpherson
Attn: Phillip R. Edin, Trustee Tel: 503-294-9205
Terry W. Weigel, Trustee Fax: 503-220-2480
Tel: 503-538-2185
Fax: 503-538-7600
Phillip R. Edin, Trustee Davis Wright Tremaine LLP
The Phillip R. Edin Living Trust Suite 2300
1102 N. Springbrook Road, No. 252 1300 S.W. Fifth Avenue
Newberg, Oregon 97132 Portland, Oregon 97201-5682
Attn: Carmen J. SantaMaria
Mr. Terry W. Weigel Tel: 503-241-2300
15732 S.E. Cordova Court Fax: 503-778-5299
Milwaukie, Oregon 97267
</TABLE>
51
<PAGE> 59
<TABLE>
<S> <C>
If to Team: Copy to:
Team, Inc. Chamberlain, Hrdlicka, White,
200 Hermann Drive Williams & Martin
Alvin, Texas 77511 1200 Smith Street, Suite 1400
P.O. Box 123 Houston, Texas 77002-4310
Alvin, Texas 77512-0123 Attn: Mr. Sidney B. Williams
Attn: Mr. Kenneth M. Tholan, President Tel: 713-658-2516
Tel: 281-388-5507 Fax: 713-658-2553
Fax: 281-388-5583
</TABLE>
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, or ordinary mail), but no such notice, request, demand, claim,
or other communication shall be deemed to have been duly given unless and until
it actually is received by the intended recipient. Any Party may change the
address to which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Parties notice in the manner
herein set forth.
11.8. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Oregon without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Oregon or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Oregon.
11.9. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Team
and the Sellers. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
11.10. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
11.11. Expenses. Except as otherwise provided in this Agreement, each
of the Parties, Climax and the Subsidiaries will bear his, her or its own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated
52
<PAGE> 60
hereby. The Sellers agree that none of Climax and its Subsidiaries has borne or
will bear any of the Sellers' costs and expenses (including any of their legal
fees and expenses) in connection with this Agreement or any of the transactions
contemplated hereby; provided, however, to the extent that Climax or any of its
Subsidiaries has borne such costs and expenses, the Sellers agree (i) to cause
such costs and expenses to be paid to Climax or such Subsidiary out of the
Purchase Price in Cash at the Closing, or (ii) to reimburse Climax or such
Subsidiary for such costs and expenses by Cash payment at the Closing.
11.12. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
11.13. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
11.14. Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 11.15 below), in addition to any other remedy to which they may
be entitled, at law or in equity.
11.15. Arbitration. All disputes, controversies or claims arising out
of the transaction evidenced by this Agreement, or between or among the Parties
hereto, including but not limited to those arising out of or relating to this
Agreement or any related instruments, agreements, or documents, including any
claim from an alleged tort, shall be determined by binding arbitration in
53
<PAGE> 61
accordance with the Federal Arbitration Act (or if not applicable, the
applicable state law), the Rules of Practice and Procedure for the Arbitration
of Commercial Disputes of the American Arbitration Association or any successor
thereof ("AAA"), and the "Special Rules" set forth below. In the event of any
inconsistency, the Special Rules shall control. Judgment upon any arbitration
award may be entered in any court having jurisdiction. Any Party to this
agreement or any related instruments, agreements, or documents may bring an
action, including a summary or expedited proceeding, to compel arbitration of
any controversy or claim to which this agreement applies in any court having
jurisdiction over such action.
11.15.1. Special Rules. The following "Special Rules" shall
apply to all arbitrations hereunder:
11.15.2. Commencement. All arbitration hearings will be
commenced within 90 days of the demand for arbitration; further, the arbitrator
shall only, upon a showing of cause, be permitted to extend the commencement of
such hearing for up to an additional 60 days.
11.15.3. Three Arbitrators. The arbitration shall be
conducted before a tribunal composed of three neutral arbitrators each of whom
shall sign an oath agreeing to be bound by the code of ethics for arbitrators in
commercial disputes promulgated by the AAA for neutral arbitrators. Each Party
shall appoint an arbitrator, obtain its appointee's acceptance of such
appointment, and deliver written notification of such appointment and acceptance
to the other Party within 30 days after delivery of the notice of arbitration.
11.15.4. Appointment of Chairman. The two Party-appointed
arbitrators shall jointly appoint the third arbitrator from the AAA "blue
ribbon" panel for commercial disputes. If the appointment of the third
arbitrator is not effected within 30 days, then, upon the joint request of the
Parties or the request of either of them, the appointing authority shall appoint
the third arbitrator, obtain acceptance of such appointment and acceptance. The
third arbitrator shall serve as the chairman of the tribunal.
11.15.5. Qualifications of Chairman. The chairman shall be a
lawyer admitted to the bar of the State of Oregon who shall have practiced for
at least 12 years, shall speak, read and write the English language fluently,
shall have expertise in commercial litigation, and be either a former judicial
officer or an active partner in a law firm of no less than 50 lawyers.
11.15.6. Unavailability of Blue Ribbon Panelists. If for any
reason members of the blue ribbon panel are not available to serve as
arbitrators or as chairman, then other commercial arbitrators of the AAA may
serve, provided that preference shall be given to former judicial officers or
active partners or shareholders in a law firm of no less than 50 lawyers with
expertise in commercial litigation.
54
<PAGE> 62
11.15.7. Impartiality. It is the intent of the Parties to
avoid the appearance of impropriety due to bias or partiality on the part of any
arbitrator. Prior to his or her formal appointment, each arbitrator shall
disclose to the Parties and to the other members of the tribunal, any financial,
fiduciary, kinship or other relationship between that arbitrator and any Party
or its counsel, or between that arbitrator and any individual or entity with any
financial, fiduciary, kinship or other relationship with any Party. For the
purpose of this Agreement, "appearance of impropriety" shall be defined as such
relationship or behavior as would cause a reasonable person to believe that bias
or partiality on the part of the arbitrator may exist in favor of any Party.
11.15.8. Written Opinion. Any award or portion thereof,
whether preliminary or final, shall be in a written opinion containing findings
of fact and conclusions of law signed by each arbitrator. The arbitrator
dissenting from an award or portion thereof shall issue a dissent from the award
or portion thereof in writing, stating the reasons for his dissent.
11.15.9. Framing of Issues. The notice of arbitration shall
contain a statement of any dispute in sufficient detail to apprise the other
party of (i) the nature and scope of each dispute, (ii) the initiating party's
position and (iii) the relief sought. Each other party shall, within 45 days
after receipt of the notice, or within such other period of time as the parties
may agree, deliver its answer to the initiating party, which shall contain its
statement of the dispute, its positions and any counterclaims and the relief
that it seeks. The initiating party shall then have 45 days, or such other
period of time as the parties may agree, to deliver its reply to any
counterclaim raised in the answer. No amendments to the notice, answer or reply
shall be permitted without the consent of the other parties or of the
arbitrators.
11.15.10. Discovery. The Parties agree that discovery shall
be handled expeditiously. The Parties shall be entitled to a reasonable number
of depositions, the final number which may be decided by the arbitrators if the
Parties cannot agree. Interrogatories and requests for production may be used by
the Parties under the Federal Rules of Civil Procedure. All disputes regarding
discovery shall be promptly resolved by the arbitrators.
11.15.11. Locale. The locale for the arbitration shall be in
Portland, Oregon unless otherwise agreed by the Parties.
11.15.12. Reservation of Rights. Nothing in this arbitration
provision shall be deemed to limit the applicability of any otherwise applicable
statutes of limitation or repose and any waivers contained in this Agreement.
55
<PAGE> 63
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
TEAM:
TEAM, INC.
By: /s/ KENNETH M. THOLAN
--------------------------------------------
Kenneth M. Tholan, President
THE BENHAMS:
/s/ R. LEROY BENHAM
-----------------------------------------------
R. LeRoy Benham
/s/ PAULA BENHAM
-----------------------------------------------
Paula Benham
THE ESOP:
CLIMAX PORTABLE
MACHINE TOOLS, INC. EMPLOYEE
STOCK OWNERSHIP PLAN TRUST
By: /s/ PHILLIP R. EDIN
--------------------------------------------
Phillip R. Edin, Trustee
By: /s/ TERRY W. WEIGEL
--------------------------------------------
Terry W. Weigel, Trustee
By: /s/ R. LEROY BENHAM
--------------------------------------------
R. LeRoy Benham, Trustee
56
<PAGE> 64
THE EDIN TRUST:
The Phillip Edin Living Trust
By: /s/ PHILLIP R. EDIN
--------------------------------------------
Phillip R. Edin, Sole Trustee
WEIGEL:
/s/ TERRY W. WEIGEL
-----------------------------------------------
Terry W. Weigel
57
<PAGE> 65
EXHIBIT A - SHAREHOLDERS
<TABLE>
<CAPTION>
Name of Seller Number of Climax Shares Held
by Such Seller
<S> <C>
R. LeRoy Benham 6,355
Paula Benham 6,355
The ESOP 7,762
Phillip R. Edin, Trustee of the Phillip Edin
Living Trust 340
Terry W. Weigel 180
</TABLE>
<PAGE> 1
EXHIBIT 2.2
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT ("Amendment") is
entered into on July 29, 1998, by and among TEAM, INC., a Texas corporation
("Team"), R. LEROY AND PAULA BENHAM, both of whom are individual residents of
the State of Oregon (the "Benhams"), THE CLIMAX PORTABLE MACHINE TOOLS, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST (the "ESOP"), which is a qualified plan
under Section 401(a) of the Code and an exempt trust under Section 501(a) of the
Code, PHILLIP R. EDIN, TRUSTEE OF THE PHILLIP EDIN LIVING TRUST u/t/a DATED
NOVEMBER 25, 1996, a trust created under the laws of the State of Oregon (the
"Edin Trust"), and TERRY W. WEIGEL, an individual resident of the State of
Oregon ("Weigel").
INTRODUCTION
The Parties entered into that certain Stock Purchase Agreement, dated
as of July 3, 1998 (the "Agreement"), which the Parties now desire to amend as
described below. Capitalized terms not otherwise defined in this Amendment shall
have the meanings given to them in the Agreement.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and for other good and valuable consideration, the Parties
agree as follows.
AGREEMENT
The Parties agree that the Delivery Date (as set forth in Section 4 of
the Agreement) shall be Wednesday, August 5, 1998. All other terms and
provisions of the Agreement shall continue in full force and effect, unaffected
by this Amendment.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
TEAM:
TEAM, INC.
By: /s/ KENNETH M. THOLAN
-----------------------------------
Kenneth M. Tholan, President
<PAGE> 2
THE BENHAMS:
/s/ R. LEROY BENHAM
--------------------------------------
R. LeRoy Benham
PAULA BENHAM
--------------------------------------
Paula Benham
THE ESOP:
CLIMAX PORTABLE
MACHINE TOOLS, INC. EMPLOYEE
STOCK OWNERSHIP PLAN TRUST
By: /s/ PHILLIP R. EDIN
-----------------------------------
Phillip R. Edin, Trustee
By: /s/ TERRY W. WEIGEL
-----------------------------------
Terry W. Weigel, Trustee
By: /s/ R. LEROY BENHAM
-----------------------------------
R. LeRoy Benham, Trustee
THE EDIN TRUST:
The Phillip Edin Living Trust
By: /s/ PHILLIP R. EDIN
-----------------------------------
Phillip R. Edin, Sole Trustee
2
<PAGE> 3
WEIGEL:
/s/ TERRY W. WEIGEL
--------------------------------------
Terry W. Weigel
3
<PAGE> 1
EXHIBIT 2.3
SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT ("Amendment") is
entered into on August 28, 1998, by and among TEAM, INC., a Texas corporation
("Team"), R. LEROY AND PAULA BENHAM, both of whom are individual residents of
the State of Oregon (the "Benhams"), THE CLIMAX PORTABLE MACHINE TOOLS, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST (the "ESOP"), which is a qualified plan
under Section 401(a) of the Code and an exempt trust under Section 501(a) of the
Code, PHILLIP R. EDIN, TRUSTEE OF THE PHILLIP EDIN LIVING TRUST u/t/a DATED
NOVEMBER 25, 1996, a trust created under the laws of the State of Oregon (the
"Edin Trust"), and TERRY W. WEIGEL, an individual resident of the State of
Oregon ("Weigel").
INTRODUCTION
The Parties entered into that certain Stock Purchase Agreement, dated
as of July 3, 1998, as amended by that certain First Amendment to Stock Purchase
Agreement, dated July 29, 1998 (the "Agreement"), which the Parties now desire
to amend as described below. Capitalized terms not otherwise defined in this
Amendment shall have the meanings given to them in the Agreement.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and for other good and valuable consideration, the Parties
agree as follows.
AGREEMENT
1. Acknowledgement and Consent to Sale of Alsana. The Parties acknowledge
that Climax has entered into that certain Alsana Stock Purchase Agreement, of
even date herewith, among Climax, Alsana Holdings, LLC, an Oregon limited
liability company ("Newco"), and R. LeRoy Benham (the "Alsana Agreement"), under
which Newco will on the Closing Date acquire all of the issued and outstanding
shares of capital stock of Alsana. The Parties further acknowledge and consent
to, and waive any breach of the Agreement caused by, the execution and delivery
of the Alsana Agreement and the consummation of the transactions contemplated
thereby.
2. Other Terms of Agreement Unaffected. Except as expressly modified
herein, the other terms and conditions contained in the Agreement shall continue
in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
TEAM:
TEAM, INC.
By: /s/ KENNETH M. THOLAN
--------------------------------------
Kenneth M. Tholan, President
THE BENHAMS:
/s/ R. LEROY BENHAM
-----------------------------------------
R. LeRoy Benham
/s/ PAULA BENHAM
-----------------------------------------
Paula Benham
THE ESOP:
CLIMAX PORTABLE
MACHINE TOOLS, INC. EMPLOYEE
STOCK OWNERSHIP PLAN TRUST
By: /s/ PHILLIP R. EDIN
--------------------------------------
Phillip R. Edin, Trustee
By: /s/ TERRY W. WEIGEL
--------------------------------------
Terry W. Weigel, Trustee
By: /s/ R. LEROY BENHAM
--------------------------------------
R. LeRoy Benham, Trustee
2
<PAGE> 3
THE EDIN TRUST:
The Phillip Edin Living Trust
By: /s/ PHILLIP R. EDIN
--------------------------------------
Phillip R. Edin, Sole Trustee
WEIGEL:
/s/ TERRY W. WEIGEL
-----------------------------------------
Terry W. Weigel
3
<PAGE> 1
EXHIBIT 2.4
Purchase of Shares from
-- ----
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into
effective as of July ___, 1998, by and between ____ ("Seller"), and TEAM, INC.,
a Texas corporation ("Buyer"). For the purposes of this Agreement, the Seller
and the Buyer are referred to herein collectively as the "Parties."
INTRODUCTION
Climax Portable Machine Tools, an Oregon corporation (the "Company")
now has a total of 24,235 shares of common stock, without par value, issued and
outstanding (the "Common Stock") and the Seller now owns of record and
beneficially an aggregate of __ shares of the Common Stock, all of which the
Seller proposes to sell under this Agreement. For the purposes of this Agreement
the __ shares of Common Stock to be sold by Seller under this Agreement shall be
referred to as the "Subject Stock." Therefore, the Parties, for the purposes and
considerations herein set forth and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by each of the Parties,
hereby agree as follows:
AGREEMENT
1. SALE AND PURCHASE. Subject to the terms, conditions,
representations, and warranties set forth in this Agreement, Seller hereby
agrees to sell, at the Closing, all of its right, title and interest, at law and
in equity, in and to the Subject Stock to the Buyer and the Buyer hereby agrees
to purchase, at the Closing, those rights, titles, and interests to the Subject
Stock from Seller.
2. PURCHASE PRICE AND CLOSING.
2.1 The purchase price to be paid to Seller by the Buyer
for the Subject Stock is $____ (or approximately $298.04 per share).
2.2 The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Greene &
Markley, P.C., The 1515 Building, Suite 600, 1515 S.W. Fifth Avenue,
Portland, Oregon, or such other place as the Parties to this Agreement
may mutually agree, at 9:00 a.m. on the second business day following
the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at
the Closing itself) or such other date as the Parties may mutually
determine; provided, however, that the Closing Date shall be no later
than August 31, 1998 (such date and time of Closing is herein called
the "Closing Date").
2.3 On the Closing Date, Buyer shall pay to Seller the
consideration for the purchase of the Subject Stock in cash. In
exchange, the Seller will deliver the certificate or certificates
evidencing the Subject Stock to Buyer, together with executed stock
powers assigning and conveying the Subject Stock to Buyer, as set forth
in subparagraph 2.4.
<PAGE> 2
2.4 On the Closing Date, Seller shall deliver to Buyer
the certificate or certificates evidencing the Subject Stock, duly
endorsed by Seller or accompanied by appropriate stock transfer powers
duly executed by Seller to Buyer. The certificate or certificates will
then be presented to the Company for registration and reissuance in the
name of Buyer.
3. REPRESENTATIONS AND WARRANTIES BY SELLER. Seller hereby
represents and warrants that the following is true and correct as of the date
hereof and will be true and correct as of the Closing Date:
3.1 Seller owns good and marketable legal and beneficial
title to the Subject Stock free and clear of any other liens,
encumbrances, adverse claims or options of any kind or nature. No other
liens, encumbrances, adverse claims or options of any kind or nature
have been created by Seller or are known by Seller to exist with
respect to any of the Subject Stock.
3.2 Seller has full legal right, power, authority, and
capacity to execute, deliver and perform this Agreement, and all action
requisite for the due execution, delivery and performance of this
Agreement by the Seller has been duly and effectively taken.
3.3 This Agreement constitutes a valid and binding
obligation of Seller, enforceable in accordance with its terms.
3.4 The execution and delivery of this Agreement by
Seller and the performance by Seller of his obligations hereunder do
not and will not (i) violate any provision of any document or
instrument governing or binding on Seller, or any contract, agreement,
law, regulation, order, injunction, judgment, decree or writ to which
Seller is subject; (ii) result in a breach of or constitute (with due
notice and/or lapse of time) a default under any indenture, contract,
or other agreement to which Seller is a party; or (iii) result in the
creation or imposition of any lien or encumbrance upon any properties
of Seller, other than that created by this Agreement.
3.5 Seller's execution, and delivery of this Agreement
and his performance of his obligations hereunder do not require the
consent or approval of any other person, including without limitation,
any tribunal, except for those that have been given, made or obtained
prior to the date hereof.
4. REPRESENTATIONS AND WARRANTIES BY BUYER. Buyer hereby
represents and warrants that the following is true and correct as of the date
hereof and will be true and correct as of the Closing Date:
4.1 Buyer has full legal right, power and authority,
including full corporate power and authority, to execute, deliver and
perform this Agreement, and all action requisite for the due execution,
delivery and performance of this Agreement by Buyer has been duly and
effectively taken.
<PAGE> 3
4.2 This Agreement constitutes a valid and binding
obligation of Buyer, enforceable in accordance with its terms.
4.3 The execution and delivery of this Agreement by Buyer
and the performance by Buyer of his obligations hereunder do not and
will not (i) violate any provision of Buyer's articles of incorporation
or bylaws, or of any document or instrument governing or binding on
Buyer, or any contract, agreement, law, regulation, order, injunction,
judgment, decree or writ to which Buyer is subject; (ii) result in a
breach of or constitute (with due notice and/or lapse of time) a
default under any indenture, contract, or other agreement to which
Buyer is a party; or (iii) result in the creation or imposition of any
lien or encumbrance upon any properties of Buyer, other than that
created by this Agreement.
4.4 Buyer's execution, and delivery of this Agreement and
his performance of his obligations hereunder do not require the consent
or approval of any other person, including without limitation, any
tribunal, except for those that have been given, made or obtained prior
to the date hereof.
5. REPRESENTATIONS TO SURVIVE. The Parties to this Agreement
hereby agree that the representations and warranties provided in paragraphs 3
and 4 above are continuing and shall survive the Closing.
6. INDEMNIFICATION.
6.1 Seller agrees to indemnify and hold the Buyer
harmless from any and all damages directly or indirectly resulting
from, relating to, or arising out of any breach of or any inaccuracy
in, any representation or warranty of Seller contained in Paragraph 3
or any breach or non-performance, partial or total, of any covenant or
agreement of Seller contained in this Agreement.
6.2 Buyer agrees to indemnify and hold Seller and the
Company harmless from any and all damages directly or indirectly
resulting from, relating to, or arising out of any breach of or any
inaccuracy in, any representation or warranty of Buyer contained in
Paragraph 4 or any breach or non-performance, partial or total, of any
covenant or agreement of Buyer contained in this Agreement.
7. OTHER COVENANTS AND ASSURANCES. The Parties hereto shall take
all other actions and execute all other documents that shall be necessary or
appropriate to effectuate the transactions provided or contemplated in this
Agreement.
8. BUYER'S OBLIGATIONS CONDITIONAL. The obligations of the Buyer
to consummate the transaction contemplated hereunder are expressly conditioned
upon the Buyer acquiring, prior to or simultaneously with the Closing, 100% of
the capital stock of the Company.
9. GOVERNING LAW. This Agreement has been executed in and shall be
governed by the laws of the State of Oregon.
<PAGE> 4
10. ENTIRE AGREEMENT. This Agreement (including any exhibits
hereto) contains the entire understanding between the Parties hereto concerning
the subject matter contained in this Agreement. There are no other
representations, agreements, arrangements or understandings, oral or written
between or among the Parties.
11. AMENDMENT AND WAIVER. This Agreement may not be amended or in
any way modified (nor may any of its terms be waived) except in a writing duly
executed by all of the Parties to this Agreement. This provision is specifically
intended to render invalid and void any alleged amendments or modifications to
this Agreement based on usage of trade or the course of performance or course of
dealing of the Parties hereto which have not been set forth in a writing signed
by all Parties.
12. SEVERABILITY. In the event that any of the provisions, or
portions thereof, of this Agreement are held to be unenforceable or invalid by
any court of competent jurisdiction, the validity and enforceability of the
remaining provisions, or portions thereof, shall not be affected thereby.
13. BINDING EFFECT. This Agreement shall be binding on and shall
inure to the benefit of the Parties hereto, and their respective heirs, personal
representatives, successors and assigns.
14. GENDER AND NUMBER. Wherever used herein, the singular number
shall include the plural and vice versa, and the male gender shall include the
female gender and vice versa except to the extent expressly provided otherwise
or otherwise inappropriate to the meaning intended herein.
15. CAPTIONS. The captions and other headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
16. NOTICES. Any notice or demand under this Agreement or in
connection with this Agreement may be given, and shall be deemed to be given and
received upon the deposit thereof, in writing in the U.S. Mail by first class
mail, postage prepaid, but actual notice, however given or received, shall
always be effective.
17. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
<PAGE> 5
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
effective as of the date first above written.
Address for Notice: SELLER:
- -------------------------------------
--------------------------------------
- -------------------------------------
- ------------------------------------- --------------------------------------
Facsimile:
---------------------------
BUYER:
Address for Notice: TEAM, INC.
200 Hermann Drive
Alvin, Texas 77511 By:
Facsimile: 281/388-5583 -----------------------------------
Kenneth M. Tholan, President
<PAGE> 1
EXHIBIT 2.5
CREDIT AGREEMENT
Among
TEAM, INC.
as Borrower,
THE FINANCIAL INSTITUTIONS
NAMED IN THIS CREDIT AGREEMENT
as Banks,
and
NATIONSBANK, N.A.,
as Agent for the Banks
$24,000,000
August 28, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS.......................................................1
1.1 Certain Defined Terms..................................................................1
1.2 Computation of Time Periods...........................................................16
1.3 Accounting Terms; Preparation of Financials...........................................16
1.4 Types.................................................................................17
1.5 Interpretation........................................................................17
ARTICLE 2. CREDIT FACILITIES.....................................................................18
2.1 Loan A Facility.......................................................................18
2.2 Letter of Credit Facility.............................................................19
2.3 Loan B Facility.......................................................................22
2.4 Loan C Facility.......................................................................23
2.5 Loan D Facility.......................................................................25
2.6 Fees..................................................................................26
2.7 Interest..............................................................................27
2.8 Breakage Costs........................................................................29
2.9 Increased Costs.......................................................................29
2.10 Illegality............................................................................30
2.11 Market Failure........................................................................30
2.12 Advancing and Payments Generally......................................................30
2.13 Taxes.................................................................................33
ARTICLE 3. CONDITIONS PRECEDENT..................................................................35
3.1 Conditions Precedent to the Initial Loan A Borrowing..................................35
3.2 Conditions Precedent to the Loan B Borrowing..........................................35
3.3 Conditions Precedent to Each Loan C Borrowing.........................................36
3.4 Conditions Precedent to the Loan D Borrowing..........................................37
3.5 Conditions Precedent to Each Borrowing................................................37
ARTICLE 4. REPRESENTATIONS AND WARRANTIES........................................................38
4.1 Organization..........................................................................38
4.2 Authorization.........................................................................38
4.3 Enforceability........................................................................38
4.4 Absence of Conflicts and Approvals....................................................38
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
4.5 Investment Companies..................................................................38
4.6 Public Utilities......................................................................38
4.7 Financial Condition...................................................................39
4.8 Condition of Assets...................................................................39
4.9 Litigation............................................................................39
4.10 Subsidiaries..........................................................................39
4.11 Laws and Regulations..................................................................40
4.12 Environmental Compliance..............................................................40
4.13 ERISA.................................................................................40
4.14 Taxes.................................................................................40
4.15 True and Complete Disclosure..........................................................40
4.16 Year 2000.............................................................................41
ARTICLE 5. COVENANTS.............................................................................41
5.1 Organization..........................................................................41
5.2 Reporting.............................................................................41
5.3 Inspection............................................................................43
5.4 Use of Proceeds.......................................................................44
5.5 Financial Covenants...................................................................44
5.6 Debt..................................................................................45
5.7 Liens.................................................................................46
5.8 Other Obligations.....................................................................46
5.9 Corporate Transactions................................................................47
5.10 Distributions.........................................................................47
5.11 Transactions with Affiliates..........................................................48
5.12 Insurance.............................................................................48
5.13 Investments...........................................................................49
5.14 Lines of Business. ..................................................................50
5.15 Compliance with Laws..................................................................50
5.16 Environmental Compliance..............................................................50
5.17 ERISA Compliance......................................................................51
5.18 Payment of Certain Claims.............................................................51
5.19 Subsidiaries..........................................................................51
ARTICLE 6. DEFAULT AND REMEDIES..................................................................52
6.1 Events of Default.....................................................................52
6.2 Termination of Commitments............................................................53
6.3 Acceleration of Credit Obligations....................................................53
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
6.4 Cash Collateralization of Letters of Credit...........................................54
6.5 Default Interest......................................................................54
6.6 Right of Setoff.......................................................................54
6.7 Actions Under Credit Documents........................................................54
6.8 Remedies Cumulative...................................................................54
6.9 Application of Payments...............................................................55
ARTICLE 7. THE AGENT.............................................................................56
7.1 Authorization and Action..............................................................56
7.2 Reliance, Etc.........................................................................56
7.3 Affiliates............................................................................57
7.4 Bank Credit Decision..................................................................57
7.5 Expenses..............................................................................57
7.6 Indemnification.......................................................................57
7.7 Successor Agent.......................................................................58
ARTICLE 8. MISCELLANEOUS.........................................................................58
8.1 Expenses..............................................................................58
8.2 Indemnification.......................................................................59
8.3 Modifications, Waivers, and Consents..................................................59
8.4 Survival of Agreements................................................................60
8.5 Assignment and Participation..........................................................60
8.6 Notice................................................................................62
8.7 Choice of Law.........................................................................62
8.8 Arbitration...........................................................................63
8.9 Counterparts..........................................................................64
8.10 No Further Agreements.................................................................64
</TABLE>
-iii-
<PAGE> 5
EXHIBITS
Exhibit A-1 - Form of Compliance Certificate
Exhibit A-2 - Form of Loan A Borrowing Base Certificate
Exhibit B-1 - Form of Loan A Borrowing Request
Exhibit B-2 - Form of Loan B Borrowing Request
Exhibit B-3 - Form of Loan C Borrowing Request
Exhibit B-4 - Form of Loan D Borrowing Request
Exhibit C - Form of Interest Rate Election Request
Exhibit D-1 - Form of Loan A Note
Exhibit D-2 - Form of Loan B Note
Exhibit D-3 - Form of Loan C Note
Exhibit D-4 - Form of Loan D Note
Exhibit E - Form of Assignment and Acceptance
Exhibit F - Form of Joinder Agreement
Exhibit G - Form of Acquisition Certificate
SCHEDULES
Schedule I - Administrative Information:
Borrower
Agent
Banks
Schedule II - Disclosures:
Section 4.10 Existing Subsidiaries
Section 5.6 Existing Capital Leases
-iv-
<PAGE> 6
CREDIT AGREEMENT
This Credit Agreement dated as of August 28, 1998, is among Team, Inc.,
a Texas corporation, as Borrower, the financial institutions named herein, as
Banks, and NationsBank, N.A., as Agent for the Banks.
The parties hereto agree as follows:
ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS.
1.1 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (unless otherwise indicated, such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Acquisition" means the direct or indirect purchase or acquisition,
whether in one or more related transactions, of any Person or group of Persons
or any related group of assets, liabilities, or securities of any Person or
group of Persons.
"Acquisition Certificate" means an acquisition certificate executed by
a Responsible Officer of the Borrower in substantially the form of Exhibit G.
"Advance" means a Loan A Advance, a Loan B Advance, a Loan C Advance,
or a Loan D Advance.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person or any Subsidiary of such Person. The
term "control" (including the terms "controlled by" or "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through
ownership, by contract, or otherwise.
"Agent" means NationsBank in its capacity as an agent pursuant to
Article 7 and any successor agent pursuant to Section 7.7.
"Agreement" means this Credit Agreement.
<PAGE> 7
"Alsana Acquisition Agreement" means the Alsana Stock Purchase
Agreement dated as of August 21, 1998 among Climax, R. Leroy Benham, Alsana
Holdings, LLC, and the Borrower (including exhibits and schedules).
"Applicable Margin" means, with respect to interest rates as of any
date of its determination, an amount equal to the percentage amount set forth in
the table below opposite the applicable ratio of (a) the consolidated Debt of
the Borrower as of the end of the fiscal quarter then most recently ended to (b)
the consolidated EBITDA of the Borrower for the four fiscal quarters then most
recently ended:
<TABLE>
<CAPTION>
- ---------- ----------------------------------------- -----------------------------------------
FUNDED LOAN A LOAN C
DEBT TO AND AND
EBITDA LOAN B LOAN D
- ---------- ----------------------------------------- -----------------------------------------
Applicable Margin Applicable Margin Applicable Margin Applicable Margin
LIBOR Tranches Prime Rate Tranche LIBOR Tranches Prime Rate Tranche
----------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
less than 1.50 1.50% 0.00% 1.75% 0.00%
greater than or equal to 1.50 but
less than or equal to 2.00 1.75% 0.00% 2.00% 0.00%
greater than 2.00 but
less than or equal to 2.50 2.00% 0.00% 2.25% 0.25%
greater than 2.50 2.25% 0.25% 2.50% 0.50%
</TABLE>
Until delivery of the first Compliance Certificate, the foregoing ratio shall be
deemed to be 1.75. Thereafter, the ratio and resulting Applicable Margin shall
be based upon Schedule C of the most recent Compliance Certificate delivered to
the Agent pursuant to Section 5.2(b) (and therefore including the EBITDA of
companies acquired by the Borrower for the applicable period to the extent
permitted in Schedule C in accordance with Section 1.3(c)).
Any adjustments to the Applicable Margin shall become effective on the 45th day
following the last day of each fiscal quarter of the Borrower; provided,
however, that if any such Compliance Certificate is not delivered when required
hereunder, the Applicable Margin with respect to each Loan shall be deemed to be
the maximum percentage amount in the column for such Loan in the table from such
45th day until such Compliance Certificate is received by the Agent.
Upon any change in the Applicable Margin, the Agent shall promptly notify the
Borrower and the Banks of the new Applicable Margin.
"Applicable Lending Office" means, with respect to each Bank and for
any particular type of transaction, the office of such Bank set forth in
Schedule I to this Agreement (or in the applicable Assignment and Acceptance by
which such Bank joined this Agreement) as its applicable lending office for such
type of transaction or such other office of such Bank as such Bank may from time
to time specify in writing to the Borrower and the Agent for such particular
type of transaction.
-2-
<PAGE> 8
"Assignment and Acceptance" means an Assignment and Acceptance in
substantially the form of Exhibit E executed by an assignor Bank, an assignee
Bank, and the Agent, in accordance with Section 8.5.
"Banks" means the lenders listed as Banks on the signature pages of
this Agreement and each Eligible Assignee that shall become a party to this
Agreement pursuant to Section 8.5(b).
"Base Rate" means, for any day, the fluctuating rate per annum of
interest equal to the greater of (a) the Prime Rate in effect on such day or (b)
the Federal Funds Rate in effect on such day plus 0.50%.
"Borrower" means Team, Inc., a Texas corporation.
"Borrowing" means any Loan A Borrowing, the Loan B Borrowing, any Loan
C Borrowing, or the Loan D Borrowing.
"Borrowing Request" means any Loan A Borrowing Request, the Loan B
Borrowing Request, any Loan C Borrowing Request, or the Loan D Borrowing
Request.
"Business Day" means any Monday through Friday during which commercial
banks are open for business in Houston, Texas, and, if the applicable Business
Day relates to any LIBOR Tranche, on which dealings are carried on in the London
interbank market.
"Capital Expenditures" means, with respect to any Person and any period
of its determination, the consolidated expenditures of such Person during such
period that are required to be included in or are reflected by the consolidated
property, plant, or equipment accounts of such Person, or any similar fixed
asset or long term capitalized asset accounts of such Person, on the
consolidated balance sheet of such Person in conformity with generally accepted
accounting principles.
"Capital Leases" means, with respect to any Person, any lease of any
property by such Person which would, in accordance with generally accepted
accounting principles, be required to be classified and accounted for as a
capital lease on the balance sheet of such Person.
"Cash Capital Expenditure Cost" means, with respect to any Person and
for any period of its determination, the consolidated Capital Expenditures of
such Person during such period other than those which were funded from the
proceeds of Debt of such Person incurred for such purpose.
"Cash Tax Cost" means, with respect to any Person and for any period of
its determination, the consolidated cash paid by such Person during such period
with respect to income taxes.
-3-
<PAGE> 9
"Change of Control" means, with respect to the Borrower, (a) the direct
or indirect acquisition after the date hereof by any Person or related Persons
constituting a group of (i) beneficial ownership of issued and outstanding
shares of Voting Securities of the Borrower, the result of which acquisition is
that such Person or such group possesses 30% or more of the combined voting
power of all then-issued and outstanding Voting Securities of the Borrower or
(ii) the power to elect, appoint, or cause the election or appointment of at
least a majority of the members of the board of directors of the Borrower, or
(b) the individuals who, at the beginning of any period of 12 consecutive
months, constitute the Borrower's board of directors (together with any new
director whose election by the Borrower's board of directors or whose nomination
for election by the Borrower's stockholders entitled to vote thereon was
approved by a vote of at least a majority of the directors then still in office
who either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason (other
than death or disability) to constitute a majority of the Borrower's board of
directors then in office.
"Climax" means Climax Portable Machine Tools, Inc., an Oregon
corporation.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute.
"Commitment" means, for any Bank, the Loan A Commitment, the Loan B
Commitment, the Loan C Commitment, or the Loan D Commitment of such Bank.
"Commonly Controlled Entity" means, with respect to any Person, any
other Person which is under common control with such Person within the meaning
of Section 414 of the Code.
"Compliance Certificate" means a compliance certificate executed by a
Responsible Officer of the Borrower in substantially the form of Exhibit A-1,
including the following attached Schedules:
Schedule A: The applicable financial reports provided under Section
5.2(a) or 5.2(b) ending on the date of the computation of the financial
covenants.
Schedule B: A schedule of any adjustments to the financial reports in
Schedule A to the Compliance Certificate, calculated and listed on a
company-by-company basis, that are requested by the Borrower to reflect
the financial results of Acquisitions made prior to the end of the
applicable period, together with the supporting financial reports of
the Acquisitions from which the Borrower prepared such adjustments,
prepared in accordance with Section 1.3(c) and otherwise in a form
acceptable to the Agent.
Schedule C: The computation of the financial covenants under this
Agreement based upon the financial reports in Schedule B to the
Compliance Certificate in a form acceptable to the Agent.
-4-
<PAGE> 10
"Credit Documents" means this Agreement, the Notes, the Letter of
Credit Documents, the Interest Hedge Agreements, the Guaranty, and the Security
Documents, and each other agreement, instrument, or document executed at any
time in connection with this Agreement.
"Credit Obligations" means all principal, interest, fees,
reimbursements, indemnifications, and other amounts now or hereafter owed by the
Borrower to the Agent and the Banks under the Credit Documents and any
increases, extensions, and rearrangements of those obligations under any
amendments, supplements, and other modifications of the documents and agreements
creating those obligations.
"Credit Parties" means the Borrower and the Guarantors.
"Debt" means, with respect to any Person, without duplication, (a)
indebtedness of such Person for borrowed money, (b) obligations of such Person
evidenced by bonds, debentures, notes, or other similar instruments, (c)
obligations of such Person to pay the deferred purchase price of property or
services (other than trade debt and normal operating liabilities incurred in the
ordinary course of business and obligations under the Deferred Compensation
Agreements), (d) obligations of such Person as lessee under Capital Leases, (e)
obligations of such Person under or relating to guaranties, purchase agreements,
or other creditor assurances, in each case, assuring a creditor against loss in
respect of indebtedness or obligations of others of the kinds referred to in
clauses (a) through (d) of this definition, (f) nonrecourse indebtedness or
obligations of others of the kinds referred to in clauses (a) through (e) of
this definition secured by any Lien on or in respect of any property of such
Person, and (g) obligations of such Person evidenced by preferred stock or other
equity interests in such Person which provide for mandatory redemption,
mandatory payment of dividends, or similar rights to the payment of money before
the maturity of any Loan. For the purposes of determining the amount of any
Debt, the amount of any Debt described in clause (e) of the definition of Debt
shall be valued at the maximum amount of the contingent liability thereunder,
the amount of any Debt described in clause (f) that is not covered by clause (e)
shall be valued at the lesser of the amount of the Debt secured or the book
value of the property securing such Debt, and the amount of any Debt described
in clause (g) shall be valued at the stated redemption value of such Debt as of
the date of determination.
"Default" means (a) an Event of Default or (b) any event or condition
which with notice or lapse of time or both would, unless cured or waived, become
an Event of Default.
"Default Rate" means, with respect to any amount due hereunder, a per
annum interest rate equal to (a) if such amount is either outstanding principal
accruing interest based upon a rate established elsewhere in this Agreement or
accrued but unpaid interest thereon, the sum of (i) the interest rate
established elsewhere in this Agreement from time to time for such principal
amount, including any applicable margin, plus (ii) 3.00% per annum or (b) in all
other cases, the Base Rate in effect from time to time plus the Applicable
Margin for the Prime Rate Tranche in effect from time to time plus 3.00% per
annum.
-5-
<PAGE> 11
"Deferred Compensation Agreements" means the Consulting and Salary
Continuation Agreement dated December 24, 1990 between the Borrower and William
T. Bramblett, the Consulting and Salary Continuation Agreement dated December
24, 1990 between the Borrower and George W. Harrison, the Consulting and Salary
Continuation Agreement dated December 24, 1990 between the Borrower and H.
Wesley Hall, the Confidential Settlement Agreement between the Borrower and H.
Wesley Hall, and the Employment and Consulting Agreement dated as of June 1,
1997 between the Borrower and William A. Ryan, as amended by the First Amendment
dated August 12, 1998.
"Derivatives" means any swap, hedge, cap, collar, or similar
arrangement providing for the exchange of risks related to price changes in any
commodity, including money.
"Dollars or $" means lawful money of the United States of America.
"EBITDA" means, with respect to any Person and for any period of its
determination, the consolidated net income of such Person for such period, plus
the consolidated interest expense and income taxes of such Person for such
period, plus the consolidated depreciation and amortization of such Person for
such period, minus all extraordinary gains added to the consolidated net income
of such Person for such period.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eligible Assignee" means, with respect to any assignment hereunder at
the time of such assignment, any commercial bank organized under the laws of the
United States or any of the countries parties to the Organization for Economic
Cooperation and Development or any political subdivision of any thereof which
has primary capital (or its equivalent) of not less than $250,000,000, is
approved by the Agent, and, so long as no Event of Default exists, is approved
by the Borrower, in either case, such approval not to be unreasonably withheld.
"Eligible Inventory" means, for any Person and any time, the Person's
inventory (as such term is defined in the Texas Business and Commerce Code),
which meets all of the following conditions: (a) the Agent has a first priority
perfected security interest in the inventory securing the Credit Obligations
subject only to Permitted Liens; (b) such inventory was purchased in an arm's
length transaction meeting the requirements of Section 5.11 or was produced by
the Person; and (c) such inventory is not held on consignment. All
determinations of inventory that is Eligible Inventory shall be made by the
Agent.
"Eligible Receivables" means, for any Person and time, the accounts (as
such term is defined in the Texas Business and Commerce Code) owed to the Person
which meet each of the following requirements: (a) such accounts arose from an
enforceable order or contract, written or oral, for the absolute sale or lease
of inventory of or sale of services by the Person which sales or leases have
-6-
<PAGE> 12
been fully and satisfactorily performed, each in the ordinary course of business
of the Person; (b) the amounts shown on the books of the Person, at such time in
respect of such accounts are the actual amounts owed by the applicable account
debtor in respect of such account; (c) the Agent has a first priority perfected
security interest in the accounts securing the Credit Obligations (unless such
accounts are accounts from a Person located outside of the United States or
accounts earned from a location outside of the United States ("foreign
accounts")); (d) such accounts are not evidenced by any promissory note, trade
acceptance, chattel paper, draft, or other instrument; (e) such accounts comply
with all material applicable legal requirements; (f) such accounts shall have
arisen pursuant to a bona fide transaction at arm's length with a purchaser who
is not an Affiliate of the Person; (g) such accounts are not subject to offset;
(h) such accounts do not include, in the aggregate, more than $1,500,000 in
foreign accounts; and (i) such accounts are not older than 90 days after the
date of the invoice that generated such account. All determinations of accounts
that are Eligible Receivables shall be made by the Agent.
"Environmental Law" means all federal, state, and local laws, rules,
regulations, ordinances, orders, decisions, agreements, and other requirements
now or hereafter in effect relating to the pollution, destruction, loss, or
injury of the environment, the presence of any contaminant in the environment,
the protection, cleanup, remediation, or restoration of the environment, the
creation, handling, transportation, use, or disposal of any waste product in the
environment, exposure of persons to any contaminant, waste, or hazardous
substance in the environment, and the health and safety of employees in relation
to their environment.
"Event of Default" has the meaning specified in Section 6.1.
"Federal Funds Rate" means, for any period, a fluctuating per annum
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for any such day on
such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any of its successors.
"Financial Statements" means the audited consolidated financial
statements of the Borrower dated as of May 31, 1998, including the audited
consolidated balance sheets of the Borrower as of such date and the consolidated
statements of income and cash flows for the fiscal year ending on such date and
the consolidating schedules used to prepare such audited consolidated financial
statements.
-7-
<PAGE> 13
"Guaranty" means the Guaranty dated as of August 28, 1998, made by the
Subsidiaries of the Borrower in favor of the Agent guaranteeing the Credit
Obligations.
"Guarantors" means the Subsidiaries of the Borrower that have executed
the Guaranty.
"Hazardous Materials" means any substance or material identified as a
hazardous substance pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended and as now or hereafter in
effect; any substance or material regulated as a hazardous waste pursuant to the
Resource Conservation and Recovery Act of 1976, as amended and as now or
hereafter in effect; and any substance or material designated as a hazardous
substance or hazardous waste pursuant to any other Environmental Law.
"Highest Lawful Rate" means the maximum lawful interest rate, if any,
that at any time or from time to time may be contracted for, charged, or
received under the laws applicable to the relevant Bank which are presently in
effect or, to the extent allowed by law, under such applicable laws which may
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow. "The Highest Lawful Rate" under this Note
shall be the indicated rate ceiling under Section 303.305(b) of the Texas
Finance Code, unless any other lawful rate ceiling exceeds the rate ceiling so
determined, and then the higher rate ceiling shall apply.
"Interest Hedge Agreements" means any swap, hedge, cap, collar, or
similar arrangement between the Borrower and any Bank (or any Affiliate of any
Bank) providing for the exchange of risks related to price changes in the
interest rate on the Advances under this Agreement.
"Interest Period" means, with respect to each LIBOR Tranche, the period
commencing on the date of such LIBOR Tranche and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The duration
of each such Interest Period shall be one, two, three, or six months, in each
case as the Borrower may select in the applicable Borrowing Request or Interest
Rate Election Request (unless there shall exist any Default or Event of Default,
in which case the Borrower may only select one month Interest Periods);
provided, however, that:
(a) whenever the last day of any Interest Period would otherwise occur
on a day other than a Business Day, the last day of such Interest Period shall
be extended to occur on the next succeeding Business Day; provided that if such
extension would cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day;
(b) any Interest Period which begins on the last Business Day of the
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month in which it would have ended if there were a
numerically corresponding day in such calendar month; and
-8-
<PAGE> 14
(c) the Borrower may not select an Interest Period for any LIBOR
Tranche which ends after any date when outstanding principal amounts of any Loan
must be repaid unless, after giving effect to such selection, the aggregate
outstanding principal amount of Base Rate Tranches under such Loan and LIBOR
Tranches under such Loan having Interest Periods which end on or before such
repayment date shall be equal to or greater than the principal amount due and
payable on such date (and therefore in no event shall any Interest Period for
any LIBOR Tranche extend beyond the applicable maturity date).
"Interest Rate Election Request" means an Interest Rate Election
Request in substantially the form of Exhibit C executed by a Responsible Officer
of the Borrower and delivered to the Agent.
"Issuing Bank" means NationsBank.
"Letter of Credit" means any commercial or standby letter of credit
issued by the Issuing Bank for the account of the Borrower pursuant to the terms
of this Agreement.
"Letter of Credit Application" means the Issuing Bank's standard form
letter of credit application for either a commercial or standby letter of
credit, as the case may be, which has been executed by the Borrower and accepted
by the Issuing Bank in connection with the issuance of a Letter of Credit.
"Letter of Credit Application Amendment" means the Issuing Bank's
standard form application to amend a letter of credit for either a commercial or
standby letter of credit, as the case may be, which has been executed by a
Borrower and accepted by the Issuing Bank in connection with the increase or
extension of a Letter of Credit.
"Letter of Credit Collateral Account" means a special cash collateral
account pledged to the Agent containing cash deposited pursuant to Sections 6.4
to be maintained with the Agent in accordance with Section 2.2(f).
"Letter of Credit Documents" means all Letters of Credit, Letter of
Credit Applications, Letter of Credit Application Amendments, and agreements,
documents, and instruments entered into in connection with or relating thereto.
"Letter of Credit Exposure" means, as of any date of its determination,
the aggregate outstanding undrawn amount of Letters of Credit plus the aggregate
of the reimbursement obligations of the Borrower under the Letter of Credit
Applications and this Agreement.
"Letter of Credit Sublimit" means $3,000,000.
"LIBOR" means, for any LIBOR Tranche for any Interest Period therefor,
the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on display page 3750 (or any
-9-
<PAGE> 15
successor page) of the Dow Jones Markets Service (formerly known as Telerate) as
the London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, the term "LIBOR" shall mean, for any LIBOR Tranche for
any Interest Period therefor, the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period; provided, however, if more than
one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be
the arithmetic mean of all such rates.
"LIBOR Tranche" shall mean any Tranche which bears interest based upon
the LIBOR, as determined in accordance with Section 2.7.
"Lien" means any mortgage, lien, pledge, charge, deed of trust,
security interest, encumbrance, or other type of preferential arrangement to
secure or provide for the payment of any obligation of any Person, whether
arising by contract, operation of law, or otherwise (including any title
retention for such purposes under any conditional sale agreement, any Capital
Lease, or any other title transfer or retention agreement).
"Loan" means Loan A, Loan B, Loan C, or Loan D.
"Loan A" means the aggregate outstanding principal amount of Loan A
Advances.
"Loan A Advance" means an advance of principal made by a Bank under any
Loan A Borrowing.
"Loan A Borrowing" means any aggregate amount of principal advanced on
the same day and pursuant to the same Loan A Borrowing Request under the Loan A
facility created in Section 2.1.
"Loan A Borrowing Base" means, at any date of its determination, the
sum of (a) 85% of the book value of the Eligible Receivables of the Borrower and
its Subsidiaries plus (b) the lesser of (i) 50% of the lesser of the book value
or fair market value of the Eligible Inventory of the Borrower and its
Subsidiaries or (ii) $5,000,000. The value of the above items shall be
determined by the Agent.
"Loan A Borrowing Base Certificate" means a borrowing base certificate
executed by a Responsible Officer of the Borrower in substantially the form of
Exhibit A-2.
"Loan A Borrowing Request" means a Loan A Borrowing Request in
substantially the form of Exhibit B-1 executed by a Responsible Officer of the
Borrower and delivered to the Agent.
-10-
<PAGE> 16
"Loan A Commitment" means, for any Bank, the amount set forth below
such Bank's name on the signature pages of this Agreement as its Loan A
Commitment, or if such Bank has entered into any Assignment and Acceptance since
the date of this Agreement, as set forth for such Bank as its Loan A Commitment
in the Register maintained by the Agent pursuant to Section 8.5(c).
"Loan A Commitment Termination Date" means September 30, 2001.
"Loan A Maturity Date" means September 30, 2001.
"Loan A Note" means a promissory note of the Borrower payable to the
order of a Bank, in substantially the form of Exhibit D-1, evidencing the
indebtedness of the Borrower to such Bank resulting from Loan A Advances made by
such Bank to the Borrower.
"Loan B" means the Loan made to the Borrower under the lending
commitment created under Section 2.3(a).
"Loan B Advance" means an advance of principal made by a Bank under any
Loan B Borrowing.
"Loan B Borrowing" means the aggregate amount of principal advanced
pursuant to the Loan B Borrowing Request under the Loan B facility created under
Section 2.3.
"Loan B Borrowing Request" means the Loan B Borrowing Request in
substantially the form of Exhibit B-2 executed by a Responsible Officer of the
Borrower and delivered to the Agent.
"Loan B Commitment" means for any Bank, the amount set opposite such
Bank's name on the signature pages hereof as its Loan B Commitment, or if such
Bank has entered into any Assignment and Acceptance, as set forth for such Bank
as its Loan B Commitment in the Register maintained by the Agent pursuant to
Section 8.5(c).
"Loan B Commitment Termination Date" means September 30, 1998.
"Loan B Maturity Date" means September 30, 2003.
"Loan B Note" means a promissory note of the Borrower payable to the
order of any Bank in substantially the form of the attached Exhibit D-2,
evidencing indebtedness of the Borrower to such Bank resulting from the Loan B
Advance of such Bank.
"Loan C" means the Loan made to the Borrower under the lending
commitment created under Section 2.4(a).
-11-
<PAGE> 17
"Loan C Advance" means an advance of principal made by a Bank under any
Loan C Borrowing.
"Loan C Borrowing" means any aggregate amount of principal advanced on
the same day pursuant to the same Loan C Borrowing Request under the Loan C
facility created under Section 2.4.
"Loan C Borrowing Request" means a Loan C Borrowing Request in
substantially the form of Exhibit B-3 executed by a Responsible Officer of the
Borrower and delivered to the Agent.
"Loan C Commitment" means for any Bank, the amount set opposite such
Bank's name on the signature pages hereof as its Loan C Commitment, or if such
Bank has entered into any Assignment and Acceptance, as set forth for such Bank
as its Loan C Commitment in the Register maintained by the Agent pursuant to
Section 8.5(c). Notwithstanding the definition of this term, funding under the
Loan C Commitment is at the discretion of the Banks in accordance with Section
2.4(a).
"Loan C Commitment Termination Date" means September 30, 1999.
"Loan C Maturity Date" means September 30, 2003.
"Loan C Note" means a promissory note of the Borrower payable to the
order of any Bank in substantially the form of the attached Exhibit D-3,
evidencing indebtedness of the Borrower to such Bank resulting from any Loan C
Advance.
"Loan D" means the Loan made to the Borrower under the lending
commitment created under Section 2.5(a).
"Loan D Advance" means an advance of principal made by a Bank under any
Loan D Borrowing.
"Loan D Borrowing Base" means the lesser of (a) 80% of the appraised
fair market value of the Borrower's corporate headquarters in Alvin, Texas, or
(b) $2,000,000. The value of the above items shall be determined by the Agent.
"Loan D Borrowing" means the aggregate amount of principal advanced
pursuant to the Loan D Borrowing Request under the Loan D facility created under
Section 2.5.
"Loan D Borrowing Request" means the Loan D Borrowing Request in
substantially the form of Exhibit B-4 executed by a Responsible Officer of the
Borrower and delivered to the Agent.
"Loan D Commitment" means for any Bank, the amount set opposite such
Bank's name on the signature pages hereof as its Loan D Commitment, or if such
Bank has entered into any
-12-
<PAGE> 18
Assignment and Acceptance, as set forth for such Bank as its Loan D Commitment
in the Register maintained by the Agent pursuant to Section 8.5(c).
"Loan D Commitment Termination Date" means September 30, 1998.f
"Loan D Maturity Date" means September 30, 2008.
"Loan D Note" means a promissory note of the Borrower payable to the
order of any Bank in substantially the form of the attached Exhibit D-4,
evidencing indebtedness of the Borrower to such Bank resulting from any Loan D
Advance.
"Majority Banks" means (a) at any time a Loan A Commitment is
outstanding, Banks holding more than 66 2/3% of the aggregate Loan A Commitments
and the aggregate unpaid principal amount of Loan B, Loan C, and Loan D and (b)
at any other time Banks holding more than 66 2/3% of the then aggregate unpaid
principal amount of the Notes held by the Banks and the Letter of Credit
Exposure of the Banks at such time.
"Maximum Number of Tranches" means with respect to each Loan, the
amount set forth below for such Loan:
Loan Maximum Number of Tranches
Loan A 3
Loan B 2
Loan C 2
Loan D 1
"Material Adverse Change" means any material adverse change in the
business, operations, financial condition, or prospects of the Borrower and its
Subsidiaries on a consolidated basis.
"Minimum Borrowing Amount" means with respect to each Loan, the amount
set forth below for such Loan:
Loan Minimum Borrowing Amount
Loan A $1,000,000 (except for a Loan A Borrowing made
under Section 2.2(c), which shall have no minimum
amount)
Loan B $100,000
Loan C $100,000
Loan D $100,000
"Minimum Tranche Amount" means $100,000.
-13-
<PAGE> 19
"Mortgages" means (a) the Deed of Trust, Security Agreement, Fixture
Filing, and Assignment of Rents dated as of the Loan D closing date made by the
Borrower in favor of the Agent securing the Credit Obligations (the "Texas
Mortgage"); (b) the Deed of Trust, Security Agreement, Fixture Filing, and
Assignment of Rents dated as of August 28, 1998 by Climax in favor of the Agent
securing the Credit Obligations; and (c) any other deed of trust, mortgage, or
similar instrument granting the Agent a security interest in real property to
secure the Credit Obligations.
"NationsBank" means NationsBank, N.A., in its individual capacity.
"Notes" means the Loan A Notes, the Loan B Notes, the Loan C Notes, and
the Loan D Notes.
"PBGC" means Pension Benefit Guaranty Corporation or its successor.
"Permitted Debt" has the meaning specified in Section 5.6
"Permitted Investments" has the meaning specified in Section 5.13.
"Permitted Liens" has the meaning specified in Section 5.7.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, or other entity, or a government or any political subdivision or agency
thereof, or any trustee, receiver, custodian, or similar official.
"Plan" means any (a) employee medical benefit plan under Section 3(1)
of ERISA, (b) employee pension benefit plan under Section 3(2) of ERISA, (c)
multiemployer plan under Section 4001(a)(3) of ERISA, and (d) employee account
benefit plan under Section 3(2) of ERISA.
"Pledge Agreement" means the Pledge Agreement dated as of August 28,
1998, made by the Borrower and its Subsidiaries in favor of the Agent pledging
the interests in the Subsidiaries of the Borrower to secure the Credit
Obligations.
"Prime Rate" means, for any day, the fluctuating per annum interest
rate in effect on such day equal to the rate of interest publicly announced by
NationsBank as its prime rate, whether or not the Borrower has notice thereof.
"Prime Rate Borrowing" means that portion of any Borrowing which bears
interest based upon the Base Rate as determined in accordance with Section 2.7.
"Prime Rate Tranche" shall mean that portion of any Loan which bears
interest based upon the Base Rate, as determined in accordance with Section 2.7.
-14-
<PAGE> 20
"Prohibited Transaction" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Code.
"ratable share" or "pro rata share" means, with respect to any Bank and
as of any date of its determination, either (a) the ratio of such Bank's
aggregate outstanding Advances and share of the Letter of Credit Exposure at
such time to the aggregate outstanding Advances of all Banks and the Letter of
Credit Exposure at such time or (b) if all of the Commitments have been
terminated, the ratio of such Bank's Commitments at such time to the aggregate
Commitments at such time.
"Related Parties" means, with respect to any Person, such Person's
stockholders, directors, officers, employees, agents, Affiliates, successors,
and assigns, and their respective stockholders, directors, officers, employees,
and agents, and, with respect to any Person that is an individual, such Person's
family relations and heirs.
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA.
"Responsible Officer" means, with respect to any Person, such Person's
Chief Executive Officer, President, Chief Financial Officer, Controller,
Secretary, or any other officer of such Person designated by any of the
foregoing in writing from time to time.
"Restricted Entities" means the Borrower and its Subsidiaries.
"Security Agreement" means the Security Agreement dated as of August
28, 1998, made by the Borrower and its Subsidiaries in favor of the Agent
granting the Agent a security interest in certain personal property of such
Persons to secure the Credit Obligations.
"Security Documents" means the Pledge Agreement, the Security
Agreement, the Mortgages, and any other document creating, perfecting,
publishing notice of, or consenting to Liens in favor of the Agent securing the
Credit Obligations.
"Subsidiary" means, with respect to any Person, any other Person, a
majority of whose outstanding Voting Securities (other than directors'
qualifying shares) shall at any time be owned by such Person or one or more
Subsidiaries of such person.
"Tranche" means any tranche of principal outstanding under a Loan
accruing interest on the same basis whether created in connection with new
advances of principal under such Loan or by the continuation or conversion of
existing tranches of principal under such Loan and shall include any Prime Rate
Tranche and any LIBOR Tranche.
"Type" has the meaning set forth in Section 1.4.
-15-
<PAGE> 21
"Voting Securities" means (a) with respect to any corporation, any
capital stock of the corporation having general voting power under ordinary
circumstances to elect directors of such corporation, (b) with respect to any
partnership, any partnership interest having general voting power under ordinary
circumstances to elect the general partner or other management of the
partnership, and (c) with respect to any other Person, such ownership interests
in such Person having general voting power under ordinary circumstances to elect
the management of such Person, in each case irrespective of whether at the time
any other class of stock, partnership interests, or other ownership interest
might have special voting power or rights by reason of the happening of any
contingency.
1.2 Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding."
1.3 Accounting Terms; Preparation of Financials.
(a) All accounting terms, definitions, ratios, and other tests
described herein shall be construed in accordance with United States generally
accepted accounting principles applied on a consistent basis with those applied
in the preparation of the Financial Statements, except as expressly set forth in
this Agreement.
(b) The Restricted Entities shall prepare their financial
statements in accordance with United States generally accepted accounting
principles applied on a consistent basis with those applied in the preparation
of the Financial Statements, unless otherwise approved in writing by the Agent.
In accordance with the foregoing, (i) any Acquisition which is permitted to be
treated as a pooling transaction shall be treated as a pooling transaction, and
following such an Acquisition the consolidated financial statements of the
Borrower shall be adjusted to reflect the results of such Acquisition during the
periods prior to such Acquisition in accordance with generally accepted
accounting principles and (ii) any Acquisition which is not permitted to be
treated as a pooling transaction shall be treated as an asset purchase, without
adjustment for prior periods.
(c) Where expressly permitted in this Agreement, the Borrower
may elect to use the compliance calculations set forth in Schedule C of a
Compliance Certificate to calculate the Applicable Margin or compliance with a
financial covenant under this Agreement. In such case the accounting terms,
definitions, ratios, and other tests used in making such calculation shall be
construed as required by paragraph (a) above except that the consolidated
financial results of the Borrower shall be deemed to be the adjusted
consolidated financial results of the Borrower set forth in Schedule B of the
Compliance Certificate. The Borrower shall prepare Schedule B and C of the
Compliance Certificate in accordance with the following provisions:
(i) No Acquisition may be included in Schedule B or C
of the Compliance Certificate at the request of the Borrower unless the
financial reports of the acquired Person or assets from which Schedule
B and C are prepared are (A) audited
-16-
<PAGE> 22
financial reports prepared by an independent certified public
accounting firm, or (B) with respect to unaudited financial reports,
are approved by the Agent.
(ii) If the Acquisition is treated as a pooling
transaction, the Borrower shall adjust the pooling accounting treatment
of the Acquisition to reflect nonrecurring items (both positive and
negative) that are permitted to be adjusted in accordance with the
guidelines established by the Securities and Exchange Commission for
acquisition accounting for reported acquisitions by public companies or
as approved by the Agent.
(iii) If the Acquisition is not treated as a pooling
transaction, the financial results of the acquired Person or assets
shall be added to the applicable financial results of the Borrower in
the same manner as if such transaction had been a pooling transaction
with such adjustments thereto as are required to reflect nonrecurring
items (both positive and negative) that are permitted to be adjusted in
accordance with the guidelines established by the Securities and
Exchange Commission for such acquisition accounting or as approved by
the Agent.
1.4 Types. The "Type" of a Tranche refers to the determination whether
such tranche is a LIBOR Tranche or the Prime Rate Tranche.
1.5 Interpretation. Article, Section, Schedule, and Exhibit references
are to this Agreement, unless otherwise specified. All references to
instruments, documents, contracts, and agreements are references to such
instruments, documents, contracts, and agreements as the same may be amended,
supplemented, and otherwise modified from time to time, unless otherwise
specified. The word "including" shall mean "including but not limited to." The
word "or" shall mean "and/or" wherever necessary to prevent interpretation of
any provision against the Agent or the Banks. Whenever the Borrower has an
obligation under this Agreement and the Credit Documents the expense of
complying with that obligation shall be an expense of the Borrower unless
otherwise specified. Whenever any determination is to be made by the Agent or
any Bank, such determination shall be in such Person's sole discretion unless
otherwise specified in this Agreement. If any provision in this Agreement and
the Credit Documents is held to be illegal, invalid, not binding, or
unenforceable, such provision shall be fully severable and this Agreement and
the Credit Documents shall be construed and enforced as if such illegal,
invalid, not binding, or unenforceable provision had never comprised a part of
this Agreement and the Credit Documents, and the remaining provisions shall
remain in full force and effect. This Agreement and the Credit Documents have
been reviewed and negotiated by sophisticated parties with access to legal
counsel and shall not be construed against the drafter. In the event of a
conflict between this Agreement and any other Credit Documents, this Agreement
shall control.
-17-
<PAGE> 23
ARTICLE 2. CREDIT FACILITIES.
2.1 Loan A Facility.
(a) Loan A Commitments. Each Bank severally agrees, on the
terms and conditions set forth in this Agreement and for the purposes set forth
in Section 5.4, to make Loan A Advances to the Borrower as such Bank's ratable
share of Loan A Borrowings requested by the Borrower from time to time on any
Business Day during the period from the date of this Agreement until the Loan A
Commitment Termination Date provided that (i) the outstanding principal amount
of Loan A Advances made by such Bank plus such Bank's ratable share of the
Letter of Credit Exposure shall not exceed such Bank's Loan A Commitment and
(ii) the outstanding principal amount under Loan A after giving effect to any
Loan A Borrowing Request pursuant to which such Bank shall make a Loan A Advance
plus the Letter of Credit Exposure shall not exceed the Loan A Borrowing Base.
Loan A Borrowings must be made in an amount equal to or greater than the
applicable Minimum Borrowing Amount and be made in multiples of the Minimum
Tranche Amount. Within the limits expressed in this Agreement, the Borrower may
from time to time borrow, prepay, and reborrow Loan A Borrowings. The
indebtedness of the Borrower to the Banks resulting from the Loan A Advances
made by the Banks shall be evidenced by Loan A Notes made by the Borrower.
(b) Method of Advancing. Each Loan A Borrowing shall be made
pursuant to a Loan A Borrowing Request given by the Borrower to the Agent in
writing or by telecopy not later than the time required pursuant to Section
2.7(a) to select the interest rate basis for the Loan A Borrowing. Each Loan A
Borrowing Request shall be fully completed and shall specify the information
required therein, and shall be irrevocable and binding on the Borrower.
(c) Prepayment.
(i) The Borrower may prepay the outstanding principal
amount of Loan A pursuant to written notice given by the Borrower to the Agent
in writing or by telecopy not later than (A) 1:00 p.m. (local time at the
Applicable Lending Office of the Agent) on the third Business Day before the
date of the proposed prepayment, in the case of the prepayment of any portion of
Loan A which is comprised of LIBOR Tranches, or (B) 11:00 a.m. (local time at
the Applicable Lending Office of the Agent) on the same Business Day of the
proposed prepayment, in the case of the prepayment of any portion of Loan A
comprised solely of the Prime Rate Tranche. Each such notice shall specify the
principal amount and Tranche or Tranches of Loan A which shall be prepaid, the
date of the prepayment, and shall be irrevocable and binding on the Borrower.
Partial prepayments of Loan A shall be made in a minimum amount equal to or
greater than the applicable Minimum Borrowing Amount, shall not cause any
Tranche to be less than the Minimum Tranche Amount, and shall not cause the
outstanding principal amount of Loan A to be less than the applicable Minimum
Borrowing Amount. Upon receipt of any notice of prepayment, the Agent shall give
prompt notice of the intended prepayment to the Banks. For each such notice
given by the
-18-
<PAGE> 24
Borrower, the Borrower shall prepay Loan A in the specified amount
on the specified date as set forth in such notice. The Borrower shall have no
right to prepay any principal amount of Loan A except as provided in this
Section 2.1(c)(i).
(ii) If, at any time, the outstanding principal
amount of Loan A exceeds the Loan A Borrowing Base, the Borrower shall prepay
the Agent, for the ratable benefit of the Banks, the amount of such excess.
(iii) Each prepayment of principal of any LIBOR
Tranche under the Loan A pursuant to this Section 2.1(c) shall be accompanied by
payment of any amounts required to be paid pursuant to Section 2.8 as a result
of such prepayment.
(d) Repayment. The Borrower shall repay to the Agent for the
ratable benefit of the Banks the outstanding principal amount of Loan A on the
Loan A Maturity Date.
2.2 Letter of Credit Facility.
(a) Commitment for Letters of Credit. The Issuing Bank shall,
on the terms and conditions set forth in this Agreement and for the purposes set
forth in Section 5.4, issue, increase, and extend Letters of Credit at the
request of the Borrower from time to time on any Business Day during the period
from the date of this Agreement until the Loan A Commitment Termination Date
provided that (i) the Letter of Credit Exposure shall not exceed the Letter of
Credit Sublimit and (ii) the outstanding principal amount of Loan A plus the
Letter of Credit Exposure shall not exceed the aggregate amount of the Loan A
Commitments. No Letter of Credit may have an expiration date later than 12
months after its issuance date, and each Letter of Credit which is
self-extending beyond its expiration date must be cancelable upon no more than
30 days notice prior to each extension period given by the Issuing Bank to the
beneficiary of such Letter of Credit. No Letter of Credit may have an expiration
date later than the Loan A Maturity Date. Each Letter of Credit must be in form
and substance acceptable to the Issuing Bank. The indebtedness of the Borrower
to the Issuing Bank resulting from Letters of Credit requested by the Borrower
shall be evidenced by the Letter of Credit Applications made by the Borrower.
(b) Requesting Letters of Credit. Each Letter of Credit shall
be issued, increased, or extended pursuant to a Letter of Credit Application or
Letter of Credit Application Amendment, as applicable, given by the Borrower to
the Issuing Bank in writing or by telecopy promptly confirmed in writing, such
Letter of Credit Application or Letter of Credit Application Amendment being
given not later than 1:00 p.m. (local time at the Applicable Lending Office of
the Agent) on the third Business Day before the date of the proposed issuance,
increase, or extension of the Letter of Credit. Each Letter of Credit
Application or Letter of Credit Application Amendment shall be fully completed
and shall specify the information required therein (including the proposed form
of the Letter of Credit or change thereto), and shall be irrevocable and binding
on the Borrower. Upon receipt by the Issuing Bank of the Letter of Credit
Application or Letter of Credit Application
-19-
<PAGE> 25
Amendment, the Issuing Bank shall give prompt notice thereof to the Agent, and
the Agent shall promptly inform the Banks of the proposed Letter of Credit or
change thereto. Subject to the satisfaction of all applicable conditions
precedent, the Issuing Bank shall, by 4:00 p.m. (local time at the Applicable
Lending Office of the Agent), on the date requested by the Borrower for the
issuance, increase, or extension of such Letter of Credit issue, increase, or
extend such Letter of Credit to the specified beneficiary. Upon the date of the
issuance, increase, or extension of a Letter of Credit, the Issuing Bank shall
be deemed to have sold to each other Bank and each other Bank shall be deemed to
have purchased from the Issuing Bank a ratable participation in the related
Letter of Credit or change thereto. The Issuing Bank shall notify the Agent of
each Letter of Credit issued, increased, or extended and the date and amount of
each Bank's participation in such Letter of Credit, and the Agent shall in turn
notify the Banks.
(c) Reimbursements for Letters of Credit. With respect to any
Letter of Credit and in accordance with the related Letter of Credit
Application, the Borrower agrees to pay to the Issuing Bank on demand fees due
with respect to such Letter of Credit as specified in Section 2.6(b)). If the
Borrower does not pay upon demand of the Issuing Bank any amount due to the
Issuing Bank under any Letter of Credit Application, in addition to any rights
the Issuing Bank may have under such Letter of Credit Application, the Issuing
Bank may upon written notice to the Agent request the satisfaction of such
obligation by the making of a Loan A Borrowing. Concurrently with such notice to
the Agent, the Issuing Bank will use reasonable efforts provide like notice to
the Borrower, provided that failure to provide such notice to the Borrower at
such time shall not invalidate the effectiveness of such request for a Loan A
Borrowing. Upon such request, the Borrower shall be deemed to have requested the
making of a Loan A Borrowing in the amount of such obligation and the transfer
of the proceeds thereof to the Issuing Bank. Such Loan A Borrowing shall be
comprised of a Prime Rate Tranche. The Agent shall promptly forward notice of
such Loan A Borrowing to the Borrower and the Banks, and each Bank shall, in
accordance with the procedures of Section 2.1(b), other than limitations on the
size of Loan A Borrowings, and notwithstanding the failure of any conditions
precedent, make available such Bank's ratable share of such Loan A Borrowing to
the Agent, and the Agent shall promptly deliver the proceeds thereof to the
Issuing Bank for application to such Bank's share of the obligations under such
Letter of Credit. The Borrower hereby unconditionally and irrevocably
authorizes, empowers, and directs the Issuing Bank to make such requests for
Loan A Borrowings on behalf of the Borrower, and the Banks to make Loan A
Advances to the Agent for the benefit of the Issuing Bank in satisfaction of
such obligations. The Agent and each Bank may record and otherwise treat the
making of such Loan A Borrowings as the making of Loan A Borrowings to the
Borrower under this Agreement as if requested by the Borrower. Nothing herein is
intended to release the Borrower's obligations under any Letter of Credit
Application, but only to provide an additional method of payment therefor. The
making of any Loan A Borrowing under this Section 2.2(c) shall not constitute a
cure or waiver of any Default or Event of Default caused by the Borrower's
failure to comply with the provisions of this Agreement or any Letter of Credit
Application.
-20-
<PAGE> 26
(d) Obligations Unconditional. The obligations of the
Borrower and each Bank under this Agreement and the Letter of Credit
Applications to make payments as required to reimburse the Issuing Bank for
draws under Letters of Credit and to make other payments due in respect of
Letters of Credit shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement and the Letter of Credit
Applications under all circumstances, including: (i) any lack of validity or
enforceability of any Letter of Credit Document; (ii) any amendment, waiver, or
consent to departure from any Letter of Credit Document; (iii) the existence of
any claim, set-off, defense, or other right which the Borrower or any Bank may
have at any time against any beneficiary or transferee of any Letter of Credit
(or any Persons for whom any such beneficiary or any such transferee may be
acting), the Issuing Bank, or any other person or entity, whether in connection
with the transactions contemplated in this Agreement or any unrelated
transaction; (iv) any statement or any other document presented under such
Letter of Credit proving to be forged, fraudulent, invalid, or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
or (v) payment by the Issuing Bank under any Letter of Credit against
presentation of a draft or certificate which does not comply with the terms of
such Letter of Credit; provided, however, that nothing contained in this
paragraph (d) shall be deemed to constitute a waiver of any remedies of the
Borrower or any Bank in connection with the Letters of Credit or the Borrower's
or such Bank's rights under paragraph (e) below.
(e) Liability of Issuing Bank. The Issuing Bank shall not
be liable or responsible for: (i) the use which may be made of any Letter of
Credit or any acts or omissions of any beneficiary or transferee in connection
therewith; (ii) the validity, sufficiency, or genuineness of documents related
to Letters of Credit, or of any endorsement thereon, even if such documents
should prove to be in any or all respects invalid, insufficient, fraudulent, or
forged; (iii) payment by the Issuing Bank against presentation of documents
which do not strictly comply with the terms of a Letter of Credit, including
failure of any documents to bear any reference or adequate reference to the
relevant Letter of Credit; or (iv) any other circumstances whatsoever in making
or failing to make payment under any Letter of Credit (INCLUDING THE ISSUING
BANK'S OWN NEGLIGENCE); except that the Issuing Bank shall be liable to the
Borrower or any Bank to the extent of any direct, as opposed to consequential,
damages suffered by the Borrower or such Bank which the Borrower or such Bank
proves were caused by (A) the Issuing Bank's gross negligence or willful
misconduct in determining whether documents presented under a Letter of Credit
comply with the terms of such Letter of Credit, (B) the Issuing Bank's willful
failure to make or delay in making lawful payment under any Letter of Credit
after the presentation to it of documentation strictly complying with the terms
and conditions of such Letter of Credit or the Issuing Bank's payment of greater
than the maximum amount permitted under any Letter of Credit, or (C) the Issuing
Bank's negligence in the handling of money.
(f) Letter of Credit Collateral Account.
(i) If the Borrower is required to deposit funds in
the Letter of Credit Collateral Account pursuant to Section 6.4, then the
Borrower and the Agent shall establish the
-21-
<PAGE> 27
Letter of Credit Collateral Account and the Borrower shall execute any documents
and agreements, including the Agent's standard form assignment of deposit
accounts, that the Agent reasonably requests in connection therewith to
establish the Letter of Credit Collateral Account and grant the Agent a first
priority security interest in such account and the funds therein. The Borrower
hereby pledges to the Agent and grants the Agent a security interest in the
Letter of Credit Collateral Account, whenever established, all funds held in the
Letter of Credit Collateral Account from time to time, and all proceeds thereof
as security for the payment of the Obligations.
(ii) Funds held in the Letter of Credit Collateral
Account shall be held as cash collateral for obligations with respect to Letters
of Credit and promptly applied by the Agent at the request of the Issuing Bank
to any reimbursement or other obligations under Letters of Credit that exist or
occur. To the extent that any surplus funds are held in the Letter of Credit
Collateral Account above the Letter of Credit Exposure, during the existence of
an Event of Default the Agent y (A) hold such surplus funds in the Letter of
Credit Collateral Account as cash collateral for the Credit Obligations or (B)
apply such surplus funds to any Credit Obligations in accordance with Section
6.9. If no Default exists, the Agent shall release to the Borrower at the
Borrower's written request any funds held in the Letter of Credit Collateral
Account.
(iii) Funds held in the Letter of Credit Collateral
Account shall be invested in money market funds of the Agent or in another
investment if mutually agreed upon by the Borrower and the Agent, but the Agent
shall have no other obligation to make any other investment of the funds
therein. The Agent shall exercise reasonable care in the custody and
preservation of any funds held in the Letter of Credit Collateral Account and
shall be deemed to have exercised such care if such funds are accorded treatment
substantially equivalent to that which the Agent accords its own property, it
being understood that the Agent shall not have any responsibility for taking any
necessary steps to preserve rights against any parties with respect to any such
funds.
2.3 Loan B Facility.
(a) Commitment for Loan B. Each Bank severally agrees, on the
terms and conditions set forth in this Agreement and for the purposes set forth
in Section 5.4, to make one Loan B Advance to the Borrower as such Bank's
ratable share of the Loan B Borrowing requested by the Borrower on any Business
Day during the period from the date of this Agreement until the Loan B
Commitment Termination Date provided that the Loan B Advance made by such Bank
shall not exceed such Bank's Loan B Commitment. The Loan B Commitment is not
revolving and therefore amounts that have been advanced and then prepaid may not
be readvanced. The indebtedness of the Borrower to the Banks resulting from the
Loan B Advances made by the Banks shall be evidenced by Loan B Notes made by the
Borrower.
(b) Method of Advancing. The Loan B Borrowing shall be made
pursuant to the Loan B Borrowing Request given by the Borrower to the Agent in
writing or by telecopy not later than the time required pursuant to Section
2.7(a) to select the interest rate basis for the Loan B
-22-
<PAGE> 28
Borrowing. The Loan B Borrowing Request shall be fully completed and shall
specify the information required therein, and shall be irrevocable and binding
on the Borrower.
(c) Prepayment.
(i) The Borrower may prepay the outstanding principal
amount of Loan B pursuant to written notice given by the Borrower to the Agent
in writing or by telecopy not later than (A) 1:00 p.m. (local time at the
Applicable Lending Office of the Agent) on the third Business Day before the
date of the proposed prepayment, in the case of the prepayment of any portion of
Loan B which is comprised of LIBOR Tranches, or (B) 11:00 a.m. (local time at
the Applicable Lending Office of the Agent) on the same Business Day of the
proposed prepayment, in the case of the prepayment of any portion of Loan B
comprised solely of the Prime Rate Tranche. Each such notice shall specify the
principal amount and Tranche or Tranches of Loan B which shall be prepaid, the
date of the prepayment, and shall be irrevocable and binding on the Borrower.
Partial prepayments of Loan B shall be made in a minimum amount equal to or
greater than the applicable Minimum Borrowing Amount, shall not cause any
Tranche to be less than the Minimum Tranche Amount, and shall not cause the
outstanding principal amount of Loan B to be less than the applicable Minimum
Borrowing Amount. Upon receipt of any notice of prepayment, the Agent shall give
prompt notice of the intended prepayment to the Banks. For each such notice
given by the Borrower, the Borrower shall prepay Loan B in the specified amount
on the specified date as set forth in such notice. The Borrower shall have no
right to prepay any principal amount of Loan B except as provided in this
Section 2.3(c)(i).
(ii) Each prepayment of principal on a LIBOR Tranche
pursuant to this Section 2.3(c) shall be accompanied by payment of any amounts
required to be paid pursuant to Section 2.8 as a result of such prepayment.
(iii) Each prepayment of principal pursuant this
Section 2.3(c) shall be applied to the required principal payments on Loan B in
the inverse order of maturity.
(d) Repayment. The Borrower shall repay to the Agent for the
ratable benefit of the Banks the outstanding principal amount of Loan B at the
end of the Loan B Commitment Termination Date in equal principal installments of
1/28th of such amount, beginning with a payment on the last day of the first
calendar quarter ending after one year after the Loan B Commitment Termination
Date and continuing with payments on the last day of each calendar quarter
thereafter until, but not including, the Loan B Maturity Date. The Borrower
shall repay to the Agent for the ratable benefit of the Banks the outstanding
principal amount of Loan B on the Loan B Maturity Date.
-23-
<PAGE> 29
2.4 Loan C Facility.
(a) Commitment for Loan C. Each Bank severally agrees,
on the terms and conditions set forth in this Agreement and for the purposes set
forth in Section 5.4, to make Loan C Advances to the Borrower as such Bank's
ratable share of Loan C Borrowings requested by the Borrower on any Business Day
during the period from the date of this Agreement until the Loan C Commitment
Termination Date provided that (i) the Acquisition for which the Loan C
Borrowing is being made has been approved by the Banks and (ii) the Loan C
Advances made by such Bank shall not exceed such Bank's Loan C Commitment. Loan
C Borrowings must be made in an amount equal to or greater than the applicable
Minimum Borrowing Amount and be made in multiples of the Minimum Tranche Amount.
The Loan C Commitment is not revolving and therefore amounts that have been
advanced and prepaid may not be readvanced. The indebtedness of the Borrower to
the Banks resulting from the Loan C Advances made by the Banks shall be
evidenced by Loan C Notes made by the Borrower.
(b) Method of Advancing. Loan C Borrowings shall be made
pursuant to Loan C Borrowing Requests given by the Borrower to the Agent in
writing or by telecopy not later than the time required pursuant to Section
2.7(a) to select the interest rate basis for the Loan C Borrowing. Each Loan C
Borrowing Request shall be fully completed and shall specify the information
required therein, and shall be irrevocable and binding on the Borrower.
(c) Prepayment.
(i) The Borrower may prepay the outstanding principal
amount of Loan C pursuant to written notice given by the Borrower to the Agent
in writing or by telecopy not later than (A) 1:00 p.m. (local time at the
Applicable Lending Office of the Agent) on the third Business Day before the
date of the proposed prepayment, in the case of the prepayment of any portion of
Loan C which is comprised of LIBOR Tranches, or (B) 11:00 a.m. (local time at
the Applicable Lending Office of the Agent) on the same Business Day of the
proposed prepayment, in the case of the prepayment of any portion of Loan C
comprised solely of the Prime Rate Tranche. Each such notice shall specify the
principal amount and Tranche or Tranches of Loan C which shall be prepaid, the
date of the prepayment, and shall be irrevocable and binding on the Borrower.
Partial prepayments of Loan C shall be made in a minimum amount equal to or
greater than the applicable Minimum Borrowing Amount, shall not cause any
Tranche to be less than the Minimum Tranche Amount, and shall not cause the
outstanding principal amount of Loan C to be less than the applicable Minimum
Borrowing Amount. Upon receipt of any notice of prepayment, the Agent shall give
prompt notice of the intended prepayment to the Banks. For each such notice
given by the Borrower, the Borrower shall prepay Loan C in the specified amount
on the specified date as set forth in such notice. The Borrower shall have no
right to prepay any principal amount of Loan C except as provided in this
Section 2.4(c)(i).
-24-
<PAGE> 30
(ii) Each prepayment of principal on a LIBOR Tranche
pursuant to this Section 2.4(c) shall be accompanied by payment of any amounts
required to be paid pursuant to Section 2.8 as a result of such prepayment.
(iii) Each prepayment of principal pursuant this
Section 2.4(c) shall be applied to the required principal payments on Loan C in
the inverse order of maturity.
(d) Repayment. The Borrower shall repay to the Agent for
the ratable benefit of the Banks the outstanding principal amount of Loan C at
the end of the Loan C Commitment Termination Date in equal principal
installments of 1/28th of such amount, beginning with a payment on the last day
of the first calendar quarter ending after the Loan C Commitment Termination
Date and continuing with payments on the last day of each calendar quarter
thereafter until, but not including, the Loan C Maturity Date. The Borrower
shall repay to the Agent for the ratable benefit of the Banks the outstanding
principal amount of Loan C on the Loan C Maturity Date.
2.5 Loan D Facility.
(a) Commitment for Loan D. Each Bank severally agrees, on
the terms and conditions set forth in this Agreement and for the purposes set
forth in Section 5.4, to make one Loan D Advance to the Borrower as such Bank's
ratable share of the Loan D Borrowing requested by the Borrower on any Business
Day during the period from the date of this Agreement until the Loan D
Commitment Termination Date provided that the Loan D Advance made by such Bank
shall not exceed such Bank's Loan D Commitment. The Loan D Commitment is not
revolving and therefore amounts that have been advanced and then prepaid may not
be readvanced. The indebtedness of the Borrower to the Banks resulting from the
Loan D Advances made by the Banks shall be evidenced by Loan D Notes made by the
Borrower.
(b) Method of Advancing. The Loan D Borrowing shall be
made pursuant to the Loan D Borrowing Request given by the Borrower to the Agent
in writing or by telecopy not later than the time required pursuant to Section
2.7(a) to select the interest rate basis for the Loan D Borrowing. The Loan D
Borrowing Request shall be fully completed and shall specify the information
required therein, and shall be irrevocable and binding on the Borrower.
(c) Prepayment.
(i) The Borrower may prepay the outstanding principal
amount of Loan D pursuant to written notice given by the Borrower to the Agent
in writing or by telecopy not later than (A) 1:00 p.m. (local time at the
Applicable Lending Office of the Agent) on the third Business Day before the
date of the proposed prepayment, in the case of the prepayment of any portion of
Loan D which is comprised of LIBOR Tranches, or (B) 11:00 a.m. (local time at
the Applicable Lending Office of the Agent) on the same Business Day of the
proposed prepayment, in the case of
-25-
<PAGE> 31
the prepayment of any portion of Loan D comprised solely of the Prime Rate
Tranche. Each such notice shall specify the principal amount and Tranche or
Tranches of Loan D which shall be prepaid, the date of the prepayment, and shall
be irrevocable and binding on the Borrower. Partial prepayments of Loan D shall
be made in a minimum amount equal to or greater than the applicable Minimum
Borrowing Amount, shall not cause any Tranche to be less than the Minimum
Tranche Amount, and shall not cause the outstanding principal amount of Loan D
to be less than the applicable Minimum Borrowing Amount. Upon receipt of any
notice of prepayment, the Agent shall give prompt notice of the intended
prepayment to the Banks. For each such notice given by the Borrower, the
Borrower shall prepay Loan D in the specified amount on the specified date as
set forth in such notice. The Borrower shall have no right to prepay any
principal amount of Loan D except as provided in this Section 2.5(c)(i).
(ii) Each prepayment of principal on a LIBOR Tranche
pursuant to this Section 2.5(c) shall be accompanied by payment of any amounts
required to be paid pursuant to Section 2.8 as a result of such prepayment.
(iii) Each prepayment of principal pursuant this
Section 2.5(c) shall be applied to the required principal payments on Loan D in
the inverse order of maturity.
(d) Repayment. The Borrower shall repay to the Agent for
the ratable benefit of the Banks the outstanding principal amount of Loan D at
the end of the Loan D Commitment Termination Date in equal principal
installments of 1/60th of such amount, beginning with a payment on the last day
of the first calendar quarter ending after the Loan D Commitment Termination
Date and continuing with payments on the last day of each calendar quarter
thereafter until, but not including, the Loan D Maturity Date. The Borrower
shall repay to the Agent for the ratable benefit of the Banks the outstanding
principal amount of Loan D on the Loan D Maturity Date.
2.6 Fees.
(a) Loan A Unused Commitment Fee. The Borrower shall pay
to the Agent for the ratable benefit of the Banks an unused commitment fee in an
amount equal to 0.25% of the average daily amount by which (i) the aggregate
amount of the Loan A Commitments exceeds (ii) the outstanding principal amount
of Loan A plus the Letter of Credit Exposure. This unused commitment fee shall
be due and payable in arrears on the last day of each calendar quarter and on
the Loan A Maturity Date.
(b) Fees for Letters of Credit. For each Letter of Credit
issued by the Issuing Bank, the Borrower shall pay to the Agent for the ratable
benefit of the Banks a letter of credit fee equal to the Applicable Margin for
Loan A LIBOR Tranches in effect from time to time per annum on the face amount
of such Letter of Credit for the stated term of such Letter of Credit, with a
minimum fee of $500. In addition, for each Letter of Credit issued by the
Issuing Bank when there
-26-
<PAGE> 32
are Banks other than the Agent among the Banks, the Borrower shall pay to the
Agent for the benefit of the Issuing Bank a fronting fee equal to 0.125% per
annum on the face amount of such Letter of Credit for the stated term of such
Letter of Credit, with a minimum fee of $500. The Borrower shall pay each such
letter of credit fee for each Letter of Credit quarterly in arrears within ten
days after when billed therefor by the Issuing Bank.
(c) Loan B Upfront Commitment Fee. The Borrower shall pay
to the Agent for the ratable benefit of the Banks upon the effectiveness of this
Agreement a one-time commitment fee payable to the Agent upon the effectiveness
of this Agreement in an amount equal to 1.00% of the aggregate amount of Loan B
Commitments.
(d) Loan C Commitment Fee. The Borrower shall pay to the
Agent for the ratable benefit of the Banks at the time of any Loan C Borrowing a
commitment fee payable to the Agent on the date of such Loan C Borrowing in an
amount equal to 1.00% of such Loan C Borrowing.
2.7 Interest.
(a) Election of Interest Rate Basis. Under the Borrowing
Request provided to the Agent in connection with the making of any Borrowing
under any Loan, and under each Interest Rate Election Request applicable to such
Loan, the Borrower may select the amount and the Type of the Tranches, and for
each LIBOR Tranche selected, any permitted Interest Period for each such LIBOR
Tranche, which will comprise such Borrowing or the Loan, provided that (A) at no
time shall there be more than the applicable Maximum Number of Tranches
outstanding under any Loan and (B) each Tranche must be in a principal amount
equal to or greater than the Minimum Tranche Amount. Such interest rate
elections must be provided to the Agent in writing or by telecopy not later than
1:00 p.m. (local time at the Applicable Lending Office of the Agent) on the
third Business Day before the date of any proposed Borrowing or interest rate
election creating any LIBOR Tranche or 11:00 a.m. (local time at the Applicable
Lending Office of the Agent) on the same day of any proposed Borrowing or
interest rate election creating only Prime Rate Tranches. The Agent shall
promptly forward copies of any Interest Rate Election Request to the Banks. For
each LIBOR Tranche, upon determination by the Agent, the Agent shall promptly
notify the Borrower and the Banks of the applicable interest rate for such
Tranche. Any conversion of an existing LIBOR Tranche prior to the last day of
its Interest Period is subject to Section 2.8. At the end of the Interest Period
for any LIBOR Tranche, if the Borrower has not selected the next interest rate
basis for such LIBOR Tranche pursuant to an Interest Rate Election Request, the
Borrower shall be deemed to have selected such Tranche to continue as a LIBOR
Tranche with an Interest Period of one month. Each Prime Rate Tranche shall
continue as a Prime Rate Tranche unless the Borrower converts such Prime Rate
Tranche pursuant to an Interest Rate Election Request.
(b) LIBOR Tranches. Each LIBOR Tranche under a Loan shall
bear interest during its Interest Period at a per annum interest rate equal to
the sum of the LIBOR for such LIBOR Tranche plus the Applicable Margin for such
LIBOR Tranche in effect from time to time. The
-27-
<PAGE> 33
Borrower shall pay to the Agent for the ratable benefit of the Banks all accrued
but unpaid interest on each LIBOR Tranche under such Loan on the last day of
each calendar quarter and on the maturity date of such Loan.
(c) Prime Rate Tranche. Each Prime Rate Tranche under a
Loan shall bear interest at a per annum interest rate equal to the Base Rate in
effect from time to time plus the Applicable Margin for such Prime Rate Tranche
in effect from time to time. The Borrower shall pay to the Agent for the ratable
benefit of the Banks all accrued but unpaid interest on the aggregate
outstanding principal amount of such Prime Rate Tranche on the last day of each
calendar quarter and on the Maturity Date of such Loan.
(d) Default Interest. Notwithstanding paragraphs (b) and
(c) above, and without limiting the rights of the Majority Banks under Section
6.5, interest shall automatically accrue on any overdue principal (including any
overdue prepayment of principal) at a rate equal to the applicable Default Rate.
The Borrower shall pay to the Agent for the ratable benefit of the Banks all
such accrued but unpaid default interest, and any other accrued but unpaid
interest on the overdue principal that is outstanding at the time when such
default interest is due and payable, on demand of the Majority Banks.
(e) Usury Protection.
(i) If, with respect to any Bank and the Borrower,
the effective rate of interest contracted for by such Bank with the Borrower
under the Credit Documents, including the stated rates of interest contracted
for hereunder and any other amounts contracted for under the Credit Documents
which are deemed to be interest, at any time exceeds the Highest Lawful Rate,
then the outstanding principal amount of the loans made by such Bank to the
Borrower hereunder shall bear interest at a rate which would make the effective
rate of interest on the loans made by such Bank to the Borrower under the Credit
Documents equal the Highest Lawful Rate until the difference between the amounts
which would have been due by the Borrower to such Bank at the stated rates and
the amounts which were due by the Borrower to such Bank at the Highest Lawful
Rate (the "Lost Interest") has been recaptured by such Bank. If, when the loans
made hereunder are repaid in full, the Lost Interest has not been fully
recaptured by such Bank pursuant to the preceding paragraph, then, to the extent
permitted by law, the interest rates charged by such Bank to the Borrower
hereunder shall be retroactively increased such that the effective rate of
interest on the loans made by such Bank to the Borrower under the Credit
Documents was at the Highest Lawful Rate since the effectiveness of this
Agreement to the extent necessary to recapture the Lost Interest not recaptured
pursuant to the preceding sentence and, to the extent allowed by law, the
Borrower shall pay to such Bank the amount of the Lost Interest remaining to be
recaptured by such Bank.
-28-
<PAGE> 34
(ii) In calculating all sums paid or agreed to be
paid to any Bank by the Borrower for the use, forbearance, or detention of money
under the Credit Documents, such amounts shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread in equal parts
throughout the term of the Credit Documents.
(iii) NOTWITHSTANDING THE FOREGOING OR ANY OTHER
TERM IN THIS AGREEMENT AND THE CREDIT DOCUMENTS TO THE CONTRARY, it is
the intention of each Bank and the Borrower to conform strictly to any
applicable usury laws. Accordingly, if any Bank contracts for, charges, or
receives any consideration from the Borrower which constitutes interest in
excess of the Highest Lawful Rate, then any such excess shall be canceled
automatically and, if previously paid, shall at such Bank's option be applied to
the outstanding amount of the loans made hereunder by such Bank to the Borrower
or be refunded to the Borrower.
2.8 Breakage Costs. If (i) any payment of principal on or any
conversion of any LIBOR Tranche is made on any date other than the last day of
the Interest Period for such LIBOR Tranche, whether as a result of any voluntary
or mandatory prepayment, any acceleration of maturity, or any other cause, (ii)
any payment of principal on any LIBOR Tranche is not made when due, or (iii) any
LIBOR Tranche is not borrowed, converted, or prepaid in accordance with the
respective notice thereof provided by the Borrower to the Agent, whether as a
result of any failure to meet any applicable conditions precedent for borrowing,
conversion, or prepayment, the permitted cancellation of any request for
borrowing, conversion, or prepayment, the failure of the Borrower to provide the
respective notice of borrowing, conversion, or prepayment, or any other cause
not specified above which is created by the Borrower, then the Borrower shall
pay to each Bank upon demand any amounts required to compensate such Bank for
any losses, costs, or expenses, including lost profits and administrative
expenses, which are reasonably allocable to such action, including losses,
costs, and expenses related to the liquidation or redeployment of funds acquired
or designated by such Bank to fund or maintain such Bank's ratable share of such
LIBOR Tranche or related to the reacquisition or redesignation of funds by such
Bank to fund or maintain such Bank's ratable share of such LIBOR Tranche
following any liquidation or redeployment of such funds caused by such action.
Such Bank need not prove matched funding of any particular funds, and a
certificate as to the amount of such loss, cost, or expense detailing the
calculation thereof and certifying that such Bank customarily charges such
amounts to its other customers in similar circumstances submitted by such Bank
to the Borrower shall be conclusive and binding for all purposes, absent
manifest error.
2.9 Increased Costs.
(a) Cost of Funds. If due to either (i) any introduction of,
change in, or change in the interpretation of any law or regulation, in each
case, after the date of this Agreement or (ii) compliance with any guideline or
request from any central bank or other governmental authority having appropriate
jurisdiction (whether or not having the force of law) given after the date of
this Agreement, there shall be any increase in the costs of any Bank
attributable to committing to make
-29-
<PAGE> 35
or obtaining funds for the making, funding, or maintaining of such Bank's
ratable share of any LIBOR Tranche in the relevant interbank market, then the
Borrower shall pay to such Bank upon demand any amounts required to compensate
such Bank for such increased costs, such amounts being due and payable upon
demand by such Bank. A certificate as to the cause and amount of such increased
cost detailing the calculation of such cost and certifying that such Bank
customarily charges such amounts to its other customers in similar circumstances
submitted by such Bank to the Borrower shall be conclusive and binding for all
purposes, absent manifest error.
(b) Capital Adequacy. If, due to either (i) any introduction
of, change in, or change in the interpretation of any law or regulation, in each
case, after the date of this Agreement or (ii) compliance with any guideline or
request from any central bank or other governmental authority having appropriate
jurisdiction (whether or not having the force of law) given after the date of
this Agreement, there shall be any increase in the capital requirements of any
Bank or its parent or holding company attributable to committing to make or
making, funding, or maintaining such Bank's ratable share of any LIBOR Tranche,
as such capital requirements are allocated by such Bank, then the Borrower shall
pay to such Bank upon demand any amounts required to compensate such Bank or its
parent or holding company for such increase in costs (including an amount equal
to any reduction in the rate of return on assets or equity of such Bank or its
parent or holding company), such amounts being due and payable upon demand by
such Bank. A certificate as to the cause and amounts detailing the calculation
of such amounts and certifying that such Bank customarily charges such amounts
to its other customers in similar circumstances submitted by such Bank to the
Borrower shall be conclusive and binding for all purposes, absent manifest
error.
2.10 Illegality. Notwithstanding any other provision in this
Agreement, if it becomes unlawful for any Bank to obtain deposits or other funds
for making or funding such Bank's ratable share of any LIBOR Tranche in the
relevant interbank market, such Bank shall so notify the Borrower and the Agent
and such Bank's commitment to create LIBOR Tranches shall be suspended until
such condition has passed, all LIBOR Tranches applicable to such Bank shall be
converted to the Prime Rate Tranche as of the end of each applicable Interest
Period or earlier if necessary, and all subsequent requests for LIBOR Tranches
shall be deemed to be requests for Prime Rate Borrowings or continuations and
conversions of the Prime Rate Tranche, as applicable, with respect to such Bank.
2.11 Market Failure. Notwithstanding any other provision in this
Agreement, if the Agent determines that: (a) quotations of interest rates for
the relevant deposits referred to in the definition of "LIBOR" are not being
provided in the relevant amounts, or maturities for purposes of determining the
rate of interest referred to in the definition of "LIBOR" or (b) the relevant
rates of interest referred to in the definition of "LIBOR" which are used as the
basis to determine the rate of interest for LIBOR Tranches will not adequately
cover the cost to any Bank of making or maintaining such Bank's ratable share of
any LIBOR Tranche, then if the Agent so notifies the Borrower, the Agent and the
Banks' commitment to create LIBOR Tranches shall be suspended until such
condition has passed, all LIBOR Tranches shall be converted to the Prime Rate
Tranche as of
-30-
<PAGE> 36
the end of each applicable Interest Period, and all subsequent requests for
LIBOR Tranches shall be deemed to be requests for Prime Rate Borrowings or
continuations and conversions of the Prime Rate Tranche, as applicable, with
respect to such Bank.
2.12 Advancing and Payments Generally.
(a) Advancing Procedures. Time is of the essence in this
Agreement and the Credit Documents. All advances hereunder shall be made in
Dollars. Upon receipt of any Borrowing Request by the Agent, the Agent shall
promptly forward notice of the Borrowing to the Banks. Subject to the
satisfaction of the applicable conditions precedent, each Bank shall, before
1:00 p.m. (local time at the Applicable Lending Office of the Agent) on the date
of the requested Borrowing, make available from its Applicable Lending Office to
the Agent at the Agent's Applicable Lending Office, in immediately available
funds, such Bank's ratable share of such Borrowing. Subject to the satisfaction
of all applicable conditions precedent, after receipt by the Agent of such
funds, the Agent shall, by 4:00 p.m. (local time at the Applicable Lending
Office of the Agent) on the date requested for such Borrowing, make such
Borrowing available to the Borrower in immediately available funds at any
account of Borrower which is designated in writing by the Borrower to the Agent.
(b) Agent Reliance on Banks in Advancing. Unless the Agent
shall have received notice from a Bank before the date of any Borrowing that
such Bank shall not make available to the Agent such Bank's ratable share of
such Borrowing, the Agent may assume that such Bank has made its ratable share
of such Borrowing available to the Agent on the date of such Borrowing in
accordance with this Agreement and the Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Bank shall not have so made its ratable share of
such Borrowing available to the Agent, such Bank agrees that it shall pay
interest on such amount for each day from the date such amount is made available
to the Borrower by the Agent until the date such amount is paid to the Agent by
such Bank at the Federal Funds Rate in effect from time to time, provided that
with respect to such Bank if such amount is not paid by such Bank by the end of
the second day after the Agent makes such amount available to the Borrower, the
interest rates specified above shall be increased by a per annum amount equal to
2.00% on the third day and shall remain at such increased rate thereafter.
Interest on such amount shall be due and payable by such Bank upon demand by the
Agent. If such Bank shall pay to the Agent such amount and interest as provided
above, such amount so paid shall constitute such Bank's Advance as part of such
Borrowing for all purposes of this Agreement even though not made on the same
day as the other Advances comprising such Borrowing. In the event that such Bank
has not repaid such amount by the end of the fifth day after such amount was
made available to the Borrower, the Borrower agrees to repay to the Agent on
demand such amount, together with interest on such amount for each day from the
date such amount was made available to the Borrower until the date such amount
is repaid to the Agent at the interest rate charged to the Borrower for such
Borrowing under the terms of this Agreement. The failure of any Bank to make
available its ratable share of any Borrowing shall not relieve any other Bank of
its obligation, if any,
-31-
<PAGE> 37
to make available its ratable share of such Borrowing. No Bank shall be
responsible for the failure of any other Bank to honor such other Bank's
obligations hereunder, including any failure to make available any funds as part
of any Borrowing.
(c) Payment Procedures. Time is of the essence in this
Agreement and the Credit Documents. All payment hereunder shall be made in
Dollars. The Borrower shall make each payment under this Agreement and under the
Notes not later than 12:00 noon (local time at the Applicable Lending Office of
the Agent) on the day when due to the Agent at the Agent's Applicable Lending
Office in immediately available funds. All payments by the Borrower hereunder
shall be made without any offset, abatement, withholding, deduction,
counterclaim, or reduction. Upon receipt of payment from the Borrower of any
principal, interest, or fees due to the Banks, the Agent shall promptly after
receipt thereof distribute to the Banks their ratable share of such payments for
the account of their respective Applicable Lending Offices. If and to the extent
that the Agent shall not have so distributed to any Bank its ratable share of
such payments, the Agent agrees that it shall pay interest on such amount for
each day after the day when such amount is made available to the Agent by the
Borrower until the date such amount is paid to such Bank by the Agent at the
Federal Funds Rate in effect from time to time, provided that if such amount is
not paid by the Agent by the end of the third day after the Borrower makes such
amount available to the Agent, the interest rates specified above shall be
increased by a per annum amount equal to 2.00% on the fourth day and shall
remain at such increased rate thereafter. Interest on such amount shall be due
and payable by the Agent upon demand by such Bank. Upon receipt of other amounts
due solely to the Agent or a specific Bank, the Agent shall distribute such
amounts to the appropriate party to be applied in accordance with the terms of
this Agreement.
(d) Agent Reliance on Borrower in Payments. Unless the Agent
shall have received written notice from the Borrower prior to any date on which
any payment is due to the Banks that the Borrower shall not make such payment in
full, the Agent may assume that the Borrower has made such payment in full to
the Agent on such date and the Agent may, in reliance upon such assumption,
cause to be distributed to each Bank on such date an amount equal to the amount
then due such Bank. If and to the extent the Borrower shall not have so made
such payment in full to the Agent, each Bank shall repay to the Agent forthwith
on demand such amount distributed to such Bank, together with interest thereon
from the date such amount is distributed to such Bank until the date such Bank
repays such amount to the Agent, at an interest rate equal to, the Federal Funds
Rate in effect from time to time, provided that with respect to such Bank, if
such amount is not repaid by such Bank by the end of the second day after the
date of the Agent's demand, the interest rates specified above shall be
increased by a per annum amount equal to 2.00% on the third day after the date
of the Agent's demand and shall remain at such increased rate thereafter.
(e) Sharing of Payments. Each Bank agrees that if it should
receive any payment (whether by voluntary payment, by realization upon security,
by the exercise of the right of setoff or banker's lien, by counterclaim or
cross action, by the enforcement of any right under the Credit Documents, or
otherwise) in respect of any obligation of the Borrower to pay principal,
interest, fees,
-32-
<PAGE> 38
or any other obligation incurred under the Credit Documents in a proportion
greater than the total amount of such principal, interest, fees, or other
obligation then owed and due by the Borrower to such Bank bears to the total
amount of principal, interest, fees, or other obligation then owed and due by
the Borrower to the Banks immediately prior to such receipt, then such Bank
receiving such excess payment shall purchase for cash without recourse from the
other Banks an interest in the obligations of the Borrower to such Banks in such
amount as shall result in a participation by all of the Banks, in proportion
with the Banks' respective pro rata shares, in the aggregate unpaid amount of
principal, interest, fees, or any such other obligation, as the case may be,
owed by the Borrower to all of the Banks; provided that if all or any portion of
such excess payment is thereafter recovered from such Bank, such purchase shall
be rescinded and the purchase price restored to the extent of such recovery, in
proportion with the Banks' respective pro rata shares.
(f) Authority to Charge Accounts. The Agent, if and to the
extent payment owed to the Agent or any Bank is not made when due, may charge
from time to time against any account of the Borrower with the Agent any amount
so due. The Agent agrees promptly to notify the Borrower after any such charge
and application made by the Agent provided that the failure to give such notice
shall not affect the validity of such charge and application.
(g) Interest and Fees. Unless expressly provided for in this
Agreement, (i) all computations of interest based on the Prime Rate (including
the Base Rate, when applicable) shall be made on the basis of a 365/366 day
year, as the case may be, (ii) all computations of interest based on the Federal
Funds Rate (including the Base Rate, when applicable) shall be made on the basis
of a 360 day year, (iii) all computations of interest based upon the LIBOR shall
be made on the basis of a 360 day year, and (iv) all computations of fees shall
be made on the basis of a 360 day year, in each case for the actual number of
days (including the first day, but excluding the last day) occurring in the
period for which such interest or fees are payable. Each determination by the
Agent of an interest rate or fee shall be conclusive and binding for all
purposes, absent manifest error.
(h) Payment Dates. Whenever any payment shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fees, as the case may be.
If the time for payment for an amount payable is not specified in this Agreement
or in any other Credit Document, the payment shall be due and payable on demand
by the Agent or the applicable Bank.
2.13 Taxes.
(a) No Deduction for Certain Taxes. Any and all payments by
the Borrower shall be made free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges, or
withholdings, and all liabilities with respect thereto, other than taxes imposed
on the income and franchise taxes imposed on the Agent, any Bank, or the
Applicable Lending Office thereof by any jurisdiction in which any such entity
is a citizen or resident or any
-33-
<PAGE> 39
political subdivision of such jurisdiction (all such nonexcluded taxes, levies,
imposts, deductions, charges, withholdings, and liabilities being hereinafter
referred to as "Taxes"). If the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable to the Agent, any Bank, or the
Applicable Lending Office thereof, (i) the sum payable shall be increased as may
be necessary so that, after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.13), such Person
receives an amount equal to the sum it would have received had no such
deductions been made; (ii) the Borrower shall make such deductions; and (iii)
the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) Other Taxes. The Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges, or similar levies which arise from any payment made or from the
execution, delivery, or registration of, or otherwise with respect to, this
Agreement or the other Credit Documents (other than those which become due as a
result of any Bank joining this Agreement as a result of any Assignment and
Acceptance, which shall be paid by the Bank which becomes a Bank hereunder as a
result of such Assignment and Acceptance).
(c) Foreign Bank Withholding Exemption. Each Bank that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it shall deliver to the Borrower and the Agent (i) two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224 or
successor applicable form, as the case may be, certifying in each case that such
Bank is entitled to receive payments under this Agreement and the Loan A Notes
payable to it, without deduction or withholding of any United States federal
income taxes, (ii) if applicable, an Internal Revenue Service Form W-8 or W-9 or
successor applicable form, as the case may be, to establish an exemption from
United States backup withholding tax, and (iii) any other governmental forms
which are necessary or required under an applicable tax treaty or otherwise by
law to reduce or eliminate any withholding tax, which have been reasonably
requested by the Borrower. Each Bank which delivers to the Borrower and the
Agent a Form 1001 or 4224 and Form W-8 or W-9 pursuant to the next preceding
sentence further undertakes to deliver to the Borrower and the Agent two further
copies of the said letter and Form 1001 or 4224 and Form W-8 or W-9, or
successor applicable forms, or other manner of certification, as the case may
be, on or before the date that any such letter or form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent letter and form previously delivered by it to the Borrower and the Agent,
and such extensions or renewals thereof as may reasonably be requested by the
Borrower and the Agent certifying in the case of a Form 1001 or 4224 that such
Bank is entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes. If an event (including
without limitation any change in treaty, law or regulation) has occurred prior
to the date on which any delivery required by the preceding sentence would
otherwise be required which renders all such forms inapplicable or which would
prevent any Bank from duly completing and delivering any such letter or form
with respect to it and such Bank advises the Borrower and the Agent that it is
not capable of receiving payments without any deduction or withholding of United
States federal income tax, and in the case of a Form W-8 or W-9, establishing an
exemption from
-34-
<PAGE> 40
United States backup withholding tax, such Bank shall not be required to deliver
such letter or forms. The Borrower shall withhold tax at the rate and in the
manner required by the laws of the United States with respect to payments made
to a Bank failing to provide the requisite Internal Revenue Service forms in a
timely manner. Each Bank which fails to provide to the Borrower in a timely
manner such forms shall reimburse the Borrower upon demand for any penalties
paid by the Borrower as a result of any failure of the Borrower to withhold the
required amounts that are caused by such Bank's failure to provide the required
forms in a timely manner.
ARTICLE 3. CONDITIONS PRECEDENT.
3.1 Conditions Precedent to the Initial Loan A Borrowing. The
obligation of the Banks to make the initial Loan A Borrowing shall be subject to
the following conditions precedent:
(a) The Borrower shall have delivered or shall have
caused to be delivered the documents and other items listed below (together with
any other documents requested by the Agent to document the agreements and intent
of the Credit Documents), each in form and with substance satisfactory to the
Agent;
(i) this Agreement, the Notes, the Guaranty, the
Pledge Agreement, and the Security Agreement;
(ii) an Opinion Letter from counsel to the Borrower
and Certificates of Secretary for the Borrower and its Subsidiaries;
(iii) such (A) stock certificates and stock powers in
blank, (B) financing statements, lien searches, lien releases, and
landlords lien waivers, (C) lien recordings, title policies and
endorsements, surveys, environmental site assessments, and appraisals,
(D) insurance policies and endorsements, and (E) other items as are
necessary or desirable to evaluate, create, perfect, prioritize, and
insure the Liens purported to be created by the terms of the Security
Documents, each duly executed and delivered by the appropriate parties
and where applicable ready for filing and recording; and
(iv) the Agent shall have received such other
documents as they may have requested at any time at or prior to the
execution of this Agreement.
(b) The Agent and the Banks shall have completed their
due diligence, including environmental due diligence, with respect to the
Borrower and its Subsidiaries and shall be satisfied with the results thereof.
(c) The Agent, the Banks, and their counsel shall have
been paid and reimbursed for all fees and expenses due and payable.
-35-
<PAGE> 41
3.2 Conditions Precedent to the Loan B Borrowing. The obligation of the
Banks to make the Loan B Borrowing under this Agreement shall be subject to the
following conditions precedent on the date of such Borrowing:
(a) All conditions precedent to the initial Loan A
Borrowing shall be satisfied.
(b) The Borrower shall have delivered or shall have
caused to be delivered the documents and other items listed below (together with
any other documents requested by the Agent to document the agreements and intent
of the Credit Documents related to Loan B), each in form and with substance
satisfactory to the Agent;
(i) amendments and joinders to this Agreement, the
Guaranty, the Pledge Agreement, and the Security Agreement and a
Mortgage covering all of the real property of Climax and its
Subsidiaries (the "Climax Mortgage");
(ii) an Opinion Letter from counsel to the Borrower
and Certificates of Secretary for the Borrower and its Subsidiaries
(including Climax and its Subsidiaries); and
(iii) such (A) stock certificates and stock powers in
blank, (B) financing statements, lien searches, lien releases, and
landlords lien waivers, (C) lien recordings, title policies and
endorsements, surveys, environmental site assessments, and appraisals,
(D) insurance policies and endorsements, and (E) other items as are
necessary or desirable to evaluate, create, perfect, prioritize, and
insure the Liens purported to be created by the terms of the Security
Documents, each duly executed and delivered by the appropriate parties
and where applicable ready for filing and recording.
(c) The Borrower shall have delivered or shall have
caused to be delivered the documents and other items listed below (together with
any other documents requested by the Agent to document the Acquisition of
Climax), each in form and with substance satisfactory to the Agent;
(i) Stock Purchase Agreement dated as of July 3,
1998, among Team, Inc., and R. Leroy and Paula Benham et. al.,
regarding the purchase of Climax (including exhibits and schedules)
("Climax Acquisition Agreement"); and
(ii) Alsana Acquisition Agreement.
(d) The Agent and the Banks shall have completed their
due diligence, including environmental due diligence, with respect to the
Borrower and its Subsidiaries and shall be satisfied with the results thereof.
(e) The Agent, the Banks, and their counsel shall have
been paid and reimbursed for all fees and expenses due and payable.
-36-
<PAGE> 42
(f) The transactions contemplated under the Climax
Acquisition Agreement and the Alsana Acquisition Agreement shall have been
consummated in accordance with the terms of those agreements without any waiver
or amendment not consented to by the Agent in writing.
3.3 Conditions Precedent to Each Loan C Borrowing. Each Loan C
Borrowing is at the discretion of the Banks, and shall be subject to the
approval of the Acquisition being funded with the proceeds of the Loan C
Borrowing by the Banks and any other conditions which the Banks may determine
shall be applicable.
3.4 Conditions Precedent to the Loan D Borrowing. The obligation
of the Banks to make the Loan D Borrowing under this Agreement shall be subject
to the following conditions precedent on the date of such Borrowing:
(a) All conditions precedent to the initial Loan A
Borrowing shall be satisfied.
(b) The Borrower shall have delivered or shall have
caused to be delivered the documents and other items listed below (together with
any other documents requested by the Agent to document the agreements and intent
of the Credit Documents related to Loan D), each in form and with substance
satisfactory to the Agent:
(i) the Texas Mortgage;
(ii) an Opinion Letter from counsel to the Borrower;
and
(iii) such (A) financing statements, lien searches,
lien releases, and landlords lien waivers, (B) lien recordings, title
policies and endorsements, surveys, environmental site assessments, and
appraisals, (C) insurance policies and endorsements, and (D) other
items as are necessary or desirable to evaluate, create, perfect,
prioritize, and insure the Liens purported to be created by the terms
of the Texas Mortgage, each duly executed and delivered by the
appropriate parties and where applicable ready for filing and
recording.
(c) The Agent, the Banks, and their counsel shall have
been paid and reimbursed for all fees and expenses due and payable.
3.5 Conditions Precedent to Each Borrowing. The obligation of the
Banks to make any Borrowing under this Agreement shall be subject to the
following conditions precedent on the date of such Borrowing:
(a) Representations and Warranties. As of the date of the
making of any Borrowing, the representations and warranties contained in each
Credit Document shall be true and correct in all material respects as of such
date (and the Borrower's request for the making of any
-37-
<PAGE> 43
Borrowing hereunder shall be deemed to be a restatement, representation, and
additional warranty of the representations and warranties contained in each
Credit Document as of such date); and
(b) Default. As of the date of the making of any Borrowing
hereunder, there shall exist no Default or Event of Default, and the making of
such Borrowing and the closing of any transactions contemplated with such
Borrowing would not cause a Default or Event of Default.
(c) Material Adverse Change. No Material Adverse Change shall
have occurred since the date of the Financial Statements.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to the Agent and each Bank, and with each request for any Borrowing
hereunder again represents and warrants to the Agent and each Bank, as follows:
4.1 Organization. As of the date of this Agreement, each
Restricted Entity (a) is duly organized, validly existing, and in good standing
under the laws of such Person's respective jurisdiction of organization and (b)
is duly licensed, qualified to do business, and in good standing in each
jurisdiction in which such Person is organized, owns property, or conducts
operations to the extent that any failure to be so licensed, qualified, or in
good standing could reasonably be expected to cause a Material Adverse Change.
4.2 Authorization. The execution, delivery, and performance by
each Credit Party of the Credit Documents to which such Credit Party is a party
and the consummation of the transactions contemplated thereby (a) do not
contravene the organizational documents of such Credit Party, (b) have been duly
authorized by all necessary corporate action of each Credit Party, and (c) are
within each Credit Party's corporate powers.
4.3 Enforceability. Each Credit Document to which any Credit
Party] is a party has been duly executed and delivered by each Credit Party
which is a party to such Credit Document and constitutes the legal, valid, and
binding obligation of each such Credit Party, enforceable against each such
Credit Party in accordance with such Credit Document's terms, except as limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or similar
laws at the time in effect affecting the rights of creditors generally and
subject to the availability of equitable remedies.
4.4 Absence of Conflicts and Approvals. The execution, delivery,
and performance by each Credit Party of the Credit Documents to which such
Credit Party is a party and the consummation of the transactions contemplated
thereby, (a) do not result in any violation or breach of any provisions of, or
constitute a default under, any note, indenture, credit agreement, security
agreement, credit support agreement, or other similar agreement to which such
Credit Party is a party or any other material contract or agreement to which
such Credit Party is a party, (b) do not violate any law or regulation binding
on or affecting such Credit Party, (c) do not require any authorization,
-38-
<PAGE> 44
approval, or other action by, or any notice to or filing with, any governmental
authority, and (d) do not result in or require the creation or imposition of any
Lien prohibited by this Agreement.
4.5 Investment Companies. No Restricted Entity or Affiliate
thereof is an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
4.6 Public Utilities. No Restricted Entity or Affiliate thereof is
a "holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended. No Restricted Entity or Affiliate thereof is a regulated public
utility.
4.7 Financial Condition.
(a) The Borrower has delivered to the Agent the Financial
Statements. The Financial Statements present fairly the financial condition of
the Borrower as of such date in accordance with generally accepted accounting
principles.
(b) As of the date of the Financial Statements, there were no
material contingent obligations, liabilities for taxes, unusual forward or
long-term commitments, or unrealized or anticipated losses of the Restricted
Entities, except as disclosed therein and adequate reserves for such items have
been made in accordance with generally accepted accounting principles. No
Material Adverse Change has occurred since the date of the Financial Statements.
No Default exists.
4.8 Condition of Assets. Each Restricted Entity has good and
indefeasible title to substantially all of its owned property and valid
leasehold rights in all of its leased property, as reflected in the financial
statements most recently provided to the Agent free and clear of all Liens
except Permitted Liens. Each Restricted Entity possesses and has properly
approved, recorded, and filed, where applicable, all permits, licenses, patents,
patent rights or licenses, trademarks, trademark rights, trade names rights, and
copyrights which are useful in the conduct of its business and which the failure
to possess could reasonably be expected to cause a Material Adverse Change. The
material properties used in the operations of each Restricted Entity are in good
repair, working order, and condition, normal wear and tear excepted. The
properties of each Restricted Entity have not been adversely affected as a
result of any fire, explosion, earthquake, flood, drought, windstorm, accident,
strike or other labor disturbance, embargo, requisition or taking of property or
cancellation of contracts, permits, or concessions by a governmental authority,
riot, activities of armed forces, or acts of God or of any public enemy in any
manner which (after giving effect to any insurance proceeds) could reasonably be
expected to cause a Material Adverse Change.
4.9 Litigation. There are no actions, suits, or proceedings
pending or, to the knowledge of the Borrower, threatened against any Restricted
Entity at law, in equity, or in admiralty, or by or
-39-
<PAGE> 45
before any governmental department, commission, board, bureau, agency,
instrumentality, domestic or foreign, or any arbitrator which could reasonably
be expected to cause a Material Adverse Change.
4.10 Subsidiaries. As of the date of this Agreement, the Borrower has
no Subsidiaries except as disclosed in Schedule II. The Borrower has no
Subsidiaries which have not been disclosed in writing to the Agent.
4.11 Laws and Regulations. Each Restricted Entity is in compliance with
all federal, state, and local laws and regulations which are applicable to the
operations and property of such Person where the failure to comply with the same
could reasonably be expected to cause a Material Adverse Change.
4.12 Environmental Compliance. Each Restricted Entity has been and is
in compliance with all Environmental Laws and has obtained and is in compliance
with all related permits necessary for the ownership and operation of any such
Person's properties, in each case, where the failure to be in compliance with
the same could reasonably be expected to cause a Material Adverse Change. Each
Restricted Entity has not received notice of and has not been investigated for
any violation or alleged violation of any Environmental Law in connection with
any such Person's presently or previously owned properties which currently
threaten action or suggest liabilities which could reasonably be expected to
cause a Material Adverse Change. Each Restricted Entity does not and has not
created, handled, transported, used, or disposed of any Hazardous Materials on
or about any such Person's properties (nor has any such Person's properties been
used for those purposes); has never been responsible for the release of any
Hazardous Materials into the environment in connection with any such Person's
operations and has not contaminated any properties with Hazardous Materials; and
does not and has not owned any properties contaminated by any Hazardous
Materials, in each case in any manner which could reasonably be expected to
cause a Material Adverse Change.
4.13 ERISA. Each Restricted Entity and each of their respective
Commonly Controlled Entities are in compliance with all provisions of ERISA to
the extent that the failure to be in compliance could reasonably be expected to
cause a Material Adverse Change. No Restricted Entity nor any of their
respective Commonly Controlled Entities participates in or during the past five
years has participated in any employee pension benefit plan covered by Title IV
of ERISA or any multiemployer plan under Section 4001(a)(3) of ERISA. With
respect to the Plans of the Restricted Entities, no Material Reportable Event or
Prohibited Transaction has occurred and exists that could reasonably be expected
to cause a Material Adverse Change.
4.14 Taxes. Each Restricted Entity has filed all United States federal,
state, and local income tax returns and all other domestic and foreign tax
returns which are required to be filed by such Person and has paid, or provided
for the payment before the same became delinquent of, all taxes due pursuant to
such returns or pursuant to any assessment received by such Person except for
-40-
<PAGE> 46
tax payments being contested in good faith, for which adequate reserves have
been established and reported in accordance with generally accepted accounting
principals, and which could not reasonably be expected to cause a Material
Adverse Change. The charges, accruals, and reserves on the books of the
Restricted Entities in respect of taxes are adequate in accordance with
generally accepted accounting principles.
4.15 True and Complete Disclosure. All factual information
furnished by or on behalf of any Credit Party in writing to the Agent or any
Bank in connection with the Credit Documents and the transactions contemplated
thereby is true and accurate in all material respects on the date as of which
such information was dated or certified and does not contain any untrue
statement of material fact or omit to state any material fact necessary to make
the statements contained therein not misleading. All projections, estimates, and
pro forma financial information furnished by any Credit Party were prepared on
the basis of assumptions, data, information, tests, or conditions believed to be
reasonable at the time such projections, estimates, and pro forma financial
information were furnished.
4.16 Year 2000.
(a) Except to the extent that a failure to do so could not
reasonably be expected to cause a Material Adverse Change, the Borrower (i) has
begun analyzing the operations of the Restricted Entities that could be
adversely affected by failure to become Year 2000 compliant (that is, that
computer applications, imbedded microchips, and other systems will be able to
perform date-sensitive functions prior to and after December 31, 1999) and (ii)
is developing a plan for becoming Year 2000 compliant in a timely manner. The
Borrower reasonably believes that the Restricted Entities and their Affiliates
will become Year 2000 compliant on a timely basis except to the extent that a
failure to do so could not reasonably be expected to cause a Material Adverse
Change.
(b) The Borrower will promptly notify the Agent in the event
the Borrower determines that any computer application which is material to the
operations of the Restricted Entities or its Affiliates or any of its material
vendors or suppliers will not be fully Year 2000 compliant on a timely basis,
except to the extent that such failure could not reasonably be expected to cause
a Material Adverse Change.
ARTICLE 5. COVENANTS. Until the Agent and the Banks receive irrevocable
payment of the Credit Obligations and have terminated this Agreement and each
other Credit Document, the Borrower shall comply with and cause compliance with
the following covenants:
5.1 Organization. The Borrower shall cause each Restricted Entity
to (a) maintain itself as an entity duly organized, validly existing, and in
good standing under the laws of such Person's respective jurisdiction of
organization and (b) be duly licensed, qualified to do business, and in good
standing in each jurisdiction in which such Person is organized, owns property,
or conducts operations and which requires such licensing or qualification where
failure to be so licensed,
-41-
<PAGE> 47
qualified, or in good standing as required by this clause (b) could reasonably
be expected to cause a Material Adverse Change; provided, however, that nothing
in this Section 5.1 shall be interpreted to be violated as a result of a
transaction permitted by Section 5.9.
5.2 Reporting. The Borrower shall furnish to the Agent all of the
following:
(a) Annual Reports. As soon as available and in any event not
later than 120 days after the end of each fiscal year of the Borrower, (i) a
copy of the annual audit report for such fiscal year for the Borrower, including
therein the consolidated balance sheets of the Borrower as of the end of such
fiscal year and the consolidated statements of income, stockholders' equity, and
cash flows for the Borrower for such fiscal year, setting forth the consolidated
financial position and results of the Borrower for such fiscal year and
certified, without any qualification or limitation of the scope of the
examination of matters relevant to the financial statements, by a nationally
recognized certified public accounting firm, (ii) a copy of the internally
prepared consolidating financial schedules of the Borrower from which the
consolidated financial statements of the Borrower provided to the Agent pursuant
to clause (i) were prepared, and (iii) a completed Compliance Certificate duly
certified by a Responsible Officer of the Borrower;
(b) Quarterly Reports. As soon as available and in any event
not later than 45 days after the end of each fiscal quarter, (i) a copy of the
internally prepared consolidated financial statements of the Borrower for such
fiscal quarter and for the fiscal year to date period ending on the last day of
such fiscal quarter, including therein the consolidated balance sheets of the
Borrower as of the end of such fiscal quarter and the consolidated statements of
income, and cash flows for such fiscal quarter and for such fiscal year to date
period, setting forth the consolidated financial position and results of the
Borrower for such fiscal quarter and fiscal year to date period, all in
reasonable detail and duly certified by a Responsible Officer of the Borrower as
having been prepared in accordance with generally accepted accounting principles
(subject to normal year-end audit adjustments), (ii) a copy of the internally
prepared consolidating financial schedules of the Borrower from which the
consolidated financial statements of Borrower provided to the Agent pursuant to
clause (i) were prepared, and (iii) a completed Compliance Certificate duly
certified by a Responsible Officer of the Borrower;
(c) Monthly Reports. As soon as available and in any event not
later than 45 days after the end of each month, (i) an accounts receivable aging
report in a form satisfactory to the Agent, (ii) an inventory summary report
including a breakdown by location in a form satisfactory to the Agent, and (iii)
a completed Loan A Borrowing Base Certificate duly certified by a Responsible
Officer of the Borrower;
(d) Acquisition Information. As soon as available prior to the
closing of any Acquisition requiring approval of any Banks, and on or prior to
the closing of any Acquisition not requiring such approval, a completed
Acquisition Certificate duly certified by a Responsible Officer of the Borrower,
which the Agent shall forward to the Banks for any Acquisition requiring
approval
-42-
<PAGE> 48
of any Banks (and prior to the consummation of the Acquisition, the Borrower
shall, upon request by the Agent, make available to the Agent at the Borrower's
offices in Houston, Texas, the acquisition documents regarding the acquired
assets, including schedules reflecting litigation liabilities, environmental
liabilities, and other assumed liabilities, and any other information regarding
the acquired assets as the Agent may reasonably request);
(e) SEC Filings. As soon as available and in any event not
later than thirty days after the filing or delivery thereof, copies of all
financial statements, reports, and proxy statements which the Borrower shall
have sent to its stockholders generally and copies of all regular and periodic
reports, if any, which any Restricted Entity shall have filed with the
Securities and Exchange Commission;
(f) Defaults. Promptly, but in any event within five Business
Days after the discovery thereof, a notice of any facts known to a Responsible
Officer of any Restricted Entity which constitute a Default, together with a
statement of a Responsible Officer of the Borrower setting forth the details of
such facts and the actions which the Borrower has taken and proposes to take
with respect thereto (and the Agent shall, promptly upon receipt from the
Borrower of a notice pursuant to this Section 5.2(f) forward a copy of such
notice to each Bank);
(g) Litigation. Promptly, but in any event within 10 Business
Days after the commencement thereof, notice of all actions, suits, and
proceedings before any court or governmental department, commission, board,
bureau, agency, or instrumentality, domestic or foreign, affecting any
Restricted Entity which, if determined adversely, could reasonably be expected
to cause a Material Adverse Change;
(h) Material Contingent Liabilities. Promptly, but in any
event within 10 Business Days after acquiring knowledge thereof, notice of any
contingent liabilities which could reasonably be expected to cause a Material
Adverse Change or any contingent liability greater than $500,000;
(i) Material Agreement Default. Promptly, but in any event
within 10 Business Days after a Responsible Officer obtains knowledge thereof,
notice of any breach by any Restricted Entity of any contract or agreement which
breach could reasonably be expected to cause a Material Adverse Change;
(j) Material Changes. Prompt written notice of any other
condition or event of which a Responsible Officer of any Restricted Entity has
knowledge, which condition or event has resulted or could reasonably be expected
to cause a Material Adverse Change; and
(k) Other Information. Such other information respecting the
business operations or property of any Restricted Entity, financial or
otherwise, as the Agent or the Majority Banks may from time to time reasonably
request.
-43-
<PAGE> 49
5.3 Inspection. The Borrower shall cause each Restricted Entity to
permit the Agent and the Banks to visit and inspect any of the properties of
such Restricted Entity, to examine all of such Person's books of account,
records, reports, and other papers, to make copies and extracts therefrom, and
to discuss their respective affairs, finances, and accounts with their
respective officers, employees, and independent public accountants all at such
reasonable times and as often as may be reasonably requested, provided that the
Borrower is given at least 3 Business Days' advance notice thereof and
reasonable opportunity to be present when independent public accountants or
other third parties are contacted.
5.4 Use of Proceeds. The proceeds of Loan A Borrowings shall be used by
the Borrower for working capital and general corporate purposes, including
Acquisitions. The proceeds of the Loan B Borrowing shall be used for the
Acquisition of all of the stock of Climax and its Subsidiaries and refinancing
Climax's existing Debt. The proceeds of Loan C Borrowings shall be used for
Acquisitions approved by the Banks. The proceeds of the Loan D Borrowing shall
be used for the refinancing of the Borrower's corporate headquarters and Alvin,
Texas manufacturing facility. The Borrower shall not, directly or indirectly,
use any part of any such proceeds for any purpose which violates, or is
inconsistent with, Regulations G, T, U, or X of the Board of Governors of the
Federal Reserve System.
5.5 Financial Covenants. The Agent shall determine compliance with the
following financial covenants based upon the applicable Schedule of the most
recent Compliance Certificate delivered to the Agent pursuant to Section 5.2(a)
or 5.2(b).
(a) Maximum Debt to EBITDA Ratio. As of the last day of each
fiscal quarter of the Borrower, the Borrower shall not permit the ratio of (i)
the consolidated Debt of the Borrower as of the end of such fiscal quarter to
(ii) the consolidated EBITDA of the Borrower for the preceding four fiscal
quarters then ended, to be greater than the ratio set forth below with respect
to the applicable period set forth below:
<TABLE>
<CAPTION>
Period Maximum Ratio
------ -------------
<S> <C>
before May 31, 1999 3.25
May 31, 1999, through
May 30, 2000 3.00
May 31, 2000, and
thereafter 2.75
</TABLE>
To the extent the requirements of Section 1.3(c)(i) are satisfied, the EBITDA of
companies acquired by the Borrower within such preceding four quarter period
shall be included in the calculation of EBITDA for this paragraph (a) based upon
Schedule C of the applicable Compliance Certificate.
-44-
<PAGE> 50
(b) Minimum Fixed Charge Coverage Ratio. As of the last day of
each fiscal quarter, the Borrower shall not permit the ratio of (i) the sum of
(A) the consolidated EBITDA of the Borrower for the preceding four fiscal
quarters then ended, less (B) the consolidated Cash Tax Cost of the Borrower
during such four fiscal quarters, less (C) the consolidated Cash Capital
Expenditure Cost of the Borrower during such four fiscal quarters to (ii) the
sum of (A) the consolidated interest expense (including interest expense accrued
under Capital Leases) of the Borrower during such four fiscal quarters, plus (B)
the consolidated required payments of principal and voluntary prepayments of
principal (including payments and prepayments under Capital Leases, but
excluding voluntary prepayments under Loan A) on the consolidated Debt of the
Borrower during such four fiscal quarters, plus (C) the consolidated payments
made by the Borrower under the Deferred Compensation Agreements during such four
fiscal quarters, to be less than 1.20 to 1.00. Compliance with this paragraph
(b) shall be determined based upon Schedule A of the applicable Compliance
Certificate.
(c) No Annual Losses. As of the last day of each fiscal year,
the Borrower shall not permit the consolidated net income of the Borrower to be
less than zero.
5.6 Debt. The Borrower shall not permit any Restricted Entity to
create, assume, incur, suffer to exist, or in any manner become liable,
directly, indirectly, or contingently in respect of, any Debt, other than the
following Debt ("Permitted Debt"):
(a) Debt in the form of the Credit Obligations;
(b) Debt in the form of unsecured indebtedness for borrowed
money that was outstanding on the date of and is reflected in the
Financial Statements and any renewals and extensions thereof that do
not increase the outstanding principal amount thereof or increase the
interest rate and fees applicable thereto or make the covenants
thereunder more restrictive;
(c) Debt permitted under Section 5.8 and Debt not otherwise
permitted by Section 5.6 or 5.8 in an aggregate outstanding principal
amount not to exceed $1,000,000;
(d) Debt of Climax under the $404,556 Promissory Note dated
May 21, 1998 payable to Alan S. Avis, Jr. and Patricia L. Avis, as
community property and the $35,000 Promissory Note dated May 21, 1998
payable to Alan S. Avis, Jr. in an aggregate principal amount not to
exceed $439,556;
(e) Until the funding of Loan D, Debt of the Borrower payable
to Sterling Bank and incurred before the date hereof for the
construction and improvement of the Borrower's facility in Alvin, Texas
in an amount not to exceed $1,874,000; and
(f) the Capital Leases listed on Schedule II.
-45-
<PAGE> 51
5.7 Liens. The Borrower shall not permit any Restricted Entity to
create, assume, incur, or suffer to exist any Lien on any of its real or
personal property whether now owned or hereafter acquired, or assign any right
to receive its income, other than the following Liens (being "Permitted Liens"):
(a) Liens securing the Credit Obligations;
(b) Liens securing purchase money debt, Capital Leases, and
assumed or acquired indebtedness for borrowed money permitted hereunder
provided that no such Lien is spread to cover any property not (i)
purchased in connection with the incurrence of such Debt, in the case
of purchase money debt or (ii) covered by such Lien at the time of the
assumption or acquisition of the indebtedness secured thereby, in the
case of assumed or acquired indebtedness for borrowed money;
(c) Liens arising in the ordinary course of business which are
not incurred in connection with the borrowing of money, the obtaining
of advances or credit, or payment of legal judgments and which do not
materially detract from the value of any Restricted Entity's assets or
materially interfere with any Restricted Entity's business, including
such (i) Liens for taxes, assessments, or other governmental charges or
levies; (ii) Liens in connection with worker's compensation,
unemployment insurance, or other social security, old age pension, or
public liability obligations; (iii) Liens in the form of legal or
equitable encumbrances deemed to exist by reason of negative pledge
covenants and other covenants or undertakings of like nature; (iv)
Liens in the form of landlords', vendors', carriers', warehousemen's,
repairmen's, mechanics', workmen's, materialmen's, construction, or
other like Liens arising by operation of law in the ordinary course of
business; and (v) contractual landlords' Liens to the extent that they
cover only the tangible personal property of the Lessee located at the
applicable leased facility and secure only the obligations of the
lessee under the applicable lease; and
(d) Liens securing the Debt permitted (i) under Section 5.6(e)
encumbering the real estate and fixtures financed with such Debt and
(ii) under Section 5.6(f) encumbering the assets financed with the
Capital Leases.
Notwithstanding the foregoing, Liens which are expressly prohibited
under other provisions of the Credit Documents are not Permitted Liens.
5.8 Other Obligations.
(a) The Borrower shall not permit any Restricted Entity to
create, incur, assume, or suffer to exist any obligations in respect of unfunded
vested benefits under any pension Plan or Deferred Compensation Agreements other
than under the Deferred Compensation Agreements as
-46-
<PAGE> 52
in effect on the date of this Agreement and deferred compensation agreements in
substantially the form of the Deferred Compensation Agreements entered into
after the date hereof providing for payments by the Borrower and the Restricted
Entities not in excess of $500,000 in the aggregate.
(b) The Borrower shall not permit any Restricted Entity to
create, incur, assume, or suffer to exist any obligations in respect of
Derivatives, other than Derivatives used by any Restricted Entity in such
Restricted Entity's respective business operations in aggregate notional
quantities not to exceed the reasonably anticipated consumption of such
Restricted Entity of the underlying commodity for the relevant period, but no
Derivatives which are speculative in nature.
5.9 Corporate Transactions. The Borrower shall not permit any
Restricted Entity to (a) merge, consolidate, or amalgamate with another Person,
or liquidate, wind up, or dissolve itself (or take any action towards any of the
foregoing), (b) convey, sell, lease, assign, transfer, or otherwise dispose of
any of its property, businesses, or other assets outside of the ordinary course
of business, or (c) make any Acquisition except that:
(i) Any Subsidiary of the Borrower may merge, consolidate, or
amalgamate into the Borrower or any wholly owned Subsidiary of the
Borrower, or convey, sell, lease, assign, transfer, or otherwise
dispose of any of its assets to the Borrower or any wholly-owned
Subsidiary of the Borrower (and if such disposition transfers all or
substantially all of the assets of transferring Subsidiary, such
subsidiary may then liquidate, wind up, or dissolve itself); provided
that the Borrower or the wholly-owned Subsidiary, as applicable, is the
surviving or acquiring entity; and
(ii) The Borrower or any Subsidiary of the Borrower may make
any Acquisition (by purchase or merger) provided that (A) the Borrower
or such Subsidiary of the Borrower is the acquiring or surviving
entity, (B) the aggregate of all consideration (other than common stock
of the Borrower) paid by the Restricted Entities in connection with any
Acquisition made on or after the date of this Agreement does not exceed
$1,000,000, (C) the aggregate of all consideration (other than common
stock of the Borrower) paid by the Restricted Entities in connection
with all Acquisitions during any 12 month period does not exceed
$2,500,000, (D) no Default or Event of Default exists and the
Acquisition would not reasonably be expected to cause a Default or
Event of Default (including any default under Section 5.5 with respect
to historical and future proforma financial status and results), and
(E) the acquired assets are in substantially the same business as the
Borrower; provided that to the extent that the Borrower obtains the
consent of the Majority Banks to an Acquisition pursuant to subsections
(B) or (C) above, the consideration paid by the Restricted Entities in
connection with such Acquisition shall not be included in any future
calculation under subsection (C) above.
5.10 Distributions. The Borrower shall not (a) declare or pay any
dividends; (b) purchase, redeem, retire, or otherwise acquire for value any of
its capital stock now or hereafter outstanding
-47-
<PAGE> 53
(other than open market purchases to satisfy obligations under a stock option
plan while no Default is continuing of the Borrower's common stock for any
aggregate consideration not to exceed $250,000 in any fiscal year of the
Borrower); or make any distribution of assets to its stockholders as such,
whether in cash, assets, or in obligations of it; (c) allocate or otherwise set
apart any sum for the payment of any dividend or distribution on, or for the
purchase, redemption, or retirement of, any shares of its capital stock; or (d)
make any other distribution by reduction of capital or otherwise in respect of
any shares of its capital stock.
5.11 Transactions with Affiliates. The Borrower shall not permit
any Restricted Entity to enter into any transaction directly or indirectly with
or for the benefit of an Affiliate except transactions (a) between the Borrower
and any of its wholly-owned Subsidiaries and between any such wholly-owned
Subsidiaries and (b) with an Affiliate for the leasing of property, the
rendering or receipt of services, or the purchase or sale of inventory or other
assets in the ordinary course of business if the monetary or business
consideration arising from such a transaction would be substantially as
advantageous to such Restricted Entity as the monetary or business consideration
which such Restricted Entity would obtain in a comparable arm's length
transaction.
5.12 Insurance.
(a) The Borrower shall cause each Restricted Entity to
maintain insurance with responsible and reputable insurance companies or
associations reasonably acceptable to the Agent in such amounts and covering
such risks as are usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which such Persons
operate. Without limiting the foregoing, the Borrower shall maintain insurance
coverage for the Restricted Entities equal to or better than, on an item by item
basis for each item, the coverage for the Restricted Entities existing on the
date of this Agreement. The Borrower shall deliver to the Agent certificates
evidencing such policies or copies of such policies at the Agent's request
following a reasonable period to obtain such certificates taking into account
the jurisdiction where the insurance is maintained.
(b) All policies of the Restricted Entities representing
property insurance shall name the Agent as mortgagee in a form satisfactory to
the Agent. All proceeds of any such property insurance shall be paid directly to
the Agent and shall be turned over to the Borrower so long as no Default or
Event of Default exists and the amount of such proceeds is less than $500,000,
but otherwise such proceeds shall be applied as determined by the Majority
Banks. If such application is against outstanding Credit Obligations, then such
application shall be made in the priority established in Section 6.9. All
policies representing liability insurance of the Restricted Entities shall name
the Agent and the Banks as additional named insureds in a form satisfactory to
the Agent. All proceeds of such liability insurance coverage for the Agent and
the Banks shall be paid as directed by the Agent to indemnify the Agent or the
applicable Bank for the liability covered. In the event that the proceeds are
paid to any Restricted Entity in violation of the foregoing, the Restricted
Entity shall hold the proceeds in trust for the Agent, segregate the proceeds
from the other funds of
-48-
<PAGE> 54
such Restricted Entity, and promptly pay the proceeds to the Agent with any
necessary endorsement. The Agent shall have the right, but not the obligation,
during the existence of an Event of Default, to make proof of loss under, settle
and adjust any claim under, and receive the proceeds under the insurance, and
the reasonable expenses incurred by the Agent in the adjustment and collection
of such proceeds shall be paid by the Borrower. The Borrower irrevocably
appoints the Agent as its attorney in fact to take such actions in its name. If
the Agent does not take such actions, the Borrower may take such actions subject
to the approval of any final action by the Agent. The Agent shall not be liable
or responsible for failure to collect or exercise diligence in the collection of
any proceeds.
5.13 Investments. The Borrower shall not permit any Restricted
Entity to make or hold any direct or indirect investment in any Person,
including capital contributions to the Person, investments in the debt or equity
securities of the Person, and loans, guaranties, trade credit, or other
extensions of credit to the Person, other than the following investments
("Permitted Investments"):
(a) (i) investments (including investments in the form of
loans) in Subsidiaries of the Borrower that are Guarantors and (ii)
investments outstanding on the date hereof in Subsidiaries of the
Borrower that are not Guarantors and up to $250,000 of additional
investments in such Subsidiaries;
(b) investments in the form of loans, guaranties, open
accounts, and other extensions of trade credit in the ordinary course
of business;
(c) investments in commercial paper, bankers' acceptances,
loan participation agreements, and other similar investments, in each
case, maturing in twelve months or less from the date of issuance and
which, at the time of acquisition are rated A-2 or better by Standard &
Poor's Ratings Service and P-2 or better by Moody's Investors Services,
Inc.;
(d) investments in direct obligations of the United States, or
investments in any Person which investments are guaranteed by the full
faith and credit of the United States, in either case maturing in
twelve months or less from the date of acquisition thereof and
repurchase agreements having a term of less than one year and fully
collateralized by such obligations which are entered into with banks or
trust companies described in clause (e) below or brokerage companies
having net worth in excess of $250,000,000;
(e) investments in time deposits or certificates of deposit
maturing within one year from the date such investment is made, issued
by a bank or trust company organized under the laws of the United
States or any state thereof having capital, surplus, and undivided
profits aggregating at least $250,000,000 or a foreign branch thereof
and whose long-term certificates of deposit are, at the time of
acquisition thereof, rated A-2 by Standard & Poor's Ratings Service or
Prime-2 by Moody's Investors Services, Inc.;
-49-
<PAGE> 55
(f) investments in money market funds which invest solely in
the types of investments described in paragraphs (c) through (e) above;
(g) loans and advances to directors, officers, and employees
of the Credit Parties made in the ordinary course of business in an
aggregate outstanding amount not to exceed $250,000;
(h) a $165,000 loan by the Borrower to Alsana Holdings, LLC
under the terms of the Alsana Acquisition Agreement and the purchase by
the Borrower for an amount not to exceed $265,830.45 the revolving line
of credit maintained by Wells Fargo Bank for Alsana, Inc. under the
terms of the Alsana Acquisition Agreement;
(i) investments outstanding on the date hereof for Climax's
50.5% interest in a joint venture with Extremeco Pty. Ltd. formed to
conduct equipment rental in Queensland, Australia and for Climax
Leasing Company, Inc.'s 50% ownership interest in Climax Rental
Ventures, LLC, an Oregon limited liability company; and
(j) up to $350,000 for a 50% interest in a joint venture to
conduct business in China.
In valuing any investments for the purpose of applying the limitations set forth
in this Agreement, such investments shall be taken at the original cost thereof
(but without reduction for any subsequent appreciation or depreciation thereof)
less any amount actually repaid or recovered on account of capital or principal
(but without reduction for any offsetting investments made by the investee in
the investor). For purposes of this Agreement, at any time when a Person becomes
a Subsidiary of the Borrower, all investments of such corporation at such time
shall be deemed to have been made by such corporation at such time.
5.14 Lines of Business. The Borrower shall not permit the
Restricted Entities to change the character of their business as conducted on
the date of this Agreement, or engage in any type of business not reasonably
related to such business as presently and normally conducted.
5.15 Compliance with Laws. The Borrower shall cause each Restricted
Entity to comply with all federal, state, and local laws and regulations which
are applicable to the operations and property of such Persons, in each case,
where the failure to comply could reasonably be expected to cause a Material
Adverse Change.
5.16 Environmental Compliance. The Borrower shall cause each
Restricted Entity to comply with all Environmental Laws and obtain and comply
with all related permits necessary for the ownership and operation of any such
Person's properties, in each case, where the failure to comply could reasonably
be expected to cause a Material Adverse Change. The Borrower shall cause each
Restricted Entity to promptly disclose to the Agent any notice to or
investigation of such
-50-
<PAGE> 56
Persons for any violation or alleged violation of any Environmental Law in
connection with any such Person's presently or previously owned properties which
represent liabilities which could reasonably be expected to cause a Material
Adverse Change. The Borrower shall not permit any Restricted Entity to create,
handle, transport, use, or dispose of any Hazardous Materials on or about any
such Person's properties; release any Hazardous Materials into the environment
in connection with any such Person's operations or contaminate any properties
with Hazardous Materials; or own properties contaminated by any Hazardous
Materials, in each case in any manner that could reasonably be expected to cause
a Material Adverse Change.
5.17 ERISA Compliance. The Borrower shall cause each Restricted
Entity to (i) comply in all material respects with all applicable provisions of
ERISA and prevent the occurrence of any Reportable Event or Prohibited
Transaction with respect to, or the termination of, any of their respective
Plans, in each case, where the failure to do so could reasonably be expected to
cause a Material Adverse Change and (ii) not create or participate in any
employee pension benefit plan covered by Title IV of ERISA or any multiemployer
plan under Section 4001(a)(3) of ERISA.
5.18 Payment of Certain Claims. The Borrower shall cause each
Restricted Entity to pay and discharge, before the same shall become delinquent,
(a) all taxes, assessments, levies, and like charges imposed upon any such
Person or upon any such Person's income, profits, or property by authorities
having competent jurisdiction prior to the date on which penalties attach
thereto except for tax payments being contested in good faith for which adequate
reserves have been established and reported in accordance with generally
accepted accounting principals which could not reasonably be expected to cause a
Material Adverse Change and (b) all rent, trade payables and current operating
liabilities, unless the same are less than 90 days past due or are being
contested in good faith, have adequate reserves established and reported in
accordance with general accepted accounting principals, and could not reasonably
be expected to cause a Material Adverse Change.
5.19 Subsidiaries.
(a) Except as permitted under paragraph (b) below, upon the
formation or acquisition of any Subsidiary, the Borrower shall and shall cause
such Subsidiary to execute and deliver to the Agent such guaranties, pledge
agreements, security agreements, mortgages, financing statements, and other
documents and agreements as are requested by the Agent to provide the Agent with
an enforceable claim against the Borrower and each of its Subsidiaries for the
payment of the Credit Obligations and a first priority Lien, subject only to
Permitted Liens, on all of the assets of the Borrower and each of its
Subsidiaries securing the Credit Obligations, in each case on the same terms as
the existing Credit Documents (including the execution and delivery of a Joinder
Agreement in substantially the form of Exhibit F for the purpose of joining such
Subsidiary as a party to the Guaranty, the Pledge Agreement, and the Security
Agreement). In connection therewith, the Borrower shall provide corporate
documentation and opinion letters reasonably satisfactory to the Agent
reflecting the corporate status of such new Subsidiary and status of such
agreements on the same terms as prior opinions received by the Agent in
connection with the Credit Documents.
-51-
<PAGE> 57
(b) Notwithstanding paragraph (a) above, the Borrower may
exempt one or more of its Subsidiaries which have not yet executed any Credit
Documents from the requirements of paragraph (a) so long as such exempt
Subsidiaries (the "Exempt Subsidiaries") satisfy the following requirements: (i)
the consolidated assets of the Exempt Subsidiaries at any time do not exceed 10%
of the consolidated assets of the Borrower at such time and (ii) the
consolidated revenues of the Exempt Subsidiaries for any fiscal quarter of the
Borrower do not exceed 10% of the consolidated EBITDA of the Borrower for such
fiscal quarter. At any time any of the foregoing requirements set forth in
clauses (i) or (ii) are no longer satisfied, then the Borrower shall cause some
or all of the Exempt Subsidiaries to promptly comply with the requirements of
paragraph (a) to the extent necessary to maintain the requirements for exemption
for the remaining Exempt Subsidiaries.
ARTICLE 6. DEFAULT AND REMEDIES.
6.1 Events of Default. Each of the following shall be an "Event of
Default" for the purposes of this Agreement and for each of the Credit
Documents:
(a) Payment Failure. The Borrower (i) fails to pay when due
any principal amounts due under this Agreement or any other Credit Document or
(ii) fails to pay when due any interest, fees, reimbursements, indemnifications,
or other amounts due under this Agreement or any other Credit Document and such
failure has not been cured within five Business Days;
(b) False Representation. Any written representation or
warranty made by any Credit Party or any Responsible Officer thereof in this
Agreement or in any other Credit Document proves to have been false or erroneous
in any material respect at the time it was made or deemed made;
(c) Breach of Covenant. (i) Any breach by the Borrower of any
of the covenants contained in Sections 5.1(a) (with respect to the Borrower),
5.2, 5.3, 5.4, 5.5, 5.6, 5.7, 5.8, 5.9, 5.10, 5.13, or 5.19 of this Agreement or
(ii) any breach by any Credit Party of any other covenants contained in this
Agreement or any other Credit Document and such breach is not cured within 30
days following the earlier of knowledge of such breach by a Responsible Officer
of such Credit Party or the Borrower's receipt of written notice thereof from
the Agent;
(d) Security Documents. Any Security Document shall at any
time and for any reason (other than one within the reasonable control of any
Bank) cease to create the Lien on the property purported to be subject to such
agreement in accordance with the terms of such agreement, or cease to be in full
force and effect, or shall be contested by any party thereto;
(e) Guaranty. Any Guaranty shall at any time and for any
reason cease to be in full force and effect with respect to any Guarantor
(except as permitted under Section 5.9 hereof) or shall be contested by any
Guarantor, or any Guarantor shall deny it has any further liability or
obligation thereunder;
-52-
<PAGE> 58
(f) Material Debt Default. (i) Any principal, interest, fees,
or other amounts due on any Debt of any Restricted Entity (other than the Credit
Obligations) is not paid when due, whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise, and such failure is not cured
within the applicable grace period, if any, and the aggregate amount of all Debt
of such Persons so in default exceeds $500,000; (ii) any other event shall occur
or condition shall exist under any agreement or instrument relating to any Debt
of any such Person (other than the Credit Obligations) the effect of which is to
accelerate or to permit the acceleration of the maturity of any such Debt,
whether or not any such Debt is actually accelerated, and such event or
condition shall not be cured within the applicable grace period, if any, and the
aggregate amount of all Debt of such Persons so in default exceeds $500,000; or
(iii) any Debt of any such Person shall be declared to be due and payable, or
required to be prepaid (other than by a regularly scheduled prepayment) prior to
the stated maturity thereof, and the aggregate amount of all Debt of such
Persons so accelerated exceeds $500,000;
(g) Bankruptcy and Insolvency. (i) there shall have been filed
against any Restricted Entity or any such Person's properties, without such
Person's consent, any petition or other request for relief seeking an
arrangement, receivership, reorganization, liquidation, or similar relief under
bankruptcy or other laws for the relief of debtors and such request for relief
(A) remains in effect for 60 or more days, whether or not consecutive, or (B) is
approved by a final nonappealable order, or (ii) any such Person consents to or
files any petition or other request for relief of the type described in clause
(i) above seeking relief from creditors, makes any assignment for the benefit of
creditors or other arrangement with creditors, or admits in writing such
Person's inability to pay such Person's debts as they become due (the occurrence
of any Event of Default under clause (i) or (ii) of this paragraph being a
"Bankruptcy Event of Default");
(h) Adverse Judgment. The aggregate outstanding amount of
judgments against the Restricted Parties not discharged or stayed pending appeal
or other court action within 30 days following entry is greater than $500,000;
or
(i) Change of Control. There shall occur any Change of
Control.
6.2 Termination of Commitments. Upon the occurrence of any Bankruptcy
Event of Default, all of the commitments of the Agent and the Banks hereunder
shall terminate. During the existence of any Event of Default other than a
Bankruptcy Event of Default, the Agent shall at the request of the Majority
Banks declare by written notice to the Borrower all of the commitments of the
Agent and the Banks hereunder terminated, whereupon the same shall immediately
terminate.
6.3 Acceleration of Credit Obligations. Upon the occurrence of any
Bankruptcy Event of Default, the aggregate outstanding principal amount of all
loans made hereunder, all accrued interest thereon, and all other Credit
Obligations shall immediately and automatically become due and payable. During
the existence of any Event of Default other than a Bankruptcy Event of Default,
the Agent shall at the request of the Majority Banks declare by written notice
to the Borrower the
-53-
<PAGE> 59
aggregate outstanding principal amount of all loans made hereunder, all accrued
interest thereon, and all other Credit Obligations to be immediately due and
payable, whereupon the same shall immediately become due and payable. In
connection with the foregoing, except for the notice provided for above in this
Article VI, the Borrower waives notice of any Default or Event of Default,
grace, notice of intent to accelerate, notice of acceleration, presentment,
demand, notice of nonpayment, protest, and all other notices.
6.4 Cash Collateralization of Letters of Credit. Upon the occurrence of
any Bankruptcy Event of Default, the Borrower shall pay to the Agent an amount
equal to the Letter of Credit Exposure to be held in the Letter of Credit
Collateral Account for disposition in accordance with Section 2.2(f). During the
existence of any Event of Default other than a Bankruptcy Event of Default, the
Agent shall at the request of the Majority Banks require by written notice to
the Borrower that the Borrower pay to the Agent an amount equal to the Letter of
Credit Exposure to be held in the Letter of Credit Collateral Account for
disposition in accordance with Section 2.2(f), whereupon the Borrower shall pay
to the Agent such amount for such purpose.
6.5 Default Interest. During the existence of an Event of Default, the
Majority Banks may declare by written notice to the Borrower that the Credit
Obligations (including the outstanding principal amount of the Loans and, to the
fullest extent permitted by law, all accrued but unpaid interest thereon and all
other Credit Obligations) shall bear interest beginning on the date of
occurrence of such Event of Default, until paid in full, at the applicable
Default Rate, payable upon demand by the Agent.
6.6 Right of Setoff. During the existence of an Event of Default, the
Agent and each Bank is hereby authorized at any time, to the fullest extent
permitted by law, to set off and apply any indebtedness owed by the Agent or
such Bank to the Borrower against any and all of the obligations of the Borrower
under this Agreement and the Credit Documents, irrespective of whether or not
the Agent or such Bank shall have made any demand under this Agreement or the
Credit Documents and although such obligations may be contingent and unmatured.
The Agent and each Bank, as the case may be, agrees promptly to notify the
Borrower after any such setoff and application made by such party provided that
the failure to give such notice shall not affect the validity of such setoff and
application.
6.7 Actions Under Credit Documents. During the existence of an Event of
Default, the Agent shall at the request of the Majority Banks take any and all
actions permitted under the other Credit Documents, including the Guaranty and
the Security Documents.
6.8 Remedies Cumulative. No right, power, or remedy conferred to the
Agent or the Banks in this Agreement and the Credit Documents, or now or
hereafter existing at law, in equity, by statute, or otherwise, shall be
exclusive, and each such right, power, or remedy shall to the full extent
permitted by law be cumulative and in addition to every other such right, power,
or remedy. No course of dealing and no delay in exercising any right, power, or
remedy conferred to the Agent
-54-
<PAGE> 60
or the Banks in this Agreement and the Credit Documents, or now or hereafter
existing at law, in equity, by statute, or otherwise, shall operate as a waiver
of or otherwise prejudice any such right, power, or remedy.
6.9 Application of Payments. Prior to any payment default upon any
maturity date or any acceleration of the Credit Obligations, all payments made
on the Credit Obligations hereunder shall be applied to the Credit Obligations
as directed by the Borrower, subject to the rules regarding the application of
payments to certain Credit Obligations provided for hereunder and in the Credit
Documents. Following any payment default upon any maturity date or any
acceleration of the Credit Obligations, all payments and collections shall be
applied to the Credit Obligations in the following order:
First, to the payment of the costs, expenses, reimbursements,
and indemnifications of the Agent that are due and payable
under the Credit Documents;
Then, ratably to the payment of the costs, expenses,
reimbursements, and indemnifications of the Banks that are due
and payable under the Credit Documents;
Then, ratably to the payment of all accrued but unpaid
interest and fees and obligations under Interest Hedge
Agreements due and payable under the Credit Documents;
Then, ratably to the payment of all outstanding principal due
and payable under the Credit Documents;
Then, ratably to the payment of any other amounts due and
owing with respect to the Credit Obligations; and
Finally, any surplus held by the Agent and remaining after
payment in full of all the Credit Obligations and reserve for
Credit Obligations not yet due and payable shall be promptly
paid over to the Borrower or to whomever may be lawfully
entitled to receive such surplus. All applications shall be
distributed in accordance with Section 2.12(a).
-55-
<PAGE> 61
ARTICLE 7. THE AGENT
7.1 Authorization and Action. Each Bank hereby appoints and authorizes
the Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement as are delegated to the Agent by the terms hereof and of
the other Credit Documents, together with such powers as are reasonably
incidental thereto. Statements under the Credit Documents that the Agent may
take certain actions, without further qualification, means that the Agent may
take such actions with or without the consent of the Banks or the Majority
Banks, but where the Credit Documents expressly require the determination of the
Banks or the Majority Banks, the Agent shall not take any such action without
the prior written consent thereof. As to any matters not expressly provided for
by this Agreement or any other Credit Document (including enforcement or
collection of the Notes), the Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the written instructions of the Majority Banks, and such instructions shall
be binding upon all Banks and all holders of Notes; provided, however, that the
Agent shall not be required to take any action which exposes the Agent to
personal liability or which is contrary to this Agreement, any other Credit
Document, or applicable law.
7.2 Reliance, Etc. Neither the Agent nor any of its Related Parties
(for the purposes of this Section 7.2, collectively, the "Indemnified Parties")
shall be liable for any action taken or omitted to be taken by any Indemnified
Party under or in connection with this Agreement or the other Credit Documents,
INCLUDING ANY INDEMNIFIED PARTY'S OWN NEGLIGENCE, except for any Indemnified
Party's gross negligence or willful misconduct. Without limitation of the
generality of the foregoing, the Agent: (a) may treat the payee of any Note as
the holder thereof until the Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to the Agent; (b)
may consult with legal counsel (including counsel for the Borrower), independent
public accountants, and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants, or experts; (c) makes no warranty or
representation to any Bank and shall not be responsible to any Bank for any
statements, warranties, or representations made in or in connection with this
Agreement or the other Credit Documents; (d) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants, or conditions of this Agreement or any other Credit Document on the
part of the Credit Parties or to inspect the property (including the books and
records) of the Credit Parties; (e) shall not be responsible to any Bank for the
due execution, legality, validity, enforceability, genuineness, sufficiency, or
value of this Agreement or any other Credit Document; and (f) shall incur no
liability under or in respect of this Agreement or any other Credit Document by
acting upon any notice,
-56-
<PAGE> 62
consent, certificate, or other instrument or writing (which may be by telecopier
or telex) reasonably believed by it to be genuine and signed or sent by the
proper party or parties.
7.3 Affiliates. With respect to its Commitments, the Advances made by
it, and the Notes issued to it, the Agent shall have the same rights and powers
under this Agreement as any other Bank and may exercise the same as though it
were not the Agent. The term "Bank" or "Banks" shall, unless otherwise expressly
indicated, include the Agent in its individual capacity. The Agent and its
Affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, any Credit
Party, and any Person who may do business with or own securities of any Credit
Party, all as if the Agent were not an agent hereunder and without any duty to
account therefor to the Banks.
7.4 Bank Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank and based on
the Financial Statements and such other documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it shall, independently and without
reliance upon the Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.
7.5 Expenses. To the extent not paid by the Borrower, each Bank
severally agrees to pay to the Agent on demand such Bank's ratable share of the
following: (a) all reasonable out-of-pocket costs and expenses of the Agent in
connection with the preparation, execution, delivery, administration,
modification, and amendment of this Agreement and the other Credit Documents,
including the reasonable fees and expenses of outside counsel for the Agent with
respect to advising the Agent as to its rights and responsibilities under this
Agreement and the Credit Documents, and (b) all out-of-pocket costs and expenses
of the Agent in connection with the preservation or enforcement of the rights of
the Agent and the Banks under this Agreement and the other Credit Documents,
whether through negotiations, legal proceedings, or otherwise, including fees
and expenses of counsel for the Agent. The provisions of this paragraph shall
survive the repayment and termination of the credit provided for under this
Agreement and any purported termination of this Agreement which does not
expressly refer to this paragraph.
7.6 Indemnification. To the extent not reimbursed by the Borrower, each
Bank severally agrees to protect, defend, indemnify, and hold harmless the Agent
and each of its Related Parties (for the purposes of this Section 7.6,
collectively, the "Indemnified Parties"), from and against all demands, claims,
actions, suits, damages, judgments, fines, penalties, liabilities, and
out-of-pocket
-57-
<PAGE> 63
costs and expenses, including reasonable costs of attorneys and related costs of
experts such as accountants (collectively, the "Indemnified Liabilities"),
actually incurred by any Indemnified Party which are related to any litigation
or proceeding relating to this Agreement, the Credit Documents, or the
transactions contemplated thereunder, INCLUDING ANY INDEMNIFIED LIABILITIES
CAUSED BY ANY INDEMNIFIED PARTY'S OWN NEGLIGENCE, but not Indemnified
Liabilities which are a result of any Indemnified Party's gross negligence or
willful misconduct. The provisions of this paragraph shall survive the repayment
and termination of the credit provided for under this Agreement and any
purported termination of this Agreement which does not expressly refer to this
paragraph.
7.7 Successor Agent. The Agent may resign at any time by giving written
notice thereof to the Banks and the Borrower and may be removed at any time with
or without cause by the Majority Banks upon receipt of written notice from the
Majority Banks to such effect. Upon receipt of notice of any such resignation or
removal, the Majority Banks shall have the right to appoint a successor Agent
with the consent of the Borrower, which consent shall not be unreasonably
withheld. If no successor Agent shall have been so appointed by the Majority
Banks with the consent of the Borrower, and shall have accepted such
appointment, within 30 days after the retiring Agent's giving of notice of
resignation or the Majority Banks' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Banks and the Borrower, appoint a successor
Agent, which shall be, in the case of a successor agent, a commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges, and duties of the retiring Agent, and the retiring Agent shall be
discharged from any duties and obligations under this Agreement and the other
Credit Documents after such acceptance. After any Agent's resignation or removal
hereunder as Agent, the provisions of this Article 7 shall inure to such
Person's benefit as to any actions taken or omitted to be taken by such Person
while such Person was Agent under this Agreement and the other Credit Documents.
ARTICLE 8. MISCELLANEOUS.
8.1 Expenses. The Borrower shall pay on demand of the applicable party
specified herein (a) all reasonable out-of-pocket costs and expenses of the
Agent in connection with the preparation, execution, delivery, administration,
modification, and amendment of this Agreement and the other Credit Documents,
including the reasonable fees and expenses of outside counsel for the Agent, and
(b) all out-of-pocket costs and expenses of the Agent and each Bank in
connection with the preservation or enforcement of their respective rights under
this Agreement and the other Credit
-58-
<PAGE> 64
Documents, whether through negotiations, legal proceedings, or otherwise,
including fees and expenses of counsel for the Agent, and each Bank. The
provisions of this paragraph shall survive the repayment and termination of the
credit provided for under this Agreement and any purported termination of this
Agreement which does not expressly refer to this paragraph.
8.2 Indemnification. The Borrower agrees to protect, defend, indemnify,
and hold harmless the Agent, each Bank, and each of their respective Related
Parties (for the purposes of this Section 8.2, collectively, the "Indemnified
Parties"), from and against all demands, claims, actions, suits, damages,
judgments, fines, penalties, liabilities, and out-of-pocket costs and expenses,
including reasonable costs of attorneys and related costs of experts such as
accountants (collectively, the "Indemnified Liabilities"), actually incurred by
any Indemnified Party which are related to any litigation or proceeding relating
to this Agreement, the Credit Documents, or the transactions contemplated
thereunder, INCLUDING ANY INDEMNIFIED LIABILITIES CAUSED BY ANY INDEMNIFIED
PARTY'S OWN NEGLIGENCE, but not Indemnified Liabilities which are a result of
any Indemnified Party's gross negligence or willful misconduct. The provisions
of this paragraph shall survive the repayment and termination of the credit
provided for under this Agreement and any purported termination of this
Agreement which does not expressly refer to this paragraph.
8.3 Modifications, Waivers, and Consents. No modification or waiver of
any provision of this Agreement or the Notes, nor any consent required under
this Agreement or the Notes, shall be effective unless the same shall be in
writing and signed by the Agent and Majority Banks and the Borrower, and then
such modification, waiver, or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that
no modification, waiver, or consent shall, unless in writing and signed by the
Agent, all the Banks, and the Borrower do any of the following: (a) increase any
Commitment of any Bank, (b) forgive or reduce any amount or rate of any
principal, interest, or fees payable under the Credit Documents, or postpone or
extend any time for payment thereof, (c) release the Guaranty or all or
substantially all collateral securing the Credit Obligations (except as
otherwise permitted or required herein), or (d) change the percentage of Banks
required to take any action under this Agreement, the Notes, or the Security
Documents, including any amendment of the definition of "Majority Banks" or this
Section 8.3. No modification, waiver, or consent shall, unless in writing and
signed by the Agent affect the rights or obligations of the Agent under the
Credit Documents. The Agent shall not modify or waive or grant any consent under
any other Credit Document of such action would be prohibited under this Section
8.3 with respect to the Credit Agreement or the Notes.
-59-
<PAGE> 65
8.4 Survival of Agreements. All representations, warranties, and
covenants of the Borrower in this Agreement and the Credit Documents shall
survive the execution of this Agreement and the Credit Documents and any other
document or agreement.
8.5 Assignment and Participation. This Agreement and the Credit
Documents shall bind and inure to the benefit of the Borrower and its successors
and assigns and the Agent and the Banks and their respective successors and
assigns. The Borrower may not assign its rights or delegate its duties under
this Agreement or any Credit Document.
(a) Assignments. Any Bank may assign to one or more banks or
other entities all or any portion of its rights and obligations with respect to
this Agreement (including the Advances owing to it, the Notes held by it, and
its Commitments); provided, however, that (i) each such assignment shall be of a
constant, and not a varying, percentage of all of such Bank's rights and
obligations under this Agreement, (ii) assignments of Commitments shall be made
in minimum amounts of $5,000,000 and be made in integral multiples of $1,000,000
and the assigning Bank, if it retains any Commitments, shall maintain at least
$5,000,000 of such Commitments, (iii) each such assignment shall be to an
Eligible Assignee, (iv) the parties to each such assignment shall execute and
deliver to the Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with the Notes subject to such assignment,
and (v) each Eligible Assignee (other than an Eligible Assignee of the Agent)
shall pay to the Agent a $3,500 administrative fee. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, which effective date shall be at least three
Business Days after the execution thereof, (A) the assignee thereunder shall be
a party hereto for all purposes and, to the extent that rights and obligations
hereunder have been assigned to it pursuant to such Assignment and Acceptance,
have the rights and obligations of a Bank hereunder and (B) the assignor
thereunder shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Agreement (and, in the case of
an Assignment and Acceptance covering all of such Bank's rights and obligations
under this Agreement, such Bank shall cease to be a party hereto).
(b) Term of Assignments. By executing and delivering an
Assignment and Acceptance, the assignor thereunder and the assignee thereunder
confirm to and agree with each other and the other parties hereto as follows:
(i) other than as provided in such Assignment and Acceptance, the assignor makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency of value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) the assignor
-60-
<PAGE> 66
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of any Credit Party or the performance or observance
by any Credit Party of any of its obligations under this Agreement or any other
instrument or document furnished pursuant hereto; (iii) the assignee confirms
that it has received a copy of this Agreement, together with copies of the
Financial Statements and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) the assignee shall, independently and without
reliance upon the Agent, the assignor or any other Bank and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (v) the assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Agent by the terms hereof, together with such powers as
are reasonably incidental thereto; and (vi) the assignee agrees that it shall
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Bank.
(c) The Register. The Agent shall maintain at its address
referred to in Section 8.6 a copy of each Assignment and Acceptance delivered to
and accepted by it and a register for the recordation of the names and addresses
of the Banks and the Commitments and Notes of each Bank from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Borrower, the Agent, and the Banks may
treat each Person whose name is recorded in the Register as a Bank hereunder for
all purposes of this Agreement. The Register shall be available for inspection
by the Borrower or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
(d) Procedures. Upon its receipt of an Assignment and
Acceptance executed by the assignor thereunder and the assignee thereunder,
together with the Notes subject to such assignment, the Agent shall, if such
Assignment and Acceptance has been completed in the appropriate form, (i) accept
such Assignment and Acceptance, (ii) record the information contained therein in
the Register, and (iii) give prompt notice thereof to the Borrower. Within five
Business Days after its receipt of such notice, the Borrower shall execute and
deliver to the Agent in exchange for the surrendered Notes new Notes in the
appropriate amounts to the order of the assignee and, if the assignor has
retained any rights and obligations hereunder, new Notes in the appropriate
amounts to the order of the assignor. Such new Notes shall be dated the
effective date of such Assignment and Acceptance and shall be in the appropriate
form.
(e) Participation. Each Bank may sell participation to one or
more banks or other entities in or to all or a portion of its rights and
obligations under this Agreement (including the
-61-
<PAGE> 67
Advances owing to it, the Notes held by it, and its Commitments); provided,
however, that (i) such Bank's obligations under this Agreement (including its
Commitments to the Borrower hereunder) shall remain unchanged, (ii) such Bank
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) such Bank shall remain the holder of any Commitments
and Notes for all purposes of this Agreement, (iv) the Borrower, the Agent, and
the other Banks shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement, and (v)
such Bank shall not require the participant's consent to any matter under this
Agreement except for those that require approval of all of the Banks under
Section 8.3. The Borrower hereby agrees that participants shall have the same
rights under Sections 2.8, 2.9, 2.10, 2.12, 2.13, and 8.2 as a Bank to the
extent of their respective participation.
(f) Assignments or Pledges to Federal Reserve Banks. In addition to the
foregoing rights of assignment and participation, any Bank may assign or pledge
any portion of its rights under this Agreement (including the Advances owed to
such Bank) to any Federal Reserve Bank in accordance with applicable law without
notice to or the consent of the Borrower or the Agent, provided that (i) such
Bank shall not be relieved of its obligations under this Agreement as a result
thereof and (ii) in no event shall the Federal Reserve Bank be entitled to
direct the actions of the pledging or assigning Bank under this Agreement.
8.6 Notice. All notices and other communications under this Agreement
and the Notes shall be in writing and mailed by certified mail (return receipt
requested), telecopied, telexed, hand delivered, or delivered by a nationally
recognized overnight courier, to the address for the appropriate party specified
in Schedule I or at such other address as shall be designated by such party in a
written notice to the other parties. Mailed notices shall be effective when
received. Telecopied or telexed notices shall be effective when transmission is
completed or confirmed by telex answerback. Delivered notices shall be effective
when delivered by messenger or courier. Notwithstanding the foregoing, notices
and communications to the Agent pursuant to Article 2 or 7 shall not be
effective until received by the Agent.
8.7 Choice of Law. This Agreement and the Notes have been prepared, are
being executed and delivered, and are intended to be performed in the State of
Texas, and the substantive laws of the State of Texas and the applicable federal
laws of the United States shall govern the validity, construction, enforcement,
and interpretation of this Agreement and the Notes; provided however, Chapter
346 of the Texas Finance Code does not apply to this Agreement or the Notes.
Each Letter of Credit shall be governed by the Uniform Customs and Practice for
Documentary Credits, International Chamber of Commerce Publication No. 500 (1993
version).
-62-
<PAGE> 68
8.8 Arbitration.
(a) Any controversy or claim between or among the parties
hereto, including those arising out of or relating to this Agreement or the
Credit Documents, including any claim based on or arising from an alleged tort,
shall be determined by binding arbitration in accordance with the Federal
Arbitration Act (or if not applicable, the applicable state law), the rules of
practice and procedure for the arbitration of commercial disputes of Judicial
Arbitration and Mediation Services, Inc. ("JAMS"), and the "special rules" set
forth in paragraph (b) below. In the event of any inconsistency, the special
rules shall control. Judgment upon any arbitration award may be entered in any
court having jurisdiction. Any party to this Agreement may bring an action,
including a summary or expedited proceeding, to compel arbitration of any
controversy or claim to which this Agreement or any of the Credit Documents
applies in any court having jurisdiction over such action.
(b) The arbitration shall be conducted in Houston, Texas, and
administered by JAMS, who shall appoint an arbitrator; if JAMS is unable or
legally precluded from administering the arbitration, then the American
Arbitration Association shall serve. All arbitration hearings shall be commenced
within 90 days of the demand for arbitration; further, the arbitrator shall only
be permitted to extend the commencement of such hearing for up to an additional
60 days and only after showing cause. The payment of costs and fees associated
with the arbitration shall be allocated between the parties by the arbitrator.
(c) Nothing in this Agreement shall be deemed to (i) limit the
applicability of any otherwise applicable statutes of limitation or repose and
any waivers contained in this Agreement or the Credit Documents; or (ii) be a
waiver by the Agent or any Bank of the protection afforded to it by 12 U.S.C.
Sec. 91 or any substantially equivalent state law; or (iii) limit the right of
the Agent or any Bank hereto (A) to exercise self help remedies such as setoff,
or (B) to take action to enforce rights under any security or support for the
Credit Obligations, including foreclosing on collateral and making claims under
guaranties, to the extent permitted under the Credit Documents, or (C) to obtain
from a court provisional or ancillary remedies such as injunctive relief, writ
of possession, or the appointment of a receiver. The Agent and any Bank may, to
the extent permitted under the Credit Documents, exercise such self help rights,
enforce rights related to security or support, or obtain such provisional or
ancillary remedies before, during, or after the pendency of any arbitration
proceeding brought pursuant to this Agreement. Neither this exercise of self
help remedies nor the institution or maintenance of an action for foreclosure or
provisional or ancillary remedies shall constitute a waiver of the right of any
party, including the claimant in any such action, to arbitrate the merits of the
controversy or claim occasioning resort to such remedies.
-63-
<PAGE> 69
8.9 Counterparts. This Agreement may be executed in multiple
counterparts which together shall constitute one and the same instrument.
8.10 No Further Agreements. THIS WRITTEN AGREEMENT AND THE CREDIT
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the date first above written.
BORROWER:
TEAM, INC.
By: /s/ TED W. OWEN
--------------------------------------
Ted W. Owen
Vice President and CFO
AGENT:
NATIONSBANK, N.A., as Agent
By: /s/ ERIC E. ENSMANN
--------------------------------------
Eric E. Ensmann
Assistant Vice President
-64-
<PAGE> 70
BANKS:
NATIONSBANK, N.A.
By: /s/ ERIC E. ENSMANN
---------------------------------
Eric E. Ensmann
Assistant Vice President
Loan A Commitment: $12,500,000
Loan B Commitment: $ 4,500,000
Loan C Commitment: $ 5,000,000
Loan D Commitment: $ 2,000,000
-65-
<PAGE> 1
EXHIBIT 99
FOR IMMEDIATE RELEASE
TEAM ANNOUNCES CLOSING OF NEW $24 MILLION CREDIT FACILITY AND COMPLETION OF
CLIMAX ACQUISITION
ALVIN, TEXAS, SEPTEMBER 1, 1998: Team, Inc. (Amex: TMI) announced today that, on
August 26, 1998, it closed a $24 million credit facility with NationsBank, N.A.
in Houston. The new facility is comprised of a $12.5 million revolving loan,
$9.5 million in term loans for business acquisitions and a $2 million mortgage
loan to refinance existing real estate indebtedness. Interest rates under the
new facility are adjustable depending upon the Company's cash flow, and are
generally more favorable than under the previously existing $10 million
revolving credit facility with another financial institution, which the Company
terminated.
Additionally, on August 28, 1998, the Company completed the previously announced
acquisition of Climax Portable Machine Tools, Inc. located in Newberg, Oregon.
Climax is a leading designer-manufacturer of portable, metal cutting machine
tools used for on-site industrial maintenance. Consideration paid was $7.2
million, consisting of $6.4 million in cash and the issuance of 200,000 shares
of the Company's common stock. Climax had revenues of $11.3 million for its
latest fiscal year ended December 31, 1997.
Commenting on the announcements, Ted W. Owen, Team's Chief Financial Officer,
said, "We are pleased to renew a relationship with NationsBank. The new credit
facility significantly improves our ability to pursue strategic objectives,
while at the same time reducing our cost of borrowed funds. The closing of this
new credit facility provided the resources necessary to complete the Climax
acquisition and allowed us to refinance $3.1 million of previously existing
Climax indebtedness at more favorable rates. We believe that the Climax
acquisition strengthens our opportunities by enabling us to offer Climax's
product lines at our 40 existing domestic customer service locations, our
foreign branches and our foreign licensees. We are excited about adding
synergies through the field machining capabilities that Climax brings to our
business and about the potential to grow that business through the leverage
provided by the NationsBank facility."
Team is professional full-service provider of specialized industrial services.
Headquartered in Alvin, Texas, the Company has 40 customer service locations in
23 states and three international subsidiaries in England, Trinidad, and
Singapore. The Company also serves the international market through licensed
arrangements in 14 countries. Team, Inc. common stock is traded on the American
Stock Exchange under the ticker symbol "TMI". For additional information,
contact William A. Ryan or Ted W. Owen at 281-331-6154.
