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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): December 15, 1999 (November
30, 1999)
XETA Corporation
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(Exact name of registrant as specified in its charter)
Oklahoma 0-16231 73-1130045
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(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1814 West Tacoma, Broken Arrow, Oklahoma 74012
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 918-664-8200
-----------------------------
Not Applicable
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(Former name or address, if changed since last report.)
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Item 2. Acquisition or Disposition of Assets
On November 30, 1999, XETA Corporation (the "Company") closed the
previously reported agreement to acquire from Mark A. Martin and Lawrence J.
Hopp 100% of the outstanding stock (the "Shares") of U.S. Technologies Systems,
Inc., a privately held Missouri corporation ("UST"). The acquisition was made
pursuant to a Stock Purchase Agreement dated as of August 1, 1999 between Mark
A. Martin and Mark A. Martin, Trustee Under Living Trust of Mark A. Martin dated
April 4, 1994, and the Company (the "Martin Agreement"), and a Stock Purchase
Agreement dated as of August 1, 1999 between Lawrence J. Hopp and Lawrence J.
Hopp, Trustee Under Living Trust of Lawrence J. Hopp dated October 13, 1994, and
the Company (the "Hopp Agreement").
UST is Lucent Technologies' largest authorized dealer of
telecommunications equipment, including voice and data technology systems, to
the commercial market. UST reported net sales and net income of $28,480,728 and
$1,765,600, respectively, for its fiscal year ended December 31, 1998. It has
sales offices in six cities, customers in thirty states, and 91 employees. The
Company intends to operate UST as a commercial channel division of its business.
The consideration for the Shares was the result of separate arms-length
negotiations with each of the sellers and consisted, in the aggregate, of $26
million in cash, $23 million of which was paid at closing, and 150,000 shares of
the Company's unregistered common stock issued to Mr. Martin at closing. The
balance of the cash purchase price is being held by the Company pursuant to the
terms of the Martin Agreement, which provides for a $2 million earn-out to be
paid to Mr. Martin contingent upon UST's achievement of certain performance
goals during the two years following the closing, and $1 million to be held for
two years as security against any losses which may be incurred due to any breach
of the representations and warranties contained in the Agreement. In addition,
under both the Martin Agreement and the Hopp Agreement, the Company will pay the
"net tax cost" (as defined in the respective agreements), if any, incurred by
Mr. Martin and Mr. Hopp as a result of taxable income being allocated to them on
earnings by UST from August 1, 1999 up to, but not including, the day of
closing.
The Company financed the cash portion of the purchase price through a
$40 million credit facility established by the Company simultaneously with the
UST acquisition pursuant to a Credit Agreement dated November 30, 1999 with Bank
One, Oklahoma, NA and Mercantile Bank, NA, the Lenders named therein, Bank One,
Oklahoma, NA, as Agent and Banc One Capital Markets, Inc., as Lead Arranger and
Sole Book Runner (the "Credit Facility"). The $23 million advanced at closing
under the Credit Facility is evidenced by two separate term notes, one in the
principal amount of $12,650,000 and one in the principal amount of $10,350,000,
payable to Bank One and to Mercantile Bank, respectively, both maturing on
November 30, 2004 (the "Term Loan"), with aggregate principal payable in equal
monthly installments of $383,333.33. Interest on the Term Loan is based on a
margin above either Bank One, Oklahoma's prime rate or LIBOR. The margin added
to the base rate is determined
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by the ratio of Total Funded Debt to EBITDA (both terms defined in the Credit
Facility) and ranges from zero to 75 basis points on prime rate based borrowings
and ranges from 150 to 250 basis points on LIBOR based borrowings. Interest on
the Term Loan is payable monthly. Of the remaining $17 million available under
the Credit Facility, $5 million can be used for working capital needs under a
revolving credit line and $12 million can be used to finance additional
acquisitions. The Credit Facility is secured by a lien against all of the
Company's and UST's assets, including a mortgage on the Company's Tulsa
headquarters, and is guaranteed by UST.
Following the closing, the Company entered into a two-year employment
agreement with Mr. Martin, who will serve as President of the Company's
commercial channel division. Mr. Martin will also be nominated to serve on the
Company's Board of Directors to be elected at the next annual meeting of
shareholders.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
It is impracticable to provide the required financial
statements at the time of filing this report. The required financial
statements will be filed by amendment to this report no later than
February 14, 2000.
(b) Pro Forma Financial Information.
It is impracticable to provide the required pro forma
financial information at the time of filing this report. The required
pro forma financial information will be filed by amendment to this
report no later than February 14, 2000.
(c) Exhibits.
See Index to Exhibits for listing of those documents filed as
exhibits to this report.
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 hereunto duly authorized.
XETA Corporation
(Registrant)
Dated: December 14, 1999 By: /s/ JON A. WIESE
-----------------------------------
Jon A. Wiese
President
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EXHIBIT INDEX
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SEC No. Description Page
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(1) Underwriting Agreement - None.
(2) Plan of acquisition, reorganization, arrangement, liquidation or succession.
2.1 Stock Purchase Agreement dated as of August 1, 1999, between MARK A. MARTIN,
individually, and MARK A. MARTIN, Trustee Under Living Trust of Mark A. Martin
dated April 4, 1994 and XETA Corporation.
The Schedules and Exhibits to the Stock Purchase
Agreement, each of which are listed below, have been
omitted from this report and will be furnished to the
Securities and Exchange Commission upon request.
Schedule 1.1 Corporate Existence; Qualification; Organizational
Documents
Schedule.1.3 Subsidiaries
Schedule.1.4 Consents
Schedule.1.5 Title to Shares
Schedule.1.6 Financial Statements
Schedule.1.7 Liabilities
Schedule.1.8 Actions Since Balance Sheet Date
Schedule.1.9 Absence of Material Changes
Schedule.1.10 Taxes
Schedule.1.11 Ownership of Assets; Trademarks; etc.
Schedule.1.12 Insurance
Schedule.1.13 Litigation and Legal Compliance
Schedule 1.14 Real Property
Schedule 1.15 Material Agreements
Schedule 1.16 Condition of Assets
Schedule 1.17 Accounts and Notes Receivable
Schedule 1.18 Permits and Licenses
Schedule 1.19 Banking Arrangements
Schedule 1.20 Interest in Assets
Schedule 1.21 Salary Information
Schedule 1.22.1 Pension Plans
Schedule 1.22.2 Welfare Plans
Schedule 1.22.3 Prohibited Transactions
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<TABLE>
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Schedule 1.22.4 Compliance
Schedule 1.22.5 COBRA
Schedule 1.22.6 Profit Sharing Plans
Schedule 1.22.7 Miscellaneous Benefit Plan Matters
Schedule 1.23 No Breach
Schedule 1.24 Brokers
Schedule 1.25 Labor Discussions
Schedule 1.26 Change of Name
Schedule 1.27 Environmental Matters
Schedule 1.28 Year 2000 Compliance
Exhibit 1.2 Non-Competition Agreement
Exhibit 1.3.2 Definition of Gross Profit
Exhibit 1.5 Employment Agreement
Exhibit 2.1 Agreement Regarding Representations,
Warranties and Covenants of the Company and the Seller
Exhibit 4.3 Confidentiality Agreement
Exhibit 5.7 Certificate Pursuant to Section 5.7 of Stock Purchase
Agreement
Exhibit 6.4 Certificate Pursuant to Section 6.4 of Stock Purchase
Agreement
</TABLE>
2.2 Stock Purchase Agreement dated as of August 1, 1999,
between LAWRENCE J. HOPP, individually, and LAWRENCE
J. HOPP, as Trustee under Living Trust of Lawrence J.
Hopp, dated October 13, 1994 and XETA Corporation.
The Schedules and Exhibits to the Stock Purchase
Agreement, each of which are listed below, have been
omitted from this report and will be furnished to the
Securities and Exchange Commission upon request.
<TABLE>
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Schedule 1.1 Corporate Existence; Qualification; Organizational
Documents
Schedule 1.3 Subsidiaries
Schedule 1.4 Consents
Schedule 1.5 Title to Shares
Schedule 1.6 Financial Statements
Schedule 1.7 Liabilities
Schedule 1.8 Actions Since Balance Sheet Date
Schedule 1.9 Absence of Material Changes
Schedule 1.10 Taxes
Schedule 1.11 Ownership of Assets; Trademarks; etc.
Schedule 1.12 Insurance
Schedule 1.13 Litigation and Legal Compliance
Schedule 1.14 Real Property
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<TABLE>
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Schedule 1.15 Material Agreements
Schedule 1.16 Condition of Assets
Schedule 1.17 Accounts and Notes Receivable
Schedule 1.18 Permits and Licenses
Schedule 1.19 Banking Arrangements
Schedule 1.20 Interest in Assets
Schedule 1.21 Salary Information
Schedule 1.22.1 Pension Plans
Schedule 1.22.2 Welfare Plans
Schedule 1.22.3 Prohibited Transactions
Schedule 1.22.4 Compliance
Schedule 1.22.5 COBRA
Schedule 1.22.6 Profit Sharing Plans
Schedule 1.22.7 Miscellaneous Benefit Plan Matters
Schedule 1.23 No Breach
Schedule 1.24 Brokers
Schedule 1.25 Labor Discussions
Schedule 1.26 Change of Name
Schedule 1.27 Environmental Matters
Schedule 1.28 Year 2000 Compliance
Exhibit 1.2 Non-Competition Agreement
Exhibit 2.1 Agreement Regarding Representations,
Warranties and Covenants of the Company and the Seller
Exhibit 4.3 Confidentiality Agreement
Exhibit 5.6 Certificate Pursuant to Section 5.6 of Stock Purchase
Agreement
Exhibit 5.7 Counsel's Opinion Letter
Exhibit 6.4 Certificate Pursuant to Section 6.4 of Stock Purchase
Agreement
</TABLE>
2.3 Credit Agreement dated as of November 30, 1999, among
XETA, the Lenders, the Agent and the Arranger.
The Schedules and Exhibits to the Credit Agreement,
each of which are listed below, have been omitted
from this report and will be furnished to the
Securities and Exchange Commission upon request.
Exhibit A-1 Form of Opinion of Counsel
(Borrower)
Exhibit A-2 Form of Opinion of Counsel (UST)
Exhibit B Compliance Certificate
Exhibit C Assignment Agreement
Exhibit D Loan/Credit Related Money Transfer
Instruction
Exhibit E-1 Form of Revolving Note
Exhibit E-2 Form of Term Note
Exhibit E-3 Form of Acquisition Note
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Exhibit E-4 Form of Acquisition Term Note
Schedule 1 Subsidiaries and Other Investments
Schedule 2 Indebtedness and Liens
2.4 Pledge and Security Agreement.
The Schedules and Exhibits to the Pledge and Security
Agreement, each of which are listed below, have been
omitted from this report and will be furnished to the
Securities and Exchange Commission upon request.
Exhibit A (See Sections 3.3, 3..4, 4.1.7 and 9.1 of
Security Agreement)
Exhibit B (See Section 3.8 of Security Agreement)
Exhibit C (See Section 3.8 of Security Agreement)
Exhibit D (See Sections 3.9 and 4.1.6 of Security
Agreement)
Exhibit E List of Pledged Securities (See Sections
3.11 of Security Agreement)
Exhibit F (See Section 3.1 of Security Agreement)
Exhibit G Supplement to Security Agreement
2.5 Real Estate Mortgage, Security Agreement, Financing
Statement and Fixture Filing (with Power of Sale).
The Schedules and Exhibits to the Real Estate
Mortgage, each of which are listed below, have been
omitted from this report and will be furnished to the
Securities and Exchange Commission upon request.
Exhibit A (Legal Description)
Exhibit B Description of Personal Property
Exhibit C Title Exceptions
2.6 Subsidiary Guaranty.
2.7 $12,650,000 Term Note - Bank One, Oklahoma, NA.
2.8 $10,350,000 Term Note - Mercantile Bank.
(4) Instruments defining rights of security holders, including
indentures - previously filed as Exhibits 3.1, 3.2 and 3.3 to
the registrant's Registration Statement on Form S-1,
Registration No. 33-7841.
(16) Letter on change in certifying accountant - N/A.
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(17) Letter on director resignation - N/A.
(20) Other documents or statements to security holders - None.
(23) Consents of experts and counsel - To be filed with the
financial statements required by Item 7, by amendment to this
report no later than February 14, 2000.
(24) Power of attorney - None.
(27) Financial Data Schedule - N/A.
(99) Additional exhibits.
99.1 Employment Agreement dated November 30, 1999 between
Mark A. Martin and the Company.
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
DATED AUGUST 1, 1999
BY AND BETWEEN
XETA CORPORATION
(THE "PURCHASER")
AND
MARK A. MARTIN
AND
MARK A. MARTIN, TRUSTEE UNDER LIVING TRUST OF
MARK A. MARTIN DATED APRIL 4, 1994
(COLLECTIVELY, THE "SELLER")
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
SECTION OF AGREEMENT PAGE NO.
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ARTICLE I - Purchase of Shares....................................................................................1
1.1 Acquisition of Shares...........................................................................1
1.2 Purchase Consideration..........................................................................1
1.3 Hold-Back.......................................................................................2
1.4 Tax Treatment...................................................................................3
1.5 Employment Agreement............................................................................4
ARTICLE II - Representations and Warranties of the Seller.........................................................4
2.1 Joint Representations and Warranties............................................................4
2.2 Investment Representation.......................................................................4
2.3 Access to Information...........................................................................4
2.5 Value...........................................................................................5
2.6 Concurrent Transaction..........................................................................5
ARTICLE III - Representations and Warranties of Purchaser.........................................................5
3.1 Corporate Existence and Qualification...........................................................5
3.2 Consents........................................................................................5
3.3 Corporate Authority.............................................................................6
3.4 No Breach.......................................................................................6
3.5 Brokers.........................................................................................6
3.6 Value...........................................................................................6
3.7 SEC Filings Complete............................................................................7
3.8 Litigation......................................................................................7
3.9 Shares Validly Issued...........................................................................7
3.10 Generally.......................................................................................7
ARTICLE IV - Covenants............................................................................................7
4.1 Pre-Closing Covenants of the Seller and the Company.............................................7
4.2 Pre-Closing Covenants of Purchaser..............................................................8
4.3 Seller's Confidentiality........................................................................8
4.4 Post-Closing Covenants of Purchaser.............................................................8
4.5 Fulfillment of Conditions.......................................................................8
4.6 Retention of Business Records...................................................................8
4.7 Tax Covenants...................................................................................9
4.8 Tax Records.....................................................................................9
4.9 Privilege.......................................................................................9
4.10 Employee Bonuses...............................................................................10
ARTICLE V - Conditions Precedent to the Obligation of Purchaser to Close.........................................10
5.1 Representations and Warranties.................................................................10
5.2 Covenants......................................................................................10
5.3 No Actions.....................................................................................10
5.4 Consents; Licenses and Permits.................................................................10
5.5 No Material Change.............................................................................11
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5.6 Completion of Due Diligence....................................................................11
5.7 Certificate....................................................................................11
5.8 Opinion........................................................................................11
5.9 Lucent Distributorship.........................................................................11
5.10 Hopp Transaction...............................................................................11
5.11 Non-Competition and Confidentiality............................................................11
5.12 Section 338(h)(10) Election....................................................................11
5.13 Board Approval.................................................................................11
5.14 Fairness Opinion...............................................................................11
5.15 Bank Financing.................................................................................12
5.16 Additional Documents...........................................................................12
5.17 Employment Agreement...........................................................................12
ARTICLE VI - Conditions Precedent to the Obligation of the Seller to Close.......................................12
6.1 Representations and Warranties.................................................................12
6.2 Covenants......................................................................................12
6.3 No Actions.....................................................................................12
6.4 Certificate....................................................................................12
6.5 Hopp Transaction...............................................................................12
6.6 Board Approval.................................................................................13
6.7 Additional Documents...........................................................................13
ARTICLE VII - Closing............................................................................................13
7.1 The Closing....................................................................................13
7.2 Location, Time and Date........................................................................13
7.3 Seller's Deliveries............................................................................13
7.4 Purchaser's Deliveries.........................................................................14
7.5 Transfer of Possession.........................................................................14
ARTICLE VIII - Survival of Representations; Indemnification......................................................14
8.1 Survival.......................................................................................14
8.2 Indemnification by the Seller..................................................................14
8.3 Indemnification by Purchaser...................................................................15
8.4 Claims.........................................................................................15
8.5 Seller's Liability.............................................................................15
8.6 Purchaser's Liability..........................................................................15
8.8 Final Determination............................................................................16
8.9 Defense of Claims..............................................................................16
8.9 Extension of Time..............................................................................16
ARTICLE IX - Termination and Waiver..............................................................................17
9.1 Termination....................................................................................17
9.2 Waivers........................................................................................17
ARTICLE X - Miscellaneous Provisions.............................................................................18
10.1 Expenses.......................................................................................18
10.2 Confidential Information.......................................................................18
10.3 Publicity......................................................................................18
10.4 Modification, Termination or Waiver............................................................18
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10.5 Notices........................................................................................18
10.6 Binding Effect and Assignment..................................................................19
10.7 Exhibits and Schedules.........................................................................19
10.8 Entire Agreement...............................................................................19
10.9 Governing Law..................................................................................19
10.10 Section Headings...............................................................................20
10.11 Gender.........................................................................................20
10.12 Severability...................................................................................20
10.13 Attorneys' Fees................................................................................20
10.14 Counterparts...................................................................................20
10.15 Recitals.......................................................................................20
10.16 Equitable Relief...............................................................................20
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT"), which is to be
effective as of the 1st day of August, 1999 (the "EFFECTIVE DATE"), is entered
into by and between XETA CORPORATION, an Oklahoma corporation ("PURCHASER"), and
MARK A. MARTIN, individually, and MARK A. MARTIN, TRUSTEE UNDER LIVING TRUST OF
MARK A. MARTIN DATED APRIL 4, 1994 (herein collectively referred to as
"Seller").
RECITALS:
A. Seller owns fifty (50) shares (the "SHARES") of the $1.00 par value
common stock of U. S. Technologies Systems, Inc., a Missouri corporation (the
"COMPANY").
B. The shares constitute fifty percent (50%) of the Company's issued
and outstanding common stock.
C. Purchaser desires to acquire from the Seller, and the Seller desires
to sell to Purchaser, all of the Shares and all associated goodwill.
NOW, THEREFORE, in consideration of the mutual benefits to be derived
hereby, the representations, warranties, covenants, and agreements herein
contained, and other good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged, Purchaser, and Seller do hereby agree as
follows:
ARTICLE I
Purchase of Shares
1.1 Acquisition of Shares. Upon the terms of, and subject to the
conditions set forth in this Agreement at the Closing, Seller shall convey to
Purchaser and Purchaser shall acquire all of the Shares and associated goodwill
from the Seller, free and clear of all manner of liens, charges, encumbrances
and claims, but subject to generally applicable laws and regulations with
respect to unregistered securities. The Shares shall constitute one-half (1/2)
of all of the Company's capital stock issued and outstanding as of the date of
Closing.
1.2 Purchase Consideration. The purchase consideration for the Shares
("PURCHASE CONSIDERATION") shall be the sum of $15,000,000 plus $11,361 (which
is the amount of interest accrued on the Company's indebtedness to Seller for
the period July 1, 1999, through July 31, 1999), plus the amount required to be
paid under Section 4.4 below, plus 150,000 shares of the Purchaser's
unregistered common capital stock (the "XETA STOCK"). The XETA Stock shall be
restricted stock as that term is defined in Rule 144 of the regulations to the
Securities Act of
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1933. Upon the sale, transfer and delivery by the Seller of the Shares to
Purchaser as set forth in Section 1.1, and in consideration therefor, Purchaser
shall cause the XETA Stock to be issued in the name of Seller or his nominee and
shall pay to the Seller, at the Closing Date as defined herein, by cashier's
check or by electronic wire transfer or other immediately available funds the
amount which is equal to $15,000,000 plus $11,361 (which is the amount of the
interest accrued on the Company's indebtedness to Seller for the period July 1,
1999, through July 31, 1999), less the "Hold-Back" described in Section 1.3
below, and less the principal amount of all indebtedness of the Company to
Seller (the "SELLER DEBT") unpaid and outstanding as of the Closing (said amount
being herein called the "CASH PORTION OF THE PURCHASE CONSIDERATION"), $1,000 of
which shall be allocated as consideration for Seller's agreement not to compete
with Purchaser or the Company, nor to solicit any of its employees, customers or
vendors, in the manner and for the periods more particularly described in a
Non-Competition Agreement in the form of Exhibit "1.2" attached hereto
("NON-COMPETITION AGREEMENT"). In addition to the Cash Portion of the Purchase
Consideration, Purchaser shall pay to Seller, at the Closing Date, the Seller
Debt, and Seller shall assign to Purchaser, without recourse or warranty (except
as set forth herein), all rights of Seller in relation to the Seller Debt.
1.3 Hold-Back. The Cash Portion of the Purchase Price shall be subject
to a $3,000,000 Hold-Back (the "HOLD-BACK"), consisting of an "INDEMNITY FUND"
and an "INCENTIVE FUND":
1.3.1 The Indemnity Fund shall consist of $1,000,000 of the
total Hold-Back and shall be held by Purchaser to secure Purchaser, for
a period of two (2) years after Closing (the "SECURITY PERIOD"),
against loss from the breach of any warranty or representation made by
Seller in or in connection with this Agreement, or any related
indemnity given by Seller. This component of the Hold-Back shall not
serve to limit Seller's liability to Purchaser in connection with any
such representation, warranty or indemnity; provided, however, that to
the extent Purchaser has no indemnifiable claims at the end of the
Security Period, Purchaser will pay to Seller the entire amount of
Indemnity Fund. In the event Purchaser has indemnifiable claims
hereunder at the end of the Security Period, which have not been
resolved under Article VIII, Purchaser shall pay Seller such portion of
the Indemnity Fund as is in excess of any amounts reasonably required
to indemnify Purchaser, in Purchaser's judgment, against such then
existing indemnifiable claims. Thereafter, Purchaser shall pay to
Seller the unapplied portion of the Indemnity Fund (if any) within ten
(10) days after a Final Determination has been made with respect to
such unresolved claims.
1.3.2 The Incentive Fund shall consist of the remaining
$2,000,000 of the total Hold-Back, the release of which to the Seller
shall be subject to the Company's achieving certain increases in its
aggregate "GROSS PROFIT" (as defined in Exhibit "1.3.2" hereto
attached) according to the provisions of this Section 1.3.2. For
purposes of this Section, the terms below have the following
definitions:
"1999 GROSS PROFIT" means the Company's Gross Profit
for the 12 months ended October 31, 1999.
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"YEAR 1" means the 12 months ending October 31, 2000.
"YEAR 2" means the 12 months ending October 31, 2001.
(i) The entire $2,000,000 Incentive Fund shall be
payable by Purchaser to Seller if the Gross Profit in Year 1
is at least 140% of the 1999 Gross Profit.
(ii) $1,000,000 of the Incentive Fund shall be
payable by Purchaser to Seller if the Gross Profit in Year 1
is at least 120%, but less than 140% of the 1999 Gross Profit;
and the second $1,000,000 of the Incentive Fund shall be
payable by Purchaser to Seller if the Gross Profit in Year 2
is at least 144% of the 1999 Gross Profit.
(iii) If the Gross Profit in Year 1 is less than 120%
of the 1999 Gross Profit, the entire $2,000,000 Incentive Fund
shall nevertheless be payable by Purchaser to Seller if the
Company's Gross Profit in Year 2 exceeds 144% of the Company's
1999 Gross Profit.
1.3.3 Amounts payable by the Purchaser to the Seller
pursuant to paragraphs 1.3.1 and 1.3.2 above shall be
accompanied by the payment of interest from the Closing Date
at a variable rate at all times equal to Purchaser's lowest
corporate borrowing rate for short term funds (which is
currently approximately 7.75% per annum).
1.3.4 Payments of the Incentive Fund shall be made no
later than the November 30 that immediately follows the
twelve-month period with respect to which Gross Profit is
determined. Seller and his representatives shall have the
right upon reasonable notice to inspect the Company's books
and financial records in order to verify or determine the
Gross Profit of the Company for any relevant period. All costs
of such inspection shall be the responsibility of Seller,
except that such costs shall be reimbursed by Purchaser to
Seller if it is determined that the Purchaser failed to
correctly compute Gross Profit in accordance with this
Agreement under circumstances in which a correct computation
results in Seller's receiving all or a portion of the
Incentive Fund. All payments of the Holdback Fund and
Incentive Fund too Seller, if any, shall be treated as part of
the Purchase Consideration, and all applications against and
deductions from the Holdback Fund and the Incentive Fund by
Purchaser, if any, shall be treated as reductions of the
Purchase Consideration.
1.4 Tax Treatment. Seller is aware of the fact, and hereby acknowledges
that Purchaser is contemporaneously, but separately, negotiating for the
possible purchase of all of Larry Hopp's stock in the Company. Seller hereby
agrees, upon request, to promptly and timely execute and file Form 8023-A and to
otherwise cooperate with Purchaser, the Company and Mr. Hopp in a joint election
to treat each transaction as a sale of assets under Section 338(h)(10) of the U.
S. Internal Revenue Code (the "CODE").
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1.5 Employment Agreement. At Closing, the Company and Seller shall
enter into an Employment Agreement in the form of Exhibit "1.5" hereto attached
("EMPLOYMENT AGREEMENT") for a primary term of two (2) years subject to
extension for a period of one (1) additional year if performance targets are
met.
ARTICLE II
Representations and Warranties
of the Seller
2.1 Joint Representations and Warranties. Contemporaneously with
Seller's execution and delivery of this Agreement, to be effective as of the
execution date hereof ("EXECUTION DATE") as well as the Closing Date, the Seller
shall make the representations and warranties to Purchaser (the "REPRESENTATIONS
AND WARRANTIES") contained in Article I of Exhibit "2.1" hereto attached (the
"INDUCEMENT"). As an inducement to the Purchaser to enter into this Agreement
and an accommodation to the Seller as a principal shareholder of the Company,
the Company shall make the Representations and Warranties jointly and severally
with the Seller. Seller and the Company shall acknowledge in making the
Representations and Warranties that Purchaser, in executing, delivering, and
consummating this Agreement, has relied and will rely upon the correctness and
completeness of each of such Representations and Warranties.
2.2 Investment Representation. The Seller hereby represents that he
understands that the transaction contemplated by this Agreement is to be carried
out as a transaction exempt from registration under the Securities Act of 1933,
as amended (the "ACT") and, accordingly the XETA Stock will not have been
registered under the Act at the time of Closing. The Seller further represents
that he is acquiring the XETA Stock for investment purposes only and not with a
view to or for resale in connection with any distribution of the XETA Stock, nor
with any present intention of distribution (within the meaning of the Act) of
the XETA Stock. The Seller understands that because the XETA Stock will not have
been registered under the Act, the Purchaser will not permit the transfer of any
of the XETA Stock without registration under the Act, which is not contemplated
by this Agreement, or upon the issuance to the Purchaser of a favorable opinion
of its counsel or of the submission to the Purchaser of such other evidence as
may be satisfactory to counsel for the Purchaser, in either case, to the effect
that any such transfer, whether pursuant to Rule 144 of the Act or otherwise,
shall not be in violation of the Act, and any applicable state securities laws,
and that the share certificates representing such shares will be issued with a
restrictive legend providing notice of such restriction.
2.3 Access to Information. The Seller represents and warrants to the
Purchaser that he has had an opportunity to ask questions of, and to receive
answers from, appropriate officers and representatives of the Purchaser
concerning the terms and conditions of the issuance of the XETA Stock and to
obtain any additional information concerning the Purchaser which the Seller has
requested. In addition, the Seller represents and acknowledges that the
Purchaser has made available for inspection by the Seller various documents
connected with the Purchaser's business that have been requested by Seller, and
has not refused in any way to permit the Seller to inspect any document
requested to be inspected by the Seller.
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2.4 Continuity of Representations. The Seller covenants and agrees to
advise Purchaser promptly of any material adverse change or deviation in or from
any of the representations and warranties herein from the Execution Date through
the Closing Date.
2.5 Value. In deciding to sell the Shares at the price provided herein,
Seller represents and warrants that he has relied on his own financial, tax,
business and legal advisors and has not relied on any express or implied
representation by Purchaser or any other person or entity as to the value of the
Shares. Seller has been employed by the Company, has been actively involved in
the management of the Company's day-to-day affairs, has had full and complete
access to all documents, records and books of the Company and has had a
reasonable opportunity to obtain such other information as he has deemed
necessary to determine the value of the Shares.
2.6 Concurrent Transaction. Seller understands and acknowledges that
the Company's other shareholder, Larry Hopp ("HOPP") has negotiated separately
with the Purchaser for the sale and purchase of Hopp's shares of the capital
stock of the Company. Seller further understands and acknowledges that the
Purchaser would not have agreed to purchase the Shares without Hopp's concurrent
agreement to sell his shares in the Company to the Purchaser, that the
concurrent purchase of Hopp's shares in the Company is a condition of Closing,
and that if negotiations with the Purchaser had been conducted by him jointly
with Hopp, Seller might have realized a higher price for the Shares.
Nevertheless, Seller is satisfied with the Purchase Consideration and other
terms provided herein, and he is willing and has freely agreed to sell the
Shares to the Purchaser for such consideration and on such terms.
ARTICLE III
Representations and Warranties of Purchaser
Purchaser makes the following representations and warranties to the
Seller, and Seller, in executing, delivering and consummating this Agreement,
has relied and will rely upon the correctness and completeness of each of such
representations and warranties:
3.1 Corporate Existence and Qualification. Purchaser is a company duly
organized, validly existing and in good standing under the laws of the State of
Oklahoma. Purchaser has the corporate power to own its assets and properties and
to carry on its business as now conducted, and Purchaser is duly qualified and
is in good standing as a foreign corporation in those jurisdictions in which it
is required to qualify in order to own its assets or properties or to carry on
its business as now conducted.
3.2 Consents. No consent of any governmental or other regulatory
agency, foreign or domestic, or any other party is required to be received by or
on the part of Purchaser to enable it to enter into and carry out this Agreement
in all material respects.
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3.3 Corporate Authority. Purchaser has the power to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by Purchaser's Board of Directors, and no other
corporate proceeding on the part of Purchaser will be necessary to authorize the
execution and delivery of this Agreement or the consummation of such
transactions. This Agreement constitutes the legal, valid and binding agreement
of Purchaser and, assuming that this Agreement constitutes the legal, valid and
binding agreement of the Seller, it is enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting the
rights of creditors and to general principles of equity.
3.4 No Breach. Neither the execution or delivery of this Agreement nor
Purchaser's compliance with any of the provisions hereof or its consummation of
the transactions contemplated hereby, will:
(a) violate or conflict with any provision of its Certificate
of Incorporation or Bylaws;
(b) violate or result, alone or with the passage of time, in
the material breach or termination of, or otherwise give any
contracting party the right to terminate or declare a default under,
the terms of any material agreement, document or undertaking, oral or
written, to which Purchaser is a party, or by which it or any of its
properties or assets may be bound (except for such violations,
conflicts, breaches or defaults as to which required waivers or
consents by other parties have been or, prior to Closing, will be
obtained);
(c) result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of
Purchaser;
(d) violate any judgment, order, injunction, decree, or award
against or binding upon Purchaser, its properties or assets; or
(e) violate any law or regulation of any jurisdiction relating
to Purchaser or any of its securities, assets or properties.
3.5 Brokers. Purchaser has not engaged, consented to, or authorized any
broker, finder, investment banker or other third party to act on its behalf,
directly or indirectly, as a broker or finder in connection with the
transactions contemplated by this Agreement, and Purchaser agrees to indemnify
the Seller against, and to hold him harmless from, any claim for brokerage or
similar commission or other compensation, which may be made against Seller by
any third party in connection with the transactions contemplated hereby based
upon any action by Purchaser.
3.6 Value. In deciding to acquire the Shares for the Purchase
Consideration, Purchaser represents and warrants that it has relied on its own
financial, tax, business and legal advisors and on the representations and
warranties of Seller and Company in this Agreement and
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the Inducement. Purchaser has not relied on any express or implied
representation by Seller or any other person or entity as to the value of the
Shares.
3.7 SEC Filings Complete. As of the time such document was filed,
Purchaser's most recent Annual Report on Form 10-K, all intervening 8-Ks (if
any) and Form 10-Qs, and Purchaser's most recent annual meeting proxy statement
(the "DISCLOSURE DOCUMENTS"), all as filed with the Securities and Exchange
Commission ("SEC"): (a) did not contain a misstatement of a material fact or an
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading; and (b) complied in all material respects
with the requirements of the Securities Exchange Act of 1934, as amended, as the
case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such documents. Since the filing of the most recent 10-K, no other
document has been required to be filed by Purchaser with the SEC which has not
been filed.
3.8 Litigation. Except as disclosed in the Disclosure Documents, there
is no action, suit, litigation, arbitration or other proceeding pending or, to
the knowledge of Purchaser threatened, against Purchaser or any of its
subsidiaries which would have a material adverse effect on its properties,
assets or business, or which would prevent or hinder the consummation of the
transactions contemplated by this Agreement or its obligations thereunder.
3.9 Shares Validly Issued. All of the XETA Stock to be issued to the
Seller pursuant to the terms of this Agreement, when issued pursuant to the
terms of this Agreement, shall be duly and validly issued, fully paid and
non-assessable, without violation of any preemptive or dissenters' or similar
rights and in full compliance with all applicable securities laws.
3.10 Generally. To the Purchaser's knowledge, no representation or
warranty by Purchaser in the Agreement or in any exhibit, schedule or closing
certificate furnished or to be furnished to the Seller pursuant to this
Agreement or in connection with the transactions contemplated by this Agreement
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact, necessarily to make the statements herein or
therein, in light of the circumstances in which they were made, not misleading.
ARTICLE IV
Covenants
4.1 Pre-Closing Covenants of the Seller and the Company. Seller and the
Company shall bind themselves, jointly and severally, to the covenants in favor
of Purchaser set forth in Article II of the Inducement. In addition, the Seller
covenants and agrees that from the Execution Date through the Closing Date he
shall not:
(a) trade in any of the Purchaser's stock;
(b) permit the Company to conduct its business other than in
the ordinary course consistent with past practice;
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(c) permit the Company, its employees, agents or
representatives, directly or indirectly, to solicit, encourage or
participate in discussions concerning, or to supply information
relating to, any other sale of any material portion of the Company's
assets or capital stock; or
(d) permit the Company to make any distributions of any kind
to its shareholders, whether of operating profits or in payment of any
debt due to any such shareholder(s), or any interest thereon, from or
after July 31, 1999, other than normal salary payable for services
rendered.
4.2 Pre-Closing Covenants of Purchaser. Purchaser hereby covenants
that, from and after the Execution Date until the Closing or the earlier
termination of this Agreement, Purchaser will use its best efforts to insure
that all of its representations and warranties contained herein are true in all
material respects as of the Closing as if repeated at and as of such time.
Purchaser shall promptly notify the Seller of any event or fact constituting or
which is likely to cause a breach or default of its covenants, representations
or warranties herein.
4.3 Seller's Confidentiality. At the Closing, Seller shall execute and
deliver to the Purchaser a Confidentiality Agreement in the form of Exhibit 4.3
hereto attached containing covenants prohibiting Seller, for the period
described therein (the "RESTRICTED PERIOD") from disclosing any confidential or
proprietary information of or concerning the Company to any third party,
including but not limited to Lucent Technologies, Inc. ("LUCENT").
4.4 Post-Closing Covenants of Purchaser. Purchaser hereby agrees to pay
Seller, within sixty (60) days after Closing,, the amount which is equal to the
"Net Tax Cost" incurred by the Seller, if any, accruing from the Effective Date
(August 1, 1999) up to but not including, the day of Closing. As used herein,
the term "Net Tax Cost" shall mean the actual cost to the Seller, which shall
include, without limitation, the actual tax cost resulting from any required tax
allocations of the Company's federal and state taxable income (excluding taxable
income, if any, resulting from the transaction contemplated by this Agreement),
reduced by the amount of any benefit derived by the Seller from any increase in
Seller's tax basis in the Shares that result from any such allocation(s).
Purchaser further agrees to cause Seller to be nominated as one of the slate of
nominees to serve on Purchaser's Board of Directors provided the Closing occurs
on or before December 15, 1999.
4.5 Fulfillment of Conditions. Purchaser and Seller each shall use all
commercially reasonable efforts to cause the conditions to Closing under this
Agreement which are reasonably within their control to be satisfied.
4.6 Retention of Business Records. For a period of six (6) years after
the Closing, the Purchaser shall retain, or cause the Company to retain, all
business records of the Company in its possession as of the Closing or otherwise
relating to periods prior to Closing. Purchaser shall permit Seller and his
authorized representatives to have access to such records upon reasonable prior
notice for any proper purpose.
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4.7 Tax Covenants. Without limiting Purchaser's payment obligation in
Section 4.4, Seller shall cause to be timely paid, before the same shall become
delinquent and before penalties accrue thereon, Seller's proportionate share of
all federal and state income taxes (including any such taxes resulting from the
sale of the Shares to Purchaser) shown on any return filed by Company with
respect to taxable periods or portions thereof ending on or before the Closing
Date, but only to the extent applicable law requires such taxes to be paid by
the shareholders of the Company. Prior to Closing Seller shall not, without the
prior written consent of Purchaser, permit Company to make or change any
election, change an annual tax accounting period, adopt or change any tax
accounting method, file any amended return, enter into any closing agreement,
settle any tax claim or assessment, surrender any right to claim a refund of
taxes, consent to any extension or waiver of the limitation period applicable to
any tax claim or assessment, or take any other action that may have the effect
of increasing the tax liability of Purchaser or Company. After the Closing
Purchaser shall not, without the prior written consent of the Seller, make or
change any tax election, change an annual tax accounting period, adopt or change
any tax accounting method, file any amended return, enter into any closing
agreements, settle any tax claim or assessment, surrender any right to claim a
refund of taxes, consent to any extension or waiver of the limitation period
applicable to any tax claim or assessment, or take any other action that may
have the effect of increasing the tax liability of Seller.
4.8 Tax Records. Each party hereto shall provide, and shall cause its
accountants and other representatives to provide, to the other party on a timely
basis, the information (including but not limited to all work papers and
records) that such party or its accountants or other representatives have within
their control and that may be reasonably necessary in connection with the
preparation of any and all returns required to be filed by such other party or
any other examination by any taxing authority or other administrative or
judicial proceeding relating to taxes of the Company or Purchaser. Each of
Seller and Purchaser shall retain or cause to be retained, until the applicable
statutes of limitations (including any extensions) have expired, copies of all
tax returns for all taxable periods of the Company beginning before the Closing
Date, together with supporting work schedules and other records or information
that may be relevant to such returns.
4.9 Privilege. The Seller and Purchaser acknowledge that Seller's legal
counsel, Thompson Coburn LLP, has acted primarily as counsel to Seller, but also
has acted as counsel to the Company and will be rendering an opinion of counsel
on behalf of the Company, in connection with this Agreement and the Inducement.
Notwithstanding such firm's role as counsel, Purchaser acknowledges that the
Company's role in this transaction, assuming the Closing occurs, is comparable
to that of an accommodation party, and Purchaser recognizes the importance to
Seller that communications with such counsel be protected by the attorney-client
privilege. Accordingly, Purchaser hereby acknowledges and agrees that all
communications between the Seller and the Company, on the one hand, and such
counsel, on the other, in connection with or in contemplation of the
transactions contemplated by this Agreement and the Inducement, shall be
entitled to protection of the attorney-client privilege, and that Seller (and
not the Company) shall be regarded as the owner of, and entitled to the benefits
and protections afforded by, such privilege.
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4.10 Employee Bonuses. Following the Closing, Purchaser agrees to take
such action as may be necessary to approve and cause to be paid to all eligible
employees of the Company, the incentive compensation bonuses which have been
accrued and reflected on the Company's books and records as of the Effective
Date pursuant to the Company's discretionary employee bonus plan.
ARTICLE V
Conditions Precedent to the
Obligation of Purchaser to Close
The obligation of Purchaser to close is subject to the fulfillment,
prior to or on the Closing Date (or, in the case of Sections 5.6, 5.8 and 5.13,
prior to or on November 15, 1999), of each of the following conditions, any one
or more of which may be waived in writing by Purchaser:
5.1 Representations and Warranties. All of the representations and
warranties of the Company and the Seller contained in this Agreement and in any
written statement, Exhibit, Schedule or certificate delivered to Purchaser
pursuant to this Agreement shall be true and correct in all material respects as
at the Effective Date as well as on the Closing Date, as if made at the Closing
as of the Closing Date.
5.2 Covenants. The Company and the Seller shall have in all material
respects performed and complied with all covenants and agreements required by
this Agreement to be performed or complied with by each of them prior to or at
the Closing.
5.3 No Actions. No action, suit, proceeding or investigation shall have
been instituted, and be continuing before a court or before or by a governmental
body or agency, or shall have been threatened and be unresolved, to restrain or
to prevent or to obtain damages in respect of, the carrying out of the
transactions contemplated hereby, or which, if successful, would materially
affect the right of Purchaser to own the Shares, or which, if successful, would
have a material adverse effect on such right, the prospects or net worth of the
Company, or the value of the Shares.
5.4 Consents; Licenses and Permits. The Company and the Seller shall
have each obtained all consents, licenses and permits of third parties to any of
the Material Agreements ( as defined in Section 1.15 of the Inducement) which
are necessary for the performance by Seller and the Company of all of their
respective obligations under this Agreement, and such other consents, if any,
which are necessary to prevent (i) any agreements of the Company from
terminating, the termination of which, in the aggregate, would have a material
adverse effect on the business, financial condition or assets of the Company, or
(ii) any material indebtedness of the Company from becoming due then or with
notice or the passage of time as a result of the performance of this Agreement.
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5.5 No Material Change. There shall have been no material change,
whether or not adverse, at the Closing Date in the business, assets, properties,
operations, financial status or prospects of the Company since December 31,
1998; provided, however, that the Seller shall release and discharge, at or
before Closing, all indebtedness of the Company outstanding to the Seller not
included as part of the Seller Debt.
5.6 Completion of Due Diligence. The Purchaser shall have completed its
due diligence examination of the Company by November 15, 1999, and found the
Shares to be in all respects satisfactory as an investment by the Purchaser.
5.7 Certificate. Purchaser shall have received a certificate in the
form of Exhibit 5.7 hereto attached, dated as of the Closing Date and signed by
the Seller and by the Company, verifying their satisfaction of the conditions
set forth in Sections 5.1 through 5.5.
5.8 Opinion. Purchaser shall have received the written opinion of legal
counsel to the Seller and the Company, dated as of the Closing Date, in form and
substance reasonably satisfactory to Purchaser and its counsel, the form and
content of such opinion to be agreed upon by November 15, 1999.
5.9 Lucent Distributorship. The Company shall have successfully renewed
and extended its existing distributorship relationship with Lucent on terms
reasonably acceptable to Purchaser.
5.10 Hopp Transaction. The Purchaser shall have been successful in
purchasing all of Mr. Hopp's shares in the Company and shall have obtained from
him his non-competition and confidentiality agreements contemplated in
connection with such transaction.
5.11 Non-Competition and Confidentiality. At the Closing, the Seller
shall have executed and delivered the Non-Competition Agreement and the
Confidentiality Agreement.
5.12 Section 338(h)(10) Election. If requested by Purchaser, the Seller
and Mr. Hopp shall have made an election under Section 338(h)(10) of the Code to
treat the sale of their shares in the Company to Purchaser as a sale of the
Company's assets for tax purposes. In such event, Purchaser shall prepare the
appropriate IRS tax forms and will provide copies of the same to Seller for
inclusion with the appropriate tax returns.
5.13 Board Approval. No later than November 15, 1999, the Board of
Directors of Purchaser shall have given its approval to the closing of the
purchase of the Shares, subject only to the conditions described in 5.14 and
5.15 hereof.
5.14 Fairness Opinion. Purchaser shall have obtained a "fairness
opinion" from the investment banking firm previously engaged by the Purchaser,
at its sole expense, in connection with the transaction contemplated by this
Agreement, finding the terms of this transaction, including the Purchase Price
and other consideration to be paid for the Shares, to be fair, from a financial
point of view, to the shareholders of the Purchaser.
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5.15 Bank Financing. The Purchaser shall have received firm commitments
from one or more financing syndicates to lend Purchaser the aggregate sum of not
less than $23,000,000, at a weighted-average interest rate per annum not to
exceed the London Interbank Offer Rate plus 2.5% per annum and repayable over a
term of not less than five (5) years.
5.16 Additional Documents. The Seller and the Company shall have
delivered all such other certificates and documents consistent with this
Agreement as Purchaser or its counsel may have reasonably requested.
5.17 Employment Agreement. At the Closing, the Seller and the Company
shall have executed and delivered the Employment Agreement.
ARTICLE VI
Conditions Precedent to the Obligation of the
the Seller to Close
The obligation of the Seller to close is subject to the fulfillment,
prior to or on the Closing Date, of each of the following conditions, any one or
more of which may be waived in writing by the Seller:
6.1 Representations and Warranties. All representations and warranties
of Purchaser contained in this Agreement and in any Exhibit, Schedule or
certificate delivered pursuant hereto or in connection with the transactions
contemplated hereby shall be true and correct in all material respects as at the
Closing Date, as if made at the Closing and as of the Closing Date.
6.2 Covenants. Purchaser shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by it prior to or at the Closing.
6.3 No Actions. No action, suit, proceeding, or investigation shall
have been instituted, and be continuing, before a court or before or by a
governmental body or agency, or shall have been threatened, and be unresolved,
by any governmental body or agency to restrain or prevent, or obtain damages in
respect of, the carrying out of the transactions contemplated hereby.
6.4 Certificate. The Seller shall have received a certificate in the
form annexed hereto as Exhibit 6.4 dated the Closing Date, signed by the
Purchaser verifying the satisfaction of the conditions contained in Sections 6.1
through 6.3.
6.5 Hopp Transaction. Hopp shall have sold his interest in Company to
Purchaser prior to or concurrently with the Closing, and shall have executed and
delivered the noncompetition and confidentiality agreements contemplated
thereby.
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6.6 Board Approval. No later than November 15, 1999, the Board of
Directors of Purchaser shall have given its approval to the closing of the
purchase of the Shares, subject only to the conditions described in 5.14 and
5.15 hereof.
6.7 Additional Documents. The Purchaser shall have delivered all such
other certificates and documents consistent with this Agreement as Seller or his
counsel may have reasonably requested.
ARTICLE VII
Closing
7.1 The Closing. The closing of the sale and acquisition of the Shares
contemplated by this Agreement (the "CLOSING") shall occur upon satisfaction of
all of the conditions precedent to the obligations of the parties to close as
set forth in Articles V and VI and upon the delivery by the parties of all of
the items to be delivered by them pursuant to Sections 7.3 and 7.4 hereof.
7.2 Location, Time and Date. The Closing shall be deemed to occur in
the offices of Barber & Bartz, 110 West 7th Street, Suite 200, Tulsa, Oklahoma,
74103, at 10:00 o'clock a.m. on November 15, 1999, subject to postponement by
Purchaser as may be reasonably necessary to satisfy the conditions precedent to
Purchaser's obligation to close hereunder, but in any event not later than
December 15, 1999, or at such other time and place as may be actually agreed to
by the parties hereto,. The date on which the Closing shall occur is referred to
in this Agreement as the "CLOSING DATE".
7.3 Seller's Deliveries. At the Closing, the Company and the Seller
will deliver or cause to be delivered to Purchaser:
(a) All certificates representing the Shares, constituting
fifty percent (50%) of the outstanding shares of the Company
immediately prior to the Closing;
(b) The Non-Competition Agreement required by Section 1.2;
(c) The Employment Agreement required by Section 1.5;
(d) The Confidentiality Agreement required by Section 4.3;
(e) The certificate required by Section 5.7;
(f) The opinion of counsel required by Section 5.8;
(g) Seller's resignation as a Director and officer of the
Company, to the extent requested by Purchaser; and
(h) Such other certified resolutions, releases, documents, and
certificates, as are required to be delivered by the Seller and/or the
Company
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pursuant to the provisions of this Agreement, including but not limited
the Inducement.
7.4 Purchaser's Deliveries. At the Closing, Purchaser will
deliver or cause to be delivered to the Seller:
(a) One or more duly executed certificates evidencing the XETA
Stock;
(b) The Cash Portion of the Purchase Consideration and the
principal amount of the Seller Debt;
(c) The certificate required by Section 6.4;
(d) The Employment Agreement required by Section 1.5; and
(e) Such other certified resolutions, documents and
certificates as are required to be delivered by Purchaser pursuant to
the provisions of this Agreement.
7.5 Transfer of Possession. As of the Closing Date, the Seller shall
give Purchaser full possession and ownership of the Shares.
ARTICLE VIII
Survival of Representations; Indemnification
8.1 Survival. The parties hereto agree that their respective
representations, warranties, covenants, and agreements contained herein shall
survive the Closing for a period of three (3) years after the Closing Date
except that those covenants, representatives and warranties made by the Seller
and/or the Company with respect to Taxes, Employee Benefit Plans and
Environmental Matters (Sections 1.10, 1.22 through 1.22.7, and 1.27 of the
Inducement) shall survive the Closing for such periods of time that the
government agencies having jurisdiction over the subject matter of those
covenants, representations and warranties may be empowered to assess a liability
or deficiency with respect to any of the matters covered thereby (the
"INDEMNIFICATION PERIOD"); provided that the Indemnification Period for
Environmental Matters (Section 1.27 of the Inducement) with respect to
properties not owned by the Company, Seller, Hopp or any of their affiliates
shall be limited to three (3) years after the Closing Date.
8.2 Indemnification by the Seller. Subject to the other provisions of
this Article VIII, the Seller agrees to save and indemnify Purchaser against,
and hold it harmless from, any and all liabilities, of every kind, nature and
description, fixed or contingent, including without limitation reasonable
attorney fees and expenses incurred in connection with any action, claim or
proceeding relating to such liabilities ("DAMAGES"), arising from the breach of
any of his representations, warranties, covenants, or agreements, contained
herein or in the Exhibits or
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Schedules hereto, a claim for which is asserted in writing by Purchaser during
the Indemnification Period.
8.3 Indemnification by Purchaser. Purchaser agrees to save and
indemnify the Seller against and to hold him harmless from any and all Damages
arising from the breach of any of Purchaser's representations, warranties,
covenants or agreements contained herein or the Exhibits hereto, a claim for
which is asserted in writing by Seller during the Indemnification Period.
8.4 Claims. All claims for Damages shall be computed net of the present
value of all readily ascertainable future tax benefits associated therewith. No
claim shall be made for matters adequately covered by insurance, nor may any
party recover punitive damages as part of its Damages.
8.5 Seller's Liability. Notwithstanding the other provisions of this
Article VIII, Purchaser shall not be entitled to indemnification for its Damages
unless and until Purchaser has sustained otherwise indemnifiable Damages of
Fifty Thousand Dollars ($50,000) (the "BASKET"), and thereafter Purchaser shall
be entitled to indemnification only for its Damages exceeding the Basket. Prior
to a Final Determination with respect to any claim against Seller for
indemnification under this Article VIII, Purchaser may withhold, from the
Indemnity Fund or Incentive Fund otherwise payable to Seller, an amount
representing Purchaser's reasonable estimate of the indemnifiable Damages
associated with such claim. Upon a Final Determination of the amount of such
claim, Purchaser shall be entitled to receive from Seller, within ten (10) days
after written demand therefor, the Damages as provided in the Final
Determination. If Seller does not pay such amount in full within such ten day
period, Purchaser may set off its unsatisfied Damages against such withheld
portion of the Indemnity Fund or Incentive Fund, as applicable, and remit the
balance of such Indemnity Fund or Incentive Fund, if any, to Seller in
accordance with this Agreement. Purchaser's right to indemnification from Seller
shall not be limited to such rights of withholding and offset. The aggregate
liability of Seller for indemnification for Damages under this Article VIII
shall not exceed an amount equal to the Purchase Consideration; and for such
purpose the XETA Stock shall be valued at an amount per share equal to the
lesser of (i) the closing price per share on the trading day next preceding the
Closing Date or (ii) the closing price per share on the trading day next
preceding the date on which the Purchaser first becomes aware of the claim
underlying its right to indemnification. In the event an indemnifiable claim
arises hereunder by virtue of Seller's breach of a representation or warranty
herein and a similar indemnifiable claim arises simultaneously in favor of
Purchaser by virtue of Hopp's breach of a similar representation or warranty
contained in his stock purchase agreement with Purchaser such that both Seller
and Hopp are equally responsible for 100% of the Damages resulting from such
claim and are each financially capable of compensating Purchaser for one-half
(1/2) of the Damages resulting therefrom, Purchaser shall limit its recovery
from Purchaser to no more than one-half (1/2) of the total of such Damages.
8.6 Purchaser's Liability. Notwithstanding the other provisions of this
Article VIII, Seller shall not be entitled to indemnification for its Damages
unless and until Seller has sustained otherwise indemnifiable Damages of Fifty
Thousand Dollars ($50,000) (the "BASKET"), and thereafter Seller shall be
entitled to indemnification only for its Damages exceeding the Basket. Upon a
Final Determination of the amount of any claim for Damages made against
15
<PAGE> 20
Purchaser by the Seller, the Seller shall be entitled to recover the amount of
such Damages as finally determined.
8.7 Final Determination. For the purposes of this Agreement, a "FINAL
DETERMINATION" shall exist when (i) the parties agree in writing upon the
amount, or (ii) a court of competent jurisdiction shall have made a
determination on the merits with respect thereto and appeal therefrom shall not
have been taken within a timely fashion from the date of such determination. The
asserting party will assign to the other party any claims against which the
asserting party has been indemnified and paid as provided herein, as to which
there may be claims against persons other than the Company, and the other party
in all respects shall be subrogated to the rights of the asserting party in
connection therewith.
8.8 Defense of Claims. Each party entitled to indemnification under
this Article VIII (the "INDEMNIFIED PARTY") agrees to notify the party required
to provide indemnification (the "INDEMNIFYING PARTY") with reasonable promptness
of any claim asserted against it in respect of which the Indemnifying Party may
be liable under this Agreement, which notification shall be accompanied by a
written statement setting forth the basis of such claim and the manner of
calculation thereof. The Indemnifying Party shall have the right, at its
election, to defend or compromise any such claim at its own expense with counsel
of its choice; provided, however, that (i) such counsel shall have been approved
by the Indemnified Party, which approval shall not be unreasonably withheld or
delayed; (ii) the Indemnified Party may participate in such defense if it so
chooses with its own counsel and at its own expense; and (iii) any such defense
or compromise shall be conducted in a manner which is reasonable and not
prejudicial to the Indemnified Party's interest in such matter. In the event the
Indemnifying Party does not undertake to defend or compromise the claim, the
Indemnifying Party shall promptly notify the Indemnified Party of its intention
not to undertake to defend or compromise the claim, and the Indemnifying Party
shall be bound by (a) the final decree of any court of competent jurisdiction
deciding the validity and amount of the claim asserted against the Indemnified
Party, and (b) any compromise of such claim made with the prior consent of the
Indemnifying Party, which shall not be unreasonably withheld or delayed.
8.9 Extension of Time. To the extent that an Indemnified Party delivers
written notice of a claim for Damages against an Indemnifying Party prior to the
expiration of the Indemnification Period, reasonably identifying the basis for
the claim and the amount of any reasonably ascertainable Damages, the
Indemnification Period shall be extended for such claim until such claim is
resolved by a Final Determination, subject to the limitations hereinabove
provided.
8.10 Restriction on Transfers. For a period of three (3) years
following the Closing Date, Seller shall at all times hold in Seller's
name (or in the name of a revocable Grantor Trust of which Seller is
the grantor, beneficiary and trustee), free and clear from any
encumbrances whatsoever, the XETA Shares and any and all property
acquired with the proceeds from the sale of any portion of the XETA
Shares.
16
<PAGE> 21
ARTICLE IX
Termination and Waiver
9.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the transactions provided
for herein abandoned at any time prior to the Closing Date:
(a) By mutual consent of the parties;
(b) By the Purchaser if, through no fault of Purchaser, any of
the conditions set forth in Article V hereof shall not have been
fulfilled on or prior to December 15, 1999, or shall become incapable
of fulfillment, and shall not have been waived;
(c) By the Seller if, through no fault of Seller, any of the
conditions set forth in Article VI hereof shall not have been fulfilled
on or prior to December 15, 1999, or shall have become incapable of
fulfillment, and shall not have been waived; or
(d) By either party, if any legal action or proceeding shall
have been instituted or threatened seeking to restrain, prohibit,
invalidate or otherwise affect the consummation of the transactions
contemplated by this Agreement which makes it inadvisable, in the
judgment of such party, to consummate same.
If terminated as described above, this Agreement shall terminate,
without any liability or obligation on the part of either party hereto to
proceed to the Closing, except for any liability (i) arising from a breach prior
to or in connection with such termination, or (ii) under any covenant that
survives termination.
9.2 Waivers. Any condition to performance by the Seller or the
Purchaser which may be legally waived on or before the Closing Date may be
waived by the party entitled to the benefit of such condition by duly authorized
instrument in writing executed by the waiving party. The failure of any party at
any time or times to require performance of any provision hereof shall not
affect or impair the right of such party to require such performance at a later
time. No waiver by any party of the breach of any term, covenant, representation
or warranty contained in this Agreement as a condition to such party's
obligations hereunder shall release or affect any liability resulting from such
breach, and no waiver of any nature, whether by conduct or otherwise, in any one
or more instances, shall be construed as, or be deemed to be, a further or
continuing waiver either of any such condition or of any breach of any other
term, covenant, representation or warranty contained in this Agreement.
9.3 Exclusivity of Remedy. Seller and Purchaser acknowledge and agree
that the provisions of Article VIII shall be the sole remedy of any party
against the other party after the Closing for breach of any representation or
warranty made by such other party pursuant to this Agreement. Each party hereby
waives any other statutory, legal or equitable remedy for relief
17
<PAGE> 22
from such breach of representation or warranty that would otherwise be available
to the injured party, even if such other statutory, legal or equitable remedy
would extend beyond the survival dates set forth in Article VIII above.
ARTICLE X
Miscellaneous Provisions
10.1 Expenses. Each party shall bear its own legal, accounting and
other professional fees, costs and expenses incurred in connection with this
Agreement and the transactions hereby intended to be effected.
10.2 Confidential Information. Each party agrees it and its
representatives shall hold in strict confidence, and shall not divulge or
disclose to any person without a need to know, any information and documents
received from the other party and, if the transactions herein contemplated are
not consummated, each party will continue to hold such information and documents
in strict confidence and shall return to such other party all such documents
then in such receiving party's possession (including the Exhibits and Schedules
to this Agreement) without retaining copies thereof; provided, that each party's
obligations under this Section 10.2 to maintain such confidentiality shall not
apply to any information or documents that are in the public domain when
furnished by the other or to be disclosed required by applicable law . In the
event of a breach or threatened breach under this Section 10.2, the parties to
this Agreement acknowledge that the person harmed or threatened to be harmed
thereby will not have an adequate remedy at law, and shall be entitled to such
equitable and injunctive relief as may be available to restrain such breach;
provided, that nothing herein shall be construed as prohibiting such person from
pursuing any other remedies available for such breach or threatened breach,
including the recovery of damages.
10.3 Publicity. The parties agree that no publicity, release or other
public announcement concerning the transactions contemplated by this Agreement
shall be issued by either party without the advance approval of the form and
substance of the same by the other party and its counsel, which approval shall
not be unreasonably withheld or delayed.
10.4 Modification, Termination or Waiver. This Agreement may be
amended, modified, superseded or terminated, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived, but only by a
written instrument executed by both parties. The failure of any party at any
time or times to require performance of any provision hereof shall in no manner
affect the right of such party at a later time to enforce the same.
10.5 Notices. Any notice or other communication required or which may
be given hereunder shall be in writing and shall be either (a) delivered
personally, (b) sent by U. S. Mail, certified or registered mail with postage
prepaid, return receipt requested, or by overnight courier service with shipping
fees prepaid, receipt requested, or (c) transmitted by telefacsimile to a
telephone number as to which the intended recipient notifies the other. Notice
shall be deemed
18
<PAGE> 23
given when so delivered personally, or if mailed or sent by courier service,
five (5) days after the date of mailing or deposited with the courier service,
addressed as follows:
If to Purchaser, to: XETA Corporation
1814 West Tacoma
Broken Arrow, OK 74012
Attn: Jon A. Wiese
With a copy to: Barber and Bartz
110 West 7th Street, Suite 200
Tulsa, OK 74119-1018
Attn: Ron B. Barber
If to the Seller: Mark A. Martin
55 Trent Drive
St. Louis, MO 63124
With copy to: Benjamin H. Hulsey
Thompson Coburn LLP
One Mercantile Center
St. Louis, MO 63101-1693
If notice is provided by facsimile it shall be deemed given upon confirmation of
transmission. Either party may change the person and/or address to which notices
or other communications are to be sent by giving written notice of any such
change to the other in the manner herein provided.
10.6 Binding Effect and Assignment. This Agreement shall be binding
upon and inure to the benefit of the successors and assigns of the parties
hereto; provided, however, that no voluntary assignment of any rights or
delegation of any obligations provided for herein may be made by any party
without the express written consent of the other.
10.7 Exhibits and Schedules. All exhibits hereto (the "EXHIBITS") and
all schedules annexed hereto or thereto (the "SCHEDULES") are expressly made a
part of this Agreement as fully as though completely set forth herein, and all
references to this Agreement herein or in any of such Exhibits or Schedules
shall be deemed to refer to and include all such Exhibits and Schedules.
10.8 Entire Agreement. This Agreement represents the entire
understanding and agreement between the parties with respect to the subject
matter hereof, and supersedes all of the negotiations, understandings and
representations (if any) made by and between such parties.
10.9 Governing Law. This Agreement shall be construed and enforced in
accordance with the local laws of the State of Oklahoma applicable to agreements
to be executed and performed wholly within said State without giving effect to
its conflicts of laws provisions. The parties further agree that in any dispute
between them relating to this Agreement, exclusive
19
<PAGE> 24
jurisdiction shall be in the trial courts located within Tulsa County, Oklahoma,
any objections as to jurisdiction or venue in such court being expressly waived.
10.10 Section Headings. The section headings contained in this
Agreement are inserted for convenience of reference only and shall not affect
the meaning or interpretation of this Agreement.
10.11 Gender. Words of the masculine gender in this Agreement shall be
deemed and construed to include correlative words of the feminine and neuter
genders and words of the neuter gender shall be deemed and construed to include
correlative words of the masculine and feminine genders.
10.12 Severability. The invalidity or unenforceability of any term or
provision of this Agreement shall in no way impair or affect the balance
thereof, which shall remain in full force and effect.
10.13 Attorneys' Fees. In the event of any litigation or controversy
arising out of or in connection with this Agreement between the parties hereto,
the prevailing party in such litigation or controversy shall be entitled to
recover from the other party all reasonable attorneys' fees, expenses and suit
costs, including those associated with any appellate or post-judgment collection
proceeding.
10.14 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but which together shall
constitute one and the same instrument.
10.15 Recitals. The recitals set forth at the beginning of this
Agreement are true and correct and incorporated by reference into the body of
this Agreement.
10.16 Equitable Relief. Each party recognizes that the other is likely
to suffer irreparable damage if the provisions of Sections 10.2 or 10.3 are not
specifically enforced. In the event of a dispute concerning any of these
sections, each party agrees that the other may, without posting bond or
security, obtain an temporary or permanent injunction restraining the
consummation of any action or transaction prohibited thereby pending
determination of such dispute. The provisions of Sections 10.2 and 10.3 shall
likewise be enforceable by a decree of specific performance. In the event of
litigation relating to such provisions, if the court determines that either
party or any of its employees, agents or representatives has breached any
thereof, the injured party shall be entitled to recover from the breaching party
its reasonable fees, costs, and expenses (including attorney fees) incurred in
connection with the negotiation of this Agreement, any related due diligence
review, and/or the prosecution of any equitable or legal proceedings and any
appeal therefrom.
20
<PAGE> 25
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"Seller" "Purchaser"
XETA CORPORATION
/s/ Mark Martin By /s/ Jon A. Wiese
- --------------------------------- -----------------------
MARK MARTIN, individually Jon A. Wiese,
President
/s/ Mark A. Martin
- ---------------------------------
MARK A. MARTIN, Trustee Under Living
Trust of Mark A. Martin dated April 4, 1994
21
<PAGE> 26
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
1.2 Non-Competition Agreement
1.3.2 Gross Profit Definition
1.5 Employment Agreement
2.1 Agreement Regarding Representations,
Warranties and Covenants of the
Company and the Seller (the
"Inducement")
4.3 Confidentiality Agreement
5.7 "Bring-Down" Certificate of the
Seller and the Company
6.4 "Bring-Down" Certificate of the
Purchaser
</TABLE>
<PAGE> 1
EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
DATED AUGUST 1, 1999
BY AND AMONG
XETA CORPORATION
(THE "PURCHASER"),
LAWRENCE J. HOPP, INDIVIDUALLY,
AND
LAWRENCE J. HOPP, TRUSTEE UNDER LIVING TRUST
OF LAWRENCE J. HOPP, DATED OCTOBER 13, 1994
(COLLECTIVELY, THE "SELLER")
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION OF
AGREEMENT
PAGE NO.
<S> <C>
ARTICLE I - Purchase of Shares................................................1
1.1 Acquisition of Shares.......................................1
1.2 Purchase Price..............................................1
1.3 Tax Treatment...............................................2
ARTICLE II - Representations and Warranties of the Seller.....................2
2.1 Joint Representations and Warranties........................2
2.2 Continuity of Representations...............................3
2.3 Value.......................................................3
2.4 Concurrent Transaction......................................3
Article III - Representations and Warranties of Purchaser.....................3
3.1 Corporate Existence and Qualification.......................3
3.2 Consents....................................................4
3.3 Corporate Authority.........................................4
3.4 No Breach...................................................4
3.5 Brokers.....................................................4
Article IV - Covenants........................................................5
4.1 Pre-Closing Covenants of the Seller and the Company.........5
4.2 Pre-Closing Covenants of Purchaser..........................5
4.3 Seller's Confidentiality Agreement..........................5
4.4 Post-Closing Covenant of Purchaser..........................6
Article V - Conditions Precedent to the Obligation of Purchaser to Close......7
5.1 Representations and Warranties..............................7
5.2 Covenants...................................................7
5.3 No Actions..................................................7
5.4 Consents; Licenses and Permits..............................7
5.5 No Material Change..........................................7
5.6 Certificate.................................................8
5.7 Opinion.....................................................8
5.8 Lucent Distributorship......................................8
5.9 Non-Competition and Confidentiality.........................8
5.10 Section 338 Election........................................8
5.11 Board Approval..............................................8
5.12 Fairness Opinion............................................8
5.13 Bank Financing..............................................8
5.14 Martin Stock................................................8
5.15 Additional Documents........................................8
Article VI - Conditions Precedent to the Obligation of the Seller to Close....9
6.1 Representations and Warranties..............................9
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
6.2 Covenants...................................................9
6.3 No Actions..................................................9
6.4 Certificate.................................................9
6.5 Martin Agreement............................................9
6.6 Headquarters Lease Extension................................9
Article VII - Closing.........................................................9
7.1 The Closing.................................................9
7.2 Location, Time and Date....................................10
7.3 Seller's Deliveries........................................11
7.4 Purchaser's Deliveries.....................................11
7.6 Transfer of Possession.....................................11
Article VIII - Survival of Representations; Indemnification..................11
8.1 Survival...................................................11
8.2 Indemnification by the Seller..............................12
8.3 Indemnification by Purchaser...............................12
8.4 Claims.....................................................12
8.5 Seller's Liability.........................................12
8.6 Purchaser's Liability......................................12
8.7 Final Determination........................................12
8.8 Defense of Claims..........................................13
8.9 Extension of Time..........................................13
Article IX - Termination and Waiver..........................................14
9.1 Termination................................................14
9.2 Waivers....................................................14
Article X - Miscellaneous Provisions.........................................15
10.1 Expenses...................................................15
10.2 Confidential Information...................................15
10.3 Publicity..................................................15
10.4 Modification, Termination or Waiver........................15
10.5 Notices....................................................15
10.6 Binding Effect and Assignment..............................16
10.7 Exhibits and Schedules.....................................16
10.8 Entire Agreement...........................................16
10.9 Governing Law..............................................16
10.10 Section Headings...........................................17
10.11 Gender.....................................................17
10.12 Severability...............................................17
10.13 Attorneys' Fees............................................17
10.14 Counterparts...............................................17
10.15 Recitals...................................................17
10.16 Equitable Relief...........................................17
</TABLE>
ii
<PAGE> 4
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT"), which is to be
effective as of the 1st day of August, 1999 (the "EFFECTIVE DATE"), is entered
into by and among XETA CORPORATION, an Oklahoma corporation ("PURCHASER"),
LAWRENCE J. HOPP, individually, and LAWRENCE J. HOPP, AS TRUSTEE UNDER LIVING
TRUST OF LAWRENCE J. HOPP, DATED OCTOBER 13, 1994 (collectively, the "Seller").
RECITALS:
A. Seller owns fifty (50) shares (the "SHARES") of the $1.00 par value
common stock of U. S. Technologies Systems, Inc., a Missouri corporation (the
"COMPANY").
B. The shares constitute fifty percent (50%) of the Company's issued
and outstanding common stock.
C. Purchaser desires to acquire from the Seller, and the Seller
desires to sell to Purchaser, all of the Shares and all associated goodwill.
NOW, THEREFORE, in consideration of the mutual benefits to be derived
hereby, the representations, warranties, covenants, and agreements herein
contained, and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, Purchaser, and Seller do hereby
agree as follows:
ARTICLE I
Purchase of Shares
1.1 Acquisition of Shares. Upon the terms of, and subject to the
conditions set forth in this Agreement at the Closing, Seller shall convey to
Purchaser and Purchaser shall acquire all of the Shares and associated goodwill
from the Seller, free and clear of all manner of liens, charges, encumbrances
and claims. The Shares shall constitute one-half (1/2) of all of the Company's
capital stock issued and outstanding as of the date of Closing.
1.2 Purchase Price. The purchase price for the Shares ("PURCHASE
PRICE") shall be $9,485,209. Upon the sale, transfer and delivery by the Seller
of the Shares to Purchaser as set forth in Section 1.1, and in consideration
therefor, Purchaser shall pay to the Seller, at the Closing Date as defined
herein, by cashier's check or by electronic wire transfer or other immediately
available funds the Purchase Price, $100,000 of which shall be allocated as
consideration for Seller's agreement not to compete with Purchaser or the
Company nor to solicit any of its
<PAGE> 5
employees, customers or vendors for a period of one (1) year after the Closing
Date, as more particularly set out in a Non-Competition Agreement in the form
of Exhibit "1.2" attached hereto ("NON-COMPETITION AGREEMENT"). In addition to
the Purchase Price, Purchaser shall pay, or cause to be paid, at the Closing,
by cashier's check or by electronic wire transfer or other immediately
available funds, the sum of $1,514,791 plus $11,361, the amount of interest
accrued on the Company's indebtedness to Seller for the period July 1, 1999,
through July 31, 1999 (collectively, the "DEBT PAYMENT"), being the principal
balance of all indebtedness of the Company to Seller. Upon payment in full of
the Debt Payment, Seller shall release and discharge the Company from any
further liability in relation to any and all indebtedness, obligations and
liabilities of any and every kind owed by the Company to Seller, whether
absolute or contingent, liquidated or unliquidated, matured or unmatured, known
or unknown, and however acquired or arising.
1.3 Tax Treatment. Seller is aware of the fact, and hereby acknowledges
that Purchaser is contemporaneously, but separately, negotiating for the
possible purchase of all of Mark Martin's stock in the Company. Though neither
purchase transaction is affected by the terms of the other, Seller hereby
agrees, upon request, to promptly and timely execute and file Form 8023-A and to
otherwise cooperate with XETA and Mr. Martin in a joint election to treat each
transaction as a sale of assets under Section 338(h)(10) of the U. S. Internal
Revenue Code (the "CODE").
1.4 Automobile. As additional consideration for and inducement to
Seller to enter into this Agreement and sell Purchaser the Shares, Purchaser
hereby agrees that it will cooperate and use its best efforts to cause the
Company-owned automobile currently being driven by Seller to be conveyed to
Seller at or immediately after Closing, free of liens and encumbrances and at
no cost to Seller, except for any tax liability incurred as a result of such
conveyance.
ARTICLE II
Representations and Warranties
of the Seller
2.1 Joint Representations and Warranties. Contemporaneously with
Seller's execution and delivery of this Agreement, to be effective as of the
execution date hereof ("EXECUTION DATE") as well as the Closing Date, the
Seller shall make the representations and warranties to Purchaser (the
"REPRESENTATIONS AND WARRANTIES") contained in Article I of the supplementary
agreement, a copy of which constitutes Exhibit "2.1" hereto attached (the
"INDUCEMENT"). As an inducement to the Purchaser to enter into this Agreement
and an accommodation to the Seller as a principal shareholder of the Company,
the Company shall make the Representations and Warranties jointly and severally
with the Seller. Each of the Representations and Warranties shall be deemed
material, and Seller and the Company shall acknowledge in making the
Representations and Warranties that Purchaser, in executing, delivering, and
consummating this Agreement, has relied and will rely upon the correctness and
completeness of each of such Representations and Warranties.
2
<PAGE> 6
2.2 Continuity of Representations. The Seller covenants and agrees
that the all representations and warranties made by him herein or in connection
herewith shall be deemed given as of the Closing Date the same as on the
Execution Date and that there will be no material adverse change or deviation
in or from the Representations and Warranties from the Execution Date through
the Closing Date, unless and only to the extent that the Company and/or the
Seller shall have particularly advised Purchaser of such each such adverse
change or deviation in writing prior to Closing.
2.3 Value. In deciding to sell the Shares at the price provided
herein, Seller represents and warrants to the Purchaser that he has relied on
his own financial, tax, business and legal advisors and has not relied on any
express or implied representation by Purchaser or any other person or entity as
to the value of the Shares. Seller has been employed by the Company, has been
actively involved in the management of the Company's day-to-day affairs, has
had full and complete access to all documents, records and books of the
Company, and has had a reasonable opportunity to obtain all such other
information as he has deemed necessary to determine the value of the Shares.
2.4 Concurrent Transaction. Seller understands and acknowledges that
the Company's other shareholder, Mark Martin ("MARTIN") has negotiated
separately with the Purchaser for the sale and purchase of Martin's shares of
the capital stock of the Company. Seller further understands and acknowledges
that the Purchaser would not have agreed to purchase the Shares without
Martin's concurrent agreement to sell his shares in the Company to the
Purchaser, that the concurrent purchase of Martin's shares in the Company is a
condition of Closing, and that if negotiations with the Purchaser had been
conducted by him jointly with Martin, Seller might have realized a higher price
for the Shares. Nevertheless, Seller is satisfied with the Purchase Price and
terms provided herein, and he is willing and has freely agreed to sell the
Shares to the Purchaser at such price and on such terms.
ARTICLE III
Representations and Warranties of Purchaser
Purchaser makes the following representations and warranties to the
Seller, each of which shall be deemed material, and Seller, in executing,
delivering and consummating this Agreement, has relied and will rely upon the
correctness and completeness of each of such representations and warranties:
3.1 Corporate Existence and Qualification. Purchaser is a company duly
organized, validly existing and in good standing under the laws of the State of
Oklahoma. Purchaser has the corporate power to own its assets and properties
and to carry on its business as now conducted, and Purchaser is duly qualified
and is in good standing as a foreign corporation in those jurisdictions in
which it is required to qualify in order to own its assets or properties or to
carry on its business as now conducted.
3
<PAGE> 7
3.2 Consents. No consent of any governmental or other regulatory
agency, foreign or domestic, or any other party is required to be received by
or on the part of Purchaser to enable it to enter into and carry out this
Agreement in all material respects.
3.3 Corporate Authority. Purchaser has the power to enter into this
Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by Purchaser's Board of
Directors, and no other corporate proceeding on the part of Purchaser will be
necessary to authorize the execution and delivery of this Agreement. This
Agreement constitutes the legal, valid and binding agreement of Purchaser and,
assuming that this Agreement constitutes the legal, valid and binding agreement
of the Seller, it is enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting the rights of
creditors and to general principles of equity.
3.4 No Breach. To the knowledge of Purchaser, neither the execution or
delivery of this Agreement nor Purchaser's compliance with any of the
provisions hereof or its consummation of the transactions contemplated hereby,
will:
(a) violate or conflict with any provision of its Certificate
of Incorporation or Bylaws;
(b) violate or result, alone or with the passage of time, in
the material breach or termination of, or otherwise give any
contracting party the right to terminate or declare a default under,
the terms of any material agreement, document or undertaking to which
Purchaser is a party, or by which it or any of its properties or
assets may be bound (except for such violations, conflicts, breaches
or defaults as to which required waivers or consents by other parties
have been or, prior to Closing, will be obtained);
(c) result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of
Purchaser;
(d) violate any judgment, order, injunction, decree, or award
against or binding upon Purchaser, its properties or assets; or
(e) violate any law or regulation of any jurisdiction
relating to Purchaser or any of its securities, assets or properties.
3.5 Brokers. Purchaser has not engaged, consented to, or authorized
any broker, finder, investment banker or other third party to act on its
behalf, directly or indirectly, as a broker or finder in connection with the
transactions contemplated by this Agreement, and Purchaser agrees to indemnify
the Seller against, and to hold him harmless from, any claim for brokerage or
similar commission or other compensation, which may be made against Seller by
any third party in connection with the transactions contemplated hereby based
upon any wrongful action by Purchaser.
4
<PAGE> 8
ARTICLE IV
Covenants
4.1 Pre-Closing Covenants of the Seller and the Company. Seller and
the Company shall bind themselves, jointly and severally, to the covenants in
favor of Purchaser set forth in Article II of the Inducement. In addition, the
Seller covenants and agrees that from the Execution Date through the Closing
Date he shall not:
(a) trade in any of the Purchaser's stock;
(b) permit the Company to conduct its business other than in
the ordinary course consistent with past practice;
(c) permit the Company, its employees, agents or
representatives, directly or indirectly, to solicit, encourage or
participate in discussions concerning, or to supply information
relating to, any other sale of any material portion of the Company's
assets or capital stock; or
(d) permit the Company to make any distributions of any kind
to its shareholders, whether of operating profits or in payment of any
debt due to any such shareholder(s), or any interest thereon, from or
after July 31, 1999, other than normal salary payable for services
rendered.
4.2 Pre-Closing Covenants of Purchaser. Purchaser hereby covenants
that, from and after the Execution Date until the Closing or the earlier
termination of this Agreement, Purchaser will use its best efforts to insure
that all of its representations and warranties contained herein are true in all
material respects as of the Closing as if repeated at and as of such time, and
that no material breach or default that has not been cured by the Closing shall
occur with respect to any of its covenants, representations or warranties
contained herein. Purchaser will not voluntarily take any action or do anything
which will cause a breach of or default respecting such covenants,
representations and warranties and shall promptly notify the Seller of any
event or fact constituting or which is likely to cause such a breach or
default.
4.3 Seller's Confidentiality Agreement. At the Closing, Seller shall
execute and deliver to the Purchaser a Confidentiality Agreement in the form of
Exhibit 4.3 hereto attached ("CONFIDENTIALITY AGREEMENT") containing covenants
prohibiting Seller, for a period of five (5) years after the Closing Date (the
"RESTRICTED PERIOD") from disclosing any confidential or proprietary
information of or concerning the Company to any third party, including but not
limited to Lucent Technologies, Inc. ("LUCENT"), which information shall
include but not be limited to: (i) any information that the Company considers
or treats as confidential whether or not the Company
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has marked such information as confidential; (ii) any financial information of
the Company including its assets and results of operations; (iii) any
information concerning or related to the Company's Total Quality Management
program or its repair procedures or purchase methods; (iv) any information
concerning past contractual disputes with Lucent and the subject matter
thereof; and (v) any information concerning previous allegations of breaches by
the Company made by Lucent, the subject matter thereof, and the disposition of
such allegations.
4.3.1 If the Seller receives a request to disclose all or
any part of the foregoing information under the terms of a subpoena or
order issued by a court or governmental body, the Seller agrees:
(a) To notify the Purchaser, as promptly as
practicable, of the existence, terms, and circumstances
surrounding such request; and
(b) To consult with the Purchaser on the
advisability of taking legally available steps to resist or
narrow such request.
If disclosure of such information is required to prevent the Seller
from being held in contempt or subject to other penalty, Seller may
furnish the information, provided that Seller shall furnish only such
portion of the information as he is, in the written opinion of counsel
satisfactory to Seller and Purchaser, legally compelled to disclose,
and he shall afford Purchaser such reasonable cooperation as it may
request to obtain an order or other reliable assurance that
confidential treatment will be accorded to the disclosed information.
4.3.2 Specifically including, and without limiting any of
his obligations under this Section 4.3, Seller further agrees, subject
to the provisions of Section 4.3.1 hereof, that he shall not directly
or indirectly provide to Lucent, any of its affiliates, or any of its
employees, officers or agents any information that is in addition to,
different from, or contrary to the information provided earlier by the
Company or any of its officers or employees to Lucent in connection
with the disposition of any earlier allegations by Lucent that the
Company had breached or was in breach of any current or previous
agreement between the Company and Lucent or its predecessor.
4.4 Post-Closing Covenant of Purchaser. Purchaser hereby agrees to
reimburse the Seller, on or before January 15, 2000, for the "Net Tax Cost"
incurred by the Seller, if any, accruing from the Effective Date up to, but not
including, the day of Closing. As used herein, the term "Net Tax Cost" shall
mean the excess of the income allocated to the Seller from the Company's
operations at the date of Closing for calendar year 1999 over the income
allocated to Seller from the Company's operations for calendar year 1999 at
July 31, 1999, multiplied by 19.6 % (excluding any transaction gains or losses,
if any, resulting from the sale of Shares contemplated by this Agreement).
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ARTICLE V
Conditions Precedent to the Obligation of Purchaser to Close
The obligation of Purchaser to close is subject to the fulfillment,
prior to or on the Closing Date, of each of the following conditions, any one
or more of which may be waived by Purchaser (except when the fulfillment of
such condition is a requirement of law:
5.1 Representations and Warranties. All of the Representations and
Warranties and all other representations and warranties of the Company and the
Seller contained in this Agreement and in any written statement, Exhibit,
Schedule or certificate delivered to Purchaser pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be true and correct
in all material respects as at the Execution Date as well as on the Closing
Date, as if made at the Closing as of the Closing Date.
5.2 Covenants. The Company and the Seller shall have in all material
respects performed and complied with all covenants and agreements required by
this Agreement to be performed or complied with by each of them prior to or at
the Closing.
5.3 No Actions. No action, suit, proceeding or investigation shall
have been instituted, and be continuing before a court or before or by a
governmental body or agency, or shall have been threatened and be unresolved,
to restrain or to prevent or to obtain damages in respect of, the carrying out
of the transactions contemplated hereby, or which, if successful, would
materially affect the right of Purchaser to own the Shares, or which, if
successful, would have a material adverse effect on such right, the prospects
or net worth of the Company, or the value of the Shares.
5.4 Consents; Licenses and Permits. The Company and the Seller shall
have each obtained all consents, licenses and permits of third parties
necessary for the performance by each of them of all of their respective
obligations under this Agreement, and such other consents, if any, which are
necessary to prevent (i) any agreements of the Company from terminating, the
termination of which, in the aggregate, would have a material adverse effect on
the business, financial condition or assets of the Company, or (ii) any
material indebtedness of the Company from becoming due then or with notice or
the passage of time as a result of the performance of this Agreement.
5.5 No Material Change. The Purchaser shall have completed its due
diligence examination of the Company and found the Shares to be in all respects
satisfactory as an investment by the Purchaser, and there shall have been no
material change, whether or not adverse, at the Closing Date in the business,
assets, properties, operations, financial status or prospects of the Company
since December 31, 1998; provided, however, that the Seller shall release and
discharge the Company, at or before Closing, from all of the Seller Claims.
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5.6 Certificate. Purchaser shall have received a certificate in the
form of Exhibit 5.6 hereto attached, dated as of the Closing Date and signed by
the Seller and by the Company, verifying their satisfaction of the conditions
set forth in Sections 5.1 through 5.5.
5.7 Opinion. Purchaser shall have received the written opinion of
legal counsel to the Seller and the Company, dated as of the Closing Date, in
form and substance reasonably satisfactory to Purchaser and its counsel
covering the matters set forth in Exhibit 5.7 hereto.
5.8 Lucent Distributorship. The Company shall have successfully
renewed and extended its existing distributorship relationship with Lucent on
terms and for a period acceptable to Purchaser.
5.9 Non-Competition and Confidentiality. At the Closing, the Seller
shall have executed and delivered the Non-Competition Agreement and the
Confidentiality Agreement, shall have tendered his resignation as a director,
officer and employee of the Company, and shall have turned over and
relinquished to the Purchaser all written notes, memoranda, reports and other
documents containing any confidential or proprietary information of or
concerning the Company.
5.10 Section 338 Election. If requested by Purchaser, the Seller shall
have made an election under Section 338(h)(10) of the Code to treat the sale of
the Shares for tax purposes as a sale of the Company's assets. In such event
Purchaser shall prepare the appropriate IRS tax forms, and will provide copies
of the same to Seller for inclusion with the appropriate tax returns.
5.11 Board Approval. The Board of Directors of Purchaser shall have
given its final approval to the closing of the purchase of the Shares.
5.12 Fairness Opinion. Purchaser shall have obtained a "fairness
opinion" from the investment banking firm previously engaged by the Purchaser,
at its sole expense, in connection with the transaction contemplated by this
Agreement, finding the terms of this transaction, including the Purchase Price
and other consideration to be paid for the Shares, to be fair, from a financial
point of view, to the Shareholders of the Purchaser.
5.13 Bank Financing. The Purchaser shall have received firm
commitments from one or more financing syndicates to lend Purchaser the
aggregate sum of not less than $23,000,000, at a weighted-average interest rate
per annum not to exceed the London Interbank Offer Rate plus 2.5% per annum and
repayable over a term of not less than five (5) years.
5.14 Martin Stock. Purchaser shall have entered into a binding
contract with Martin for the purchase of all of the Company's remaining
outstanding stock.
5.15 Additional Documents. The Seller and the Company shall have
delivered, in a form mutually acceptable to Purchaser and Seller, all such
other certificates and documents as Purchaser or its counsel may have
reasonably requested as necessary to consummate the transaction contemplated by
this Agreement.
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ARTICLE VI
Conditions Precedent to the Obligation of the
Seller to Close
The obligation of the Seller to close is subject to the fulfillment,
prior to or on the Closing Date, of each of the following conditions, any one
or more of which may be waived by the Seller (except when the fulfillment of
such condition is a requirement of law):
6.1 Representations and Warranties. All representations and warranties
of Purchaser contained in this Agreement and in any Exhibit, Schedule or
certificate delivered pursuant hereto or in connection with the transactions
contemplated hereby shall be true and correct in all material respects as at
the Closing Date, as if made at the Closing and as of the Closing Date.
6.2 Covenants. Purchaser shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by it prior to or at the Closing.
6.3 No Actions. No action, suit, proceeding, or investigation shall
have been instituted, and be continuing, before a court or before or by a
governmental body or agency, or shall have been threatened, and be unresolved,
by any governmental body or agency to restrain or prevent, or obtain damages in
respect of, the carrying out of the transactions contemplated hereby.
6.4 Certificate. The Seller shall have received a certificate in the
form annexed hereto as Exhibit 6.4 dated the Closing Date, signed by the
Purchaser verifying the satisfaction of the conditions contained in Sections
6.1 through 6.3.
6.5 Martin Agreement. On or before November 1, 1999, the Purchaser and
Martin shall have entered into a stock purchase agreement for his sale to the
Purchaser of all of his stock in the Company.
6.6 Headquarters Lease Extension. If on the Closing Date, Seller is
the sole owner of the building in which the Company's executive offices are
located (the "BUILDING"), a ninety (90) day extension of the Company's existing
month-to-month lease thereof, duly executed by Seller and further providing for
such lease to continue thereafter on a month-to-month basis, until terminated
by either party upon thirty (30) days' prior written notice to the other
("HEADQUARTERS LEASE EXTENSION").
ARTICLE VII
Closing
7.1 The Closing. The closing of the sale and acquisition of the Shares
contemplated by this Agreement (the "CLOSING") shall occur upon satisfaction of
all of the conditions precedent to
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the obligations of the parties to close as set forth in Articles V and VI and
upon the delivery by the parties of all of the items to be delivered by them
pursuant to Sections 7.3 and 7.4 hereof.
7.2 Location, Time and Date. The Closing shall be held in the offices
of Barber & Bartz, 110 West 7th Street, Suite 200, Tulsa, Oklahoma, 74103, at
10:00 o'clock a.m. on November 15, 1999, or at such other time and place as may
be mutually agreed to by the parties hereto; provided, however, that the
Purchaser shall have the right, as provided in Section 7.2.1 below, to extend
the date of Closing for one (1) thirty-day period; provided, further, that the
Closing shall in no event occur later than December 15, 1999 (the "TERMINATION
DATE"). (The date on which the Closing shall occur is referred to in this
Agreement as the "CLOSING DATE").
7.2.1 The Purchaser shall be entitled to extend the Closing
from November 15, 1999, to the Termination Date provided (a) Purchaser
pays Seller the sum of $150,000 as earnest money to be applied to the
Purchase Price at Closing and (b) the conditions to Purchaser's
obligation to close described in Sections 5.8, 5.11 and 5.14 shall
have been satisfied or waived. Purchaser will accompany its payment of
such earnest money with a written status report to Seller confirming
that Purchaser has completed its due diligence review of the Company
and that Mark Martin executed a stock purchaser agreement with
Purchaser by November 1, 1999, and informing Seller of any breach or
breaches of the conditions to Purchaser's obligation to close
described in Sections 5.1, 5.2, 5.3 and 5.5 of this Agreement of which
Purchaser is aware as of the date of such status report; provided,
however, that the furnishing of such status report shall in no way
waive or impair Purchaser's right to require Seller's strict
compliance with all of the representations, warranties and covenants
made by Seller in this Agreement, including but not limited to those
described in said Sections 5.1, 5.2, 5.3 and 5.5.
7.2.2 If the Closing shall not occur by the Termination Date
and Seller shall have satisfied all conditions imposed on Seller
hereunder prior to that date, Seller shall be entitled to retain said
$150,000 of earnest money as liquidated damages in full satisfaction
of Purchaser's obligations under this Agreement. The parties hereby
expressly agree that this liquidated damage amount has been calculated
by the parties based upon their good faith estimate of the actual
damage that Seller would likely suffer as a result of Purchaser's
failure to close by the Termination Date, assuming Seller is ready,
willing and able to close on that date and has satisfied all
conditions to Purchaser's obligation to close hereunder. The parties
further agree, (i) that such amount is reasonable in light of the
anticipated actual harm that the Seller would suffer by reason of
Purchaser's wrongful failure to close, and (ii) that the difficulty of
proving Seller's actual damages and the lack of an adequate remedy at
law require the inclusion of liquidated damages herein.
7.2.3 The parties expressly agree, notwithstanding any other
contrary provision in this Agreement, that the retention of such
earnest money as liquidated damages shall be the Seller's sole and
exclusive remedy for Purchaser's failure to close by the Termination
Date; provided, however, that Purchaser shall be entitled to a full
refund of its earnest money if any condition to its obligation to
close hereunder (other than those described in Section 7.2.1) shall
remain unsatisfied as of the Termination Date.
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7.3 Seller's Deliveries. At the Closing, the Company and the Seller
will deliver or cause to be delivered to Purchaser:
(a) All certificates representing the Shares, constituting
fifty percent (50%) of the outstanding shares of the Company
immediately prior to the Closing;
(b) The certificate required by Section 5.6;
(c) The opinion of counsel required by Section 5.7;
(d) The Non-Competition Agreement, the Confidentiality
Agreement, and the Seller's resignation as an officer, director and
employee of the Company;
(e) If Seller is the sole owner of the Building on the
Closing Date, the Headquarters Lease Extension; and
(f) Such other certified resolutions, releases, documents,
and certificates, as are required to be delivered by the Seller and/or
the Company pursuant to the provisions of this Agreement, including
but not limited the Inducement.
7.4 Purchaser's Deliveries. At the Closing, Purchaser will deliver or
cause to be delivered to the Seller:
(a) The Purchase Price and the Debt Payment;
(b) The certificate required by Section 6.4;
(c) If the Seller is the sole owner of the Building on the
Closing Date, the Headquarters Lease Extension; and
(d) Such other certified resolutions, documents and
certificates as are required to be delivered by Purchaser pursuant to
the provisions of this Agreement.
7.5 Transfer of Possession. As of the Closing Date, the Seller shall
give Purchaser full possession and ownership of the Shares.
ARTICLE VIII
Survival of Representations; Indemnification
8.1 Survival. The parties hereto agree that their respective
representations, warranties, covenants, and agreements contained herein shall
survive the Closing for a period of three (3) years after the Closing Date
except that those covenants, representatives and warranties made by the Seller
and/or the Company with respect to Taxes, Employee Benefit Plans and
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<PAGE> 15
Environmental Matters (Sections 1.10, 1.22 through 1.22.7, and 1.27 of the
Inducement) shall survive the Closing for such periods of time that the
government agencies having jurisdiction over the subject matter of those
covenants, representations and warranties may be empowered to assess a
liability or deficiency with respect to any of the matters covered thereby (the
"INDEMNIFICATION PERIOD").
8.2 Indemnification by the Seller. The Seller agrees to save, defend,
and indemnify Purchaser against, and hold it harmless from, any and all
liabilities, of every kind, nature and description, fixed or contingent,
including without limitation reasonable attorney fees and expenses incurred in
connection with any action, claim or proceeding relating to such liabilities
("DAMAGES"), arising from the breach of any of his representations, warranties,
covenants or agreements contained herein or in the Exhibits or Schedules
hereto, which arise or a claim for which is made during the Indemnification
Period. Purchaser shall be entitled to set-off against any amounts due to the
Seller hereunder (including, without limitation, any compensation due pursuant
to the terms of the Non-Competition Agreement), the amount of any indemnity
claims, as reasonably estimated by Purchaser, which may arise under this
Agreement; provided, however, Purchaser's right to indemnification shall in no
way be limited to the amount of such set-off.
8.3 Indemnification by Purchaser. Purchaser agrees to save, defend and
indemnify the Seller against and to hold him harmless from any and all Damages
arising from the breach of any of Purchaser's representations, warranties,
covenants or agreements contained herein or the Exhibits hereto, which arise
and a claim for which is made during the Indemnification Period.
8.4 Claims. All claims for Damages arising out of breaches of
representations or warranties regarding tax deficiency assessments relating to
federal and state income tax returns filed prior to Closing, shall be computed
net of the present value of all readily ascertainable future tax benefits
associated therewith. No claim shall be made for matters adequately covered by
insurance.
8.5 Seller's Liability. Subject to the limitation contained in Section
8.2, upon a Final Determination of the amount of any claim for Damages made
against the Seller by Purchaser, Purchaser shall be entitled to recover the
amount of such Damages as finally determined; provided that Seller's liability
to Purchaser shall be limited to the sum of the Purchase Price and the Debt
Payment.
8.6 Purchaser's Liability. Upon a Final Determination of the amount of
any claim for Damages made against Purchaser by the Seller, the Seller shall be
entitled to recover the amount of such Damages as finally determined.
8.7 Final Determination. For the purposes of this Article VIII, a
"FINAL DETERMINATION" shall exist when (i) the parties agree upon the amount,
or (ii) a court of competent jurisdiction shall have made a Final Determination
with respect thereto and appeal therefrom shall not have been taken within a
timely fashion from the date of such determination. The asserting party will
assign to the other party any claims against which the asserting party has been
indemnified and paid as provided herein, as to which there may be claims
against persons other
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than the Company, and the other party in all respects shall be subrogated to
the rights of the asserting party in connection therewith.
8.8 Defense of Claims. Each party entitled to indemnification under
this Article VIII (the "INDEMNIFIED PARTY") agrees to notify the party required
to provide indemnification (the "INDEMNIFYING PARTY") with reasonable
promptness of any claim asserted against it in respect of which the
Indemnifying Party may be liable under this Agreement, which notification shall
be accompanied by a written statement setting forth the basis of such claim and
the manner of calculation thereof. The Indemnifying Party shall have the right,
at its election, to defend or compromise any such claim at their own expense
with counsel of their choice; provided, however, that (i) such counsel shall
have been approved by the Indemnified Party prior to engagement, which approval
shall not be unreasonably withheld or delayed; (ii) the Indemnified Party may
participate in such defense if it so chooses with its own counsel and at its
own expense; and (iii) any such defense or compromise shall be conducted in a
manner which is reasonable and not contrary to the Indemnified Party's
interest. In the event the Indemnifying Party does not undertake to defend or
compromise the claim, the Indemnifying Party shall promptly notify the
Indemnified Party of its intention not to undertake to defend or compromise the
claim, and the Indemnifying Party shall be bound by the final decree of any
court of competent jurisdiction deciding the validity and amount of the claim
asserted against the Indemnified Party.
8.9 Extension of Time. To the extent that an Indemnified Party files a
claim for Damages against an Indemnifying Party prior to the expiration of the
Indemnification Period, reasonably identifying the basis for the claim and the
amount of any reasonably ascertainable damages, the Indemnification Period
shall be extended for such claim until such claim is resolved, subject to the
limitations hereinabove provided.
8.10 Restriction on Transfers. From and after the Closing Date, Seller
shall not assign or transfer, for consideration less than fair market value, to
Seller's parents, siblings, spouse or children, or a trust for any of their
benefit, any portion of or interest in the Restricted Portion of the Purchase
Price (as hereinafter defined) received by Seller for the Shares, nor or any
portion of or interest in any property purchased or acquired by Seller with any
part of the Restricted Portion of the Purchase Price if the result of such
assignment or transfer might be in any manner to diminish the assets to which
Purchaser could resort in order to recover on any claim for Damages under this
Article VIII, unless Seller first obtains Purchaser's prior written consent to
the proposed assignment or transfer, which consent shall not be unreasonably
withheld, and the proposed assignee/transferee first signs a security agreement
and/or limited guaranty in favor of, and acceptable to, Purchaser and equal to
the value of the portion of or interest in the Restricted Portion of the
Purchase Price to be received by the assignee/transferee. As used herein,
"Restricted Portion of the Purchase Price" means:
(a) $7,500,000 during the first twelve (12) months after the
Closing Date;
(b) $5,000,000 during the period commencing twelve (12)
months after the Closing Date through the date which is thirty-six
(36) months after the Closing Date; and
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(c) $3,000,000 during the period commencing thirty-six (36)
months after the Closing Date through the date which is forty-eight
(48) months after the Closing Date.
ARTICLE IX
Termination and Waiver
9.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the transactions provided
for herein abandoned at any time prior to the Closing Date:
(a) By mutual consent of the parties;
(b) By the Purchaser if any of the conditions set forth in
Article V hereof shall not have been fulfilled on or prior to the
Termination Date, or shall become incapable of fulfillment, and shall
not have been waived;
(c) By the Seller if any of the conditions set forth in
Article VI hereof shall not have been fulfilled on or prior to the
Termination Date, or shall have become incapable of fulfillment, and
shall not have been waived; or
(d) By either party, if any legal action or proceeding shall
have been instituted or threatened seeking to restrain, prohibit,
invalidate or otherwise affect the consummation of the transactions
contemplated by this Agreement which makes it inadvisable, in the
judgment of such party, to consummate same.
If terminated as described above, this Agreement shall be void and of
no further force or effect, without any liability or obligation on the part of
either party hereto except for any liability which may arise pursuant to
Sections 10.1, 10.2 and 10.3.
9.2 Waivers. Any condition to performance by the Seller or the
Purchaser which may be legally waived on or before the Closing Date may be
waived by the party entitled to the benefit of such condition by duly
authorized instrument in writing executed by the waiving party. The failure of
any party at any time or times to require performance of any provision hereof
shall not affect or impair the right of such party to require such performance
at a later time. No waiver by any party of the breach of any term, covenant,
representation or warranty contained in this Agreement as a condition to such
party's obligations hereunder shall release or affect any liability resulting
from such breach, and no waiver of any nature, whether by conduct or otherwise,
in any one or more instances, shall be construed as, or be deemed to be, a
further or continuing waiver either of any such condition or of any breach of
any other term, covenant, representation or warranty contained in this
Agreement.
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ARTICLE X
Miscellaneous Provisions
10.1 Expenses. Each party shall bear its own legal, accounting and
other professional fees, costs and expenses incurred in connection with this
Agreement and the transactions hereby intended to be effected.
10.2 Confidential Information. Each party agrees it and its
representatives shall hold in strict confidence, and shall not divulge or
disclose to any person without a need to know, any information and documents
received from the other party and, if the transactions herein contemplated are
not consummated, each party will continue to hold such information and
documents in strict confidence and shall return to such other party all such
documents then in such receiving party's possession (including the Exhibits and
Schedules to this Agreement) without retaining copies thereof; provided, that
each party's obligations under this Section 10.2 to maintain such
confidentiality shall not apply to any information or documents that are in the
public domain when furnished by the other or to be disclosed required by
applicable law . In the event of a breach or threatened breach under this
Section 10.2, the parties to this Agreement acknowledge that the person harmed
or threatened to be harmed thereby will not have an adequate remedy at law, and
shall be entitled to such equitable and injunctive relief as may be available
to restrain such breach; provided, that nothing herein shall be construed as
prohibiting such person from pursuing any other remedies available for such
breach or threatened breach, including the recovery of damages.
10.3 Publicity. The parties agree that no publicity, release or other
public announcement concerning the transactions contemplated by this Agreement
shall be issued by either party without the advance approval of the form and
substance of the same by the other party and its counsel, which approval, in
the case of any publicity, release or other public announcement required by
applicable law, shall not be unreasonably withheld or delayed.
10.4 Modification, Termination or Waiver. This Agreement may be
amended, modified, superseded or terminated, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived, but only by a
written instrument executed by both parties. The failure of any party at any
time or times to require performance of any provision hereof shall in no manner
affect the right of such party at a later time to enforce the same.
10.5 Notices. Any notice or other communication required or which may
be given hereunder shall be in writing and shall be either (a) delivered
personally, (b) sent by U. S. Mail, certified or registered mail with postage
prepaid, return receipt requested, or by overnight courier service with
shipping fees prepaid, receipt requested, or (c) transmitted by telefacsimile
to a telephone number as to which the intended recipient notifies the other.
Notice shall be deemed given when so delivered personally, or if mailed or sent
by courier service, five (5) days after the date of mailing or deposited with
the courier service, addressed as follows:
If to Purchaser, to: XETA Corporation
1814 West Tacoma
Broken Arrow, OK 74012
Attn: Jon A. Wiese, President
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With a copy to: Barber and Bartz
110 West 7th Street, Suite 200
Tulsa, OK 74119-1018
Attn: Ron B. Barber
If to the Seller: Lawrence J. Hopp, Individually
8836 Raleigh Drive
St. Louis, MO 63123
and
Lawrence J. Hopp, Trustee
8836 Raleigh Drive
St. Louis, MO 63123
With a copy to: James R. Dankenbring
Dankenbring, Greiman, Osterholt &
Hoffmann, P.C.
Clayton Centre, Fifth Floor
120 S. Central Avenue
St. Louis, MO 63105
If notice is provided by facsimile it shall be deemed given upon confirmation
of transmission. Either party may change the person and/or address to which
notices or other communications are to be sent by giving written notice of any
such change to the other in the manner herein provided.
10.6 Binding Effect and Assignment. This Agreement shall be binding
upon and inure to the benefit of the successors and assigns of the parties
hereto; provided, however, that no assignment of any rights or delegation of
any obligations provided for herein may be made by any party without the
express written consent of the other.
10.7 Exhibits and Schedules. All exhibits hereto (the "EXHIBITS") and
all schedules annexed hereto or thereto (the "SCHEDULES") are expressly made a
part of this Agreement as fully as though completely set forth herein, and all
references to this Agreement herein or in any of such Exhibits or Schedules
shall be deemed to refer to and include all such Exhibits and Schedules.
10.8 Entire Agreement. This Agreement represents the entire
understanding and agreement between the parties with respect to the subject
matter hereof, and supersedes all of the negotiations, understandings and
representations (if any) made by and between such parties.
10.9 Governing Law. This Agreement shall be construed and enforced in
accordance with the local laws of the State of Oklahoma applicable to
agreements to be executed and performed wholly within said State without giving
effect to its conflicts of laws provisions. The parties further agree that in
any dispute between them relating to this Agreement, exclusive
16
<PAGE> 20
jurisdiction shall be in the trial courts located within Tulsa County, Oklahoma,
any objections as to jurisdiction or venue in such court being expressly waived.
10.10 Section Headings. The section headings contained in this
Agreement are inserted for convenience of reference only and shall not affect
the meaning or interpretation of this Agreement.
10.11 Gender. Words of the masculine gender in this Agreement shall be
deemed and construed to include correlative words of the feminine and neuter
genders and words of the neuter gender shall be deemed and construed to include
correlative words of the masculine and feminine genders.
10.12 Severability. The invalidity or unenforceability of any term or
provision of this Agreement shall in no way impair or affect the balance
thereof, which shall remain in full force and effect.
10.13 Attorneys' Fees. In the event of any litigation or controversy
arising out of or in connection with this Agreement between the parties hereto,
the prevailing party in such litigation or controversy shall be entitled to
recover from the other party all reasonable attorneys' fees, expenses and suit
costs, including those associated with any appellate or post-judgment
collection proceeding.
10.14 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but which together shall
constitute one and the same instrument.
10.15 Recitals. The recitals set forth at the beginning of this
Agreement are true and correct and incorporated by reference into the body of
this Agreement.
10.16 Equitable Relief. Each party recognizes that the other is likely
to suffer irreparable damage if the provisions of Section 4.3 or Sections 10.2
or 10.3 are not specifically enforced. In the event of a dispute concerning any
of these sections, each party agrees that the other may, without posting bond
or security, obtain an temporary or permanent injunction restraining the
consummation of any action or transaction prohibited thereby pending
determination of such dispute. The provisions of Section 4.3 and Sections 10.2
and 10.3 shall likewise be enforceable by a decree of specific performance. In
the event of litigation relating to such provisions, if the court determines
that either party or any of its employees, agents or representatives has
breached any thereof, the injured party shall be entitled to recover from the
breaching party its reasonable fees, costs, and expenses (including attorney
fees) incurred in connection with the negotiation of this Agreement, any
related due diligence review, and/or the prosecution of any equitable or legal
proceedings and any appeal therefrom.
17
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"Seller" "Purchaser"
XETA CORPORATION
/s/ Lawrence J. Hopp By /s/ Jon A. Wiese
- -------------------------------- ----------------------------
LAWRENCE J. HOPP, individually JON A. WIESE,
President
"Seller's Spouse" (for purposes of acknowledging
and agreeing to be bound by Section 8.10 only)
/s/ Christine T. Hopp
- --------------------------------
CHRISTINE T. HOPP
/s/ Lawrence J. Hopp
- --------------------------------
LAWRENCE J. HOPP, Trustee under
Living Trust of Lawrence J. Hopp, dated
October 13, 1999
18
<PAGE> 22
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
1.2 Non-Competition Agreement
2.1 Agreement Regarding
Representations, Warranties and
Covenants of The Company and the
Seller (the "Inducement")
4.3 Confidentiality Agreement
5.6 "Bring-Down" Certificate of the
Seller and the Company
5.7 Opinion of Counsel
6.4 Purchaser's "Bring-Down"
Certificate
</TABLE>
<PAGE> 1
EXHIBIT 2.3
CREDIT AGREEMENT
This Credit Agreement, dated as of November 30, 1999, is among Xeta
Corporation, an Oklahoma corporation, the Lenders (as hereinafter defined), Bank
One, Oklahoma, NA, a national banking association, as Agent, and Banc One
Capital Markets, Inc., as Lead Arranger and Sole Book Runner.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1. Certain Definitions. As used in this Agreement:
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Borrower or any of its Subsidiaries (i) acquires any going business or all or
substantially all of the assets of any firm, corporation or limited liability
company, or division thereof, whether through purchase of assets, merger or
otherwise or (ii) directly or indirectly acquires (in one transaction or as the
most recent transaction in a series of transactions) at least a majority (in
number of votes) of the securities of a corporation which have ordinary voting
power for the election of directors (other than securities having such power
only by reason of the happening of a contingency) or a majority (by percentage
or voting power) of the outstanding ownership interests of a partnership or
limited liability company.
"Acquisition Document" means, with respect to any Acquisition or
proposed Acquisition, each asset purchase agreement, stock purchase agreement,
merger agreement or other similar transaction document pertaining thereto.
"Acquisition Loan" means, with respect to a Lender, any loan made by
such Lender pursuant to Section 2.1.3 (or any continuation or conversion
thereof).
"Acquisition Loan Commitment" means, for each Lender, the obligation of
such Lender to make Acquisition Loans to the Borrower in an aggregate amount not
exceeding the amount set forth opposite such Lender's name on the signature
pages hereto directly underneath the caption "Acquisition Loan Commitment" or as
set forth in any Notice of Assignment relating to any assignment that has become
effective pursuant to Section 12.3.2, as such amount may be modified from time
to time pursuant to the terms hereof.
"Acquisition Loan Facility" means the revolving credit facility
established by the Lenders pursuant to Section 2.1.3.
"Acquisition Loan Facility Conversion Balance" means the aggregate
principal amount of Acquisition Loans outstanding on any Acquisition Loan
Conversion Date and on the Acquisition
<PAGE> 2
Loan Facility Termination Date, after giving effect to any Acquisition Loans
made or repaid on such date.
"Acquisition Loan Facility Conversion Date" means each of November 30,
2000, and November 30, 2001.
"Acquisition Loan Facility Termination Date" means November 30, 2002,
or any earlier date on which the Aggregate Acquisition Loan Commitment is
reduced to zero or otherwise terminated pursuant to the terms hereof.
"Acquisition Note" means a promissory note issued at the request of a
Lender pursuant to Section 2.13, substantially in the form of Exhibit "E-3".
"Acquisition Term Loan" means, with respect to a Lender, the loan made
by such Lender upon conversion of its Acquisition Loans outstanding on any
Acquisition Loan Facility Conversion Date pursuant to Section 2.1.4 (or any
continuation or conversion thereof).
"Acquisition Term Note" means a promissory note issued at the request
of a Lender pursuant to Section 2.13, substantially in the form of Exhibit
"E-4".
"Advance" means a borrowing under the Revolving Credit Facility, the
Term Loan Facility or the Acquisition Loan Facility that is (i) made by the
Lenders on the same Borrowing Date, or (ii) converted or continued by the
Lenders on the same date of conversion or continuation, consisting, in either
case, of the aggregate amount of the several Loans of the same Type and, in the
case of Eurodollar Loans, for the same Interest Period.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
"Agent" means Bank One in its capacity as contractual representative of
the Lenders pursuant to Article X, and not in its individual capacity as a
Lender, and any successor Agent appointed pursuant to Article X.
"Aggregate Acquisition Loan Commitment" means the aggregate of the
Acquisition Loan Commitments of all of the Lenders, as reduced from time to time
pursuant to the terms hereof.
"Aggregate Revolving Credit Commitment" means the aggregate of the
Revolving Credit Commitments of all of the Lenders, as reduced from time to time
pursuant to the terms hereof.
"Aggregate Term Loan Commitment" means, at any time, the aggregate of
the Term Loan Commitments of all of the Lenders.
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<PAGE> 3
"Agreement" means this Credit Agreement, as it may be amended or
modified and in effect from time to time.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum
of the Federal Funds Effective Rate for such day plus 1/2% per annum.
"Applicable Fee Rate" means, at any time, the percentage rate per annum
at which Commitment Fees are accruing on the unused portion of the Aggregate
Revolving Credit Facility Commitment and the Aggregate Acquisition Loan
Commitment at such time as set forth in the Pricing Schedule.
"Applicable Margin" means, with respect to Advances of any Type at any
time, the percentage rate per annum which is applicable at such time with
respect to Advances of such Type as set forth in the Pricing Schedule.
"Arranger" means Banc One Capital Markets, Inc., a Delaware
corporation, and its successors, in its capacity as Lead Arranger and Sole Book
Runner.
"Article" means an article of this Agreement unless another document is
specifically referenced.
"Authorized Officer" means any of Jack R. Ingram, Jon A. Wiese and
Robert B. Wagner, acting singly.
"Bank One" means Bank One, Oklahoma, NA, a national banking
association, in its individual capacity, and its successors.
"Borrower" means Xeta Corporation, an Oklahoma corporation, and its
successors and assigns.
"Borrowing Date" means a date (including the Closing Date) on which an
Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.8.
"Business Day" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in New York and Tulsa for the conduct of
substantially all of their commercial lending activities, interbank wire
transfers can be made on the Fedwire system and dealings in United States
dollars are carried on in the London interbank market and (ii) for all other
purposes, a day (other than a Saturday or Sunday) on which banks generally are
open in Tulsa for the conduct of substantially all of their commercial lending
activities and interbank wire transfers can be made on the Fedwire system.
3
<PAGE> 4
"Capital Expenditures" means, without duplication, any expenditures for
any purchase or other acquisition of any asset which would be classified as a
fixed or capital asset on a consolidated balance sheet of the Borrower and its
Subsidiaries prepared in accordance with GAAP, excluding (i) the cost of assets
acquired with Capitalized Lease Obligations, (ii) expenditures of insurance
proceeds to rebuild or replace any asset after a casualty loss and (iii)
leasehold improvement expenditures for which the Borrower or a Subsidiary is
reimbursed promptly by the lessor.
"Capitalized Lease" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with GAAP.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in conformity with GAAP.
"Cash Equivalent Investments" means (i) short-term obligations of, or
fully guaranteed by, the United States of America, (ii) commercial paper rated
A-1 or better by S&P or P-1 or better by Moody's, (iii) demand deposit accounts
maintained in the ordinary course of business, and (iv) certificates of deposit
issued by and time deposits with commercial banks (whether domestic or foreign)
having capital and surplus in excess of $100,000,000; provided, in each case
that the same provides for payment of both principal and interest (and not
principal alone or interest alone) and is not subject to any contingency
regarding the payment of principal or interest.
"Change in Control" means (i) the acquisition by any Person, or two or
more Persons acting in concert, of beneficial ownership (within the meaning of
Rule 13d-3 of the SEC under the Securities Exchange Act of 1934) of 35% or more
of the outstanding shares of voting stock of the Borrower, or (ii) the existence
of any circumstance or the occurrence of any event whereby the individuals who
comprise the Incumbent Board shall cease for any reason to constitute at least
two-thirds of the voting members of the Board of Directors of the Borrower. For
purposes of this definition: (i) the "Incumbent Board" means the individuals who
are members of the Board of Directors of the Borrower as of the date of this
Agreement and any individual who is hereafter elected to the Board of Directors
by the Borrower's common stockholders after his or her nomination for election
as a new director is approved by a vote of at least two-thirds of the Incumbent
Board, provided, however, that no individual shall be considered a member of the
Incumbent Board if such individual initially assumes office as a result of
either an actual or threatened "election contest" (as described in Rule 14A-11
of the SEC promulgated under the Securities Exchange Act of 1934) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board of Directors, including an individual elected by
reason of any agreement intended to avoid or settle any election contest or
proxy contest; and (ii) Jon A. Wiese and Mark A. Martin shall be deemed members
of the Incumbent Board if elected to the Board of Directors of the Borrower at
the annual meeting of the Borrower's common stockholders to be held in December,
1999.
4
<PAGE> 5
"Closing Date" means the date on or before December 15, 1999, on which
the conditions precedent set forth in Section 4.1 are satisfied or waived by the
Required Lenders and the Term Loans are made hereunder.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Collateral Documents" means, collectively, the Security Agreement, the
Mortgage and all other agreements and instruments now or hereafter securing all
or any part of the Obligations, and all UCC-1 financing statements, fixture
filings, lien entry forms and other documents, instruments, agreements and
certificates executed and delivered by the Borrower or any Subsidiary in
connection with the foregoing.
"Commitment" means, for each Lender, such Lender's Term Loan
Commitment, Revolving Credit Commitment and Acquisition Loan Commitment,
collectively, and as the context requires, refers to each of them individually.
"Consolidated Capital Expenditures" means, with reference to any
period, the Capital Expenditures of the Borrower and its Subsidiaries calculated
on a consolidated basis for such period.
"Consolidated EBIDA" means Consolidated Net Income plus, to the extent
deducted from revenues in determining Consolidated Net Income, (i) Consolidated
Interest Expense, (ii) depreciation, and (iii) amortization, all calculated for
the Borrower and its Subsidiaries on a consolidated basis. In calculating
Consolidated EBIDA (and any other financial ratios or determinations which refer
to Consolidated EBIDA) following the closing of any Acquisition, such
calculation shall be adjusted to take into account the financial impact of such
Acquisition (as if such Acquisition had occurred prior to, and the Subsidiary or
Property acquired pursuant to such Acquisition had been owned by the Borrower
throughout, the entire calculation period prior to the date as of which such
calculation is being made), but the manner of making such adjustment shall be
determined by the Lender in its sole discretion using such methodology as the
Lender deems appropriate under the circumstances.
"Consolidated EBITDA" means Consolidated Net Income plus, to the extent
deducted from revenues in determining Consolidated Net Income, (i) Consolidated
Interest Expense, (ii) expense for taxes paid in cash, (iii) depreciation, and
(iv) amortization, all calculated for the Borrower and its Subsidiaries on a
consolidated basis. In calculating Consolidated EBITDA (and any other financial
ratios or determinations which refer to Consolidated EBITDA) following the
closing of any Acquisition, such calculation shall be adjusted to take into
account the financial impact of such Acquisition (as if such Acquisition had
occurred prior to, and the Subsidiary or Property acquired pursuant to such
Acquisition had been owned by the Borrower throughout, the entire calculation
period prior to the date as of which such calculation is being made), but the
manner of making such adjustment shall be determined by the Lender in its sole
discretion using such methodology as the Lender deems appropriate under the
circumstances.
5
<PAGE> 6
"Consolidated Funded Indebtedness" means at any time the aggregate
dollar amount of Consolidated Indebtedness which has actually been funded and is
outstanding at such time, whether or not such amount is due or payable at such
time.
"Consolidated Indebtedness" means at any time the Indebtedness of the
Borrower and its Subsidiaries calculated on a consolidated basis as of such
time.
"Consolidated Interest Expense" means, with reference to any period,
the interest expense of the Borrower and its Subsidiaries calculated on a
consolidated basis for such period.
"Consolidated Net Income" means, with reference to any period, the net
income (or loss) of the Borrower and its Subsidiaries calculated on a
consolidated basis for such period.
"Consolidated Net Worth" means at any time the consolidated
stockholders' equity of the Borrower and its Subsidiaries calculated on a
consolidated basis as of such time.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract or the obligations of any such Person as general
partner of a partnership with respect to the liabilities of the partnership.
"Conversion/Continuation Notice" is defined in Section 2.9.
"Controlled Group" means all members of a controlled group of
corporations or other business entities and all trades or businesses (whether or
not incorporated) under common control which, together with the Borrower or any
of its Subsidiaries, are treated as a single employer under Section 414 of the
Code.
"Corporate Base Rate" means a rate per annum equal to the corporate
base rate or prime rate of interest announced by Bank One or by its parent, Bank
One Corporation, from time to time, changing when and as said corporate base
rate or prime rate changes.
"Default" means an event described in Article VII.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
(i) the protection of the environment, (ii) the effect of the environment on
human health, (iii) emissions, discharges or releases of pollutants,
contaminants, hazardous substances or wastes into surface water, ground water or
land, or (iv) the manufacture, processing,
6
<PAGE> 7
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, hazardous substances or wastes or the clean-up or
other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"Eurodollar Advance" means an Advance which, except as otherwise
provided in Section 2.11, bears interest at the applicable Eurodollar Rate.
"Eurodollar Base Rate" means, with respect to a Eurodollar Advance for
the relevant Interest Period, the applicable British Bankers' Association
Interest Settlement Rate for deposits in U.S. dollars appearing on Reuters
Screen FRBD as of 11:00 a.m. (London time) two Business Days prior to the first
day of such Interest Period, and having a maturity equal to such Interest
Period, provided that, (i) if Reuters Screen FRBD is not available to the Agent
for any reason, the applicable Eurodollar Base Rate for the relevant Interest
Period shall instead be the applicable British Bankers' Association Interest
Settlement Rate for deposits in U.S. dollars as reported by any other generally
recognized financial information service as of 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period, and having a
maturity equal to such Interest Period, and (ii) if no such British Bankers'
Association Interest Settlement Rate is available to the Agent, the applicable
Eurodollar Base Rate for the relevant Interest Period shall instead be the rate
determined by the Agent to be the rate at which Bank One or one of its Affiliate
banks offers to place deposits in U.S. dollars with first-class banks in the
London interbank market at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period, in the approximate amount
of Bank One's relevant Eurodollar Loan and having a maturity equal to such
Interest Period.
"Eurodollar Loan" means a Loan which, except as otherwise provided in
Section 2.11, bears interest at the applicable Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base
Rate applicable to such Interest Period, divided by (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such Interest Period, plus
(ii) the Applicable Margin.
"Excluded Taxes" means, in the case of each Lender or applicable
Lending Installation and the Agent, taxes imposed on its overall net income, and
franchise taxes imposed on it, by (i) the jurisdiction under the laws of which
such Lender or the Agent is incorporated or organized or (ii) the jurisdiction
in which the Agent's or such Lender's principal executive office or such
Lender's applicable Lending Installation is located.
"Exhibit" refers to an exhibit to this Agreement, unless another
document is specifically referenced.
"Facility" means any of the Revolving Credit Facility, the Term Loan
Facility or the Acquisition Loan Facility.
7
<PAGE> 8
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Tulsa
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"Fee Letter" means that certain letter agreement dated as of October
27, 1999, by and among the Borrower, the Agent and the Arranger.
"Financial Contract" of a Person means (i) any exchange-traded or
over-the-counter futures, forward, swap or option contract or other financial
instrument with similar characteristics, or (ii) any Rate Management
Transaction.
"Floating Rate" means, for any day, a rate per annum equal to the
Alternate Base Rate for such day plus (ii) the Applicable Margin, in each case
changing when and as the Alternate Base Rate changes.
"Floating Rate Advance" means an Advance which, except as otherwise
provided in Section 2.11, bears interest at the Floating Rate.
"Floating Rate Loan" means a Loan which, except as otherwise provided
in Section 2.11, bears interest at the Floating Rate.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied in a manner consistent with that used in preparing the
financial statements referred to in Section 5.4.
"Guaranty" means the Subsidiary Guaranty to be executed by UST in favor
of the Agent for the benefit of the Lenders and the Agent, as the same may be
amended, modified or supplemented from time to time.
"Indebtedness" of a Person means such Person's (i) obligations for
borrowed money, (ii) obligations representing the deferred purchase price of
Property or services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade), (iii)
obligations, whether or not assumed, secured by Liens or payable out of the
proceeds or production from Property now or hereafter owned or acquired by such
Person, (iv) obligations which are evidenced by notes, acceptances, or other
instruments, (v) obligations of such Person to purchase securities or other
Property arising out of or in connection with the sale of the same or
substantially similar securities or Property, (vi) Capitalized Lease
Obligations, (vii) any other obligation for borrowed money or other financial
accommodation which in
8
<PAGE> 9
accordance with GAAP would be shown as a liability on the consolidated balance
sheet of such Person, and (viii) Off-Balance Sheet Liabilities.
"Interest Period" means, with respect to a Eurodollar Advance, a period
of one, three or six months commencing on a Business Day selected by the
Borrower pursuant to this Agreement. Such Interest Period shall end on the day
which corresponds numerically to such date one, three or six months thereafter,
provided, however, that if there is no such numerically corresponding day in
such next, third or sixth succeeding month, such Interest Period shall end on
the last Business Day of such next, third or sixth succeeding month. If an
Interest Period would otherwise end on a day which is not a Business Day, such
Interest Period shall end on the next succeeding Business Day, provided,
however, that if said next succeeding Business Day falls in a new calendar
month, such Interest Period shall end on the immediately preceding Business Day.
"Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in the
trade) or contribution of capital by such Person; stocks, bonds, mutual funds,
partnership interests, notes, debentures or other securities owned by such
Person; any deposit accounts and certificate of deposit owned by such Person;
and structured notes, derivative financial instruments and other similar
instruments or contracts owned by such Person.
"Lenders" means the lending institutions listed on the signature pages
of this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the Agent,
the office, branch, subsidiary or affiliate of such Lender or the Agent listed
on the signature pages hereof or on a Schedule or otherwise selected by such
Lender or the Agent pursuant to Section 2.17.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"Leverage Ratio" means, as of any date of calculation, the ratio of (i)
Consolidated Funded Indebtedness outstanding on such date to (ii) Consolidated
EBITDA for the Borrower's then most-recently ended four fiscal quarters.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).
9
<PAGE> 10
"Loan" means, with respect to a Lender, any loan made by such Lender
pursuant to Article II (or any conversion or continuation thereof). A "Loan" may
be a Revolving Loan, a Term Loan, an Acquisition Loan or an Acquisition Term
Loan.
"Loan Documents" means this Agreement, any Notes issued pursuant to
Section 2.13, the Collateral Documents, the Guaranty, any guaranty agreement
hereafter executed by a Subsidiary in connection herewith, and any other
documents, agreements, instruments and writings executed by the Borrower or any
Subsidiary in connection with this Agreement or the Facilities.
"Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of operations,
or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the
ability of the Borrower to perform its obligations under the Loan Documents to
which it is a party, or (iii) the validity or enforceability of any of the Loan
Documents or the rights or remedies of the Agent or the Lenders thereunder.
"Material Indebtedness" is defined in Section 7.5.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means the Real Estate Mortgage, Security Agreement,
Assignment of Rents, Financing Statement and Fixture Filing to be executed by
the Borrower in favor of the Agent for the benefit of the Lenders, covering the
Borrower's real property located in Broken Arrow, Oklahoma, as the same may be
amended, modified or supplemented from time to time.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"Non-U.S. Lender" is defined in Section 3.5(iv).
"Note" means any promissory note issued at the request of a Lender
pursuant to Section 2.13 (whether a Revolving Note, a Term Note, an Acquisition
Note or an Acquisition Term Note).
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Loans, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrower to the Lenders
or to any Lender, the Agent or any indemnified party arising under the Loan
Documents.
"Off-Balance Sheet Liability" of a Person means (i) any repurchase
obligation or liability of such Person with respect to accounts or notes
receivable sold by such Person, (ii) any liability under any Sale and Leaseback
Transaction which is not a Capitalized Lease, (iii) any liability under any
so-called "synthetic lease" transaction entered into by such Person, or (iv) any
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<PAGE> 11
obligation arising with respect to any other transaction which is the functional
equivalent of or takes the place of borrowing but which does not constitute a
liability on the balance sheets of such Person, but excluding from this clause
(iv) Operating Leases.
"Operating Lease" of a Person means any lease of Property (other than a
Capitalized Lease) by such Person as lessee which has an original term
(including any required renewals and any renewals effective at the option of the
lessor) of one year or more.
"Other Taxes" is defined in Section 3.5(ii).
"Participants" is defined in Section 12.2.1.
"Payment Date" means the last day of each calendar month.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Person" means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"Plan" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Borrower or any member of the Controlled Group may have any
liability.
"Pricing Schedule" means the Schedule attached hereto identified as
such.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.
"Pro Rata Share" means, with respect to any Lender at any time, the
percentage obtained by dividing (A) the sum of (i) such Lender's Term Loan
outstanding at such time, plus (ii) such Lender's Revolving Credit Commitment at
such time, as adjusted from time to time in accordance with the provisions of
this Agreement (or, in the event the Aggregate Revolving Credit Commitment has
terminated, the sum of such Lender's Revolving Loans outstanding at such time),
plus (iii) such Lender's Acquisition Loan Commitment at such time, as adjusted
from time to time in accordance with the provisions of this Agreement (or, in
the event the Aggregate Acquisition Loan Facility Commitment has terminated, the
sum of such Lender's Acquisition Loans and Acquisition Term Loans outstanding at
such time) by (B) the sum of (i) the aggregate amount of all Term Loans
outstanding at such time, plus (ii) the Aggregate Revolving Credit Commitment at
such time (or, in the event the Aggregate Revolving Credit Commitment has
terminated, the total of all Revolving Loans outstanding at such time) plus
(iii) the Aggregate Acquisition Loan Commitment at such time (or, in the event
the Aggregate Revolving Credit Commitment has terminated, the total of all
Acquisition Loans and Acquisition Term Loans outstanding at such time).
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"Purchasers" is defined in Section 12.3.1.
"Rate Management Obligations" of a Person means any and all obligations
of such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all Rate
Management Transactions, and (ii) any and all cancellations, buy backs,
reversals, terminations or assignments of any Rate Management Transactions.
"Rate Management Transaction" means any transaction (including an
agreement with respect thereto) now existing or hereafter entered into between
the Borrower and any Lender or Affiliate thereof which is a rate swap, basis
swap, forward rate transaction, commodity swap, commodity option, equity or
equity index swap, equity or equity index option, bond option, interest rate
option, foreign exchange transaction, cap transaction, floor transaction, collar
transaction, forward transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions) or any combination
thereof, whether linked to one or more interest rates, foreign currencies,
commodity prices, equity prices or other financial measures.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"Rentals" of a Person means the aggregate fixed amounts payable by such
Person under any Operating Lease.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"Reports" is defined in Section 9.5.
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"Required Lenders" means Lenders whose Pro Rata Shares, in the
aggregate, are greater than 66.67%, except that, in the event there are not more
than two (2) Lenders as of any relevant date, "Required Lenders" means all of
the Lenders.
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.
"Revolving Credit Commitment" means, for each Lender, the obligation of
such Lender to make Revolving Loans to the Borrower in an amount not exceeding
the amount set forth opposite such Lender's name on the signature pages hereto
directly underneath the caption "Revolving Loan Commitment" or as set forth in
any Notice of Assignment relating to any assignment that has become effective
pursuant to Section 12.3.2, as such amount may be modified from time to time
pursuant to the terms hereof.
"Revolving Credit Facility" means the revolving credit facility
established by the Lenders pursuant to Section 2.1.1.
"Revolving Credit Facility Termination Date" means November 30, 2002,
or any earlier date on which the Aggregate Revolving Credit Commitment is
reduced to zero or otherwise terminated pursuant to the terms hereof.
"Revolving Loan" means, with respect to a Lender, any loan made by such
Lender pursuant to Section 2.1.1 (or any continuation or conversion thereof).
"Revolving Note" means a promissory note issued at the request of a
Lender pursuant to Section 2.13, substantially in the form of Exhibit "E-1".
"S&P" means Standard and Poor's Ratings Services, a division of The
McGraw Hill Companies, Inc.
"SEC" means the Securities and Exchange Commission of the United States
of America, or any successor agency to its functions.
"Sale and Leaseback Transaction" means any sale or other transfer of
Property by any Person with the intent to lease such Property as lessee.
"Schedule" refers to a specific schedule to this Agreement, unless
another document is specifically referenced.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Secured Obligations" means, collectively, (i) the Obligations and (ii)
all Rate Management Obligations owing to one or more Lenders.
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"Security Agreement" means the Pledge and Security Agreement to be
executed by the Borrower, UST and each Subsidiary hereafter formed or acquired
by the Borrower in favor of the Agent for the benefit of the Lenders, as the
same may be amended, modified or supplemented from time to time.
"Single Employer Plan" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Borrower.
"Substantial Portion" means, with respect to the Property of the
Borrower and its Subsidiaries, Property which (i) represents more than 10% of
the consolidated assets of the Borrower and its Subsidiaries as would be shown
in the consolidated financial statements of the Borrower and its Subsidiaries as
at the beginning of the twelve-month period ending with the month in which such
determination is made, or (ii) is responsible for more than 10% of the
consolidated net sales or of the consolidated net income of the Borrower and its
Subsidiaries as reflected in the financial statements referred to in clause (i)
above.
"Target" is defined in Section 6.12.2.
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and any and all liabilities with
respect to the foregoing, but excluding Excluded Taxes and Other Taxes.
"Term Loan" means, with respect to a Lender, the loan made by such
Lender pursuant to Section 2.1.2 (and any conversion or continuation thereof).
"Term Loan Commitment" means, for each Lender, the amount set forth
opposite such Lender's name in the signature pages hereto directly underneath
the caption "Term Loan Commitment."
"Term Loan Facility" means the term loan facility established by the
Lenders pursuant to Section 2.1.2.
"Term Note" means a promissory note issued at the request of a Lender
pursuant to Section 2.13, substantially in the form of Exhibit "E-2".
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"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as a Floating
Rate Advance or a Eurodollar Advance.
"UST" means U. S. Technologies Systems, Inc., a Missouri corporation.
"UST Acquisition" means the Acquisition contemplated by the UST
Acquisition Agreements.
"UST Acquisition Agreements" means, collectively, (i) that certain
Stock Purchase Agreement dated August 1, 1999, between the Borrower, as
purchaser, and Mark A. Martin, individually, and Mark A. Martin, Trustee Under
Living Trust of Mark A. Martin dated April 4, 1994, as seller, and (ii) that
certain Stock Purchase Agreement dated August 1, 1999, between the Borrower, as
purchaser, and Lawrence J. Hopp, individually, and Lawrence J. Hopp, Trustee
Under Living Trust of Lawrence J. Hopp dated October 13, 1994, as seller.
"Unfunded Liabilities" means the amount (if any) by which the present
value of all vested and unvested accrued benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer plan terminations.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership, limited liability company,
association, joint venture or similar business organization 100% of the
ownership interests having ordinary voting power of which shall at the time be
so owned or controlled.
"Year 2000 Issues" means anticipated costs, problems and uncertainties
associated with the inability of certain computer applications to effectively
handle data including dates on and after January 1, 2000, as such inability
affects the business, operations and financial condition of the Borrower and its
Subsidiaries and of the Borrower's and its Subsidiaries' material customers,
suppliers and vendors.
"Year 2000 Program" is defined in Section 5.19.
1.2. Plural Terms. The definitions set forth in Section 1.2 shall be
equally applicable to both the singular and plural forms of the defined terms.
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1.3. References to Subsidiaries. Reference in this Agreement to
Subsidiaries of the Borrower shall be applicable only during such periods of
time that the Borrower (with the consent of the Required Lenders) has one or
more Subsidiaries.
1.4. Accounting. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP. References
herein to the "consolidated" financial statements of the Borrower and to
accounting or financial determinations which are to be made hereunder on a
"consolidated" basis shall apply only during such periods of time that the
Borrower (with the consent of the Required Lenders) has one or more consolidated
Subsidiaries.
1.5. Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents.
ARTICLE II
THE CREDITS
2.1. The Credit Facilities.
2.1.1. Revolving Credit Facility. From and including the
Closing Date and prior to the Revolving Credit Facility Termination Date, each
Lender severally agrees, on the terms and conditions set forth in this
Agreement, to make revolving loans to the Borrower from time to time (each
individually a "Revolving Loan" and, collectively, the "Revolving Loans") in
amounts not to exceed in the aggregate at any one time outstanding the amount of
its Revolving Credit Commitment. Each Advance under the Revolving Credit
Facility shall consist of Revolving Loans made by the Lenders ratably in
proportion to each Lender's Pro Rata Share of the Aggregate Revolving Credit
Commitment, and at no time shall the aggregate principal amount of all Revolving
Loans outstanding hereunder exceed the Aggregate Revolving Credit Commitment. No
Lender shall be responsible for any failure by any other Lender to perform its
obligation to make any Revolving Loan hereunder nor shall the Revolving Credit
Commitment of any Lender be increased or decreased as a result of any such
failure. Subject to the terms of this Agreement, the Borrower may borrow, repay
and reborrow Revolving Loans at any time prior to the Revolving Credit Facility
Termination Date. The Revolving Credit Commitments of the Lenders shall expire
on the Revolving Credit Facility Termination Date.
2.1.2. Term Loan Facility. On the Closing Date, each Lender
severally agrees, on the terms and conditions set forth in this Agreement, to
make a term loan to the Borrowers in an amount equal to the amount of its Term
Loan Commitment (each individually a "Term Loan" and collectively, the "Term
Loans"). No Lender shall be responsible for any failure by any other Lender to
perform its obligation to make any Term Loan hereunder nor shall the Term Loan
Commitment of any Lender be increased or decreased as a result of such failure.
No portion of any Term Loan shall be reborrowed once it is repaid.
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2.1.3. Acquisition Loan Facility. After the Closing Date and
prior to the Acquisition Loan Facility Termination Date, each Lender severally
agrees, on the terms and conditions set forth in this Agreement, to make
acquisition loans to the Borrower from time to time (each individually an
"Acquisition Loan" and, collectively, the "Acquisition Loans") in amounts not to
exceed in the aggregate the amount of its Acquisition Loan Commitment. Each
Advance under the Acquisition Loan Facility shall consist of Acquisition Loans
made by the Lenders ratably in proportion to each Lender's Pro Rata Share of the
Aggregate Acquisition Loan Commitment, and at no time shall the aggregate
principal amount of all Acquisition Loans at any time made hereunder exceed the
Aggregate Acquisition Loan Commitment. No Lender shall be responsible for any
failure by any other Lender to perform its obligation to make an Acquisition
Loan hereunder nor shall the Acquisition Loan Commitment of any Lender be
increased or decreased as a result of any such failure. No portion of any
Acquisition Loan may be reborrowed once it is repaid. The Acquisition Loan
Commitments of the Lenders shall expire on the Acquisition Loan Facility
Termination Date.
2.1.4. Conversion of Acquisition Loans. On each Acquisition
Loan Facility Conversion Date and on the Acquisition Loan Facility Termination
Date, the Acquisition Loan Facility Conversion Balance then outstanding shall be
converted into Acquisition Term Loans of the Lenders, with the Acquisition Term
Loan of each Lender being in an amount equal to such Lender's Pro Rata Share of
the Acquisition Loan Facility Conversion Balance.
2.2. Purpose; Use of Proceeds.
2.2.1 Revolving Credit Facility. Proceeds of each Advance made
under the Revolving Credit Facility shall be used by the Borrower for general
corporate working capital purposes and to finance Capital Expenditures.
2.2.2. Term Loan Facility. Proceeds of the Advance made on the
Closing Date under the Term Loan Facility shall be used by the Borrower to
finance the consideration payable by it under the terms of the UST Acquisition
Agreements.
2.2.3. Acquisition Loan Facility. Proceeds of each Advance
made under the Acquisition Loan Facility shall be used by the Borrower to
finance an Acquisition which is permitted to be made without the consent of the
Required Lenders under the provisions of Section 6.12.2(ii) or which has been
approved by the Required Lenders in accordance with the provisions of Section
6.12.2(iii).
2.3. Required Principal Payments; Termination.
2.3.1. Revolving Credit Facility. Any outstanding Revolving
Loans and all other unpaid Obligations arising under or relating to the
Revolving Credit Facility shall be due and payable in full on the Revolving
Credit Facility Termination Date.
2.3.2. Term Loan Facility. The Term Loans shall be payable as
to principal in sixty (60) consecutive monthly payments, which shall be due on
each Payment Date
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commencing December 31, 1999, and continuing on the last day of each calendar
month thereafter, with each installment (except the final installment due at
maturity) to be in the aggregate principal amount of $383,333.33 and with the
final installment due at maturity to be equal to the then outstanding principal
balance of the Term Loans and all other unpaid Obligations arising under or
relating to the Term Loan Facility.
2.3.3. Acquisition Loan Facility. The Acquisition Term Loans
made on either of the Acquisition Loan Facility Conversion Dates shall be
payable as to principal in sixty (60) consecutive monthly payments, which shall
be due on each Payment Date commencing on the first Payment Date occurring after
the applicable Acquisition Loan Facility Conversion Date and continuing on the
last day of each calendar month thereafter, with each installment to be in the
aggregate principal amount equal to one-sixtieth (1/60th) of the applicable
Acquisition Loan Facility Conversion Balance. The Acquisition Term Loans made on
the Acquisition Loan Facility Termination Date shall be payable as to principal
in forty-eight (48) consecutive monthly payments, which shall be due on each
Payment Date commencing on the first Payment Date occurring after the
Acquisition Loan Facility Termination Date and continuing on the last day of
each calendar month thereafter, with each installment to be in the aggregate
principal amount equal to one forty-eighth (1/48th) of the applicable
Acquisition Loan Facility Conversion Balance.
2.3.4. Mandatory Prepayments. Within three (3) Business Days
after receipt thereof, the Borrower shall make a mandatory prepayment on the
Loans in an amount equal to the net proceeds received by the Borrower from (i)
the sale of a Substantial Portion of its Properties, (ii) the creation or
incurrence of additional Indebtedness (other than Loans and additional
Indebtedness permitted under Section 6.11), or (iii) the sale or issuance of any
equity securities (but in the case of any sale or issuance of equity securities,
prepayment shall be required only to the extent that the net proceeds thereof
are less than or equal to the aggregate principal amount of all outstanding Term
Loans, Acquisition Loans and Acquisition Term Loans). Any mandatory prepayment
made pursuant to clause (i) or (ii) preceding shall be applied as follows (to
the extent of available proceeds): first, to the principal installments payable
under Section 2.3.2 with respect to the Term Loans in the inverse order of
maturity; then, to the principal installments payable under Section 2.3.3 with
respect to the Acquisition Term Loans in the inverse order of maturity; then, to
any outstanding Acquisition Loans; and finally, to any outstanding Revolving
Loans. Any mandatory prepayment made pursuant to clause (iii) preceding shall be
applied as follows (to the extent of available proceeds): first, to the
principal installments payable under Section 2.3.2 with respect to the Term
Loans in the inverse order of maturity; then, to the principal installments
payable under Section 2.3.3 with respect to the Acquisition Term Loans in the
inverse order of maturity; and finally, to any outstanding Acquisition Loans. To
the extent any mandatory prepayment is applied to the outstanding Revolving
Loans, the Aggregate Revolving Credit Commitment shall be permanently reduced by
a like amount. Nothing contained in this Section 2.3.4 shall nullify the
requirements, as set forth in Section 6.11 and 6.13, respectively, for consent
of the Required Lenders to any sale by the Borrower of a Substantial Portion of
its Properties or the creation or incurrence of additional Indebtedness.
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2.4. Types of Advances. The Advances under the Revolving Credit
Facility, the Term Loan Facility and the Acquisition Loan Facility may be
Floating Rate Advances or Eurodollar Advances, or a combination thereof,
selected by the Borrowers in accordance with Sections 2.8 and 2.9. Not more than
three (3) Eurodollar Advances may be outstanding at any time under any Facility.
2.5. Commitment Fee; Reductions in Aggregate Commitments. The Borrower
agrees to pay to the Agent for the account of each Lender a commitment fee at a
per annum rate equal to the Applicable Fee Rate on the daily unused portion of
such Lender's Revolving Credit Commitment and Acquisition Loan Commitment from
the date hereof to and including the Revolving Credit Facility Termination Date,
payable on each Payment Date hereafter and on the Revolving Credit Facility
Termination Date. The Borrower may permanently reduce the Aggregate Revolving
Credit Commitment or the Aggregate Acquisition Loan Commitment, in whole or in
part ratably among the Lenders, in integral multiples of $2,000,000, upon at
least three Business Days' written notice to the Agent, which notice shall
specify the amount of any such reduction, provided, however, that the amount of
the Aggregate Revolving Credit Commitment and/or the Aggregate Acquisition Loan
Commitment may not be reduced below the aggregate principal amount of the
Advances outstanding under the Revolving Credit Facility or the Acquisition Loan
Facility, as applicable. All accrued commitment fees shall be payable on the
effective date of any termination of the obligations of the Lenders to make
Loans hereunder.
2.6. Minimum Amount of Each Advance. Each Eurodollar Advance shall be
in the minimum amount of $500,000 (and in multiples of $250,000 if in excess
thereof), and each Floating Rate Advance shall be in the minimum amount of
$250,000 (and in multiples of $100,000 if in excess thereof), provided, however,
that any Floating Rate Advance under the Revolving Credit Facility or the
Acquisition Loan Facility may be in the amount of the unused Aggregate Revolving
Credit Commitment or unused Aggregate Acquisition Loan Commitment, as the case
may be.
2.7. Optional Principal Payments. The Borrower may from time to time
pay, without penalty or premium, all outstanding Floating Rate Advances, or, in
a minimum aggregate amount of $250,000 or any integral multiple of $100,000 in
excess thereof, any portion of the outstanding Floating Rate Advances upon one
Business Days' prior notice to the Agent. The Borrower may pay, without premium
or penalty, any Eurodollar Advance at the end of the applicable Interest Period,
but no Eurodollar Advance may be pre-paid prior to the end of the applicable
Interest Period. Principal prepayments made on the Term Loans or the Acquisition
Term Loans shall be applied to the principal installments payable under Section
2.3.2 or 2.3.3, as applicable, in the inverse order of maturity.
2.8. Method of Selecting Types and Interest Periods for New Advances.
The Borrower shall select the Type of Advance and, in the case of each
Eurodollar Advance, the Interest Period applicable thereto from time to time.
The Borrower shall give the Agent irrevocable notice (a "Borrowing Notice") not
later than 10:00 a.m. (Tulsa time) at least one Business Day before the
Borrowing Date of each Floating Rate Advance and three Business Days before the
Borrowing Date for each Eurodollar Advance, specifying:
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(i) the Borrowing Date, which shall be a Business Day, of such
Advance,
(ii) the aggregate amount of such Advance,
(iii) the Type of Advance selected, and
(iv) in the case of each Eurodollar Advance, the Interest Period
applicable thereto.
Not later than noon (Tulsa time) on each Borrowing Date, each Lender shall make
available its Loan or Loans in funds immediately available in Tulsa to the Agent
at its address specified pursuant to Article XIII. The Agent will make the funds
so received from the Lenders available to the Borrower at the Agent's aforesaid
address.
2.9. Conversion and Continuation of Outstanding Advances. Floating Rate
Advances shall continue as Floating Rate Advances unless and until such Floating
Rate Advances are converted into Eurodollar Advances pursuant to this Section
2.9 or are repaid in accordance with Section 2.3 or 2.7. Each Eurodollar Advance
shall continue as a Eurodollar Advance until the end of the then applicable
Interest Period therefor, at which time such Eurodollar Advance shall be
automatically converted into a Floating Rate Advance unless the Borrower shall
have given the Agent a Conversion/Continuation Notice (as defined below)
requesting that, at the end of such Interest Period, such Eurodollar Advance
continue as a Eurodollar Advance for the same or another Interest Period or
unless such Eurodollar Advance is repaid in accordance with Section 2.3. Subject
to the terms of Section 2.6, the Borrower may elect from time to time to convert
all or any part of a Floating Rate Advance into a Eurodollar Advance. The
Borrower shall give the Agent irrevocable notice (a "Conversion/Continuation
Notice") of each conversion of a Floating Rate Advance into a Eurodollar Advance
or continuation of a Eurodollar Advance not later than 10:00 a.m. (Tulsa time)
at least three Business Days prior to the date of the requested conversion or
continuation, specifying:
(i) the requested date, which shall be a Business Day, of such
conversion or continuation,
(ii) the aggregate amount and Type of the Advance which is to be
converted or continued, and
(iii) the amount of such Advance which is to be converted into or
continued as a Eurodollar Advance and the duration of the
Interest Period applicable thereto.
2.10. Interest; Changes in Interest Rate. Each Floating Rate Advance
shall bear interest on the outstanding principal amount thereof, for each day
from and including the date such Advance is made or is automatically converted
from a Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.9,
to but excluding the date it is paid or is converted into a Eurodollar Advance
pursuant to Section 2.9 hereof, at a rate per annum equal to the Floating Rate
for such day. Changes in the rate of interest on that portion of any Advance
maintained as a Floating Rate Advance will take effect simultaneously with each
change in the Alternate Base
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Rate. Each Eurodollar Advance shall bear interest on the outstanding principal
amount thereof from and including the first day of the Interest Period
applicable thereto to (but not including) the last day of such Interest Period
at the interest rate determined by the Agent as applicable to such Eurodollar
Advance based upon the Borrower's selections under Sections 2.8 and 2.9 and
otherwise in accordance with the terms hereof. No Interest Period with respect
to any Advance under any Facility may end after the maturity or termination of
such Facility. The Borrower shall select Interest Periods so that it is not
necessary to repay any portion of a Eurodollar Advance prior to the last day of
the applicable Interest Period in order to make a payment (including a mandatory
prepayment) required pursuant to Section 2.3.
2.11. Rates Applicable After Default. Notwithstanding anything to the
contrary contained in Section 2.8 or 2.9, during the continuance of a Default or
Unmatured Default the Required Lenders may, at their option, by notice to the
Borrower (which notice may be revoked at the option of the Required Lenders
notwithstanding any provision of Section 8.2 requiring unanimous consent of the
Lenders to changes in interest rates), declare that no Advance may be made as,
converted into or continued as a Eurodollar Advance. During the continuation of
a Default, the Required Lenders may, at their option, by notice to the Borrower
(which notice may be revoked at the option of the Required Lenders
notwithstanding any provision of Section 8.2 requiring unanimous consent of the
Lenders to changes in interest rates), declare that (i) each Eurodollar Advance
shall bear interest for the remainder of the applicable Interest Period at the
rate otherwise applicable to such Interest Period plus 2% per annum and (ii)
each Floating Rate Advance shall bear interest at a rate per annum equal to the
Floating Rate in effect from time to time plus 2% per annum, provided that,
during the continuance of a Default under Section 7.6 or 7.7, the interest rates
set forth in clauses (i) and (ii) above shall be applicable to all Advances
without any election or action on the part of the Agent or any Lender.
2.12. Method of Payment. All payments of the Obligations hereunder
shall be made, without setoff, deduction, or counterclaim, in immediately
available funds to the Agent at the Agent's address specified pursuant to
Article XIII, or at any other Lending Installation of the Agent specified in
writing by the Agent to the Borrower, by noon (local time) on the date when due
and shall be applied ratably by the Agent among the Lenders. Each payment
delivered to the Agent for the account of any Lender shall be delivered promptly
by the Agent to such Lender in the same type of funds that the Agent received at
its address specified pursuant to Article XIII or at any Lending Installation
specified in a notice received by the Agent from such Lender. The Agent is
hereby authorized to charge the account of the Borrower maintained with Bank One
for each payment of principal, interest and fees as it becomes due hereunder.
2.13. Noteless Agreement; Evidence of Indebtedness.
(i) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrower to
such Lender resulting from each Loan made by such Lender from time to time,
including the amounts of principal and interest payable and paid to such Lender
from time to time hereunder.
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(ii) The Agent shall also maintain accounts in which it will
record (a) the amount of each Loan made hereunder, the Type thereof and the
Interest Period with respect thereto, (b) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (c) the amount of any sum received by the Agent hereunder
from the Borrower and each Lender's share thereof.
(iii) The entries maintained in the accounts maintained
pursuant to paragraphs (i) and (ii) shall be prima facie evidence of the
existence and amounts of the Obligations therein recorded; provided, however,
that the failure of the Agent or any Lender to maintain such accounts or any
error therein shall not in any manner affect the obligation of the Borrower to
repay the Obligations in accordance with their terms.
(iv) Any Lender may request that its Loans be evidenced by one
or more promissory notes (each, a "Note"). In such event, the Borrower shall
prepare, execute and deliver to such Lender one or more Notes payable to the
order of such Lender in a form supplied by the Agent. Thereafter, the Loans
evidenced by such Notes and interest thereon shall at all times (including after
any assignment pursuant to Section 12.3) be represented by one or more Notes
payable to the order of the payee named therein or any assignee pursuant to
Section 12.3, except to the extent that any such Lender or assignee subsequently
returns any such Notes for cancellation and requests that such Loans once again
be evidenced as described in paragraphs (i) and (ii) above.
2.14. Telephonic Notices. The Borrower hereby authorizes the Lenders
and the Agent to extend, convert or continue Advances, effect selections of
Types of Advances and to transfer funds based on telephonic notices made by any
person or persons the Agent or any Lender in good faith believes to be acting on
behalf of the Borrower, it being understood that the foregoing authorization is
specifically intended to allow Borrowing Notices and Conversion/Continuation
Notices to be given telephonically. The Borrower agrees to deliver promptly to
the Agent a written confirmation, if such confirmation is requested by the Agent
or any Lender, of each telephonic notice signed by an Authorized Officer. If the
written confirmation differs in any material respect from the action taken by
the Agent and the Lenders, the records of the Agent and the Lenders shall govern
absent manifest error.
2.15. Interest Payment Dates; Interest and Fee Basis. Interest accrued
on each Floating Rate Advance shall be payable on each Payment Date, commencing
with the first such date to occur after the date hereof and at maturity.
Interest accrued on that portion of the outstanding principal amount of any
Floating Rate Advance converted into a Eurodollar Advance on a day other than a
Payment Date shall be payable on the date of conversion. Interest accrued on
each Eurodollar Advance shall be payable on the last day of its applicable
Interest Period, on any date on which the Eurodollar Advance is prepaid, whether
by mandatory prepayment, upon acceleration or otherwise, and at maturity.
Interest accrued on each Eurodollar Advance having an Interest Period longer
than three months shall also be payable on the last day of each three-month
interval during such Interest Period. Interest and commitment fees shall be
calculated for actual days elapsed on the basis of a 360-day year. Interest
shall be payable for the day an Advance is made but not for the day of any
payment on the amount paid if payment is
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received prior to noon (local time) at the place of payment. If any payment of
principal of or interest on an Advance shall become due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day
and, in the case of a principal payment, such extension of time shall be
included in computing interest in connection with such payment.
2.16. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof, the Agent will notify
each Lender of the contents of each reduction notice with respect to the
Aggregate Revolving Credit Commitment or Aggregate Acquisition Loan Commitment,
Borrowing Notice, Conversion/Continuation Notice and repayment notice received
by it hereunder. The Agent will notify each Lender of the interest rate
applicable to each Eurodollar Advance promptly upon determination of such
interest rate and will give each Lender prompt notice of each change in the
Alternate Base Rate.
2.17. Lending Installations. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Loans and any Notes issued hereunder shall be
deemed held by each Lender for the benefit of any such Lending Installation.
Each Lender may, by written notice to the Agent and the Borrower in accordance
with Article XIII, designate replacement or additional Lending Installations
through which Loans will be made by it and for whose account Loan payments are
to be made.
2.18. Non-Receipt of Funds by the Agent. Unless the Borrower or a
Lender, as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of the Lenders, that it does not
intend to make such payment, the Agent may assume that such payment has been
made. The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption. If
such Lender or the Borrower, as the case may be, has not in fact made such
payment to the Agent, the recipient of such payment shall, on demand by the
Agent, repay to the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to (x) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day for the first three days and,
thereafter, the interest rate applicable to the relevant Loan or (y) in the case
of payment by the Borrower, the interest rate applicable to the relevant Loan.
2.19. Replacement of Lender. If the Borrower is required pursuant to
Section 3.1, 3.2 or 3.5 to make any additional payment to any Lender or if any
Lender's obligation to make or continue, or to convert Floating Rate Advances
into, Eurodollar Advances shall be suspended pursuant to Section 3.3 (any Lender
so affected, an "Affected Lender"), the Borrower may elect, if such amounts
continue to be charged or such suspension is still effective, to replace such
Affected Lender as a Lender party to this Agreement, provided that no Default or
Unmatured Default shall have occurred and be continuing at the time of such
replacement, and provided further that, concurrently with such replacement, (i)
another bank or other entity which is reasonably satisfactory to the Borrower
and the Agent shall agree, as of such date, to purchase
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for cash the Advances and other Obligations due to the Affected Lender pursuant
to an assignment substantially in the form of Exhibit C and to become a Lender
for all purposes under this Agreement and to assume all obligations of the
Affected Lender to be terminated as of such date and to comply with the
requirements of Section 12.3 applicable to assignments, and (ii) the Borrower
shall pay to such Affected Lender in same day funds on the day of such
replacement (A) all interest, fees and other amounts then accrued but unpaid to
such Affected Lender by the Borrower hereunder to and including the date of
termination, including without limitation payments due to such Affected Lender
under Sections 3.1, 3.2 and 3.5, and (B) an amount, if any, equal to the payment
which would have been due to such Lender on the day of such replacement under
Section 3.4 had the Loans of such Affected Lender been prepaid on such date
rather than sold to the replacement Lender.
2.20 Collateral. To secure the Obligations, the Borrower shall grant
and convey, and cause UST and each Subsidiary hereafter formed or acquired by
the Borrower to grant and convey, to the Agent, and further, shall maintain and
cause to be maintained in favor of the Agent at all times during the term of
this Agreement and until the Obligations are paid and satisfied in full, valid
and perfected first priority security interests and mortgage liens in all of the
now existing and after-acquired tangible and intangible Property of the Borrower
and each of its Subsidiaries, whether real, personal or mixed, subject only to
Permitted Liens, including, without limitation, all accounts, inventory,
equipment, fixtures (including trade fixtures), real estate, buildings and
improvements, leaseholds, general intangibles, patents, trademarks, trade names,
franchises, investment property (including all shares of capital stock or other
equity securities of each of the Borrower's Subsidiaries) and deposit accounts
of the Borrower and each of its Subsidiaries, and all proceeds of any thereof.
In order to provide the Agent with such first priority perfected security
interests and mortgage liens, the Borrower shall, from time to time, execute and
deliver, or cause to be executed and delivered, such instruments, agreements,
assignments, financing statements and other documents, and take or cause to be
taken such actions as may be necessary in the opinion of the Agent and the
Agent's counsel to provide such valid and perfected first priority security
interests and mortgage liens, including, without limitation, the Collateral
Documents.
2.21 Guaranties. The Borrower shall further cause UST and each
Subsidiary hereafter formed or acquired by the Borrower to guarantee to the
Lenders and the Agent the prompt payment and performance of the Obligations and
to maintain such guarantees in full force and effect at all times during the
term of this Agreement and until the Obligations are paid and satisfied in full.
In order to provide the Lenders and the Agent with such guarantees, the Borrower
shall cause UST to execute and deliver the Guaranty and shall cause each
Subsidiary hereafter formed or acquired by the Borrower to execute and deliver a
guaranty in the same form and containing substantially the same terms as the
Guaranty.
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ARTICLE III
YIELD PROTECTION; TAXES
3.1. Yield Protection. If, on or after the date of this Agreement, the
adoption of any law or any governmental or quasi-governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law), or any
change in the interpretation or administration thereof by any governmental or
quasi-governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender or
applicable Lending Installation with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency:
(i) subjects any Lender or any applicable Lending Installation to
any Taxes, or changes the basis of taxation of payments (other
than with respect to Excluded Taxes) to any Lender in respect
of its Eurodollar Loans, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar
requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender or any
applicable Lending Installation (other than reserves and
assessments taken into account in determining the interest
rate applicable to Eurodollar Advances), or
(iii) imposes any other condition the result of which is to increase
the cost to any Lender or any applicable Lending Installation
of making, funding or maintaining its Eurodollar Loans or
reduces any amount receivable by any Lender or any applicable
Lending Installation in connection with its Eurodollar Loans,
or requires any Lender or any applicable Lending Installation
to make any payment calculated by reference to the amount of
Eurodollar Loans held or interest received by it, by an amount
deemed material by such Lender,
and the result of any of the foregoing is to increase the cost to such Lender or
applicable Lending Installation of making or maintaining its Eurodollar Loans or
Commitment or to reduce the return received by such Lender or applicable Lending
Installation in connection with such Eurodollar Loans or Commitment, then,
within 15 days of demand by such Lender, the Borrower shall pay such Lender such
additional amount or amounts as will compensate such Lender for such increased
cost or reduction in amount received.
3.2. Changes in Capital Adequacy Regulations. If a Lender determines
the amount of capital required or expected to be maintained by such Lender, any
Lending Installation of such Lender or any corporation controlling such Lender
is increased as a result of a Change, then, within 15 days of demand by such
Lender, the Borrower shall pay such Lender the amount necessary to compensate
for any shortfall in the rate of return on the portion of such increased capital
which such Lender determines is attributable to this Agreement, its Loans or its
Commitment to make Loans hereunder (after taking into account such Lender's
policies as to capital adequacy). "Change" means (i) any change after the date
of this Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of
or change in any other law, governmental
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or quasi-governmental rule, regulation, policy, guideline, interpretation, or
directive (whether or not having the force of law) after the date of this
Agreement which affects the amount of capital required or expected to be
maintained by any Lender or any Lending Installation or any corporation
controlling any Lender. "Risk-Based Capital Guidelines" means (i) the risk-based
capital guidelines in effect in the United States on the date of this Agreement,
including transition rules, and (ii) the corresponding capital regulations
promulgated by regulatory authorities outside the United States implementing the
July 1988 report of the Basle Committee on Banking Regulation and Supervisory
Practices Entitled "International Convergence of Capital Measurements and
Capital Standards," including transition rules, and any amendments to such
regulations adopted prior to the date of this Agreement.
3.3. Availability of Types of Advances. If any Lender determines that
maintenance of its Eurodollar Loans at a suitable Lending Installation would
violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or if the Required Lenders determine that (i) deposits
of a type and maturity appropriate to match fund Eurodollar Advances are not
available or (ii) the interest rate applicable to Eurodollar Advances does not
accurately reflect the cost of making or maintaining Eurodollar Advances, then
the Agent shall suspend the availability of Eurodollar Advances and require any
affected Eurodollar Advances to be converted to Floating Rate Advances.
3.4. Funding Indemnification. If any payment of a Eurodollar Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a Eurodollar
Advance is not made on the date specified by the Borrower for any reason other
than default by the Lenders, the Borrower will indemnify each Lender for any
loss or cost incurred by it resulting therefrom, including, without limitation,
any loss or cost in liquidating or employing deposits acquired to fund or
maintain such Eurodollar Advance.
3.5. Taxes.
(i) All payments by the Borrower to or for the account of any Lender or
the Agent hereunder or under any Note shall be made free and clear of and
without deduction for any and all Taxes. If the Borrower shall be required by
law to deduct any Taxes from or in respect of any sum payable hereunder to any
Lender or the Agent, (a) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 3.5) such Lender or the Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (b) the Borrower shall make such deductions, (c) the
Borrower shall pay the full amount deducted to the relevant authority in
accordance with applicable law and (d) the Borrower shall furnish to the Agent
the original copy of a receipt evidencing payment thereof within 30 days after
such payment is made.
(ii) In addition, the Borrower hereby agrees to pay any present or
future stamp or documentary taxes and any other excise or property taxes,
charges or similar levies which arise
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from any payment made hereunder or under any Note or from the execution or
delivery of, or otherwise with respect to, this Agreement or any Note ("Other
Taxes").
(iii) The Borrower hereby agrees to indemnify the Agent and each Lender
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed on amounts payable under this Section 3.5) paid by
the Agent or such Lender and any liability (including penalties, interest and
expenses, other than penalties, interest and expenses proximately arising from
the gross negligence of the party seeking to be indemnified) arising therefrom
or with respect thereto. Payments due under this indemnification shall be made
within 30 days of the date the Agent or such Lender makes demand therefor
pursuant to Section 3.6.
(iv) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof (each a "Non-U.S. Lender") agrees that it
will, not less than ten Business Days after the date of this Agreement, (i)
deliver to each of the Borrower and the Agent two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, certifying in either
case that such Lender is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes, and
(ii) deliver to each of the Borrower and the Agent a United States Internal
Revenue Form W-8 or W-9, as the case may be, and certify that it is entitled to
an exemption from United States backup withholding tax. Each Non-U.S. Lender
further undertakes to deliver to each of the Borrower and the Agent (x) renewals
or additional copies of such form (or any successor form) on or before the date
that such form expires or becomes obsolete, and (y) after the occurrence of any
event requiring a change in the most recent forms so delivered by it, such
additional forms or amendments thereto as may be reasonably requested by the
Borrower or the Agent. All forms or amendments described in the preceding
sentence shall certify that such Lender is entitled to receive payments under
this Agreement without deduction or withholding of any United States federal
income taxes, unless an event (including without limitation any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form or amendment with respect to it and such Lender advises the Borrower and
the Agent that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax.
(v) For any period during which a Non-U.S. Lender has failed to provide
the Borrower with an appropriate form pursuant to clause (iv), above (unless
such failure is due to a change in treaty, law or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
occurring subsequent to the date on which a form originally was required to be
provided), such Non-U.S. Lender shall not be entitled to indemnification under
this Section 3.5 with respect to Taxes imposed by the United States; provided
that, should a Non-U.S. Lender which is otherwise exempt from or subject to a
reduced rate of withholding tax become subject to Taxes because of its failure
to deliver a form required under clause (iv), above, the Borrower shall take
such steps as such Non-U.S. Lender shall reasonably request to assist such
Non-U.S. Lender to recover such Taxes.
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(vi) Any Lender that is entitled to an exemption from or reduction of
withholding tax with respect to payments under this Agreement or any Note
pursuant to the law of any relevant jurisdiction or any treaty shall deliver to
the Borrower (with a copy to the Agent), at the time or times prescribed by
applicable law, such properly completed and executed documentation prescribed by
applicable law as will permit such payments to be made without withholding or at
a reduced rate.
(vii) If the U.S. Internal Revenue Service or any other governmental
authority of the United States or any other country or any political subdivision
thereof asserts a claim that the Agent did not properly withhold tax from
amounts paid to or for the account of any Lender (because the appropriate form
was not delivered or properly completed, because such Lender failed to notify
the Agent of a change in circumstances which rendered its exemption from
withholding ineffective, or for any other reason), such Lender shall indemnify
the Agent fully for all amounts paid, directly or indirectly, by the Agent as
tax, withholding therefor, or otherwise, including penalties and interest, and
including taxes imposed by any jurisdiction on amounts payable to the Agent
under this subsection, together with all costs and expenses related thereto
(including attorneys fees and time charges of attorneys for the Agent, which
attorneys may be employees of the Agent). The obligations of the Lenders under
this Section 3.5(vii) shall survive the payment of the Obligations and
termination of this Agreement.
3.6. Lender Statements; Survival of Indemnity. To the extent reasonably
possible, each Lender shall designate an alternate Lending Installation with
respect to its Eurodollar Loans to reduce any liability of the Borrower to such
Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of
Eurodollar Advances under Section 3.3, so long as such designation is not, in
the judgment of such Lender, disadvantageous to such Lender. Each Lender shall
deliver a written statement of such Lender to the Borrower (with a copy to the
Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such
written statement shall set forth in reasonable detail the calculations upon
which such Lender determined such amount and shall be final, conclusive and
binding on the Borrower in the absence of manifest error. Determination of
amounts payable under such Sections in connection with a Eurodollar Loan shall
be calculated as though each Lender funded its Eurodollar Loan through the
purchase of a deposit of the type and maturity corresponding to the deposit used
as a reference in determining the Eurodollar Rate applicable to such Loan,
whether in fact that is the case or not. Unless otherwise provided herein, the
amount specified in the written statement of any Lender shall be payable on
demand after receipt by the Borrower of such written statement. The obligations
of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of
the Obligations and termination of this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Conditions to Closing. The obligation of the Lenders to establish
the Facilities, to make the initial Advance under the Revolving Credit Facility
and to make the Term Loans under
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the Term Loan Facility is subject to the Borrower's satisfaction of the
following conditions precedent at or as of the Closing Date:
4.1.1 Execution and Delivery of Loan Documents. The Borrower
shall have executed and delivered to the Agent, and (as applicable) caused UST
to execute and deliver to the Agent, the following Loan Documents in sufficient
copies for the Agent and each of the Lenders:
(i) This Agreement.
(ii) Any Notes requested by a Lender pursuant to Section 2.13
payable to the order of each such requesting Lender.
(iii) The Security Agreement, together with appropriate UCC-1 financing
statements.
(iv) The Mortgage.
(v) The Guaranty.
4.1.2. Delivery of Documents. The Borrower shall have executed
(where necessary) and delivered to the Agent sufficient copies for the Agent and
the Lenders:
(i) Copies of the articles or certificate of incorporation of each
of the Borrower and UST, together with all amendments thereto,
and a certificate of good standing for each of the Borrower
and UST, each certified by the appropriate governmental
officer in its jurisdiction of incorporation, and copies of a
certificate of good standing issued by the appropriate
governmental officer in each other jurisdiction in which the
Borrower and/or UST has any offices or conducts any
significant business operations.
(ii) Copies of the bylaws of each of the Borrower and UST, each
certified by its Secretary or Assistant Secretary.
(iii) Copies of the resolutions or other actions of the Board of
Directors or other governing body of each the Borrower and
UST, authorizing the execution of the Loan Documents to which
it is a party.
(iv) An incumbency certificate, executed by the Secretary or
Assistant Secretary of the Borrower, which shall identify by
name and title and bear the signatures of the Authorized
Officers and any other officers of the Borrower authorized to
sign the Loan Documents to which the Borrower is a party, upon
which certificate the Agent and the Lenders shall be entitled
to rely until informed of any change in writing by the
Borrower, and an incumbency certificate, executed by the
Secretary or Assistant Secretary of UST, which shall identify
by name and title and bear the signatures of the officers of
the UST authorized to sign the Loan Documents to
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which UST is a party, upon which certificate the Agent and the
Lenders shall be entitled to rely until informed of any change
in writing by UST.
(v) A certificate, signed by the chief financial officer of the
Borrower, stating that, to the best of such officer's
knowledge, after diligent inquiry, on or as of the Closing
Date, (A) no Default or Unmatured Default has occurred and is
continuing, (B) the representations and warranties continued
in Article V of this Agreement are true and correct, (C) the
Borrower has experienced no material adverse change in its
financial condition since July 31, 1999 and (D) UST has
experienced no material adverse change in its financial
condition since August 31, 1999.
(vi) A written opinion of the Borrower's counsel, addressed to the
Agent and the Lenders, in substantially the form of Exhibit
A-1, and a written opinion of UST's counsel, addressed to the
Agent and the Lenders, in substantially the form of Exhibit
A-2.
(vii) Written money transfer instructions, in substantially the form
of Exhibit D, addressed to the Agent and signed by an
Authorized Officer, together with such other related money
transfer authorizations as the Agent may have reasonably
requested.
(viii) Information satisfactory to the Agent and the Required Lenders
regarding the Borrower's and UST's Year 2000 Program.
(ix) Evidence of compliance with applicable federal regulations
governing loans in areas having special flood hazards.
(x) The insurance certificate described in Section 5.21.
(xi) A pro forma opening-day consolidated balance sheet of the
Borrower and UST reflecting the UST Acquisition and the
consolidating entries relating thereto.
(xii) Such other documents as any Lender or its counsel may have
reasonably requested.
4.1.3 UST Acquisition. The following conditions precedent
shall have been satisfied with respect to the UST Acquisition:
(i) The Borrower shall have delivered to the Agent fully executed
copies of each of the UST Acquisition Agreements and all other
Acquisition Documents relating to the UST Acquisition, and the
terms and provisions of the same shall be satisfactory to the
Lenders.
(ii) The Lenders shall have completed a due diligence review of the
financial condition, operations and prospects of the Borrower
and UST (including a review
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of the due diligence conducted by the Borrower in connection
with the UST Acquisition Agreements), and the results of such
due diligence review shall be satisfactory to the Lenders.
(iii) The closings of the transactions contemplated by each of the
UST Acquisition Agreements shall have occurred simultaneously
with the closing of this Agreement in accordance with the
terms and provisions of the respective UST Acquisition
Agreements.
(iv) Each of the parties to the respective UST Acquisition
Agreements and UST shall have satisfied or performed all
obligations required under the terms of the UST Acquisition
Agreements to be satisfied or performed at or prior to the
closing thereof and all other conditions precedent to the
closings of the UST Acquisition Agreements shall have been
satisfied, and evidence of the foregoing shall have been
delivered to the Agent with sufficient copies for the Lenders.
(v) All legal matters incident to the UST Acquisition shall be
satisfactory to the Lenders and their counsel.
4.1.4. Other Conditions. The Borrower shall have satisfied the
following additional conditions precedent at or as of the Closing Date:
(i) The Borrower shall have paid all fees set forth in the Fee
Letter, to the extent such fees are dues and payable at or as
of the Closing Date.
(ii) There shall not have occurred any material adverse change in
the business, Property, prospects, condition (financial or
otherwise) or results of operations of the Borrower or UST.
4.2 Acquisition Loans. The Lenders shall not be required to make any
Acquisition Loans under the Acquisition Loan Facility unless on or as of the
applicable Borrowing Date:
(i) Either (A) the proposed Acquisition shall be permitted without
the consent of the Required Lenders under the provisions of
Section 6.12.2(ii), and the Borrower shall have delivered all
documents required to be delivered under the terms of Section
6.12.2(ii), or (B) the proposed Acquisition, including the
terms and conditions thereof, and all related Acquisition
Documents shall have been approved by the Required Lenders in
accordance with Section 6.12.2(iii).
(ii) All conditions precedent to the closing of the proposed
Acquisition (as set forth in the applicable Acquisition
Documents and as otherwise required by applicable law) shall
have been satisfied, including the procurement of all
necessary approvals of governmental agencies and authorities,
and the closing of the proposed Acquisition shall have
occurred simultaneously in accordance with the provisions of
such Acquisition Documents.
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(iii) The Borrower and, if applicable, the Target to be acquired
pursuant to such Acquisition shall have executed and
delivered, or caused to be executed and delivered, such
agreements and documents and taken such other actions as may
be necessary to comply with Section 6.25.
(iv) All legal matters incident to the proposed Acquisition shall
be satisfactory to the Lenders and their counsel.
4.3. Each Advance. The Lenders shall not be required to make an Advance
under any Facility unless on the applicable Borrowing Date:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in Article V are
true and correct as of such Borrowing Date except to the
extent any such representation or warranty is stated to relate
solely to an earlier date, in which case such representation
or warranty shall have been true and correct on and as of such
earlier date.
(iii) All legal matters incident to the making of such Advance shall
be satisfactory to the Lenders and their counsel.
4.4 Effect of Borrowing Notice. Each Borrowing Notice with respect to
each such Advance shall constitute a representation and warranty by the Borrower
that the conditions contained in Sections 4.2(i) and (ii) have been satisfied.
Any Lender may require a duly completed compliance certificate in substantially
the form of Exhibit B as a condition to making an Advance.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders as follows (and, to
the extent any of the representations and warranties on this Article V are given
or deemed given at the Closing Date or at any date prior to the Closing Date,
references to Subsidiaries of the Borrower shall be deemed to include a
reference to UST):
5.1. Existence and Standing. Each of the Borrower and its Subsidiaries
is and will continue to be a corporation, partnership or limited liability
company, duly and properly incorporated or organized, as the case may be,
validly existing and (to the extent such concept applies to such entity) in good
standing under the laws of its jurisdiction of incorporation or organization and
has all requisite authority and is duly qualified or licensed to conduct its
business in each jurisdiction in which it owns any Property or conducts any
business (except where failure to be so qualified or licensed could not
reasonably be expected to have a Material
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Adverse Effect or result in the forfeiture of any Property). Neither the
Borrower nor any of its Subsidiaries owns any Property or conducts business
outside the United States of America.
5.2. Authorization and Validity. Each of the Borrower and its
Subsidiaries has the power and authority and legal right to execute and deliver
the Loan Documents to which it is a party and to perform its obligations
thereunder. The execution and delivery by each of the Borrower and its
Subsidiaries of the Loan Documents to which it is a party and the performance of
its obligations thereunder have been duly authorized by proper corporate
proceedings, and the Loan Documents to which it is a party constitute its legal,
valid and binding obligations, enforceable against it in accordance with their
terms, except as enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally.
5.3. No Conflict; Government Consent. Neither the execution and
delivery by the Borrower and its Subsidiaries of the Loan Documents to which
each is a party, nor the consummation of the transactions therein contemplated,
nor compliance with the provisions thereof will violate (i) any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding on the
Borrower or any of its Subsidiaries or (ii) the Borrower's or any Subsidiary's
articles or certificate of incorporation, partnership agreement, certificate of
partnership, articles or certificate of organization, by-laws, or operating or
other management agreement, as the case may be, or (iii) the provisions of any
indenture, instrument or agreement to which the Borrower or any of its
Subsidiaries is a party or is subject, or by which it, or its Property, is
bound, or conflict with or constitute a default thereunder, or result in, or
require, the creation or imposition of any Lien in, of or on the Property of the
Borrower or a Subsidiary pursuant to the terms of any such indenture, instrument
or agreement. No order, consent, adjudication, approval, license, authorization,
or validation of, or filing, recording or registration with, or exemption by, or
other action in respect of any governmental or public body or authority, or any
subdivision thereof, which has not been obtained by the Borrower or any of its
Subsidiaries, is required to be obtained by the Borrower or any of its
Subsidiaries in connection with the execution and delivery of the Loan
Documents, the borrowings under this Agreement, the payment and performance by
the Borrower of the Obligations or the legality, validity, binding effect or
enforceability of any of the Loan Documents.
5.4. Financial Statements.
(i) The audited financial statements of the Borrower for the
fiscal year ended October 31, 1998, and the unaudited interim
financial statements of the Borrower for the nine months ended
July 31, 1999, copies of which have heretofore been delivered
to the Lenders, were prepared in accordance with GAAP in
effect on the date such statements were prepared and fairly
present the financial position of the Borrower at such date
and the results of operations for the periods then ended.
(ii) The audited financial statements of UST for the fiscal year
ended December 31, 1998, and the unaudited interim financial
statements of UST for the nine months ended September 30,
1999, copies of which have heretofore been delivered to the
Lenders, were prepared in accordance with GAAP in effect on
the date such
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statements were prepared and fairly present the financial
position of UST at such date and the results of operations
for the periods then ended.
5.5. Material Adverse Change. Since the respective dates of the
financial statements referred to in Section 5.4, there has been no adverse
change in the business, Property, prospects, condition (financial or otherwise)
or results of operations of the Borrower and its Subsidiaries which could
reasonably be expected to have a Material Adverse Effect.
5.6. Taxes. The Borrower and its Subsidiaries have filed all United
States federal tax returns and all other tax returns which are required to be
filed and have paid all taxes due pursuant to said returns or pursuant to any
assessment received by the Borrower or any of its Subsidiaries, except for (i)
such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided in accordance with GAAP and as to which no
Lien exists, and (ii) such taxes, if any, which may be owing by UST as a result
of certain matters which have been disclosed in a letter of even date addressed
to the Lenders. As of the date of this Agreement, the United States income tax
returns of the Borrower have been audited by the Internal Revenue Service
through the fiscal year ended October 31, 1996. No tax liens have been filed and
no claims are being asserted with respect to any such taxes. The charges,
accruals and reserves on the books of the Borrower and its Subsidiaries in
respect of any taxes or other governmental charges are adequate.
5.7. Litigation and Contingent Obligations. There is no litigation,
arbitration, governmental investigation, proceeding or inquiry pending or, to
the knowledge of any of their officers, threatened against or affecting the
Borrower or any of its Subsidiaries which could reasonably be expected to have a
Material Adverse Effect or which seeks to prevent, enjoin or delay the making of
any Loans. Other than any liability incident to any litigation, arbitration or
proceeding which could not reasonably be expected to have a Material Adverse
Effect, the Borrower has no material contingent obligations not provided for or
disclosed in the financial statements referred to in Section 5.4.
5.8. Subsidiaries. Schedule 1 contains an accurate list of all
Subsidiaries of the Borrower as of the date of this Agreement and as of the
Closing Date, setting forth their respective jurisdictions of organization and
the percentage of their respective capital stock or other ownership interests
owned by the Borrower or other Subsidiaries. All of the issued and outstanding
shares of capital stock or other ownership interests of such Subsidiaries have
been (to the extent such concepts are relevant with respect to such ownership
interests) duly authorized and issued and are fully paid and non-assessable.
5.9. ERISA. No Single Employer Plan has any Unfunded Liabilities. Each
Plan complies in all material respects with all applicable requirements of law
and regulations, no Reportable Event has occurred with respect to any Plan,
neither the Borrower nor any other member of the Controlled Group has withdrawn
from any Plan or initiated steps to do so, and no steps have been taken to
reorganize or terminate any Plan.
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5.10. Accuracy of Information. No information, exhibit or report
furnished by the Borrower or any of its Subsidiaries to the Agent or to any
Lender in connection with the negotiation of, or compliance with, the Loan
Documents contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statements contained therein not
misleading.
5.11. Regulation U. Margin stock (as defined in Regulation U)
constitutes less than 25% of the value of those assets of the Borrower and its
Subsidiaries which are subject to any limitation on sale, pledge, or other
restriction hereunder.
5.12. Material Agreements. Neither the Borrower nor any Subsidiary is a
party to any agreement or instrument or subject to any charter or other
corporate restriction which could reasonably be expected to have a Material
Adverse Effect. Neither the Borrower nor any Subsidiary is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in (i) any agreement to which it is a party, which default
could reasonably be expected to have a Material Adverse Effect or (ii) any
agreement or instrument evidencing or governing Indebtedness.
5.13. Compliance With Laws. The Borrower and its Subsidiaries have
complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof having jurisdiction over the conduct of their respective
businesses or the ownership of their respective Property.
5.14. Ownership of Properties. Except as set forth on Schedule 2, on
the date of this Agreement, the Borrower and its Subsidiaries will have good
title, free of all Liens other than those permitted by Section 6.15, to all of
the Property and assets reflected in the Borrower's most recent consolidated
financial statements provided to the Agent as owned by the Borrower and its
Subsidiaries.
5.15. Plan Assets; Prohibited Transactions. The Borrower is not an
entity deemed to hold "plan assets" within the meaning of 29 C.F.R. ss.
2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA)
which is subject to Title I of ERISA or any plan (within the meaning of Section
4975 of the Code), and neither the execution of this Agreement nor the making of
Loans hereunder gives rise to a prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code.
5.16. Environmental Matters. In the ordinary course of its business,
the officers of the Borrower consider the effect of Environmental Laws on the
business of the Borrower and its Subsidiaries, in the course of which they
identify and evaluate potential risks and liabilities accruing to the Borrower
due to Environmental Laws. On the basis of this consideration, the Borrower has
concluded that Environmental Laws cannot reasonably be expected to have a
Material Adverse Effect. Neither the Borrower nor any Subsidiary has received
any notice to the effect that its operations are not in material compliance with
any of the requirements of applicable Environmental Laws or are the subject of
any federal or state investigation evaluating whether any remedial action is
needed to respond to a release of any toxic or hazardous waste or
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substance into the environment, which non-compliance or remedial action could
reasonably be expected to have a Material Adverse Effect.
5.17. Investment Company Act. Neither the Borrower nor any Subsidiary
is an "investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
5.18. Public Utility Holding Company Act. Neither the Borrower nor any
Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
5.19. Year 2000. The Borrower has made a full and complete assessment
of the Year 2000 Issues and has a realistic and achievable program for
remediating the Year 2000 Issues on a timely basis (the "Year 2000 Program").
Based on such assessment and on the Year 2000 Program, the Borrower does not
reasonably anticipate that Year 2000 Issues will have a Material Adverse Effect.
5.20. Post-Retirement Benefits. Neither the Borrower nor any Subsidiary
provides or is obligated to provide any post-retirement medical and insurance
benefits to its employees or former employees.
5.21. Insurance. The certificate signed by the President or chief
financial officer of the Borrower, that attests to the existence and adequacy
of, and summarizes, the property and casualty insurance program carried by the
Borrower with respect to itself and its Subsidiaries and that has been furnished
by the Borrower to the Agent and the Lenders, is complete and accurate. This
summary includes the insurer's or insurers' name(s), policy number(s),
expiration date(s), amount(s) of coverage, type(s) of coverage, exclusion(s),
and deductibles. This summary also includes similar information, and describes
any reserves, relating to any self-insurance program that is in effect.
5.22. Solvency.
(i) Immediately after the consummation of the transactions to
occur on the Closing Date and immediately following the making
of each Loan to be made on the Closing Date or at any time
thereafter, and after giving effect to the application of the
proceeds of such Loans, (a) the fair value of the assets of
the Borrower and its Subsidiaries on a consolidated basis, at
a fair valuation, will exceed the debts and liabilities,
subordinated, contingent or otherwise, of the Borrower and its
Subsidiaries on a consolidated basis; (b) the present fair
saleable value of the Properties of the Borrower and its
Subsidiaries on a consolidated basis will be greater than the
amount that will be required to pay the probable liability of
the Borrower and its Subsidiaries on a consolidated basis on
their debts and other liabilities, subordinated, contingent or
otherwise, as such debts and other liabilities become absolute
and matured; (c) the Borrower and its Subsidiaries on
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a consolidated basis will be able to pay their debts and
liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured; and (d) the
Borrower and its Subsidiaries on a consolidated basis will not
have unreasonably small capital with which to conduct the
businesses in which they are engaged as such businesses are
now conducted and are proposed to be conducted after the
Closing Date.
(ii) The Borrower does not intend to, or to permit any of its
Subsidiaries to, and does not believe that it or any of its
Subsidiaries will, incur debts beyond its ability to pay such
debts as they mature, taking into account the timing of and
amounts of cash to be received by it or any such Subsidiary
and the timing of the amounts of cash to be payable on or in
respect of its Indebtedness or the Indebtedness of any such
Subsidiary.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
6.1. Financial Reporting. The Borrower will maintain, for itself and
each Subsidiary, a system of accounting established and administered in
accordance with GAAP, and will furnish to the Lenders:
(i) Within 90 days after the close of each of its fiscal years, an
unqualified audit report certified by independent certified
public accountants acceptable to the Lenders, prepared in
accordance with GAAP on a consolidated and consolidating basis
(consolidating statements need not be certified by such
accountants) for itself and its Subsidiaries, including
balance sheets as of the end of such period, related profit
and loss and reconciliation of surplus statements, and a
statement of cash flows, accompanied by any management letter
prepared by said accountants.
(ii) Within 45 days after the close of the first three quarterly
periods of each of its fiscal years, for itself and its
Subsidiaries, consolidated and consolidating unaudited balance
sheets as at the close of each such period and consolidated
and consolidating profit and loss and reconciliation of
surplus statements and a statement of cash flows for the
period from the beginning of such fiscal year to the end of
such quarter, all certified by its chief financial officer.
(iii) Together with the financial statements required under Sections
6.1(i) and (ii), a compliance certificate in substantially the
form of Exhibit B signed by its chief financial officer
showing the calculations necessary to determine compliance
with this Agreement and stating that no Default or Unmatured
Default exists, or if any Default or Unmatured Default exists,
stating the nature and status thereof.
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(iv) Within 90 days after the close of each of its fiscal years, a
financial projection and budget forecast covering the
immediately subsequent three (3) year period.
(v) Within 270 days after the close of each fiscal year, a
statement of the Unfunded Liabilities of each Single Employer
Plan, certified as correct by an actuary enrolled under ERISA.
(vi) As soon as possible and in any event within 10 days after the
Borrower knows that any Reportable Event has occurred with
respect to any Plan, a statement, signed by the chief
financial officer of the Borrower, describing said Reportable
Event and the action which the Borrower proposes to take with
respect thereto.
(vii) As soon as possible and in any event within 10 days after
receipt by the Borrower, a copy of (a) any notice or claim to
the effect that the Borrower or any of its Subsidiaries is or
may be liable to any Person as a result of the release by the
Borrower, any of its Subsidiaries, or any other Person of any
toxic or hazardous waste or substance into the environment,
and (b) any notice alleging any violation of any federal,
state or local environmental, health or safety law or
regulation by the Borrower or any of its Subsidiaries.
(viii) Promptly upon the furnishing thereof to the shareholders of
the Borrower, copies of all financial statements, reports and
proxy statements so furnished.
(ix) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular
reports which the Borrower or any of its Subsidiaries files
with the SEC.
(x) Such other information (including non-financial information)
as the Agent or any Lender may from time to time reasonably
request.
6.2. Use of Proceeds. The Borrower will, and will cause each Subsidiary
to, use the proceeds of the Advances only for the purposes stated in Section
2.2. The Borrower will not, nor will it permit any Subsidiary to, use any of the
proceeds of the Advances to purchase or carry any "margin stock" (as defined in
Regulation U).
6.3. Notice of Default. The Borrower will, and will cause each
Subsidiary to, give prompt notice in writing to the Lenders of the occurrence of
any Default or Unmatured Default and of any other development, financial or
otherwise (including, without limitation, developments with respect to Year 2000
Issues), which could reasonably be expected to have a Material Adverse Effect.
6.4. Conduct of Business. The Borrower will, and will cause each
Subsidiary to, carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as it is presently
conducted and do all things necessary to remain duly incorporated
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or organized, validly existing and (to the extent such concept applies to such
entity) in good standing as a domestic corporation, partnership or limited
liability company in its jurisdiction of incorporation or organization, as the
case may be, and maintain all requisite authority to conduct its business in
each jurisdiction in which its business is conducted.
6.5. Taxes. The Borrower will, and will cause each Subsidiary to,
timely file complete and correct United States federal and applicable foreign,
state and local tax returns required by law and pay when due all taxes,
assessments and governmental charges and levies upon it or its income, profits
or Property, except those which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been set aside in
accordance with GAAP.
6.6. Insurance. The Borrower will, and will cause each Subsidiary to,
maintain with financially sound and reputable insurance companies insurance on
all their Property in such amounts and covering such risks as is consistent with
sound business practice, and the Borrower will furnish to any Lender upon
request full information as to the insurance carried.
6.7. Compliance with Laws. The Borrower will, and will cause each
Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject including,
without limitation, all Environmental Laws.
6.8. Maintenance of Properties. The Borrower will, and will cause each
Subsidiary to, do all things necessary to maintain, preserve, protect and keep
its Property in good repair, working order and condition, and make all necessary
and proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times.
6.9. Inspection. The Borrower will, and will cause each Subsidiary to,
permit the Agent and the Lenders, by their respective representatives and
agents, to inspect any of the Property, books and financial records of the
Borrower and each Subsidiary, to examine and make copies of the books of
accounts and other financial records of the Borrower and each Subsidiary, and to
discuss the affairs, finances and accounts of the Borrower and each Subsidiary
with, and to be advised as to the same by, their respective officers at such
reasonable times and intervals as the Agent or any Lender may designate.
6.10. Dividends. The Borrower will not, nor will it permit any
Subsidiary to, declare or pay any dividends or make any distributions on its
capital stock (other than dividends payable in its own capital stock) or redeem,
repurchase or otherwise acquire or retire any of its capital stock at any time
outstanding, except that (i) any Subsidiary may declare and pay dividends or
make distributions to the Borrower or to a Wholly-Owned Subsidiary and (ii) the
Borrower may pay cash dividends on its capital stock so long as (A) no Default
or Unmatured Default exists on the date any such dividend is paid or declared,
and (B) the payment of such dividend will not result in or give rise to any
Default or Unmatured Default, including a violation of any of the financial
covenants set forth in Section 6.24.
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6.11. Indebtedness. The Borrower will not, nor will it permit any
Subsidiary to, create, incur or suffer to exist any Indebtedness, except:
(i) The Loans.
(ii) Indebtedness existing on the date hereof and described in
Schedule 2.
(iii) Purchase money Indebtedness incurred in the ordinary course of
business in connection with the Borrower's purchase of
equipment used in connection with its business and not
exceeding $250,000 at any one time outstanding.
(iv) Obligations, not exceeding $5,000,000 in the aggregate at any
one time outstanding, representing the deferred purchase price
(or other seller financing) payable to the seller or sellers
in connection with any Acquisition permitted or approved under
Section 6.12.2, provided that the terms and conditions of such
seller financing are approved in advance by the Required
Lenders.
(v) Rate Management Obligations arising under Rate Management
Transactions related to the Loans.
6.12. Mergers and Acquisitions.
6.12.1 Mergers and Consolidations. Except for any merger or
consolidation incident to an Acquisition permitted under Section 6.12.2, the
Borrower will not, nor will it permit any Subsidiary to, merge or consolidate
with or into any other Person, except that a Subsidiary may merge into the
Borrower or a Wholly-Owned Subsidiary.
6.12.2 Acquisitions. The Borrower will not, nor will it permit
any Subsidiary to, make any Acquisition of any Person, except that Acquisitions
may be permitted or approved in accordance with the following:
(i) For any proposed Acquisition, the following conditions must be
satisfied: (A) the Acquisition must be non-hostile, (B) the
Acquisition must be made in compliance with all applicable
laws and regulations, (C) the Person to be acquired (the
"Target") must be engaged in the business of providing
telecommunications equipment, services and/or applications or
in a substantially related line of business, (D) the Target
must be located in the United States, (E) if the Acquisition
is structured as a merger or consolidation, the Borrower must
be the surviving entity, (F) if the Target will become a
Subsidiary, it must become a consolidated Subsidiary, (G)
there must not exist any Default or Unmatured Default prior to
or as of the effective date of such Acquisition, and (H) the
consummation of such Acquisition must not result in or give
rise to any Default or Unmatured Default, including a
violation of any of the financial covenants set forth in
Section 6.24.
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(ii) If the total consideration payable by the Borrower in
connection with a proposed Acquisition (including Indebtedness
to be paid or assumed) does not exceed $7,000,000, the
Borrower may make such Acquisition without the prior consent
of the Required Lenders so long as the conditions set forth in
clause (i) above are satisfied, provided that, prior to the
consummation of such Acquisition, the Borrower shall deliver
to the Agent, with sufficient copies for the Lenders, (A) a
Compliance Certificate (which shall not be binding on the
Lenders), prepared on a pro forma basis giving effect to the
transactions contemplated to be conducted at the closing
thereof, demonstrating that the Borrower will be in compliance
with the financial covenants set forth in Section 6.24
immediately following the consummation of the Acquisition, (B)
the Acquisition Documents relating to the proposed
Acquisition, (C) the Target's audited financial statements for
the three fiscal years immediately preceding (to the extent
available) or such other financial statements and federal
income tax returns of the Target as are available for the
three fiscal years immediately preceding or such shorter
period as the Target has been in existence, (D) the Target's
interim unaudited financial statements for the fiscal period
most recently ended, and (E) if applicable, all registration
statements, reports and other filings made by the Target with
the SEC during the two years immediately preceding.
(iii) If the total consideration payable by the Borrower in
connection with a proposed Acquisition (including Indebtedness
to be paid or assumed) exceeds $7,000,000, the Borrower may
not make such Acquisition without the prior consent of the
Required Lenders (such consent to be given, withheld or
conditioned by the Required Lenders in their sole and absolute
discretion based upon such factors as the Lenders shall deem
appropriate). The Borrower may request that the Lenders
consent to a proposed Acquisition by submitting a written
request to the Agent accompanied by sufficient copies for the
Lenders of the following documents: (A) a description of the
business conducted by the Target, (B) a summary of the
material terms and conditions of the proposed Acquisition, (C)
the Acquisition Documents relating to the proposed
Acquisition, (D) a Compliance Certificate (prepared on a pro
forma basis giving effect to the transactions contemplated to
be conducted at the closing of the proposed Acquisition)
demonstrating that the Borrower will be in compliance with the
financial covenants set forth in Section 6.24 immediately
following the consummation of such Acquisition, (E) the
Target's audited financial statements for the three fiscal
years immediately preceding (to the extent available) or such
other financial statements and federal income tax returns of
the Target as are available for the three fiscal years
immediately preceding or such shorter period as the Target has
been in existence, (F) the Target's interim unaudited
financial statements for the fiscal period most recently
ended, and (G) if applicable, all registration statements,
reports and other filings made by the Target with the SEC
during the two years immediately preceding. Any Acquisition
proposed for approval pursuant to this clause (iii) must at a
minimum satisfy the conditions set forth in clause (i) above.
In evaluating any request submitted by the Borrower, the
Lenders shall be given an
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opportunity to complete a due diligence review of the
financial condition, operations and prospects of the Target,
and the results of such due diligence review shall be
satisfactory to the Required Lenders. The Borrower agrees to
furnish, or cause to be furnished, such additional information
and documents as any Lender may request for purposes of
conducting its due diligence review and evaluating the merits
of the proposed Acquisition. If the Required Lenders do not
consent in writing to the proposed Acquisition within thirty
(30) days following the Borrower's submission of its request
for approval, the Required Lenders will be deemed not to have
approved such request. Any determination by the Required
Lenders not to approve a proposed Acquisition shall be final.
(iv) Prior to or simultaneously with the consummation of any
Acquisition permitted under clause (ii) above or approved by
the Required Lenders pursuant to clause (iii) above, the
Borrower shall also comply with Section 6.25.
6.13. Sale of Assets. The Borrower will not, nor will it permit any
Subsidiary to, lease, sell or otherwise dispose of its Property to any other
Person, except:
(i) Sales of inventory in the ordinary course of business.
(ii) Leases, sales or other dispositions of its Property (exclusive
of any notes receivable or accounts receivable) that, together
with all other Property of the Borrower and its Subsidiaries
previously leased, sold or disposed of (other than inventory
in the ordinary course of business) as permitted by this
Section 6.13(ii) during the twelve-month period ending with
the month in which any such lease, sale or other disposition
occurs, do not constitute a Substantial Portion of the
Property of the Borrower and its Subsidiaries.
6.14. Investments. The Borrower will not, nor will it permit any
Subsidiary to, make or suffer to exist any Investments (including without
limitation, loans and advances to, and other Investments in, Subsidiaries), or
commitments therefor, or to create any Subsidiary or to become or remain a
partner in any partnership or joint venture, except:
(i) Cash Equivalent Investments.
(ii) Existing Investments in Subsidiaries and other Investments in
existence on the date hereof and described in Schedule 1.
(iii) Any Investment arising from an Acquisition permitted or
approved under Section 6.12.2.
(iv) Other Investments not exceeding $500,000 in the aggregate at
any time outstanding.
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6.15. Liens. The Borrower will not, nor will it permit any Subsidiary
to, create, incur, or suffer to exist any Lien in, of or on the Property of the
Borrower or any of its Subsidiaries, except:
(i) Liens for taxes, assessments or governmental charges or levies
on its Property if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or are
being contested in good faith and by appropriate proceedings
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of
obligations not more than 60 days past due or which are being
contested in good faith by appropriate proceedings and for
which adequate reserves shall have been set aside on its
books.
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions,
or other social security or retirement benefits, or similar
legislation.
(iv) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a
nature generally existing with respect to properties of a
similar character and which do not in any material way affect
the marketability of the same or interfere with the use
thereof in the business of the Borrower or its Subsidiaries.
(v) Liens existing on the date hereof and described in Schedule 2.
(vi) Liens in favor of the Agent, for the benefit of the Lenders,
granted pursuant to any Collateral Document.
6.16. Capital Expenditures. The Borrower will not, nor will it permit
any Subsidiary to, expend, or be committed to expend, in excess of $1,500,000
for Capital Expenditures during any one fiscal year on a non-cumulative basis in
the aggregate for the Borrower and its Subsidiaries.
6.17. Year 2000. The Borrower will take and will cause each of its
Subsidiaries to take all such actions as are reasonably necessary to
successfully implement the Year 2000 Program and to assure that Year 2000 Issues
will not have a Material Adverse Effect. At the request of the Agent, the
Borrower will provide a description of the Year 2000 Program, together with any
updates or progress reports with respect thereto.
6.18. Affiliates. The Borrower will not, and will not permit any
Subsidiary to, enter into any transaction (including, without limitation, the
purchase or sale of any Property or service) with, or make any payment or
transfer to, any Affiliate except in the ordinary course of business and
pursuant to the reasonable requirements of the Borrower's or such Subsidiary's
business and upon fair and reasonable terms no less favorable to the Borrower or
such Subsidiary than the Borrower or such Subsidiary would obtain in a
comparable arms-length transaction.
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6.19. Operating Leases. The Borrower will not, nor will it permit any
Subsidiary to, enter into or remain liable upon any Operating Lease, except to
the extent that the aggregate annual payments due on all Operating Leases of the
Borrower and its Subsidiaries do not exceed $250,000.
6.20. Sale and Leaseback Transactions and Other Off-Balance Sheet
Liabilities. The Borrower will not, nor will it permit any Subsidiary to, enter
into or suffer to exist any (i) Sale and Leaseback Transaction or (ii) any other
transaction pursuant to which it incurs or has incurred Off-Balance Sheet
Liabilities, except for Rate Management Obligations permitted to be incurred
under the terms of Section 6.11(v).
6.21. Contingent Obligations. The Borrower will not, nor will it permit
any Subsidiary to, make or suffer to exist any Contingent Obligation (including,
without limitation, any Contingent Obligation with respect to the obligations of
a Subsidiary), except by endorsement of instruments for deposit or collection in
the ordinary course of business.
6.22. Letters of Credit. None of the Borrowers will apply for or become
liable upon or in respect of any Letter of Credit.
6.23. Financial Contracts. The Borrower will not, nor will it permit
any Subsidiary to, enter into or remain liable upon any Financial Contract,
other than Rate Management Transactions related to the Loans.
6.24. Financial Covenants.
6.24.1. Current Ratio. The Borrower will not permit its
current ratio, determined as of the end of each of its fiscal quarters in
accordance with GAAP, to be less than 1.25 to 1.0.
6.24.2. Debt Service Coverage Ratio. The Borrower will not
permit the ratio, determined as of the end of each of its fiscal quarters for
the then most-recently ended four fiscal quarters, of (i) Consolidated EBIDA
minus (A) unfunded Consolidated Capital Expenditures and (B) dividends paid or
declared, to (ii) Consolidated Interest Expense, plus current maturities of
long-term Consolidated Funded Indebtedness (for the immediately following twelve
(12) month period), all calculated for the Borrower and its Subsidiaries on a
consolidated basis, to be less than 1.20 to 1.0.
6.24.3. Leverage Ratio. The Borrower will not permit the
ratio, determined as of the end of each of its fiscal quarters, of (i)
Consolidated Funded Indebtedness to (ii) Consolidated EBITDA for the then
most-recently ended four fiscal quarters to be greater than 2.75 to 1.0.
6.24.4. Minimum Net Worth. The Borrower will at all times
maintain Consolidated Net Worth of not less than the sum of (i) $17,000,000 plus
(ii) 75% of Consolidated Net Income earned in each fiscal quarter beginning with
the quarter ending January
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31, 2000 (without deduction for losses), plus (iii) 100% of the net proceeds of
any offering by the Borrower of equity securities of the Borrower.
6.25 Additional Collateral and Guaranties.
6.25.1 Acquisitions. In the event that, subsequent to the
Closing Date, any Person becomes a Subsidiary of the Borrower, whether pursuant
to an Acquisition or otherwise, the Borrower shall pledge all shares of capital
stock or other equity securities of such Subsidiary to the Agent, as provided in
the Security Agreement, and deliver the original stock certificates evidencing
such shares to the Agent, together with appropriate stock powers executed in
blank, and shall cause such Subsidiary (i) to grant a Lien (security interest)
in all of its personal property by joining the Security Agreement and filing
such UCC-1 financing statements or similar instruments required by the Agent,
(ii) if such Subsidiary owns or leases any real property, to comply with Section
6.25.2 below, (iii) to execute and deliver to the Agent for the benefit of the
Lenders a guaranty with respect to the Obligations, in the same form and
containing substantially the same terms as the Guaranty, and (iv) otherwise, to
provide such documentation and take such other actions as such Subsidiary would
have provided and taken if such Person had been a Subsidiary on the Closing
Date. The Borrower agrees that, following the delivery of any Collateral
Documents required to be executed and delivered by this Section 6.25.1, the
Agent shall have a valid and enforceable first priority Lien on the respective
Collateral covered thereby, free and clear of all Liens other than Permitted
Liens. All actions to be taken pursuant to this Section 6.25.1 shall be at the
expense of the Borrower, shall be taken to the reasonable satisfaction of the
Agent, and shall be taken prior to or simultaneously with the formation or
Acquisition of such Subsidiary.
6.25.2 Real Property. In the event that, subsequent to the
Closing Date, the Borrower or any of its Subsidiaries intends to acquire or
lease any real property which is material or otherwise important to the business
operations of the Borrower or such Subsidiary, the Borrower shall, or shall
cause such Subsidiary to, notify the Agent of such intent as soon as is
reasonably practicable prior to the acquisition or lease of such real property.
At the request of the Agent or the Required Lenders, the Borrower shall cause
the Borrower or Subsidiary acquiring or leasing the real property to execute and
deliver a mortgage instrument, substantially in the form of the Mortgage
delivered on the Closing Date (subject to variation for compliance with local
law), and provide all relevant documentation with respect thereto. The Borrowers
agree that, following the taking of the actions with respect to any real
property required by this Section 6.25.2, the Agent shall have a valid and
enforceable first priority Lien on such real property, free and clear of all
defects and Liens, except for Permitted Liens and other matters acceptable to
the Agent in its reasonable discretion. All actions to be taken pursuant to this
Section 6.25.2 shall be at the expense of the Borrower, shall be taken to the
reasonable satisfaction of the Agent, and shall be taken within ten (10) days
after such real property is acquired or leased.
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ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:
7.1. Any representation or warranty made or deemed made by or on behalf
of the Borrower or any of its Subsidiaries to the Lenders or the Agent under or
in connection with this Agreement, any Loan, or any certificate or information
delivered in connection with this Agreement or any other Loan Document shall be
materially false on the date as of which made.
7.2. Nonpayment of principal of any Loan when due, or nonpayment of
interest upon any Loan or of any commitment fee or other obligations under any
of the Loan Documents within five days after the same becomes due.
7.3. The breach by the Borrower of any of the terms or provisions of
Section 6.2, 6.10, 6.11, 6.12.1, 6.12.2, 6.13, 6.14, 6.15, 6.16, 6.17, 6.18,
6.19, 6.23, 6.24.1, 6.24.2, 6.24.3 or 6.24.4.
7.4. The breach by the Borrower (other than a breach which constitutes
a Default under another Section of this Article VII) of any of the terms or
provisions of this Agreement which is not remedied within 20 days after written
notice from the Agent or any Lender.
7.5. Failure of the Borrower or any of its Subsidiaries to pay when
due any Indebtedness aggregating in excess of $250,000 ("Material
Indebtedness"), or the default by the Borrower or any of its Subsidiaries in the
performance (beyond the applicable grace period with respect thereto, if any) of
any term, provision or condition contained in any agreement under which any such
Material Indebtedness was created or is governed, or any other event shall occur
or condition exist, the effect of which default or event is to cause, or to
permit the holder or holders of such Material Indebtedness to cause, such
Material Indebtedness to become due prior to its stated maturity; or any
Material Indebtedness of the Borrower or any of its Subsidiaries shall be
declared to be due and payable or required to be prepaid or repurchased (other
than by a regularly scheduled payment) prior to the stated maturity thereof; or
the Borrower or any of its Subsidiaries shall not pay, or admit in writing its
inability to pay, its debts generally as they become due.
7.6. The Borrower or any of its Subsidiaries shall (i) have an order
for relief entered with respect to it under the Federal bankruptcy laws as now
or hereafter in effect, (ii) make an assignment for the benefit of creditors,
(iii) apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar official for it or
any Substantial Portion of its Property, (iv) institute any proceeding seeking
an order for relief under the Federal bankruptcy laws as now or hereafter in
effect or seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, winding up, liquidation, reorganization, arrangement, adjustment or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed against
it, (v) take any corporate or partnership action to
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authorize or effect any of the foregoing actions set forth in this Section 7.6
or (vi) fail to contest in good faith any appointment or proceeding described in
Section 7.7.
7.7. Without the application, approval or consent of the Borrower or
any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Borrower or any of its Subsidiaries or any
Substantial Portion of its Property, or a proceeding described in Section
7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries and
such appointment continues undischarged or such proceeding continues undismissed
or unstayed for a period of 30 consecutive days.
7.8. Any court, government or governmental agency shall condemn, seize
or otherwise appropriate, or take custody or control of, all or any portion of
the Property of the Borrower and its Subsidiaries which, when taken together
with all other Property of the Borrower and its Subsidiaries so condemned,
seized, appropriated, or taken custody or control of, during the twelve-month
period ending with the month in which any such action occurs, constitutes a
Substantial Portion.
7.9. The Borrower or any of its Subsidiaries shall fail within 30 days
to pay, bond or otherwise discharge one or more (i) judgments or orders for the
payment of money in excess of $500,000 in the aggregate, or (ii) nonmonetary
judgments or orders which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, which judgment(s), in any such case,
is/are not stayed on appeal or otherwise being appropriately contested in good
faith.
7.10. The Unfunded Liabilities of all Single Employer Plans shall
exceed in the aggregate $250,000 or any Reportable Event shall occur in
connection with any Plan.
7.11. The Borrower or any of its Subsidiaries shall (i) be the subject
of any proceeding or investigation pertaining to the release by the Borrower,
any of its Subsidiaries or any other Person of any toxic or hazardous waste or
substance into the environment, or (ii) violate any Environmental Law, which, in
the case of an event described in clause (i) or clause (ii), could reasonably be
expected to have a Material Adverse Effect.
7.12. Any Change in Control shall occur.
7.13. The occurrence of any "default", as defined in any Loan Document
(other than this Agreement) or the breach of any of the terms or provisions of
any Loan Document (other than this Agreement), which default or breach continues
beyond any period of grace therein provided.
7.14. Any Collateral Document shall for any reason fail to create a
valid and perfected first priority security interest in the collateral purported
to be covered thereby (other than with respect to motor vehicles included in the
Collateral, to the extent the Agent's lien is not noted on the certificates of
title relating thereto), except as permitted by the terms of any Collateral
Document, or any Collateral Document shall fail to remain in full force or
effect or any action
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shall be taken to discontinue or to assert the invalidity or unenforceability of
any Collateral Document, or the Borrower or any Subsidiary shall fail to comply
with any of the terms or provisions of any Collateral Document.
7.15. The Guaranty or any other guaranty hereafter delivered to the
Agent by any Subsidiary in respect of the Obligations shall for any reason cease
to remain in full force or effect, or any action shall be taken by UST or other
Subsidiary party thereto to revoke, cancel or terminate the same or to assert
the invalidity or unenforceability thereof, or UST or such other Subsidiary
shall fail to comply with any of the terms or provisions of the Guaranty or
other guaranty.
7.16. Nonpayment by the Borrower or any Subsidiary of any Rate
Management Obligation when due or the breach by the Borrower or any Subsidiary
of any term, provision or condition contained in any Rate Management
Transaction.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration. If any Default described in Section 7.6 or 7.7
occurs with respect to the Borrower, the obligations of the Lenders to make
Loans hereunder shall automatically terminate and the Obligations shall
immediately become due and payable without any election or action on the part of
the Agent or any Lender. If any other Default occurs, the Required Lenders (or
the Agent with the consent of the Required Lenders) may terminate or suspend the
obligations of the Lenders to make Loans hereunder, or declare the Obligations
to be due and payable, or both, whereupon the Obligations shall become
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which the Borrower hereby expressly waives.
If, within 30 days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans
hereunder as a result of any Default (other than any Default as described in
Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or
decree for the payment of the Obligations due shall have been obtained or
entered, the Required Lenders (in their sole discretion) shall so direct, the
Agent shall, by notice to the Borrower, rescind and annul such acceleration
and/or termination.
8.2. Amendments. Subject to the provisions of this Article VIII, the
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrower hereunder or waiving any
Default hereunder; provided, however, that no such supplemental agreement shall,
without the consent of all of the Lenders:
(i) Extend the final maturity of any Loan, or postpone any
regularly scheduled payment of principal of any Loan, or
forgive all or any portion of the principal
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amount thereof, or reduce the rate or extend the time of
payment of interest or fees thereon.
(ii) Reduce the percentage specified in the definition of Required
Lenders.
(iii) Extend the Revolving Credit Facility Termination Date or the
Acquisition Loan Facility Termination Date, or reduce the
amount or extend the payment date for, the mandatory payments
required under Section 2.3, or increase the amount of any
Commitment of any Lender hereunder, or permit the Borrower to
assign its rights under this Agreement.
(iv) Amend this Section 8.2.
No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent. The Agent may waive payment
of the fee required under Section 12.3.2 without obtaining the consent of any
other party to this Agreement.
8.3. Preservation of Rights. No delay or omission of the Lenders or the
Agent to exercise any right under the Loan Documents shall impair such right or
be construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
the Borrower to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 8.2, and then only
to the extent in such writing specifically set forth. All remedies contained in
the Loan Documents or by law afforded shall be cumulative and all shall be
available to the Agent and the Lenders until the Obligations have been paid in
full.
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations. All representations and warranties of
the Borrower contained in this Agreement shall survive the making of the Loans
herein contemplated.
9.2. Governmental Regulation. Anything contained in this Agreement to
the contrary notwithstanding, no Lender shall be obligated to extend credit to
the Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
9.3. Entire Agreement. The Loan Documents embody the entire agreement
and understanding among the Borrower, the Agent and the Lenders and supersede
all prior agreements and understandings among the Borrower, the Agent and the
Lenders relating to the subject matter thereof other than the Fee Letter.
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9.4. Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any of
its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement and
their respective successors and assigns. The parties hereto expressly agree that
the Arranger shall enjoy the benefits of the provisions of Sections 9.5, 9.8 and
10.11 to the extent specifically set forth therein and shall have the right to
enforce such provisions on its own behalf and in its own name.
9.5. Expenses; Indemnification.
9.5.1. Expenses. The Borrower shall reimburse the Agent and
the Arranger for any costs, internal charges and out-of-pocket expenses
(including attorneys' fees and time charges of attorneys for the Agent, which
attorneys may be employees of the Agent) paid or incurred by the Agent or the
Arranger in connection with the preparation, negotiation, execution, delivery,
syndication, review, amendment, modification, and administration of the Loan
Documents; provided, however, that the fees of Crowe & Dunlevy, counsel to the
Agent, incurred in connection with the preparation, negotiation, execution and
delivery of the Loan Documents shall not exceed the amounts set forth in the
memorandum to David Page dated October 22, 1999 (subject to the assumptions and
exceptions stated in such memorandum). The Borrower also agrees to reimburse the
Agent, the Arranger and the Lenders for any costs, internal charges and
out-of-pocket expenses (including attorneys' fees and time charges of attorneys
for the Agent, the Arranger and the Lenders, which attorneys may be employees of
the Agent, the Arranger or the Lenders) paid or incurred by the Agent, the
Arranger or any Lender in connection with the collection and enforcement of the
Loan Documents. Expenses being reimbursed by the Borrower under this Section
include, without limitation, costs and expenses incurred in connection with the
Reports described in the following sentence. The Borrower acknowledges that from
time to time Bank One may prepare and may distribute to the Lenders (but shall
have no obligation or duty to prepare or to distribute to the Lenders) certain
audit reports (the "Reports") pertaining to the Borrower's assets for internal
use by Bank One from information furnished to it by or on behalf of the
Borrower, after Bank One has exercised its rights of inspection pursuant to this
Agreement.
9.5.2. Indemnification. The Borrower hereby further agrees to
indemnify the Agent, the Arranger, each Lender, their respective affiliates, and
each of their directors, officers and employees against all losses, claims,
damages, penalties, judgments, liabilities and expenses (including, without
limitation, all expenses of litigation or preparation therefor whether or not
the Agent, the Arranger, any Lender or any affiliate is a party thereto) which
any of them may pay or incur arising out of or relating to this Agreement, the
other Loan Documents, the transactions contemplated hereby or the direct or
indirect application or proposed application of the proceeds of any Loan
hereunder except to the extent that they are determined in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of the party seeking
indemnification.
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9.5.3 Survival. The obligations of the Borrower under this
Section 9.5 shall survive the termination of this Agreement.
9.6. Numbers of Documents. All statements, notices, closing documents,
and requests hereunder shall be furnished to the Agent with sufficient
counterparts so that the Agent may furnish one to each of the Lenders.
9.7. Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable, or invalid
without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
9.8. Nonliability of Lenders. The relationship between the Borrower on
the one hand and the Lenders and the Agent on the other hand shall be solely
that of borrower and lender. Neither the Agent, the Arranger nor any Lender
shall have any fiduciary responsibilities to the Borrower. Neither the Agent,
the Arranger nor any Lender undertakes any responsibility to the Borrower to
review or inform the Borrower of any matter in connection with any phase of the
Borrower's business or operations. The Borrower agrees that neither the Agent,
the Arranger nor any Lender shall have liability to the Borrower (whether
sounding in tort, contract or otherwise) for losses suffered by the Borrower in
connection with, arising out of, or in any way related to, the transactions
contemplated and the relationship established by the Loan Documents, or any act,
omission or event occurring in connection therewith, unless it is determined in
a final non-appealable judgment by a court of competent jurisdiction that such
losses resulted from the gross negligence or willful misconduct of the party
from which recovery is sought. Neither the Agent, the Arranger nor any Lender
shall have any liability with respect to, and the Borrower hereby waives,
releases and agrees not to sue for, any special, indirect or consequential
damages suffered by the Borrower in connection with, arising out of, or in any
way related to the Loan Documents or the transactions contemplated thereby.
9.9. Confidentiality. Each Lender agrees to hold any confidential
information which it may receive from the Borrower pursuant to this Agreement in
confidence, except for disclosure (i) to its Affiliates and to other Lenders and
their respective Affiliates, (ii) to legal counsel, accountants, and other
professional advisors to such Lender or to a Transferee, (iii) to regulatory
officials, (iv) to any Person as requested pursuant to or as required by law,
regulation, or legal process, (v) to any Person in connection with any legal
proceeding to which such Lender is a party, (vi) to such Lender's direct or
indirect contractual counterparties in swap agreements or to legal counsel,
accountants and other professional advisors to such counterparties, and (vii)
permitted by Section 12.4.
9.10. Nonreliance. Each Lender hereby represents that it is not relying
on or looking to any margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) for the repayment of the Loans provided
for herein.
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9.11. Disclosure. The Borrower and each Lender hereby (i) acknowledge
and agree that Bank One and/or its Affiliates from time to time may hold
investments in, make other loans to or have other relationships with the
Borrower and its Affiliates, and (ii) waive any liability of Bank One or such
Affiliate of Bank One to the Borrower or any Lender, respectively, arising out
of or resulting from such investments, loans or relationships other than
liabilities arising out of the gross negligence or willful misconduct of Bank
One or its Affiliates.
ARTICLE X
THE AGENT
10.1. Appointment; Nature of Relationship. Bank One is hereby appointed
by each of the Lenders as its contractual representative (herein referred to as
the "Agent") hereunder and under each other Loan Document, and each of the
Lenders irrevocably authorizes the Agent to act as the contractual
representative of such Lender with the rights and duties expressly set forth
herein and in the other Loan Documents. The Agent agrees to act as such
contractual representative upon the express conditions contained in this Article
X. Notwithstanding the use of the defined term "Agent," it is expressly
understood and agreed that the Agent shall not have any fiduciary
responsibilities to any Lender by reason of this Agreement or any other Loan
Document and that the Agent is merely acting as the contractual representative
of the Lenders with only those duties as are expressly set forth in this
Agreement and the other Loan Documents. In its capacity as the Lenders'
contractual representative, the Agent (i) does not hereby assume any fiduciary
duties to any of the Lenders, (ii) is a "representative" of the Lenders within
the meaning of Section 9-105 of the Uniform Commercial Code and (iii) is acting
as an independent contractor, the rights and duties of which are limited to
those expressly set forth in this Agreement and the other Loan Documents. Each
of the Lenders hereby agrees to assert no claim against the Agent on any agency
theory or any other theory of liability for breach of fiduciary duty, all of
which claims each Lender hereby waives.
10.2. Powers. The Agent shall have and may exercise such powers under
the Loan Documents as are specifically delegated to the Agent by the terms of
each thereof, together with such powers as are reasonably incidental thereto.
The Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder except any action specifically provided by
the Loan Documents to be taken by the Agent.
10.3. General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Lenders or
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Loan Document or in connection herewith or therewith except
to the extent such action or inaction is determined in a final non-appealable
judgment by a court of competent jurisdiction to have arisen from the gross
negligence or willful misconduct of such Person.
10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor
any of its directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into, or verify (a) any statement, warranty
or representation made in connection with any
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Loan Document or any borrowing hereunder; (b) the performance or observance of
any of the covenants or agreements of any obligor under any Loan Document,
including, without limitation, any agreement by an obligor to furnish
information directly to each Lender; (c) the satisfaction of any condition
specified in Article IV, except receipt of items required to be delivered solely
to the Agent; (d) the existence or possible existence of any Default or
Unmatured Default; (e) the validity, enforceability, effectiveness, sufficiency
or genuineness of any Loan Document or any other instrument or writing furnished
in connection therewith; (f) the value, sufficiency, creation, perfection or
priority of any Lien in any collateral security; or (g) the financial condition
of the Borrower or any guarantor of any of the Obligations or of any of the
Borrower's or any such guarantor's respective Subsidiaries. The Agent shall have
no duty to disclose to the Lenders information that is not required to be
furnished by the Borrower to the Agent at such time, but is voluntarily
furnished by the Borrower to the Agent (either in its capacity as Agent or in
its individual capacity).
10.5. Action on Instructions of Lenders. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder and under
any other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders. The Lenders hereby
acknowledge that the Agent shall be under no duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this Agreement
or any other Loan Document unless it shall be requested in writing to do so by
the Required Lenders. The Agent shall be fully justified in failing or refusing
to take any action hereunder and under any other Loan Document unless it shall
first be indemnified to its satisfaction by the Lenders, based upon their Pro
Rata Shares, against any and all liability, cost and expense that it may incur
by reason of taking or continuing to take any such action.
10.6. Employment of Agents and Counsel. The Agent may execute any of
its duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the Lenders
and all matters pertaining to the Agent's duties hereunder and under any other
Loan Document.
10.7. Reliance on Documents; Counsel. The Agent shall be entitled to
rely upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
10.8. Agent's Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify the Agent in proportion to their Pro Rata Shares (i) for
any amounts not reimbursed by the Borrower for which the Agent is entitled to
reimbursement by the Borrower under the Loan Documents, (ii) for any other
expenses incurred by the Agent on behalf of the Lenders, in connection with the
preparation, execution, delivery, administration and enforcement
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of the Loan Documents (including, without limitation, for any expenses incurred
by the Agent in connection with any dispute between the Agent and any Lender or
between two or more of the Lenders) and (iii) for any liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of the Loan Documents or any other document delivered in connection therewith or
the transactions contemplated thereby (including, without limitation, for any
such amounts incurred by or asserted against the Agent in connection with any
dispute between the Agent and any Lender or between two or more of the Lenders),
or the enforcement of any of the terms of the Loan Documents or of any such
other documents, provided that (x) no Lender shall be liable for any of the
foregoing to the extent any of the foregoing is found in a final non-appealable
judgment by a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of the Agent and (y) any indemnification
required pursuant to Section 3.5(vii) shall, notwithstanding the provisions of
this Section 10.8, be paid by the relevant Lender in accordance with the
provisions thereof. The obligations of the Lenders under this Section 10.8 shall
survive payment of the Obligations and termination of this Agreement.
10.9. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Unmatured Default
hereunder unless the Agent has received written notice from a Lender or the
Borrower referring to this Agreement describing such Default or Unmatured
Default and stating that such notice is a "notice of default". In the event that
the Agent receives such a notice, the Agent shall give prompt notice thereof to
the Lenders.
10.10. Rights as a Lender. The Agent shall be a Lender, and as such the
Agent shall have the same rights and powers hereunder and under any other Loan
Document with respect to its Commitment and its Loans as any other Lender and
may exercise the same as though it were not the Agent, and the term "Lender" or
"Lenders" shall, at any time when the Agent is a Lender, unless the context
otherwise indicates, include the Agent in its individual capacity. The Agent and
its Affiliates may accept deposits from, lend money to, and generally engage in
any kind of trust, debt, equity or other transaction, in addition to those
contemplated by this Agreement or any other Loan Document, with the Borrower or
any of its Subsidiaries in which the Borrower or such Subsidiary is not
restricted hereby from engaging with any other Person.
10.11. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent, the Arranger or any other
Lender and based on the financial statements prepared by the Borrower and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and without
reliance upon the Agent, the Arranger or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.
10.12. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower, such resignation to be
effective upon the appointment of a successor Agent or, if no successor Agent
has been appointed, forty-five days after the
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retiring Agent gives notice of its intention to resign. The Agent may be removed
at any time with or without cause by written notice received by the Agent from
the Required Lenders, such removal to be effective on the date specified by the
Required Lenders. Upon any such resignation or removal, the Required Lenders
shall have the right to appoint, on behalf of the Borrower and the Lenders, a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders within thirty (30) days after the resigning Agent's giving
notice of its intention to resign, then the resigning Agent may appoint, on
behalf of the Borrower and the Lenders, a successor Agent. Notwithstanding the
previous sentence, the Agent may at any time without the consent of the Borrower
or any Lender, appoint any of its Affiliates which is a commercial bank as a
successor Agent hereunder. If the Agent has resigned or been removed and no
successor Agent has been appointed, the Lenders may perform all the duties of
the Agent hereunder and the Borrower shall make all payments in respect of the
Obligations to the applicable Lender and for all other purposes shall deal
directly with the Lenders. No successor Agent shall be deemed to be appointed
hereunder until such successor Agent has accepted the appointment. Any such
successor Agent shall be a commercial bank having capital and retained earnings
of at least $100,000,000. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
resigning or removed Agent. Upon the effectiveness of the resignation or removal
of the Agent, the resigning or removed Agent shall be discharged from its duties
and obligations hereunder and under the Loan Documents. After the effectiveness
of the resignation or removal of an Agent, the provisions of this Article X
shall continue in effect for the benefit of such Agent in respect of any actions
taken or omitted to be taken by it while it was acting as the Agent hereunder
and under the other Loan Documents. In the event that there is a successor to
the Agent by merger, or the Agent assigns its duties and obligations to an
Affiliate pursuant to this Section 10.12, then the term "Corporate Base Rate" as
used in this Agreement shall mean the prime rate, base rate or other analogous
rate of the new Agent.
10.13. Agent's Fee. The Borrower agrees to pay to the Agent, for its
own account, the fees agreed to be paid by the Borrower pursuant to the Fee
Letter, or as otherwise agreed from time to time.
10.14. Delegation to Affiliates. The Borrower and the Lenders agree
that the Agent may delegate any of its duties under this Agreement to any of its
Affiliates. Any such Affiliate (and such Affiliate's directors, officers, agents
and employees) which performs duties in connection with this Agreement shall be
entitled to the same benefits of the indemnification, waiver and other
protective provisions to which the Agent is entitled under Articles IX and X.
10.15. Collateral Releases. The Lenders hereby empower and authorize
the Agent to execute and deliver to the Borrower on their behalf any agreements,
documents or instruments as shall be necessary or appropriate to effect any
releases of Collateral which shall be permitted by the terms hereof or of any
other Loan Document or which shall otherwise have been approved by the Required
Lenders (or, if required by the terms of Section 8.2, all of the Lenders) in
writing.
55
<PAGE> 56
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. Setoff. In addition to, and without limitation of, any rights of
the Lenders under applicable law, if the Borrower becomes insolvent, however
evidenced, or any Default occurs, any and all deposits (including all account
balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness at any time held or owing by any Lender or
any Affiliate of any Lender to or for the credit or account of the Borrower may
be offset and applied toward the payment of the Obligations owing to such
Lender, whether or not the Obligations, or any part thereof, shall then be due.
11.2. Ratable Payments. If any Lender, whether by setoff or otherwise,
has payment made to it upon its Loans (other than payments received pursuant to
Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion than that received by any
other Lender, such Lender agrees, promptly upon demand, to purchase a portion of
the Loans held by the other Lenders so that after such purchase each Lender will
hold its ratable proportion of Loans. If any Lender, whether in connection with
setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligations or such amounts which may be
subject to setoff, such Lender agrees, promptly upon demand, to take such action
necessary such that all Lenders share in the benefits of such collateral ratably
in proportion to their Loans. In case any such payment is disturbed by legal
process, or otherwise, appropriate further adjustments shall be made.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower and the
Lenders and their respective successors and assigns, except that (i) the
Borrower shall not have the right to assign its rights or obligations under the
Loan Documents and (ii) any assignment by any Lender must be made in compliance
with Section 12.3. The parties to this Agreement acknowledge that clause (ii) of
this Section 12.1 relates only to absolute assignments and does not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by any Lender of all or any portion of its rights under
this Agreement and any Note to a Federal Reserve Bank; provided, however, that
no such pledge or assignment creating a security interest shall release the
transferor Lender from its obligations hereunder unless and until the parties
thereto have complied with the provisions of Section 12.3. The Agent may treat
the Person which made any Loan or which holds any Note as the owner thereof for
all purposes hereof unless and until such Person complies with Section 12.3;
provided, however, that the Agent may in its discretion (but shall not be
required to) follow instructions from the Person which made any Loan or which
holds any Note to direct payments relating to such Loan or Note to another
Person. Any assignee of the rights to any Loan or any Note agrees by acceptance
of such assignment to be bound by all the terms and provisions of the Loan
Documents. Any request, authority or consent of any Person, who at the time of
making such request or giving such authority or consent is the owner of the
rights to any Loan
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<PAGE> 57
(whether or not a Note has been issued in evidence thereof), shall be conclusive
and binding on any subsequent holder or assignee of the rights to such Loan.
12.2. Participations.
12.2.1. Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with applicable law,
at any time sell to one or more banks or other entities
("Participants") participating interests in any Loan owing to such
Lender, any Note held by such Lender, any Commitment of such Lender or
any other interest of such Lender under the Loan Documents. In the
event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under the Loan Documents shall
remain unchanged, such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, such
Lender shall remain the owner of its Loans and the holder of any Note
issued to it in evidence thereof for all purposes under the Loan
Documents, all amounts payable by the Borrower under this Agreement
shall be determined as if such Lender had not sold such participating
interests, and the Borrower and the Agent shall continue to deal solely
and directly with such Lender in connection with such Lender's rights
and obligations under the Loan Documents.
12.2.2. Voting Rights. Each Lender shall retain the sole right
to approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other
than any amendment, modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which forgives
principal, interest or fees or reduces the interest rate or fees
payable with respect to any such Loan or Commitment, extends the
Revolving Credit Facility Termination Date or the Acquisition Loan
Facility Termination Date, postpones any date fixed for any
regularly-scheduled payment of principal of, or interest or fees on,
any such Loan or Commitment, releases any guarantor of any such Loan or
releases all or substantially all of the collateral, if any, securing
any such Loan.
12.2.3. Benefit of Setoff. The Borrower agrees that each
Participant shall be deemed to have the right of setoff provided in
Section 11.1 in respect of its participating interest in amounts owing
under the Loan Documents to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under the
Loan Documents, provided that each Lender shall retain the right of
setoff provided in Section 11.1 with respect to the amount of
participating interests sold to each Participant. The Lenders agree to
share with each Participant, and each Participant, by exercising the
right of setoff provided in Section 11.1, agrees to share with each
Lender, any amount received pursuant to the exercise of its right of
setoff, such amounts to be shared in accordance with Section 11.2 as if
each Participant were a Lender.
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<PAGE> 58
12.3. Assignments.
12.3.1. Permitted Assignments. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any
time assign to one or more banks or other entities ("Purchasers") all
or any part of its rights and obligations under the Loan Documents;
provided, however, that each Purchaser must purchase the same Pro Rata
Share in each of the Term Loan Facility, the Revolving Credit Facility
and the Acquisition Loan Facility. Such assignment shall be
substantially in the form of Exhibit C or in such other form as may be
agreed to by the parties thereto. The consent of the Borrower and the
Agent shall be required prior to an assignment becoming effective with
respect to a Purchaser which is not a Lender or an Affiliate thereof;
provided, however, that if a Default has occurred and is continuing,
the consent of the Borrower shall not be required. Such consent shall
not be unreasonably withheld or delayed. Each such assignment with
respect to a Purchaser which is not a Lender or an Affiliate thereof
shall (unless each of the Borrower and the Agent otherwise consents) be
in an amount not less than the lesser of (i) $5,000,000 or (ii) the
remaining amount of the assigning Lender's total Commitment (calculated
as at the date of such assignment) or its outstanding Loans (if all of
the applicable Commitments have been terminated).
12.3.2. Effect; Effective Date. Upon (i) delivery to the Agent
of an assignment, together with any consents required by Section
12.3.1, and (ii) payment of a $4,000 fee to the Agent for processing
such assignment (unless such fee is waived by the Agent), such
assignment shall become effective on the effective date specified in
such assignment. The assignment shall contain a representation by the
Purchaser to the effect that none of the consideration used to make the
purchase of the Commitment and Loans under the applicable assignment
agreement constitutes "plan assets" as defined under ERISA and that the
rights and interests of the Purchaser in and under the Loan Documents
will not be "plan assets" under ERISA. On and after the effective date
of such assignment, such Purchaser shall for all purposes be a Lender
party to this Agreement and any other Loan Document executed by or on
behalf of the Lenders and shall have all the rights and obligations of
a Lender under the Loan Documents, to the same extent as if it were an
original party hereto, and no further consent or action by the
Borrower, the Lenders or the Agent shall be required to release the
transferor Lender with respect to the percentage of the Aggregate
Commitment and Loans assigned to such Purchaser. Upon the consummation
of any assignment to a Purchaser pursuant to this Section 12.3.2, the
transferor Lender, the Agent and the Borrower shall, if the transferor
Lender or the Purchaser desires that its Loans be evidenced by Notes,
make appropriate arrangements so that new Notes or, as appropriate,
replacement Notes are issued to such transferor Lender and new Notes
or, as appropriate, replacement Notes, are issued to such Purchaser, in
each case in principal amounts reflecting their respective Commitments,
as adjusted pursuant to such assignment.
12.4. Dissemination of Information. The Borrower authorizes each Lender
to disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information
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<PAGE> 59
in such Lender's possession concerning the creditworthiness of the Borrower and
its Subsidiaries, including without limitation any information contained in any
Reports; provided that each Transferee and prospective Transferee agrees to be
bound by Section 9.11 of this Agreement.
12.5. Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of Section 3.5(iv).
ARTICLE XIII
NOTICES
13.1. Notices. Except as otherwise permitted by Section 2.14 with
respect to borrowing notices, all notices, requests and other communications to
any party hereunder shall be in writing (including electronic transmission,
facsimile transmission or similar writing) and shall be given to such party: (x)
in the case of the Borrower, any of the initial Lenders or the Agent, at its
address or facsimile number set forth on the signature pages hereof, (y) in the
case of any Person who hereafter becomes a Lender, at its address or facsimile
number set forth below in its administrative questionnaire or (z) in the case of
any party, at such other address or facsimile number as such party may hereafter
specify for the purpose by notice to the Agent and the Borrower in accordance
with the provisions of this Section 13.1. Each such notice, request or other
communication shall be effective (i) if given by facsimile transmission, when
transmitted to the facsimile number specified in accordance with this Section
13.1 and confirmation of receipt is received, (ii) if given by mail, 72 hours
after such communication is deposited in the mails with first class postage
prepaid, addressed as aforesaid, or (iii) if given by any other means, when
delivered (or, in the case of electronic transmission, received) at the address
specified in this Section; provided that notices to the Agent under Article II
shall not be effective until received.
13.2. Change of Address. The Borrower, the Agent and any Lender may
each change the address for service of notice upon it by a notice in writing to
the other parties hereto.
ARTICLE XIV
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Borrower, the
Agent and the Lenders and each party has notified the Agent by facsimile
transmission or telephone that it has taken such action.
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ARTICLE XV
CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
15.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE
STATE OF OKLAHOMA, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS.
15.2. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR OKLAHOMA STATE
COURT SITTING IN TULSA, OKLAHOMA, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER
HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT
THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER
IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER
AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN
TULSA, OKLAHOMA.
15.3. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have
executed this Agreement as of the date first above written.
XETA CORPORATION
By: /s/ ROBERT B. WAGNER
------------------------------------
Title: VP Finance
---------------------------------
1814 W. Tacoma
Broken Arrow, Oklahoma 74012
Attention: Robert B. Wagner
-----------------------------
Telephone: (918) 664-8200
FAX: (918) 664-6876
Term Loan Commitment: BANK ONE, OKLAHOMA, NA,
$12,650,000 Individually and as Agent
Revolving Loan Commitment: By: /s/ TIMOTHY T. KOSKI
$ 2,750,000 ------------------------------------
Title: Vice President
Acquisition Loan Commitment: ---------------------------------
$ 6,600,000 Attention: Timothy T. Koski
Telephone: (918) 586-5147
FAX: (918) 586-5474
Address: 15 East Fifth Street
Tulsa, Oklahoma 74103
Term Loan Commitment: MERCANTILE BANK, N.A.
$10,350,000
Revolving Loan Commitment: By: /s/ GREGORY B. VATTEROTT, JR.
$ 2,250,000 ------------------------------------
Title: Assistant Vice President
Acquisition Loan Commitment: ---------------------------------
$ 5,400,000 Attention: Gregory B. Vatterott, Jr.
Telephone: (314) 418-2243
FAX: (314) 418-8090
Address: 8th & Locust Streets
P.O. Box 524
St. Louis, Missouri 63166
Total Commitments:
$ 40,000,000
=============
61
<PAGE> 62
BANC ONE CAPITAL MARKETS, INC.,
as Lead Arranger and Book Runner
By: /s/ ELIZABETH CADWALLADER
------------------------------------
Name: Elizabeth Cadwallader
----------------------------------
Title: Managing Director
---------------------------------
1717 Main Street, 4th Floor
Dallas, Texas 75201
Attention: Elizabeth E. Cadwallader,
Managing Director
Telephone: (214) 290-2393
FAX: (214) 290-2336
62
<PAGE> 63
PRICING SCHEDULE
<TABLE>
<CAPTION>
==============================================================================================================
APPLICABLE MARGIN LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
STATUS STATUS STATUS STATUS STATUS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Eurodollar Rate 1.50% 1.75% 2.00% 2.25% 2.50%
- --------------------------------------------------------------------------------------------------------------
Floating Rate 0.0% 0.0% 0.25% 0.50% 0.75%
==============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================================
APPLICABLE FEE RATE LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
STATUS STATUS STATUS STATUS STATUS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commitment Fee 0.20% 0.25% 0.30% 0.35% 0.45%
==============================================================================================================
</TABLE>
For the purposes of this Schedule, the following terms have the
following meanings, subject to the final paragraph of this Schedule:
"Financials" means the annual or quarterly financial statements of the
Borrower delivered pursuant to Section 6.1(i) or (ii).
"Level I Status" exists at any date if, as of the last day of the
fiscal quarter of the Borrower referred to in the most recent Financials, the
Leverage Ratio is less than or equal to 1.0 to 1.00.
"Level II Status" exists at any date if, as of the last day of the
fiscal quarter of the Borrower referred to in the most recent Financials, (i)
the Borrower has not qualified for Level I Status and (ii) the Leverage Ratio is
less than or equal to 1.5 to 1.00.
"Level III Status" exists at any date if, as of the last day of the
fiscal quarter of the Borrower referred to in the most recent Financials, (i)
the Borrower has not qualified for Level I Status or Level II Status and (ii)
the Leverage Ratio is less than or equal to 2.0 to 1.00.
"Level IV Status" exists at any date if, as of the last day of the
fiscal quarter of the Borrower referred to in the most recent Financials, (i)
the Borrower has not qualified for Level I Status, Level II Status or Level III
Status and (ii) the Leverage Ratio is less than or equal to 2.5 to 1.00.
"Level V Status" exists at any date if the Borrower has not qualified
for Level I Status, Level II Status, Level III Status or Level IV Status.
"Status" means either Level I Status, Level II Status, Level III
Status, Level IV Status or Level V Status.
The Applicable Margin and Applicable Fee Rate shall be determined in
accordance with the foregoing table based on the Borrower's Status as reflected
in the then most recent Financials.
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<PAGE> 64
Adjustments, if any, to the Applicable Margin or Applicable Fee Rate shall be
effective five Business Days after the Agent has received the applicable
Financials. If the Borrower fails to deliver the Financials to the Agent at the
time required pursuant to Section 6.1, then the Applicable Margin and Applicable
Fee Rate shall be the highest Applicable Margin and Applicable Fee Rate set
forth in the foregoing table until five days after such Financials are so
delivered.
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<PAGE> 1
EXHIBIT 2.4
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT is entered into as of November 30,
1999 by and among Xeta Corporation, an Oklahoma corporation (the "Borrower"),
U.S. Technologies Systems, Inc., a Missouri corporation ("UST"), and each of the
Borrower's Subsidiaries hereafter party hereto (the Borrower, UST and each of
such Subsidiaries shall be singularly referred to as a "Grantor" and
collectively as the "Grantors"), and Bank One, Oklahoma, NA, a national banking
association having its principal office in Tulsa, Oklahoma, in its capacity as
agent (the "Agent") for the lenders party to the Credit Agreement referred to
below.
PRELIMINARY STATEMENT
The Borrower, the Agent and the Lenders are entering into a Credit
Agreement dated as of November 30, 1999 (as it may be amended or modified from
time to time, the "Credit Agreement"). Each Grantor is entering into this Pledge
and Security Agreement (as it may be amended or modified from time to time, the
"Security Agreement") in order to induce the Lenders to enter into and extend
credit to the Borrower under the Credit Agreement.
ACCORDINGLY, each Grantor and the Agent, on behalf of the Lenders,
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Terms Defined in Credit Agreement. All capitalized terms used
herein and not otherwise defined shall have the meanings assigned to such terms
in the Credit Agreement.
1.2. Terms Defined in Oklahoma Uniform Commercial Code. Terms defined
in the Oklahoma Uniform Commercial Code which are not otherwise defined in this
Security Agreement are used herein as defined in the Oklahoma Uniform Commercial
Code as in effect on the date hereof.
1.3. Definitions of Certain Terms Used Herein. As used in this Security
Agreement, in addition to the terms defined in the Preliminary Statement, the
following terms shall have the following meanings:
"Accounts" means all rights to payment for goods sold or leased or
services rendered by any Grantor, whether or not earned by performance, together
with all security interests or other security held by or granted to such Grantor
to secure such rights to payment.
"Article" means a numbered article of this Security Agreement, unless
another document is specifically referenced.
"Chattel Paper" means any writing or group of writings which evidences
both a monetary obligation and a security interest in or a lease of specific
goods.
<PAGE> 2
"Collateral" means all Accounts, Chattel Paper, Deposit Accounts,
Documents, Equipment, Fixtures, General Intangibles, Investment Property,
Instruments, Inventory, Pledged Deposits, Stock Rights and Other Collateral,
wherever located, in which any Grantor now has or hereafter acquires any right
or interest, and the proceeds, insurance proceeds and products thereof, together
with all books and records, customer lists, credit files, computer files,
programs, printouts and other computer materials and records related thereto.
"Control" shall have the meaning set forth in Article 8 of the Oklahoma
Uniform Commercial Code as in effect from time to time.
"Default" means an event described in Section 5.1.
"Deposit Accounts" means all demand, time, savings, passbook and other
deposit accounts maintained with any bank, savings and loan association, credit
union or like organization, other than an account represented by a certificate
of deposit.
"Documents" means all documents of title and goods evidenced thereby,
including without limitation all bills of lading, dock warrants, dock receipts,
warehouse receipts and orders for the delivery of goods, and also any other
document which in the regular course of business or financing is treated as
adequately evidencing that the person in possession of it is entitled to
receive, hold and dispose of the document and the goods it covers.
"Equipment" means all equipment, machinery, furniture and goods used or
usable by each Grantor in its business and all other tangible personal property
(other than Inventory), and all accessions and additions thereto, including,
without limitation, all Fixtures.
"Exhibit" refers to a specific exhibit to this Security Agreement,
unless another document is specifically referenced.
"Fixtures" means all goods which become so related to particular real
estate that an interest in such goods arises under any real estate law
applicable thereto, including, without limitation, all trade fixtures.
"General Intangibles" means all intangible personal property (other
than Accounts) including, without limitation, all contract rights, rights to
receive payments of money, choses in action, causes of action, judgments, tax
refunds and tax refund claims, patents, trademarks, trade names, copyrights,
licenses, franchises, computer programs, software, goodwill, customer and
supplier contracts, interests in general or limited partnerships, joint ventures
or limited liability companies, reversionary interests in pension and profit
sharing plans and reversionary, beneficial and residual interests in trusts,
leasehold interests in real or personal property, rights to receive rentals of
real or personal property and guarantee and indemnity claims, including without
limitation any indemnity claims arising from or in connection with the UST
Acquisition Agreements or any other Acquisition Documents.
"Investment Property" means all securities, whether certificated or
uncertificated, security entitlements, securities accounts, commodity contracts,
and commodity accounts and any Stock Rights related thereto.
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"Instruments" means all negotiable instruments and other writings which
evidence a right to the payment of money and which are not themselves security
agreements or leases and are of a type which in the ordinary course of business
are transferred by delivery with any necessary endorsement or assignment,
including, without limitation, all checks, drafts, notes, bonds, debentures,
government securities, certificates of deposit and letters of credit.
"Inventory" means all goods held for sale or lease, or furnished or to
be furnished under contracts of service, or consumed in any Grantor's business,
including without limitation raw materials, intermediates, work in process,
packaging materials, finished goods, semi-finished inventory, scrap inventory,
manufacturing supplies and spare parts, all such goods that have been returned
to or repossessed by or on behalf of such Grantor, and all such goods released
to any Grantor or to third parties under trust receipts or similar documents.
"Lenders" means the lenders party to the Credit Agreement and their
successors and assigns.
"Lien" means any lien (statutory or other), security interest,
mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, the interest of a
vendor or lessor under any conditional sale, capitalized lease or other title
retention agreement).
"Obligations" means any and all existing and future indebtedness,
obligation and liability of every kind, nature and character, direct or
indirect, absolute or contingent (including all renewals, extensions and
modifications thereof and all fees, costs and expenses incurred by the Agent or
the Lenders in connection with the preparation, administration, collection or
enforcement thereof), of any Grantor to the Agent or any Lender or any branch,
subsidiary or affiliate thereof, arising under or pursuant to this Security
Agreement, the Credit Agreement and any promissory note or notes now or
hereafter issued under the Credit Agreement.
"Other Collateral" means any other personal property of any Grantor not
included within the defined terms Accounts, Chattel Paper, Deposit Accounts,
Documents, Equipment, Fixtures, General Intangibles, Instruments, Inventory,
Investment Property, Pledged Deposits and Stock Rights, including, without
limitation, all cash on hand and all deposit accounts or other deposits (general
or special, time or demand, provisional or final) with any bank or other
financial institution, it being intended that the Collateral include all
personal property of each Grantor.
"Pledged Deposits" means all time deposits of money, whether or not
evidenced by certificates, which a Grantor may from time to time designate as
pledged to the Agent or to any Lender as security for any Obligation, and all
rights to receive interest on said deposits.
"Rate Management Transaction" means any transaction (including an
agreement with respect thereto) now existing or hereafter entered into between
the Borrower and any Lender or Affiliate thereof which is a rate swap, basis
swap, forward rate transaction, commodity swap, commodity option, equity or
equity index swap, equity or equity index option, bond option, interest rate
option, foreign exchange transaction, cap transaction, floor transaction, collar
transaction, forward transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions) or any combination
thereof, whether linked to one or more interest rates, foreign currencies,
commodity prices, equity prices or other financial measures.
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"Rate Management Obligations" means any and all obligations of the
Borrower, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all Rate
Management Transactions, and (ii) any and all cancellations, buy backs,
reversals, terminations or assignments of any Rate Management Transactions.
"Receivables" means the Accounts, Chattel Paper, Deposit Accounts,
Documents, Investment Property, Instruments, Pledged Deposits or Stock Rights,
and any other rights or claims to receive money which are General Intangibles or
which are otherwise included as Collateral.
"Required Secured Parties" means (x) prior to an acceleration of the
Obligations under the Credit Agreement, the Required Lenders and (y) after an
acceleration of the Obligations under the Credit Agreement, Lenders and their
Affiliates holding in the aggregate at least 66-2/3% of the total of (i) the
unpaid principal amount of outstanding Advances and (ii) the aggregate net early
termination payments and all other amounts then due and unpaid from the Borrower
to the Lenders or their Affiliates under Rate Management Transactions, as
determined by the Agent in its reasonable discretion, except that, in the event
there are not more than two (2) Lenders as of any relevant date after an
acceleration of the Obligations under the Credit Agreement, "Required Secured
Parties" means all of the Lenders and their Affiliates holding in the aggregate
at least 66-2/3% of the total of (i) the unpaid principal amount of outstanding
Advances and (ii) the aggregate net early termination payments and all other
amounts then due and unpaid from the Borrower to the Lenders or their Affiliates
under Rate Management Transactions.
"Section" means a numbered section of this Security Agreement, unless
another document is specifically referenced.
"Secured Obligations" means the Obligations and Rate Management
Obligations entered into with one or more of the Lenders or their Affiliates.
"Security" has the meaning set forth in Article 8 of the Oklahoma
Uniform Commercial Code as in effect from time to time
"Stock Rights" means any securities, dividends or other distributions
and any other right or property which any Grantor shall receive or shall become
entitled to receive for any reason whatsoever with respect to, in substitution
for or in exchange for any securities or other ownership interests in a
corporation, partnership, joint venture or limited liability company
constituting Collateral and any securities, any right to receive securities and
any right to receive earnings, in which any Grantor now has or hereafter
acquires any right, issued by an issuer of such securities.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
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ARTICLE II
GRANT OF SECURITY INTEREST
Each Grantor hereby pledges, assigns and grants to the Agent, on behalf
of and for the ratable benefit of the Lenders and (to the extent specifically
provided herein) their Affiliates, a security interest in and to the Collateral
to secure the prompt and complete payment and performance of the Secured
Obligations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each Grantor represents and warrants to the Agent and the Lenders that:
3.1. Title, Authorization, Validity and Enforceability. Each Grantor
has good and valid rights in and title to the Collateral with respect to which
it has purported to grant a security interest hereunder, free and clear of all
Liens except for Liens permitted under Section 4.1.6, and has full power and
authority to grant to the Agent the security interest in such Collateral
pursuant hereto. The execution and delivery by each of the Grantors of this
Security Agreement has been duly authorized by proper corporate, partnership,
limited liability company or other proceedings, as applicable, and this Security
Agreement constitutes a legal, valid and binding obligation of each Grantor and
creates a security interest which is enforceable against each Grantor in all now
owned and hereafter acquired Collateral. When financing statements have been
filed in the appropriate offices against the Grantors in the locations listed on
Exhibit "F", the Agent will have a fully perfected first priority security
interest in that Collateral in which a security interest may be perfected by
filing, subject only to Liens permitted under Section 4.1.6.
3.2. Conflicting Laws and Contracts. Neither the execution and delivery
by the Grantors of this Security Agreement, the creation and perfection of the
security interest in the Collateral granted hereunder, nor compliance with the
terms and provisions hereof will violate any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on any Grantor or such Grantor's
articles or certificate of incorporation or by-laws, partnership agreements, or
operating agreements, as the case may be, the provisions of any indenture,
instrument or agreement to which any Grantor is a party or is subject, or by
which it, or its property, is bound, or conflict with or constitute a default
thereunder, or result in the creation or imposition of any Lien pursuant to the
terms of any such indenture, instrument or agreement (other than any Lien of the
Agent on behalf of the Lenders).
3.3. Principal Location. Each Grantor's mailing address, and the
location of its chief executive office and of the books and records relating to
the Receivables, is disclosed in Exhibit "A"; no Grantor has any other places of
business except those set forth in Exhibit "A".
3.4. Property Locations. The Inventory, Equipment and Fixtures are
located solely at the locations described in Exhibit "A". All of said locations
are owned by a Grantor except for locations (i) which are leased by a Grantor as
lessee and designated in Part B of Exhibit "A" and (ii) at which Inventory is
held in a public warehouse or is otherwise held by a bailee or on consignment as
designated in Part C of Exhibit "A", with respect to which Inventory such
Grantor has delivered bailment agreements, warehouse receipts, financing
statements or other documents satisfactory to the Lenders to protect the Agent's
and the Lenders' security interest in such Inventory.
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3.5. No Other Names. No Grantor has conducted business under any name
except the name in which it has executed this Security Agreement.
3.6. No Default. No Default or Unmatured Default exists.
3.7. Accounts and Chattel Paper. The names of the obligors, amounts
owing, due dates and other information with respect to the Accounts and Chattel
Paper are and will be correctly stated in all records of the Grantors relating
thereto and in all invoices and reports with respect thereto furnished to the
Agent by the Grantors from time to time. As of the time when each Account or
each item of Chattel Paper arises, the Grantors shall be deemed to have
represented and warranted that such Account or Chattel Paper, as the case may
be, and all records relating thereto, are genuine and in all respects what they
purport to be.
3.8. Filing Requirements. None of the Equipment is covered by any
certificate of title, except for the vehicles described in Part A of Exhibit
"B". None of the Collateral is of a type for which security interests or liens
may be perfected by filing under any federal statute except for (i) the vehicles
described in Part B of Exhibit "B" and (ii) patents, trademarks and copyrights
held by a Grantor and described in Part C of Exhibit "B". The legal description,
county and street address of the property on which any Fixtures are located is
set forth in Exhibit "C" together with the name and address of the record owner
of each such property.
3.9. No Financing Statements. No financing statement describing all or
any portion of the Collateral which has not lapsed or been terminated naming any
Grantor as debtor has been filed in any jurisdiction except (i) financing
statements naming the Agent on behalf of the Lenders as the secured party, (ii)
as described in Exhibit "D" and (iii) as permitted by Section 4.1.6
3.10. Federal Employer Identification Number. The Borrower's Federal
employer identification number is 73-1130045, and UST's Federal employer
identification number is 43-1528852.
3.11. Pledged Securities and Other Investment Property. Exhibit "E"
sets forth a complete and accurate list of the Instruments, Securities and other
Investment Property delivered to the Agent. As designated, the applicable
Grantor is the direct and beneficial owner of each Instrument, Security and
other type of Investment Property listed on Exhibit "E" as being owned by it,
free and clear of any Liens, except for the security interest granted to the
Agent for the benefit of the Lenders hereunder. Each Grantor further represents
and warrants that (i) all such Instruments, Securities or other types of
Investment Property which are shares of stock in a corporation or ownership
interests in a partnership or limited liability company have been (to the extent
such concepts are relevant with respect to such Instrument, Security or other
type of Investment Property) duly and validly issued, are fully paid and
non-assessable and (ii) with respect to any certificates delivered to the Agent
representing an ownership interest in a partnership or limited liability
company, either such certificates are Securities as defined in Article 8 of the
Uniform Commercial Code of the applicable jurisdiction as a result of actions by
the issuer or otherwise, or, if such certificates are not Securities, such
Grantor has so informed the Agent so that the Agent may take steps to perfect
its security interest therein as a General Intangible.
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ARTICLE IV
COVENANTS
From the date of this Security Agreement, and thereafter until this
Security Agreement is terminated:
4.1. General.
4.1.1. Inspection. Each Grantor will permit the Agent or any
Lender, by its representatives and agents (i) to inspect the
Collateral, (ii) to examine and make copies of the records of the
Grantors relating to the Collateral and (iii) to discuss the Collateral
and the related records of the Grantors with, and to be advised as to
the same by, the Grantors' officers and employees (and, in the case of
any Receivable, with any person or entity which is or may be obligated
thereon), all at such reasonable times and intervals as the Agent or
such Lender may determine, and all at the Grantors' expense.
4.1.2. Taxes. Each Grantor will pay when due all taxes,
assessments and governmental charges and levies upon the Collateral,
except those which are being contested in good faith by appropriate
proceedings and with respect to which no Lien exists.
4.1.3. Records and Reports; Notification of Default. Each
Grantor will maintain complete and accurate books and records with
respect to the Collateral, and furnish to the Agent, with sufficient
copies for each of the Lenders, such reports relating to the Collateral
as the Agent shall from time to time request. Each Grantor will give
prompt notice in writing to the Agent and the Lenders of the occurrence
of any Default or Unmatured Default and of any other development,
financial or otherwise, which might materially and adversely affect the
Collateral.
4.1.4. Financing Statements and Other Actions; Defense of
Title. Each Grantor will execute and deliver to the Agent all financing
statements and other documents and take such other actions as may from
time to time be requested by the Agent in order to maintain a first
perfected security interest in and, in the case of Investment Property,
Control of, the Collateral. Each Grantor will take any and all actions
necessary to defend title to the Collateral against all persons and to
defend the security interest of the Agent in the Collateral and the
priority thereof against any Lien not expressly permitted hereunder.
4.1.5. Disposition of Collateral. No Grantor will sell, lease
or otherwise dispose of the Collateral except (i) prior to the
occurrence of a Default or Unmatured Default, dispositions specifically
permitted pursuant to Section 6.13 of the Credit Agreement, (ii) until
such time following the occurrence of a Default as such Grantor
receives a notice from the Agent instructing the Grantor to cease such
transactions, sales or leases of Inventory in the ordinary course of
business, and (iii) until such time as such Grantor receives a notice
from the Agent pursuant to Article VII, proceeds of Inventory and
Accounts collected in the ordinary course of business.
4.1.6. Liens. No Grantor will create, incur, or suffer to
exist any Lien on the Collateral except (i) the security interest
created by this Security Agreement, (ii) existing Liens described
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in Exhibit "D" and (iii) other Liens permitted pursuant to Section 6.15
[Liens] of the Credit Agreement.
4.1.7. Change in Location or Name. No Grantor will (i) have
any Inventory, Equipment or Fixtures or proceeds or products thereof
(other than Inventory and proceeds thereof disposed of as permitted by
Section 4.1.5) at a location other than a location specified in Exhibit
"A", (ii) maintain records relating to the Receivables at a location
other than at the location specified on Exhibit "A", (iii) maintain a
place of business at a location other than a location specified on
Exhibit "A", (iv) change its name or taxpayer identification number or
(v) change its mailing address, unless such Grantor shall have given
the Agent not less than 30 days' prior written notice thereof, and the
Agent shall have determined that such change will not adversely affect
the validity, perfection or priority of the Agent's security interest
in the Collateral.
4.1.8. Other Financing Statements. No Grantor will sign or
authorize the signing on its behalf of any financing statement naming
it as debtor covering all or any portion of the Collateral, except as
permitted by Section 4.1.6.
4.2. Receivables.
4.2.1. Certain Agreements on Receivables. No Grantor will
make or agree to make any discount, credit, rebate or other reduction
in the original amount owing on a Receivable or accept in satisfaction
of a Receivable less than the original amount thereof, except that,
prior to the occurrence of a Default, such Grantor may reduce the
amount of Accounts arising from the sale of Inventory in accordance
with consistent past practice and present policies and in the ordinary
course of business.
4.2.2. Collection of Receivables. Except as otherwise
provided in this Security Agreement, each Grantor will collect and
enforce, at such Grantor's sole expense, all amounts due or hereafter
due to such Grantor under the Receivables.
4.2.3. Delivery of Invoices. Each Grantor will deliver to the
Agent immediately upon its request after the occurrence of a Default
duplicate invoices with respect to each Account bearing such language
of assignment as the Agent shall specify.
4.2.4. Disclosure of Counterclaims on Receivables. If (i) any
discount, credit or agreement to make a rebate or to otherwise reduce
the amount owing on a Receivable exists or (ii) if, to the knowledge of
any Grantor, any dispute, setoff, claim, counterclaim or defense exists
or has been asserted or threatened with respect to a Receivable, such
Grantor will disclose such fact to the Agent in writing in connection
with the inspection by the Agent of any record of such Grantor relating
to such Receivable and in connection with any invoice or report
furnished by such Grantor to the Agent relating to such Receivable.
4.3. Inventory and Equipment.
4.3.1. Maintenance of Goods. Each Grantor will do all things
necessary to maintain, preserve, protect and keep the Inventory and the
Equipment in good repair and working and saleable condition.
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4.3.2. Insurance. The Grantors will (i) maintain fire and
extended coverage insurance on the Inventory and Equipment containing a
lender's loss payable clause in favor of the Agent, on behalf of the
Lenders, and providing that said insurance will not be terminated
except after at least 30 days' written notice from the insurance
company to the Agent, (ii) maintain such other insurance on the
Collateral for the benefit of the Agent as the Agent shall from time to
time request, (iii) furnish to the Agent upon the request of the Agent
from time to time the originals of all policies of insurance on the
Collateral and certificates with respect to such insurance and (iv)
maintain general liability insurance naming the Agent, on behalf of the
Lenders, as an additional insured.
4.3.3. Titled Vehicles. Each Grantor will give the Agent
notice of its acquisition of any vehicle covered by a certificate of
title and deliver to the Agent, upon request, the original of any
vehicle title certificate and do all things necessary to have the Lien
of the Agent noted on any such certificate.
4.4. Instruments, Securities, Chattel Paper, Documents and Pledged
Deposits. Each Grantor will (i) deliver to the Agent immediately upon execution
of this Security Agreement the originals of all Chattel Paper, Securities and
Instruments (if any then exist), (ii) hold in trust for the Agent upon receipt
and immediately thereafter deliver to the Agent any Chattel Paper, Securities
and Instruments constituting Collateral, (iii) upon the designation of any
Pledged Deposits (as set forth in the definition thereof), deliver to the Agent
such Pledged Deposits which are evidenced by certificates included in the
Collateral endorsed in blank, marked with such legends and assigned as the Agent
shall specify, and (iv) upon the Agent's request, after the occurrence and
during the continuance of a Default, deliver to the Agent (and thereafter hold
in trust for the Agent upon receipt and immediately deliver to the Agent) any
Document evidencing or constituting Collateral.
4.5. Uncertificated Securities and Certain Other Investment Property.
Each Grantor will permit the Agent from time to time to cause the appropriate
issuers (and, if held with a securities intermediary, such securities
intermediary) of uncertificated securities or other types of Investment Property
not represented by certificates which are Collateral to mark their books and
records with the numbers and face amounts of all such uncertificated securities
or other types of Investment Property not represented by certificates and all
rollovers and replacements therefor to reflect the Lien of the Agent granted
pursuant to this Security Agreement. Each Grantor will take any actions
necessary to cause (i) the issuers of uncertificated securities which are
Collateral and which are Securities and (ii) any financial intermediary which is
the holder of any Investment Property, to cause the Agent to have and retain
Control over such Securities or other Investment Property. Without limiting the
foregoing, each Grantor will, with respect to Investment Property held with a
financial intermediary, cause such financial intermediary to enter into a
control agreement with the Agent in form and substance satisfactory to the
Agent.
4.6. Stock and Other Ownership Interests.
4.6.1. Changes in Capital Structure of Issuers. No Grantor
will (i) permit or suffer any issuer of privately held corporate
securities or other ownership interests in a corporation, partnership,
joint venture or limited liability company constituting Collateral to
dissolve, liquidate, retire any of its capital stock or other
Instruments or Securities evidencing ownership,
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reduce its capital or merge or consolidate with any other entity, or
(ii) vote any of the Instruments, Securities or other Investment
Property in favor of any of the foregoing.
4.6.2. Issuance of Additional Securities. No Grantor will
permit or suffer the issuer of privately held corporate securities or
other ownership interests in a corporation, partnership, joint venture
or limited liability company constituting Collateral to issue any such
securities or other ownership interests, any right to receive the same
or any right to receive earnings, except to such Grantor.
4.6.3. Registration of Pledged Securities and other Investment
Property. Each Grantor will permit any registerable Collateral to be
registered in the name of the Agent or its nominee at any time at the
option of the Required Secured Parties.
4.6.4. Exercise of Rights in Pledged Securities and other
Investment Property. Each Grantor will permit the Agent or its nominee
at any time after the occurrence of a Default, without notice, to
exercise all voting and corporate rights relating to the Collateral,
including, without limitation, exchange, subscription or any other
rights, privileges, or options pertaining to any corporate securities
or other ownership interests or Investment Property in or of a
corporation, partnership, joint venture or limited liability company
constituting Collateral and the Stock Rights as if it were the absolute
owner thereof.
4.7. Pledged Deposits. No Grantor will withdraw all or any portion of
any Pledged Deposit or fail to rollover said Pledged Deposit without the prior
written consent of the Agent.
4.8. Deposit Accounts. Each Grantor will (i) upon the Agent's request,
notify each bank or other financial institution in which it maintains a deposit
account or other deposit (general or special, time or demand, provisional or
final) of the security interest granted to the Agent hereunder and cause each
such bank or other financial institution to acknowledge such notification in
writing and (ii) upon the Agent's request after the occurrence and during the
continuance of a Default, deliver to each such bank or other financial
institution a letter, in form and substance acceptable to the Agent,
transferring dominion and control over each such account to the Agent. In the
case of deposits maintained with Lenders, the terms of such letter shall be
subject to the provisions of the Credit Agreement regarding setoffs.
4.9. Federal, State or Municipal Claims. Each Grantor will notify the
Agent of any Collateral which constitutes a claim against the United States
government or any state or local government or any instrumentality or agency
thereof, the assignment of which claim is restricted by federal, state or
municipal law.
ARTICLE V
DEFAULT
5.1. Default. The occurrence of any one or more of the following
events shall constitute a Default:
5.1.1. Any representation or warranty made by or on behalf of
any Grantor under or in connection with this Security Agreement shall
be materially false as of the date on which made.
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5.1.2. The breach by any Grantor of any of the terms or
provisions of Article IV or Article VII.
5.1.3. The breach by any Grantor (other than a breach which
constitutes a Default under Section 5.1.1 or 5.1.2) of any of the terms
or provisions of this Security Agreement which is not remedied within
20 days after the giving of written notice to such Grantor by the
Agent.
5.1.4. Any material portion of the Collateral shall be: (i)
transferred or otherwise disposed of, either voluntarily or
involuntarily, in any manner not permitted by Section 4.1.5 or 8.7 or
(ii) lost, stolen, damaged or destroyed.
5.1.5. Any Secured Obligation shall not be paid when due,
whether at stated maturity, upon acceleration, or otherwise.
5.1.6. The occurrence of any "Default" under, and as defined
in, the Credit Agreement.
5.1.7. Any limited partnership interests or ownership
interests in a limited liability company which are included within the
Collateral shall at any time constitute a Security or the issuer of any
such interests shall take any action to have such interests treated as
a Security unless (i) all certificates or other documents constituting
such Security have been delivered to the Agent and such Security is
properly defined as such under Article 8 of the Uniform Commercial Code
of the applicable jurisdiction, whether as a result of actions by the
issuer thereof or otherwise, or (ii) the Agent has entered into a
control agreement with the issuer of such Security or with a securities
intermediary relating to such Security and such Security is defined as
such under Article 8 of the Uniform Commercial Code of the applicable
jurisdiction, whether as a result of actions by the issuer thereof or
otherwise.
5.2. Acceleration and Remedies. Upon the acceleration of the
obligations under the Credit Agreement pursuant to Section 8.1 thereof, the
Obligations and, to the extent provided for under the Rate Management
Transactions evidencing the same, the Rate Management Obligations, shall
immediately become due and payable without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, and the Agent may,
with the concurrence or at the direction of the Required Secured Parties,
exercise any or all of the following rights and remedies:
5.2.1. Those rights and remedies provided in this Security
Agreement, the Credit Agreement, or any other Loan Document, provided
that this Section 5.2.1 shall not be understood to limit any rights or
remedies available to the Agent and the Lenders prior to a Default.
5.2.2. Those rights and remedies available to a secured party
under the Oklahoma Uniform Commercial Code (whether or not the Oklahoma
Uniform Commercial Code applies to the affected Collateral) or under
any other applicable law (including, without limitation, any law
governing the exercise of a bank's right of setoff or bankers' lien)
when a debtor is in default under a security agreement.
5.2.3. Without notice except as specifically provided in
Section 8.1 or elsewhere herein, sell, lease, assign, grant an option
or options to purchase or otherwise dispose of the Collateral
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or any part thereof in one or more parcels at public or private sale,
for cash, on credit or for future delivery, and upon such other terms
as the Agent may deem commercially reasonable.
5.3. Debtor's Obligations Upon Default. Upon the request of the Agent
after the occurrence of a Default, each Grantor will:
5.3.1. Assembly of Collateral. Assemble and make available to
the Agent the Collateral and all records relating thereto at any place
or places specified by the Agent.
5.3.2. Secured Party Access. Permit the Agent, by the Agent's
representatives and agents, to enter any premises where all or any part
of the Collateral, or the books and records relating thereto, or both,
are located, to take possession of all or any part of the Collateral
and to remove all or any part of the Collateral.
5.4. License. The Agent is hereby granted a license or other right to
use, following the occurrence and during the continuance of a Default, without
charge, each Grantor's labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks, service marks, customer lists and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling any
Collateral, and, following the occurrence and during the continuance of a
Default, each Grantor's rights under all licenses and all franchise agreements
shall inure to the Agent's benefit. In addition, each Grantor hereby irrevocably
agrees that the Agent may, following the occurrence and during the continuance
of a Default, sell any of such Grantor's Inventory directly to any person,
including without limitation persons who have previously purchased such
Grantor's Inventory from the Grantor and in connection with any such sale or
other enforcement of the Agent's rights under this Agreement, may sell Inventory
which bears any trademark owned by or licensed to any Grantor and any Inventory
that is covered by any copyright owned by or licensed to any Grantor and the
Agent may finish any work in process and affix any trademark owned by or
licensed to any Grantor and sell such Inventory as provided herein.
ARTICLE VI
WAIVERS, AMENDMENTS AND REMEDIES
No delay or omission of the Agent or any Lender to exercise any right
or remedy granted under this Security Agreement shall impair such right or
remedy or be construed to be a waiver of any Default or an acquiescence therein,
and any single or partial exercise of any such right or remedy shall not
preclude any other or further exercise thereof or the exercise of any other
right or remedy. No waiver, amendment or other variation of the terms,
conditions or provisions of this Security Agreement whatsoever shall be valid
unless in writing signed by the Agent with the concurrence or at the direction
of the Lenders required under Section 8.2 of the Credit Agreement and then only
to the extent in such writing specifically set forth. All rights and remedies
contained in this Security Agreement or by law afforded shall be cumulative and
all shall be available to the Agent and the Lenders until the Secured
Obligations have been paid in full.
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ARTICLE VII
PROCEEDS; COLLECTION OF RECEIVABLES
7.1. Lockboxes. Upon request of the Agent after the occurrence of a
Default or Unmatured Default, each Grantor shall execute and deliver to the
Agent irrevocable lockbox agreements in the form provided by or otherwise
acceptable to the Agent, which agreements shall be accompanied by an
acknowledgment by the bank where the lockbox is located of the Lien of the Agent
granted hereunder and of irrevocable instructions to wire all amounts collected
therein to a special collateral account at the Agent.
7.2. Collection of Receivables. The Agent may at any time after the
occurrence of a Default, by giving the Grantors written notice, elect to require
that the Receivables be paid directly to the Agent for the benefit of the
Lenders. In such event, each Grantor shall, and shall permit the Agent to,
promptly notify the account debtors or obligors under the Receivables of the
Lenders' interest therein and direct such account debtors or obligors to make
payment of all amounts then or thereafter due under the Receivables directly to
the Agent. Upon receipt of any such notice from the Agent, each Grantor shall
thereafter hold in trust for the Agent, on behalf of the Lenders, all amounts
and proceeds received by it with respect to the Receivables and Other Collateral
and immediately and at all times thereafter deliver to the Agent all such
amounts and proceeds in the same form as so received, whether by cash, check,
draft or otherwise, with any necessary endorsements. The Agent shall hold and
apply funds so received as provided by the terms of Sections 7.3 and 7.4.
7.3. Special Collateral Account. The Agent may require all cash
proceeds of the Collateral to be deposited in a special non-interest bearing
cash collateral account with the Agent and held there as security for the
Secured Obligations. No Grantor shall have any control whatsoever over said cash
collateral account. If no Default or Unmatured Default has occurred or is
continuing, the Agent shall from time to time deposit the collected balances in
said cash collateral account into the Borrower's general operating account with
the Agent. If any Default or Unmatured Default has occurred and is continuing,
the Agent may (and shall, at the direction of the Required Secured Parties),
from time to time, apply the collected balances in said cash collateral account
to the payment of the Secured Obligations whether or not the Secured Obligations
shall then be due.
7.4. Application of Proceeds. The proceeds of the Collateral shall be
applied by the Agent to payment of the Secured Obligations in the following
order unless a court of competent jurisdiction shall otherwise direct:
(a) FIRST, to payment of all costs and expenses of the Agent
incurred in connection with the collection and enforcement of the
Secured Obligations or of the security interest granted to the Agent
pursuant to this Security Agreement;
(b) SECOND, to payment of that portion of the Secured
Obligations constituting accrued and unpaid interest and fees, pro rata
among the Lenders and their Affiliates in accordance with the amount of
such accrued and unpaid interest and fees owing to each of them;
(c) THIRD, to payment of the principal of the Secured
Obligations and the net early termination payments and any other Rate
Management Obligations then due and unpaid from the Borrower to any of
the Lenders or their Affiliates, pro rata among the Lenders and their
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Affiliates in accordance with the amount of such principal and such net
early termination payments and other Rate Management Obligations then
due and unpaid owing to each of them;
(d) FOURTH, to payment of any Secured Obligations (other than
those listed above) pro rata among those parties to whom such Secured
Obligations are due in accordance with the amounts owing to each of
them; and
(e) FIFTH, the balance, if any, after all of the Secured
Obligations have been satisfied, shall be deposited by the Agent into
the Borrower's general operating account with the Agent.
ARTICLE VIII
GENERAL PROVISIONS
8.1. Notice of Disposition of Collateral. Each Grantor hereby waives
notice of the time and place of any public sale or the time after which any
private sale or other disposition of all or any part of the Collateral may be
made. To the extent such notice may not be waived under applicable law, any
notice made shall be deemed reasonable if sent to the applicable Grantor,
addressed as set forth in Article IX, at least ten days prior to (i) the date of
any such public sale or (ii) the time after which any such private sale or other
disposition may be made.
8.2. Compromises and Collection of Collateral. The Grantors and the
Agent recognize that setoffs, counterclaims, defenses and other claims may be
asserted by obligors with respect to certain of the Receivables, that certain of
the Receivables may be or become uncollectible in whole or in part and that the
expense and probability of success in litigating a disputed Receivable may
exceed the amount that reasonably may be expected to be recovered with respect
to a Receivable. In view of the foregoing, each Grantor agrees that the Agent
may at any time and from time to time, if a Default has occurred and is
continuing, compromise with the obligor on any Receivable, accept in full
payment of any Receivable such amount as the Agent in its sole discretion shall
determine or abandon any Receivable, and any such action by the Agent shall be
commercially reasonable so long as the Agent acts in good faith based on
information known to it at the time it takes any such action.
8.3. Secured Party Performance of Debtor Obligations. Without having
any obligation to do so, the Agent may perform or pay any obligation which any
Grantor has agreed to perform or pay in this Security Agreement and each Grantor
shall reimburse the Agent for any amounts paid by the Agent pursuant to this
Section 8.3. The Grantors' obligation to reimburse the Agent pursuant to the
preceding sentence shall be a Secured Obligation payable on demand.
8.4. Authorization for Secured Party to Take Certain Action. Each
Grantor irrevocably authorizes the Agent at any time and from time to time in
the sole discretion of the Agent and appoints the Agent as its attorney in fact
(i) to execute on behalf of such Grantor as debtor and to file financing
statements necessary or desirable in the Agent's sole discretion to perfect and
to maintain the perfection and priority of the Agent's security interest in the
Collateral, (ii) to indorse and collect any cash proceeds of the Collateral,
(iii) to file a carbon, photographic or other reproduction of this Security
Agreement or any financing statement with respect to the Collateral as a
financing statement in such offices as the Agent in its sole discretion deems
necessary or desirable to perfect and to maintain the
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perfection and priority of the Agent's security interest in the Collateral, (iv)
to contact and enter into one or more agreements with the issuers of
uncertificated securities which are Collateral and which are Securities or with
financial intermediaries holding other Investment Property as may be necessary
or advisable to give the Agent Control over such Securities or other Investment
Property, (v) subject to the terms of Section 4.1.5, to enforce payment of the
Receivables in the name of the Agent or any Grantor, (vi) to apply the proceeds
of any Collateral received by the Agent to the Secured Obligations as provided
in Article VII and (vii) to discharge past due taxes, assessments, charges, fees
or Liens on the Collateral (except for such Liens as are specifically permitted
hereunder), and each Grantor agrees to reimburse the Agent on demand for any
payment made or any expense incurred by the Agent in connection therewith,
provided that this authorization shall not relieve any Grantor of any of its
obligations under this Security Agreement or under the Credit Agreement.
8.5. Specific Performance of Certain Covenants. Each Grantor
acknowledges and agrees that a breach of any of the covenants contained in
Sections 4.1.5, 4.1.6, 4.4, 5.3, or 8.7 or in Article VII will cause irreparable
injury to the Agent and the Lenders, that the Agent and Lenders have no adequate
remedy at law in respect of such breaches and therefore agrees, without limiting
the right of the Agent or the Lenders to seek and obtain specific performance of
other obligations of the Grantors contained in this Security Agreement, that the
covenants of each Grantor contained in the Sections referred to in this Section
8.5 shall be specifically enforceable against each Grantor.
8.6. Use and Possession of Certain Premises. Upon the occurrence of a
Default, the Agent shall be entitled to occupy and use any premises owned or
leased by any Grantor where any of the Collateral or any records relating to the
Collateral are located until the Secured Obligations are paid or the Collateral
is removed therefrom, whichever first occurs, without any obligation to pay such
Grantor for such use and occupancy.
8.7. Dispositions Not Authorized. No Grantor is authorized to sell or
otherwise dispose of the Collateral except as set forth in Section 4.1.5 and
notwithstanding any course of dealing between any Grantor and the Agent or other
conduct of the Agent, no authorization to sell or otherwise dispose of the
Collateral (except as set forth in Section 4.1.5) shall be binding upon the
Agent or the Lenders unless such authorization is in writing signed by the Agent
with the consent or at the direction of the Required Lenders.
8.8. Benefit of Agreement. The terms and provisions of this Security
Agreement shall be binding upon and inure to the benefit of each Grantor, the
Agent and the Lenders and their respective successors and assigns, except that
no Grantor shall have the right to assign its rights or delegate its obligations
under this Security Agreement or any interest herein, without the prior written
consent of the Agent.
8.9. Survival of Representations. All representations and warranties of
each Grantor contained in this Security Agreement shall survive the execution
and delivery of this Security Agreement.
8.10. Taxes and Expenses. Any taxes (including income taxes) payable or
ruled payable by Federal or State authority in respect of this Security
Agreement shall be paid by the Grantors, together with interest and penalties,
if any. The Grantors shall reimburse the Agent for any and all out-of-pocket
expenses and internal charges (including reasonable attorneys', auditors' and
accountants' fees and reasonable time charges of attorneys, paralegals, auditors
and accountants who may be employees of
15
<PAGE> 16
the Agent) paid or incurred by the Agent in connection with the preparation,
execution, delivery, administration, collection and enforcement of this Security
Agreement and in the audit, analysis, administration, collection, preservation
or sale of the Collateral (including the expenses and charges associated with
any periodic or special audit of the Collateral). Any and all costs and expenses
incurred by any Grantor in the performance of actions required pursuant to the
terms hereof shall be borne solely by such Grantor.
8.11. Headings. The title of and section headings in this Security
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the terms and provisions of this Security Agreement.
8.12. Termination. This Security Agreement shall continue in effect
(notwithstanding the fact that from time to time there may be no Secured
Obligations outstanding) until (i) the Credit Agreement has terminated pursuant
to its express terms and (ii) all of the Secured Obligations have been
indefeasibly paid and performed in full and no commitments of the Agent or the
Lenders which would give rise to any Secured Obligations are outstanding.
8.13. Entire Agreement. This Security Agreement embodies the entire
agreement and understanding between the Grantors and the Agent relating to the
Collateral and supersedes all prior agreements and understandings between the
Grantors and the Agent relating to the Collateral.
8.14. CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS)
OF THE STATE OF OKLAHOMA, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO
NATIONAL BANKS.
8.15. Distribution of Reports. Each Grantor authorizes the Agent, as
the Agent may elect in its sole discretion, to discuss with and furnish to its
Affiliates and to the Lenders or to any other person or entity having an
interest in the Secured Obligations (whether as a guarantor, pledgor of
collateral, participant or otherwise) all financial statements, audit reports
and other information pertaining to any Grantor whether such information was
provided by such Grantor or prepared or obtained by the Agent. Neither the Agent
nor any of its employees, officers, directors or agents makes any representation
or warranty regarding any audit reports or other analyses of the Grantors'
condition which the Agent may in its sole discretion prepare and elect to
distribute, nor shall the Agent or any of its employees, officers, directors or
agents be liable to any person or entity receiving a copy of such reports or
analyses for any inaccuracy or omission contained in or relating thereto.
8.16. Indemnity. Each Grantor hereby agrees to indemnify the Agent and
the Lenders, and their respective successors, assigns, agents and employees,
from and against any and all liabilities, damages, penalties, suits, costs, and
expenses of any kind and nature (including, without limitation, all expenses of
litigation or preparation therefor whether or not the Agent or any Lender is a
party thereto) imposed on, incurred by or asserted against the Agent or the
Lenders, or their respective successors, assigns, agents and employees, in any
way relating to or arising out of this Security Agreement, or the manufacture,
purchase, acceptance, rejection, ownership, delivery, lease, possession, use,
operation, condition, sale, return or other disposition of any Collateral
(including, without limitation, latent and other defects, whether or not
discoverable by the Agent or the Lenders or the Grantors, and any claim for
patent, trademark or copyright infringement).
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<PAGE> 17
ARTICLE IX
NOTICES
9.1. Sending Notices. All notices, requests and other communications
to the Grantors, the Agent or the Lenders hereunder shall be in writing or by
telecopy, and shall be sufficiently given to the Agent, the Lenders or the
Grantors if addressed or delivered to them at, in the case of the Borrower, the
Agent and the Lenders, their respective addresses and telecopier numbers
specified in Article XIII of the Credit Agreement, in the case of UST at the
address and telecopier number set forth on the signature page hereto and, in the
case of any other Grantors, at their respective addresses and telecopier numbers
specified in the instruments pursuant to which such Person becomes an Additional
Grantor.
9.2. Change in Address for Notices. Each of the Grantors, the Agent
and the Lenders may change the address for service of notice upon it by a notice
in writing to the other parties.
ARTICLE X
THE AGENT
Bank One, NA has been appointed Agent for the Lenders hereunder
pursuant to Article X of the Credit Agreement. It is expressly understood and
agreed by the parties to this Security Agreement that any authority conferred
upon the Agent hereunder is subject to the terms of the delegation of authority
made by the Lenders to the Agent pursuant to the Credit Agreement, and that the
Agent has agreed to act (and any successor Agent shall act) as such hereunder
only on the express conditions contained in such Article X. Any successor Agent
appointed pursuant to Article X of the Credit Agreement shall be entitled to all
the rights, interests and benefits of the Agent hereunder.
ARTICLE XI
ADDITIONAL GRANTORS
In the event that any Subsidiary of the Borrower is required, under the
terms of the Credit Agreement or otherwise, to grant a security interest in its
Collateral, such Subsidiary shall become a Grantor hereunder and shall be bound
by all of the terms and conditions hereof, upon the delivery to the Agent of an
executed counterpart of a Supplement to this Security Agreement in the form of
Exhibit G attached hereto.
[SIGNATURES CONTAINED ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the Borrower, UST and the Agent have executed this
Security Agreement as of the date first above written.
XETA CORPORATION, an Oklahoma corporation
By: /s/ ROBERT B. WAGNER
---------------------------------
Name: Robert B. Wagner
-------------------------------
Title: VP Finance
------------------------------
U. S. TECHNOLOGIES SYSTEMS, INC., a
Missouri corporation
By: /s/ JON A. WIESE
---------------------------------
Name: Jon A. Wiese
-------------------------------
Title: President
------------------------------
891 Bolger Court
Fenton, Missouri 63026
Attention:
---------------------------
Telephone: (314) 349-4440
FAX: (314) 349-1110
BANK ONE, OKLAHOMA, NA,
as Agent
By: /s/ TIMOTHY T. KOSKI
---------------------------------
Name: Timothy T. Koski
-------------------------------
Title: Vice President
------------------------------
18
<PAGE> 1
EXHIBIT 2.5
REAL ESTATE MORTGAGE, SECURITY AGREEMENT,
FINANCING STATEMENT AND FIXTURE FILING
(with Power of Sale)
THIS REAL ESTATE MORTGAGE, SECURITY AGREEMENT, FINANCING STATEMENT AND
FIXTURE FILING (hereinafter called "Mortgage") is made effective as of the 30th
day of November, 1999, by and among XETA CORPORATION, an Oklahoma corporation,
with its business offices at 1814 W. Tacoma, Broken Arrow, Oklahoma 74012, as
mortgagor (the "Mortgagor"), and BANK ONE, OKLAHOMA, N. A., having a mailing
address at 15 East Fifth Street, Tulsa, Oklahoma 74103, in its capacity as Agent
(the "Agent") for itself and the other lenders (the "Lenders") party to the
Credit Agreement referred to below. The Agent (for itself and for the other
Lenders) is hereinafter referred to as "Mortgagee."
WHEREAS, Mortgagor, the Agent and the Lenders are entering into a
Credit Agreement dated as of November 30, 1999 (as it may be amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement");
capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement;
WHEREAS, pursuant to the Credit Agreement, Mortgagee has agreed, upon
satisfaction of the terms and conditions set forth therein, to make the Loans to
Mortgagor;
NOW, THEREFORE, to secure to Mortgagee the payment of the aforesaid
mortgage indebtedness and the indebtedness and obligations hereafter described,
Mortgagor does hereby grant, bargain, sell, convey, mortgage and grant a
security interest unto Mortgagee and its successors and assigns, with power of
sale, all of its right, title and interest in and to the tracts of real property
located in Tulsa County, State of Oklahoma, described at Exhibit A annexed
hereto together with all and singular the tenements, hereditaments and
appurtenances thereof; all buildings and improvements now or hereafter
constructed thereon including (without limitation) all fixtures, equipment,
machinery, apparatus, appliances and articles of personal property of every
kind, item, type and character now owned or hereafter acquired by Mortgagor and
now or hereafter located in, at or on and used for or useful in the operation,
management and maintenance of the aforesaid real property, buildings or
improvements (all of which property is herein called the "Collateral"), which
shall include, but not be limited to all of the items and types of Collateral
described at Exhibit B annexed hereto and (d) all proceeds and products thereof.
The above-described real property, appurtenances, buildings, improvements and
Collateral are hereinafter collectively called the "Mortgaged Premises" and are
hereby declared to be subject to the lien of this Mortgage as continuing and
continuous, first and prior security for the payment of the following-described
indebtedness and obligations:
A. Any and all existing and future indebtedness, obligation, and
liability of every kind, nature and character, direct or indirect,
absolute or contingent (including all renewals, extensions and
modifications thereof and all fees, costs and expenses incurred
<PAGE> 2
by the Agent or the Lenders in connection with the preparation,
administration, collection or enforcement thereof), of Mortgagor to the
Agent or any Lender or any branch, subsidiary or affiliate thereof,
arising under or pursuant to this Mortgage, the Credit Agreement and
any promissory note or notes now or hereafter issued under the Credit
Agreement.
B. The performance by Mortgagor of each covenant, agreement and
obligation of Mortgagor under this Mortgage and each covenant,
agreement and obligation of Mortgagor under the Credit Agreement.
C. All Obligations (as described and defined in the Credit Agreement),
including without limitation, any sums which may be advanced or paid by
Mortgagee under the terms of this Mortgage on account of the default or
failure of Mortgagor to comply with the covenants herein.
D. The payment by Mortgagor to Mortgagee of any and all amounts
reasonably expended by Mortgagee in exercising or attempting to
exercise any right or remedy granted or otherwise available to
Mortgagee upon the occurrence of an Event of Default.
E. The payment by Mortgagor to Mortgagee of interest on all amounts
expended by Mortgagee for any purpose specified in paragraphs C and D
above at the default rate provided in Section 2.11 of the Credit
Agreement.
TO HAVE AND TO HOLD the Mortgaged Premises with all the rights,
improvements and appurtenances thereunto belonging, or in anywise appertaining
unto Mortgagee, their successors and assigns, forever. Mortgagor covenants that,
except only as stated at Exhibit C annexed hereto, Mortgagor is well and
lawfully seized of a good and indefeasible fee simple estate in the Mortgaged
Premises, that Mortgagor is the lawful owner of and has a good and lawful right
and title to sell, convey and mortgage and encumber the same, that the Mortgaged
Premises are free and clear of all general and special taxes, liens, charges,
assessments and encumbrances of every kind and character and that Mortgagor
hereby warrants and will forever defend the title thereto against the claims or
demands of all persons.
1. Payment of Obligations. If Mortgagor shall pay the indebtedness
herein described, including (without limitation) the Obligations, and shall in
all things do and timely perform all other acts and agreements herein contained
to be done, then, and in that event only, this Mortgage shall be and become null
and void.
2. Maintenance; Waste. With respect to the Mortgaged Premises,
Mortgagor covenants and agrees: to keep the same in good condition and repair;
to pay all general and special taxes and assessments and other charges that may
be levied or assessed upon or against the same as they become due and payable
and to furnish to Mortgagee receipts showing payment of any such taxes and
assessments, if demanded; to pay all debts for repair or improvements now
existing or hereafter arising which may become liens upon or charges against the
Mortgaged Premises; to comply with or cause to be complied with all requirements
of any governmental
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<PAGE> 3
authority relating to the Mortgaged Premises; pursuant to the terms and
conditions of paragraph 3 below, to promptly repair, restore, replace or rebuild
any part of the Mortgaged Premises which may be damaged or destroyed by any
casualty whatsoever or which may be affected by any condemnation proceeding or
exercise of eminent domain; and to promptly notify Mortgagee of any damage to
the Mortgaged Premises in excess of Twenty Thousand Dollars ($20,000). Mortgagor
further covenants and agrees that Mortgagor will not: commit or suffer to be
committed any waste of or on the Mortgaged Premises; initiate, join in or
consent to any change in any private restrictive covenant, zoning ordinance or
other public or private restrictions limiting, restricting or defining the uses
which may be made of the Mortgaged Premises or any part thereof; or permit any
lien or encumbrance of any kind or character to accrue or remain on the
Mortgaged Premises or any part thereof other than the lien of this Mortgage.
3. Insurance. Mortgagor will keep the Mortgaged Premises insured for
the benefit of Mortgagee against loss or damage by fire, lightning, windstorm,
hail, explosion, riot, riot attending a strike, civil commotion, aircraft,
vehicles, smoke, vandalism and malicious mischief, all in amounts approved by
Mortgagee, and shall provide Mortgagee with evidence of liability insurance in
amounts approved by Mortgagee and, if applicable, flood insurance in an amount
equal to the maximum amount of coverage made available with respect to the
Mortgaged Premises under the National Flood Insurance Program (or evidence
satisfactory to Mortgagee that the Mortgaged Premises are not located in an area
designated by the Secretary of Housing and Urban Development as an area having
special flood or mudslide hazards and that flood insurance is not required for
this mortgage loan under the terms of any law, regulation or rule governing
Mortgagee's activities), and when and to the extent reasonably required by
Mortgagee, against any other risk insured against by persons operating like
properties in the locality of the Mortgaged Premises; all insurance herein
provided for shall be in form and with insurance companies reasonably approved
by Mortgagee; regardless of the types or amounts of insurance reasonably
required and approved by Mortgagee, Mortgagor will assign and deliver to
Mortgagee all certificates and copies of policies of insurance which insure
against any loss or damage to the Mortgaged Premises as collateral and further
security for the payment of the indebtedness secured by this Mortgage, with
Mortgagee named as first mortgagee, loss payee or an additional insured,
whichever is appropriate as determined by Mortgagee pursuant to a mortgage
clause endorsement acceptable to Mortgagee, on each such certificate and policy
of insurance.
If Mortgagee by reason of such insurance receives any money for loss or
damage, such amount shall, subject to the following proviso, be held by
Mortgagee and paid to Mortgagor for the repair or restoration of the Mortgaged
Premises, provided that Mortgagor shall not be in default hereunder, and if
Mortgagor shall have delivered to Mortgagee within sixty (60) days after such
casualty: (a) evidence reasonably satisfactory to Mortgagee that none of
Mortgagor's leases covering space in the Mortgaged Premises will be materially
adversely affected by any such casualty or the delay caused thereby in
completion of or repairs in the Mortgaged Premises, (b) evidence reasonably
satisfactory to Mortgagee that any sale contract or long term loan commitment
held by Mortgagor for the Mortgaged Premises will not be materially adversely
affected by the casualty or the delay caused thereby in completion of or repairs
in the Mortgaged Premises, (c) plans and specifications, in form and substance
reasonably satisfactory to Mortgagee, for any such rebuilding or restoration,
(d) a budget for rebuilding or restoration
3
<PAGE> 4
reasonably satisfactory to Mortgagee, and (e) evidence reasonably satisfactory
to Mortgagee that Mortgagor has or will have upon receipt of insurance proceeds,
all amounts necessary to pay the cost of such rebuilding or restoration.
Otherwise, Mortgagee may retain and apply the insurance proceeds toward
payment of the indebtedness and obligations secured by this Mortgage. Mortgagee
shall not be obligated to see to the proper application of any amount paid over
to Mortgagor. Not less than twenty (20) days prior to the expiration dates of
each certificate or policy required of Mortgagor pursuant to this paragraph,
Mortgagor will deliver to Mortgagee a renewal certificate and copy of the policy
or policies marked "premium paid" or accompanied by other evidence of payment
satisfactory to Mortgagee. In the event of a foreclosure of this Mortgage, the
purchaser of the Mortgaged Premises shall succeed to all the rights of
Mortgagor, including any right to unearned premiums, in and to all certificates
and policies of insurance assigned and delivered to Mortgagee pursuant to the
provisions of this paragraph.
Mortgagor specifically covenants and agrees that in the event Mortgagor
has provided Mortgagee with evidence reasonably satisfactory to Mortgagee that
flood insurance covering the Mortgaged Premises should not be required at time
of execution of this Mortgage and the Mortgaged Premises should thereafter
become eligible for flood insurance under the National Flood Insurance Program,
or under any subsequent Act of Congress of the United States, and should the
Mortgaged Premises be located in an area now or thereafter designated by the
Secretary of Housing and Urban Development as an area having special flood or
mudslide hazards, Mortgagor and Mortgagor's successors in title shall maintain
at its or their sole cost and expense flood insurance available under the
National Flood Insurance Program, in such amounts and in such form as may be
required by Mortgagee.
4. Alterations. No building or other property now or hereafter subject
to the lien of this Mortgage shall be removed, demolished or materially altered,
without the prior written consent of Mortgagee, except that Mortgagor shall have
the right, without such written prior consent, to remove and dispose of, free
from the lien of this Mortgage, such Collateral as from time to time may become
worn or obsolete, provided that either: (a) simultaneously with or prior to such
removal, any such Collateral shall be replaced with other Collateral of a value
at least equal to that of the replaced Collateral and free from any title
retention device, security agreement or other encumbrance, and by such removal
or replacement, Mortgagor shall be deemed to have subjected such Collateral to
the lien of this Mortgage; or (b) any net cash proceeds received from such
disposition shall be paid over promptly to Mortgagee to be applied to the
indebtedness hereby secured.
5. Defaults. The occurrence of any one or more of the following events
(regardless of the reason therefor) shall constitute an event of default (an
"Event of Default") hereunder:
(a) the failure of Mortgagor to make any payment of any
monetary Obligation or of any other principal or interest or fees or other
amounts payable by Mortgagor hereunder, under the Credit Agreement or under any
of the Notes when and as the same shall become due
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<PAGE> 5
and payable whether at the due date thereof or at a date fixed for prepayment
thereof or by acceleration thereof or otherwise; or
(b) Mortgagor shall default in the due performance and
observance of any non-monetary Obligation or of any other obligation, covenant
or agreement contained herein; or
(c) Any representation or warranty of Mortgagor hereunder is
or shall be incorrect when made in any material respect; or
(d) the occurrence of any "Default" under the Credit Agreement
or any other Loan Document; or
(e) the occurrence of any other event which, by the express
term hereof, constitutes a default or an event of default under this Mortgage,
including, without limitation, the occurrence of any default specified in
paragraphs 19, 24 or 25 below.
6. Remedies. Upon the occurrence of any one or more Events of Default,
the Mortgagee shall have the right (but shall not be obligated) in addition to
its rights and remedies under the Credit Agreement, any other Loan Document and
hereunder, to take such action personally, or by its agents or attorneys, with
or without entry, and without notice, demand, presentment or protest (each and
all of which are hereby expressly waived), as it deems necessary or advisable to
protect or enforce its rights and remedies against Mortgagor and to the
Mortgaged Premises, including the following actions, each of which may be
pursued concurrently or otherwise, at such time and in such order as Mortgagee
may determine, in its sole discretion, without impairing or otherwise effecting
its other rights or remedies:
(a) Declare the entire balance of the Obligations (including
the entire principal balance thereof, all accrued and unpaid interest thereon
and all other such sums secured hereby) to be immediately due and payable and
upon any such declaration the entire unpaid balance of all of the Obligations
shall become and be immediately due and payable, without presentment, demand,
protest, notice of intent to accelerate, notice of acceleration, or further
notice of any kind, all of which are hereby expressly waived by Mortgagor; or
(b) Foreclose this Mortgage or sell the Mortgaged Premises in
accordance with the Oklahoma Power of Sale Mortgage Foreclosure Act, as the same
may be amended from time to time, and shall be entitled to the possession of the
Mortgaged Premises and the rents, lease payments, security deposits and profits
and proceeds thereof; or
(c) Institute an action, suit or proceeding in equity for the
specific performance of any of the provisions contained in the Credit Agreement,
in any other Loan Document or herein; or
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(d) Subject to applicable law, sue and recover a judgment on
the Obligations, as the same becomes due and payable, or on account of any
default or defaults by Mortgagor under the Obligations, the Credit Agreement,
under any other Loan Document or hereunder; or
(e) Enter upon the Mortgaged Premises, and exclude Mortgagor
and its agents and servants wholly therefrom, without liability for trespass,
damages or otherwise and take possession of all books, records and accounts
relating thereto, and Mortgagor agrees to surrender possession of the Mortgaged
Premises and of such books, records and accounts to Mortgagee on demand after
the happening of any Event of Default; and having and holding the same may use,
operate, manage, preserve, control and otherwise deal therewith and conduct the
business thereof, either personally or by its superintendents, managers, agents,
servants, attorneys or receivers without interference from Mortgagor; and upon
each such entry and from time to time thereafter may, at the expense of
Mortgagor, without interference by Mortgagor, and as may seem advisable to
Mortgagee, (i) by purchase, repair or construction, maintain and restore the
Mortgaged Premises, (ii) insure or reinsure the same, (iii) make all necessary
or proper repairs, renewals, replacements, alterations, additions, betterments
and improvements thereto and thereon, (iv) complete the construction, repair or
rehabilitation of any improvements and, in the course of such completion, make
such changes in the contemplated or completed improvements as it may deem
advisable, and/or (v) in every such case in connection with the foregoing have
the right to exercise all rights and powers of Mortgagor with respect to the
Mortgaged Premises, either in Mortgagor's name or otherwise, including the right
to make, cancel, enforce or modify leases, and obtain and evict tenants and
subtenants on such terms as it may deem advisable; or
(f) With or without the entrance upon or taking possession of
the Mortgaged Premises, collect and receive all Rents and cash collateral
derived from the Mortgaged Premises; or
(g) Release any portion of the Mortgaged Premises for such
consideration as the Mortgagee may require without, as to the remainder of the
Mortgaged Premises, in anyway impairing or affecting the lien or priority of
this Mortgage, or improving the position of any subordinate lienholder or other
person with respect thereto, except to the extent that the Obligations shall
have been reduced by the actual monetary consideration, if any, received by
Mortgagee for such release, and may accept by assignment, pledge or otherwise
any other property in place thereof as Mortgagee may require without being
accountable for so doing to any other lienor; or
(h) Take any other action, or pursue any other right or
remedy, as Mortgagee may have under applicable law, and Mortgagor does hereby
grant the same to Mortgagee.
In the event that Mortgagee shall exercise any of the rights or remedies set
forth herein, Mortgagee shall not be deemed to have entered upon or taken
possession of the Mortgaged Premises except upon the exercise of its option to
do so, as evidenced by its demand and overt act for such purpose, nor shall
Mortgagee be deemed a mortgagee-in-possession by reason of
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such entry or taking possession. Mortgagee will not be liable to account for
action taken pursuant to any such exercise other than for rents actually
received by such party, nor for any loss sustained by Mortgagor resulting from
any failure to let the Mortgaged Premises, nor from any other act or omission of
Mortgagee except to the extent such loss is caused by the gross negligence or
willful misconduct of Mortgagee. Mortgagor hereby consents to, ratifies and
confirms the exercise by Mortgagee of said rights and remedies, and appoints
Mortgagee as its attorney-in-fact. This power, being coupled with an interest,
shall be irrevocable as long as the Obligations are not fully repaid and
discharged and shall be granted distinctly to Mortgagee, and Mortgagee may
utilize its power to the extent permitted by applicable law.
In any proceeding, judicial or otherwise, to foreclose this Mortgage or
enforce any other remedy of Mortgagee under the Credit Agreement, under any
other Loan Document or hereunder, there shall be allowed and included as an
addition to and a part of the Obligations in the decree for sale or other
judgment or decree all expenditures and expenses which are paid or incurred in
connection with the exercise by Mortgagee of any of its rights and remedies
provided or referred to herein (including, without limitation, court costs and
attorneys' fees), and the same shall be secured by this Mortgage.
If the Mortgagor shall fail to pay any of the taxes, assessments,
debts, liens or other charges as the same become due and payable, or to insure
the Mortgaged Premises or deliver the certificates of insurance and copies of
the policies of insurance as herein provided, or to perform Mortgagor's
covenants and agreements herein, Mortgagee is hereby authorized, at its option,
to insure the Mortgaged Premises, or any part thereof, and pay the costs of such
insurance, and to pay such taxes, assessments, debts, liens or other charges
herein described, or any part thereof, and to remedy Mortgagor's failure to
perform hereunder and pay the costs associated therewith, and Mortgagor hereby
agrees to refund on demand all sum or sums so paid, with interest thereon at the
default rate specified in Section 2.11 of the Credit Agreement; and any such sum
or sums so paid together with interest thereon shall become a part of the
indebtedness hereby secured; provided, however, that the retention of a lien
hereunder for any sum so paid shall not be a waiver of subrogation or
substitution which Mortgagee might otherwise have.
Mortgagor hereby represents and warrants to Mortgagee that this
mortgage transaction does not involve a consumer loan as said term is defined in
Section 3-104 of Title 14A of the Oklahoma Statutes, that this Mortgage does not
secure an extension of credit made primarily for an agricultural purpose as
defined in paragraph 4 of Section 1-301 of Title 14A of the Oklahoma Statutes
and is not a mortgage on any of Mortgagor's homestead or personal residence.
7. Receivership. Mortgagor hereby voluntarily and expressly consents
and stipulates to the appointment of a receiver over the Mortgaged Premises in
the event Mortgagee elects to seek the appointment of a receiver following
Mortgagor's non-performance, breach, default or violation of any condition,
covenant or other agreement in this Mortgage or the Obligations secured hereby.
In such event Mortgagee shall be entitled to appointment of a receiver without
the necessity of establishing that the property is probably insufficient to
discharge the mortgage debt, the express purpose and intent of this clause being
hereby acknowledged to provide for the appointment of a receiver in accordance
with the provisions of 12 O.S. Section 1551(2)(c), as amended,
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upon the occurrence of any breach, default, violation or other non-performance
under this Mortgage by Mortgagor.
8. Taxes; Expenses. Mortgagor will pay, before same become delinquent
or any penalty attaches thereto for nonpayment, any and all taxes, assessments
and charges, general or special, of every nature and to whomsoever assessed,
that may be now or hereafter levied or assessed under any law now existing or
hereafter enacted, directly or indirectly upon the Mortgaged Premises or any
part thereof, upon the rents, issues, income or profits thereof or upon the
indebtedness secured hereby. Mortgagor will not suffer or permit any liens,
security interests, levies, attachments or other encumbrances to become
effective, or to be asserted, against any of the Mortgaged Premises, and will
regularly and promptly submit to Mortgagee such evidence of the due and punctual
payment of such taxes, assessments or charges as Mortgagee may require. The
foregoing notwithstanding, Mortgagor may in good faith contest, by a proper
legal proceeding, the validity or amount of any such taxes, assessments or
charges, provided Mortgagor deposit with Mortgagee as security for payment of
such contested taxes, assessments or charges an amount equal thereto, plus
interest and penalties, and further provided that Mortgagor will pay such
contested item and all costs and penalties, if any, at least thirty (30) days
before the date the Mortgaged Premises may be sold by the taxing authorities
because of nonpayment of said taxes, assessments or charges.
Upon violation of the foregoing undertaking in any part, or upon the
passage by the State of Oklahoma of any law imposing payment of the whole or any
part of the aforesaid taxes or assessments upon Mortgagee, or deducting from the
value of the Mortgaged Premises for the purpose of taxation any liens thereon,
or changing in any way the laws now in force for the taxation of mortgages or
debts secured by mortgage for state or local purposes, or the manner of the
collection of any such taxes so as to materially adversely affect this Mortgage,
or upon the rendering by any court of competent jurisdiction of a decision
holding that any undertaking by Mortgagor to pay such taxes or assessments, or
any of them, or any similar undertaking, is in whole or in part legally
inoperative or void, then in such event, unless the applicable law permits
Mortgagor to pay the same and Mortgagor in fact promptly pays all such taxes,
the indebtedness secured hereby will, at the option of Mortgagee, without notice
to any party, become immediately mature, due and payable. Mortgagor also agrees
to pay any and all taxes which may be levied or assessed directly or indirectly
upon the Obligations (except only any federal and state income taxes on the
Obligations), this Mortgage and the indebtedness hereby secured, and further
agree to pay all reasonable expenses incurred in connection with the creation of
the indebtedness hereby secured, including, without limitation, attorney's fees,
title insurance fees, survey expenses and recording costs, without regard to any
law which may be hereafter enacted imposing payment of the whole or any part
thereof upon Mortgagee; and, upon violation of the foregoing agreement to pay
such taxes and assessments, or if the rate of said taxes and expenses added to
the respective rates of interest provided for in the Credit Agreement shall
exceed the then maximum legal rate of interest, then, and in any such event, the
indebtedness hereby secured, without deduction, shall, at the option of
Mortgagee become immediately due and payable, anything contained in this
Mortgage or in the Credit Agreement notwithstanding. The additional amounts
which may become due and payable hereunder shall be regarded as part of the
indebtedness secured by this Mortgage. This paragraph shall not apply to the
amount to be
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paid under the present Oklahoma mortgage registration tax laws, which amount
Mortgagee agrees to pay.
9. Tax and Insurance Accounts. Mortgagor will deposit monthly with
Mortgagee (on each Payment Date) an amount equal to one-twelfth (1/12) of the
sum of the amounts Mortgagee shall estimate to be the annual ad valorem personal
and real property taxes, assessments due and payable with respect to the
Mortgaged Premises and annual insurance premiums required so that Mortgagee will
have sufficient funds on hand to pay said taxes, assessments and insurance
premiums twenty (20) days before the due date thereof; provided, however, that
for so long as such taxes, special assessments and premiums are being timely
paid and Mortgagor provides Mortgagee with evidence of such payment and no other
condition or event exists or has occurred or failed to occur which but for the
passage of time or the giving of notice or both would constitute an Event of
Default and no such Event of Default exists, Mortgagee waives the monthly escrow
of taxes, special assessments and insurance premiums, thereby permitting
Mortgagor to forego such monthly escrow deposits. Such monthly tax and insurance
deposits shall be held by Mortgagee and shall not bear or accrue interest, shall
not be trust funds and upon the occurrence of an Event of Default all such funds
may be applied by Mortgagee on account of the indebtedness and Obligations
secured hereby. Failure of Mortgagor so to make such monthly deposits or any
deficiency in the amount thereof, unless made good or cured by Mortgagor prior
to the next succeeding monthly installment due date, shall constitute an event
of default hereunder. It shall be the responsibility of Mortgagor to furnish
Mortgagee with tax bills or statements in sufficient time to timely pay the
taxes and assessments before any penalty attaches or interest charges accrue
thereon and the insurance premiums before any of the policies lapse.
10. Expenses of Collection. It is agreed that if, and as often as, this
Mortgage, the Credit Agreement or any of the Notes is placed in the hands of an
attorney for collection or for representation of Mortgagee in any bankruptcy,
insolvency, probate or other judicial proceeding, or this Mortgage is referred
to an attorney for collection or foreclosure, or to protect the priority or
validity of this Mortgage, or to prosecute or defend any suit affecting the
Mortgaged Premises, or to enforce or defend any of Mortgagee's rights hereunder,
Mortgagor shall pay to Mortgagee its reasonable attorneys' fees, together with
all court costs, expenses for abstracting or title examination, title insurance
or other disbursements, costs or expenses relating to the Mortgaged Premises,
all of which sums, together with interest thereon, shall be secured hereby.
11. Appraisement. In case of judicial foreclosure hereof and sale
hereunder, appraisement of the Mortgaged Premises is hereby expressly waived, or
not waived, at the sole option of Mortgagee, such option to be exercised thereby
at the time judgment is entered in such foreclosure, or at any time prior
thereto.
12. Sale in Parcels. In case of any sale under this Mortgage by virtue
of judicial proceedings, power of sale or otherwise, the Mortgaged Premises may
be sold in one parcel and as an entirety or in such parcels, manner or order as
Mortgagee in its sole discretion may elect, and Mortgagor waives any and all
rights which Mortgagor may have to insist upon the sale of the Mortgaged
Premises in one parcel or in separate parcels.
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13. Condemnation Awards. Mortgagor covenants and agrees that if at any
time all or any portion of the Mortgaged Premises shall be taken or damaged
under the power of eminent domain, the award received by condemnation
proceedings for any property so taken or any payment received in lieu of such
condemnation proceedings shall be paid directly to Mortgagee and applied as a
principal prepayment on the Obligations in such order as Mortgagee shall
determine in its sole discretion; provided, however, subject to the same terms
and conditions for payment of insurance proceeds to Mortgagor as set forth
above, such award or payment from condemnation proceedings shall be paid to
Mortgagor for the purpose of altering, restoring or rebuilding any part of the
Mortgaged Premises which may have been altered, damaged or destroyed as a result
of any such taking or damage; provided, that Mortgagee shall not be obligated to
see to the application of any amount paid over to Mortgagor. If the terms for
payment of such award to Mortgagor are not met, then Mortgagee may retain and
apply the award toward payment of the indebtedness and other Obligations secured
by this Mortgage. Mortgagor, immediately upon obtaining knowledge of the
institution of any proceedings or negotiations for the condemnation of the
Mortgaged Premises, or any portion thereof, will notify Mortgagee in writing of
the pendency of such negotiations or proceedings. Mortgagee may participate in
any such negotiations or proceedings, and Mortgagor from time to time will
execute and deliver to Mortgagee all instruments requested by Mortgagee to
permit such participation.
14. Certificate. Mortgagor, upon written request of Mortgagee, made
either personally or by mail, shall certify, by a writing duly acknowledged, to
Mortgagee or to any proposed assignee of this Mortgage, the amount of principal
and interest then secured by this Mortgage and whether Mortgagor has knowledge
of any offsets or defenses against the indebtedness or other Obligations hereby
secured, within twenty (20) days after such request by Mortgagee.
15. Notice. Unless expressly provided to the contrary therein, every
provision for notice, demand, consent or request shall be deemed fulfilled only
upon compliance with the notice provisions more particularly described in
paragraph 27 hereof.
16. Renewals/Extensions/Future Advances. This Mortgage shall secure the
payment of the Obligations under the Credit Agreement, which include obligations
not only with respect to existing indebtedness, but also with respect to such
future advances made pursuant to the terms of the Credit Agreement or this
Mortgage, whether such advances are made before, during or, to the extent
allowable under applicable law, after the pendency of any proceedings to
foreclose the lien of this Mortgage or otherwise enforce the rights of Mortgagee
hereunder to the same extent as if such future advances were made on the date of
the execution of this Mortgage. The total amount of indebtedness represented by
such Obligations and that may be so secured may decrease or increase from time
to time, and shall include any disbursements by or on behalf of the Lenders made
for the payment of taxes, levies or insurance on the Mortgaged Premises, with
interest on such disbursements at the applicable interest rates. The provisions
of this Section 16 shall not be construed to imply any obligation on the Lenders
to make any future advances, it being the intention of the parties that any
future advances shall be solely at the
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discretion and option of the Lenders, except as otherwise expressly provided in
the Credit Agreement.
17. Inspection. Mortgagee and any persons authorized by Mortgagee shall
have the right to enter and inspect the Mortgaged Premises at all reasonable
times upon reasonable prior notice to Mortgagor.
18. Indulgences, Extensions, No Waiver. No failure by Mortgagee to
insist upon the strict performance by Mortgagor of any of the terms and
provisions hereof shall be deemed to be a waiver of any of the terms and
provisions hereof, and Mortgagee, notwithstanding any such failure, shall have
the right thereafter to insist upon the strict performance by Mortgagor of any
and all of the terms and provisions of this Mortgage to be performed by
Mortgagor. Neither Mortgagor nor any other person now or hereafter obligated for
the payment of the whole or any part of the indebtedness now or hereafter
secured by this Mortgage shall be relieved of such obligation by reason of the
failure of Mortgagee to comply with any request of Mortgagor or of any other
person so obligated to take action to foreclose this Mortgage or otherwise
enforce any of the provisions of this Mortgage or of any obligations secured by
this Mortgage, or by reason of the release, regardless of consideration, of the
whole or any part of the security held for the indebtedness secured by this
Mortgage, or by reason of any agreement or stipulation between any subsequent
owner or owners of the Mortgaged Premises and Mortgagee extending, from time to
time, the time of payment or modifying the terms of the Credit Agreement or this
Mortgage if the consent of Mortgagor has been obtained in connection with such
modification to the extent Mortgagor remains liable for repayment of the
Obligations, and in the latter event, Mortgagor and all such other persons shall
continue to be liable to make such payments according to the terms of any such
agreement of extension or modification unless expressly released and discharged
in writing by Mortgagee. Regardless of consideration, and without the necessity
for any notice to or consent by the holder of any subordinate lien on the
Mortgaged Premises, Mortgagee may release the obligation of anyone at any time
liable for any of the indebtedness secured by this Mortgage or any part of the
security held for such indebtedness and may from time to time extend the time of
payment or otherwise modify the terms of the Credit Agreement, the Notes and/or
this Mortgage without, as to the security for the remainder thereof, in any way
impairing or affecting the lien of this Mortgage or the priority of such lien,
as security for the payment of the indebtedness as it may be so extended or
modified, over any subordinate lien. Mortgagee may resort for the payment of
indebtedness hereby secured to any other security therefor held by Mortgagee in
such order and manner as Mortgagee may elect.
19. Prohibited Acts. Mortgagor will not, without the express prior
written approval of Mortgagee sell, agree to sell, convey, mortgage, pledge or
otherwise transfer or encumber all or any part of the Mortgaged Premises or any
interest therein (such prohibition on encumbrance is deemed not to include
either mechanics' or materialmen's liens for which Mortgagor has provided
indemnification, bonding or other action sufficient to prevent enforcement of
such lien satisfactory to Mortgagee within thirty (30) days after the inception
of such lien). The occurrence of any of the aforesaid events, whether by
operation of law or otherwise, without Mortgagee's prior written approval, shall
constitute an event of default hereunder, and Mortgagee may declare the
indebtedness hereby secured immediately due and payable and exercise any or
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all of Mortgagee's rights herein provided without other or further notice. This
provision shall apply to each and every sale, agreement to sell, conveyance,
mortgage, transfer or encumbrance, regardless of whether or not Mortgagee has
consented to or waived its rights hereunder, whether by action or inaction, in
connection with any previous sale, agreement to sell, conveyance, mortgage,
transfer or encumbrance, whether one or more.
20. Hazardous Materials. Mortgagor shall not cause or permit the
violation of any law relating to industrial hygiene or environmental conditions
in connection with the Mortgaged Premises, including without limitation, soil
and ground water conditions; or use, generate, manufacture, store or dispose of
any Hazardous Materials on, under or about the Mortgaged Premises, except in
accordance with all applicable laws. Mortgagor shall indemnify and hold
Mortgagee harmless from any loss, damage, liability, cost, expense and/or claim
(including without limitation the cost of any fines, remedial action, damage to
the environment and cleanup, court related costs and the fees of attorneys and
other experts) arising from (i) the use, release or disposal of any Hazardous
Materials on, under or about the Mortgaged premises or the transport of any
Hazardous Materials to or from the Mortgaged Premises; and (ii) the violation of
any law relating to industrial hygiene or environmental conditions in connection
with the Mortgaged Premises, including soil and ground water conditions; and
(iii) the breach of any of the representations, warranties and covenants of
Mortgagor with respect to Hazardous Materials herein set forth. For purposes of
this paragraph 20, "Hazardous Materials" shall be defined as: any flammable
explosives, radioactive materials, oil or petroleum or chemical liquids or
solids, liquid or gaseous products or hazardous wastes, toxic substances and
similar substances and materials, including all substances and materials defined
as hazardous or toxic wastes, substances or materials under any applicable law.
21. Cumulative Remedies. The rights of Mortgagee arising under the
clauses and covenants contained in this Mortgage shall be separate, distinct and
cumulative and none of them shall be in exclusion of the other. No act of
Mortgagee shall be construed as an election to proceed under any one provision
herein to the exclusion of any other provision, anything herein or otherwise to
the contrary notwithstanding.
22. Reserved.
23. Security Interest. This Mortgage shall also be considered to be and
shall be construed as a security agreement and a financing statement with
respect to any and all of the items and types of the Collateral herein described
or referenced which may be subject to a security interest pursuant to the
Oklahoma Uniform Commercial Code and Mortgagor hereby grants and pledges to
Mortgagee a first and prior, continuing security interest in and to the
Collateral (including all proceeds and products thereof) described or referred
to herein (including Exhibit B annexed hereto) whether now owned or hereafter
acquired. Mortgagee shall be entitled to exercise any and all rights that it may
have hereunder or under the Oklahoma Uniform Commercial Code with respect to the
Collateral.
A. Assembly of Collateral. Upon the occurrence of an Event of Default
hereunder and acceleration of the indebtedness pursuant to the
provisions hereof, Mortgagee may at
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its discretion require Mortgagor to assemble the Collateral and make it
available to Mortgagee at a place reasonably convenient to both parties
to be designated by Mortgagee.
B. Manner of Sale. Upon the occurrence of an Event of Default hereunder
and acceleration of the indebtedness pursuant to the provisions hereof,
or of the Obligations secured hereby, all or any part of the Collateral
may, at the sole discretion of Mortgagee, be combined with the real
property covered hereby and sold together with such real property as an
entirety, or the Collateral (or any part of the Collateral not sold
together with the real property) may be sold separately, as one parcel
or in such parcels, manner or order as Mortgagee, in its sole
discretion, may elect.
C. Notice of Sale. Mortgagee shall give Mortgagor written notice of the
time and place of any public sale of any of the Collateral or of the
time after which any private sale or other intended disposition thereof
is to be made by sending notice to Mortgagor at least ten (10) days
before the time of the sale or other disposition, which provisions for
notice each and all of Mortgagor and Mortgagee agree are reasonable.
D. Additional Documents. Mortgagor will from time to time, within ten
(10) days after request by Mortgagee, execute, acknowledge and deliver
any financing statement, continuation statement, inventory list or
other similar documents that Mortgagee may reasonably request in order
to protect, preserve, continue, perfect, extend or maintain the
security interest under and the priority of this Mortgage and will,
upon demand, pay any expenses and fees incurred by Mortgagee in the
preparation, execution and filing of any such documents.
E. Financing Statement Filings. Mortgagor agrees that this Mortgage may
be filed by Mortgagee in the appropriate records or tract index as a
financing statement and in the office(s) necessary to perfect a chattel
filing and a fixture filing. For financing statement filing purposes
the address of Mortgagee, as secured party, is:
BANK ONE, OKLAHOMA, N.A.
15 East Fifth Street
Tulsa, Oklahoma 74103
Attention: Tim Koski, Corporate Banking
and the mailing address of Mortgagor, as debtor, is:
XETA CORPORATION
an Oklahoma corporation
1814 W. Tacoma
Broken Arrow, Oklahoma 74012
Attention:
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F. Copy of Financing Statement. A carbon, photographic or other
reproduction of this Mortgage shall be sufficient as financing
statement for all purposes, whether or not the original hereof has been
recorded or filed in the State of Oklahoma.
G. Fixture Filing. This Mortgage shall be filed of record against the
tract index of the real estate records of the County Clerk of Tulsa
County, Oklahoma as a fixture filing and covers all of the items and
types of Collateral constituting or to constitute fixtures as defined
in 12A O.S. Section 9-313(1)(a) and this Mortgage shall constitute a
"fixture filing" as set forth in 12A O.S. Section 9-313(1)(b).
24. Bankruptcy. The entire indebtedness secured by this Mortgage shall
become immediately due and payable at the option of Mortgagee if by order of a
court of competent jurisdiction a receiver or liquidator or trustee of any one
or more of Mortgagor, or of all or any part of the Mortgaged Premises, shall be
appointed and shall not have been discharged within thirty (30) days; or, if by
decree of any such court, any one or more of Mortgagor shall be insolvent or the
Mortgaged Premises shall have been sequestered and such decree shall have
continued undischarged and unstayed for thirty (30) days after the entry
thereof; or if any one or more of Mortgagor shall file or have filed against it
a proceeding seeking relief under any provision or chapter of any bankruptcy or
insolvency law or shall consent to the filing of any bankruptcy petition against
any one or more of Mortgagor under any such law; or if any one or more of
Mortgagor shall file a petition or answer seeking reorganization, rehabilitation
or an arrangement with creditors; or if (without limitation of the generality of
the foregoing) any one or more of Mortgagor shall make an assignment for the
benefit of creditors, become insolvent or shall admit in writing an inability to
pay debts generally as they become due, or shall consent to the appointment of a
receiver, trustee or liquidator of any one or more of Mortgagor, or of all or
any part of the Mortgaged Premises.
25. Leases/Assignment of Rents and Profits. With respect to any and all
applicable subsisting and future leases (collectively the "Leases") affecting
the Mortgaged Premises, Mortgagor represents and agrees as follows: (a) to
perform faithfully Mortgagor's covenants under the Leases and neither do nor
neglect to do, nor permit to be done, anything (other than pursuing the
enforcement of the terms of such leases in the exercise of remedies thereunder)
which might cause the modification or termination of any of the Leases (or of
the obligations of any lessee or any person claiming through such lessee), or
which might diminish or impair the value of any of the Leases or the rents
provided for therein (or the interest of Mortgagor or Mortgagee therein or
thereunder); (b) to permit no assignment of any of the Leases or any subletting
thereunder and not to anticipate for more than one (1) month in advance of any
rents that may become collectible under any of the Leases; (c) except for this
Mortgage and any other mortgage expressly permitted by the terms hereof, not to
execute a mortgage or create or permit a lien affecting the Mortgaged Premises;
(d) to execute and/or deliver to Mortgagee, within ten (10) days after request
therefor, such rent rolls, collateral assignments, estoppel certificates
(reciting, among other things, that all outstanding Leases are effective and
binding), and other instruments as might be reasonably required by Mortgagee
with respect to any Lease now or hereafter affecting the Mortgaged Premises; and
(e) that all representations made by Mortgagor to Mortgagee in connection with
the Leases are and will be true and correct.
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Mortgagor hereby mortgages, pledges and collaterally grants and assigns
to Mortgagee as additional security for the Obligations and the other
obligations all of such Leases now existing or hereafter made of all or any part
of the Mortgaged Premises together with all rents, lease payments, other profits
and security deposits due or held or hereafter to become due or held in
connection therewith. This assignment is intended to grant unto Mortgagee all
rights, powers, remedies and privileges afforded to a mortgagee under 46 O.S.
Section 4A, as amended, and no additional duties or obligations (fiduciary or
otherwise) except those expressly required of or imposed on mortgagees by the
aforesaid statutory provision as a result of this Assignment or exercise or
attempted exercise of its rights hereunder.
26. Subrogation. To the extent funds are advanced under the Loans
hereby secured for the purpose of paying any indebtedness secured by any
mortgage lien having priority over the lien of this Mortgage, Mortgagee shall be
subrogated to any and all rights, superior titles, liens and equities owned or
claimed by the holder of such prior mortgage. Except with respect to the
priority of any mortgage to which Mortgagee is subrogated pursuant to the
provisions hereof, the terms and provisions of this Mortgage shall govern the
rights and remedies of Mortgagee and shall supersede the rights and remedies
provided under any mortgage to which Mortgagee is subrogated.
27. Notices. All notices required hereunder or pursuant to the Credit
Agreement or any other Loan Documents therein defined or described shall be
forwarded by certified or registered mail, return receipt requested, by hand
delivery or by courier (federal express or other similar reputable courier
service) as follows:
Mortgagor:
XETA CORPORATION,
an Oklahoma corporation
1814 W. Tacoma
Broken Arrow, Oklahoma 74102
Attention:
Mortgagee:
BANK ONE, OKLAHOMA, N.A.
15 East Fifth Street
Tulsa, Oklahoma 74103
Attention: Tim Koski, Corporate Banking
Either party hereto may designate a new or different address for notice
purposes to the other party by complying with the terms and provisions hereof.
28. Governing Law. The Mortgaged Premises are located in the State of
Oklahoma, and the parties hereto agree that this Mortgage shall be governed by
and construed according to the laws of the State of Oklahoma and applicable
federal law.
15
<PAGE> 16
29. Construction. Wherever used in this Mortgage, unless the context
clearly indicates a contrary intent or unless otherwise specifically provided
herein, the word "Mortgagor" shall mean any one, more than one or all of the
"Mortgagor and/or any subsequent owner or owners of the Mortgaged Premises," the
word "Mortgagee" shall mean "Mortgagee or any subsequent holder or holders of
this Mortgage for themselves and as agent for the other Lenders," the phrase
"Notes" shall mean "notes secured by this Mortgage", the word "person" shall
mean "an individual, corporation, partnership or unincorporated association".
The paragraph headings contained herein are included as a matter of convenience
and are not intended to define, limit or modify the terms of this Mortgage. This
Mortgage shall be binding on Mortgagor and all successors and assigns of each of
Mortgagor and shall inure to the benefit of Mortgagee and all successors and
assigns of Mortgagee.
30. Amendment. This Mortgage cannot be changed except by an agreement
in writing signed by the party against whom enforcement of the change is sought.
31. Power of Sale. In addition to the option to foreclose this
Mortgage, upon the occurrence of any default of any kind, Mortgagor hereby
expressly grants to Mortgagee a power of sale and Mortgagee shall be empowered
and entitled, at its option, to sell the Mortgaged Premises in accordance with
the Oklahoma Power of Sale Mortgage Foreclosure Act, as the same may be amended
from time to time.
A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY
ALLOW MORTGAGEE TO TAKE THE MORTGAGED PREMISES AND SELL IT WITHOUT GOING TO
COURT IN A FORECLOSURE ACTION UPON DEFAULT BY MORTGAGOR UNDER THIS MORTGAGE.
IN WITNESS WHEREOF, Mortgagor has duly executed and delivered this
instrument to Mortgagee in Tulsa, Oklahoma, by the undersigned duly authorized
officer thereof pursuant to all necessary corporate acts of Mortgagor effective
as of the date first above written.
XETA CORPORATION, an
Oklahoma corporation
By: /s/ ROBERT B. WAGNER
-------------------------------
Name: Robert B. Wagner
Title: VP Finance
"Mortgagor/Debtor"
16
<PAGE> 17
ACKNOWLEDGMENT
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
On this 30th day of November, 1999, before me appeared Robert B.
Wagner, to me personally known, who, being by me duly sworn, did say that he is
VP Finance of Xeta Corporation, an Oklahoma corporation, and that said
instrument was signed on behalf of said corporation, and he acknowledged said
instrument to be his free act and deed and the free act and deed of the
corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal in the County and State aforesaid, the day and year first above
written.
/s/ DEBBIE L. HASKINS
--------------------------------
Notary Public
My Commission Expires:
Oct. 23, 2002
- --------------------------
[SEAL]
17
<PAGE> 1
EXHIBIT 2.6
SUBSIDIARY GUARANTY
THIS SUBSIDIARY GUARANTY (this "Guaranty") is made as of the 30th day
of November, 1999, by U. S. TECHNOLOGIES SYSTEMS, INC., a Missouri corporation
(the "Subsidiary Guarantor") in favor of the Agent, for the benefit of the
Lenders and the Agent, under the Credit Agreement referred to below.
RECITALS
A. Xeta Corporation, an Oklahoma corporation (the "Principal"), and
Bank One, Oklahoma, NA, a national banking association, as Agent (the "Agent"),
and certain other Lenders from time to time party thereto have entered into a
certain Credit Agreement dated as of November 30, 1999 (as same may be amended
or modified from time to time, the "Credit Agreement"), providing, subject to
the terms and conditions thereof, for extensions of credit to be made by the
Lenders to the Principal.
B. It is a condition precedent to the Agent and the Lenders executing
the Credit Agreement that the Subsidiary Guarantor execute and deliver this
Guaranty whereby the Subsidiary Guarantor shall guarantee the payment when due,
subject to Section 9 hereof, of all Guaranteed Obligations.
C. In consideration of the financial and other support that the
Principal has provided, and such financial and other support as the Principal
may in the future provide, to the Subsidiary Guarantor, and in order to induce
the Lenders and the Agent to enter into the Credit Agreement, and the Lenders
and their Affiliates to enter into one or more Rate Management Transactions with
the Principal, and because the Subsidiary Guarantor has determined that
executing this Guaranty is in its interest and to its financial benefit, the
Subsidiary Guarantor is willing to guarantee the obligations of the Principal
under the Credit Agreement, any Note, any Rate Management Transaction, and the
other Loan Documents.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION l.1. Selected Terms Used Herein.
"Guaranteed Obligations" is defined in Section 3 below.
SECTION 1.2. Terms in Credit Agreement. Other capitalized terms used
herein but not defined herein shall have the meaning set forth in the Credit
Agreement.
SECTION 2.1. Representations and Warranties. The Subsidiary Guarantor
represents and warrants (which representations and warranties shall be deemed to
have been renewed upon each Borrowing Date under the Credit Agreement) that:
<PAGE> 2
(a) It is a corporation, partnership or limited liability
company duly and properly incorporated or organized, as the case may be, validly
existing and (to the extent such concept applies to such entity) in good
standing under the laws of its jurisdiction of incorporation or organization and
has all requisite authority to conduct its business in each jurisdiction in
which its business is conducted.
(b) It has the power and authority and legal right to execute
and deliver this Guaranty and to perform its obligations hereunder. The
execution and delivery by it of this Guaranty and the performance of its
obligations hereunder have been duly authorized by proper corporate proceedings,
and this Guaranty constitutes a legal, valid and binding obligation of the
Subsidiary Guarantor enforceable against it in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
(c) Neither the execution and delivery by it of this Guaranty,
nor the consummation of the transactions herein contemplated, nor compliance
with the provisions hereof will violate (i) any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on it or any of its
subsidiaries or (ii) its articles or certificate of incorporation, partnership
agreement, certificate of partnership, articles or certificate of organization,
by-laws, or operating or other management agreement, as the case may be, or
(iii) the provisions of any indenture, instrument or agreement to which it or
any of its subsidiaries is a party or is subject, or by which it, or its
Property, is bound, or conflict with or constitute a default thereunder, or
result in, or require, the creation or imposition of any Lien in, of or on the
Property of the Subsidiary Guarantor or a subsidiary thereof pursuant to the
terms of any such indenture, instrument or agreement. No order, consent,
adjudication, approval, license, authorization, or validation of, or filing,
recording or registration with, or exemption by, or other action in respect of
any governmental or public body or authority, or any subdivision thereof, which
has not been obtained by it or any of its subsidiaries, is required to be
obtained by it or any of its subsidiaries in connection with the execution and
delivery of this Guaranty or the performance by it of its obligations hereunder
or the legality, validity, binding effect or enforceability of this Guaranty.
SECTION 2.2. Covenants. The Subsidiary Guarantor covenants that, so
long as any Lender has any Commitment outstanding under the Credit Agreement,
any Rate Management Transaction remains in effect or any of the Guaranteed
Obligations shall remain unpaid, that it will, and, if necessary, will enable
the Principal to, fully comply with those covenants and agreements set forth in
the Credit Agreement.
SECTION 3. The Guaranty. Subject to Section 9 hereof, the Subsidiary
Guarantor hereby absolutely and unconditionally guarantees, as primary obligor
and not as surety, the full and punctual payment (whether at stated maturity,
upon acceleration or early termination or otherwise, and at all times
thereafter) and performance of the Obligations and the Rate Management
Obligations, including without limitation any such Obligations or Rate
Management Obligations incurred or accrued during the pendency of any
bankruptcy, insolvency, receivership or other
-2-
<PAGE> 3
similar proceeding, whether or not allowed or allowable in such proceeding
(collectively, subject to the provisions of Section 9 hereof, being referred to
collectively as the "Guaranteed Obligations"). Upon failure by the Principal to
pay punctually any such amount, the Subsidiary Guarantor agrees that it shall
forthwith on demand pay to the Agent for the benefit of the Lenders and the
Agent and, if applicable, their Affiliates, the amount not so paid at the place
and in the manner specified in the Credit Agreement, any Note, any Rate
Management Transaction or the relevant Loan Document, as the case may be. This
Guaranty is a guaranty of payment and not of collection. The Subsidiary
Guarantor waives any right to require the Agent or any Lender to sue the
Principal, any other guarantor, or any other person obligated for all or any
part of the Guaranteed Obligations, or otherwise to enforce its payment against
any collateral securing all or any part of the Guaranteed Obligations.
SECTION 4. Guaranty Unconditional. Subject to Section 9 hereof, the
obligations of the Subsidiary Guarantor hereunder shall be unconditional and
absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or release
in respect of any of the Guaranteed Obligations, by operation of law or
otherwise, or any obligation of any other guarantor of any of the
Guaranteed Obligations, or any default, failure or delay, willful or
otherwise, in the payment or performance of the Guaranteed Obligations;
(ii) any modification or amendment of or supplement to the Credit
Agreement, any Note, any Rate Management Transaction or any other Loan
Document;
(iii) any release, nonperfection or invalidity of any direct or
indirect security for any obligation of the Principal under the Credit
Agreement, any Note, the Security Agreement, any Rate Management
Transaction, any other Loan Document, or any obligations of any other
guarantor of any of the Guaranteed Obligations, or any action or
failure to act by the Agent, any Lender or any Affiliate of any Lender
with respect to any collateral securing all or any part of the
Guaranteed Obligations;
(iv) any change in the corporate existence, structure or ownership of
the Principal or any other guarantor of any of the Guaranteed
Obligations, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting the Principal, or any other guarantor of
the Guaranteed Obligations, or its assets or any resulting release or
discharge of any obligation of the Principal, or any other guarantor of
any of the Guaranteed Obligations;
(v) the existence of any claim, setoff or other rights which the
Subsidiary Guarantor may have at any time against the Principal, any
other guarantor of any of the Guaranteed Obligations, the Agent, any
Lender or any other Person, whether in connection herewith or any
unrelated transactions;
(vi) any invalidity or unenforceability relating to or against the
Principal, or any other
-3-
<PAGE> 4
guarantor of any of the Guaranteed Obligations, for any reason related
to the Credit Agreement, any Rate Management Transaction, any other
Loan Document, or any provision of applicable law or regulation
purporting to prohibit the payment by the Principal, or any other
guarantor of the Guaranteed Obligations, of the principal of or
interest on any Note or any other amount payable by the Principal under
the Credit Agreement, any Note, any Rate Management Transaction or any
other Loan Document; or
(vii) any other act or omission to act or delay of any kind by the
Principal, any other guarantor of the Guaranteed Obligations, the
Agent, any Lender or any other Person or any other circumstance
whatsoever which might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of the Subsidiary Guarantor's
obligations hereunder.
SECTION 5. Discharge Only Upon Payment In Full: Reinstatement In
Certain Circumstances. The Subsidiary Guarantor's obligations hereunder shall
remain in full force and effect until all Guaranteed Obligations shall have been
indefeasibly paid in full, the Commitments under the Credit Agreement shall have
terminated or expired and all Rate Management Transactions have terminated or
expired. If at any time any payment of the principal of or interest on any Note
or any other amount payable by the Principal or any other party under the Credit
Agreement, any Rate Management Transaction or any other Loan Document is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of the Principal or otherwise, the Subsidiary
Guarantor's obligations hereunder with respect to such payment shall be
reinstated as though such payment had been due but not made at such time.
SECTION 6. Waivers. The Subsidiary Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and, to the fullest extent
permitted by law, any notice not provided for herein, as well as any requirement
that at any time any action be taken by any Person against the Principal, any
other guarantor of any of the Guaranteed Obligations, or any other Person.
SECTION 7. Subrogation. The Subsidiary Guarantor hereby agrees not to
assert any right, claim or cause of action, including, without limitation, a
claim for subrogation, reimbursement, indemnification or otherwise, against the
Principal arising out of or by reason of this Guaranty or the obligations
hereunder, including, without limitation, the payment or securing or purchasing
of any of the Guaranteed Obligations by the Subsidiary Guarantor unless and
until the Guaranteed Obligations are indefeasibly paid in full, any commitment
to lend under the Credit Agreement and any other Loan Documents is terminated
and all Rate Management Transactions have terminated or expired.
SECTION 8. Stay of Acceleration. If acceleration of the time for
payment of any of the Guaranteed Obligations is stayed upon the insolvency,
bankruptcy or reorganization of the Principal, all such amounts otherwise
subject to acceleration under the terms of the Credit Agreement, any Note, any
Rate Management Transaction or any other Loan Document shall
-4-
<PAGE> 5
nonetheless be payable by the Subsidiary Guarantor hereunder forthwith on demand
by the Agent made at the request of the Required Lenders.
SECTION 9. Limitation on Obligations. (a) The provisions of this
Guaranty are severable, and in any action or proceeding involving any state
corporate law, or any state, federal or foreign bankruptcy, insolvency,
reorganization or other law affecting the rights of creditors generally, if the
obligations of the Subsidiary Guarantor under this Guaranty would otherwise be
held or determined to be avoidable, invalid or unenforceable on account of the
amount of the Subsidiary Guarantor's liability under this Guaranty, then,
notwithstanding any other provision of this Guaranty to the contrary, the amount
of such liability shall, without any further action by the Subsidiary Guarantor,
the Agent or any Lender, be automatically limited and reduced to the highest
amount that is valid and enforceable as determined in such action or proceeding
(such highest amount determined hereunder being the relevant Subsidiary
Guarantor's "Maximum Liability"). This Section 9(a) with respect to the Maximum
Liability of the Subsidiary Guarantor is intended solely to preserve the rights
of the Agent hereunder to the maximum extent not subject to avoidance under
applicable law, and neither the Subsidiary Guarantor nor any other person or
entity shall have any right or claim under this Section 9(a) with respect to the
Maximum Liability, except to the extent necessary so that the obligations of the
Subsidiary Guarantor hereunder shall not be rendered voidable under applicable
law.
(b) The Subsidiary Guarantor agrees that the Guaranteed Obligations may
at any time and from time to time exceed the Maximum Liability of each
Subsidiary Guarantor, and may exceed the aggregate Maximum Liability of any
other guarantors, without impairing this Guaranty or affecting the rights and
remedies of the Agent hereunder. Nothing in this Section 9(b) shall be construed
to increase the Subsidiary Guarantor's obligations hereunder beyond its Maximum
Liability.
(c) In the event the Subsidiary Guarantor (a "Paying Subsidiary
Guarantor") shall make any payment or payments under this Guaranty or shall
suffer any loss as a result of any realization upon any collateral granted by it
to secure its obligations under this Guaranty, any other subsidiary guarantor
(each a "Non-Paying Subsidiary Guarantor") shall contribute to such Paying
Subsidiary Guarantor an amount equal to such Non-Paying Subsidiary Guarantor's
"Pro Rata Share" of such payment or payments made, or losses suffered, by such
Paying Subsidiary Guarantor. For the purposes hereof, each Non-Paying Subsidiary
Guarantor's "Pro Rata Share" with respect to any such payment or loss by a
Paying Subsidiary Guarantor shall be determined as of the date on which such
payment or loss was made by reference to the ratio of (i) such Non-Paying
Subsidiary Guarantor's Maximum Liability as of such date (without giving effect
to any right to receive, or obligation to make, any contribution hereunder) or,
if such Non-Paying Subsidiary Guarantor's Maximum Liability has not been
determined, the aggregate amount of all monies received by such Non-Paying
Subsidiary Guarantor from the Principal after the date hereof (whether by loan,
capital infusion or by other means) to (ii) the aggregate Maximum Liability of
all subsidiary guarantors hereunder (including such Paying Subsidiary Guarantor)
as of such date (without giving effect to any right to receive, or obligation to
make, any contribution hereunder), or to the extent that a
-5-
<PAGE> 6
Maximum Liability has not been determined for any subsidiary guarantors, the
aggregate amount of all monies received by such subsidiary guarantors from the
Principal after the date hereof (whether by loan, capital infusion or by other
means). Nothing in this Section 9 (c) shall affect the Subsidiary Guarantor's or
any other guarantor's several liability for the entire amount of the Guaranteed
Obligations (up to such guarantor's Maximum Liability). The Subsidiary Guarantor
covenants and agrees that its right to receive any contribution under this
Guaranty from a Non-Paying Subsidiary Guarantor shall be subordinate and junior
in right of payment to all the Guaranteed Obligations. The provisions of this
Section 9(c) are for the benefit of both the Agent and the Subsidiary Guarantor
and may be enforced by any one, or more, or all of them in accordance with the
terms hereof.
SECTION 10. Application of Payments. All payments received by the Agent
hereunder shall be applied by the Agent to payment of the Guaranteed Obligations
in the following order unless a court of competent jurisdiction shall otherwise
direct:
(a) FIRST, to payment of all costs and expenses of the Agent
incurred in connection with the collection and enforcement of the
Guaranteed Obligations or of any security interest granted to the Agent
in connection with any collateral securing the Guaranteed Obligations;
(b) SECOND, to payment of that portion of the Guaranteed
Obligations constituting accrued and unpaid interest and fees, pro rata
among the Lenders and their Affiliates in accordance with the amount of
such accrued and unpaid interest and fees owing to each of them;
(c) THIRD, to payment of the principal of the Guaranteed
Obligations and the net early termination payments and any other Rate
Management Obligations then due and unpaid from the Borrower to any of
the Lenders or their Affiliates, pro rata among the Lenders and their
Affiliates in accordance with the amount of such principal and such net
early termination payments and other Rate Management Obligations then
due and unpaid owing to each of them; and
(d) FOURTH, to payment of any Guaranteed Obligations (other
than those listed above) pro rata among those parties to whom such
Guaranteed Obligations are due in accordance with the amounts owing to
each of them.
SECTION 11. Notices. All notices, requests and other communications to
any party hereunder shall be given or made by telecopier or other writing and
telecopied, or mailed or delivered to the intended recipient at its address or
telecopier number set forth on the signature pages hereof or such other address
or telecopy number as such party may hereafter specify for such purpose by
notice to the Agent in accordance with the provisions of Article XIII of the
Credit Agreement. Except as otherwise provided in this Guaranty, all such
communications shall be deemed to have been duly given when transmitted by
telecopier, or personally delivered or, in the
-6-
<PAGE> 7
case of a mailed notice sent by certified mail return-receipt requested, on the
date set forth on the receipt (provided, that any refusal to accept any such
notice shall be deemed to be notice thereof as of the time of any such refusal),
in each case given or addressed as aforesaid.
SECTION 12. No Waivers. No failure or delay by the Agent or any Lenders
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies provided in this Guaranty, the Credit Agreement, any
Note, any Rate Management Transaction and the other Loan Documents shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 13. No Duty to Advise. The Subsidiary Guarantor assumes all
responsibility for being and keeping itself informed of the Principal's
financial condition and assets, and of all other circumstances bearing upon the
risk of nonpayment of the Guaranteed Obligations and the nature, scope and
extent of the risks that the Subsidiary Guarantor assumes and incurs under this
Guaranty, and agrees that neither the Agent nor any Lender has any duty to
advise any of the Subsidiary Guarantors of information known to it regarding
those circumstances or risks.
SECTION 14. Successors and Assigns. This Guaranty is for the benefit of
the Agent and the Lenders and their respective successors and permitted assigns
and in the event of an assignment of any amounts payable under the Credit
Agreement, any Note, any Rate Management Transaction, or the other Loan
Documents, the rights hereunder, to the extent applicable to the indebtedness so
assigned, shall be transferred with such indebtedness. This Guaranty shall be
binding upon the Subsidiary Guarantor and its successors and permitted assigns.
SECTION 15. Changes in Writing. Neither this Guaranty nor any provision
hereof may be changed, waived, discharged or terminated orally, but only in
writing signed by the Subsidiary Guarantor and the Agent with the consent of the
Required Lenders.
SECTION 16. Costs of Enforcement. The Subsidiary Guarantor agrees to
pay all costs and expenses including, without limitation, all court costs and
attorneys' fees and expenses paid or incurred by the Agent or any Lender or any
Affiliate of any Lender in endeavoring to collect all or any part of the
Guaranteed Obligations from, or in prosecuting any action against, the
Principal, the Subsidiary Guarantor or any other guarantor of all or any part of
the Guaranteed Obligations.
SECTION 17. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF OKLAHOMA. THE SUBSIDIARY GUARANTOR HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF OKLAHOMA AND OF ANY OKLAHOMA STATE COURT SITTING IN TULSA, OKLAHOMA
AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
GUARANTY (INCLUDING, WITHOUT LIMITATION, ANY OF THE OTHER LOAN
-7-
<PAGE> 8
DOCUMENTS) OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE SUBSIDIARY GUARANTOR
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE SUBSIDIARY
GUARANTOR, AND THE AGENT AND THE LENDERS ACCEPTING THIS GUARANTY, HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 18. Taxes. All payments required to be made by the Subsidiary
Guarantor hereunder shall be made without setoff or counterclaim and free and
clear of and without deduction or withholding for or on account of, any present
or future taxes, levies, imposts, duties or other charges of whatsoever nature
imposed by any government or any political or taxing authority thereof (but
excluding Excluded Taxes), provided, however, that if the Subsidiary Guarantor
is required by law to make such deduction or withholding, the Subsidiary
Guarantor shall forthwith (i) pay to the Agent or any Lender, as applicable,
such additional amount as results in the net amount received by the Agent or any
Lender, as applicable, equaling the full amount which would have been received
by the Agent or any Lender, as applicable, had no such deduction or withholding
been made, (ii) pay the full amount deducted to the relevant authority in
accordance with applicable law, and (iii) furnish to the Agent or any Lender, as
applicable, certified copies of official receipts evidencing payment of such
withholding taxes within 30 days after such payment is made.
IN WITNESS WHEREOF, the Subsidiary Guarantor has caused this Guaranty
to be duly executed, under seal, by its authorized officer as of the day and
year first above written.
U. S. TECHNOLOGIES SYSTEMS,
INC., a Missouri corporation
By: /s/ JON A. WIESE
-------------------------------
Name: Jon A. Wiese
-----------------------------
Title: Vice President
----------------------------
891 Bolger Court
Fenton, Missouri 63026
Telephone: (314) 349-4440
FAX: (314) 349-1110
-8-
<PAGE> 1
EXHIBIT 2.7
TERM NOTE
$12,650,000 November 30, 1999
Xeta Corporation, an Oklahoma corporation (the "Borrower"), promises to
pay to the order of Bank One, Oklahoma, NA (the "Lender") the aggregate unpaid
principal amount of the Term Loan made by the Lender to the undersigned pursuant
to Section 2.1.2 of the Agreement (as hereinafter defined), in immediately
available funds at the main office of Bank One, Oklahoma, N.A., Tulsa, Oklahoma,
as Agent, together with interest on the unpaid principal amount hereof at the
rates and on the dates set forth in the Agreement. The undersigned shall pay the
principal of and accrued and unpaid interest on the Term Loan in full on the
Term Loan Facility Maturity Date and prior to maturity shall make such payments,
including mandatory prepayments, as are required to be made under the terms of
Article II of the Agreement.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of the Term Loan and the date and amount of each principal
payment hereunder.
This Note is one of the Term Notes issued pursuant to, and is entitled
to the benefits of, the Credit Agreement dated as of November 30, 1999 (which,
as it may be amended or modified and in effect from time to time, is herein
called the "Agreement"), among the Borrower, the lenders party thereto,
including the Lender, and Bank One, Oklahoma, NA, as Agent, to which Agreement
reference is hereby made for a statement of the terms and conditions governing
this Note, including the terms and conditions under which this Note may be
prepaid or its maturity date accelerated. This Note is secured pursuant to the
Collateral Documents, all as more specifically described in the Agreement, and
reference is made thereto for a statement of the terms and provisions thereof.
Capitalized terms used herein and not otherwise defined herein are used with the
meanings attributed to them in the Agreement.
XETA CORPORATION,
an Oklahoma corporation
By: /s/ ROBERT B. WAGNER
----------------------------------
Print Name: Robert B. Wagner
--------------------------
Title: VP Finance
-------------------------------
<PAGE> 2
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
TERM NOTE OF XETA CORPORATION
DATED NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
---- --------- ----------- --------- -------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 2.8
TERM NOTE
$10,350,000 November 30, 1999
Xeta Corporation, an Oklahoma corporation (the "Borrower"), promises to
pay to the order of Mercantile Bank, N.A. (the "Lender") the aggregate unpaid
principal amount of the Term Loan made by the Lender to the undersigned pursuant
to Section 2.1.2 of the Agreement (as hereinafter defined), in immediately
available funds at the main office of Bank One, Oklahoma, N.A., Tulsa, Oklahoma,
as Agent, together with interest on the unpaid principal amount hereof at the
rates and on the dates set forth in the Agreement. The undersigned shall pay the
principal of and accrued and unpaid interest on the Term Loan in full on the
Term Loan Facility Maturity Date and prior to maturity shall make such payments,
including mandatory prepayments, as are required to be made under the terms of
Article II of the Agreement.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of the Term Loan and the date and amount of each principal
payment hereunder.
This Note is one of the Term Notes issued pursuant to, and is entitled
to the benefits of, the Credit Agreement dated as of November 30, 1999 (which,
as it may be amended or modified and in effect from time to time, is herein
called the "Agreement"), among the Borrower, the lenders party thereto,
including the Lender, and Bank One, Oklahoma, NA, as Agent, to which Agreement
reference is hereby made for a statement of the terms and conditions governing
this Note, including the terms and conditions under which this Note may be
prepaid or its maturity date accelerated. This Note is secured pursuant to the
Collateral Documents, all as more specifically described in the Agreement, and
reference is made thereto for a statement of the terms and provisions thereof.
Capitalized terms used herein and not otherwise defined herein are used with the
meanings attributed to them in the Agreement.
XETA CORPORATION,
an Oklahoma corporation
By: /s/ ROBERT B. WAGNER
---------------------------
Print Name: Robert B. Wagner
-------------------
Title: VP Finance
------------------------
<PAGE> 2
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
TERM NOTE OF XETA CORPORATION
DATED NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
---- --------- ----------- --------- -------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 99.1
EXHIBIT "A"
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT"), is entered into as of
November 30 , 1999, by and between U. S. TECHNOLOGIES SYSTEMS, INC., a Missouri
corporation ("USTI"), being a wholly-owned subsidiary of XETA CORPORATION, an
Oklahoma corporation ("XETA") and MARK A. MARTIN, a resident of the State of
Missouri ("MARTIN").
R E C I T A L S:
A. Pursuant to a Stock Purchase Agreement dated effective as of August
1, 1999 (the "PURCHASE AGREEMENT"), Martin has sold to XETA and XETA has
purchased from Martin all of his shares of common stock in USTI.
B. All capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Purchase Agreement.
C. The Purchase Agreement provides that, as a condition to either
party's obligation to close, Martin and USTI shall have executed and delivered
this Agreement.
D. USTI is engaged in the business of distributing and servicing
telephone systems to commercial customers (the "BUSINESS").
E. XETA and USTI (hereinafter referred to, collectively, as the
"COMPANY") currently do business throughout the United States of America, Canada
and Mexico and wish to avail themselves of the services of Martin for the
continued management of the Business, and Martin wishes to accept such
employment on the terms and conditions hereinafter set forth.
F. Martin has been advised by counsel concerning the meaning and legal
effect of this Agreement and its various provisions.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, together
with a portion of the Purchase Consideration paid by the Purchaser for the
Shares and the goodwill associated therewith, and in consideration of the mutual
covenants and promises contained herein, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto do hereby agree as follows:
1. Duties. Subject to the terms and conditions of this Agreement, USTI
(the "EMPLOYER") and XETA hereby employ Martin, and Martin hereby accepts
employment with the Employer and XETA as President of USTI in St. Louis,
Missouri, where he will function as President of XETA's Commercial Channel
Division, with duties commensurate with such position as shall be determined
from time to time by the Company. It is agreed that the Company will not
<PAGE> 2
require Martin to move his residence from St. Louis, Missouri during the term
hereof. Martin hereby agrees to devote his full professional time and attention,
and his best efforts, to the performance of such duties, to diligently comply
with all specific reasonable instructions concerning the performance of such
duties as shall be communicated to him by the Company, to the extent such
instructions are not illegal or, in Martin's reasonable belief, unethical, and
to make reports to the Company concerning all matters under his control or
within his knowledge whenever reasonably requested by the Company. The
Commercial Channel Division shall be comprised of those businesses currently
engaged in by USTI and all other businesses outside the hospitality market,
which are subsequently acquired by the Company.
2. Employment Term. Subject to the provisions respecting the
termination of this Agreement, the term of this Agreement (the "TERM") shall be
two (2) years, subject to extension for a period of one (1) additional year if
performance targets for USTI mutually agreed to by the Company and Martin are
met during the initial term.
3. Compensation.
3.1 The Employer agrees to pay Martin an initial annual base
salary (the "BASE SALARY") during the Term equal to the gross amount of One
Hundred Twenty Thousand Dollars ($120,000), less deductions and withholdings.
Payments of Base Salary will be made in equal semi-monthly installments in
accordance with USTI's procedures regarding the payment of executive
compensation. On at least an annual basis Martin's performance for the previous
twelve (12) month period shall be evaluated by the Compensation Committee of
XETA's Board of Directors and by its President. Martin's Base Salary shall not
be reduced during the Term.
3.2 In addition to the Base Salary, while Martin is employed
by the Employer, he shall be entitled to participate in the Company's incentive
compensation plan attached hereto as Exhibit "A"; provided, however, that all
Incentive Compensation Plan methodology/algorithms shall be subject to review
and revision upon subsequent acquisitions by the Company; provided further that
such review and revision shall not have the effect of decreasing Martin's total
compensation for future performance by him which is equivalent to his past
performance, and that such review and revision shall not occur more frequently
than every six (6) months.
4. Employee Benefits.
4.1 Martin may participate in all of the employee benefit
plans and programs offered by the Employer to its employees to the extent that
Martin meets the eligibility requirements for each individual plan or program.
Such plans and programs currently include the following:
(i) Medical and group term life insurance;
(ii) 401(k) and discretionary profit sharing plans;
(iii) Vacation days based on years of service; and
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<PAGE> 3
(iv) National Holidays.
Such benefits shall be governed by the terms of XETA's plan documents (where
applicable). For purposes of determining which benefits Martin may be entitled
to receive, Martin shall be credited by the Employer, to the extent that
Employer is able to arrange for this, with the years of service he has had with
the USTI prior to Closing.
4.2 The Employer shall reimburse Martin for all ordinary and
necessary out-of-pocket business, travel and entertainment expenses, incurred on
behalf of the Company by Martin, in the performance of his duties and
responsibilities hereunder, subject to and in accordance with the Employer's
customary policies and procedures for expense verification and reimbursement.
4.3 The Employer shall also provide Martin with the use of a
Company-owned automobile of the make and model comparable to the automobile
supplied to Martin by USTI prior to the Closing. The Employer shall be
responsible for the payment of all automobile insurance premiums arising for
coverage for use within the scope of Martin's employment, reasonable routine
maintenance, and for reimbursement of other ordinary and necessary expenses
arising from the business use of such automobile.
5. Restrictions on Competition and Solicitation.
5.1 As used herein, "GEOGRAPHIC AREA" shall mean the United
States of America.
5.2 As used herein, "NON-COMPETITION PERIOD" shall mean the
period commencing on the Closing Date and ending two (2) years
thereafter; provided, however, that if Seller's employment with
Purchaser and the Company shall be terminated for "cause" (as defined
in the Employment Agreement) the Non-Competition Period shall not end
until two (2) years after the last payment of compensation by the
Company or the Purchaser pursuant to the Employment Agreement.
5.3 Martin shall not during the Non-Competition Period, either
directly or indirectly, as a stockholder of any corporation, a member
of any limited liability company, a partner of any partnership, or
otherwise as an owner, investor, principal, agent, officer, director,
associate, employee, consultant, creditor, co-venturer or in any other
manner, engage within the Geographic Area in any business that competes
in any manner with the Commercial Channel Division of the Company, nor
have any other interest in or be associated with a business that
competes in any manner with the Commercial Channel Division of the
Company within the Geographic Area, nor shall Seller assist any person
to whom Seller is related within the third degree, by blood or by
marriage, to do anything that Seller would be prohibited from doing
personally by reason of this Section 3.4; provided, however, that this
provision shall not be deemed to prevent or limit Martin from owning
capital stock or other securities of any corporation which are publicly
owned or regularly traded in the over-the-counter market or on any
securities exchange so long as such
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<PAGE> 4
investment does not exceed, directly or indirectly, 5% of the issuer's
outstanding securities of the same class.
5.4 During the Non-Competition Period, Martin shall not
directly or indirectly solicit, request, or advise, any person who is
or has been an employee of the Commercial Channel Division of the
Company within eighteen (18) months prior to the Closing Date to
terminate or change such person's relationship with the Commercial
Channel Division of the Company or to work in any business venture or
activity that is substantially competitive with any business conducted
by the Commercial Channel Division of the Company within the Geographic
Area during the Non-Competition Period.
5.5 During the Non-Competition Period, Martin shall not shall
not directly or indirectly divert or attempt to divert from the
Commercial Channel Division of the Company any business interest or
expectancy whatsoever, nor directly or indirectly solicit, request,
advise, or seek to induce, any person or entity who or which is or has
been a customer of the Commercial Channel Division of the Company
within eighteen (18) months prior to the Closing Date to terminate or
change such person's relationship with the Commercial Channel Division
of the Company or to purchase any product or service which is
substantially competitive with any product or service provided by the
Commercial Channel Division of the Company within the Geographic Area
during the Non-Competition Period.
5.6 During the Non-Competition Period, Martin shall not
request, advise, or seek to induce, any supplier or vendor of the
Commercial Channel Division of the Company to terminate or change such
supplier's or such vendor's relationship with the Commercial Channel
Division of the Company.
5.7 The restrictive covenants contained within this Section 5
are essential elements of this Agreement, and but for Martin's
agreement to comply with such covenants, the Company would not have
entered into this Agreement.
5.8 The Company and Martin agree that the foregoing covenants
are appropriate and reasonable when considered in light of the nature
and extent of the business conducted by the Commercial Channel Division
of the Company.
6. Confidentiality. For a period of five (5) years from and after the
Closing Date (the "NON-DISCLOSURE PERIOD"), Martin shall not use or disclose to
any third party, including but not limited to Lucent Technologies, Inc.
("LUCENT"), any confidential or proprietary information whatsoever of or
concerning the Company, which information (collectively, the "CONFIDENTIAL
INFORMATION") shall include but shall not be limited to: (i) all information
that the Company considers or treats as confidential whether or not the Company
has marked such information as confidential; (ii) all financial information of
the Company including the nature, location, condition or value of its assets and
any results of operations; (iii) all information concerning or related to the
Company's TQM Labs repair procedures or purchase methods; (iv) all information
concerning past
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<PAGE> 5
contractual disputes with Lucent or any other party and the subject matter
thereof; and (v) all information concerning previous allegations made by Lucent
or any other party of breaches by the Company of any agreement, the subject
matter thereof, and the disposition of any such allegation; provided, however,
that for purposes of this Agreement the term "Confidential Information" shall
not include information within the public domain by any means other than
unauthorized disclosure.
6.1 None of the Confidential Information shall ever be
disclosed by Martin during the Non-Disclosure Period, nor shall he
authorize or permit any of his agents under his control to disclose any
Confidential Information to any third party without the Company's
express prior written consent; provided, however, that Martin may
disclose Confidential Information to the extent required by court
order, subpoena or other compulsory legal process so long as he
notifies the Company prior to such disclosure and affords the Company a
reasonable opportunity to object to such disclosure or a to seek other
appropriate protection for such Confidential Information.
6.2 Upon termination of his employment with the Company,
Martin shall promptly deliver to the Company any and all Company
records and any manuals, books, blank forms, documents, correspondence,
memoranda, notes, notebooks, plans, records, reports, information,
computer disks, computer tapes, source codes, data, tables,
calculations, and other documentation (and copies thereof), however
recorded, relating to the business of the Company or which contain any
Confidential Information which he may possess or have within his
control, together with all keys, access cards, access codes, passwords,
credit cards, personal computers, telephones and other electronic
equipment or devices belonging to the Company.
7. Representations and Warranties. Specifically with regard to the
covenants contained in Sections 5 and 6 hereof, but without any limitation
thereto, Martin hereby acknowledges, represents and warrants to the Company
that:
7.1 Martin has access to, and is knowledgeable concerning, the
trade secrets of USTI, and following the Closing, will have access to, and
become knowledgeable concerning the trade secrets of XETA.
7.2 The covenants contained in Sections 5 and 6 are essential
to XETA's main business purpose for entering into the Purchase Agreement, and
are made by Martin to protect the legitimate interests of the Company with
respect to XETA's purchase of USTI, including all goodwill associated with its
purchase of the Shares.
7.3 The Geographic Area, the Non-Competition Period, the
Non-Disclosure Period, and the activities in which Martin has hereby agreed not
to engage, are appropriate and reasonable in all respects in light of the nature
of the business of USTI and XETA and their legitimate need to protect their
respective customer bases and branch locations, and the investment by the XETA
in the Shares and all goodwill associated therewith.
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<PAGE> 6
7.4 If any portion of the covenants set forth in Section 5 or
6 of this Agreement is held by a court of competent jurisdiction to be
unreasonable, arbitrary or against public policy, then such portion of such
covenants shall be considered divisible both as to time and geographic area. The
Company and Martin agree that, if any court of competent jurisdiction determines
that either the Non-Competition Period, the Geographic Area, the Non-Disclosure
Period, or the scope of the activities hereby restricted is unreasonable,
arbitrary and/or against public policy, then a lesser period, geographic area or
range of activities, which is determined to be reasonable, non-arbitrary and not
against public policy, may be enforced against Martin.
7.5 The execution and delivery of this Agreement, the
performance by Martin of the covenants and agreements contained herein, and the
enforcement by the Company of the provisions contained herein, will cause no
undue hardship on Martin.
8. Termination.
8.1 In the event of the death of Martin, his employment shall
terminate automatically, without any liability to or upon the Company other than
to pay Base Salary for services rendered prior to the date of Martin's death and
incentive compensation that accrued during his employment and prior to his date
of death.
8.2 In the event that Martin becomes disabled as the term
"DISABILITY" is defined in 42 U.S.C. ss. 12101, et. seq., and if because of that
disability Martin cannot be reasonably accommodated without causing undue
hardship for the Employer, the Company may terminate Martin's employment
hereunder notwithstanding any contrary other provision in this Agreement to the
contrary. In the event Martin is terminated because of a Disability, Martin
shall be entitled to receive only Base Salary for services rendered prior to the
date of Disability, incentive compensation that accrued during his employment
and prior to his date of Disability, and any disability benefits that may
payable pursuant to the terms of any applicable disability policy held by the
Employer.
8.3 Notwithstanding any other provision herein, this Agreement
shall terminate without any liability to or upon the Company other than to pay
Base Salary for services rendered prior to the date of termination if Martin is
terminated for "cause." As used herein "CAUSE" shall mean: (i) any breach of any
material term of this Agreement, (ii) Martin's repeated failure or refusal to
perform any of duties hereunder or to comply with the Company's reasonable
directives, (iii) Martin's misappropriation of any funds or property of the
Company which are valued in excess of one hundred dollars ($100), (iv) Martin's
breach of any fiduciary duty to the Company, (v) Martin's commission of an act
of gross negligence, fraud, or of an act that involves a conflict of interest or
self-dealing and has a material adverse effect on any aspect of the Company's
business, or (vi) Martin's conviction of any felony; provided that the Martin
shall not be terminated for cause prior to receiving notice of the Company's
contention that such cause exists and being afforded a period of ten (10) days
to cure such cause, unless the extension of such ten-day cure period would have
a material adverse effect on the Company.
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<PAGE> 7
8.4 The Company may terminate Martin's employment hereunder
upon providing Martin at least thirty (30) days prior notice thereof. If his
employment is terminated by the Company without cause, the Employer will
continue to pay Martin's compensation and benefits as described in Sections 3
and 4 hereof for the balance of the Term of this Agreement.
8.5 The termination of Martin's employment shall not affect
XETA's obligation to pay any Purchase Consideration otherwise due to him
pursuant to the Purchase Agreement.
9. Remedies.
9.1 Martin acknowledges that any violation of Section 5 or 6
of this Agreement will result in irreparable injury to the Company for which
there is no adequate remedy at law. Martin agrees that, in the event he breaches
or threatens to breach Section 5 or 6 of this Agreement, the Company shall be
entitled to injunctive relief, both temporary, preliminary and permanent, in
addition to any other legal or equitable remedies which may be available to the
Company. Neither XETA nor USTI shall be required to post a bond in order to
obtain an injunction or any other equitable relief hereunder.
9.2 The provisions of Sections 5 and 6 hereof shall survive
termination of this Agreement by Martin or the Company.
10. Assignment. This Agreement and all rights and benefits hereunder
are personal to Martin, and neither it nor any right or interest of Martin
herein may be voluntarily or involuntarily sold, transferred or assigned by
Martin; provided, however, that the Employer may assign its rights, duties and
obligations hereunder to XETA without the prior written consent of Martin.
11. Entire Agreement. Except as provided in the Non-Competition
Agreement and the Confidentiality Agreement delivered by Martin pursuant to the
Purchase Agreement, all dated of even date herewith, this Agreement represents
the entire understanding and agreement between the parties with respect to the
subject matter hereof, and supersedes all of the negotiations, understandings
and representations (if any) made by and between such parties. Except as
otherwise provided herein, the terms or provisions hereof may be amended,
supplemented, waived or changed only by a writing signed by the Company and
Martin.
12. Severability. In the event any provision of this Agreement is held
illegal or invalid, the remaining provisions of this Agreement shall not be
affected thereby.
13. Waiver. The waiver of a breach of any provision of this Agreement
by any party or the failure of any party otherwise to insist upon strict
performance of any provision hereof shall not constitute a waiver of any
subsequent breach or of any subsequent failure to perform. No course of dealing
shall alter the obligations of Martin under this Agreement or otherwise affect
the ability of the Company to strictly enforce the terms of this Agreement.
14. Notice. Any notice required by this Agreement may be waived, in
writing, by the party entitled to receive such notice. Unless the parties are
notified to the contrary, notice required
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<PAGE> 8
under this Agreement shall be in writing and personally delivered or sent by
certified mail, if to the Company at XETA's principal executive offices, at 1814
West Tacoma, Broken Arrow, OK 74012, Attn: Mr. Jon A. Wiese, President, with
copy to Barber and Bartz, 110 West 7th Street, Suite 200, Tulsa, OK 74119-1018,
Attn: Ron B. Barber, Esq., and if to Martin, at the last address filed by him in
writing with the Company, with copy to Mr. Benjamin H. Hulsey, Esq., Thompson
Coburn LLP, One Mercantile Center, St. Louis, MO 63101-1693.
15. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective heirs, personal representatives,
successors and permitted assigns. This Agreement may be assigned by the Company
to any successor or affiliate.
16. Jurisdiction and Venue. The parties agree that, in any dispute
between them relating to this Agreement, exclusive jurisdiction shall be in the
trial courts, Federal or State, sitting within Tulsa County, Oklahoma, and venue
shall lie only in such courts, and any and all objections as to such
jurisdiction and venue are hereby expressly waived by each party.
17. Governing Law. Except as otherwise provided in Section 16, this
Agreement shall be construed, and the legal relations between the parties hereto
determined, in accordance with the local laws of the State of Oklahoma
applicable to agreements made and to be performed entirely within said State,
without giving effect to its conflicts of laws provisions.
18. Attorneys' Fees. If any party hereto institutes litigation to
enforce its rights or remedies under this Agreement, the party prevailing in
such litigation shall be entitled to receive an award of the prevailing party's
reasonable attorney fees and all costs incurred in connection with such
litigation. The foregoing shall include reasonable attorney fees and costs
(including paralegal fees) incurred at trial, on any appeal, and in any
proceeding in bankruptcy. The agreement of the parties represented by this
Agreement is in addition to, and not in lieu of, any other agreement or
obligation of the parties contained in the Purchase Agreement or any other
agreement contemplated thereby or executed and delivered in connection
therewith.
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
constitute but one and the same agreement.
20. Recitals. The recitals set forth at the beginning of this Agreement
are true and correct and by are hereby incorporated by reference into the body
of this Agreement.
21. Gender, Number. Words of gender may be read as masculine, feminine,
or neuter, as required by context. Words of number may be read as singular or
plural, as required by context. All terms such as "herein," "hereby" or
"hereunder" refer to this Agreement as a whole.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
day and year first above written.
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<PAGE> 9
"USTI" "Martin"
U.S. TECHNOLOGIES SYSTEMS, INC.,
a Missouri corporation
By /s/ Mark A. Martin /s/ Mark A. Martin
---------------------------------- ----------------------------
Printed Name: Mark A. Martin MARK A. MARTIN
Title: President
XETA CORPORATION,
an Oklahoma corporation
By /s/ Jon A. Wiese
----------------------------------
Jon A. Wiese, President
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<PAGE> 10
EXHIBIT "A"
INCENTIVE COMPENSATION PROGRAM
1. Subject to Paragraph 2 below, Martin's incentive compensation shall consist
of:
a. "Commission" equal to 0.5% of any positive Gross Profit of the
Commercial Channel Division for each quarter of each fiscal
year, payable thirty (30) days after the end of said quarter.
b. "Base Bonus" equal to 0.5% of any positive difference between
the Gross Profit of the Commercial Channel Division for that
fiscal year and for its prior fiscal year (provided that,
during the first fiscal year of this Agreement, Martin's Base
Bonus shall be based on the positive difference between the
Gross Profits of the Commercial Channel Division for that
fiscal year and USTI's Gross Profit for the same twelve (12)
month period in the year immediately preceding the Closing of
the Purchase Agreement, payable sixty (60) days after the end
of the fiscal year.
c. "Extra Bonus" equal to 10% of any positive difference between
the Gross Profit of the Commercial Channel Division for that
fiscal year and the projected Gross Profit of the Commercial
Channel Division under the Commercial Channel Plan approved by
XETA's Board of Directors, payable sixty (60) days after the
close of each fiscal year. Such Commercial Channel Plan shall
provide for no more than 25% annual growth.
All incentive compensation hereunder shall commence with the fiscal year and
quarter beginning November 1, 1999.
2. As used herein, "Gross Profit" means "Revenue" less "Cost of Goods Sold,"
where:
Revenue means and includes receipts from sales from all sources, including,
new and used equipment, installations of equipment, repairs, consulting,
maintenance, long distance, commissions for the sale of Lucent Technologies,
Inc. maintenance contracts, leases and transportation, excluding only
rebates for product purchases and co-op advertising rebates; and
Cost of Goods Sold means and includes all direct equipment, parts, material
and labor cost; average inventory cost of product sold as calculated by the
Prelude(TM) Software on a basis consistent with past practices (including
capitalized conversion cost of used equipment sold such as, refurb cost and
repair cost of used equipment); installation, transportation, and warehouse
cost; excluding only rebates for product purchases and co-op advertising
rebates. No XETA corporate overhead shall be allocated to Cost of Goods
Sold.
