<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD ENDED
COMMISSION FILE NUMBER 1-12380
----------------------
AVIALL, INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE 65-0433083
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2055 DIPLOMAT DRIVE
DALLAS, TEXAS 75234-8989
(Address of principal executive offices) (Zip Code)
(972) 406-2000
(Registrant's telephone number, including area code)
Indicate by check X whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
The number of shares of Common Stock, par value $.01 per share, outstanding
at November 4, 1996 was 19,525,379.
================================================================================
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
AVIALL, INC.
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------------------------------------
1996 1995 1996 1995
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Net sales $98,637 83,111 284,399 257,841
Cost of sales 74,210 61,083 211,605 189,534
- --------------------------------------------------------------------------------------------------------------------
Gross profit 24,427 22,028 72,794 68,307
Operating and other expenses:
Selling and administrative expenses 19,378 18,025 61,051 58,051
Nonrecurring charges 2,763 (4,201) 6,613 (4,201)
Interest expense 3,503 2,827 9,656 8,587
- --------------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations before income taxes (1,217) 5,377 (4,526) 5,870
Provision for income taxes 1,210 2,643 1,657 3,497
- --------------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations (2,427) 2,734 (6,183) 2,373
Discontinued operations:
Earnings from operations (net of income tax expense of
$1,173 and $3,678 in 1995) - 1,689 - 6,080
Gain on disposal 6,446 - 16,946 -
- --------------------------------------------------------------------------------------------------------------------
Earnings from discontinued operations 6,446 1,689 16,946 6,080
- --------------------------------------------------------------------------------------------------------------------
Net earnings before extraordinary item 4,019 4,423 10,763 8,453
- --------------------------------------------------------------------------------------------------------------------
Extraordinary loss 3,421 - 3,421 -
- --------------------------------------------------------------------------------------------------------------------
Net earnings $ 598 4,423 7,342 8,453
====================================================================================================================
Net earnings (loss) per share:
Earnings (loss) from continuing operations $ (0.13) 0.14 (0.32) 0.12
Earnings from discontinued operations 0.33 0.09 0.87 0.32
Extraordinary loss (0.17) 0.00 (0.17) 0.00
- --------------------------------------------------------------------------------------------------------------------
Net earnings $ 0.03 0.23 0.38 0.44
====================================================================================================================
Weighted average common and common equivalent shares 19,539,541 19,443,847 19,516,576 19,412,195
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 3
AVIALL, INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
- -------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 7,082 4,690
Receivables 50,513 55,725
Inventories 72,190 100,619
Prepaid expenses and other current assets 4,335 2,953
Deferred income taxes 18,992 45,961
Net assets of discontinued operations - 238,048
- -------------------------------------------------------------------------------------------------------------
Total current assets 153,112 447,996
- -------------------------------------------------------------------------------------------------------------
Property, plant and equipment 9,578 12,129
Intangible assets 60,109 59,425
Deferred income taxes 30,219 3,249
Other assets 14,154 16,128
- -------------------------------------------------------------------------------------------------------------
Total assets $267,172 538,927
=============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 4,220 185,171
Accounts payable 26,311 48,176
Accrued expenses 67,684 86,218
- -------------------------------------------------------------------------------------------------------------
Total current liabilities 98,215 319,565
- -------------------------------------------------------------------------------------------------------------
Long-term debt 55,239 110,439
Other liabilities 23,369 26,391
Shareholders' equity (common stock of $.01 par value per share with 80,000,000
shares authorized and 19,520,851 shares and 19,443,712 shares issued and
outstanding at September 30, 1996 and December 31, 1995, respectively;
preferred stock of $.01 par value with 10,000,000 shares authorized and no
shares issued and outstanding) 90,349 82,532
- -------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $267,172 538,927
=============================================================================================================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
AVIALL, INC.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
September 30,
---------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 7,342 8,453
Gain on disposal of discontinued operations (16,946) -
Nonrecurring charges 6,613 (4,201)
Extraordinary loss 3,421 -
Continuing operations depreciation and amortization 8,051 5,505
Discontinued operations depreciation and amortization - 16,760
Deferred income taxes (2,814) 1,277
Changes in:
Receivables (559) 2,954
Inventories 4,164 2,322
Accounts payable 6,231 (4,317)
Accrued expenses (2,637) (29,122)
Other, net (4,087) 1,546
Discontinued operations working capital changes 5,020 38,504
- ------------------------------------------------------------------------------------------------------------
13,799 39,681
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from businesses sold 261,276 76,800
Capital expenditures (1,027) (3,303)
Sales of property, plant and equipment 2,011 474
Other, net - (861)
Net change in discontinued operations property, plant and equipment 603 (11,745)
- ------------------------------------------------------------------------------------------------------------
262,863 61,365
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt proceeds 50,000 -
Net change in revolving credit facility (152,542) (27,168)
Debt repaid (169,632) (78,666)
Debt issue costs paid (2,571) -
Issuance of common stock 475 101
Dividends paid - (582)
- ------------------------------------------------------------------------------------------------------------
(274,270) (106,315)
- ------------------------------------------------------------------------------------------------------------
Change in cash 2,392 (5,269)
Cash, beginning of period 4,690 11,486
- ------------------------------------------------------------------------------------------------------------
Cash, end of period $ 7,082 6,217
============================================================================================================
CASH PAID FOR INTEREST AND INCOME TAXES:
Interest $17,583 23,025
Income taxes $ 1,123 19,195
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
AVIALL, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, these financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for
the three- and nine-month periods ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1996. Certain prior year amounts have been reclassified to conform to the
current year presentation. For further information, refer to the financial
statements and footnotes thereto included in Aviall, Inc.'s ("Aviall" or the
"Company") Form 10-K for the year ended December 31, 1995.
NOTE 2 - NONRECURRING CHARGE
In April 1996, the Company signed a letter of intent to sell its aerospace
fastener distribution business (the "Fastener Business") and recorded a $3.9
million first quarter charge in connection with the planned sale. In the third
quarter of 1996, an additional charge of $2.8 million was recorded to reflect
the final contract terms and higher than estimated transaction-related expenses
in connection with the sale of the Fastener Business which was completed on
September 19, 1996.
NOTE 3 - DISCONTINUED OPERATIONS
In April 1996, Aviall and its wholly owned subsidiary, Aviall Services,
Inc., signed a definitive agreement with Greenwich Air Services, Inc.
("Greenwich") and its wholly owned subsidiary, GASI Engine Services, Inc., for
the sale of its engine repair operations in Dallas/Fort Worth and Prestwick,
Scotland and its component repair facility in McAllen, Texas. Also in April
1996, Aviall signed a definitive agreement with Curtiss-Wright Flight Systems,
Inc. for the sale of its Miami-based accessory services repair station. The
accessory repair services sale was completed on May 20, 1996, and the engine
repair services sale was completed on June 10, 1996. The engine repair
services sale agreement provided Greenwich the unilateral option to pay a
portion of the purchase price in stock. Greenwich did not exercise this option
and paid the full purchase price in cash (or assumed liabilities). Included in
the $212.5 million estimated loss on disposal recorded in December 1995 was a
$10.5 million provision for loss on sale of the stock which was reversed in the
second quarter of 1996.
In the third quarter of 1996, the Company recognized an additional gain on
disposal of $6.4 million as a result of changes in estimates for
transaction-related expenses and settlement of the final sale price of its
engine repair services business. The final settlement included the receipt by
Aviall of $10.4 million placed in escrow at the close of the sale pending
finalization of the audited closing date net asset statement.
NOTE 4 - EXTRAORDINARY LOSS
The $3.4 million extraordinary loss resulted from the write-off of
unamortized debt issuance costs associated with the Company's 1993 amended
credit agreement which was refinanced in the third quarter of 1996.
NOTE 5 - INVENTORIES
<TABLE>
<CAPTION>
September 30, December 31,
(In thousands) 1996 1995
- --------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Distribution parts $76,753 130,212
Reserves for excess and obsolete inventories (4,563) (29,593)
- --------------------------------------------------------------------------------
$72,190 100,619
================================================================================
</TABLE>
5
<PAGE> 6
NOTE 6 - DEBT
In September 1996, the Company replaced its domestic credit facilities.
The new senior credit facilities (the "Credit Facilities") consist of a $50
million five-year amortizing secured term loan due through 2001 (the "Term
Loan"), and a $50 million five-year secured revolving loan due in 2001 (the
"Revolving Credit Facility") with availability determined by reference to a
borrowing base of eligible accounts receivable and inventory of the Company.
The Credit Facilities contain various covenants, including financial covenants,
limitations on debt and limitations on capital expenditures. As of September
30, 1996, the Company had $50 million outstanding under the Term Loan and $5
million outstanding under the Revolving Credit Facility.
Under the Credit Facilities, the Company can select between two floating
rate options: the London Interbank Offering Rate ("LIBOR") plus an applicable
margin ranging from .75% to 2.25% dependent upon certain of the Company's
ratios or the Alternate Base Rate ("ABR") which is the higher of the agent
bank's prime rate and the federal funds rate plus .5%, plus an applicable
margin ranging from zero to 1.25% dependent upon certain of the Company's
ratios. The applicable margin for the period through June 1997 will be 2% and
1% for the LIBOR and ABR, respectively. Additionally, the Credit Facilities
provide for the issuance of up to $20 million of letters of credit subject to
the borrowing base. Commitment fees ranging from .25% to .5% are payable on
the unused portion of the Revolving Credit Facility. The Credit Facilities are
secured by substantially all of the Company's domestic assets, certain foreign
assets and 65% of the stock of each of the Company's foreign subsidiaries.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW. The following discussion and analysis should be read in conjunction
with the information set forth under Item 7: Management's Discussion and
Analysis of Financial Condition and Results of Operations on pages 11 through
16 of Aviall, Inc.'s Form 10K for the year ended December 31, 1995.
RESULTS OF OPERATIONS. The following table sets forth net sales, gross profit
and selling and administrative expense for the ongoing business separate from
the Fastener Business that was sold in September 1996.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
----------------------------------------------------
(In thousands) 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Net sales
Ongoing business $91,244 76,496 261,314 240,391
Fastener Business 7,393 6,615 23,085 17,450
- -------------------------------------------------------------------------------------------------------------------
Total net sales $98,637 83,111 284,399 257,841
===================================================================================================================
Gross profit
Ongoing business $22,132 19,817 65,791 62,701
Fastener Business 2,295 2,211 7,003 5,606
- -------------------------------------------------------------------------------------------------------------------
Total gross profit $24,427 22,028 72,794 68,307
===================================================================================================================
Selling and administrative expense
Ongoing business $17,734 16,179 55,534 52,302
Fastener Business 1,644 1,846 5,517 5,749
- -------------------------------------------------------------------------------------------------------------------
Total selling and administrative expense $19,378 18,025 61,051 58,051
===================================================================================================================
</TABLE>
6
<PAGE> 7
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 1995.
Net sales for the ongoing operations in the third quarter of 1996 were
$91.2 million, up $14.7 million, or 19%, from the $76.5 million recorded in the
same 1995 quarter. The increase was driven primarily by increased shipments to
the domestic general aviation and international aviation customers.
Gross profit for the ongoing operations of $22.1 million was $2.3 million
higher than the $19.8 million in the 1995 third quarter. Gross profit as a
percentage of sales decreased from 25.9% to 24.3%. This decrease in gross
profit percentage was a result of a focus on recapturing and expanding sales.
Selling and administrative expenses for the ongoing operations were up $1.6
million to $17.7 million in the third quarter of 1996. The increase principally
consisted of severance expenses associated with corporate staff reductions and
legal and accounting fees associated with the April 1996 amendment of the 1993
credit agreement.
Interest expense was $.7 million higher than in the third quarter 1995,
reflecting the $1.8 million acceleration of amortization of debt issuance costs
associated with the April 1996 amendment of the 1993 credit agreement offset by
lower interest expense due to reduced debt balances. The portion of interest
expense related to debt issuance amortization was $1.5 million greater than in
the same 1995 period. Additionally, as a result of the September 1996 senior
debt refinancing by the Company, the remaining $3.4 million of unamortized debt
issuance costs related to the 1993 amended credit agreement were written off as
an extraordinary item in the 1996 third quarter.
The nonrecurring charge of $2.8 million is the effect of final contract
terms and higher than estimated transaction- related expenses on the sale of
the Fastener Business.
The $6.4 million gain on disposal recorded in the third quarter of 1996
resulted from changes in estimates for transaction-related expenses and the
determination of the final sale price of the Company's commercial engine
services business.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 1995.
Net sales from ongoing operations in the first nine months of 1996 were
$261.3 million, an increase of $20.9 million, or 9%, from the $240.4 million
recorded in the comparable 1995 period. Sales related to a discontinued product
line, turbine parts, decreased $10.2 million. Excluding the discontinued
turbine part sales from each period, sales in the ongoing operations increased
$31.1 million, or 14%, on increased shipments in all part sales customer
segments and higher volume in product repair services.
Gross profit from ongoing operations of $65.8 million in the first nine
months of 1996 increased $3.1 million, or 5%, from the first nine months of
1995. Gross profit as a percentage of sales decreased from 26.1% in 1995 to
25.2% in 1996. This decrease stemmed primarily from lower margins on the
disposal of excess inventory and a focus on recapturing and expanding sales.
Selling and administrative expenses for the ongoing operations were up $3.2
million to $55.5 million in the first nine months of 1996. The increase
resulted principally from additional severance charges and legal and accounting
fees associated with the April 1996 amendment of the Company's 1993 credit
agreement.
The nonrecurring charge of $6.6 million was comprised of the effect of
final contract terms and higher than estimated transaction-related expenses on
the sale of the Fastener Business.
Interest expense was $1.1 million higher than in 1995, reflecting the
accelerated amortization of debt issuance costs associated with the April 1996
amendment of the 1993 credit agreement. Additionally, as a result of the
September 1996 senior debt refinancing by the Company, the remaining $3.4
million of unamortized debt issuance costs related to the 1993 amended credit
agreement were written off as an extraordinary item.
The 1996 results include a $16.9 million gain from the disposal of
discontinued operations due to the receipt of cash rather than an anticipated
partial stock payment, changes in estimates for transaction-related expenses
and the determination of the final sale price of the Company's commercial
engine services business.
7
<PAGE> 8
FINANCIAL CONDITION. The following table sets forth pro forma cash flows for
the ongoing business and the Fastener Business.
<TABLE>
<CAPTION>
Nine months ended
September 30,
----------------------
(In thousands) 1996 1995
- -----------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $(9,604) 8,453
Nonrecurring charges 6,613 (4,201)
Extraordinary loss 3,421 -
Depreciation and amortization 8,051 5,505
Change in working capital and other 298 (25,340)
- -----------------------------------------------------------------------------------------------------
8,779 (15,583)
- ------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (1,027) (3,303)
Sales of property, plant and equipment 2,011 474
Other, net - (861)
- ------------------------------------------------------------------------------------------------------
984 (3,690)
- ------------------------------------------------------------------------------------------------------
Net cash flows before financing activities $9,763 (19,273)
======================================================================================================
</TABLE>
Cash flow from operations was $8.8 million in the first nine months of 1996
compared to $(15.6) million in the 1995 period. Working capital improved
during 1996 primarily as a result of higher accounts payable. In the 1996
period, depreciation and amortization expense increased due to the acceleration
of debt issuance cost amortization as a result of the Company amending its 1993
credit agreement to provide for a maturity date of April 30, 1997. In 1995,
the negative cash flow from operating activities was primarily due to a payment
to Ryder System, Inc. for the settlement of 1993 federal income taxes pursuant
to the tax-sharing agreement entered into in connection with the spin-off in
December 1993.
The Company completed the sale of its Fastener Business in the third
quarter of 1996 resulting in cash proceeds of $18.4 million. In addition, the
Company finalized the outstanding issues related to the commercial engine
service business sale resulting in the receipt of $10.4 million placed in
escrow at the closing of such sale. These amounts were used to repay debt in
accordance with the requirements of the Company's prior credit facilities.
In September 1996, the Company completed a $100 million refinancing of its
existing domestic credit facilities. The new bank credit agreement replaces
the previously amended 1993 domestic credit agreement that had existed since
Aviall's spin-off from Ryder System, Inc. in December 1993. The new senior
credit facilities (the "Credit Facilities") consist of a $50 million five-year
amortizing secured loan due through 2001 and a $50 million five-year secured
revolving loan due in 2001 with availability determined by reference to a
borrowing base of eligible accounts receivable and inventory of the Company.
The Credit Facilities contain various covenants including financial covenants,
limitation on debt and limitation on capital expenditures. Under the Credit
Facilities, the Company can select between two floating rate options: the
London Interbank Offering Rate ("LIBOR") plus an applicable margin ranging from
.75% to 2.25% dependent upon certain of the Company's ratios or the Alternate
Base Rate ("ABR") which is the higher of the agent bank's prime rate and the
federal funds rate plus .5%, plus an applicable margin ranging from zero to
1.25% dependent upon certain of the Company's ratios. The applicable margin
for the period through June 1997 will be 2% and 1% for the LIBOR and ABR,
respectively.
The Company believes that its expected cash flow from operations and
availability under its revolving lines of credit are sufficient to meet its
current working capital needs and the funding of expenses associated with the
sale of the engine services business. The new Credit Facilities will provide
significant interest expense savings compared to the prior credit facilities.
8
<PAGE> 9
OUTLOOK. The Company has completed the sales of non-strategic business units
and used the net proceeds to pay down debt. The remaining domestic bank debt
was replaced with a new senior secured credit facility which is expected to
provide interest savings in future periods. Management believes the Company
has made significant progress in streamlining the corporate functions to reduce
cost and improve efficiency. The Company intends to seek further opportunities
for cost reductions and efficiency improvements in all areas of its operations.
Aviall's new focus is on the distribution of aviation parts and providing
inventory information services. Management believes this strategic focus will
enable the Company to improve profitability through participation in markets
which offer significant growth opportunities. In addition, the Company's
estimated $160 million net operating loss carryforward as of December 31, 1996
will minimize U.S. federal income tax payments for several years.
CERTAIN FORWARD-LOOKING STATEMENTS. This report contains certain
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995) relating to the Company that are based on the
beliefs of the management of the Company, as well as assumptions made by and
information currently available to the Company's management. When used in this
report, the words "anticipate," "believe," "estimate," "expect," "intend" and
similar expressions, as they relate to the Company or the Company's management,
identify forward-looking statements. Such statements reflect the current views
of the Company with respect to future events and are subject to certain risks,
uncertainties and assumptions relating to the operations and results of
operations of the Company, including as a result of competitive factors and
pricing pressures, shifts in market demand, general economic conditions and
other factors. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may vary
materially from those described herein as anticipated, believed, estimated,
expected or intended.
PART II - OTHER INFORMATION
<TABLE>
<CAPTION>
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<S> <C>
10.1 Credit Agreement, dated as of September 26, 1996, by and among Aviall, Inc. and the financial
institutions parties thereto.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
</TABLE>
During the quarter for which this Form 10-Q is filed, the Company
filed a Current Report on Form 8-K dated September 19, 1996 under
Item 2 - Acquisition or Disposition of Assets.
9
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AVIALL, INC.
November 8, 1996 By /s/ Jacqueline K. Collier
Jacqueline K. Collier
Vice President and Controller
(Authorized Officer/Chief Accounting Officer)
10
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
10.1 Credit Agreement, dated as of September 26, 1996, by and among Aviall, Inc. and the financial
institutions parties thereto.
27.1 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 10.1
AVIALL, INC.
$100 MILLION SENIOR SECURED CREDIT FACILITIES
NATIONSBANK OF TEXAS, N.A.
Administrative Agent
LC Fronting Bank
J.P. MORGAN SECURITIES INC.
Documentation Agent
NATIONSBANC CAPITAL MARKETS, INC.
Syndication Agent
SEPTEMBER 26, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1 DEFINITIONS AND TERMS . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . 1
1.2 Number and Gender of Words . . . . . . . . . . . . . 19
1.3 Accounting Principles . . . . . . . . . . . . . . . 19
SECTION 2 AMOUNTS AND TERMS OF THE LOAN FACILITIES . . . . . . 20
2.1 Term Loan . . . . . . . . . . . . . . . . . . . . . 20
2.2 Revolving Credit Facility . . . . . . . . . . . . . 20
2.3 Borrowing Procedure . . . . . . . . . . . . . . . . 20
2.4 LC Subfacility . . . . . . . . . . . . . . . . . . . 21
2.5 Termination or Reduction of Revolving Credit
Commitment . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3 TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . 27
3.1 Notes and Payments . . . . . . . . . . . . . . . . . 27
3.2 Interest and Principal Payments and Commitment
Reductions . . . . . . . . . . . . . . . . . . . . . 27
3.3 Voluntary Prepayments . . . . . . . . . . . . . . . 28
3.4 Mandatory Prepayments . . . . . . . . . . . . . . . 28
3.5 Quotation of Rates . . . . . . . . . . . . . . . . . 29
3.6 Default Rate . . . . . . . . . . . . . . . . . . . . 29
3.7 Interest Calculations; Determination of Rates . . . 30
3.8 Interest Periods . . . . . . . . . . . . . . . . . . 30
3.9 Conversions/Continuations . . . . . . . . . . . . . 30
3.10 Order of Application . . . . . . . . . . . . . . . . 31
3.11 Sharing of Payments, Etc. . . . . . . . . . . . . . 31
3.12 Offset . . . . . . . . . . . . . . . . . . . . . . . 32
3.13 Booking Loans . . . . . . . . . . . . . . . . . . . 32
3.14 Basis Unavailable or Inadequate for LIBOR Rate . . . 32
3.15 Additional Costs . . . . . . . . . . . . . . . . . . 33
3.16 Change in Laws . . . . . . . . . . . . . . . . . . . 34
3.17 Consequential Loss . . . . . . . . . . . . . . . . . 34
3.18 Taxes . . . . . . . . . . . . . . . . . . . . . . . 34
3.19 Net Payments . . . . . . . . . . . . . . . . . . . . 36
SECTION 4 FEES . . . . . . . . . . . . . . . . . . . . . . . . 36
4.1 Treatment of Fees . . . . . . . . . . . . . . . . . 36
4.2 Administrative Agent's Fee . . . . . . . . . . . . . 37
4.3 Arrangement Fee . . . . . . . . . . . . . . . . . . 37
</TABLE>
(i)
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
4.4 Facility Fee . . . . . . . . . . . . . . . . . . . . 37
4.5 Commitment Fee . . . . . . . . . . . . . . . . . . . 37
4.6 LC Fees . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . 38
5.1 Conditions Precedent to Initial Loan . . . . . . . . 38
5.2 Conditions Precedent to Each Loan and LC . . . . . . 42
5.3 Conditions Precedent to Each Conversion of a Loan . 42
SECTION 6 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . 43
6.1 Purpose of Credit Facility . . . . . . . . . . . . . 43
6.2 Existence, Good Standing, Authority, and
Authorizations . . . . . . . . . . . . . . . . . . . 43
6.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . 44
6.4 Authorization and Contravention . . . . . . . . . . 44
6.5 Binding Effect . . . . . . . . . . . . . . . . . . . 44
6.6 Financial Statements . . . . . . . . . . . . . . . . 45
6.7 Litigation, Claims, Investigations . . . . . . . . . 45
6.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . 45
6.9 Environmental Matters . . . . . . . . . . . . . . . 45
6.10 Employee Benefit Plans . . . . . . . . . . . . . . . 47
6.11 Properties; Liens . . . . . . . . . . . . . . . . . 48
6.12 Government Regulations . . . . . . . . . . . . . . . 48
6.13 Transactions with Affiliates . . . . . . . . . . . . 48
6.14 Debt . . . . . . . . . . . . . . . . . . . . . . . . 48
6.15 Material Agreements . . . . . . . . . . . . . . . . 48
6.16 Insurance . . . . . . . . . . . . . . . . . . . . . 49
6.17 Labor Matters . . . . . . . . . . . . . . . . . . . 49
6.18 Solvency . . . . . . . . . . . . . . . . . . . . . . 49
6.19 Tradenames . . . . . . . . . . . . . . . . . . . . . 49
6.20 Intellectual Property . . . . . . . . . . . . . . . 49
6.21 Compliance with Laws . . . . . . . . . . . . . . . . 50
6.22 Chief Executive Office; Chief Place of Business . . 50
6.23 Full Disclosure . . . . . . . . . . . . . . . . . . 50
SECTION 7 COVENANTS . . . . . . . . . . . . . . . . . . . . . 50
7.1 Use of Proceeds . . . . . . . . . . . . . . . . . . 51
7.2 Books and Records . . . . . . . . . . . . . . . . . 51
7.3 Items to be Furnished . . . . . . . . . . . . . . . 51
7.4 Inspections . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C>
7.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . 54
7.6 Prepayment of Other Debt . . . . . . . . . . . . . . 54
7.7 Expenses . . . . . . . . . . . . . . . . . . . . . . 54
7.8 Maintenance of Existence, Assets, and Business . . . 55
7.9 Insurance . . . . . . . . . . . . . . . . . . . . . 55
7.10 Preservation and Protection of Rights . . . . . . . 55
7.11 Employee Benefit Plans . . . . . . . . . . . . . . . 55
7.12 Environmental Laws . . . . . . . . . . . . . . . . . 56
7.13 Debt . . . . . . . . . . . . . . . . . . . . . . . . 57
7.14 Liens . . . . . . . . . . . . . . . . . . . . . . . 58
7.15 Transactions with Affiliates . . . . . . . . . . . . 60
7.16 Compliance with Laws and Documents . . . . . . . . . 60
7.17 Assignment . . . . . . . . . . . . . . . . . . . . . 60
7.18 Fiscal Year and Accounting Methods . . . . . . . . . 60
7.19 Government Regulations . . . . . . . . . . . . . . . 60
7.20 Indemnification . . . . . . . . . . . . . . . . . . 61
7.21 Loans, Advances, and Investments . . . . . . . . . . 62
7.22 Dividends and Distributions . . . . . . . . . . . . 64
7.23 Disposition of Assets . . . . . . . . . . . . . . . 64
7.24 Capital Expenditures . . . . . . . . . . . . . . . . 65
7.25 Mergers and Dissolutions . . . . . . . . . . . . . . 65
7.26 Conduct and Scope of Business . . . . . . . . . . . 65
7.27 Financial Covenants . . . . . . . . . . . . . . . . 66
7.28 Designated Subsidiaries . . . . . . . . . . . . . . 67
7.29 After-Acquired Property . . . . . . . . . . . . . . 67
7.30 After-Acquired Subsidiaries . . . . . . . . . . . . 68
7.31 Delivery of Certain Collateral and Lien Releases . . 68
SECTION 8 DEFAULT . . . . . . . . . . . . . . . . . . . . . . 68
8.1 Payment of Obligation . . . . . . . . . . . . . . . 68
8.2 Covenants . . . . . . . . . . . . . . . . . . . . . 69
8.3 Debtor Relief . . . . . . . . . . . . . . . . . . . 69
8.4 Judgments and Attachments . . . . . . . . . . . . . 69
8.5 Government Action . . . . . . . . . . . . . . . . . 69
8.6 Misrepresentation . . . . . . . . . . . . . . . . . 70
8.7 Change of Control . . . . . . . . . . . . . . . . . 70
8.8 Default Under Other Agreements . . . . . . . . . . . 70
8.9 Employee Benefit Plans . . . . . . . . . . . . . . . 71
8.10 Validity and Enforceability of Loan Documents . . . 71
</TABLE>
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<TABLE>
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<S> <C> <C>
SECTION 9 RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . 71
9.1 Remedies Upon Default . . . . . . . . . . . . . . . 71
9.2 Company Waivers . . . . . . . . . . . . . . . . . . 72
9.3 Performance by Administrative Agent . . . . . . . . 72
9.4 Delegation of Duties and Rights . . . . . . . . . . 72
9.5 Not in Control . . . . . . . . . . . . . . . . . . . 73
9.6 Course of Dealing . . . . . . . . . . . . . . . . . 73
9.7 Cumulative Rights . . . . . . . . . . . . . . . . . 73
9.8 Application of Proceeds . . . . . . . . . . . . . . 73
9.9 Diminution in Value of Collateral . . . . . . . . . 73
9.10 Certain Proceedings . . . . . . . . . . . . . . . . 74
SECTION 10 AGREEMENT AMONG LENDERS . . . . . . . . . . . . . . 74
10.1 Administrative Agent . . . . . . . . . . . . . . . . 74
10.2 Expenses . . . . . . . . . . . . . . . . . . . . . . 76
10.3 Proportionate Absorption of Losses . . . . . . . . . 76
10.4 Delegation of Duties; Reliance . . . . . . . . . . . 76
10.5 Limitation of Liability . . . . . . . . . . . . . . 77
10.6 Notice of Default; Instructions . . . . . . . . . . 78
10.7 Limitation of Liability . . . . . . . . . . . . . . 79
10.8 Relationship of Lenders . . . . . . . . . . . . . . 79
10.9 Collateral . . . . . . . . . . . . . . . . . . . . . 79
10.10 Benefits of Agreement . . . . . . . . . . . . . . . 80
10.11 LC Fronting Bank . . . . . . . . . . . . . . . . . . 80
SECTION 11 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . 80
11.1 Headings . . . . . . . . . . . . . . . . . . . . . . 80
11.2 Nonbusiness Days . . . . . . . . . . . . . . . . . . 80
11.3 Communications . . . . . . . . . . . . . . . . . . . 80
11.4 Form and Number of Documents . . . . . . . . . . . . 81
11.5 Exceptions to Covenants . . . . . . . . . . . . . . 81
11.6 Survival . . . . . . . . . . . . . . . . . . . . . . 81
11.7 Governing Law . . . . . . . . . . . . . . . . . . . 81
11.8 Invalid Provisions . . . . . . . . . . . . . . . . . 81
11.9 Maximum Interest . . . . . . . . . . . . . . . . . . 82
11.10 Entirety . . . . . . . . . . . . . . . . . . . . . . 82
11.11 Venue; Service of Process; Jury Trial . . . . . . . 83
11.12 Amendments, Consents, Conflicts, and Waivers . . . . 84
11.13 Multiple Counterparts . . . . . . . . . . . . . . . 85
</TABLE>
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TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
11.14 Successors and Assigns; Participation . . . . . . . 85
11.15 Discharge Only Upon Payment in Full;
Reinstatement in Certain Circumstances . . . . . . . 88
11.16 Confidentiality . . . . . . . . . . . . . . . . . . 88
11.17 Non-Application of Chapter 15 of Texas Credit
Code . . . . . . . . . . . . . . . . . . . . . . . . 89
</TABLE>
(v)
<PAGE> 7
Schedule 2.1 - Lenders and Committed Sums
Schedule 2.4 - Existing LCs
Schedule 5.1(e) - UCC Filing Offices
Schedule 6.3 - Subsidiaries
Schedule 6.7 - Litigation
Schedule 6.9 - Environmental Matters
Schedule 6.11 - Location of Personal Property
Schedule 6.13 - Affiliate Transactions
Schedule 6.15 - Material Agreements
Schedule 6.16 - Insurance
Schedule 6.19 - Tradenames
Schedule 6.20 - Intellectual Property
Schedule 6.22 - Principal Offices
Schedule 7.13 - Existing Debt
Schedule 7.14 - Existing Liens
Schedule 7.21 - Other Investments
Schedule 7.29 - Lease Estoppels
Exhibit A-1 - Form of Term Note
Exhibit A-2 - Form of Revolving Credit Note
Exhibit B - Form of Guaranty
Exhibit C-1 - Form of Pledge Agreement - Borrower
Exhibit C-2 - Form of Pledge Agreement - Subsidiary
Exhibit D-1 - Form of Security Agreement-Borrower
Exhibit D-2 - Form of Security Agreement-Subsidiary
Exhibit E-1 - Form of Notice of Borrowing
Exhibit E-2 - Form of Notice of Conversion
Exhibit E-3 - Form of Notice of LC
Exhibit E-4 - Form of LC Applications
Exhibit F - Form of Collateral Account Agreement
Exhibit G - Form of Compliance Certificate
Exhibit H - Form of Borrowing Base Report
Exhibit I-1 - Form of Opinion of Counsel to the Companies
Exhibit I-2 - Form of Opinion of Winstead Sechrest & Minick
P.C.
Exhibit J - Form of Assignment Agreement
Exhibit K - Form of Landlord Estoppel
(vi)
<PAGE> 8
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of September 26, 1996, among
Aviall, Inc., a Delaware corporation ("BORROWER"), Lenders (hereinafter
defined), NationsBank of Texas, N.A., as Administrative Agent and LC
Fronting Bank, J.P. Morgan Securities Inc., as Documentation Agent, and
NationsBanc Capital Markets, Inc., as Syndication Agent.
RECITALS
A. Borrower has requested that Lenders extend credit to
Borrower in the form of a term loan in the aggregate amount of $50,000,000
(referred to below as the Term Loan), and revolving credit loans in an
aggregate amount up to $50,000,000 (referred to below as the Revolving
Credit Facility), all on the terms and conditions set forth herein, for the
purpose of repaying its outstanding senior debt facilities and for other
purposes set forth herein.
B. Upon and subject to the terms of this Agreement, Lenders
are willing to extend such credit to Borrower.
Accordingly, in consideration of the mutual covenants contained
herein, Borrower, Administrative Agent, Documentation Agent, Syndication
Agent, LC Fronting Bank, and Lenders agree as follows:
SECTION 1 DEFINITIONS AND TERMS.
1.1 Definitions. As used herein:
ADMINISTRATIVE AGENT means NationsBank of Texas, N.A., and its
successor or successors as Administrative Agent for Lenders under this
Agreement pursuant to SECTION 10.1(B).
AFFILIATE of any Person means any other individual or entity that
directly or indirectly controls, or is controlled by, or is under common
control with, such Person, and, for purposes of this definition only,
"control," "controlled by," and "under common control with" mean
possession, directly or indirectly, of the power to vote more than 5% of
the Voting Stock of such Person or to direct or cause the direction of the
management or policies of such Person (whether through ownership of Voting
Stock, by contract, or otherwise).
AFTER-ACQUIRED SUBSIDIARY is defined in SECTION 7.30.
AGREEMENT means this Credit Agreement (as the same may hereafter be
amended, modified, supplemented or restated from time to time).
APPLICABLE MARGIN means, at the time of any determination thereof,
for purposes of all Loans under the Term Loan and the Revolving Credit
Facility, as applicable, the margin of interest over the Base Rate or the
LIBOR Rate, as the case may be, which is applicable at the time of any
<PAGE> 9
determination of interest rates under this Agreement, which Applicable
Margin shall be subject to adjustment (upwards or downwards, as
appropriate), as follows:
(a) As of the initial Borrowing Date until the fifth
Business Day after delivery pursuant to SECTION
7.3(B) hereof of Borrower's quarterly Financial
Statements and Compliance Certificate as of the
last day of the fiscal quarter ending on or about
June 30, 1997, unless such Financial Statements
are not delivered timely in which event the
highest Applicable Margin will be in effect from
the required delivery date until such time as such
Financial Statements and Compliance Certificate
are actually delivered:
<TABLE>
<CAPTION>
=====================================================================
Applicable Margin Applicable Margin
for LIBOR Rate for Base Rate
Loans Loans
- ---------------------------------------------------------------------
<S> <C>
2.00% 1.00%
=====================================================================
</TABLE>
(b) Thereafter, the Applicable Margin shall be
adjusted based on the ratio of Funded Debt to EBITDA determined as
of the last day of the preceding fiscal quarter as follows:
<TABLE>
<CAPTION>
================================================================================
Ratio of Applicable Margin Applicable Margin
Funded Debt for LIBOR Rate for Base Rate
to EBITDA Loans Loans
- --------------------------------------------------------------------------------
<S> <C> <C>
Greater than 4.00 2.25% 1.25%
- --------------------------------------------------------------------------------
Less than or equal to 4.00 but 2.00% 1.00%
greater than 3.50
- --------------------------------------------------------------------------------
Less than or equal to 3.50 but 1.75% 0.75%
greater than 3.00
- --------------------------------------------------------------------------------
Less than or equal to 3.00 but 1.50% 0.50%
greater than 2.25
- --------------------------------------------------------------------------------
Less than or equal to 2.25 but 1.00% 0%
greater than 1.50
- --------------------------------------------------------------------------------
Less than or equal to 1.50 0.75% 0%
================================================================================
</TABLE>
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<PAGE> 10
The ratio of Funded Debt to EBITDA shall be determined as of the
last day of the preceding fiscal quarter from the then most current
quarterly or annual Financial Statements and related Compliance
Certificate delivered by Borrower pursuant to SECTIONS 7.3(A) and
7.3(B) hereof. The adjustment, if any, to the Applicable Margin
pursuant to this SUBSECTION (B) shall be effective commencing on
the fifth Business Day after delivery of Financial Statements (and
the related Compliance Certificate) containing the Funded Debt to
EBITDA ratio. If Borrower fails at any time to timely furnish to
Lenders the Financial Statements and related Compliance
Certificates as required to be delivered pursuant to SECTIONS
7.3(A) and (B) hereof, then the highest Applicable Margin will be
in effect from the required delivery date until such time as such
Financial Statements and Compliance Certificates are actually
delivered.
AUTHORIZATIONS means all filings, recordings, and registrations
with, and all validations or exemptions, approvals, orders, authorizations,
consents, franchises, licenses, certificates, and permits and ratings from,
any Tribunal (including, without limitation, the FAA, the CAA and any other
similar authority) and, to the extent the absence of any Authorization from
such Person would be a Material Adverse Event, any original equipment
manufacturer.
BASE RATE means, for any day, the greater of (a) the prime rate per
annum most recently announced by Administrative Agent as its prime rate in
effect at its principal office in Dallas, Texas, automatically fluctuating
upward and downward with and at the time specified in each such
announcement without special notice to Borrower or any other Person, which
prime rate may not necessarily represent the lowest or best rate actually
charged to a customer, or (b) the sum of the Federal Funds Rate plus 0.5%.
BASE RATE LOAN means a Loan bearing interest at the sum of the Base
Rate plus the Applicable Margin.
BORROWER is defined in the introductory paragraph to this
Agreement.
BORROWER SECURITY AGREEMENT means a security agreement in
substantially the form and upon the terms of EXHIBIT D-1 (as the same may
hereafter be amended, modified, supplemented or restated from time to
time).
BORROWING BASE means, at any time the sum of (i) 80% of the
aggregate amount of Eligible Accounts, plus (ii) 50% of the aggregate book
value of Eligible Inventory (calculated on a basis consistent with
practices in effect on December 31, 1995), in each case determined on a
consolidated basis with all intercompany eliminations; provided, however,
that COMPONENT (II) shall never exceed 50% of the aggregate amount of
Eligible Accounts plus Eligible Inventory. For purposes of calculating the
Dollar equivalent of Eligible Accounts described in PARAGRAPH (7) of the
definition of Eligible Accounts, the conversion rates as reported in The
Wall Street Journal on the date as of which calculation is being made shall
be used.
-3-
<PAGE> 11
BORROWING BASE DEFICIENCY means, at any time, the amount by which
the Revolving Credit Commitment Usage exceeds the Borrowing Base.
BORROWING BASE REPORT means a certificate substantially in the form
attached as EXHIBIT H.
BORROWING DATE is defined in SECTION 2.3(A).
BUSINESS DAY means (a) for all purposes, any day other than
Saturday, Sunday, and any other day on which commercial banking
institutions are required or authorized by Law to be closed in New York,
New York, or Dallas, Texas, and (b) in respect of any LIBOR Rate Loan, a
day on which dealings are current in the London interbank market and
commercial banks are open for international business in London.
CAA means the Civil Aviation Authority of the United Kingdom and
any successor Authority.
CAPITAL EXPENDITURES means, for any Person, the aggregate amount of
all expenditures which would be capitalized on such Person's balance sheet
in accordance with GAAP.
CAPITAL LEASE means any capital lease or sublease which should be
capitalized in accordance with GAAP on a balance sheet.
CERCLA means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601 et seq.
CHANGE OF CONTROL is defined in SECTION 8.7.
CODE means the Internal Revenue Code of 1986, as amended, together
with rules and regulations promulgated thereunder.
COLLATERAL means the collateral described in the Security Documents
from time to time subject to or intended to be subject to Liens securing
the Obligation and shall include without limitation all proceeds of
litigation.
COMMITTED SUM means, for any Lender in respect of either the Term
Loan or the Revolving Credit Facility, the amounts respectively stated
beside its name for the Term Loan or the Revolving Credit Facility on
SCHEDULE 2.1 or on the most recently amended SCHEDULE 2.1, if any,
delivered by Administrative Agent pursuant to this Agreement, subject to
reduction and cancellation as provided in this Agreement.
COMMITMENT PERCENTAGE means, at the time of any determination
thereof for any Lender in respect of the Term Loan and the Revolving Credit
Facility, respectively, the proportion which its Committed Sum in respect
thereof bears to the aggregate Committed Sums of all Lenders in respect
thereof.
-4-
<PAGE> 12
COMPANIES means, at the time of any determination thereof, Borrower
and each of its Subsidiaries and "Company" means any one of them.
COMPLIANCE CERTIFICATE means a certificate signed by the chief
financial officer, treasurer or controller of Borrower, substantially in
the form of EXHIBIT G.
CONSEQUENTIAL LOSS means any loss or expense which any Lender may
reasonably incur in respect of a LIBOR Rate Loan as a consequence of (a)
any inability, failure or refusal of Borrower to take such Loan after
Borrower shall have requested it under this Agreement, or (b) any
prepayment or payment of such Loan or conversion of such Loan to a Loan of
another Type, in each case, prior to the last day of the Interest Period
therefor.
CONTRACT RATE is defined in SECTION 11.9.
CURRENT DATE is defined in SECTION 5.1(G).
CURRENT FINANCIALS means, at the time of any determination thereof,
the most recently delivered to Lenders of the Financial Statements of
Borrower and its consolidated Subsidiaries required to be delivered under
SECTIONS 7.3(A) or 7.3(B), as the case may be.
CURRENT RATIO means, at any particular time, the ratio of (i) the
sum of cash, cash equivalents, accounts receivable, and inventory of
Borrower and its Subsidiaries on a consolidated basis, to (ii) the sum of
accounts payable, accrued expenses, and current maturities of long term
Debt of Borrower and its Subsidiaries on a consolidated basis.
DEBT means (without duplication), for any Person, all obligations,
contingent or otherwise (including, without limitation, contingent
obligations in connection with letters of credit), which in accordance with
GAAP should be classified upon such Person's balance sheet as liabilities,
but in any event including, without limitation, whether or not such
obligations in accordance with GAAP should be classified as liabilities,
(a) liabilities secured (or for which the holder of such Debt has an
existing Right, contingent or otherwise, to be so secured) by any Lien
existing on property owned or acquired by such Person or a Subsidiary
thereof (whether or not the liability secured thereby shall have been
assumed), (b) obligations which have been or under GAAP should be
capitalized for financial reporting purposes, (c) all guaranties,
endorsements, and other contingent obligations with respect to Debt of
others, including, but not limited to, any obligations to purchase, sell,
or furnish property or services primarily for the purpose of enabling such
other Person to make payment of any of such Person's Debt, or to otherwise
assure the holder of any of such Debt against loss with respect thereto,
and (d) liabilities under any interest rate swap, collar, floor, cap or
similar contract.
DEBTOR RELIEF LAWS means the Bankruptcy Code of the United States
of America and all other applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, receivership, insolvency,
reorganization, fraudulent transfer or conveyance, suspension of payments
or similar Laws from time to time in effect affecting the Rights of
creditors generally.
-5-
<PAGE> 13
DEFAULT is defined in SECTION 8.
DEFAULT RATE means a per annum rate of interest equal from day to
day to (a) with respect to any Loan, the rate otherwise applicable to such
Loan (including, without limitation, the Applicable Margin included in such
rate) plus 2%, and (b) with respect to any other amounts due hereunder, the
Base Rate plus the Applicable Margin then in effect for Base Rate Loans
plus 2%.
DESIGNATED SUBSIDIARIES means those Subsidiaries of Borrower
designated on SCHEDULE 6.3 as a foreign Subsidiary in the process of
terminating its existence through liquidation or merger or as an inactive
Subsidiary.
DISTRIBUTION for any Person means, with respect to any shares of
any capital stock or other equity securities issued by such Person, (a) the
retirement, redemption, purchase, or other acquisition for value of any
such securities, (b) the declaration or payment of any dividend on or with
respect to any such securities, (c) any loan or advance by such Person to,
or other investment by such Person in, the holder of any of such
securities, and (d) any other payment by such Person with respect to such
securities.
DOCUMENTATION AGENT means J.P. Morgan Securities Inc., and its
successors, as Documentation Agent under this Agreement.
DOLLARS or $ means lawful money of the United States of America.
EBITDA means, for any period, for Borrower and its Subsidiaries on
a consolidated basis, the sum of (a) earnings (or loss) before provision
for interest and income Taxes for such period, plus (b) all non-cash
charges, including, but not limited to, depreciation and amortization and
other non-cash charges to the extent that such non-cash charges are
actually deducted in arriving at such earnings, plus (c) losses (or minus
gains) from the sale of fixed assets not in the ordinary course of business
and other extraordinary items, plus (d) restructuring costs incurred to the
extent that such restructuring costs are actually deducted in arriving at
such earnings (including but not limited to severance costs, write-off of
debt issuance costs originally incurred with respect to the Existing Credit
Agreement, loan restructuring fees, interest rate hedging termination costs
and fees, and real estate lease buyout costs or termination fees) so long
as such costs, other than with respect to the write-off of debt issuance
costs, do not exceed $5,000,000 in the aggregate during the term of this
Agreement, and with respect to the write-off of debt issuance costs such
costs do not exceed $4,000,000 in the aggregate during the term of this
Agreement, minus (e) the excess of amounts reserved prior to the date
hereof with respect to Borrower's discontinued lines of business over
amounts actually expended in connection therewith (or plus any shortfalls
in amounts so reserved which are required to be expended) to the extent
such amounts are actually deducted in arriving at such earnings, minus (f)
interest income for such period received under that certain promissory note
dated March 15, 1995, executed by International Airmotive Corp. and payable
to the order of Aviall Services, Inc. in the original principal amount of
$12,000,000 (the "AIRMOTIVE NOTE") to the extent such amounts are actually
included in arriving at such earnings.
-6-
<PAGE> 14
ELIGIBLE ACCOUNTS means, at the time of any determination thereof,
the aggregate of all accounts receivable (net of reserves) of the
Restricted Companies for inventory sold or leased or services rendered, in
either case in the ordinary course of business, which meet all of the
following requirements:
(1) Not evidenced by negotiable instruments (except a
negotiable instrument in which Administrative Agent, for the
benefit of Lenders, has a first and prior perfected Lien) or
documents;
(2) Legal, valid and binding obligations of the
account obligor;
(3) Payable by third party obligors;
(4) Payable on customary terms;
(5) Obligations for products shipped and subject to
invoice, in compliance with all applicable Laws;
(6) If arising pursuant to a contract with the United
States government, an account receivable in which Administrative
Agent for the benefit of Lenders has a perfected first priority
Lien pursuant to the Assignment of Claims Act, or, if arising
pursuant to a contract with any other government, an account
receivable which is insured by an insurer satisfactory to
Administrative Agent;
(7) Denominated and payable in Dollars or other
acceptable, freely convertible currency with conversion rates
reported in The Wall Street Journal;
(8) If a domestic account receivable, an "account" as
defined by the Uniform Commercial Code in the appropriate
jurisdiction;
(9) Not more than 90 days past due;
(10) Not modified, extended, or renegotiated in any way
not provided for in the Security Documents and not charged off;
(11) Not subject to defense, withholding, offset,
counterclaim, or dispute for more than 30 days past invoice date
unless the aggregate disputed amounts for a single obligor are
less than 10% of the total amount owed to the Restricted
Companies by such obligor;
(12) As to which there exists a first and prior
perfected Lien in favor of Administrative Agent for the benefit of
Lenders to secure the Obligation and no other Liens except
Permitted Liens;
-7-
<PAGE> 15
(13) Secured by a prior perfected Lien in the
underlying security, if any;
(14) Not owed by an obligor that is the subject of a
proceeding under any Debtor Relief Law unless the obligor is the
subject of a proceeding under Chapter 11 of the Bankruptcy Code of
the United States of America to the extent the claim in respect of
such account is an administrative expense claim in such proceeding;
(15) Not owed by an obligor that has more than 20% of
its aggregate accounts owed to the Restricted Companies outstanding
more than 90 days past due, or for whom a material credit loss has
been recognized or reserved against (but without duplication of
amounts which have already been deducted in calculating net
accounts receivable) and not reversed during the previous three
years;
(16) Not that portion of an account which, when
aggregated with other amounts payable by the same obligor, is in
excess of 5% of aggregate accounts receivable of the Restricted
Companies, unless approved by the Required Lenders; and
(17) Not that portion of amounts owed by obligors whose
residence or principal place of business, as the case may be, is
located outside the United States of America, the United Kingdom or
Canada (unless an account receivable insured by an insurer
satisfactory to Administrative Agent) in excess of 25% of the
aggregate accounts receivable of the Restricted Companies, unless
otherwise approved by Required Lenders.
Any right to payment that is at any time an Eligible Account, but
which subsequently fails to meet the foregoing requirements, shall
cease to be an Eligible Account, and from and after such date shall
not constitute part of the Borrowing Base unless and until it shall
again become an Eligible Account but shall remain a portion of the
Collateral.
ELIGIBLE ASSIGNEE means (a) a commercial bank organized under the
laws of the United States of America, or any State thereof, and having a
combined capital and surplus in excess of $50,000,000, (b) a commercial
bank organized under the laws of any other country which is a member of
OECD, or a political subdivision of any such country, and having a combined
capital and surplus in excess of $50,000,000; provided that such bank is
acting through a branch or agency located in (x) the United States or the
country in which it is organized or another country which is also a member
of the OECD or (y) the Cayman Islands, (c) the central bank of any country
which is a member of the OECD, (d) a commercial finance company or finance
subsidiary of a corporation organized under the laws of the United States
of America, or any State thereof, and having a combined capital and surplus
in excess of $50,000,000, (e) an insurance company organized under the laws
of the United States of America (or any State thereof) and having a
combined capital and surplus in excess of $50,000,000, (f) a savings bank
or savings and loan association organized under the laws of the United
States of America, or any State thereof, and having a combined capital and
surplus in excess of $50,000,000, (g) a pension fund or other institutional
lender or investor, and (h) any Lender party to this Agreement on the
initial Borrowing Date or any Affiliate of any thereof, provided that no
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Person (other than a Person described in CLAUSE (H)) may be an Eligible
Assignee unless (1) it represents and warrants that it does not engage in
the same line of business as, or derive more than 5% of its revenues in the
same line of business as, the Companies, and (2) if no Default exists,
Borrower, Administrative Agent, and LC Fronting Bank shall have consented
thereto, which consent shall not be unreasonably withheld.
ELIGIBLE INVENTORY means, at the time of any determination thereof,
all inventory owned by the Restricted Companies (exclusive of (i) inventory
stored in foreign locations and inventory at locations [other than
Borrower's warehouse at 2075 Diplomat Drive, Dallas, Texas] for which
Administrative Agent has not received a landlord's Lien waiver satisfactory
to it which in the aggregate exceed 15% of the total amount of inventory,
and (ii) work in process) that is stored in a storage facility listed on
SCHEDULE 6.11 and that in each case would be classified as inventory of a
Restricted Company in accordance with GAAP and that is subject to a first
and prior perfected Lien (except with respect to inventory stored in
foreign locations) in favor of Administrative Agent for the benefit of
Lenders to secure the Obligation and no other Liens except landlord's Liens
which are subordinated to the Liens in favor of Administrative Agent upon
terms satisfactory to Administrative Agent, minus the annual rent expense
of Borrower at its warehouse located at 2075 Diplomat Drive, Dallas, Texas,
until such time as the landlord at such location has subordinated its
landlord Lien to the Liens in favor of Administrative Agent upon terms
satisfactory to Administrative Agent. Eligible Inventory shall not include
any Inventory which together with all other Inventory having the same part
number has not been sold within two years of purchase. Any inventory that
is at any time Eligible Inventory, but which subsequently fails to meet the
foregoing requirements, shall cease to be Eligible Inventory, and from and
after such date shall not constitute part of the Borrowing Base unless and
until it shall again become Eligible Inventory but shall remain a portion
of the Collateral.
EMPLOYEE PLAN means any Pension Benefit Plan, any Welfare Benefit
Plan, and any material employee benefit plan, policy, or arrangement
(whether written or oral) established or maintained by any Company or to
which any Company contributes or is required to contribute, including but
not limited to stock option, bonus, management incentive, deferred
compensation, and cafeteria plans, policies, or arrangements.
ENVIRONMENTAL BUDGET means a consolidated budget for the Companies
reflecting (a) a good faith estimate (including the basis or rationale for
the estimate) of the amount and nature of any probable Environmental
Liabilities known to any Company that are reasonably anticipated to result
in expenditures by any Company in the applicable fiscal year or those that
may result in future expenditures by any Company on the occurrence of any
contingency, and (b) the amount of any reserves or other provisions for
loss if such probable Environmental Liabilities result in actual
expenditures by any Company.
ENVIRONMENTAL INDEMNITY AGREEMENT means any contract or agreement
(including without limitation, insurance policies) known to any Company
pursuant to which any Company or Predecessor is (or may reasonably claim to
be) entitled to receive reimbursement or other payment on account of any
Environmental Liability, excluding, however, any contracts or agreements
(x) in
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the nature of environmental consulting or engineering contracts and/or
agreements for professional services, or (y) the terms of which preclude
any Company or Predecessor from asserting a claim for reimbursement or
other payment on account of any Environmental Liability.
ENVIRONMENTAL LAW means any applicable Law that relates (a) to the
pollution or protection of air, ground or surface water or soil, or human
health, (b) to the manufacturing, processing, recycling, distribution, use,
investigation, reporting, treatment, storage, disposal, transportation, or
other handling of Hazardous Substances, or (c) to the Release or threatened
Release of Hazardous Substances.
ENVIRONMENTAL LIABILITY means any liability, loss, fine, penalty,
charge, liens, damage, cost, or expense of any kind that results directly
or indirectly, in whole or in part, (I) under an Environmental Law from (a)
the violation of any Environmental Law, (b) the Release or threatened
Release of any Hazardous Substance, (c) removal, remedial, or other similar
actions in response to the Release or threatened Release of any Hazardous
Substance, (d) from actual or threatened damages to natural resources, or
(e) the imposition of injunctive relief or other orders, or (II) from
personal injury, death, or property damage which occurs as a result of any
Company's use, storage, handling, disposal, or the Release or threatened
Release of a Hazardous Substance, in any case not already the subject of
any reasonably adequate reserves or other provisions for loss, including
without limitation, insurance policies.
ENVIRONMENTALLY MATERIAL means any one or more circumstances or
events which, individually or collectively, results in Environmental
Liability in excess of $2,500,000.
ENVIRONMENTAL PERMIT means any permit, license, or other
authorization from any Tribunal that is required under any Environmental
Law for the lawful conduct of any business, process, or other activity.
ENVIRONMENTAL REPORT means any one or more environmental site
assessments or investigations conducted at any time or from time to time
concerning any Real Property and/or the operations of any Company, whether
at the request of Required Lenders, upon the order or request of any
Tribunal, or at the voluntary instigation of such Company.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations and rulings thereunder.
ERISA AFFILIATE means any company or trade or business (whether or
not incorporated) which, for purposes of Title IV of ERISA, is a member of
the Borrower's controlled group or which is under common control with
Borrower within the meaning of Section 414 of the Code.
EXHIBIT means an exhibit to this Agreement unless otherwise
specified.
EXISTING CREDIT AGREEMENT is defined in SECTION 5.1(V).
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EXISTING LCS is defined in SECTION 2.4(K).
FAA means the Federal Aviation Administration and any successor
authority.
FEDERAL FUNDS RATE means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 0.01%) determined (which
determination shall be conclusive and binding, absent manifest error) by
Administrative Agent to be equal to the weighted average of the rates on
overnight Federal funds transactions with member banks of the Federal
Reserve System arranged by Federal funds brokers on such day, as published
by the Federal Reserve Bank of Dallas on the Business Day next succeeding
such day, or, if such rates are not published for any day, the average of
the quotations at approximately 10:00 a.m. (Dallas, Texas time) received by
the Administrative Agent from three Federal funds brokers of recognized
standing selected by the Administrative Agent in its sole discretion.
FINANCIAL STATEMENTS means balance sheets, profit and loss
statements, reconciliations of capital and surplus, and statements of cash
flow prepared in accordance with GAAP, which profit and loss statements and
statements of cash flow shall be in comparative form to the corresponding
period of the preceding fiscal year and to the figures for the
corresponding quarter in the budget furnished pursuant to SECTION 7.3(D),
and which balance sheets and reconciliations of capital and surplus shall
be in comparative form to the prior fiscal year-end figures.
FIXED CHARGE COVERAGE RATIO means, on any date of determination, on
a consolidated basis for Borrower and its consolidated Subsidiaries, for
the four fiscal quarters ending on such date, the ratio of (a) EBITDA,
minus income Taxes paid during such period, to (b) the sum of (i) Interest
Expense for such period, plus (ii) scheduled principal payments on Debt for
borrowed money and under Capital Leases for such period, plus (iii) cash
dividends paid during such period.
FUNDED DEBT means (without duplication), for any Person, (a) the
obligations in respect of Debt of such Person for money borrowed net of
unamortized debt issuance costs, (b) all obligations of such Person under
Capital Leases, (c) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations, and
all obligations under any title retention agreement (but excluding trade
accounts payable arising in the ordinary course of business), (d) all
obligations of the type referred to in CLAUSES (A) through (C) preceding of
other Persons for the payment of which such Person is responsible or liable
as obligor, guarantor, or otherwise, and (e) all obligations of the type
referred to in CLAUSES (A) through (D) preceding of other Persons secured
by any Lien on any property or asset of such Person (whether or not such
obligation is assumed by such Person), the amount of such obligation being
deemed to be the lesser of the value of such property or assets or the
amount of the obligation so secured.
GAAP means generally accepted accounting principles of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board which (except as
set forth in SECTION 1.3) are applicable from time to time.
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GUARANTY means a guaranty in substantially the form and upon the
terms of EXHIBIT B (as the same may hereafter be amended, modified,
supplemented or restated from time to time).
HAZARDOUS SUBSTANCE means (a) any substance as to which
investigation, removal, remediation, or other response is required under
any Environmental Law, (b) any substance that is defined or classified as a
hazardous waste, hazardous material, pollutant, contaminant, or toxic or
hazardous substance under any Environmental Law, including without
limitation, any hazardous substance within the meaning of Section 101(14)
of CERCLA, (c) petroleum, oil, gasoline, natural gas, fuel oil, motor oil,
waste oil, diesel fuel, jet fuel, and other petroleum hydrocarbons, (d)
asbestos and asbestos-containing materials in any form, or (e)
polychlorinated biphenyls.
INCUMBENT BOARD is defined in SECTION 8.7.
INTEREST EXPENSE means for any period of calculation thereof, all
interest (whether accrued as a liability and payable in cash or imputed) on
Debt during such period (including, without limitation, (a) imputed
interest on Capital Lease obligations, and (b) costs associated with Rate
Protection Agreements that are expensed as interest in accordance with
GAAP, less any payments under Rate Protection Agreements which in
accordance with GAAP are treated as interest income), but excluding
amortization of debt issuance costs, and without deduction for interest
income received in respect of the Airmotive Note.
INTEREST PERIOD is determined in accordance with SECTION 3.8.
LAWS means all applicable statutes, laws, treaties, ordinances,
tariff requirements, rules, regulations, orders, writs, injunctions,
decrees, judgments, opinions, or interpretations of any Tribunal as
enacted, promulgated, or amended from time to time.
LC means an Existing LC or a letter of credit issued by LC Fronting
Bank under this Agreement pursuant to an LC Agreement.
LC AGREEMENT means an application for an LC and the related
reimbursement agreement in the forms customarily used by LC Fronting Bank
submitted by Borrower to Administrative Agent and LC Fronting Bank for an
LC for its own account (whether issued on its behalf or on behalf of any of
the Companies); provided that, each such LC Agreement shall specifically
provide that in the event of a conflict between the terms of such LC
Agreement and the Loan Documents, the Loan Documents shall be controlling.
LC EXPOSURE means, without duplication, the sum of (a) the
aggregate amount remaining to be drawn on all uncancelled LCs plus (b) the
aggregate unpaid reimbursement obligations of Borrower in respect of
drawings or drafts under any LC. For the purpose of calculating the Dollar
equivalent of the LC Exposure in connection with maximum amount available
under the Revolving Credit Facility and the LC Subfacility, the LC Fronting
Bank shall determine the Dollar equivalent of any LC issued or applied for
on the date such a determination of availability is required.
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LC FRONTING BANK means NationsBank of Texas, N.A. as the issuer of
LCs pursuant to SECTION 2.4 hereof, and its successor or successors as LC
Fronting Bank under this Agreement pursuant to SECTION 10.11.
LC SUBFACILITY means a subfacility of the Revolving Credit Facility
for the issuance of LCs as described in and subject to the limitations of
SECTION 2.4.
LENDERS means the financial institutions named on SCHEDULE 2.1 or
on the most recently amended SCHEDULE 2.1, if any, delivered by
Administrative Agent pursuant to this Agreement, and, subject to the terms
and conditions of this Agreement, their respective successors and assigns,
but not any Participant who is not otherwise a party to this Agreement.
LIBOR RATE means with respect to a LIBOR Rate Loan for the relevant
Interest Period, the per annum rate of interest (rounded upward, if
necessary, to the nearest 0.01%) equal to the quotient obtained by dividing
(a) the rate appearing on Telerate Page 3750 (or any successor page), or,
if not available, appearing on the Reuters Screen LIBO Page (if more than
one rate, then the average of such rates) as the London interbank offered
rate for deposits in Dollars at approximately 11:00 a.m. (London time) two
(2) Business Days prior to the first day of the applicable Interest Period
in an amount comparable to the amount of the relevant LIBOR Rate Loans and
having a maturity comparable to the applicable Interest Period; by (b) one
minus the Reserve Requirement (expressed as a decimal) applicable to such
Interest Period.
LIBOR RATE LOAN means a Loan bearing interest at the sum of the
LIBOR Rate plus the Applicable Margin.
LIEN means any lien (including statutory liens), mortgage, security
interest, pledge, collateral assignment, charge, title retention agreement,
or other encumbrance of any kind.
LITIGATION means any action by or before any Tribunal.
LOAN means any amount loaned by one or more Lenders to Borrower
under the Loan Documents (whether such amount constitutes an original
disbursement of funds, the continuation of an amount outstanding, or
payment of a draft under an LC) under the Term Loan or the Revolving Credit
Facility (including the LC Subfacility).
LOAN DOCUMENTS means (a) this Agreement, certificates delivered
pursuant to this Agreement, and Exhibits and Schedules hereto, (b) all
agreements, documents, or instruments executed by any of the Companies in
favor of Administrative Agent or Lenders (or Administrative Agent on behalf
of Lenders) and delivered pursuant to this Agreement or otherwise delivered
in connection with all or any part of the Obligation, including, without
limitation, the Notes, the Guaranties, the Security Documents, all LCs,
including, without limitation, all Existing LCs, and all LC Agreements, and
(c) all renewals, extensions, or restatements of, or amendments or
supplements to, any of the foregoing made in accordance with the terms of
any of the foregoing.
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MAJORITY LENDERS means, on any date of determination, any
combination of Lenders who collectively hold more than 50% of the sum of
(a) the aggregate Committed Sums under the Revolving Credit Facility and
(b) the Principal Debt under the Term Loan outstanding as of such date.
MATERIAL ADVERSE EVENT means any set of one or more circumstances
or events which, individually or collectively, results in any (a) material
and adverse effect on the business, properties, condition (financial or
otherwise of) or results of operations of, the Companies (excluding the
Designated Subsidiaries), in each case considered as a whole, from that
represented in the consolidated Financial Statements of the Companies for
the period ended June 30, 1996, or (b) Default or Potential Default.
MATERIAL AGREEMENT means, for any one of the Companies, any
material written or oral agreement, contract, commitment, or understanding
to which such Company is a party, by which such Company is directly or
indirectly bound, or to which any assets of such Company may be subject,
and which is not cancelable by such Company upon 30 days or less notice
without liability for further payment other than nominal penalty, and which
requires such Company to pay more than $2,500,000 during any 12-month
period, excluding purchase orders for materials or inventory in the
ordinary course of business.
MAXIMUM AMOUNT is defined in SECTION 11.9.
MAXIMUM RATE is defined in SECTION 11.9.
MORTGAGE means each mortgage, deed of trust or other similar
instrument encumbering the properties of any Company, now or hereafter
executed by any Company in favor of Administrative Agent for the benefit of
Lenders and LC Fronting Bank (as the same may hereafter be amended,
modified, supplemented or restated from time to time).
MULTIEMPLOYER PLAN means a multiemployer plan as defined in
Sections 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code to
which any Company or any ERISA Affiliate (i) is making, or has made, or has
an obligation to make contributions, or (ii) is accruing, or has accrued,
an obligation to make contributions.
NONEXCLUDED TAXES is defined in SECTION 3.18(A).
NOTES means, at the time of any determination thereof, all
outstanding and unpaid Term Notes and Revolving Credit Notes.
NOTICE OF BORROWING is defined in SECTION 2.3(A).
NOTICE OF CONVERSION is defined in SECTION 3.9.
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NOTICE OF LC is defined in SECTION 2.4(A).
OBLIGATION means all present and future indebtedness, liabilities,
and obligations, and all renewals and extensions thereof, or any part
thereof, now or hereafter owed to Administrative Agent, LC Fronting Bank,
Documentation Agent, Syndication Agent or any Lender by any Company arising
from, by virtue of, or pursuant to, (a) any Loan Document, together with
all interest accruing thereon, fees, costs, and expenses (including,
without limitation, all attorneys' fees and expenses incurred in the
enforcement or collection thereof) payable under the Loan Documents, or (b)
any Rate Protection Agreement with a Lender.
OTHER TAXES is defined in SECTION 3.18(B).
OECD means the Organization for Economic Cooperation and
Development.
PARTICIPANT is defined in SECTION 11.14(B).
PBGC means the Pension Benefit Guaranty Corporation, or any
successor thereof, established pursuant to ERISA.
PENSION BENEFIT PLAN means any "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA established or maintained by
any Company or to which any Company contributes or is required to
contribute.
PERMITTED DEBT means Debt described in SECTION 7.13.
PERMITTED LIENS means Liens described in SUBSECTIONS (I) through
(IX) of SECTION 7.14.
PERSON means any individual, entity, or Tribunal.
PLEDGE AGREEMENT means a pledge agreement in substantially the form
and upon the terms of EXHIBIT C-1 (for Borrower) or EXHIBIT C-2 (for any
Subsidiary of Borrower) (as the same may hereafter be amended, modified,
supplemented or restated from time to time).
POTENTIAL DEFAULT means the occurrence of any event or existence of
any circumstance described in SECTION 8 hereof which, with the giving of
notice under SECTION 8 hereof or lapse of time provided in SECTION 8 hereof
or both, would become a Default.
PREDECESSOR means any corporation or other person or entity for
whose obligations and liabilities any Company may be liable as the result
of any merger, de facto merger, stock purchase, asset purchase or
divestiture, combination, joint venture, investment, reclassification, or
other similar business transaction.
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PRINCIPAL DEBT means, at the time of any determination thereof, the
aggregate unpaid principal balance of all Loans and all unreimbursed
payments pursuant to LCs.
PRO RATA and PRO RATA PART means, at the time of any determination
thereof (a) for any Lender in respect of the Term Loan or the Revolving
Credit Facility, respectively, the proportion that the Principal Debt owed
to it thereunder bears to the aggregate Term Principal Debt or Revolving
Credit Principal Debt owed to all Lenders thereunder, as the case may be,
and (b) for any Lender in respect of the total facilities hereunder,
including without limitation for purposes of SECTION 10, the proportion
that the aggregate Principal Debt owed to it under this Agreement bears to
the Principal Debt owed to all Lenders hereunder.
PURCHASER is defined in SECTION 11.14(C).
RATE PROTECTION AGREEMENT means a swap, collar, floor, cap, foreign
exchange agreement, or other contract entered into by Borrower with any
Lender or another Person reasonably acceptable to Administrative Agent
under the Laws of a jurisdiction in which such contracts are legal and
enforceable, which is intended to reduce or eliminate the risk of
fluctuations in interest rates applicable to Loans under this Agreement.
REAL PROPERTY means any land, buildings, fixtures, and other
improvements to land now or hereafter directly or indirectly owned by any
Restricted Company or leased to or otherwise operated by any Restricted
Company.
RELEASE means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposal, or
other movement into the air, ground or surface water, or soil.
REPORTABLE EVENT shall have the meaning specified in Section 4043
of ERISA in connection with an Employee Plan, excluding events for which
the notice requirement is waived under applicable PBGC regulations.
REPRESENTATIVES means representatives, officers, directors,
employees, attorneys, and agents.
REQUIRED LENDERS means, on any date of determination, any
combination of Lenders who collectively hold at least 66.67% of the sum of
(a) the aggregate Committed Sums under the Revolving Credit Facility and
(b) the Principal Debt under the Term Loan outstanding as of such date.
RESERVE REQUIREMENT means, with respect to any LIBOR Rate Loan for
the relevant Interest Period, the reserve percentage applicable for
determining the maximum reserve requirement (including all basic,
supplemental, emergency, special, marginal, and other reserves required by
applicable Law) applicable to a member bank of the Federal Reserve System
in respect of eurocurrency fundings or liabilities with a term equal to
such Interest Period.
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RESPONSIBLE OFFICER means the chairman, president, chief executive
officer, chief financial officer, vice president, treasurer or controller
of Borrower.
RESTRICTED COMPANIES, at the time of any determination thereof,
shall mean Borrower and each of its Subsidiaries organized under the Laws
of the United States.
REVOLVING CREDIT COMMITMENT USAGE means, at the time of any
determination thereof, without duplication, the sum of (a) the aggregate
Principal Debt outstanding under the Revolving Credit Facility, plus (b)
the LC Exposure.
REVOLVING CREDIT FACILITY means the credit facility (the Principal
Debt of which when added to the aggregate amount remaining to be drawn on
all uncancelled LCs may never exceed the aggregate of $50,000,000, as such
amount is subject to reduction and cancellation in accordance with this
Agreement) described in and subject to the limitations of SECTION 2.2(A).
REVOLVING CREDIT NOTE means a promissory note in substantially the
form of EXHIBIT A-2, and all renewals, extensions, amendments and
replacements of all or any part thereof.
REVOLVING CREDIT PRINCIPAL DEBT means, on any date of
determination, that portion of the Principal Debt outstanding under the
Revolving Credit Facility.
REVOLVING CREDIT TERMINATION DATE means the earlier of (a)
September 30, 2001, or (b) the effective date that Lenders' commitments to
lend under this Agreement are otherwise cancelled or terminated in
accordance with this Agreement.
RIGHTS means rights, remedies, powers, privileges, and benefits.
RYDER means Ryder System, Inc.
RYDER ERISA AFFILIATE means any company or trade or business
(whether or not incorporated) which, for purposes of Title IV of ERISA, is
a member of Ryder's controlled group or which is under common control with
Ryder within the meaning of Section 414 of the Code.
SCHEDULE means a schedule attached to this Agreement unless
specified otherwise.
SECURITY DOCUMENTS means the Pledge Agreements, Borrower Security
Agreement, Subsidiary Security Agreements, the Mortgages and any collateral
account agreement delivered pursuant to SECTION 3.4(D) or otherwise.
SOLVENT means, as to a Person, that (a) the aggregate fair market
value of such Person's assets exceeds its liabilities (whether contingent,
subordinated, unmatured, unliquidated, or otherwise), (b) such Person has
sufficient cash flow to enable it to pay its Debts as they mature, and (c)
such Person does not have unreasonably small capital to conduct such
Person's businesses.
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SUBSIDIARY of any Person means any entity of which an aggregate of
more than 50% (in number of votes) of the stock (or equivalent interests)
is owned of record or beneficially, directly or indirectly, by such Person;
when no Person is specified, SUBSIDIARY and SUBSIDIARIES shall mean those
of Borrower.
SUBSIDIARY SECURITY AGREEMENT means a security agreement in
substantially the form and upon the terms of EXHIBIT D-2.
SYNDICATION AGENT means NationsBanc Capital Markets, Inc., and its
successors, as Syndication Agent under this Agreement.
TANGIBLE NET WORTH means Borrower's net worth as determined in
accordance with GAAP minus goodwill, patents, trademarks, trade names,
copyrights, franchises and deferred charges, and all similar assets that
would be classified as intangible assets.
TAX TRANSFEREE is defined in SECTION 3.18(A).
TAXES means, for any Person, taxes, assessments, or other
governmental charges or levies imposed upon such Person, its income, or any
of its properties, franchises, or assets.
TERM NOTE means a promissory note in substantially the form of
EXHIBIT A-1, and all renewals, extensions, amendments and replacements of
all or any part thereof.
TERM PRINCIPAL DEBT means, on any date of determination, that
portion of the Principal Debt outstanding under the Term Loan.
TERM LOAN means the loan originally in the amount of $50,000,000,
described in and subject to the limitations of SECTION 2.1(A).
TOTAL COMMITMENT means, on any date of determination the sum of all
Committed Sums for all Lenders in respect of the Term Loan and the
Revolving Credit Facility (as any such facility may have been reduced or
cancelled as provided in this Agreement) then in effect.
TRIBUNAL means any (a) local, state, commonwealth, federal or
foreign judicial, executive, or legislative instrumentality, or any agency,
authority, commission, or board thereof, including, without limitation, any
aviation authority, (b) private arbitration board or panel, or (c) central
bank.
TYPE means any type of Loan determined with respect to the interest
option applicable thereto.
VOTING STOCK shall mean securities (as such term is defined in
Section 2(1) of the Securities Act of 1933, as amended) of any class or
classes, the holders of which are ordinarily, in the absence
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of contingencies, entitled to elect a majority of the corporate directors
(or Persons performing similar functions).
WELFARE BENEFIT PLAN means any "employee welfare benefit plan"
within the meaning of Section 3(1) of ERISA established or maintained by
any Company or to which any Company contributes or is required to
contribute.
1.2 Number and Gender of Words. Whenever in any Loan Document
the singular number is used, the same shall include the plural where
appropriate and vice versa, and words of any gender shall include each
other gender where appropriate.
1.3 Accounting Principles. All accounting and financial terms
used in the Loan Documents and the compliance with each financial covenant
therein shall be determined in accordance with GAAP as in effect on
December 31, 1995, and all accounting principles shall be applied on a
consistent basis so that the accounting principles in a current period are
comparable in all material respects to those applied in the consolidated
Financial Statements for the Companies for the twelve months ended December
31, 1995; provided that the Financial Statements required to be delivered
pursuant to SECTION 7.3(A) and (B) shall be prepared in accordance with
GAAP as in effect from time to time. If a change occurs in GAAP, the
Compliance Certificate and Borrowing Base Certificate shall include
calculations setting forth the adjustments from the relevant financial
items as shown in the current Financial Statements, based on the then
current GAAP, to the corresponding financial items based on GAAP as used in
the Financial Statements for the twelve months ended December 31, 1995, so
as to demonstrate how such financial covenant compliance was derived from
the current Financial Statements; provided, however, that Administrative
Agent, Documentation Agent, Lenders and Borrower will thereafter negotiate
in good faith to revise any affected covenants to make such covenants
consistent with the prior covenants and GAAP, as then in effect, and, after
any such revision as shall be agreed to by Borrower and Majority Lenders,
this Agreement will be construed in accordance with GAAP, as then in
effect.
SECTION 2 AMOUNTS AND TERMS OF THE LOAN FACILITIES.
2.1 Term Loan.
(a) Subject to and in reliance upon the terms,
conditions, representations, and warranties in the Loan Documents,
each Lender that has a Committed Sum under the Term Loan severally
and not jointly agrees to lend to Borrower in a single advance on
the initial Borrowing Date such Lender's Commitment Percentage of
the Loans under the Term Loan made on the initial Borrowing Date.
(b) Loans under the Term Loan shall, at the option of
Borrower, bear interest at (i) the Base Rate plus the Applicable
Margin, or (ii) the LIBOR Rate plus the Applicable Margin.
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<PAGE> 27
2.2 Revolving Credit Facility.
(a) Subject to and in reliance upon the terms,
conditions, representations, and warranties in the Loan Documents,
each Lender that has a Committed Sum under the Revolving Credit
Facility severally and not jointly agrees to lend to Borrower such
Lender's Commitment Percentage of one or more Loans under the
Revolving Credit Facility, which, subject to the Loan Documents,
Borrower may borrow, repay, and reborrow under this Agreement;
provided that (i) each such Loan must occur on a Business Day and
no later than the Business Day immediately preceding the Revolving
Credit Termination Date; (ii) each such Loan shall be in an amount
not less than $1,000,000 or a greater integral multiple of
$1,000,000 or, if such Loan is made pursuant to SECTION 2.4(E), in
the amount of the drawing under the LC giving rise to the deemed
Notice of Borrowing; and (iii) on any date of determination, the
Revolving Credit Commitment Usage shall never exceed the lesser of
(x) $50,000,000 (as such amount is subject to reduction and
cancellation in accordance with this Agreement) or (y) the
Borrowing Base.
(b) Loans under the Revolving Credit Facility shall,
at the option of Borrower, bear interest at (i) the Base Rate plus
the Applicable Margin, or (ii) the LIBOR Rate plus the Applicable
Margin.
2.3 Borrowing Procedure. The following procedures apply to
Loans.
(a) Each Loan (other than a Loan pursuant to SECTION
2.4(E)) shall be made on Borrower's notice (a "NOTICE OF
BORROWING", substantially in the form of EXHIBIT E-1) to
Administrative Agent requesting that Lenders fund a Loan on a
certain date (the "BORROWING DATE"), which notice (i) shall be
irrevocable and binding on Borrower, (ii) shall state if it is for
a Loan under the Term Loan or the Revolving Credit Facility, (iii)
shall specify the Borrowing Date, amount, Type, and (for a Loan
comprised of LIBOR Rate Loans) Interest Period, and (iv) must be
received by Administrative Agent no later than 10:00 a.m. (Dallas,
Texas time) on the third Business Day preceding the Borrowing Date
for any LIBOR Rate Loan or on the Borrowing Date for any Base Rate
Loan. Administrative Agent shall promptly notify each Lender with
respect to each Notice of Borrowing.
(b) Each Lender shall remit its Commitment Percentage
for the relevant facility of each requested Loan to Administrative
Agent's principal office in Dallas, Texas, in funds which are or
will be available for immediate use by Administrative Agent by
12:00 Noon (Dallas, Texas time) on the Borrowing Date therefor.
Subject to receipt of such funds, Administrative Agent shall
(unless to its actual knowledge any of the conditions precedent
therefor have not been satisfied by Borrower or waived by Required
Lenders) make such funds available to Borrower by causing such
funds to be deposited to Borrower's account with Administrative
Agent, which account shall be designated to Administrative Agent by
Borrower. Notwithstanding the foregoing, unless Administrative
Agent shall have been notified by a Lender prior to a Borrowing
Date that such Lender does not intend to make
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<PAGE> 28
available to Administrative Agent such Lender's Commitment
Percentage of the applicable Loan, Administrative Agent may assume
that such Lender has made such proceeds available to Administrative
Agent on such date, as required herein, and Administrative Agent
may (unless to its actual knowledge any of the conditions precedent
therefor have not been satisfied by Borrower or waived by Required
Lenders), in reliance upon such assumption (but shall not be
required to), make available to Borrower a corresponding amount in
accordance with the foregoing terms, but, if such corresponding
amount is not in fact made available to Administrative Agent by
such Lender on such Borrowing Date, Administrative Agent shall be
entitled to recover such corresponding amount on demand (i) from
such Lender, together with interest at the Federal Funds Rate
during the period commencing on the date such corresponding amount
was made available to Borrower and ending on (but excluding) the
date Administrative Agent recovers such corresponding amount from
such Lender, or (ii), if such Lender fails to pay such
corresponding amount forthwith upon such demand, then from
Borrower, together with interest at a rate per annum equal to the
applicable rate for such Loan during the period commencing on such
Borrowing Date and ending on (but excluding) the date
Administrative Agent recovers such corresponding amount from
Borrower. No Lender shall be responsible for the failure of any
other Lender to make available its Commitment Percentage of any
Loan, but the failure of any Lender to make available its
Commitment Percentage of any Loan shall not relieve any other
Lender from its obligation to do so.
2.4 LC Subfacility.
(a) Subject to the terms and conditions of this
Agreement and applicable Law, LC Fronting Bank agrees to issue LCs
on behalf of Lenders that have a Committed Sum under the Revolving
Credit Facility, upon Borrower's application therefor by delivering
to Administrative Agent and LC Fronting Bank a properly completed
notice (a "NOTICE OF LC," substantially in the form of EXHIBIT E-3)
and an LC Agreement with respect thereto no later than 10:00 a.m.
(Dallas, Texas time) three (3) Business Days before such LC is to
be issued; provided that (i) on any date of determination, as
determined by Administrative Agent, the Revolving Credit Commitment
Usage shall never exceed the lesser of the Borrowing Base or
$50,000,000 (as such amount is subject to reduction and
cancellation in accordance with this Agreement), (ii) on any date
of determination, the LC Exposure shall never exceed $20,000,000;
and (iii) each LC must expire no later than the earlier of 18
months after the date of its issuance or August 31, 2001; provided
that each LC may be automatically renewed for successive twelve
month periods (but no renewal period may extend beyond August 31,
2001) unless LC Fronting Bank shall have given prior notice to the
applicable beneficiary of its election not to extend such LC.
Administrative Agent shall promptly notify each Lender with respect
to each Notice of LC. LC Fronting Bank agrees to deliver
notification of the issuance of an LC delivered hereunder to the
beneficiary of such LC promptly upon its issuance. LC Fronting
Bank will use its reasonable best efforts, but is not required, to
issue LCs in a currency other than Dollars. For purposes of
calculating the Dollar equivalent of any LC issued in a currency
other than Dollars, LC Fronting Bank shall determine the Dollar
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<PAGE> 29
equivalent of the amount of such LC on the date of issuance and
shall determine the Dollar equivalent of any draft paid by LC
Fronting Bank in a currency other than Dollars on the date of
payment, in each case based on the quoted spot exchange rate as
determined by LC Fronting Bank. Any payment by Borrower and any
funding by Lenders in respect of any LC issued in a currency other
than Dollars shall be made in the Dollar equivalent.
(b) Immediately upon the issuance by LC Fronting Bank
of any LC, LC Fronting Bank shall be deemed to have sold and
transferred to each other Lender that has a Committed Sum under the
Revolving Credit Facility, and each such Lender shall be deemed
irrevocably and unconditionally to have purchased and received from
LC Fronting Bank, without recourse or warranty, an undivided
interest and participation, to the extent of such Lender's
Commitment Percentage under the Revolving Credit Facility, in such
LC and all Rights of LC Fronting Bank in respect thereof (other
than Rights to receive certain fees provided for in SECTION
2.4(C)). Upon issuance or renewal or extension of an LC, LC
Fronting Bank shall provide a copy to Administrative Agent, and
Administrative Agent shall provide copies of such LC to each other
Lender.
(c) In order to induce LC Fronting Bank to issue and
maintain LCs and Lenders to participate therein, Borrower agrees to
pay or reimburse LC Fronting Bank (i) on the date on which any
draft is presented under any LC, the amount of any draft paid or to
be paid by LC Fronting Bank, and (ii) promptly, upon demand, the
amount of any fees in addition to the fees described in SECTION
4.6, that LC Fronting Bank customarily charges to a Person
similarly situated in the ordinary course of its business for
amending LC Agreements, for honoring drafts, and taking similar
action in connection with letters of credit. Subject to the
proviso at the end of SECTION 2.4(D), Borrower's obligations under
this SECTION 2.4(C) shall be absolute and unconditional under any
and all circumstances and irrespective of any setoff, counterclaim,
or defense to payment which Borrower may have at any time against
LC Fronting Bank or any other Person, and shall be made in
accordance with the terms and conditions of this Agreement under
all circumstances, including, without limitation, any of the
following circumstances: (1) any lack of validity or enforceability
of this Agreement or any of the Loan Documents; (2) the existence
of any claim, setoff, defense, or other Right which Borrower may
have at any time against a beneficiary named in a LC, any
transferee of any LC (or any Person for whom any such transferee
may be acting), LC Fronting Bank, Administrative Agent, any Lender,
or any other Person, whether in connection with this Agreement, any
LC, the transactions contemplated herein, or any unrelated
transactions (including any underlying transaction between Borrower
and the beneficiary named in any such LC); (3) any draft,
certificate, or any other document presented under the LC proving
to be forged, fraudulent, invalid, or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;
and (4) the occurrence of any Potential Default or Default.
Administrative Agent shall promptly distribute such payments
received from Borrower to LC Fronting Bank or, in the case of a
funding by Lenders pursuant to SECTION 2.4(E), to all Lenders
according to their Pro Rata Part of the Revolving Credit Facility.
Interest on any amounts remaining unpaid by Borrower under this
clause at any time
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<PAGE> 30
from and after the date such amounts become payable until paid in
full shall be payable by Borrower to Administrative Agent on demand
at the Default Rate unless paid in full with the proceeds of a Loan
advanced pursuant to SECTION 2.4(E).
(d) If any draft shall be presented for honor under
any LC, LC Fronting Bank shall promptly notify Administrative Agent
and Borrower of the date and amount of such draft; provided that
failure to give any such notice shall not affect the obligations of
Borrower hereunder. LC Fronting Bank shall make payment upon
presentment of a draft for honor unless it appears that presentment
on its face does not comply with the terms of such LC, regardless
of whether (i) any default or potential default under any other
agreement has occurred and (ii) the obligations under any other
agreement have been performed by the beneficiary or any other
Person (and LC Fronting Bank shall not be liable for any obligation
of any Person thereunder). LC Fronting Bank and Lenders shall not
be responsible for, and Borrower's reimbursement obligations for
honored drafts shall not be affected by, any matter or event
whatsoever (including, without limitation, the validity or
genuineness of documents or of any endorsements thereof, even if
such documents should in fact prove to be in any respect invalid,
fraudulent, or forged), or any dispute among any Company, the
beneficiary of any LC, or any other Person to whom any LC may be
transferred, or any claims whatsoever of any Company against any
beneficiary of any LC or any such transferee; provided that,
nothing in this SECTION 2.4 shall constitute a waiver of Borrower's
Rights to assert any claim based upon the gross negligence or
willful misconduct of LC Fronting Bank, Administrative Agent or any
Lender.
(e) If Borrower is obligated to reimburse LC Fronting
Bank as provided in SECTION 2.4(C), LC Fronting Bank shall promptly
notify Administrative Agent, and Administrative Agent shall
promptly notify each Lender that has a Committed Sum under the
Revolving Credit Facility of such reimbursement obligation, of the
date and amount of the drawing, and of such Lender's Commitment
Percentage under the Revolving Credit Facility thereof. Unless
Borrower shall have notified LC Fronting Bank prior to 10:00 a.m.
(Dallas, Texas time) on the date of such drawing that Borrower
intends to reimburse LC Fronting Bank for the amount of such
drawing with funds other than the proceeds of the Loans, Borrower
shall be deemed to have given a Notice of Borrowing to
Administrative Agent requesting such Lenders to make Loans under
the Revolving Credit Facility on the date on which such drawing is
honored in an amount equal to the amount of such drawing, and,
subject to satisfaction or waiver of the conditions specified in
SECTION 5.2, each Lender shall, on the date of such drawing, make
available its Commitment Percentage of Loans in the amount of such
drawing, the proceeds of which shall be applied directly by
Administrative Agent to reimburse LC Fronting Bank for the amount
of such drawing; provided that if for any reason proceeds of Loans
are not received by LC Fronting Bank on such date in an amount
equal to the amount of such drawing, Borrower shall reimburse LC
Fronting Bank on the Business Day immediately following the date of
such drawing, in an amount in same day funds equal to the excess of
the amount of such drawing over the amount of such Loans, if any,
as shall be so received, plus accrued interest on such amount at
the per annum rate of
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<PAGE> 31
the sum of the Base Rate plus the Applicable Margin. If Borrower
fails to reimburse LC Fronting Bank as provided in SECTION 2.4(C)
or the preceding sentence for any reason whatsoever (including,
without limitation, the failure to satisfy any condition precedent
set forth in SECTION 5.2), LC Fronting Bank shall promptly notify
Administrative Agent and Administrative Agent shall promptly notify
each Lender of the unreimbursed amount of such drawing and of such
Lender's Commitment Percentage (and amount) of the unreimbursed
amount. Each such Lender shall promptly and unconditionally make
available to Administrative Agent for the account of LC Fronting
Bank, in immediately available funds such Lender's Commitment
Percentage of such unpaid reimbursement obligation, which funds
shall be paid to Administrative Agent on or before the close of
business on the Business Day on which such notice was given by
Administrative Agent (if given prior to 12:00 Noon, Dallas, Texas
time) or on the next succeeding Business Day (if notice was given
after 12:00 Noon, Dallas, Texas time). All such amounts payable by
any such Lender shall include interest thereon accruing at the
Federal Funds Rate from the day the applicable draft is paid by LC
Fronting Bank to (but not including) the date such amount is paid
by such Lender to Administrative Agent for the account of LC
Fronting Bank. Borrower agrees that any Lender making payments to
Administrative Agent for the account of LC Fronting Bank may to the
fullest extent permitted by Law, exercise all of its Rights of
payment (including the Right of offset) with respect to such amount
as fully as if such Lender were the direct creditor of Borrower in
such amount. The obligations of such Lenders to make payments to
Administrative Agent for the account of LC Fronting Bank with
respect to LCs shall be irrevocable and not subject to any
qualification or exception whatsoever (other than the gross
negligence or willful misconduct of LC Fronting Bank) and shall be
made in accordance with the terms and conditions of this Agreement
under all circumstances, including, without limitation, any of the
following circumstances: (i) any lack of validity or enforceability
of this Agreement or any of the Loan Documents; (ii) the existence
of any claim, setoff, defense, or other Right which Borrower may
have at any time against a beneficiary named in a LC, any
transferee of any LC (or any Person for whom any such transferee
may be acting), Administrative Agent, LC Fronting Bank, any Lender,
or any other Person, whether in connection with this Agreement, any
LC, the transactions contemplated herein, or any unrelated
transactions (including any underlying transaction between Borrower
and the beneficiary named in any such LC); (iii) any draft,
certificate, or any other document presented under the LC proving
to be forged, fraudulent, invalid, or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;
and (iv) the occurrence of any Potential Default or Default.
(f) Borrower acknowledges that each LC will be deemed
issued upon delivery to its beneficiary or Borrower. If Borrower
requests any LC be delivered to Borrower rather than the
beneficiary, and Borrower subsequently cancels such LC, Borrower
agrees to return it to LC Fronting Bank together with Borrower's
written certification that it has never been delivered to such
beneficiary. If any LC is delivered to its beneficiary pursuant to
Borrower's instructions, no cancellation thereof by Borrower shall
be effective without written consent of such beneficiary to LC
Fronting Bank and return of such LC to LC Fronting Bank.
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<PAGE> 32
BORROWER HEREBY AGREES THAT IF LC FRONTING BANK BECOMES INVOLVED IN
ANY DISPUTE AS A RESULT OF BORROWER'S CANCELLATION OF ANY LC, IT
SHALL INDEMNIFY LC FRONTING BANK FOR ALL LOSSES, COSTS, DAMAGES,
EXPENSES, AND ATTORNEYS' FEES SUFFERED OR INCURRED BY LC FRONTING
BANK AS A RESULT THEREOF.
(g) LC Fronting Bank agrees with each Lender that it
will exercise and give the same care and attention to each LC as it
gives to its other letters of credit. Each Lender and Borrower
agree that, in paying any draw under any LC, LC Fronting Bank shall
not have any responsibility to obtain any document (other than any
documents required by the respective LC) or to ascertain or inquire
as to the validity or accuracy of any such document or the
authority of the Person delivering any such document. LC Fronting
Bank, Administrative Agent, Lenders, and their respective
Representatives shall not be liable to any other Lender or any
Company for the use which may be made of any LC or for any acts or
omissions of any beneficiary thereof in connection therewith. Any
action, inaction, error, delay, or omission taken or suffered by LC
Fronting Bank or any of its Representatives under or in connection
with any LC, the draws, drafts, or documents relating thereto, or
the transmission, dispatch, or delivery of any message or advice
related thereto, if in good faith and in conformity with such Laws
as LC Fronting Bank or any of its Representatives may deem
applicable and in accordance with the LC Agreement covering such
LC, shall be binding upon the Companies and Lenders and shall not
place LC Fronting Bank or any of its Representatives under any
resulting liability to any Company or any Lender. Any action taken
or omitted to be taken by LC Fronting Bank under or in connection
with any LC if taken or omitted in the absence of gross negligence
or willful misconduct shall not create for LC Fronting Bank any
resulting liability to any Lender or any Company.
(h) On the Revolving Credit Termination Date or upon
demand by Administrative Agent upon the occurrence and continuance
of a Default, Borrower shall provide to Administrative Agent, for
the benefit of Lenders, cash collateral in an amount equal to 102%
of the LC Exposure existing on such date.
(i) IN ADDITION TO AMOUNTS PAYABLE AS ELSEWHERE
PROVIDED IN THIS AGREEMENT, BORROWER AND EACH RESTRICTED COMPANY ON
WHOSE BEHALF A LC IS ISSUED HEREBY JOINTLY AND SEVERALLY AGREES TO
PROTECT, INDEMNIFY, PAY AND SAVE LC FRONTING BANK, ADMINISTRATIVE
AGENT, DOCUMENTATION AGENT, AND EACH LENDER HARMLESS FROM AND
AGAINST ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, DAMAGES, LOSSES,
COSTS, CHARGES, AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES)
WHICH LC FRONTING BANK, ADMINISTRATIVE AGENT, DOCUMENTATION AGENT,
OR ANY LENDER MAY INCUR OR BE SUBJECT TO AS A CONSEQUENCE, DIRECT
OR INDIRECT, OF (I) THE ISSUANCE OF ANY LC OR (II) THE FAILURE OF
LC FRONTING BANK TO HONOR A DRAFT UNDER SUCH LC AS
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<PAGE> 33
A RESULT OF ANY ACT OR OMISSION, WHETHER RIGHTFUL OR WRONGFUL, OF
ANY PRESENT OR FUTURE TRIBUNAL; PROVIDED THAT, BORROWER SHALL HAVE
NO LIABILITY TO INDEMNIFY LC FRONTING BANK, ADMINISTRATIVE AGENT,
DOCUMENTATION AGENT, OR ANY LENDER IN RESPECT OF ANY LIABILITY
ARISING OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH
PARTY.
(j) Although referenced in any LC, terms of any
particular agreement or other obligation to the beneficiary are not
in any manner incorporated herein. The fees and other amounts
payable with respect to each LC shall be as provided in this
Agreement, drafts under any LC shall be deemed part of the
Obligation, and in the event of any conflict between the terms of
this Agreement and any LC Agreement, the terms of this Agreement
shall be controlling.
(k) SCHEDULE 2.4 contains a description of Existing
LCs issued by The First National Bank of Boston prior to September
26, 1996, for the account of Borrower. The First National Bank of
Boston shall, with respect to the Existing LCs, constitute an "LC
Fronting Bank" for all purposes of this Agreement and any Existing
LC shall constitute an LC for all purposes of this Agreement. Each
such Existing LC shall, for purposes of SECTION 2.4(B) and SECTION
4.6, be deemed issued on the date of this Agreement. Except as
modified by the provisions of this SECTION 2.4(K), the provisions
of the LC Agreements shall continue to apply to the Existing LCs.
The First National Bank of Boston as LC Fronting Bank for the
Existing LCs shall be entitled to all fees due to the LC Fronting
Bank with respect to the Existing LCs.
2.5 Termination or Reduction of Revolving Credit Commitment.
Upon giving not less than three (3) Business Days prior written and
irrevocable notice to Administrative Agent, Borrower may terminate in whole
or in part, without premium or penalty, the unused portion of the aggregate
Committed Sums under the Revolving Credit Facility; provided that each
partial termination shall be in an amount of not less than $5,000,000 (or,
if less, the remaining Committed Sums under the Revolving Credit Facility)
or a greater integral multiple of $1,000,000, and shall be Pro Rata as a
reduction of the Committed Sums of all Lenders that have Committed Sums
under the Revolving Credit Facility. Each such termination shall be
permanent and not subject to reinstatement.
SECTION 3 TERMS OF PAYMENT.
3.1 Notes and Payments.
(a) The Term Principal Debt shall be evidenced by the
Term Notes, one payable to each Lender that has a Committed Sum
under the Term Loan in the stated principal amount of its Committed
Sum for the Term Loan. Revolving Credit Principal Debt shall be
evidenced by the Revolving Credit Notes, one payable to each Lender
that has a Committed
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<PAGE> 34
Sum under the Revolving Credit Facility in the stated amount of its
Committed Sum for the Revolving Credit Facility.
(b) Each payment or prepayment on the Obligation is
due and must be paid at Administrative Agent's principal office in
Dallas, Texas, in immediately available funds by 1:00 p.m. (Dallas,
Texas time) on the day due. Payments made after 1:00 p.m. (Dallas,
Texas time) shall be deemed made on the Business Day next
following. Administrative Agent shall pay to each Lender any
payment or prepayment to which such Lender is entitled hereunder on
the same day Administrative Agent shall have received the same from
Borrower; provided such payment or prepayment is received by
Administrative Agent prior to 1:00 p.m. (Dallas, Texas time) and
otherwise before 1:00 p.m. (Dallas, Texas time) on the Business Day
next following. If and to the extent Administrative Agent shall
not make such payments to Lenders when due as set forth in the
preceding sentence, such unpaid amounts shall accrue interest at
the Federal Funds Rate from the due date until (but not including)
the date on which Administrative Agent makes such payments to
Lenders.
3.2 Interest and Principal Payments and Commitment Reductions.
(a) Interest on each LIBOR Rate Loan shall be due and
payable as it accrues on the last day of its respective Interest
Period, and in the case of an Interest Period greater than three
months, at three-month intervals after the first day of such
Interest Period, and on the Revolving Credit Termination Date.
Interest on each Base Rate Loan shall be due and payable as it
accrues on the last day of each calendar quarter, commencing
December 31, 1996, and on the Revolving Credit Termination Date.
(b) The Term Principal Debt shall be payable in
principal installments in the following amounts on the following
dates:
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<PAGE> 35
<TABLE>
<CAPTION>
Payment Amount Payment Date
-------------- ------------
<S> <C>
$1,000,000 September 30 and December 31, 1997
$2,000,000 March 31, June 30, September 30 and
December 31, 1998
$3,000,000 March 31, June 30, September 30 and
December 31, 1999
$3,250,000 March 31, June 30, September 30, and
December 31, 2000
$5,000,000 March 31 and June 30, 2001
Balance of Principal Debt September 30, 2001
</TABLE>
3.3 Voluntary Prepayments. After giving Administrative Agent
advance written notice of the intent to prepay, Borrower may voluntarily
prepay all or any part of the Principal Debt from time to time and at any
time, in whole or in part, without premium or penalty except as set forth
below; provided that (i) such notice must be received by Administrative
Agent by 1:00 p.m. (Dallas, Texas time) on (A) the third Business Day
preceding the date of prepayment of a LIBOR Rate Loan, and (B) one (1)
Business Day preceding the date of prepayment of a Base Rate Loan; (ii)
each such partial prepayment must be in a minimum amount of at least
$1,000,000 or a greater integral multiple of $1,000,000 thereof; (iii) all
accrued interest on the amount of the Obligation prepaid must also be paid
in full, to the date of such prepayment; and (iv) Borrower may not prepay
any LIBOR Rate Loan prior to the end of the applicable Interest Period
unless on the date of such prepayment Borrower shall pay the related
Consequential Loss, if any. Each notice of prepayment shall specify the
prepayment date, the facility hereunder being prepaid, the Type of Loan(s)
and amount(s) of such Loan(s) to be prepaid and shall constitute a binding
obligation of Borrower to make a prepayment on the date stated therein.
All voluntary prepayments on Term Principal Debt shall be applied to
remaining principal of the Term Principal Debt in the inverse order of
maturity. Voluntary prepayments of the Revolving Credit Facility Principal
Debt may be reborrowed subject to the terms and conditions of the Loan
Documents.
3.4 Mandatory Prepayments.
(a) On any date of determination if the Revolving
Credit Commitment Usage exceeds the lesser of (i) the aggregate of
Lenders' Committed Sums under the Revolving Credit Facility or (ii)
the Borrowing Base, then Borrower shall make a mandatory prepayment
of the Principal Debt under the Revolving Credit Facility in at
least the amount of such excess, together with (A) all accrued and
unpaid interest on the principal amount so prepaid and (B) any
Consequential Loss arising as a result thereof.
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<PAGE> 36
(b) On each date Borrower issues any equity
securities, except issuances resulting from the exercise of
employee stock options, Borrower shall make a mandatory prepayment
on the Obligation in an amount equal to 75% of the cash proceeds of
any such equity issuances net of all ordinary reasonable legal
expenses, commissions and other fees and expenses paid or to be
paid to Persons not Affiliates of the Company and all Taxes
assessed in connection therewith. All such proceeds shall be
applied to the remaining installments of the Term Loan in the
inverse order of maturity and then to reduce the Revolving Credit
Principal Debt and the Total Commitments under the Revolving Credit
Facility. At such time Borrower shall also prepay all accrued and
unpaid interest on the principal amount so prepaid and any
Consequential Loss arising as a result thereof.
(c) On each date Borrower issues any Debt permitted by
SECTION 7.13(L), Borrower shall make a mandatory prepayment on the
Obligation in an amount equal to 100% of the cash proceeds of any
such Debt issuances net of all ordinary reasonable legal expenses,
commissions and other fees and expenses paid or to be paid to
Persons not Affiliates of the Company and all Taxes assessed in
connection therewith. All such proceeds shall be applied to the
remaining installments of the Term Loan in the inverse order of
maturity and then to reduce the Revolving Credit Principal Debt and
the Total Commitments under the Revolving Credit Facility. At such
time Borrower shall also prepay all accrued and unpaid interest on
the principal amount so prepaid and any Consequential Loss arising
as a result thereof.
(d) To the extent that any prepayment is required
under this SECTION 3.4 which will require Borrower to make a
prepayment of any Loan other than on the last day of the applicable
Interest Period, Borrower may, at its option, place such amount as
cash Collateral for the Obligation in an account with
Administrative Agent pursuant to the terms of an agreement in the
form of EXHIBIT F.
3.5 Quotation of Rates. It is hereby acknowledged that a
Responsible Officer or other appropriately designated officer or employee
of Borrower may call Administrative Agent on or before the date on which a
Notice of Borrowing is to be delivered by Borrower in order to receive an
indication of the rates then in effect, but such indicated rates shall
neither be binding upon Administrative Agent or Lenders nor affect the rate
of interest which thereafter is actually in effect when the Notice of
Borrowing is given.
3.6 Default Rate. At the option of Required Lenders and to
the extent permitted by Law, upon the occurrence and during the continuance
of a Default in the payment of any Principal Debt or interest thereon, all
Principal Debt and accrued interest thereon and any other amount due or
becoming due hereunder shall bear interest at the Default Rate until paid,
regardless whether such payment is made before or after entry of a
judgment.
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3.7 Interest Calculations; Determination of Rates.
(a) All payments of interest shall be calculated on
the basis of actual number of days (including the first day but
excluding the last day) elapsed but computed as if each calendar
year consisted of 360 days, in the case of a LIBOR Rate Loan, or
365 days, in the case of a Base Rate Loan (unless based on the
Federal Funds Rate in which case it shall be computed as if each
calendar year consisted of 360 days). All interest rate
determinations and calculations by Administrative Agent shall be
conclusive and binding absent manifest error.
(b) The provisions of this Agreement relating to
calculation of the Base Rate and the LIBOR Rate are included only
for the purpose of determining the rate of interest or other
amounts to be paid hereunder that are based upon such rate.
(c) Each change in the Base Rate will become
effective, without notice to Borrower or any other Person, upon the
effective date of such change.
3.8 Interest Periods. When Borrower requests any LIBOR Rate
Loan, such Loan shall be elected for an interest period (each an "INTEREST
PERIOD") which shall be a period of one, two, three or six months;
provided, however, (a) the initial Interest Period for a LIBOR Rate Loan
shall commence on the date of such Loan (including the date of any
conversion thereto), and each Interest Period occurring thereafter in
respect of such Loan shall commence on the day on which the next preceding
Interest Period applicable thereto expires; (b) if any Interest Period for
a LIBOR Rate Loan begins on a day for which there is no numerically
corresponding Business Day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the next Business Day
immediately following what otherwise would have been such numerically
corresponding day in the calendar month at the end of such Interest Period
(unless such date would be in a different calendar month from what would
have been the month at the end of such Interest Period, or unless there is
no numerically corresponding day in the calendar month at the end of the
Interest Period; whereupon, such Interest Period shall end on the last
Business Day in the calendar month at the end of such Interest Period); (c)
no Interest Period may be chosen with respect to any portion of the
Principal Debt which would extend beyond the scheduled repayment date for
such portion of the Principal Debt; and (d) no more than an aggregate of
five (5) Interest Periods shall be in effect at one time.
3.9 Conversions/Continuations. Borrower may (a) convert a
Base Rate Loan or portion thereof at any time to a LIBOR Rate Loan, or (b)
elect a new Interest Period (in the case of a LIBOR Rate Loan), by giving
notice (a "NOTICE OF CONVERSION", substantially in the form of EXHIBIT E-2)
of such intent no later than 10:00 a.m. (Dallas, Texas time) on the third
Business Day prior to the date of conversion or the last day of the
Interest Period, as the case may be, in the case of a conversion to a LIBOR
Rate Loan or an election of a new Interest Period; provided that, the
principal amount converted to, or continued as, a LIBOR Rate Loan shall be
in an amount not less than $1,000,000 or a greater integral multiple of
$1,000,000. Administrative Agent shall promptly notify each Lender with
respect to each Notice of Conversion. Absent Borrower's timely notice of
conversion or election
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of a new Interest Period as provided herein, a LIBOR Rate Loan shall be
deemed converted to a Base Rate Loan effective as of the expiration of the
Interest Period applicable thereto.
3.10 Order of Application.
(a) Payments and prepayments of the Obligation shall
be applied in the order and manner specified in this Agreement;
provided that if no order is specified and no Default in the
payment of Principal Debt or interest thereon has occurred and is
continuing, payments and prepayments of the Obligation shall be
applied in the order and manner as Borrower may direct, or, if
Borrower shall fail to give directions, in the following order:
(i) to fees and expenses for which Administrative Agent, LC
Fronting Bank, Syndication Agent, Documentation Agent or Lenders
have not been paid or reimbursed in accordance with the Loan
Documents; (ii) to accrued interest on the Principal Debt; (iii) to
Principal Debt of the Revolving Credit Facility then due, if any,
and then to Term Principal Debt then due and payable; (iv) to any
reimbursement obligation with respect to any LC which is due and
payable and which remains unfunded by any Loan under the Revolving
Credit Facility; (v) to that portion of the Principal Debt
outstanding under the Revolving Credit Facility (in an order that
will minimize any Consequential Loss); (vi) to the remaining
Principal Debt in such order as Required Lenders may elect
(provided that Required Lenders will apply such amounts in an order
that will minimize any Consequential Loss); and (vii) to the
remaining Obligation.
(b) If a Default in the payment of Principal Debt or
interest thereon has occurred and is continuing, subject to the
provisions of this Agreement relating to application of payments,
any payment or prepayment (including proceeds from the exercise of
any Rights) shall be applied in the following order: (i) to all
fees and expenses for which Administrative Agent, LC Fronting Bank,
Syndication Agent, Documentation Agent or Lenders have not been
paid or reimbursed in accordance with the Loan Documents; (ii) to
accrued interest on the Principal Debt; (iii) to any reimbursement
obligation with respect to any LC which is due and payable and
which remains unfunded by any Loan under the Revolving Credit
Facility; (iv) pro rata to the remaining outstanding Principal Debt
under the Term Loan and the Revolving Credit Facility; (v) to the
remaining Obligation in the order and manner Required Lenders deem
appropriate; and (vi) as a deposit with Administrative Agent, for
the benefit of Lenders, as security for, and to provide for the
payment of, any reimbursement obligations, if any, thereafter
arising with respect to any LC.
3.11 Sharing of Payments, Etc. If any Lender shall obtain any
payment (whether voluntary, involuntary, or otherwise, including, without
limitation, as a result of exercising its Rights under SECTION 3.12) on
account of the Loans made by it or its participation in LCs which is in
excess of its ratable share of payments on account of the Loans or LCs
obtained by all Lenders entitled to share therein, such Lender shall
purchase from the other Lenders such participations as shall be necessary
to cause such purchasing Lender to share the excess payment ratably with
each of them; provided, however, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender, the purchase
shall be rescinded and the purchase price restored to the extent of
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<PAGE> 39
such recovery. Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this section may to the
fullest extent permitted by Law, exercise all of its Rights of payment
(including the Right of offset) with respect to such participation as fully
as if such Lender were the direct creditor of Borrower in the amount of
such participation.
3.12 Offset. Upon the occurrence and during the continuance of
a Default, each Lender and its Affiliates shall be entitled to exercise
(for the benefit of all Lenders in accordance with SECTION 3.11) the Rights
of offset and/or banker's Lien against each and every account and other
property, or any interest therein, which any Company may now or hereafter
have with, or which is now or hereafter in the possession of, such Lender
to the extent of the full amount of any past due portion of the Obligation
owed to such Lender.
3.13 Booking Loans.
(a) To the extent permitted by Law, any Lender may
make, carry, or transfer its Loans at, to, or for the account of
any of its branch offices or the office of any of its Affiliates,
provided that no Affiliate shall be entitled to receive any greater
payment under SECTIONS 3.15, 3.16 and 3.18 than the transferor
Lender would have been entitled to receive with respect to such
Loans.
(b) Each Lender agrees that, upon the occurrence of
any event giving rise to the operation of SECTIONS 3.15, 3.16 or
3.18 with respect to such Lender, it will, if requested by
Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another lending office
for any Loans affected by such event, provided that such
designation is made on such terms that such Lender and its lending
office suffer no economic, legal or regulatory disadvantage, with
the object of avoiding the consequence of the event giving rise to
the operation of any such Section. Nothing in this SECTION 3.13
shall affect or postpone any of the obligations of Borrower or the
right of any Lender provided in SECTIONS 3.15, 3.16 or 3.18.
3.14 Basis Unavailable or Inadequate for LIBOR Rate. If, on or
before any date on which a LIBOR Rate is to be determined for a Loan,
Administrative Agent determines that appropriate quotations are not being
provided for the amount of the Loan or for the Interest Period requested or
Required Lenders determine that the resulting rate does not accurately
reflect the cost to Lenders of making, maintaining, or converting Loans at
such rate for the applicable Interest Period, then Administrative Agent
shall promptly give notice of such determination to Borrower and Lenders
(and such determination shall be conclusive and binding on Borrower, absent
manifest error) and such Loan shall bear interest at the sum of the Base
Rate plus the Applicable Margin. Until Administrative Agent notifies
Borrower that the circumstances giving rise to such condition no longer
exist, Lenders' commitments hereunder to make or maintain, or to convert
to, LIBOR Rate Loans shall be suspended and such Loans shall be made or
maintained at the sum of the Base Rate plus the Applicable Margin. Subject
to the terms and conditions of this Agreement, if Administrative Agent
notifies Borrower that the circumstances giving rise to the suspension of
Lenders' obligations to make or maintain LIBOR
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<PAGE> 40
Rate Loans no longer exist, Borrower shall be entitled to request LIBOR
Rate Loans and convert Base Rate Loans to LIBOR Rate Loans as if the
provisions of this paragraph had never applied.
3.15 Additional Costs.
(a) If, in respect of all or any portion of any LIBOR
Rate Loan owed to any Lender (i) any change in present Law or any
future Law shall impose, modify, or deem applicable, or compliance
by such Lender with any requirement (whether or not having the
force of Law) of any Tribunal shall result in, any requirement that
any reserves (including, without limitation, any marginal,
emergency, supplemental, special, or other reserves) be maintained,
and (ii) any of the same results in a reduction in any sums
receivable by such Lender hereunder or an increase in the costs
incurred by such Lender in advancing or maintaining any portion of
any LIBOR Rate Loan, then such Lender (through Administrative
Agent) shall notify Borrower upon becoming aware of same and
deliver to Borrower a certificate setting forth in reasonable
detail the amount necessary to compensate such Lender for such
reduction or such increase (which certificate shall be conclusive
and binding as to such amount, absent manifest error), and Borrower
shall pay such amount to Administrative Agent (for the account of
such Lender) within ten (10) Business Days after demand therefor.
(b) If with respect to all or any portion of any Loan
or any LC, any change in present Law or any future Law regarding
capital adequacy or compliance by LC Fronting Bank (as issuer of
LCs) or any Lender with any request, directive, or requirement now
existing or hereafter imposed by any Tribunal regarding capital
adequacy (whether or not having the force of Law), shall result in
a reduction in the rate of return on the capital of such Lender or
any corporation controlling such Lender as a consequence of its
obligations under this Agreement to a level below that which it
otherwise could have achieved, taking into consideration its
policies with respect to capital adequacy (and it may, in
determining such amount, utilize such assumptions and allocations
of costs and expenses as it shall deem reasonable and may use any
reasonable averaging or attribution method), then (unless the
effect of such event is already reflected in the rate of interest
then applicable hereunder) LC Fronting Bank or such Lender (through
Administrative Agent) shall notify Borrower upon becoming aware of
same and deliver to Borrower a certificate setting forth in
reasonable detail the calculation of the amount necessary to
compensate Administrative Agent or such Lender therefor, which
certificate shall be conclusive and binding absent manifest error,
and Borrower shall pay such amount to Administrative Agent (for the
account of LC Fronting Bank or such Lender) within ten (10)
Business Days after demand therefor.
3.16 Change in Laws. If at any time any Law or the
interpretation thereof by any Tribunal shall make it unlawful for any
Lender to make or maintain LIBOR Rate Loans, or any central bank or other
Tribunal to which any Lender is subject shall assert that it is unlawful to
make or maintain LIBOR Rate Loans, then such Lender (through Administrative
Agent) shall notify Borrower upon becoming aware of same, and (a) in
respect of undisbursed funds, such Lender shall not be obligated to make
any requested Loan which would be unlawful, and (b) in respect of any
outstanding Loan
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<PAGE> 41
(i) if maintaining such Loan until the last day of the Interest Period
applicable thereto is unlawful, such Loan shall be converted to a Base Rate
Loan as of the date of such notice, and Borrower shall pay any related
Consequential Loss, or (ii) if not so prohibited by Law, such Loan shall be
converted to a Base Rate Loan as of the last day of the Interest Period
then applicable thereto, or (iii) if any such conversion will not resolve
such unlawfulness, Borrower shall prepay promptly such LIBOR Rate Loan,
without penalty, but with any related Consequential Loss.
3.17 Consequential Loss. BORROWER SHALL INDEMNIFY EACH LENDER
AGAINST, AND SHALL PAY TO ADMINISTRATIVE AGENT (FOR THE ACCOUNT OF SUCH
LENDER) WITHIN TEN (10) BUSINESS DAYS AFTER DEMAND THEREFOR, THE AMOUNT OF
ANY CONSEQUENTIAL LOSS OF SUCH LENDER. When any Lender demands that
Borrower pay any Consequential Loss, such Lender shall deliver to Borrower
and Administrative Agent a certificate setting forth in reasonable detail
the basis for imposing such Consequential Loss and the calculation of such
amount thereof, which calculation shall be conclusive and binding absent
manifest error.
3.18 Taxes.
(a) Subject to SUBSECTION 3.18(F), any and all
payments by Borrower hereunder or under the Notes to or for the
benefit of any Lender shall be made, in accordance with SECTION 3,
free and clear of and without deduction or withholding for any and
all present or future Taxes, levies, imposts, duties, fees,
assessments, deductions, charges or withholdings and all
liabilities with respect thereto, excluding (i) Taxes imposed on
its net income (including, without limitation, any Taxes imposed on
branch profits) and franchise Taxes imposed on it by the
jurisdiction under the Laws of which such Lender is organized or
any political subdivision thereof, (ii) Taxes imposed on its net
income (including, without limitation, any Taxes imposed on branch
profits), and franchise Taxes imposed on it, by the jurisdiction of
such Lender's applicable lending office or any political
subdivision thereof, (iii) any Taxes, levies, imposts, deductions,
charges or withholdings that are in effect and that would apply to
a payment to such Lender as of the Closing Date, (iv) if any Person
acquires any interest in this Agreement or any Note pursuant to the
provisions hereof, including without limitation a participation
(whether or not by operation of law), or a foreign Lender changes
the office in which the Loan is made, accounted for or booked (any
such Person or such foreign Lender in that event being referred to
as a "TAX TRANSFEREE"), any Taxes, levies, imposts, deductions,
charges or withholdings to the extent that they are in effect and
would apply to a payment to such Tax Transferee as of the date of
the acquisition of such interest or change in office, as the case
may be, and (v) Taxes which are otherwise included in any amounts
otherwise payable by Borrower pursuant to any other provision of
this Agreement (all such nonexcluded Taxes, levies, imposts,
deductions, charges, withholdings and liabilities, excluding ITEMS
(I) through (V) above, being hereinafter referred to as
"NONEXCLUDED TAXES"). If Borrower shall be required by Law to
deduct any Nonexcluded Taxes from or in respect of any sum payable
hereunder or under any Note to or for the benefit of any Lender or
any Tax Transferee, (A) the sum payable shall be increased as may
be necessary so that after
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making all required deductions of Nonexcluded Taxes such Lender or
such Tax Transferee, as the case may be, receives an amount equal
to the sum it would have received had no such deductions been made,
(B) Borrower shall make such deductions, and (C) Borrower shall pay
the full amount so deducted to the relevant taxation authority or
other authority in accordance with applicable Law.
(b) In addition, Borrower agrees to pay any present or
future stamp, documentary, privilege, intangible or similar Taxes
or any excise or property Taxes, charges or similar levies that
arise at any time and from time to time (i) from any payment made
under any and all Loan Documents, or (ii) from the execution or
delivery of, or from the filing or recording or maintenance of, or
otherwise with respect to the exercise by Administrative Agent or
Lenders of their Rights under, any and all Loan Documents
(hereinafter referred to as "OTHER TAXES").
(c) BORROWER WILL INDEMNIFY ADMINISTRATIVE AGENT, LC
FRONTING BANK, DOCUMENTATION AGENT, EACH LENDER AND EACH TAX
TRANSFEREE FOR THE FULL AMOUNT OF TAXES, AND WILL INDEMNIFY
ADMINISTRATIVE AGENT, LC FRONTING BANK, DOCUMENTATION AGENT, EACH
LENDER AND THE TAX TRANSFEREE FOR THE FULL AMOUNT OF OTHER TAXES
PAID BY ADMINISTRATIVE AGENT, LC FRONTING BANK, DOCUMENTATION
AGENT, SUCH LENDER OR SUCH TAX TRANSFEREE, AS THE CASE MAY BE, AND
ANY LIABILITY ARISING SOLELY THEREFROM OR WITH RESPECT THERETO,
WHETHER OR NOT SUCH TAXES, OTHER TAXES OR OTHER ITEMS WERE
CORRECTLY OR LEGALLY ASSERTED. PAYMENT OF THIS INDEMNIFICATION
SHALL BE MADE WITHIN 30 DAYS FROM THE DATE ADMINISTRATIVE AGENT, LC
FRONTING BANK, DOCUMENTATION AGENT, SUCH LENDER OR SUCH TAX
TRANSFEREE, AS THE CASE MAY BE, MAKES WRITTEN DEMAND THEREFOR.
(d) Within 30 days after the date that any Lender or
any Tax Transferee receives a refund of any Taxes which are clearly
identified to an amount for which it has been indemnified by
Borrower pursuant to the provisions of SUBSECTION (C) preceding,
such Lender or Tax Transferee, as the case may be, shall pay to
Borrower such refund of Taxes along with any interest received with
respect thereto.
(e) Each Lender that is organized under the laws of
any jurisdiction other than the United States of America or any
State thereof (a) represents to Administrative Agent and Borrower
that (i) under applicable Laws and treaties no Taxes will be
required to be withheld by Administrative Agent or Borrower with
respect to any payments to be made to such Lender in respect of the
Obligation and (ii) it has furnished to Administrative Agent and
Borrower two duly completed copies of either U.S. Internal Revenue
Service Form 4224 or Form 1001 (wherein such Lender claims
entitlement to complete exemption from U.S. federal withholding
tax on all interest payments hereunder) or Form W-8, as applicable,
and
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(b) covenants to (i) provide Administrative Agent and Borrower a
new Form 4224, Form 1001 or Form W-8 upon the expiration or
obsolescence of any previously delivered form in accordance with
applicable Laws, duly executed and completed by such Lender and
(ii) comply from time to time with all applicable Laws with regard
to such withholding tax exemption.
(f) The obligation of Borrower to pay the amounts
described in this SECTION 3.18 to any Lender shall not apply:
(i) to any payment to a Lender hereunder if
such Lender has failed to submit a Form 1001 (relating to
such Lender and entitling it to a complete exemption from
withholding on all interest to be received by it hereunder
in respect of the Loans) or Form 4224 (relating to all
interest to be received by such Lender hereunder in
respect of the Loans as required pursuant to SUBSECTION
(E) preceding), or Form W-8, as applicable, or
(ii) to any Tax imposed solely by reason of
the failure by such Lender to comply with applicable
certification, information, documentation or other
reporting requirements concerning the nationality,
residence, identity or connections with the United States
of America of such Lender if such compliance is required
by statute or regulation of any Tribunal as a precondition
to relief or exemption from such Tax.
3.19 Net Payments. All payments made by Borrower under this
Agreement or under any Note will be made without setoff, counterclaim or
other defense.
SECTION 4 FEES.
4.1 Treatment of Fees. Except as otherwise provided by Law,
the fees described in this SECTION 4 (a) are in addition to, and not in
lieu of, interest and expenses otherwise described in this Agreement, (b)
shall be payable in accordance with SECTION 3.1(B), (c) shall be
non-refundable, (d) shall, to the fullest extent permitted by Law, bear
interest, if not paid when due, at the Default Rate, and (e) shall be
calculated on the basis of actual number of days (including the first day
but excluding the last day) elapsed, but computed as if each calendar year
consisted of 360 days.
4.2 Administrative Agent's Fee. Borrower shall pay to
Administrative Agent, solely for its own account, the administrative agency
fee described in a separate letter agreement between Borrower and
Administrative Agent.
4.3 Arrangement Fee. On the date of this Agreement, Borrower
shall pay to Syndication Agent an arrangement fee described in a separate
letter agreement between Borrower and Syndication Agent, and to
Documentation Agent an arrangement fee described in a separate letter
agreement among Borrower, Documentation Agent, and Morgan Guaranty Trust
Company of New York.
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4.4 Facility Fee. On the date of this Agreement, (i) each
Lender (other than NationsBank of Texas, N.A. and Morgan Guaranty Trust
Company of New York) will be paid the facility fees previously agreed to be
paid to such Lender, and (ii) NationsBank of Texas, N.A. and Morgan
Guaranty Trust Company of New York will be paid the facility fees described
in separate letter agreements with Borrower.
4.5 Commitment Fee. Borrower shall pay to Administrative
Agent, for the ratable account of Lenders having a Committed Sum under the
Revolving Credit Facility, a commitment fee, payable in arrears on the last
day of each calendar quarter (commencing December 31, 1996), and on the
Revolving Credit Termination Date, equal to a rate per annum as set forth
below, calculated on the amount by which (a) the aggregate Committed Sums
under the Revolving Credit Facility exceed (b) the average daily Revolving
Credit Commitment Usage, in each case during the calendar quarter (or
portion thereof commencing on the initial Borrowing Date) preceding and
including such due date; provided that, for the purposes of this SECTION
4.5, "RATABLE" shall mean, for any period of calculation, with respect to
any such Lender, that proportion which (x) the average daily unused
Committed Sum of such Lender under the Revolving Credit Facility during
such period bears to (y) the aggregate amount of the average daily unused
Committed Sums for all Lenders under the Revolving Credit Facility during
such period. As of the Initial Borrowing Date, the commitment fee will be
0.45% until the fifth Business Day after delivery pursuant to SECTION
7.3(B) hereof of Borrower's quarterly Financial Statements and Compliance
Certificate as of the last day of the fiscal quarter ending on or about
June 30, 1997, unless such Financial Statements are not delivered timely in
which event the highest Applicable Margin will be in effect from the
required delivery date until such time as such Financial Statements and
Compliance Certificate are actually delivered. Thereafter the commitment
fee will be adjusted based on the ratio of Funded Debt to EBITDA determined
as of the last day of the preceding fiscal quarter, as follows:
<TABLE>
<CAPTION>
================================================================================
Funded Debt to Applicable
EBITDA Ratio Commitment Fee
- --------------------------------------------------------------------------------
<S> <C>
Greater than 4.00 0.50%
- --------------------------------------------------------------------------------
Less than or equal to 4.00 but
greater than 3.50 0.45%
- --------------------------------------------------------------------------------
Less than or equal to 3.50 but
greater than 3.00 0.375%
- --------------------------------------------------------------------------------
Less than or equal to 3.00 but
greater than 2.25 0.35%
- --------------------------------------------------------------------------------
Less than or equal to 2.25 but
greater than 1.50 0.30%
- --------------------------------------------------------------------------------
Less than or equal to 1.50 0.25%
================================================================================
</TABLE>
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<PAGE> 45
The ratio of Funded Debt to EBITDA shall be determined as of the last day
of the preceding fiscal quarter from the then most current quarterly or
annual Financial Statements and related Compliance Certificate delivered by
Borrower pursuant to SECTIONS 7.3(A) and 7.3(B) hereof. The adjustment, if
any, to the commitment fee shall be effective commencing on the fifth
Business Day after delivery of Financial Statements (and the related
Compliance Certificate) containing the Funded Debt to EBITDA ratio. If
Borrower fails at any time to timely furnish to Lenders the Financial
Statements and related Compliance Certificates as required to be delivered
pursuant to SECTIONS 7.3(A) and (B) hereof, then the highest commitment fee
will be in effect from the required delivery date until such time as such
Financial Statements and Compliance Certificates are actually delivered.
4.6 LC Fees. Borrower shall pay to Administrative Agent for
distribution to LC Fronting Bank a fee for each LC equal to 0.125% per
annum calculated on the amount of such LC remaining to be drawn. Borrower
shall pay to Administrative Agent, for the ratable benefit of Lenders
having a Committed Sum under the Revolving Credit Facility in accordance
with their respective Commitment Percentages under the Revolving Credit
Facility, a fee for each LC equal to the product of (i) the Applicable
Margin on such date for LIBOR Rate Loans (applied on a per annum basis)
multiplied by (ii) the amount of such LC remaining to be drawn based on the
number of days elapsed for any period of calculation. Such fees shall be
payable quarterly in arrears on the last day of each calendar quarter, for
the period from the issue date for the applicable LC to the next quarterly
payment date, and thereafter on the last day of each calendar quarter to
and including the stated expiry date.
SECTION 5 CONDITIONS PRECEDENT.
5.1 Conditions Precedent to Initial Loan. Lenders will not be
obligated to fund the initial Loan and LC Fronting Bank will not be
obligated to issue any LC, unless Administrative Agent has received (with
sufficient copies for the Lenders) all of the following in form and
substance satisfactory to (unless otherwise specified) Administrative Agent
and Documentation Agent (unless otherwise indicated, all documents shall be
dated as of the date of this Agreement):
(a) Notes. For each Lender with a Committed Sum under
the Term Loan, a Term Note in the form of EXHIBIT A-1; and for each
Lender with a Committed Sum under the Revolving Credit Facility, a
Revolving Credit Note in the form of EXHIBIT A-2; as contemplated
in SECTION 3.1(A).
(b) Pledge Agreements. A Pledge Agreement, in the
form of EXHIBIT C-1, executed by Borrower and in the form of
EXHIBIT C-2 executed by each Subsidiary organized under the Laws of
the United States that owns equity interests in any Subsidiary,
covering the stock or other equity interest of all direct
Subsidiaries of Borrower or such Subsidiary, as applicable, except
foreign Subsidiaries, together with stock certificates evidencing
the stock pledged thereunder and blank stock powers for such
certificates.
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<PAGE> 46
(c) Borrower Security Agreement. The Borrower
Security Agreement, in the form of EXHIBIT D-1, executed by
Borrower.
(d) Subsidiary Security Agreements. A Security
Agreement, in the form of EXHIBIT D-2, executed by each Subsidiary
of Borrower other than the foreign Subsidiaries.
(e) UCC Financing Statements. UCC financing
statements for filing in each filing office set forth on SCHEDULE
5.1(E) hereto, executed by Borrower and the Subsidiaries executing
a Subsidiary Security Agreement, as debtor, in favor of
Administrative Agent as secured party for the benefit of Lenders
and LC Fronting Bank.
(f) Guaranty. A Guaranty, in the form of EXHIBIT B,
executed by each Subsidiary of Borrower other than the foreign
Subsidiaries.
(g) Articles of Incorporation. Copies of the Articles
or Certificate of Incorporation (or similar document), and all
amendments thereto, of each Restricted Company that is executing
any Loan Document, accompanied by certificates that such copy is
correct and complete, one dated a Current Date (as used herein, the
term "CURRENT DATE" means any date not more than 60 days prior to
the date of this Agreement), issued by the appropriate Tribunal of
the jurisdiction of incorporation of each such Company, and one
dated the date of this Agreement, executed by the Secretary or an
Assistant Secretary of each such Company.
(h) Bylaws. Copies of the Bylaws (or similar
document), and all amendments thereto, of each Restricted Company,
accompanied by a certificate that such copy is correct and
complete, executed by the Secretary or an Assistant Secretary of
each such Company.
(i) Good Standing and Authority. Certificates of the
appropriate Tribunals of such jurisdictions as Administrative Agent
and Documentation Agent may request, each dated a Current Date, to
the effect that each Restricted Company is in good standing with
respect to the payment of franchise and similar Taxes and is duly
qualified to transact business in such jurisdictions (accompanied,
if requested by Administrative Agent and Documentation Agent, by
the certificate of the Secretary or an Assistant Secretary of
Borrower, that such Tribunal certificates are true and correct).
(j) Incumbency. Certificates of incumbency of all
officers of each Restricted Company who will be authorized to
execute or attest any of the Loan Documents on behalf of any
Company, executed by the President or a Vice President and the
Secretary or an Assistant Secretary of each such Company.
(k) Resolutions. Copies of resolutions approving the
Loan Documents and authorizing the transactions contemplated in the
Loan Documents duly adopted by the Board of Directors of each
Company that is executing any Loan Document, accompanied by a
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certificate of the Secretary or an Assistant Secretary of each such
Company, that such copy is a true and correct copy of resolutions
duly adopted at a meeting of (which may be held by conference
telephone or similar communications equipment by means of which all
Persons participating in a meeting can hear each other if permitted
by applicable Law and, if required by such Law, by the Bylaws of
such Company), or by the unanimous written consent of (if permitted
by applicable Law and, if required by such Law, by the Bylaws of
such Company), the Board of Directors of such Company, and that
such resolutions constitute all the resolutions adopted with
respect to such transactions, have not been amended, modified, or
revoked in any respect, and are in full force and effect as of the
date of this Agreement.
(l) Opinion of Counsel to the Companies. The opinion
of Jones Day Reavis & Pogue, counsel to the Companies, Jeffrey J.
Murphy, General Counsel of the Companies, and local counsel to the
Companies, addressed to Administrative Agent, Documentation Agent,
and Lenders, as to the matters covered in EXHIBIT I-1.
(m) Local Counsel Opinions. Such other written
opinions of local counsel in Tennessee, California, Georgia, and
Florida, as Administrative Agent and Documentation Agent may
reasonably require, addressed to Administrative Agent,
Documentation Agent and Lenders, in form and substance satisfactory
to Administrative Agent and Documentation Agent.
(n) Opinion of Winstead Sechrest & Minick P.C. The
opinion of Winstead Sechrest & Minick P.C., substantially in the
form of EXHIBIT I-2.
(o) Lien Searches and Lien Releases. Filing officer
certificates (or commercial reports similar thereto, if
satisfactory to Administrative Agent and Documentation Agent) under
Section 9-407(2) of the UCC, releases or partial releases of Liens
or financing statements, and other evidence satisfactory to
Administrative Agent that there are no Liens on any assets of any
Restricted Company, except the Permitted Liens.
(p) Insurance. Certificates of insurance for each
policy of insurance maintained by any Company reflecting
Administrative Agent, for the benefit of Lenders, as an additional
insured, together with evidence of payment of all premiums thereon.
(q) Notice of Borrowing. A duly completed Notice of
Borrowing for the initial Loans.
(r) Borrowing Base Report. A duly completed Borrowing
Base Report.
(s) Internal Revenue Service Forms. Duly completed
copies of Form 4224 or Form 1001, as applicable, from each foreign
Lender.
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(t) Payment of Fees and Expenses. Payment of all fees
payable on or prior to the initial Borrowing Date to Administrative
Agent, Syndication Agent, Documentation Agent or any Lender as
provided for in SECTION 4, together with reimbursements to LC
Fronting Bank, Administrative Agent, Syndication Agent and
Documentation Agent for all amounts described in SECTION 7.7.
(u) Authorizations. Evidence satisfactory to Lenders
and their counsel that the Companies shall have made all filings
and registrations and shall have obtained all Authorizations which
are or may be required as prerequisites to the validity and
enforceability of the Loan Documents, and the transactions
contemplated thereby.
(v) Repayment of Certain Existing Debt. Evidence
satisfactory to Administrative Agent, Documentation Agent and their
counsel that the Companies shall have paid or concurrently with the
making of the initial Loan will pay, in full (including principal,
interest, and fees), all outstanding liquidated Debt to the
Lenders, LC Fronting Bank and Managing Agents pursuant to that
certain Credit Agreement dated as of November 23, 1993, as amended
(the "EXISTING CREDIT AGREEMENT").
(w) Other Documents. Copies of such other agreements,
documents, instruments, certificates, and evidences as
Administrative Agent may reasonably request.
5.2 Conditions Precedent to Each Loan and LC. In addition,
Lenders will not be obligated to make any Loan (other than a Loan pursuant
to SECTION 3.9) and LC Fronting Bank will not be obligated to issue any LC
unless on the Borrowing Date of such Loan and the issuance date of such LC,
as applicable (and after giving effect thereto), as the case may be: (a)
Administrative Agent shall have timely received therefor a Notice of
Borrowing unless a Notice of Borrowing is deemed to have been given
pursuant to SECTION 2.4(E) or Notice of LC as the case may be; (b) all of
the representations and warranties of Borrower or any Company set forth in
the Loan Documents are true and correct in all material respects (except to
the extent that (i) the representations and warranties speak to a specific
date or (ii) in the case of representations and warranties set forth in
SECTIONS 6.2, 6.3, 6.6, 6.7, 6.11, 6.13, 6.15, 6.16, 6.20 and 6.22, the
facts on which such representations and warranties are based have been
changed by transactions contemplated or permitted by this Agreement and
supplemental Schedules have been delivered with respect thereto and, in the
case of SCHEDULE 6.7, approved by Required Lenders, and in the case of
SCHEDULE 6.13, approved by Majority Lenders); (c) no material adverse
change shall have occurred since December 31, 1995, in the condition,
financial or otherwise, or business, of the Companies taken as a whole (as
determined by Required Lenders); (d) no Default or Potential Default shall
have occurred and be continuing; (e) the funding of such Loans and the
issuance of such LC, as applicable, is permitted by Law; and (f) all
conditions related to such Loan or LC, as applicable, shall have been
satisfied in the reasonable determination of all Lenders, in the case of
the Loans made and LCs issued on the initial Borrowing Date, or of Required
Lenders, in the case of any Loan made or LC issued thereafter, and upon the
reasonable request of Administrative Agent, Borrower shall have delivered
to Administrative Agent evidence substantiating any of the matters in the
Loan Documents which are
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necessary to enable Borrower to qualify for such Loan or LC. Each Notice
of Borrowing and Notice of LC, as applicable, delivered to Administrative
Agent shall constitute the representation and warranty by Borrower to
Administrative Agent that the statements in CLAUSES (B), (C), and (D) above
are true and correct in all respects. Each condition precedent in this
Agreement is material to the transactions contemplated in this Agreement,
and time is of the essence in respect of each thereof. Subject to the
prior approval of all Lenders, in the case of the Loans made and LCs issued
on the initial Borrowing Date, or of Required Lenders, in the case of any
Loan or LC made thereafter, Lenders may fund any Loan and LC Fronting Bank
may issue any LC without all conditions being satisfied, but, to the extent
permitted by Law, the same shall not be deemed to be a waiver of the
requirement that each such condition precedent be satisfied as a
prerequisite for any subsequent funding or issuance, unless all Lenders
specifically waive each such item in writing.
5.3 Conditions Precedent to Each Conversion of a Loan.
Lenders will not be obligated to convert any Loan to a LIBOR Rate Loan or
continue any LIBOR Rate Loan for a new Interest Period pursuant to SECTION
3.9 unless on the date of conversion of such Loan (and after giving effect
thereto), as the case may be: (a) Administrative Agent shall have timely
received therefor a Notice of Conversion; (b) all of the representations
and warranties of Borrower or any Company set forth in the Loan Documents
are true and correct in all material respects (except the representations
and warranties set forth in SECTIONS 6.6 and 6.7 and except to the extent
that (i) the representations and warranties speak to a specific date or
(ii) in the case of representations and warranties set forth in SECTIONS
6.2, 6.3, 6.11, 6.13, 6.15, 6.16, 6.20 and 6.22, the facts on which such
representations and warranties are based have been changed by transactions
contemplated or permitted by this Agreement and supplemental Schedules have
been delivered with respect thereto and, in the case of SCHEDULE 6.13,
approved by Majority Lenders); (c) no Default or Potential Default shall
have occurred and be continuing; (d) the funding of such Loans is permitted
by Law; and (e) all conditions related to such Loan shall have been
satisfied in the reasonable determination of Required Lenders.
SECTION 6 REPRESENTATIONS AND WARRANTIES. Borrower, as to itself
and each Company, represents and warrants to Administrative Agent and
Lenders as follows:
6.1 Purpose of Credit Facility. After the initial Borrowing
Date, Borrower will use the Revolving Credit Facility for working capital
of the Companies, Capital Expenditures by the Companies, the issuance of
LCs and other lawful corporate purposes. No Company is engaged
principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any "margin
stock" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System, as amended. No LC and no part of the proceeds of
any Loan will be used, directly or indirectly, for a purpose which violates
any Law, including without limitation, the provisions of Regulation U of
the Board of Governors of the Federal Reserve System, as amended.
6.2 Existence, Good Standing, Authority, and Authorizations.
Each Company (excluding Designated Subsidiaries) is duly organized, validly
existing, and in good standing under the Laws of
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its jurisdiction of organization (such jurisdictions being identified on
SCHEDULE 6.3). Except where failure is not reasonably likely to be a
Material Adverse Event, each Company (excluding Designated Subsidiaries)
(a) is duly qualified to transact business and is in good standing as a
foreign corporation in each jurisdiction where the nature and extent of its
business and properties require the same (such jurisdictions being
identified on SCHEDULE 6.3, as supplemented from time to time after the
initial Borrowing Date) and (b) possesses all requisite authority, power,
licenses, permits, agreements, Authorizations, and franchises to use its
assets and conduct its business as it is now being, or is contemplated
herein to be, conducted. No Authorization which has not heretofore been
obtained is required to authorize, or is required in connection with, the
execution, delivery, legality, validity, binding effect, performance of, or
enforceability of the Loan Documents. Except where failure is not
reasonably likely to be a Material Adverse Event, the Companies (excluding
Designated Subsidiaries) have obtained all licenses, permits, agreements,
Authorizations and franchises necessary and appropriate to operate their
respective businesses, as required, and all such licenses, permits,
agreements, Authorizations and franchises are in full force and effect.
There are no violations of any of the foregoing which, individually or
collectively, are reasonably likely to be a Material Adverse Event, nor are
there any proceedings pending or threatened against the Companies to revoke
or limit any such Authorization which are reasonably likely to be adversely
determined and if successful are reasonably likely to be a Material Adverse
Event.
6.3 Subsidiaries. Borrower has no Subsidiaries except as
disclosed on SCHEDULE 6.3 (as supplemented from time to time after the
initial Borrowing Date to reflect any change to such schedule as a result
of transactions permitted by this Agreement), and all of the outstanding
shares of capital stock (or similar voting interests) of each such
Subsidiary are duly authorized, validly issued, fully paid, and
nonassessable and are owned of record and beneficially as set forth
thereon, free and clear of any Liens, restrictions, claims, or Rights of
another Person, other than Permitted Liens, and none of such shares is
subject to any warrant, option, or other Right of any Person to acquire the
same or subject to any restriction on transfer thereof except for
restrictions imposed by securities Laws and general corporate Laws. Each
of the Designated Subsidiaries is either inactive or is in the process of
dissolving or consolidating with another Company, as set forth on SCHEDULE
6.3. The aggregate loans and advances to, and investments of the Companies
in, all Designated Subsidiaries is not in excess of $2,000,000 as of the
initial Borrowing Date.
6.4 Authorization and Contravention. The execution and
delivery by each Company of each Loan Document to which it is a party, and
the performance by such Company of its obligations thereunder (a) are
within the corporate power of such Company, (b) have been duly authorized
by all necessary corporate action, (c) require no action by or in respect
of, or filing with, any Tribunal, which action or filing has not been taken
or made on or prior to the initial Borrowing Date, (d) will not violate any
provision of the charter or bylaws of such Company, (e) will not violate
any provision of Law applicable to it, other than such violations which
individually or collectively could not be a Material Adverse Event, (f)
will not violate any Material Agreements to which it is a party, other than
such violations which could not be a Material Adverse Event, or (g) will
not result in the creation or imposition of any Lien on any asset of any
Company. Other than such consents and approvals the failure of which to
obtain could not be a Material Adverse Event, the Companies have obtained
all
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necessary consents and approvals of any Person or Tribunal required to be
obtained in order for such Company to execute, deliver, and perform the
Loan Documents,. No Company is in violation of any provision of Law
applicable to it, other than such violations which are not reasonably
likely to be a Material Adverse Event.
6.5 Binding Effect. Upon execution and delivery by all
parties thereto, each Loan Document will constitute a legal, valid, and
binding obligation of each Company party thereto, enforceable against each
such Company in accordance with its terms, except as enforceability may be
limited by applicable Debtor Relief Laws and general principles of equity.
6.6 Financial Statements. The Current Financials were
prepared in accordance with GAAP and present fairly the consolidated
financial condition, results of operations, and cash flows of Borrower and
its Subsidiaries as of and for the portion of the fiscal year ending on the
date or dates thereof (subject in the case of interim statements only to
normal year-end audit adjustments). There were no material liabilities,
direct or indirect, fixed or contingent, of the Companies as of the date or
dates of the Current Financials which are not reflected therein or in the
notes thereto, to the extent required by GAAP. Except for transactions
directly related to, or specifically contemplated by, the Loan Documents,
there have been no changes in the financial condition of the Companies from
that shown in the Current Financials after such date which are reasonably
likely to be a Material Adverse Event, nor has Borrower or any Company
incurred any liability not permitted by this Agreement, direct or indirect,
fixed or contingent, after such date which could be a Material Adverse
Event.
6.7 Litigation, Claims, Investigations. Except as described
on SCHEDULE 6.7 (as supplemented from time to time after the initial
Borrowing Date, if, with respect to such supplemental Schedule, the matters
disclosed thereon are approved by Required Lenders), no Company is subject
to, or aware to the best of its knowledge of the threat of, any Litigation
which is reasonably likely to be adversely determined, and if adversely
determined, is reasonably likely to be a Material Adverse Event. Moreover,
except as set forth on SCHEDULE 6.7, there are no formal complaints, suits,
claims, investigations, or proceedings initiated at or by any Tribunal
pending or to the best of its knowledge threatened by or against any
Company which (i) if adversely determined, could impair the ability of
Borrower to perform or pay its obligations under the Loan Documents or
impair the Rights of Lenders under the Loan Documents or their ability to
exercise such Rights, or (ii) if adversely determined are reasonably likely
to be a Material Adverse Event, nor are there any judgments, decrees, or
orders of any Tribunal outstanding against any Company which are reasonably
likely to be a Material Adverse Event.
6.8 Taxes. All Tax returns of each Company required to be
filed have been filed (or extensions have been granted) prior to
delinquency, except for any such returns for which the failure to so file
is not reasonably likely to be a Material Adverse Event, and all Taxes
imposed upon each Company which are due and payable have been paid prior to
delinquency, other than Taxes for which the criteria for Permitted Liens
(as specified in SECTION 7.14(F)) have been satisfied or for which
nonpayment thereof is not reasonably likely to constitute a Material
Adverse Event.
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6.9 Environmental Matters.
(a) No consent or other approval of any Tribunal, nor
any declaration or other filing with any Tribunal, not obtained or
made, is required under any Environmental Law in connection with
any transaction contemplated by the Loan Documents, except for the
absence of, failure to obtain, or to make any one or more of which
is not reasonably likely to be Environmentally Material.
(b) Except as disclosed on SCHEDULE 6.9 or as is not
reasonably likely to be Environmentally Material, no Real Property
is encumbered by any Lien under any Environmental Law, listed on
any Contaminated Site List, and no Company knows that any such
encumbrance or listing is being considered by any Tribunal.
(c) Except as disclosed on SCHEDULE 6.9 or as is not
reasonably likely to be Environmentally Material, no Company knows
or has reason to believe that any of the following are present at
any Real Property: (i) any asbestos or asbestos-containing
material; (ii) any underground or aboveground storage tank or tank
system subject to regulation under any Environmental Law; or (iii)
any electrical or other fixtures or equipment containing
polychlorinated biphenyls.
(d) Except as disclosed on SCHEDULE 6.9 or as is not
reasonably likely to be Environmentally Material, no Company knows
or has reason to believe that any Release of any Hazardous
Substance has occurred at or in the vicinity of any Real Property
(i) in a quantity that requires any report or other notice to any
Tribunal pursuant to any Environmental Law that has not been
submitted to the appropriate Tribunal, or (ii) that has resulted or
that threatens to result in the presence of any Hazardous Substance
in the environment in a quantity, concentration, state, or other
condition that exceeds any applicable standard for the protection
of human health or the environment under any Environmental Law or
which requires remediation for which a Company is responsible under
any lease agreement under which a Company is the lessee.
(e) Except as disclosed on SCHEDULE 6.9 or as is not
reasonably likely to be Environmentally Material, no Real Property
(upon which manufacturing or repair activities occur or have
occurred), has been used except as in compliance with Environmental
Laws for the storage, recycling and treatment, or disposal of any
Hazardous Substance while owned or operated by any Company. No
Company has actual or constructive knowledge that any such use has
occurred at any other time.
(f) Except as disclosed on SCHEDULE 6.9 or as is not
reasonably likely to be Environmentally Material, each Company and
Real Property is in compliance with all Environmental Laws and
applicable Environmental Permits. Except where not likely to be
Environmentally Material, each Environmental Permit required to be
issued to any Company or for any process or activity of any Company
under any Environmental Law has been issued,
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is in full force and effect, and will remain in full force and
effect notwithstanding the consummation of the transactions
contemplated by the Loan Documents.
(g) Except as disclosed on SCHEDULE 6.9 or SCHEDULE
6.7 or as is not reasonably likely to be Environmentally Material,
no Company has received any notice from any Tribunal that it or any
Predecessor is potentially liable for any removal, remediation, or
other response costs under any Environmental Law as the result of
the Release or threatened Release of any Hazardous Substance.
(h) Except as disclosed on SCHEDULE 6.9 or SCHEDULE
6.7:
(i) no Company is subject to any Litigation;
and
(ii) no Litigation is, to the knowledge of
each Company, pending against any Predecessor; and
(iii) no Litigation is, to the knowledge of
each Company, threatened against any Company or
Predecessor;
which is reasonably likely to be adversely determined, and if
adversely determined, is reasonably likely to be a Material Adverse
Event, in which it is asserted that any Company or Predecessor (x)
failed to comply with any Environmental Law or Environmental
Permit, (y) is liable for or should be compelled to undertake any
removal, remediation, or other response actions as the result of
the Release or threatened Release of any Hazardous Substance, or
(z) is liable for damages, fines, penalties, or other relief
(including the revocation of any Environmental Permit) as the
result of noncompliance with any Environmental Law or as the result
of the Release or threatened Release of any Hazardous Substance.
(i) No Company knows of any material error or omission
in any Environmental Report.
6.10 Employee Benefit Plans. (a) No Pension Benefit Plan has
incurred an accumulated funding deficiency, as defined in Section 302 of
ERISA and Section 412 of the Code, (b) excluding premiums required to be
paid to the PBGC (all of which have been paid or the time for such payment
has not passed), no Company has incurred material liability under ERISA to
the PBGC in connection with any such Pension Benefit Plan, (c) no Company
or ERISA Affiliate has incurred any withdrawal liability within the meaning
of Section 4201 of ERISA as a result of a withdrawal, in whole or in part,
from participation in a Multiemployer Plan where such withdrawal could be a
Material Adverse Event, (d) with respect to any Pension Benefit Plan and
Welfare Benefit Plan, there have been no "prohibited transactions" (as
defined in Section 406 of ERISA or Section 4975 of the Code) which could be
a Material Adverse Event, and (e) no Reportable Event has occurred with
respect to any Pension Benefit Plan which could be a Material Adverse
Event. Except where no Material Adverse
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Event could result therefrom, no Company or ERISA Affiliate has any
liability under or is subject to any lien under ERISA, the Code or any
similar provisions of any law of Canada or any province thereof to or on
account of any employee benefit plan, program, scheme or arrangement
established or maintained by Ryder or a Ryder ERISA Affiliate, or to which
Ryder or a Ryder ERISA Affiliate contributes or had an obligation to
contribute, including but not limited to any such liability arising from
such Company or ERISA Affiliate having been under common control with Ryder
or any Ryder ERISA Affiliate within the meaning of Section 414 of the Code
or any equivalent provision of the laws of the United Kingdom, or of Canada
or any province thereof. Each Employee Plan complies in all material
respects, both in form and operation, with ERISA and the Code. Except as
disclosed in the Current Financials, the Companies do not sponsor or
participate in and have no current or future obligation to contribute to
any plan, fund, or arrangement that provides post-retirement or
post-termination medical, health, or similar benefits which could be a
Material Adverse Event. To the knowledge of the Borrower, no Multiemployer
Plan is in reorganization within the meaning of Section 418 of the Code.
6.11 Properties; Liens. Each Company has good and marketable
title to all its property reflected on the Current Financials. SCHEDULE
6.11 (as supplemented from time to time) accurately describes the location
of all tangible personal property of the Restricted Companies. There is no
Lien (other than the Liens created by the Loan Documents) on any shares of
stock of any Subsidiary and, except for Permitted Liens, there is no Lien
on any property of any Company, and the execution, delivery, performance,
or observance of the Loan Documents will not require or result in the
creation of any Lien on such property, except as contemplated by the Loan
Documents.
6.12 Government Regulations. No Restricted Company is subject
to regulation under the Investment Company Act of 1940, as amended, the
Public Utility Holding Company Act of 1935, as amended, or any other
material Law (other than Regulations G, T, U, and X of the Board of
Governors of the Federal Reserve System) which regulates the incurrence of
Debt.
6.13 Transactions with Affiliates. As of the initial Borrowing
Date, except as disclosed on SCHEDULE 6.13 (as supplemented from time to
time after the initial Borrowing Date, if, with respect to such
supplemental Schedule, the matters disclosed thereon are approved by
Majority Lenders), no Company is a party to a transaction with any of its
Affiliates, other than transactions in the ordinary course of business and
upon fair and reasonable terms not materially less favorable than such
Company could obtain or could become entitled to in an arm's-length
transaction with a Person that was not its Affiliate.
6.14 Debt. No Company is an obligor on any Debt other than
Permitted Debt.
6.15 Material Agreements. No Company is a party to any
Material Agreement, except for the Loan Documents and the Material
Agreements described on SCHEDULE 6.15 (as supplemented from time to time).
All such Material Agreements are in full force and effect, and no default
or potential default exists on the part of any Company thereunder, which is
reasonably likely to be a Material Adverse Event.
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6.16 Insurance. Each Company maintains with financially sound
and reputable insurers (or, as to workers' compensation or similar
insurance, with an insurance fund or by self-insurance authorized by the
jurisdictions in which it operates) insurance in such amounts (and with
such deductibles) and covering such risks as is ordinary and customary for
similar businesses in the industry in the jurisdictions in which it
operates. Each such insurance policy maintained by the Companies is set
forth on SCHEDULE 6.16 (as supplemented from time to time).
6.17 Labor Matters. There are no actual or threatened strikes,
labor disputes, slow downs, walkouts, or other concerted interruptions of
operations by the employees of any Company that are reasonably likely to be
a Material Adverse Event. Hours worked by and payment made to employees of
the Restricted Companies have not been in violation of the Fair Labor
Standards Act or any other applicable Law dealing with such matters, other
than any such violations, individually or collectively, which are not
reasonably likely to constitute a Material Adverse Event. All payments due
from any Company on account of employee health and welfare insurance have
been paid or accrued as a liability on its books in accordance with GAAP,
other than any such nonpayments which, individually or collectively, are
not reasonably likely to constitute a Material Adverse Event.
6.18 Solvency. At the time of each Loan hereunder, each
Restricted Company is (and after giving effect to the transactions
contemplated by the Loan Documents, and any incurrence of additional Debt
will be) Solvent.
6.19 Tradenames. Neither Borrower nor any Company that is a
party to any Security Document has used or transacted business under any
other corporate or trade name in the five-year period preceding the initial
Borrowing Date, except as set forth on SCHEDULE 6.19.
6.20 Intellectual Property. SCHEDULE 6.20 (as supplemented
from time to time) accurately sets forth the United States and foreign
patents, patent applications, copyright applications and registrations, and
service mark and trademark applications and registrations of the Companies,
and the record owners and beneficial owners thereof. Each Company owns,
possesses or has the right to use all licenses, permits, patents, patent
applications, copyrights, service marks, trademarks, service mark and
trademark applications, trade secrets, trade names and other intellectual
property rights necessary to continue to conduct its businesses as
heretofore conducted by it, now conducted by it, and proposed to be
conducted by it immediately after the initial Borrowing Date except any
such property the absence of which is not reasonably likely to be a
Material Adverse Event. Each of the foregoing is in full force and effect
and each Company is conducting its business without infringement or claim
of infringement of any license, permit, patent, copyright, service mark,
trademark, trade name, trade secret, or other intellectual property right
of others, other than any such infringements or claims which, individually
or collectively, are not reasonably likely to be a Material Adverse Event.
To the knowledge of any Company, there is no infringement or claim of
infringement by others of any license, permit, patent, copyright, service
mark, trademark, trade name, trade secret, or other intellectual property
right of any Company which is reasonably likely to be a Material Adverse
Event. Except as set forth in SCHEDULE 6.20, no United States or foreign
patent, patent application, copyright or copyright registration, service
mark or trademark, trademark or service mark registration or
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application, owned by any Company is subject to a license, other than to
another Company or entity under the direct control of a Company, and the
goodwill inured in any trademark or service mark, registered or
unregistered, owned by each Company is not otherwise encumbered.
6.21 Compliance with Laws. No Company is in violation of any
Laws, other than such violations which, individually or collectively, are
not reasonably likely to be a Material Adverse Event. No Company has
received notice alleging any noncompliance with any Laws, except for such
noncompliance which has been cured or no longer exists, or which is not
reasonably likely to constitute a Material Adverse Event.
6.22 Chief Executive Office; Chief Place of Business. SCHEDULE
6.22 (as supplemented from time to time) accurately sets forth the location
of the chief executive office and chief place of business (as such terms
are used in the Uniform Commercial Code of each state whose law would
purport to govern the attachment and perfection of the security interests
granted by the Security Documents) of Borrower and each Subsidiary which is
a party to any Security Document.
6.23 Full Disclosure. There is no material fact or condition
relating to the Loan Documents or the financial condition, business, or
property of any Company which is reasonably likely to be a Material Adverse
Event and which has not been related, in writing, to Administrative Agent,
Documentation Agent and Syndication Agent. All information heretofore
furnished by or on behalf of any Company prior to the date hereof to
Administrative Agent, Syndication Agent, Documentation Agent or any Lender
in connection with the Loan Documents was, and as of the initial Borrowing
Date, will be, true and accurate in all material respects in light of the
circumstances in which made or based on reasonable estimates on the date as
of which such information is stated or certified.
SECTION 7 COVENANTS. So long as Lenders are committed to fund Loans
and LC Fronting Bank is committed to issue LCs under this Agreement and
thereafter until the Obligation is paid and performed in full, unless
Borrower receives a prior written consent to the contrary by Administrative
Agent as authorized by Required Lenders, Borrower covenants and agrees that
it will and will cause each Subsidiary to comply with the following:
7.1 Use of Proceeds. Borrower shall use the proceeds of Loans
only for the purposes represented herein.
7.2 Books and Records. Each Company shall maintain books,
records and accounts necessary to prepare the financial statements required
to be delivered hereunder in accordance with GAAP.
7.3 Items to be Furnished. Borrower shall cause the following
to be furnished to Lenders:
(a) Promptly after preparation, and no later than 120
days after the last day of each fiscal year of Borrower, Financial
Statements showing the consolidated and
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consolidating (except with respect to cash flow in the case of
consolidating statements) financial condition and results of
operations of Borrower and its consolidated Subsidiaries as of, and
for the year ended on, such last day, accompanied by:
(i) the unqualified opinion of a firm of
nationally-recognized independent certified public
accountants, based on an audit as to the consolidated
Financial Statements and a review as to the consolidating
Financial Statements, using generally accepted auditing
standards, that such Financial Statements were prepared in
accordance with GAAP and present fairly the consolidated
financial condition and results of operations of the
Companies,
(ii) any management letter prepared by such
accounting firm,
(iii) a certificate from such accounting firm
to Administrative Agent indicating that during its audit
it obtained no knowledge of any Default or Potential
Default or, if it obtained such knowledge, the nature and
period of existence thereof, and
(iv) a Compliance Certificate with respect to
such Financial Statements.
(b) Promptly after preparation, and no later than 60
days after the last day of each of the first three fiscal quarters,
and no later than 90 days after the end of the fourth fiscal
quarter, of each fiscal year of Borrower, Financial Statements
showing the consolidated and consolidating (except with respect to
cash flow in the case of consolidating statements) financial
condition and results of operations of the Companies for such
fiscal quarter and for the period from the beginning of the current
fiscal year to such last day, accompanied by a Compliance
Certificate with respect to such Financial Statements.
(c) Within 15 Business Days after the last day of each
calendar month, a Borrowing Base Report as of such last day.
(d) Prior to the close of each fiscal year of
Borrower, the quarterly financial budget for the next succeeding
fiscal year, and financial projections for the succeeding three
fiscal years, all in such detail as shall be reasonably
satisfactory to Administrative Agent, accompanied by a certificate
executed by the chief financial officer, treasurer or controller of
Borrower, certifying that such projections and budget were prepared
by Borrower based on assumptions which, in light of the historical
performance of the Companies and their prospects for the future,
are realistic.
(e) Notice, promptly after Borrower knows, (i) the
existence and status of any Litigation which, if determined
adversely to any Company, is reasonably likely to be a Material
Adverse Event, (ii) any material change in any material fact or
circumstance represented or warranted in any Loan Document, (iii) a
Default or Potential Default,
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specifying the nature thereof and what action Borrower or any other
Company has taken, is taking, or proposes to take with respect
thereto, (iv) the receipt by any Company of any notice from any
Tribunal of the expiration without renewal, termination, material
modification or suspension of, or institution of any proceedings to
terminate, materially modify, or suspend, any Authorization granted
by the FAA, the CAA or any other Authorization now or hereafter
held by (or required to be held by) any Company which is required
for such Company to operate its business in compliance with all
applicable Laws and which the failure to so hold is reasonably
likely to be a Material Adverse Event, (v) any federal, state, or
local statute, regulation, or ordinance or judicial or
administrative order limiting or controlling the operations of any
Company which has been issued or adopted hereafter and which is of
material adverse importance or effect in relation to the operation
of any Company, (vi) the receipt by any Company of notice of any
violation or alleged violation of any Environmental Law, which
violation or alleged violation could individually or collectively
with other such violations or allegations, constitute a Material
Adverse Event, or (vii) any material breach by any Company party to
a Material Agreement. The notice shall include or be accompanied
by such information and materials then in the possession of any
Company as may be necessary to disclose all relevant facts and
circumstances.
(f) Promptly after preparation, true, correct, and
complete copies of all material reports or filings (including
without limitation each Form 10-K and Form 10-Q) filed by or on
behalf of any Company with the Securities and Exchange Commission.
(g) Promptly upon receipt thereof, a copy of each
interim or special audit made by independent accountants of the
books of any Company and any management letter received from such
accountants.
(h) Promptly upon reasonable request therefor by
Administrative Agent, Documentation Agent, or two or more Lenders
(through Administrative Agent) whose Committed Sums aggregate at
least 25% of the aggregate Committed Sums of all Lenders, such
information (not otherwise required to be furnished under the Loan
Documents) respecting the business affairs, assets, and liabilities
of the Companies, and such certifications and documents, in
addition to those mentioned in this Agreement, as reasonably
requested.
(i) Borrower shall submit a proposed Environmental
Budget for each forthcoming fiscal year 30 days prior to the
commencement thereof. The Environmental Budget is intended as a
means of assisting Administrative Agent and Lenders to monitor
compliance with the Loan Documents and to preserve and protect the
Collateral. The Environmental Budget forecasts, but does not
restrict, expenditures. Accordingly, each Company shall make
expenditures as necessary to comply with other requirements of this
Section, even if the expenditures are not contemplated by the
Environmental Budget. If any material expenditures occur (or can
reasonably be anticipated by any Company to occur in the current
fiscal year) that are not reflected on the current fiscal year's
approved Environmental Budget, Borrower shall notify Administrative
Agent of the relevant facts and circumstances within 30 days and
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if requested by Required Lenders, shall appropriately revise the
Environmental Budget. Borrower shall represent and warrant that
each Environmental Budget (as the same may be revised in accordance
with the immediately preceding sentence) contains no material error
or omission.
(j) Within 60 days after the end of each fiscal year,
Borrower shall submit to Administrative Agent a report comparing
any material differences between actual expenditures and those
projected in the prior fiscal year's Environmental Budget.
(k) Within 30 days of the date any Environmental
Report is finalized, Borrower shall deliver to Administrative Agent
copies thereof.
(l) Within 30 days of obtaining knowledge of the
existence thereof, Borrower shall deliver to Administrative Agent a
copy of any Environmental Indemnity Agreement not otherwise
previously known to exist.
(m) Within 45 days of any request therefor and with
respect to each Environmental Indemnity Agreement that Required
Lenders consider material, information reasonably satisfactory to
Required Lenders regarding the creditworthiness of the indemnitor
or other obligor under such Environmental Indemnity Agreement and
written statements reasonably satisfactory to Required Lenders from
Borrower regarding the status of such Environmental Indemnity
Agreement and any claims or demands thereunder.
7.4 Inspections. Each Company shall allow Administrative
Agent (or its Representatives) or any Lender to inspect any of its
properties, to review reports, files, and other records and to make and
take away reasonably requested copies thereof, to conduct tests or
investigations, and to discuss any of its affairs, conditions, and finances
with such Company's other creditors, directors, officers, or public
accountants, from time to time, during reasonable business hours upon
reasonable notice; provided that, notwithstanding the foregoing, prior to
the occurrence of a Default or Potential Default, Administrative Agent (or
its Representatives) or any such Lender will obtain the prior approval of a
Responsible Officer prior to any such discussions with officers, directors
or public accountants of any Company and all costs associated with such
inspection shall be paid by the party requesting such inspection; provided,
further, that, if a Default or Potential Default has occurred and is
continuing, no notice shall be required and no such prior approval from a
Responsible Officer shall be required to have been obtained by
Administrative Agent (or its Representatives) or any such Lender, and
Borrower shall pay all costs associated with any such inspection.
7.5 Taxes. Each Company (a) shall promptly pay when due any
and all Taxes other than Taxes the amount or validity of which is being
contested in good faith by lawful proceedings diligently conducted, against
which reserve or other provision required by GAAP has been made, and in
respect of which levy and execution of any lien securing same have been and
continue to be stayed, and (b) will not, directly or indirectly, use any
portion of the proceeds of any Loan to pay the wages of employees unless a
timely payment to or deposit with the United States of America or
applicable
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jurisdiction of all amounts of Tax required to be deducted and withheld
with respect to such wages is also made.
7.6 Prepayment of Other Debt. No Company shall make any
voluntary prepayment of principal of, or interest on, any Funded Debt other
than the Obligation, whether subordinate to the Obligation or not, except
(a) prepayment of Debt described in SECTION 7.13(M) and SECTION 7.13(N) and
(b) when no Default or Potential Default exists, prepayment of Debt which
is not subordinated to the Obligation in the aggregate amount of $500,000
per fiscal year.
7.7 Expenses. Borrower shall promptly pay on the initial
Borrowing Date and thereafter within ten (10) Business Days after request
therefor (i) all reasonable costs, fees, and out of pocket expenses paid or
incurred by Administrative Agent, LC Fronting Bank, Documentation Agent and
Syndication Agent in connection with the negotiation, preparation,
delivery, execution, administration and syndication of the Loan Documents
and any related amendment, waiver, or consent (including, but not limited
to, the reasonable fees and expenses of counsel to Administrative Agent, LC
Fronting Bank, Documentation Agent and Syndication Agent, including any
local counsel, and the reasonable fees and expenses of non-legal
professionals retained by Administrative Agent, LC Fronting Bank,
Documentation Agent and Syndication Agent) and (ii) all reasonable costs
and expenses of Administrative Agent and LC Fronting Bank incurred by
Administrative Agent or LC Fronting Bank in connection with the enforcement
of the obligations of any Company arising under the Loan Documents or the
exercise or preservation of any Rights arising under the Loan Documents
(including, but not limited to, reasonable attorneys' fees and court
costs), and, after a Default in the payment of any amount due hereunder,
all such reasonable costs and expenses of any Lender in connection with
such enforcement or exercise of such Rights, all of which shall be a part
of the Obligation, and shall bear interest at the Default Rate from the
date due until the date paid in full.
7.8 Maintenance of Existence, Assets, and Business. Except as
otherwise permitted by SECTION 7.26, each Company excluding Designated
Subsidiaries shall at all times (a) maintain its existence and good
standing in the jurisdiction of its organization and its authority to
transact business in all other jurisdictions identified for such Company on
SCHEDULE 6.3, as supplemented from time to time after the initial Borrowing
Date, except where the failure to so maintain its authority to transact
business is not reasonably expected to be a Material Adverse Event; (b)
maintain all licenses, permits, and franchises necessary for its business
except where the failure to so maintain is not reasonably expected to be a
Material Adverse Event; (c) keep all of its assets which are used and
useful in and necessary to its business in good working order and condition
(ordinary wear and tear excepted) and make all necessary repairs thereto
and replacements thereof; and (d) do all things necessary to obtain, renew,
extend, and continue in effect all licenses, permits, agreements,
Authorizations and franchises which may at any time and from time to time
be necessary and appropriate to operate its business for any Company,
except where the failure to do so is not reasonably expected to be a
Material Adverse Event. Nothing contained in this SECTION 7.8 shall
restrict disposition of assets to the extent permitted by SECTION 7.23.
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7.9 Insurance. Each Company shall, at its cost and expense,
maintain insurance with financially sound and reputable insurers, in such
amounts (and with such deductibles), and covering such risks, as shall be
ordinary and customary for similar businesses in the industry in the
jurisdiction in which it operates and commercially available to the
Companies. Each Company shall deliver to Administrative Agent certificates
of insurance from time to time received by it for each such policy of
insurance, reflecting Administrative Agent, for the benefit of Lenders, as
an additional insured and co-loss payee, and evidence of payment of all
premiums thereon.
7.10 Preservation and Protection of Rights. Each Company shall
perform such acts and duly authorize, execute, acknowledge, deliver, file,
and record any additional agreements, documents, instruments, and
certificates as Administrative Agent or Required Lenders may reasonably
deem necessary or appropriate in order to preserve and protect the Rights
of Administrative Agent and Lenders under any Loan Document.
7.11 Employee Benefit Plans. Except where a Material Adverse
Event could not result therefrom, no Company or ERISA Affiliate shall,
directly or indirectly, (a) engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code), (b) incur any
"accumulated funding deficiency" as such term is defined in Section 302 of
ERISA with respect to any Pension Benefit Plan, (c) permit any Employee
Plan to ever be subject to involuntary termination proceedings, (d) without
the consent of the Required Lenders, fully or partially withdraw from any
Multiemployer Plan, (e) without the consent of the Required Lenders, agree
to contribute to any multiemployer plan within the meaning of Section
4001(a)(3) which was not a Multiemployer Plan as of the date of this
Agreement, (f) permit any Pension Benefit Plan which is intended to be
qualified under Section 401(a) of the Code to cease to be qualified, or (g)
permit any employee benefit plan, program, scheme or arrangement maintained
by the Company or an ERISA Affiliate in Canada or the United Kingdom to
suffer an event which, under the relevant law of such jurisdiction, is
equivalent to a prohibited transaction or accumulated funding deficiency.
7.12 Environmental Laws.
(a) Each Company shall operate and manage its
businesses, processes, and other activities (including without
limitation, activities for which expenditures are identified in any
Environmental Budget) in a manner consistent with the ordinary and
customary environmental management and engineering practices of
similar businesses in the industry.
(b) The Companies shall take all steps that may be
necessary or appropriate to timely assert and receive payment of
claims under any Environmental Indemnity Agreement. No Company
shall consent to any modification or amendment of any Environmental
Indemnity Agreement, or waive, compromise, settle, or otherwise
release or discharge any obligation or liability of the indemnitor
or other obligor thereunder in an amount greater than $5 million
without the prior written consent of Required Lenders in each
instance.
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(c) Except as is not reasonably likely to be
Environmentally Material, the Companies shall comply with all
Environmental Laws, obtain and keep in effect all Environmental
Permits required by Environmental Laws, and comply with all
Environmental Permits.
(d) Except as is not reasonably likely to be
Environmentally Material, if any Release of a Hazardous Substance
occurs at any Real Property that has resulted in any report or
other notice to any Tribunal or that results or threatens to result
in the presence of any Hazardous Substance in the environment in a
quantity, concentration, state, or other condition that exceeds any
applicable standard for the protection of human health or the
environment under any Environmental Law, (i) Borrower shall notify
Administrative Agent within 30 days after any Company first has
knowledge or reason to believe that such a Release of a Hazardous
Substance has occurred, (ii) the Companies shall promptly take such
reasonable and prudent actions as may be required under
Environmental Law to terminate such Release of a Hazardous
Substance, to prevent or minimize potential Environmental
Liabilities from such Release of a Hazardous Substance, and to
comply with Environmental Laws, and (iii) thereafter, the Companies
shall promptly and diligently carry out such removal, remedial, or
other response actions to prevent or minimize potential
Environmental Liabilities from such Release of a Hazardous
Substance and to comply with Environmental Laws. At the request of
Required Lenders, at any time, Borrower shall provide Lenders
reasonable information regarding the status and progress of actions
taken to comply with the foregoing obligations.
7.13 Debt. No Company shall, directly or indirectly, create,
incur, or suffer to exist any direct, indirect, fixed, or contingent
liability for any Debt, other than (without duplication):
(a) Debt existing on the initial Borrowing Date, as
more particularly described on SCHEDULE 7.13;
(b) Debt under this Agreement and the Notes;
(c) Debt incurred by Borrower under any Rate
Protection Agreement;
(d) Debt of a Restricted Company listed on SCHEDULE
6.3 to Borrower or to another Restricted Company listed on such
Schedule;
(e) obligations under Capital Leases and Debt secured
by a Lien described in SECTION 7.14(II), subject to the limitations
set forth in SECTION 7.14(II);
(f) current accounts payable and accrued expenses
arising out of transactions (other than borrowings) in the ordinary
course of business and documentary letters of credit to support
same;
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(g) endorsements of instruments or items of payment
for deposit to the general account of any Company in the ordinary
course of business;
(h) Guaranties of the Obligation;
(i) indemnities by any Company of liabilities of
directors and officers pursuant to provisions contained in such
Company's articles of incorporation or bylaws, or otherwise
permitted by applicable Laws;
(j) Other Debt of Borrower, all of the proceeds of
which are applied as a prepayment of the Obligation provided that
such Debt repays the Obligation in full and all commitments of
Lenders hereunder are contemporaneously terminated;
(k) Exclusive of Debt described in SUBSECTION (M)
below, Debt of the foreign Subsidiaries existing on September 26,
1996, plus additional Debt in an amount not to exceed $5,000,000 at
any time outstanding;
(l) Unsecured Debt which is subordinated to the
Obligation upon terms and conditions satisfactory to Required
Lenders so long as the net cash proceeds of such Debt are applied
as a mandatory prepayment of the Obligation in accordance with
SECTION 3.4(C);
(m) Debt of Aviall (Canada) Ltd. to The Royal Bank of
Canada in an amount not to exceed $5,000,000 at any time
outstanding secured solely by an LC or the assets of Aviall
(Canada) Ltd. and incurred for working capital purposes;
(n) Debt comprised of borrowings against the cash
surrender value of life insurance policies owned by a Company and
of which such Company is the beneficiary up to the maximum amount
of $3,000,000 at any time outstanding; and
(o) Extensions, renewals, and refinancings of the Debt
described in (A), (C), (D), (E), (K), (L), (M), and (N) above so
long as the terms thereof are no less favorable to the Companies
than the terms of the Debt to be so refinanced, there are no
increases (except as expressly contemplated by the subparagraphs
above) in the principal amount thereof, no additional security for
such Debt is provided, the priority of any such Debt is not
favorably modified, and the maturity of any such Debt is not
shortened.
7.14 Liens. No Company will, directly or indirectly, (a)
create, incur, or suffer or permit to be created or incurred or to exist
any Lien upon any of its assets, or (b) enter into or permit to exist any
arrangement or agreement which directly or indirectly prohibits any Company
from creating or incurring any Lien on any of its assets, other than the
Loan Documents, except:
(i) The existing Liens described on SCHEDULE 7.14
hereto, together with renewals and extensions thereof but not
increases in the principal debt secured thereby, but only to the
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respective dates, if any, set forth in SCHEDULE 7.14 for the
removal and termination of any such Liens;
(ii) Liens and negative pledges on property (including
any inventory acquired by a Restricted Company and financed by or
arranged by the seller in connection with a contract to provide
services) incurred at the time of purchase thereof, securing all or
part of the purchase price thereof to any Company and Liens
(whether or not assumed) existing in property at the time of
purchase thereof by any Company, as the case may be (and extension,
renewal and replacement Liens upon the same property theretofore
subject to a Lien described in this SECTION 7.14(B), provided that
the amount secured by each Lien constituting such extension,
renewal or replacement shall not exceed the amount secured by the
Lien theretofore existing), and, provided, further,
(1) each such Lien is confined solely to the
property so purchased, improvements thereto and proceeds
thereof; and
(2) the aggregate amount secured by all such
Liens, plus the aggregate amount of obligations of the
Companies under Capital Leases, shall not exceed at any
time an amount equal to 5% of the book value of the
tangible assets of the Companies.
(iii) Pledges or deposits made to secure payment of
worker's compensation, or to participate in any fund in connection
with worker's compensation, unemployment insurance, pensions, or
other social security programs;
(iv) Good-faith pledges or deposits made to secure
performance of bids, tenders, contracts (other than for the
repayment of borrowed money), or leases, or to secure statutory
obligations, surety or appeal bonds, or indemnity, performance, or
other similar bonds (other than for the repayment of borrowed
money) as all such Liens arise in the ordinary course of business
of the Companies so long as such Liens are limited to specific
property of the Companies and do not in the aggregate materially
detract from the value of the property of the Person in question or
materially impair the use thereof in the operation of its business;
(v) Encumbrances consisting of zoning restrictions,
easements, or other restrictions on the use of real property, none
of which impair in any material respect the use of such property by
the Person in question in the operation of its business, and none
of which is violated by existing or proposed structures or land
use;
(vi) The following so long as the validity or amount
thereof is being contested in good faith and by appropriate and
lawful proceedings diligently conducted (if any claim is being
asserted with respect thereto), reserve or other appropriate
provision (if any) required by GAAP shall have been made, levy and
execution thereon have been stayed and continue to be stayed, and
they do not in the aggregate materially detract from the value of
the
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property of the Person in question, or materially impair the use
thereof in the operation of its business: Claims and Liens for
Taxes due and payable; claims and Liens upon, and defects of title
to, real or personal property, including any attachment of personal
or real property or other legal process prior to adjudication of a
dispute on the merits; claims and Liens of mechanics, materialmen,
warehousemen, carriers, landlords, or other like statutory Liens;
and adverse judgments on appeal;
(vii) Liens created under the Loan Documents;
(viii) Liens on assets covered by the Liens created under
the Loan Documents in favor of any Lender party to a Rate
Protection Agreement; and
(ix) Liens on assets of Aviall (Canada) Ltd. in favor
of The Royal Bank of Canada to secure the Debt permitted by SECTION
7.13(M) or any refinancing thereof permitted by SECTION 7.13(O).
7.15 Transactions with Affiliates. No Company shall enter into
any transaction with any of its Affiliates (excluding other Restricted
Companies), other than (a) the transactions disclosed on SCHEDULE 6.13 (as
supplemented from time to time, if, with respect to such supplemental
Schedule, the matters disclosed thereon are approved by Majority Lenders),
and (b) other transactions in the ordinary course of business and upon fair
and reasonable terms not materially less favorable than such Company could
obtain or could become entitled to in an arm's-length transaction with a
Person that was not its Affiliate.
7.16 Compliance with Laws and Documents. No Company shall
violate the provisions of any Laws applicable to it, including, without
limitation, the rules and regulations promulgated by the FAA or CAA or the
provisions of any Material Agreement to which it is a party if such
violation alone, or when aggregated with all other such violations, is
reasonably likely to be a Material Adverse Event; no Company shall (a)
violate the provisions of its charter or bylaws or (b) modify, repeal,
replace, or amend any provision of its charter or bylaws if such action is
reasonably likely to be a Material Adverse Event.
7.17 Assignment. No Company shall assign or transfer any of
its Rights, duties, or obligations under any of the Loan Documents;
provided that, if any Restricted Company merges with another Restricted
Company in accordance with SECTION 7.25 hereof, the assignment or transfer
of such Rights, duties, and obligations shall be permitted so long as the
surviving Company assumes all obligations of the other Company arising
under the Loan Documents.
7.18 Fiscal Year and Accounting Methods. No Company shall
change its fiscal year for book accounting purposes or its method of
accounting other than changes made in accordance with GAAP.
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7.19 Government Regulations. No Restricted Company shall
conduct its business in such a way that it will become subject to
regulation under the Investment Company Act of 1940, as amended, the Public
Utility Holding Company Act of 1935, as amended, or any other material Law
which regulates the incurrence of Debt.
7.20 Indemnification.
(a) THE RESTRICTED COMPANIES SHALL, JOINTLY AND
SEVERALLY, INDEMNIFY AND HOLD HARMLESS ADMINISTRATIVE AGENT,
DOCUMENTATION AGENT, SYNDICATION AGENT AND EACH LENDER AND THEIR
RESPECTIVE PARENTS, SUBSIDIARIES, DIRECTORS, OFFICERS, EMPLOYEES,
AFFILIATES, ATTORNEYS, AGENTS, SUCCESSORS AND ASSIGNS,
(COLLECTIVELY, THE "INDEMNIFIED PARTIES") FROM AND AGAINST, AND
REIMBURSE EACH INDEMNIFIED PARTY UPON ITS DEMAND FOR, ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, CLAIMS, AND PROCEEDINGS AND ALL COSTS, EXPENSES
(INCLUDING, WITHOUT LIMITATION, ALL REASONABLE ATTORNEYS' FEES,
INCLUDING ALLOCATED COSTS OF IN-HOUSE COUNSEL, AND LEGAL EXPENSES,
WHETHER OR NOT SUIT IS BROUGHT), AND DISBURSEMENTS OF ANY KIND OR
NATURE WHATSOEVER INCLUDING ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS, AND
PROCEEDINGS AND ALL COSTS AND EXPENSES ARISING OUT OF OR RESULTING
FROM ANY INDEMNIFIED PARTY'S ORDINARY NEGLIGENCE (THE "INDEMNIFIED
LIABILITIES") WHICH MAY AT ANY TIME BE IMPOSED ON, INCURRED BY, OR
ASSERTED AGAINST THE INDEMNIFIED PARTIES, IN ANY WAY RELATING TO OR
ARISING OUT OF (A) THE DIRECT OR INDIRECT RESULT OF THE VIOLATION
BY ANY COMPANY OF ANY ENVIRONMENTAL LAW, (B) THE GENERATION,
MANUFACTURE, PRODUCTION, STORAGE, RECYCLING, RELEASE, THREATENED
RELEASE, DISCHARGE, DISPOSAL OR PRESENCE ON THE REAL PROPERTY OF A
HAZARDOUS SUBSTANCE (INCLUDING, WITHOUT LIMITATION, (I) ALL DAMAGES
OF ANY SUCH USE, GENERATION, MANUFACTURE, PRODUCTION, STORAGE,
RECYCLING, RELEASE, THREATENED RELEASE, DISCHARGE, DISPOSAL, OR
PRESENCE, OR (II) THE COSTS OF ANY REQUIRED OR NECESSARY
ENVIRONMENTAL INVESTIGATION, MONITORING, REPAIR, CLEANUP, OR
DETOXIFICATION AND THE PREPARATION AND IMPLEMENTATION OF ANY
CLOSURE, REMEDIAL, OR OTHER PLANS), OR (C) THE LOAN DOCUMENTS OR
ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN OR THE USE OF PROCEEDS
OF ANY LOAN, TO THE EXTENT THAT ANY OF THE INDEMNIFIED LIABILITIES
RESULTS, DIRECTLY OR INDIRECTLY, FROM ANY CLAIM MADE OR ACTION,
SUIT, OR PROCEEDING COMMENCED BY OR ON BEHALF OF ANY
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PERSON OTHER THAN THE INDEMNIFIED PARTIES (PROVIDED THAT, NO
INDEMNIFIED PARTY SHALL HAVE THE RIGHT TO BE INDEMNIFIED HEREUNDER
FOR ITS OWN FRAUD, GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT OR FOR
ANY INDEMNIFIED LIABILITIES ARISING FROM ANY DISPUTE AMONG
INDEMNIFIED PARTIES, LENDERS OR PARTICIPANTS EXCEPT FOR INDEMNIFIED
LIABILITIES ATTRIBUTED TO ACTIONS OF ANY COMPANY, RYDER OR ANY
AFFILIATE).
(b) The foregoing agreements shall:
(i) Survive (1) the foreclosure of any Lien
or any transfer in lieu of foreclosure, (2) the repayment
of the Loans, (3) the release of any or all Liens of
Administrative Agent for the benefit of Lenders, or (4)
the sale or other transfer of any Real Property or other
Collateral to any Person;
(ii) Not be limited in amount, even if that
amount exceeds the amount of the Loans;
(iii) Include (but not be limited to) (1)
damages to persons, property, or natural resources arising
under any statutory or common Law, (2) punitive damages,
fines, and other penalties, and (3) loss of value of any
Real Property or other Collateral;
(iv) Not be affected by (1) any act or
omission of any Tribunal or other third party, or (2) the
source or origin of any Hazardous Substance; and
(v) Not be affected by Administrative Agent,
Documentation Agent or any Lender's or any other
Indemnified Party's (1) investigation or actual or
constructive knowledge, (2) ordinary negligent act or
omission, or (3) course of dealing or waiver; provided,
however, the Companies shall not be obligated under this
Section for any Environmental Liability caused solely by
Administrative Agent or any Lender's knowing violation of
an Environmental Law or caused solely by the gross
negligence or willful misconduct of Administrative Agent
or any Lender.
7.21 Loans, Advances, and Investments. Except as permitted by
SECTION 7.22 or SECTION 7.26, no Company shall make or permit to remain
outstanding any loan, advance, extension of credit, or capital contribution
to, make any investment in, or purchase or commit to purchase any stock or
other securities or evidences of Debt of, or interests in, any other
Person, other than:
(a) investments existing on the initial Borrowing Date
and described on SCHEDULE 7.21;
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(b) the capital stock of a Subsidiary owned on the
initial Borrowing Date and listed on SCHEDULE 6.3;
(c) advances to employees to meet expenses incurred by
such employees or in connection with relocation by employees, in
each case in the ordinary course of business;
(d) loans, advances and investments between Borrower
and any Restricted Company listed on SCHEDULE 6.3 as of the initial
Borrowing Date or between Restricted Companies listed on SCHEDULE
6.3 as of the initial Borrowing Date;
(e) obligations of, or fully guaranteed by, the United
States of America (including repurchase obligations) maturing
within one year from the date of acquisition;
(f) short term certificates of deposit and time
deposits, which mature in one year from the date of issuance and
which are fully insured by the Federal Deposit Insurance
Corporation or are issued by any Lender or by commercial banks
organized under the Laws of the United States or any state thereof,
Canada, western Europe, or Japan, with a long term debt rating of
"A" or better by Standard & Poors Corporation or of "A2" or better
by Moody's Investors Service, Inc. or with a short term commercial
paper rating of "A1" or better by Standard & Poors Corporation or
"P1" or better by Moody's Investors Service, Inc.;
(g) commercial paper maturing in 270 days or less from
the date of issuance and rated not less than "P-1" by Moody's
Investors Service, Inc., or not less than "A-1" by Standard & Poors
Corporation;
(h) readily marketable tax-free municipal bonds of a
domestic issuer maturing in three years or less from the date of
acquisition thereof, which are rated "aaa" or better by Moody's
Investors Service, Inc., or "AAA" or better by Standard & Poors
Corporation;
(i) demand deposit accounts maintained in the ordinary
course of business;
(j) Loans and advances to, and investments in, foreign
Designated Subsidiaries that do not exceed at any time $2,000,000
in the aggregate for all foreign Designated Subsidiaries or
$500,000 for any foreign Designated Subsidiary;
(k) investments by the Restricted Companies in joint
ventures, subject to the limitations set forth in SECTION 7.24, so
long as (i) such entity is established in the ordinary course of
business on an arm's length basis and no Company has any liability
for the obligations of the joint venture or any other partner,
joint venturer, or other Person with respect thereto, (ii) such
joint venture has no Debt which is recourse to any Company or its
assets, and (iii) Administrative Agent, for the benefit of Lenders,
has a perfected first priority security interest in 100% (or, in
the case of foreign joint ventures, 65%) of the equity interest
owned by the Restricted Companies; and
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<PAGE> 69
(l) Loans and advances to, investments in, and LCs
issued on behalf of foreign Subsidiaries (excluding foreign
Designated Subsidiaries) in which Administrative Agent, for the
benefit of Lenders, has a perfected first priority security
interest in 65% of the stock or other equity interest, that do not
exceed at any time in the aggregate for all such Subsidiaries
$30,000,000 during calendar year 1996, $31,000,000 during calendar
year 1997, $32,000,000 during calendar year 1998, $33,000,000
during calendar year 1999, $34,000,000 during calendar year 2000,
and $35,000,000 during calendar year 2001.
7.22 Dividends and Distributions. No Company shall directly or
indirectly declare, make, or pay any Distribution other than (a)
Distributions declared, made, or paid by Borrower wholly in the form of its
capital stock, (b) Distributions by any Company to Borrower, (c) cash
dividends on its stock and/or stock repurchases in an aggregate amount not
to exceed $1,000,000 per fiscal year at such time as the ratio of Funded
Debt to EBITDA shall not have exceeded 3.0 to 1 for four consecutive
quarters and no Default or Potential Default exists, and (d) other
Distributions in an amount not to exceed $250,000 in the aggregate during
the term of this Agreement. No Company shall enter into or permit to exist
any arrangement or agreement which directly or indirectly prohibits any
Subsidiary from making any Distribution to Borrower.
7.23 Disposition of Assets. No Company shall sell, assign,
lease, transfer, or otherwise dispose of any of its assets other than (a)
sales or leases of inventory in the ordinary course of business, (b) the
sale, discount, or transfer of delinquent accounts receivable in the
ordinary course of business for purposes of collection, (c) occasional
sales of immaterial assets and dispositions of obsolete assets for
consideration not less than the fair market value thereof and in a
cumulative amount not in excess of $2,500,000, and (d) sales, leases, or
other dispositions from a Company to a Restricted Company. No Company
shall enter into any sale-leaseback arrangement with any Person pursuant to
which such Company shall lease any asset (whether now owned or hereafter
acquired) if such asset has been or is to be sold or transferred by any
Company to any other Person unless the proceeds from such sale are at least
as great as the fair market value of the asset which has been or is to be
sold and all proceeds from such sale are applied as a prepayment of the
Obligation (accompanied, in the case of a prepayment under the Revolving
Credit Facility, by a corresponding reduction of the aggregate Committed
Sums under the Revolving Credit Facility) and no Default or Potential
Default exists at the time of such sale or would exist after giving effect
to such transaction.
7.24 Capital Expenditures. The Companies shall not directly or
indirectly make Capital Expenditures except Capital Expenditures by the
Companies that do not exceed the following amounts:
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<PAGE> 70
<TABLE>
<CAPTION>
Period Maximum Amount Permitted
------ ------------------------
<S> <C>
September 26, 1996 to December 31, 1997 $2,750,000
January 1, 1998 to December 31, 1998 $2,000,000
January 1, 1999 to December 31, 1999 $3,000,000
January 1, 2000 to December 31, 2000 $3,000,000
January 1, 2001 to September 30, 2001 $3,000,000
</TABLE>
plus Capital Expenditures aggregating not more than $5,000,000 for the
purpose of replacing or upgrading of the computer systems of the Companies;
provided that Capital Expenditures by the foreign Subsidiaries may not
exceed $1,000,000 during any fiscal year. The amount of Capital
Expenditures permitted hereunder for any fiscal year shall be reduced by
the amount of investments during such fiscal year by the Restricted
Companies under SECTION 7.21(K).
7.25 Mergers and Dissolutions. No Company shall, directly or
indirectly, merge or consolidate with any other Person, other than (a)
mergers among wholly-owned Restricted Companies, provided that, in any
merger involving Borrower, Borrower must be the surviving entity and in any
merger involving a foreign Company and a domestic Company, the domestic
Company must be the surviving entity; (b) mergers among foreign
Subsidiaries (excluding the Designated Subsidiaries) so long as
Administrative Agent, for the benefit of Lenders, has a first and prior
perfected Lien on 65% of the stock of the surviving Subsidiary, and
opinions and other evidences satisfactory to Administrative Agent have been
delivered; (c) as previously approved by Required Lenders, or (d) mergers
of Designated Subsidiaries with and into other Companies. Other than
liquidations, dissolutions or mergers permitted under this SECTION 7.25 and
sales of assets permitted pursuant to SECTION 7.23, no Restricted Company
shall liquidate, wind up, or dissolve (or suffer any liquidation or
dissolution).
7.26 Conduct and Scope of Business. No Company will engage in
any business other than the businesses conducted by the Companies on the
date of this Agreement and businesses reasonably related thereto, and the
Companies as a whole will not discontinue any of their material businesses
or operations, except as a result of the discontinuance of business by the
Designated Subsidiaries.
7.27 Financial Covenants. As calculated on a consolidated
basis for Borrower and its Subsidiaries:
(a) Borrower shall not permit the ratio of its Funded
Debt to EBITDA as of the end of any fiscal quarter listed below,
calculated in the case of EBITDA, for the four fiscal quarters then
ended (except that with respect to the fiscal quarters ending prior
to June 30, 1997, such calculation shall be made for the period
beginning July 1, 1996, through the date of calculation, and at
December 31, 1996 shall be calculated on the basis of 2 times
EBITDA and at March 31, 1997 shall be calculated on the basis of
4/3 times EBITDA), to exceed the following:
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<PAGE> 71
<TABLE>
<CAPTION>
Period Maximum Ratio Permitted
------ -----------------------
<S> <C>
December 31, 1996 4.0 to 1
March 31, 1997 4.25 to 1
June 30, 1997 to September 30, 1997 4.0 to 1
December 31, 1997 3.75 to 1
March 31, 1998 to September 30, 1998 3.5 to 1
December 31, 1998 3.25 to 1
March 31, 1999 to September 30, 1999 2.75 to 1
December 31, 1999 to September 30, 2000 2.5 to 1
December 31, 2000 and thereafter 2.0 to 1
</TABLE>
(b) Borrower shall never permit its Fixed Charge
Coverage Ratio as of the end of any fiscal quarter during the
applicable period listed below, for the four fiscal quarters ending
on such date (except that with respect to the fiscal quarters
ending prior to June 30, 1997, such calculation shall be made for
the period beginning July 1, 1996, through the date of
calculation), to be less than the following:
<TABLE>
<CAPTION>
Period Minimum Ratio Permitted
------ -----------------------
<S> <C>
December 31, 1996 to December 31, 1997 2.0 to 1
March 31, 1998 and thereafter 1.5 to 1
</TABLE>
(c) Borrower shall not permit the ratio of the Current
Ratio of Borrower and its consolidated Subsidiaries (as calculated
at the end of each of its fiscal quarters in accordance with GAAP)
to be less than the following:
<TABLE>
<CAPTION>
Period Minimum Ratio Permitted
------ -----------------------
<S> <C>
December 31, 1996 and thereafter 1.25 to 1
</TABLE>
(d) Borrower shall never permit the Tangible Net Worth
of Borrower and its consolidated Subsidiaries (as calculated at the
end of each of its fiscal quarters) to be less than $23,000,000,
plus the sum of 75% of the consolidated net income of Borrower and
its consolidated Subsidiaries for each fiscal quarter ending after
December 31, 1996 (with no deduction if consolidated net income is
a deficit figure), and 100% of the net proceeds received by any
Company from the sale of stock or other equity.
(e) Borrower shall not at any time permit the
aggregate rental expenses of the Companies of a capital and
operating nature to exceed the following:
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<PAGE> 72
<TABLE>
<CAPTION>
Period Maximum Amount Permitted
------ ------------------------
<S> <C>
September 26, 1996 to December 31, 1997 $10,000,000
January 1, 1998 to December 31, 1998 9,000,000
January 1, 1999 to December 31, 1999 9,500,000
January 1, 2000 to December 31, 2000 10,000,000
January 1, 2001 to December 31, 2001 10,500,000
</TABLE>
7.28 Designated Subsidiaries. At the option of the Companies,
the foreign Designated Subsidiaries may continue to operate their
respective businesses, subject to the limitations on investments in such
Subsidiaries as set forth in SECTION 7.21(J), or the Designated
Subsidiaries may be liquidated, dissolved or merged into another Company
or, so long as no Restricted Company is materially adversely affected,
dissolved through an insolvency proceeding.
7.29 After-Acquired Property. Concurrently upon any Restricted
Company acquiring any additional interest in real property having a value
in excess of $500,000 in any acquisition or a series of acquisitions, such
Company shall execute and deliver, at the request of Required Lenders,
additional mortgages, deeds of trust or other collateral assignments
satisfactory in form and substance to Administrative Agent, granting to
Administrative Agent, for the benefit of Lenders and LC Fronting Bank, a
first priority Lien in such real property, and shall deliver surveys,
appraisals, environmental reports and title insurance policies as may be
required by Majority Lenders and satisfactory in amount, form and substance
to Administrative Agent. Prior to any Restricted Company maintaining
assets with an aggregate value in excess of $1,000,000 at any leased
business location, such Company shall use reasonable best efforts to cause
to be executed and delivered to Administrative Agent an estoppel and
subordination agreement executed and acknowledged by the lessor thereof,
waiving or subordinating its landlord's Liens, if any, to the Liens in
favor of Lenders and otherwise upon terms reasonably satisfactory to
Administrative Agent. The Companies agree to use reasonable best efforts
to deliver to Administrative Agent on or before February 28, 1997 estoppel
and subordination agreements executed by the lessors of each leasehold
interest listed on SCHEDULE 7.29. Administrative Agent agrees that the
form of Landlord Estoppel attached hereto as EXHIBIT K is satisfactory to
it. Within thirty days after any Restricted Company maintains equipment
and other fixed assets with an aggregate book value in excess of $1,000,000
at any business location, other than locations at which such filing is
prohibited by the terms of the lease for such location and for which no
consent or waiver may be obtained, such Company shall deliver to
Administrative Agent a UCC fixture filing in form and substance
satisfactory to Administrative Agent for such location.
7.30 After-Acquired Subsidiaries. Concurrently upon the
formation or acquisition by any Restricted Company of any Subsidiary after
the date hereof (an "AFTER-ACQUIRED SUBSIDIARY"), such Company shall pledge
all (or, in the case of a foreign After-Acquired Subsidiary, 65%) of its
stock or other equity interest in the After-Acquired Subsidiary and shall
cause the After-Acquired Subsidiary (other than a foreign After-Acquired
Subsidiary) to deliver articles of incorporation, bylaws, and resolutions
and such opinions as Administrative Agent shall require and to execute a
Guaranty and such mortgages, security agreements and other collateral
documents, in the same form as the Security Documents, as shall be required
by Administrative Agent to create first priority Liens
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in favor of Administrative Agent, for the benefit of Lenders, in
substantially all the assets of such After-Acquired Subsidiary.
7.31 Delivery of Certain Collateral and Lien Releases. On or
before February 28, 1997, Borrower shall deliver or cause to be delivered
(a) to Administrative Agent (with sufficient copies for Lenders) a Pledge
Agreement in substantially the form of EXHIBIT C-1, executed by Borrower
and in substantially the form of EXHIBIT C-2, executed by each Subsidiary
organized under the Laws of the United States that owns equity interests in
any foreign Subsidiary, covering 65% of the stock or other equity interest
of all foreign Subsidiaries, together with stock certificates evidencing
the stock pledged thereunder and blank stock powers for such certificates,
in form and substance satisfactory to Administrative Agent and
Documentation Agent, and (b) to Administrative Agent evidence of the
release of all Liens upon the assets of foreign Subsidiaries which secure
the Debt owing under the Existing Credit Agreement.
SECTION 8 DEFAULT. The term "DEFAULT" means the occurrence and
continuance of any one or more of the following events:
8.1 Payment of Obligation. The failure or refusal of any
Company to pay (a) Principal Debt when the same becomes due and payable in
accordance with the Loan Documents, or (b) interest, fees, or any other
part of the Obligation (other than as set forth in CLAUSES (C) and (D))
within three (3) Business Days after the same becomes due and payable in
accordance with the Loan Documents; (c) the indemnifications and
reimbursements provided for in SECTIONS 3.15 through 3.18 within ten (10)
Business Days after demand therefor or as otherwise required by such
Sections; or (d) the failure of the Company to punctually and properly
perform, observe, and comply with SECTION 7.20 or with any other provision
in the Loan Documents setting forth indemnification or reimbursement
obligations (other than pursuant to SECTIONS 3.15 through 3.18) of the
Companies, and such failure or refusal continues for fifteen (15) days.
8.2 Covenants. The failure or refusal of Borrower (and, if
applicable, any other Company) to punctually and properly perform, observe,
and comply with:
(a) Any covenant, agreement, or condition contained in
SECTIONS 7.1, 7.8(A) (as it relates to corporate existence), 7.13,
7.14, 7.15, 7.17, and 7.21 THROUGH 7.27; or
(b) Any covenant, agreement, or condition contained in
SECTION 7.3, and such failure or refusal continues for fifteen (15)
days; or
(c) Any other covenant, agreement, or condition
contained in any Loan Document (other than the covenants to pay the
Obligation set forth in SECTION 8.1 and the covenants in CLAUSES
(A) and (B) preceding), and such failure or refusal continues for
30 days.
8.3 Debtor Relief. Any Restricted Company (a) shall fail to
pay its Debts generally as they become due, (b) shall voluntarily seek,
consent to, or acquiesce in the benefit of any Debtor Relief
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<PAGE> 74
Law with respect to it or any substantial part of its property, assets or
business, or (c) shall become a party to or is made the subject of any
proceeding provided for by any Debtor Relief Law with respect to it or any
substantial part of its property, assets or business, other than as a
creditor or claimant, (unless, in the event such proceeding is involuntary,
the petition instituting same is dismissed within 60 days after its
filing).
8.4 Judgments and Attachments. Any Company fails, within 60
days after entry, to pay, bond, or otherwise discharge any judgment or
order for the payment of money the uninsured portion of which is in excess
of $1,000,000 (individually or collectively) or any warrant of attachment,
sequestration, or similar proceeding against any Company's assets having a
value (individually or collectively) of $1,000,000, which in each such case
is not either (a) stayed on appeal or (b) in the case of any attachment,
sequestration or similar proceeding, being diligently contested in good
faith by appropriate proceedings and adequate reserves have been set aside
on the books of such Company in accordance with GAAP and as to which no
foreclosure proceeding has been commenced against any property that has not
been stayed.
8.5 Government Action. (a) A final non-appealable order is
issued by any Tribunal, including, but not limited to, the United States
Justice Department, seeking to cause any Restricted Company to divest a
substantial portion of its assets pursuant to any antitrust, restraint of
trade, unfair competition, industry regulation, or similar Laws, or (b) any
Tribunal shall condemn, seize, or otherwise appropriate, or take custody or
control of all or any substantial portion of the assets of any Restricted
Company, which in the case of either (A) or (B) would be a Material Adverse
Event.
8.6 Misrepresentation. Any representation or warranty made by
any Company contained in any Loan Document shall at any time prove to have
been incorrect in any material respect when made in light of the
circumstances in which made.
8.7 Change of Control. A Change of Control shall occur.
For the purpose of this Section, a "CHANGE OF CONTROL" shall be deemed to
have occurred if:
(a) a third person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), but excluding any employee benefit plan or
plans of Borrower and its subsidiaries and affiliates, becomes the
beneficial owner, directly or indirectly, of twenty percent (20%)
or more of the combined voting power of Borrower's outstanding
voting securities ordinarily having the right to vote for the
election of directors of Borrower; or
(b) the individuals who, as of September 26, 1996
constituted the Board of Directors of Borrower (the "BOARD"
generally and as of September 26, 1996 the "INCUMBENT BOARD")
cease for any reason to constitute at least two-thirds (2/3) of the
Board, or in the case of a merger or consolidation of Borrower, do
not constitute or cease to constitute at least two-thirds (2/3) of
the board of directors of the surviving company (or in a case where
the surviving corporation is controlled, directly or indirectly, by
another corporation or entity
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<PAGE> 75
do not constitute or cease to constitute at least two-thirds (2/3)
of the board of such controlling corporation or do not have or
cease to have at least two-thirds (2/3) voting seats on any body
comparable to a board of directors of such controlling entity or,
if there is no body comparable to a board of directors, at least
two-thirds (2/3) voting control of such controlling entity),
provided that any person becoming a director (or, in the case of a
controlling non-corporate entity, obtaining a position comparable
to a director or obtaining a voting interest in such entity)
subsequent to September 26, 1996, whose election, or nomination for
election, was approved by a vote of the persons comprising at least
two-thirds (2/3) of the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent
Board.
8.8 Default Under Other Agreements. (a) Any Company fails to
pay when due any Funded Debt (other than the Obligation) or any obligation
under any Material Agreement in excess (individually or collectively) of
$2,500,000; (b) any breach exists under any agreement to which any Company
is a party which results in the acceleration of the maturity of any Funded
Debt or of any obligation under any Material Agreement in excess
(individually or collectively) of $2,500,000 or permits (or, with the
giving of notice or lapse of time or both, would permit) the holder of such
Funded Debt or a party to such Material Agreement or a Person acting on
such Person's behalf to accelerate the maturity thereof; or (c) any Funded
Debt or any obligation under any Material Agreement in excess (individually
or collectively) of $2,500,000 shall be declared to be due and payable or
required to be prepaid by any Company prior to the stated maturity thereof.
8.9 Employee Benefit Plans. Any of the following exists with
respect to any Employee Plan of any Company, but only where a Material
Adverse Event could result: (a) a Reportable Event; (b) disqualification
or involuntary termination proceedings; (c) voluntary termination
proceedings are initiated while a funding deficiency (as determined under
section 412 of the Code) exists; (d) withdrawal liability exists with
respect to a Multiemployer Plan; (e) a trustee is appointed by any federal
district court or the PBGC to administer an Employee Plan; (f) termination
proceedings are initiated by the PBGC; or (g) failure by any Company to
promptly notify Administrative Agent upon such Company's receipt of notice
of any proceeding or other actions which may result in termination of an
Employee Plan if such proceeding or termination could constitute a Material
Adverse Event.
8.10 Validity and Enforceability of Loan Documents. Any Loan
Document shall, at any time after its execution and delivery and for any
reason, cease to be in full force and effect in any material respect or be
declared to be null and void or the validity or enforceability thereof be
contested by any Company party thereto or any Company shall deny that it
has any liability or obligations under any Loan Document to which it is a
party.
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SECTION 9 RIGHTS AND REMEDIES.
9.1 Remedies Upon Default.
(a) If a Default exists under SECTION 8.3(B) or (C),
the commitment to extend credit hereunder shall automatically
terminate and the entire unpaid balance of the Obligation shall
automatically become due and payable without any action or notice
of any kind whatsoever.
(b) If any Default exists other than as set forth in
SECTION 9.1(A) with respect to a Default under SECTION 8.3(B) or
(C), Administrative Agent may (in the case of (I) and (II) below
with the consent of Required Lenders), and, subject to the terms of
SECTION 10, shall upon the request of Required Lenders or Required
Lenders' may, do any one or more of the following: (i) if the
maturity of the Obligation has not already been accelerated under
SECTION 9.1(A), declare the entire unpaid balance of the
Obligation, or any part thereof, immediately due and payable,
whereupon it shall be due and payable; (ii) terminate the
commitments of Lenders to extend credit or issue LCs hereunder;
(iii) reduce any claim to judgment; (iv) to the extent permitted by
Law, exercise (or request each Lender to, and each Lender shall be
entitled to, exercise) the Rights of offset or banker's Lien
against the interest of any Company in and to every account and
other property of any Company which are in the possession of
Administrative Agent or any Lender to the extent of the full amount
of any past due portion of the Obligation (to the extent permitted
by Law, each Company being deemed directly obligated to each Lender
in the full amount of the Obligation for such purposes); (v)
demand, at any time after the occurrence and during the continuance
of a Default in the payment of Principal Debt or interest thereon,
that Borrower provide cash collateral in an account with
Administrative Agent in an amount equal to 102% of the LC Exposure
then existing; and (vi) exercise any and all other legal or
equitable Rights afforded by the Loan Documents, the Laws of the
State of Texas or any other applicable jurisdiction as
Administrative Agent shall deem appropriate, or otherwise,
including, but not limited to, the Right to bring suit or other
proceedings before any Tribunal either for specific performance of
any covenant or condition contained in any of the Loan Documents or
in aid of the exercise of any Right granted to Administrative Agent
or any Lender in any of the Loan Documents.
9.2 Company Waivers. To the extent permitted by Law, each
Company hereby waives presentment and demand for payment, protest, notice
of intention to accelerate, notice of acceleration, and notice of protest
and nonpayment, and agrees that its liability with respect to the
Obligation, or any part thereof, shall not be affected by any renewal or
extension in the time of payment of the Obligation, by any indulgence, or
by any release or change in any security for the payment of the Obligation.
9.3 Performance by Administrative Agent. If any covenant,
duty, or agreement of any Company is not performed in accordance with the
terms of the Loan Documents, after the occurrence and during the
continuance of a Default, Administrative Agent may, at its option (but
subject to the
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approval of Required Lenders), perform or attempt to perform such covenant,
duty, or agreement on behalf of such Company. In such event, any amount
expended by Administrative Agent in such performance or attempted
performance shall be payable by the Companies, jointly and severally, to
Administrative Agent on demand, shall become part of the Obligation, and
shall bear interest at the Default Rate from the date of such expenditure
by Administrative Agent until paid. Notwithstanding the foregoing, it is
expressly understood that Administrative Agent does not assume and shall
never have, except by its express written consent, any liability or
responsibility for the performance of any covenant, duty, or agreement of
any Company.
9.4 Delegation of Duties and Rights. Lenders may perform any
of their duties or exercise any of their Rights under the Loan Documents by
or through their respective Representatives.
9.5 Not in Control. None of the covenants or other provisions
contained in any Loan Document shall, or shall be deemed to, give
Administrative Agent or Lenders the Right to exercise control over the
assets (including, without limitation, real property), affairs, or
management of any Company, the power of Administrative Agent or Lenders
being limited to the Right to exercise the remedies provided in SECTION 9.
All rights or powers that Administrative Agent and Lenders have under the
Loan Documents exist solely to preserve and protect the Collateral and to
assure payment and performance of the Obligation. All rights or powers
that Administrative Agent or any Lender exercises pursuant to the Loan
Documents shall be exercised in a manner calculated by Lender in its good
faith business judgment to preserve and protect the Collateral and to
assure payment and performance of the Obligation. Nothing in the Loan
Documents shall be construed as giving Administrative Agent or any Lender
any right or power to (i) preclude or interfere with any Company's
compliance with any Law, (ii) to require any act or omission by any Company
that may be harmful to persons or property, or (iii) exercise control over
the affairs or management of any Company.
9.6 Course of Dealing. The acceptance by Administrative Agent
or Lenders at any time and from time to time of partial payment on the
Obligation shall not be deemed to be a waiver of any Default then existing.
No waiver by Administrative Agent, Required Lenders, or Lenders of any
Default shall be deemed to be a waiver of any other then-existing or
subsequent Default. No delay or omission by Administrative Agent, Required
Lenders, or Lenders in exercising any Right under the Loan Documents shall
impair such Right or be construed as a waiver thereof or any acquiescence
therein, nor shall any single or partial exercise of any such Right
preclude other or further exercise thereof, or the exercise of any other
Right under the Loan Documents or otherwise.
9.7 Cumulative Rights. All Rights available to Administrative
Agent and Lenders under the Loan Documents are cumulative of and in
addition to all other Rights granted to Administrative Agent and Lenders at
law or in equity, whether or not the Obligation is due and payable and
whether or not Administrative Agent or Lenders have instituted any suit for
collection, foreclosure, or other action in connection with the Loan
Documents.
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9.8 Application of Proceeds. Any and all proceeds ever
received by Administrative Agent or Lenders from the exercise of any Rights
under SECTION 9 pertaining to the Obligation shall be applied to the
Obligation in the order and manner set forth in SECTION 3.10(B).
9.9 Diminution in Value of Collateral. Neither Administrative
Agent, Documentation Agent, nor any Lender shall have any liability or
responsibility whatsoever for any diminution in or loss of value of any
Collateral now or hereafter securing payment or performance of all or part
of the Obligation, subject to the provisions of the Loan Documents.
9.10 Certain Proceedings. Borrower will promptly execute and
deliver, or cause the execution and delivery of, all applications,
certificates, instruments, registration statements, and all other documents
and papers Administrative Agent or Lenders may reasonably request in
connection with the obtaining of any consent, approval, registration,
qualification, permit, license, or authorization of any Tribunal or other
Person necessary or appropriate for the effective exercise of any Rights
under the Loan Documents. Because Borrower agrees that Administrative
Agent's and Lenders' remedies at Law for failure of Borrower to comply with
the provisions of this paragraph would be inadequate and that such failure
would not be adequately compensable in damages, Borrower agrees that the
covenants of this paragraph may be specifically enforced.
SECTION 10 AGREEMENT AMONG LENDERS.
10.1 Administrative Agent.
(a) Each Lender and LC Fronting Bank hereby appoints
Administrative Agent (and Administrative Agent hereby accepts such
appointment) as its nominee and agent, in its name and on its
behalf: (i) to act as nominee for and on behalf of such Lender and
LC Fronting Bank in and under all Loan Documents; (ii) to arrange
the means whereby the funds of Lenders and LC Fronting Bank are to
be made available to Borrower under the Loan Documents; (iii) to
take such action as may be requested by any Lender or LC Fronting
Bank under the Loan Documents (when such Lender or LC Fronting Bank
is entitled to make such request under the Loan Documents and after
such requesting Lender or LC Fronting Bank has obtained the
concurrence of such other Lenders as may be required under the Loan
Documents); (iv) to receive all documents and items to be furnished
to Lenders and LC Fronting Bank under the Loan Documents; (v) to be
the secured party, mortgagee, beneficiary, and similar party in
respect of, and to receive, as the case may be, any Collateral for
the benefit of Lenders and LC Fronting Bank; (vi) to promptly
distribute to each Lender and LC Fronting Bank all items delivered
by Borrower pursuant to SECTION 7.3 and other material information,
requests, documents, and items received from Borrower under the
Loan Documents; (vii) to promptly distribute to each Lender and LC
Fronting Bank its ratable part of each payment or prepayment
(whether voluntary, as proceeds of collateral upon or after
foreclosure, as proceeds of insurance thereon, or otherwise) in
accordance with the terms of the Loan Documents; and (viii) to
deliver to the appropriate Persons requests, demands,
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approvals, and consents received from Lenders and LC Fronting Bank;
provided, however, Administrative Agent shall not be required to
take any action which is contrary to the Loan Documents or
applicable Law.
(b) Administrative Agent may resign as Administrative
Agent under the Loan Documents at any time upon at least 30 days
prior written notice to Borrower, LC Fronting Bank and Lenders, and
may be removed as Administrative Agent under the Loan Documents at
any time with cause by Required Lenders. Should the initial or any
successor Administrative Agent ever cease to be a party hereto or
should the initial or any successor Administrative Agent ever
resign or be removed as Administrative Agent, then Required Lenders
shall elect the successor Administrative Agent from among the
Lenders (other than the resigning Administrative Agent) with the
consent of Borrower (which consent shall not be unreasonably
withheld). If no successor Administrative Agent shall have been so
appointed within 30 days after the retiring Administrative Agent's
giving of notice of resignation or the Required Lenders' removal of
the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of Lenders and LC Fronting Bank, appoint a
successor Administrative Agent, which shall be a commercial bank
having a combined capital and surplus of at least $1,000,000,000.
Upon the acceptance of any appointment as Administrative Agent
under the Loan Documents by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and
become vested with all the Rights of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations of Administrative Agent under the
Loan Documents, and each Lender and LC Fronting Bank shall execute
such documents as any Lender or LC Fronting Bank may reasonably
request to reflect such change in and under the Loan Documents.
After any retiring Administrative Agent's resignation or removal as
Administrative Agent under the Loan Documents, the provisions of
this SECTION 10 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Administrative Agent
under the Loan Documents.
(c) Administrative Agent, in its capacity as a Lender,
shall have the same Rights under the Loan Documents as any other
Lender and may exercise the same as though it were not acting as
Administrative Agent; the term "Lender" shall, unless the context
otherwise indicates, include Administrative Agent; and any
resignation, or removal of by Administrative Agent hereunder shall
not impair or otherwise affect any Rights which it has or may have
in its capacity as an individual Lender. Each Lender, LC Fronting
Bank and Borrower agree that Administrative Agent is not a
fiduciary for Lenders, LC Fronting Bank or for Borrower but simply
is acting in the capacity described herein to alleviate
administrative burdens for Borrower, Lenders and LC Fronting Bank,
that Administrative Agent has no duties or responsibilities to
Lenders, LC Fronting Bank, or Borrower except those expressly set
forth herein, and that Administrative Agent in its capacity as a
Lender has all Rights of any other Lender. In performing its
duties as Administrative Agent hereunder, Administrative Agent will
use the same care as it takes in connection with Loans in which it
alone is interested, subject to the limitations on liabilities
contained in this SECTION 10.
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(d) Administrative Agent may now or hereafter be
engaged in one or more loan, letter of credit, leasing, or other
financing transactions with Borrower, act as trustee or depositary
for Borrower, or otherwise be engaged in other transactions with
Borrower (collectively, the "OTHER ACTIVITIES") not the subject of
the Loan Documents. Without limiting the Rights of Lenders and LC
Fronting Bank specifically set forth in the Loan Documents,
Administrative Agent shall not be responsible to account to Lenders
or LC Fronting Bank for such other activities, and no Lender or LC
Fronting Bank shall have any interest in any other activities, any
present or future guaranties by or for the account of Borrower
which are not contemplated or included in the Loan Documents, any
present or future offset exercised by Administrative Agent in
respect of such other activities, any present or future property
taken as security for any such other activities, or any property
now or hereafter in the possession or control of Administrative
Agent which may be or become security for the obligations of
Borrower arising under the Loan Documents by reason of the general
description of indebtedness secured or of property contained in any
other agreements, documents or instruments related to any such
other activities; provided that, if any payments in respect of such
guaranties or such property or the proceeds thereof shall be
applied to reduction of the obligations of Borrower arising under
the Loan Documents, then each Lender shall be entitled to share in
such application ratably.
10.2 Expenses. Upon demand by Administrative Agent, LC
Fronting Bank, Documentation Agent, or Syndication Agent, each Lender shall
pay its Pro Rata Part of any expenses (including, without limitation, court
costs, attorneys' fees and other costs of collection) incurred by
Administrative Agent, LC Fronting Bank, Documentation Agent or Syndication
Agent in connection with any of the Loan Documents if Administrative Agent,
LC Fronting Bank, Documentation Agent or Syndication Agent does not receive
reimbursement therefor from other sources within 60 days after incurred;
provided that each Lender shall be entitled to receive its Pro Rata Part of
any reimbursement for such expenses, or part thereof, which Administrative
Agent, LC Fronting Bank, Documentation Agent or Syndication Agent
subsequently receives from such other sources.
10.3 Proportionate Absorption of Losses. Except as herein
provided, nothing in the Loan Documents shall be deemed to give any Lender
any advantage over any other Lender insofar as the Obligation arising under
the Loan Documents is concerned, or to relieve any Lender from ratably
absorbing any losses sustained with respect to the Obligation (except to
the extent unilateral actions or inactions by any Lender result in any
credit, allowance, setoff, defense, or counterclaim solely with respect to
all or any part of such Lender's Pro Rata Part of the Obligation).
10.4 Delegation of Duties; Reliance. Administrative Agent,
Documentation Agent, LC Fronting Bank, and Syndication Agent may perform
any of their respective duties or exercise any of their respective Rights
under the Loan Documents by or through their respective Representatives.
Administrative Agent, Documentation Agent, LC Fronting Bank, Syndication
Agent and their respective Representatives shall (a) be entitled to rely
upon (and shall be protected in relying upon) any writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telecopy,
telegram, telex or teletype message, statement, order, or other documents
or conversation believed to be
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genuine and correct and to have been signed or made by the proper Person
and, with respect to legal matters, upon opinion of counsel, (b) be
entitled to deem and treat each Lender as the owner and holder of its Pro
Rata Part of the Principal Debt for all purposes until, subject to SECTION
11.14, written notice of the assignment or transfer thereof shall have been
given to and received by Administrative Agent (and any request,
authorization, consent, or approval of any Lender shall be conclusive and
binding on each Purchaser and Participant until such notice is given and
received), (c) not be deemed to have notice of the occurrence of a Default
unless a responsible officer of Administrative Agent, who handles matters
associated with the Loan Documents and transactions thereunder, has actual
knowledge thereof or Administrative Agent has been notified thereof by a
Lender or Borrower, or, in the case of LC Fronting Bank, has been notified
thereof by Administrative Agent, a Lender or Borrower, and (d) be entitled
to consult with legal counsel (including counsel for Borrower), independent
accountants and other experts and shall not be liable for any action taken
or omitted to be taken in good faith in accordance with the advice of such
counsel, accountants or experts.
10.5 Limitation of Liability.
(a) None of Administrative Agent, Documentation Agent,
LC Fronting Bank, Syndication Agent or any of their respective
Representatives shall be liable for any action taken or omitted to
be taken by it or them in good faith and believed by it or them to
be within the discretion or power conferred upon it or them or be
responsible for the consequences of any error of judgment, except
for fraud, gross negligence, or willful misconduct, and none of
Administrative Agent, Documentation Agent, LC Fronting Bank,
Syndication Agent, or any of their respective Representatives has a
fiduciary relationship with any Lender by virtue of the Loan
Documents or the transactions contemplated thereby (provided that
nothing herein shall negate the obligation of Administrative Agent
to account for funds received by it for the account of any Lender).
(b) Unless indemnified to its satisfaction against
loss, cost, liability, and expense, neither Administrative Agent
nor LC Fronting Bank shall be compelled to do any act under the
Loan Documents or to take any action toward the execution or
enforcement of the powers thereby created or to prosecute or defend
any suit in respect of the Loan Documents. If Administrative Agent
or LC Fronting Bank requests instructions from Lenders or Required
Lenders, as the case may be, with respect to any act or action
(including, but not limited to, any failure to act) in connection
with any Loan Document, Administrative Agent or LC Fronting Bank
shall be entitled (but shall not be required) to refrain (without
incurring any liability to any Person by so refraining) from such
act or action unless and until it has received such instructions.
In no event, however, shall Administrative Agent or LC Fronting
Bank, or any of their respective Representatives be required to
take any action which it or they determine could incur for it or
them criminal or onerous civil liability. Without limiting the
generality of the foregoing, no Lender shall have any right of
action against Administrative Agent or LC Fronting Bank as a result
of Administrative Agent's or LC Fronting Bank's
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acting or refraining from acting hereunder in accordance with the
instructions of Required Lenders (or all Lenders if required by
SECTION 11.12(B)).
(c) Neither Administrative Agent, LC Fronting Bank,
Documentation Agent, nor Syndication Agent shall be responsible in
any manner to any Lender or any Participant for, and each Lender
represents and warrants that it has not relied upon Administrative
Agent, LC Fronting Bank, Documentation Agent or Syndication Agent
in respect of, (i) the creditworthiness of any Company and the
risks involved to such Lender, (ii) the effectiveness,
enforceability, genuineness, validity, or the due execution of any
Loan Document, (iii) any representation, warranty, document,
certificate, report, or statement made therein or furnished
thereunder or in connection therewith, (iv) the existence,
priority, or perfection of any Lien hereafter granted or purported
to be granted under any Loan Document, or (v) observation of or
compliance with any of the terms, covenants, or conditions of any
Loan Document on the part of any Company. Each Lender agrees to
indemnify Administrative Agent, Documentation Agent, LC Fronting
Bank, Syndication Agent and their respective Representatives and
hold them harmless from and against (but limited to such Lender's
Pro Rata Part of) any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, reasonable
expenses, and reasonable disbursements of any kind or nature
whatsoever which may be imposed on, asserted against, or incurred
by them in any way relating to or arising out of the Loan Documents
or any action taken or omitted by them under the Loan Documents, to
the extent Administrative Agent, LC Fronting Bank, Documentation
Agent, Syndication Agent and their respective Representatives are
not reimbursed for such amounts by any Company (provided that,
Administrative Agent, LC Fronting Bank, Documentation Agent,
Syndication Agent and their Representatives shall not have the
right to be indemnified hereunder for its or their own fraud, gross
negligence, or willful misconduct).
10.6 Notice of Default; Instructions. Administrative Agent
shall promptly notify Lenders and LC Fronting Bank upon receipt by
Administrative Agent of notice from Borrower or any Lender that a Default
or Potential Default has occurred or upon becoming aware of any Default or
Potential Default. Upon the occurrence and continuance of a Default,
Lenders agree to promptly confer in order that Required Lenders or Lenders,
as the case may be, may agree upon a course of action for the enforcement
of the Rights of Lenders; and Administrative Agent shall be entitled to
refrain from taking any action (without incurring any liability to any
Person for so refraining) unless and until Administrative Agent shall have
received instructions from Required Lenders.
10.7 Limitation of Liability. To the extent permitted by Law,
(a) neither Administrative Agent, LC Fronting Bank, Documentation Agent nor
Syndication Agent (acting in their respective agent capacities) shall incur
any liability to any other Lender, Documentation Agent, Syndication Agent,
LC Fronting Bank, Administrative Agent, or Participant except for acts or
omissions resulting from its own gross negligence or willful misconduct,
and (b) neither Administrative Agent, LC Fronting Bank, Documentation Agent
nor Syndication Agent, Lender, or Participant shall incur any liability to
any other Person for any act or omission of any other Lender or any other
Participant.
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10.8 Relationship of Lenders. Nothing herein shall be
construed as creating a partnership or joint venture among Administrative
Agent, LC Fronting Bank, Documentation Agent, Syndication Agent, and
Lenders or among Lenders.
10.9 Collateral.
(a) In actions with respect to any property of any
Company, Administrative Agent is acting for the ratable benefit of
each Lender and LC Fronting Bank. Any and all agreements to
subordinate (whether made heretofore or hereafter) other
indebtedness or obligations of Borrower to the Obligation shall be
construed as being for the ratable benefit of each Lender and LC
Fronting Bank. If Administrative Agent acquires any security for
the Obligation or any guaranty of the Obligation upon or in lieu of
foreclosure, the same shall be held for the benefit of all Lenders
and LC Fronting Bank in proportion to their respective Pro Rata
Parts.
(b) Each Lender and LC Fronting Bank authorizes and
directs Administrative Agent to enter into the Security Documents
for the benefit of Lenders and LC Fronting Bank. The
Administrative Agent is hereby authorized on behalf of Lenders and
LC Fronting Bank to take any action with respect to any Collateral
or Security Documents which may be necessary to perfect and
maintain perfected the Liens upon the Collateral granted pursuant
to the Security Documents.
(c) The Lenders and LC Fronting Bank hereby authorize
Administrative Agent to release any Lien granted to or held by
Administrative Agent upon any Collateral (i) upon termination of
the commitments of lenders hereunder and payment and satisfaction
in full of the Obligation, and (ii) constituting assets or property
which has been disposed of and which disposition was permitted
under SECTION 7.23.
10.10 Benefits of Agreement. Except for the representations and
covenants in SECTIONS 10.1(C) and 10.9 in favor of Borrower, none of the
provisions of this SECTION 10 shall inure to the benefit of any Company or
any other Person other than Lenders and LC Fronting Bank; consequently,
neither any Company nor any other Person shall be entitled to rely upon, or
to raise as a defense, in any manner whatsoever, the failure of any Lender
or LC Fronting Bank to comply with such provisions.
10.11 LC Fronting Bank. LC Fronting Bank may resign as LC
Fronting Bank under the Loan Documents upon prior notice to Administrative
Agent and Borrower, subject to the appointment of a successor LC Fronting
Bank satisfactory to Borrower and Required Lenders.
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SECTION 11 MISCELLANEOUS.
11.1 Headings. The headings, captions, and arrangements used
in any of the Loan Documents are for convenience only and shall not be
deemed to limit, amplify, or modify the terms of the Loan Documents, nor
affect the meaning thereof.
11.2 Nonbusiness Days. In any case where any payment or action
is due under any Loan Document on a day which is not a Business Day, such
payment or action may be delayed until the next-succeeding Business Day,
but interest and fees shall continue to accrue in respect of any payment to
which it is applicable until such payment is in fact made; provided that,
if in the case of any such payment in respect of a LIBOR Rate Loan the
next-succeeding Business Day is in the next calendar month, then such
payment shall be made on the next-preceding Business Day.
11.3 Communications. Unless specifically otherwise provided,
whenever any Loan Document requires or permits any consent, approval,
notice, request, or demand from one party to another, such communication
must be in writing (which may be by telex or telecopy) to be effective and
shall be deemed to have been given (a) if by telex, when transmitted to the
telex number, if any, for such party, and the appropriate answerback is
received, (b) if by telecopy, when transmitted to the telecopy number for
such party (and all such communications sent by telecopy shall be confirmed
promptly thereafter by personal delivery or mailing in accordance with the
provisions of this section; provided, that any requirement in this
parenthetical shall not affect the date on which such telecopy shall be
deemed to have been delivered), (c) if by mail, on the third Business Day
after it is enclosed in an envelope, properly addressed to such party,
properly stamped, sealed, and deposited in the appropriate official postal
service, or (d) if by any other means, when actually delivered to such
party. Until changed by notice pursuant hereto, the address (and telex and
telecopy numbers, if any) for each Lender, and Administrative Agent is set
forth on SCHEDULE 2.1. Any such communication to Borrower or any Company
shall be addressed to:
Aviall, Inc.
2055 Diplomat Drive
Dallas, TX 75235
Attn: Treasurer with a copy to
General Counsel
Fax: (972) 406-6636
11.4 Form and Number of Documents. Each agreement, document,
instrument, or other writing to be furnished under any provision of this
Agreement must be in form and substance and in such number of counterparts
as may be reasonably satisfactory to Administrative Agent and Documentation
Agent.
11.5 Exceptions to Covenants. No Company shall take any action
or fail to take any action which is permitted as an exception to any of the
covenants contained in any Loan Document if such
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action or omission would result in the breach of any other covenant
contained in any of the Loan Documents.
11.6 Survival. All covenants, agreements, undertakings,
representations, and warranties made in any of the Loan Documents shall
survive all closings under the Loan Documents and, except as otherwise
indicated, shall not be affected by any investigation made by any party.
All rights of, and provisions relating to, reimbursement and
indemnification of Administrative Agent, Documentation Agent, LC Fronting
Bank, Syndication Agent or any Lender shall survive termination of this
Agreement and payment in full of the Obligation.
11.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND ANY
DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN BORROWER, ADMINISTRATIVE AGENT, LC
FRONTING BANK, DOCUMENTATION AGENT, SYNDICATION AGENT AND LENDERS IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN THE
MORTGAGES, IF ANY, WHICH ARE SUBJECT TO THE PROVISIONS SET FORTH THEREIN),
AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS
OF LAWS PROVISIONS) AND DECISIONS OF THE STATE OF TEXAS EXCEPT TO THE
EXTENT THE LAWS OF THE JURISDICTION WHERE COLLATERAL IS LOCATED MANDATORILY
REQUIRE APPLICATION OF SUCH LAWS WITH REGARD TO SUCH COLLATERAL.
11.8 Invalid Provisions. If any provision in any Loan Document
is held to be illegal, invalid, or unenforceable, such provision shall be
fully severable; the appropriate Loan Document shall be construed and
enforced as if such provision had never comprised a part thereof; and the
remaining provisions thereof shall remain in full force and effect and
shall not be affected by such provision or by its severance therefrom.
Administrative Agent, Documentation Agent, Syndication Agent, Lenders, LC
Fronting Bank, and each Company party to such Loan Document agree to
negotiate, in good faith, the terms of a replacement provision as similar
to the severed provision as may be possible and be legal, valid, and
enforceable.
11.9 Maximum Interest. Regardless of any provision contained
in any Loan Document, no Lender, LC Fronting Bank, Administrative Agent,
Documentation Agent or Syndication Agent shall ever be entitled to contract
for, charge, take, reserve, receive, or apply, as interest on the
Obligation, or any part thereof, any amount in excess of the Maximum Rate,
and, if Lenders, LC Fronting Bank, Administrative Agent, Documentation
Agent or Syndication Agent ever do so, then such excess shall be deemed a
partial prepayment of principal and treated hereunder as such and any
remaining excess shall be refunded to Borrower. If at any time the
interest rate (the "CONTRACT RATE") for any Loan shall exceed the Maximum
Rate, thereby causing the interest accruing on such Loan to be limited to
the Maximum Rate, then any subsequent reduction in the Contract Rate for
such Loan shall not reduce the rate of interest on such Loan below the
Maximum Rate until the aggregate
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amount of interest accrued on such Loan equals the aggregate amount of
interest which would have accrued on such Loan if the Contract Rate for
such Loan had at all times been in effect. In determining if the interest
paid or payable exceeds the Maximum Rate, Borrower and Lenders shall, to
the maximum extent permitted under applicable Law, (a) treat all Loans as
but a single extension of credit (and Lenders, LC Fronting Bank,
Administrative Agent, Documentation Agent or Syndication Agent and Borrower
agree that such is the case and that provision herein for multiple Loans is
for convenience only), (b) characterize any nonprincipal payment as an
expense, fee, or premium rather than as interest, (c) exclude voluntary
prepayments and the effects thereof, and (d) amortize, prorate, allocate,
and spread the total amount of interest throughout the entire contemplated
term of the Obligation; provided that, if the Obligation is paid and
performed in full prior to the end of the full contemplated term thereof,
and if the interest received for the actual period of existence thereof
exceeds the Maximum Amount, Lenders, LC Fronting Bank, Administrative
Agent, Documentation Agent or Syndication Agent shall refund such excess,
and, in such event, Lenders shall not, to the extent permitted by Law, be
subject to any penalties provided by any Laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount. As used herein, "MAXIMUM AMOUNT" and "MAXIMUM RATE" respectively
mean, for each Lender, LC Fronting Bank, Administrative Agent,
Documentation Agent or Syndication Agent, the maximum non-usurious amount
and the maximum non- usurious rate of interest which, under applicable Law,
such Lender, LC Fronting Bank, Administrative Agent, Documentation Agent or
Syndication Agent is permitted to contract for, charge, take, reserve, or
receive on the Obligation.
11.10 ENTIRETY. THIS AGREEMENT (AS AMENDED IN WRITING FROM TIME
TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY ANY COMPANY, ANY
LENDER, LC FRONTING BANK, DOCUMENTATION AGENT, SYNDICATION AGENT AND/OR
ADMINISTRATIVE AGENT REPRESENT THE FINAL AGREEMENT BETWEEN THE COMPANIES,
LENDERS, LC FRONTING BANK, DOCUMENTATION AGENT, SYNDICATION AGENT AND
ADMINISTRATIVE AGENT AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY SUCH PARTIES. THERE ARE
NO ORAL AGREEMENTS BETWEEN SUCH PARTIES.
11.11 VENUE; SERVICE OF PROCESS; JURY TRIAL.
(a) BORROWER HEREBY EXPRESSLY SUBMITS TO THE
JURISDICTION OF STATE AND FEDERAL COURTS LOCATED IN TEXAS.
BORROWER WAIVES IN ALL DISPUTES BEFORE ANY COURT ANY OBJECTION THAT
IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
(b) BORROWER AGREES THAT ADMINISTRATIVE AGENT, LC
FRONTING BANK, DOCUMENTATION AGENT, SYNDICATION AGENT AND ANY
LENDER SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY
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APPLICABLE LAW, TO PROCEED AGAINST BORROWER OR ITS PROPERTY IN A
COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH TO ENABLE
ADMINISTRATIVE AGENT, LC FRONTING BANK, DOCUMENTATION AGENT,
SYNDICATION AGENT OR ANY LENDER TO REALIZE ON SUCH PROPERTY, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
ADMINISTRATIVE AGENT, LC FRONTING BANK, DOCUMENTATION AGENT,
SYNDICATION AGENT OR ANY LENDER. BORROWER WAIVES ANY OBJECTION
THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH
ADMINISTRATIVE AGENT, LC FRONTING BANK, DOCUMENTATION AGENT,
SYNDICATION AGENT OR ANY LENDER HAS COMMENCED A PROCEEDING
DESCRIBED IN THIS PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS.
(c) TO THE EXTENT PERMITTED BY LAW, BORROWER,
ADMINISTRATIVE AGENT, LC FRONTING BANK, DOCUMENTATION AGENT,
SYNDICATION AGENT AND LENDERS EACH WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A BENCH
TRIAL WITHOUT A JURY.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF
ADMINISTRATIVE AGENT, LC FRONTING BANK, DOCUMENTATION AGENT,
SYNDICATION AGENT, ANY LENDER OR ANY HOLDER OF A NOTE TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST BORROWER IN ANY OTHER
JURISDICTION.
11.12 Amendments, Consents, Conflicts, and Waivers.
(a) Except as otherwise specifically provided, (i)
this Agreement may only be amended by an instrument in writing
executed jointly by Borrower and Required Lenders and supplemented
only by documents delivered or to be delivered in accordance with
the express terms hereof, and (ii) the other Loan Documents may
only be the subject of an amendment, modification, or waiver if
Borrower and Required Lenders have approved same; provided that no
amendment, waiver or consent affecting the rights or duties of
Administrative Agent or LC Fronting Bank shall in any event be
effective unless in writing and signed by Administrative Agent or
LC Fronting Bank, as applicable, in addition to Borrower and the
Lenders required herein to take such action.
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(b) Any amendment to or consent or waiver under this
Agreement or any Loan Document which purports to accomplish any of
the following must be by an instrument in writing executed by
Borrower, Administrative Agent and LC Fronting Bank and executed
(or approved, as the case may be) by each Lender: (i) extends the
due date or decreases the amount of any scheduled payment or other
payment of the Obligation beyond the date specified in the Loan
Documents; (ii) decreases any rate or amount of interest, fees, or
other sums payable to Administrative Agent, LC Fronting Bank or
Lenders hereunder (except such reductions as are contemplated by
this Agreement); (iii) changes the definition of "APPLICABLE
MARGIN," "COMMITTED SUM," "COMMITMENT PERCENTAGE," "MAJORITY
LENDERS," "REQUIRED LENDERS," "REVOLVING CREDIT TERMINATION DATE,"
or "TOTAL COMMITMENT"; (iv) increases any one or more Lenders'
Committed Sums; (v) releases (in whole or in part) any Guaranty or
releases (in whole or in part) any Collateral, except to the extent
dispositions of assets are permitted by this Agreement; or (vi)
changes this CLAUSE (B) or any other matter specifically requiring
the consent of all Lenders hereunder.
(c) Any conflict or ambiguity between the terms and
provisions herein and terms and provisions in any other Loan
Document shall be controlled by the terms and provisions herein.
(d) No course of dealing nor any failure or delay by
Administrative Agent, LC Fronting Bank, any Lender, or any of their
respective Representatives with respect to exercising any Right of
Administrative Agent, LC Fronting Bank or any Lender hereunder
shall operate as a waiver thereof. A waiver must be in writing and
signed by Required Lenders (or by all Lenders, if required
hereunder, or by Majority Lenders, if permitted hereunder) to be
effective, and such waiver will be effective only in the specific
instance and for the specific purpose for which it is given.
11.13 Multiple Counterparts. This Agreement may be executed in
a number of identical counterparts, each of which shall be deemed an
original for all purposes and all of which constitute, collectively, one
agreement; but, in making proof of this Agreement, it shall not be
necessary to produce or account for more than one such counterpart. It is
not necessary that each Lender execute the same counterpart so long as
identical counterparts are executed by Borrower, each Lender,
Administrative Agent, LC Fronting Bank, Syndication Agent, and
Documentation Agent. This Agreement shall become effective when
counterparts hereof shall have been executed and delivered to
Administrative Agent by each Lender, Administrative Agent, LC Fronting
Bank, Syndication Agent, Documentation Agent, and Borrower, or, in the case
only of Lenders, when Administrative Agent shall have received telecopied,
telexed, or other evidence satisfactory to it that each Lender has executed
and is delivering to Administrative Agent a counterpart hereof. Certain
Lenders may have executed multiple signature pages hereof in addition to
full counterparts hereof, in which event, Borrower and Administrative Agent
are authorized to execute such additional signature pages and insert them,
along with signature pages for other parties hereto, into one or more
counterparts of this Agreement containing signatures of all parties hereto,
each of which counterpart shall be deemed an original of this Agreement for
all purposes.
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<PAGE> 89
11.14 Successors and Assigns; Participation.
(a) This Agreement shall be binding upon, and inure to
the benefit of the parties hereto and their respective successors
and assigns, except that (i) no Company may, directly or
indirectly, assign or transfer, or attempt to assign or transfer,
any of its Rights, duties or obligations under any Loan Documents
without the express written consent of all Lenders (except for such
assignments or transfers permitted by SECTION 7.17 hereof), and
(ii) no Lender may transfer, assign or sell any participation in
its portion of the Obligation except as permitted under this
section, and no Lender may pledge or encumber its portion of the
Obligation except to a Person that qualifies as an Eligible
Assignee and that has agreed in writing (with a copy to Borrower
and Administrative Agent) to be bound by the provisions of SECTION
11.16. Notwithstanding CLAUSE (II) of this SECTION 11.14(A), any
Lender may at any time, without the consent of Borrower or
Administrative Agent, assign all or any portion of its Rights under
this Agreement, the Loan Documents, and the Notes to a Federal
Reserve Bank; provided, however, that no such assignment shall
release the transferor Lender from its obligations under this
Agreement.
(b) Subject to the provisions of this section and in
accordance with applicable Law, any Lender may, upon notice to
Borrower and Administrative Agent, in the ordinary course of its
business and in accordance with applicable Law, at any time sell to
one or more Persons (each a "PARTICIPANT") participating interests
in an amount not less than $5,000,000 in its portion of the
Obligation. In the event of any such sale to a Participant, (i)
such Lender shall remain a "Lender" under this Agreement and the
Participant shall not constitute a "Lender" hereunder, (ii) such
Lender's obligations under this Agreement shall remain unchanged,
(iii) such Lender shall remain solely responsible for the
performance thereof, (iv) such Lender shall remain the holder of
its share of the Principal Debt for all purposes under this
Agreement, and (v) Borrower and Administrative Agent shall continue
to deal solely and directly with such Lender in connection with
such Lender's Rights and obligations under the Loan Documents.
Participants shall have no Rights under the Loan Documents.
Subject to the following, each Lender shall be entitled to obtain
(on behalf of its Participants) the benefits of SECTIONS 3.15
through 3.18 with respect to all participations in its part of the
Obligation outstanding from time to time so long as Borrower shall
not be obligated to pay any amount in excess of the amount that
would be due to such Lender under SECTIONS 3.15 through 3.18
calculated as though no participations have been made. No Lender
shall sell any participating interest under which the Participant
shall have any Rights to approve any amendment, modification, or
waiver of any Loan Document, except to the extent such amendment,
modification, or waiver extends the due date for payment of any
amount in respect of principal, interest, or fees due under the
Loan Documents, reduces the interest rate or the amount of
principal or fees applicable to the Obligation (except such
reductions as are contemplated by this Agreement) or releases any
material portion of the Collateral (except as permitted by this
Agreement); provided that in those cases where a Participant is
entitled to the benefits of SECTIONS 3.15 through 3.18, such Lender
must include a voting mechanism in the relevant participation
agreement whereby a majority of such Lender's portion of the
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<PAGE> 90
Obligation (whether held by such Lender or participated) shall
control the vote for all of such Lender's portion of the
Obligation. Except in the case of the sale of a participating
interest to a Lender, the relevant participation agreement shall
not permit the Participant to transfer, pledge, assign, sell
participation in, or otherwise encumber its portion of the
Obligation. Each Participant shall comply with and be bound by the
obligations set forth in SECTION 11.16 as fully as if such
Participant were a Lender hereunder.
(c) Subject to the provisions of this section, upon
the prior notice to Borrower and Administrative Agent, any Lender
may, in the ordinary course of its business and in accordance with
applicable Law, sell to one or more Eligible Assignees (each a
"PURCHASER") a proportionate part (not less than $5,000,000 of (i)
Term Principal Debt, (ii) its Committed Sum under the Revolving
Credit Facility, or (iii) a combination of (I) AND (II), unless
such Lender is selling all of its Rights and obligations under the
Loan Documents or is selling to another Lender or an Affiliate of a
Lender) of all or any part of its Rights and obligations under the
Loan Documents, and such Purchaser shall assume such Rights and
obligations, pursuant to an Assignment Agreement, substantially in
the form of EXHIBIT J hereto; provided that no Lender may sell an
interest that would cause its combined Term Principal Debt and
Committed Sum under the Revolving Credit Facility to be less than
$5,000,000, except in the case of a sale of all of its Rights and
obligations under the Loan Documents. Upon (i) delivery of an
executed copy of the Assignment Agreement to Borrower and
Administrative Agent, and (ii) payment of a fee of $3,000 from such
transferor to Administrative Agent, from and after the assignment's
effective date (which shall be after the date of such delivery),
such Purchaser shall for all purposes be a Lender party to this
Agreement and shall have all the Rights and obligations of a Lender
under this Agreement to the same extent as if it were an original
party hereto with commitments as set forth in the assignment
agreement, and the transferor Lender shall be released from its
obligations hereunder to a corresponding extent, and, except as
provided in the following sentence, no further consent or action by
Borrower, Lenders, or Administrative Agent shall be required. Upon
the consummation of any transfer to a Purchaser pursuant to this
CLAUSE (C), SCHEDULE 2.1 shall automatically be deemed to reflect
the name, address, and Committed Sum of such Purchaser,
Administrative Agent shall deliver to Borrower and Lenders an
amended SCHEDULE 2.1 reflecting such changes, Borrower shall
execute and deliver to each of the transferor Lender and such
Purchaser, Notes in the face amount of the respective Committed
Sums following such transfer, and, upon receipt of such Notes, such
transferor Lender shall return to Borrower the Notes previously
delivered to such Lender hereunder. A Purchaser shall be subject
to all the provisions in this section the same as if it were a
Lender signatory hereto as of the initial Borrowing Date.
(d) If pursuant to CLAUSES (B) or (C) above any
interest in the Obligation is transferred to any Participant or
Purchaser which is organized under the Laws of any jurisdiction
other than the United States of America or any state thereof, the
transferor Lender shall, as a condition to the effectiveness and
completion of such transfer, cause such Participant or Purchaser,
concurrently with the effectiveness of such transfer (i) to
represent
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<PAGE> 91
to the transferor Lender (for the benefit of the transferor Lender,
Administrative Agent, and Borrower) that, under applicable Laws, no
Taxes will be required to be withheld by Administrative Agent,
Borrower, or the transferor Lender with respect to any payments to
be made to such Participant or Purchaser in respect of the
Obligation, (ii) to furnish to each of the transferor Lender,
Administrative Agent, and Borrower two duly completed copies of
either U.S. Internal Revenue Service Form 4224 or Form 1001
(wherein such Purchaser or Participant claims entitlement to
complete exemption from United States federal withholding Tax on
all interest payments hereunder), or Form W-8, as applicable, and
(iii) to agree (for the benefit of the transferor Lender,
Administrative Agent, and Borrower), (x) to provide the transferor
Lender, Administrative Agent, and Borrower a new Form 4224 or Form
1001 or Form W-8, as applicable, upon the expiration or
obsolescence of any previously delivered form in accordance with
applicable Laws, duly executed and completed by such Purchaser, and
(y) to comply from time to time with all applicable Laws with
regard to such withholding Tax exemption.
(e) The Administrative Agent will maintain records
that reflect and identify the owners of an interest in the
Obligation.
11.15 Discharge Only Upon Payment in Full; Reinstatement in
Certain Circumstances. Each Company's obligations under the Loan Documents
shall remain in full force and effect until the Total Commitment shall have
terminated and the Obligation shall have been paid in full, except for
provisions under the Loan Documents expressly intended to survive by the
terms hereof or by the terms of the applicable Loan Documents. If at any
time any payment of the principal of or interest on any Note or any other
amount payable by Borrower under any Loan Document is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy, or
reorganization of Borrower or otherwise, the obligations of each Company
under the Loan Documents with respect to such payment shall be reinstated
as though such payment had been due but not made at such time.
11.16 Confidentiality. Administrative Agent, Documentation
Agent, Syndication Agent, LC Fronting Bank, each Lender and each
Participant shall hold all non-public information, furnished by or on
behalf of Borrower and Companies in connection with or pursuant to the
negotiation, preparation or requirements of this Agreement or any of the
Loan Documents which have been identified as such by Borrower in accordance
with its customary procedures for handling confidential information of this
nature and in accordance with safe and sound banking practices and in any
event, may make any disclosure to its attorneys or as reasonably required
by any prospective bona fide Eligible Assignee or Participant in connection
with the contemplated transfer of any Loan so long as any such contemplated
Eligible Assignee or Participant has agreed in writing (with a copy to each
of Borrower and Administrative Agent) to be bound by the provisions of this
SECTION 11.16 or as required or requested by any governmental agency or
representative thereof or pursuant to any Law or legal process; provided
that unless specifically prohibited by applicable Law or court order,
Administrative Agent, Documentation Agent, Syndication Agent, LC Fronting
Bank, each Lender and each Participant shall notify Borrower of any request
by any governmental agency or
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<PAGE> 92
representative thereof (other than any such request in connection with an
examination of the financial condition of such Person by such governmental
agency) for disclosure of such non-public information.
11.17 Non-Application of Chapter 15 of Texas Credit Code. The
provisions of Chapter 15 of the Texas Credit Code (Vernon's Texas Civil
Statutes, Article 5069-15) are specifically declared by the parties hereto
not to be applicable to this Agreement or any of the other Loan Documents
or to the transactions contemplated hereby.
[REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURE PAGES FOLLOW.]
-85-
<PAGE> 93
EXECUTED the 26th day of September, 1996, but effective as of the date
first mentioned on the initial page of this Credit Agreement.
AVIALL, INC.,
as Borrower
By /s/ C. Van Den Handel
------------------------------------
C. Van Den Handel
Treasurer and Director of Planning
NATIONSBANK OF TEXAS, N.A.,
as Administrative Agent and LC Fronting
Bank
By /s/ Todd Shipley
------------------------------------
Todd Shipley
Senior Vice President
J.P. MORGAN SECURITIES INC.,
as Documentation Agent
By /s/ Michael C. Mauer
------------------------------------
Michael C. Mauer
Vice President
NATIONSBANC CAPITAL MARKETS, INC.,
as Syndication Agent
By /s/ Gary L. Kahn
------------------------------------
Gary L. Kahn
Senior Vice President
<PAGE> 94
Signature Page to that certain Credit Agreement dated as of September
26, 1996, among Aviall, Inc., as Borrower, NationsBank of Texas, N.A., as
Administrative Agent and LC Fronting Bank, J.P. Morgan Securities Inc., as
Documentation Agent, NationsBanc Capital Markets, Inc., as Syndication Agent,
and certain Lenders named therein, including the undersigned.
EXECUTED the 26th day of September, 1996, but effective as of the date
first mentioned on the initial page of this Credit Agreement.
THE FIRST NATIONAL BANK OF BOSTON,
as a Lender
By /s/ Robert L. Wallace
------------------------------------
Robert L. Wallace
Director
<PAGE> 95
Signature Page to that certain Credit Agreement dated as of September
26, 1996, among Aviall, Inc., as Borrower, NationsBank of Texas, N.A., as
Administrative Agent and LC Fronting Bank, J.P. Morgan Securities Inc., as
Documentation Agent, NationsBanc Capital Markets, Inc., as Syndication Agent,
and certain Lenders named therein, including the undersigned.
EXECUTED the 26th day of September, 1996, but effective as of the date
first mentioned on the initial page of this Credit Agreement.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as a Lender
By /s/ Stephen B. King
------------------------------------
Stephen B. King
Vice President
<PAGE> 96
Signature Page to that certain Credit Agreement dated as of September
26, 1996, among Aviall, Inc., as Borrower, NationsBank of Texas, N.A., as
Administrative Agent and LC Fronting Bank, J.P. Morgan Securities Inc., as
Documentation Agent, NationsBanc Capital Markets, Inc., as Syndication Agent,
and certain Lenders named therein, including the undersigned.
EXECUTED the 26th day of September, 1996, but effective as of the date
first mentioned on the initial page of this Credit Agreement.
NATIONSBANK OF TEXAS, N.A.,
as a Lender
By /s/ Todd Shipley
------------------------------------
Todd Shipley
Senior Vice President
<PAGE> 97
Signature Page to that certain Credit Agreement dated as of September
26, 1996, among Aviall, Inc., as Borrower, NationsBank of Texas, N.A., as
Administrative Agent and LC Fronting Bank, J.P. Morgan Securities Inc., as
Documentation Agent, NationsBanc Capital Markets, Inc., as Syndication Agent,
and certain Lenders named therein, including the undersigned.
EXECUTED the 26th day of September, 1996, but effective as of the date
first mentioned on the initial page of this Credit Agreement.
SOCIETE GENERALE, SOUTHWEST AGENCY,
as a Lender
By /s/ Richard M. Lewis
------------------------------------
Richard M. Lewis
Vice President
<PAGE> 98
Signature Page to that certain Credit Agreement dated as of September
26, 1996, among Aviall, Inc., as Borrower, NationsBank of Texas, N.A., as
Administrative Agent and LC Fronting Bank, J.P. Morgan Securities Inc., as
Documentation Agent, NationsBanc Capital Markets, Inc., as Syndication Agent,
and certain Lenders named therein, including the undersigned.
EXECUTED the 26th day of September, 1996, but effective as of the date
first mentioned on the initial page of this Credit Agreement.
THE SUMITOMO BANK, LIMITED,
as a Lender
By /s/ Kirk L. Stites
Kirk L. Stites
------------------------------------
Vice President and Manager
By /s/ Julie A. Schell
------------------------------------
Julie A. Schell
Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AVIALL,
INC.'S THIRD QUARTER 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH THIRD QUARTER 1996 FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 7,082
<SECURITIES> 0
<RECEIVABLES> 55,655
<ALLOWANCES> 5,142
<INVENTORY> 72,190
<CURRENT-ASSETS> 153,112
<PP&E> 40,863
<DEPRECIATION> 31,285
<TOTAL-ASSETS> 267,172
<CURRENT-LIABILITIES> 98,215
<BONDS> 55,239
0
0
<COMMON> 195
<OTHER-SE> 90,154
<TOTAL-LIABILITY-AND-EQUITY> 267,172
<SALES> 284,399
<TOTAL-REVENUES> 284,399
<CGS> 211,605
<TOTAL-COSTS> 211,605
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,656
<INCOME-PRETAX> (4,526)
<INCOME-TAX> 1,657
<INCOME-CONTINUING> (6,183)
<DISCONTINUED> 16,946
<EXTRAORDINARY> (3,421)
<CHANGES> 0
<NET-INCOME> 7,342
<EPS-PRIMARY> .38
<EPS-DILUTED> 0
</TABLE>
