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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to .
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Commission File Number 0-14488
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Seitel, Inc.
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(Exact name of registrant as specified in charter)
Delaware 76-0025431
- ------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
50 Briar Hollow Lane
West Building, 7th Floor
Houston, Texas 77027
- -------------------------------- --------------------------
(Address of principal executive (Zip Code)
offices)
(713) 627-1990
--------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
-------------------------------
Former name, former address and
former fiscal year, if changed
since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
As of August 12, 1996 there were 9,969,854 shares of the Company's common stock,
par value $.01 per share, outstanding.
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Page 1 of 200
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION Page
-------
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 1996 (Unaudited) and December 31, 1995 3
Consolidated Statements of Operations (Unaudited)
for the Three Months Ended June 30,
1996 and 1995 4
Consolidated Statements of Operations (Unaudited)
for the Six Months Ended June 30,
1996 and 1995 5
Consolidated Statements of Stockholders'
Equity (Unaudited) for the Six Months Ended
June 30, 1996 6
Consolidated Statements of Cash Flows (Unaudited)
for the Six Months Ended June 30, 1996
and 1995 7
Notes to Consolidated Interim
Financial Statements 9
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations 11
PART II. OTHER INFORMATION 13
Page 2 of 200
<PAGE>
<TABLE>
<CAPTION>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
June 30, December 31,
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
Cash and equivalents $ 18,902 $ 6,242
Receivables
Trade 46,839 40,992
Notes and other 1,575 1,289
Net data bank 107,858 105,369
Net oil and gas properties 74,977 42,424
Net geophysical and other property and equipment 11,497 10,126
Prepaid expenses, deferred charges and other assets 4,909 3,125
--------- ---------
TOTAL ASSETS $ 266,557 $ 209,567
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 22,288 $ 18,422
Income taxes payable 694 227
Net liabilities of discontinued operations 383 1,105
Debt
Senior Notes 75,000 52,500
Subordinated debentures - 1,989
Term Loans 2,933 3,071
Obligations under capital leases 3,124 3,723
Contingent payables 279 279
Deferred income taxes 8,592 6,472
Deferred revenue 22,400 1,401
--------- ---------
TOTAL LIABILITIES 135,693 89,189
--------- ---------
CONTINGENCIES AND COMMITMENTS
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share;
authorized 5,000,000 shares; none issued - -
Common stock, par value $.01 per share;
authorized 20,000,000 shares; issued and
outstanding 9,764,044 and 9,436,854 at June
30, 1996 and December 31, 1995, respectively 98 94
Additional paid-in capital 90,026 85,821
Retained earnings 42,168 35,936
Treasury stock, 409 and 414 shares at cost at
June 30,1996 and December 31, 1995, respectively (4) (4)
Notes receivable from officers and employees (1,350) (1,395)
Cumulative translation adjustment (74) (74)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 130,864 120,378
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 266,557 $ 209,567
========= =========
</TABLE>
The accompanying notes are an integral
part of these consolidated financial
statements
Page 3 of 200
<PAGE>
<TABLE>
<CAPTION>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
Three Months Ended June 30,
---------------------------
1996 1995
-------- --------
<S> <C> <C>
REVENUE $ 27,180 $ 22,143
EXPENSES:
Depreciation, depletion and amortization 10,111 7,199
Cost of sales 4,399 4,440
Selling, general and administrative expenses 5,346 4,480
Net interest expense 727 912
-------- --------
20,583 17,031
-------- --------
Income from continuing operations before provision
for income taxes 6,597 5,112
Provision for income taxes 2,441 1,891
-------- --------
Income from continuing operations 4,156 3,221
Income from discontinued operations, net of income
tax expense of $71 - 120
Loss on disposal of discontinued operations, net of
income tax benefit of $580 (988) -
-------- --------
NET INCOME $ 3,168 $ 3,341
======== ========
Earnings per share:
Primary
Income from continuing operations $ .41 $ .33
Income from discontinued operations - .01
Loss on disposal of discontinued operations (.10) -
-------- --------
Net income $ .31 $ .34
======== ========
Assuming full dilution
Income from continuing operations $ .41 $ .32
Income from discontinued operations - .01
Loss on disposal of discontinued operations (.10) -
-------- --------
Net income $ .31 $ .33
======== ========
Weighted average number of common and common equivalent shares:
Primary 10,258 9,929
======== ========
Assuming full dilution 10,273 10,170
======== ========
</TABLE>
The accompanying notes are an integral
part of these consolidated financial
statements.
Page 4 of 200
<PAGE>
<TABLE>
<CAPTION>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
Six Months Ended June 30,
-------------------------
1996 1995
-------- --------
<S> <C> <C>
REVENUE $ 47,446 $ 38,751
EXPENSES:
Depreciation, depletion and amortization 18,157 14,473
Cost of sales 7,669 4,787
Selling, general and administrative expenses 8,849 8,229
Net interest expense 1,311 1,726
-------- --------
35,986 29,215
-------- --------
Income from continuing operations before provision
for income taxes 11,460 9,536
Provision for income taxes 4,240 3,528
-------- --------
Income from continuing operations 7,220 6,008
Income from discontinued operations, net of income
tax expense of $181 - 307
Loss on disposal of discontinued operations, net
of income tax benefit of $580 (988) -
-------- --------
NET INCOME $ 6,232 $ 6,315
======== ========
Earnings per share:
Primary
Income from continuing operations $ .72 $ .62
Income from discontinued operations - .03
Loss on disposal of discontinued operations (.10) -
-------- --------
Net income $ .62 $ .65
======== ========
Assuming full dilution
Income from continuing operations $ .71 $ .60
Income from discontinued operations - .03
Loss on disposal of discontinued operations (.10) -
-------- --------
Net income $ .61 $ .63
======== ========
Weighted average number of common and common equivalent shares:
Primary 10,131 9,784
======== ========
Assuming full dilution 10,248 10,091
======== ========
</TABLE>
The accompanying notes are an integral
part of these consolidated financial
statements.
Page 5 of 200
<PAGE>
<TABLE>
<CAPTION>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
Notes
Common Stock Additional Treasury Stock Receivables Cumulative
----------------- Paid-in Retained --------------- from Officers Translation
Shares Amount Capital Earnings Shares Amount & Employees Adjustments
--------- ------ ------- -------- ------ ------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 5,976,472 $ 60 $25,672 $12,225 -- $ -- $(2,150) $ (164)
Proceeds from issuance of
common stock 10,916 -- 37 -- -- -- -- --
Payments received on notes
receivable from officers
and employees -- -- -- -- (414) (4) 111 --
Foreign currency translation
adjustment -- -- -- -- -- -- -- 79
Net income -- -- -- 5,717 -- -- -- --
--------- ----- ------- ------- ----- ----- ------- -------
Balance, December 31, 1993 5,987,388 60 25,709 17,942 (414) (4) (2,039) (85)
Sale of common stock through
public offering 1,061,200 11 31,906 -- -- -- -- --
Proceeds from issuance
of common stock 770,364 7 7,280 -- -- -- -- --
Tax reduction from exercise
of stock options -- -- 1,879 -- -- -- -- --
Conversion and exchanges of
subordinated debentures 1,006,667 10 8,837 -- -- -- -- --
Payments received on notes
receivable from officers
and employees -- -- -- -- -- -- 488 --
Foreign currency translation
adjustment -- -- -- -- -- -- -- 13
Net income -- -- -- 9,315 -- -- -- --
--------- ----- ------- ------- ----- ----- ------- -------
Balance, December 31, 1994 8,825,619 88 75,611 27,257 (414) (4) (1,551) (72)
Proceeds from issuance of
common stock 445,939 4 6,894 -- -- -- -- --
Tax reduction from exercise
of stock options -- -- 1,900 -- -- -- -- --
Conversions and exchanges
of subordinated debentures 165,296 2 1,416 -- -- -- -- --
Payments received on notes
receivable from officers
and employees -- -- -- -- -- -- 156 --
Foreign currency translation
adjustment -- -- -- -- -- -- -- (2)
Net income -- -- -- 8,679 -- -- -- --
--------- ----- ------- ------- ----- ----- ------- -------
Balance, December 31, 1995 9,436,854 94 85,821 35,936 (414) (4) (1,395) (74)
Proceeds from issuance of
common stock 112,886 2 1,959 -- 5 -- -- --
Tax reduction from exercise
of stock options -- -- 368 -- -- -- -- --
Conversions and exchanges of
subordinated debentures 214,304 2 1,878 -- -- -- -- --
Payments received on notes
receivable from officers
and employees -- -- -- -- -- -- 45 --
Net Income -- -- -- 6,232 -- -- -- --
--------- ----- ------- ------- ----- ----- ------- -------
Balance, June 30, 1996 (unaudited) 9,764,044 $ 98 $90,026 $42,168 (409) $ (4) $(1,350) $ (74)
========= ===== ======= ======= ===== ====== ======= =======
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
Page 6 of 200
<PAGE>
<TABLE>
<CAPTION>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Six Months Ended June 30,
-------------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 43,789 $ 40,567
Proceeds from volumetric production payment 20,000 -
Cash paid to suppliers and employees (23,363) (18,329)
Interest paid (1,724) (503)
Interest received 439 13
Income taxes paid (800) (2,452)
-------- --------
Net cash provided by operating activities 38,341 19,296
-------- --------
Cash flows from investing activities:
Cash invested in seismic data (14,008) (27,376)
Cash invested in oil and gas properties (32,479) (12,261)
Cash paid to acquire property and equipment (3,100) (761)
Cash from disposal of property and equipment 59 -
Advances made to oil and gas joint venture partner - (1,142)
Collections on loans made 94 -
-------- --------
Net cash used in investing activities (49,434) (41,540)
-------- --------
Cash flows from financing activities:
Borrowings under line of credit agreements - 41,489
Principal payments under line of credit - (23,019)
Borrowings under term loan 433 -
Principal payments on term loans (571) (398)
Principal payments on capital lease obligations (640) (751)
Payments on notes receivable from officers and employees 45 -
Proceeds from issuance of senior notes 22,500 -
Proceeds from issuance of common stock 1,970 5,173
Costs of debt and equity transactions (36) (45)
-------- --------
Net cash provided by financing activities 23,701 22,449
-------- --------
Effect of exchange rate changes (182) -
-------- --------
Net increase in cash and equivalents 12,426 205
Cash and cash equivalents at beginning of period:
Continuing operations 6,242 846
Discontinued operations 234 695
-------- --------
Total cash and equivalents at beginning of period 6,476 1,541
-------- --------
Cash and cash equivalents at end of period:
Continuing operations 18,902 1,621
Discontinued operations - 125
-------- --------
Total cash and equivalents at end of period $ 18,902 $ 1,746
======== ========
</TABLE>
The accompanying notes are an integral
part of these consolidated financial
statements.
Page 7 of 200
<PAGE>
<TABLE>
<CAPTION>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited), continued
(In thousands)
Six Months Ended June 30,
-------------------------
1996 1995
-------- --------
<S> <C> <C>
Reconciliation of net income to net cash provided by operating activities:
Net income $ 6,232 $ 6,315
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, depletion and amortization 18,619 14,708
Loss (income) from discontinued operations, net of tax 988 (307)
Non-cash sales (Note E) - (1,000)
Gain on sale of property and equipment (22) -
Increase in receivables (6,227) (4,735)
Increase in other assets (2,021) (1,662)
Proceeds from volumetric production payment 20,000 -
Increase in other liabilities 2,715 5,411
-------- --------
Total adjustments 34,052 12,415
Net cash provided by (used in) operating activities of:
Continuing operations 40,284 18,730
Discontinued operations (1,943) 566
-------- --------
$ 38,341 $ 19,296
======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
Page 8 of 200
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)
June 30, 1996
NOTE A-BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions of Regulation S-X. Accordingly, they do
not include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Certain reclassifications
have been made to the amounts in the prior year's financial statements to
conform to the current year's presentation. Operating results for the six months
ended June 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. For further information, refer
to the financial statements and notes thereto for the year ended December 31,
1995.
NOTE B-EARNINGS PER SHARE
Earnings per share is based on the weighted average number of
outstanding shares of common stock during the respective periods, including
common equivalent shares applicable to assumed exercise of stock options and
warrants when such common stock equivalents are dilutive, and the Company's
other potentially dilutive securities.
Earnings per share was determined by dividing net income, as adjusted
below, by applicable shares outstanding (in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
1995 1995
-------- --------
<S> <C> <C>
Net income as reported $ 3,341 $ 6,315
Interest eliminated on assumed conversion of 9%
convertible subordinated debentures 25 50
------- -------
Total income used for fully diluted earnings per share $ 3,366 $ 6,365
======= =======
Weighted average number of common and
common equivalent shares 9,929 9,784
======= =======
Weighted average number of common shares-
assuming full dilution 10,170 10,091
======= =======
</TABLE>
NOTE C-DATA BANK
Costs incurred in the creation of proprietary seismic data are
capitalized. Seismic data costs are amortized for each project in the proportion
that its revenue for a period relates to management's estimate of ultimate
revenue. Since inception, management has established guidelines regarding its
annual charge for amortization. Under these guidelines, 90% of the cost incurred
in the creation of proprietary seismic data is amortized within five years of
inception for two-dimensional seismic data and within seven years of inception
for three-dimensional seismic data, and the final 10% is amortized on a
straight-line basis over fifteen years. Costs of existing seismic data libraries
purchased by the Company are fully amortized within ten years from date of
purchase. On a periodic basis, the carrying value of each seismic data program
is compared to its estimated future revenue and, if appropriate, is reduced to
its estimated net realizable value.
Page 9 of 200
<PAGE>
NOTE D-OIL AND GAS PROPERTIES
The Company accounts for its oil and gas exploration and production
activities using the full-cost method of accounting. Under this method, all
costs associated with acquisition, exploration and development of oil and gas
reserves, including directly related overhead costs and interest costs related
to its unevaluated properties and certain properties under development which are
not currently being amortized, are capitalized. For the six months ended June
30, 1996 and 1995, general and administrative costs of $506,000 and $401,000,
respectively, have been capitalized to oil and gas properties. For the six
months ended June 30, 1996 and 1995, interest costs of $642,000 and $304,000,
respectively, have been capitalized to oil and gas properties.
In June 1996, the Company's exploration and production subsidiary,
along with certain general partnerships for which it acts as managing partner
and in which certain officers, directors and employees of the Company and
members of their immediate families are partners, acquired an additional 30%
working interest in certain oil and gas properties for $26.5 million in cash.
The Company's subsidiary acquired a working interest of approximately 28.5%, and
such partnerships acquired a working interest of approximately 1.5%. The Company
previously owned a 19% working interest in such properties and such partnerships
owned a 1% working interest. At the same time, the Company sold a volumetric
production payment for $20 million to certain limited partnerships. Under the
terms of the production payment agreements, the Company conveyed a real property
interest of approximately 8 billion cubic feet of certain natural gas and
approximately 380,000 barrels of other hydrocarbons to the purchaser. The
Company retains responsibility for its working interest share of the cost of
operations. The proceeds of the sale were applied toward the acquisition cost of
the oil and gas properties. The Company accounted for the proceeds received in
the transaction as deferred revenue which will be amortized into revenue and
income as natural gas and other hydrocarbons are produced and delivered during
the term of the volumetric production payment agreements.
NOTE E-SUPPLEMENTAL CASH FLOW INFORMATION
Significant non-cash investing and financing activities are as follows:
1. During the first six months of 1996 and 1995, the Company issued
214,304 and 157,216 shares, respectively, of its common stock upon the
conversion and exchange of $1,989,000 and $1,457,000, respectively, of
its 9% convertible subordinated debentures. In connection with these
conversions and exchanges, unamortized bond issue costs totaling
$109,000 and $93,000 during the first six months of 1996 and 1995,
respectively, have been charged to additional paid-in-capital.
2. During the first six months of 1995, the Company licensed seismic data
valued at $1,000,000, in exchange for the purchase of seismic data for
its library.
NOTE F--DISCONTINUED OPERATIONS
On March 22, 1996, the Company's Board of Directors unanimously adopted
a plan of disposal to discontinue the Company's gas marketing operations.
Accordingly, the Company's consolidated financial statements as of December 31,
1995, were restated to reflect the discontinued operations. Effective August 1,
1996, the Company assigned substantially all of its contracts to purchase and
supply natural gas to a retail energy marketer. During the quarter ended June
30, 1996, the Company recorded an additional loss from discontinued operations
of $988,000, which is net of an income tax benefit of $580,000, primarily due to
changes in market prices to purchase gas supply. The net liabilities of
discontinued operations at June 30, 1996, consist primarily of accounts payable
and accrued liabilities offset by trade receivables and income tax benefits.
Page 10 of 200
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Total revenue increased 23% and 22% during the second quarter and first
six months of 1996, respectively, as compared to the second quarter and first
six months of 1995. Revenue primarily consists of revenue generated from the
seismic business and oil and gas production. Seismic revenue increased from
$21,193,000 during the second quarter of 1995 to $23,419,000 during the second
quarter of 1996, primarily due to an increase in revenue generated from the
licensing of seismic data currently in the Company's library. The increase in
seismic revenue from $36,991,000 during the first six months of 1995 to
$41,300,000 during the first six months of 1996 is primarily attributable to an
increase in proprietary data acquisition performed for outside parties by the
Company's crew subsidiary. Oil and gas revenue increased from $950,000 in the
second quarter of 1995 to $3,761,000 in the second quarter of 1996 and increased
from $1,760,000 in the first six months of 1995 to $6,146,000 in the first six
months of 1996. These increases in oil and gas revenue are due to more wells
being on line during the 1996 periods as compared to the 1995 periods and due to
higher prices being received on oil and gas production. At June 30, 1996, a
total of 82 wells were producing as compared to a total of 45 wells at June 30,
1996.
Depreciation, depletion and amortization consists primarily of data
bank amortization. Refer to Note C for a description of the Company's
amortization policy. Data bank amortization increased from $6,637,000 during the
second quarter of 1995 to $8,498,000 during the second quarter of 1996 and
increased from $13,380,000 to $15,488,000 for the first six months of 1995 and
1996, respectively. As a percentage of revenue from licensing seismic data, data
bank amortization was 44% and 48% for the second quarter of 1995 and 1996,
respectively, and 44% and 49% for the first six months of 1995 and 1996,
respectively. These changes are primarily due to the mix of sales of 2D and 3D
data amortized at varying percentages based on each data program's current and
expected future revenue stream.
Cost of sales consists of expenses associated with the acquisition of
seismic data for non-affiliated parties, seismic resale support services, and
oil and gas production. Cost of sales decreased from $4,440,000 to $4,399,000
for the second quarter of 1995 and 1996, respectively, and increased from
$4,787,000 to $7,669,000 for the first six months of 1995 and 1996,
respectively. The increase in cost of sales for the first half of 1996 is
primarily due to an increase in the cost of sales associated with the
acquisition of seismic data for non-affiliated parties that occurred in the
first quarter of 1996. During the first quarter of 1995, the Company's crew
subsidiary performed work solely for the Company's seismic data and exploration
and production subsidiaries for which no revenue or costs are recognized in the
consolidated statement of operations. During the first quarter of 1996, the
Company's crew subsidiary performed work for outside parties and the Company's
subsidiaries, resulting in revenue and cost of sales being reflected in the
consolidated statement of operations for the work performed for outside parties.
During the second quarter of 1996, the mix of work performed by the Company's
crew subsidiary was similar to the second quarter of 1995 and resulted in a
minimal change in the cost of sales. Additionally, cost of sales associated with
oil and gas production increased during the second quarter and first half of
1996 as compared to the same periods in 1995 due to the corresponding increase
in oil and gas revenue. Revenues from these areas increased from $6,849,000, to
$9,239,000 during the second quarter of 1995 and 1996, respectively, and
increased from $7,844,000 to $15,036,000 during the first six months of 1995 and
1996, respectively.
The Company's selling, general and administrative expenses increased
during the 1996 periods as compared to the 1995 periods primarily as a result of
variable expenses related to the increased volume of business. As a percentage
of total revenue, these expenses were 20% for the second quarter of 1995 and
1996, and decreased from 21% for the first six months of 1995 to 19% for the
first six months of 1996.
The decrease in net interest expense during the 1996 periods as
compared to the 1995 periods is primarily due to an increase in interest income
earned on the investment of increased cash balances.
On March 22, 1996, the Company's Board of Directors unanimously adopted
a plan of disposal to discontinue the Company's gas marketing operations.
Page 11 of 200
<PAGE>
Accordingly, the Company's consolidated financial statements as of December 31,
1995, were restated to reflect the discontinued operations. Effective August 1,
1996, the Company assigned substantially all of its contracts to purchase and
supply natural gas to a retail energy marketer. During the quarter ended June
30, 1996, the Company recorded an additional loss from discontinued operations
of $988,000, which is net of an income tax benefit of $580,000, primarily due to
changes in market prices to purchase gas supply; such loss represents the final
charge related to the discontinued operations.
On July 3, 1996, the Company acquired a 50% equity interest in Energy
Research International ("ERI"), a holding company which wholly owns two marine
seismic companies, Horizon Exploration Limited and Horizon Seismic Inc.
Beginning July 3, 1996, financial results from the Company's equity interest in
ERI will be included in the Company's consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
On December 28, 1995, the Company completed a private placement of
three series of unsecured Senior Notes totaling $75 million. The Company
contemporaneously issued its Series A Notes and Series B Notes, which total
$52.5 million and bear interest at a fixed rate of 7.17%. On April 9, 1996, the
Company issued its Series C Notes, which total $22.5 million and bear interest
at a fixed rate of 7.48%. The Series A Notes mature on December 30, 2001, and
require annual principal payments of $8.333 million beginning December 30, 1999.
The Series B and Series C Notes mature on December 30, 2002, and require annual
principal payments of $10 million beginning December 30, 1998. Interest on all
series of the notes is payable semi-annually on June 30 and December 30. The
Company used the majority of the proceeds of the Series A and Series B Notes to
repay amounts outstanding under a $25 million revolving line of credit, amounts
outstanding under a wholly-owned subsidiary's $75 million reducing revolving
line of credit, and amounts owed to a seismic contractor. The proceeds of the
Series C Notes are being used primarily to fund petroleum exploration and
development activities of its wholly-owned subsidiary and for other working
capital or general corporate purposes.
The Company filed a registration statement on Form S-3 (the "Shelf
Registration Statement") in June 1994 to offer from time to time in one or more
series (i) unsecured debt securities, which may be senior or subordinated, (ii)
preferred stock, par value $0.01 per share, and (iii) common stock, par value
$.01 per share, or any combination of the foregoing, at an aggregate initial
offering price not to exceed $75,000,000. The Shelf Registration Statement was
declared effective by the Securities and Exchange Commission on June 30, 1994.
In August 1994, the Company completed a public offering of 1,061,200 shares of
its common stock priced at $32 per share pursuant to the Shelf Registration
Statement. The net proceeds from the offering (after underwriting commission and
offering expenses) totaled $31,917,000. After this sale of common stock at an
initial aggregate offering price of $33,958,400, the Company may offer
additional securities in the future for up to an aggregate initial offering
price of $41,041,600 pursuant to the Shelf Registration Statement.
On July 22, 1996, the Company entered into an agreement with The First
National Bank of Chicago for a $25,000,000 unsecured revolving line of credit
facility. The facility bears interest at a rate determined by the ratio of the
Company's debt to cash flow from operations. While the company has no amounts
outstanding under the facility at this time, pursuant to the interest rate
pricing structure, $25,000,000 currently could be borrowed at LIBOR plus 3/4%,
the bank's prevailing prime rate, or the sum of the Federal Funds effective rate
for such day plus 1/2%. The facility matures on July 22, 1999.
On July 9, 1996, a wholly-owned subsidiary of the Company obtained two
term loans aggregating $7,264,000 for the purchase of land and marine seismic
equipment which secures the debt. The first term loan has a principal amount of
$5,902,000, is for a term of five years and bears interest at the rate of 8%.
Monthly principal and interest payments total $120,000. The balance outstanding
on this loan at August 12, 1996 was $5,822,000. The second term loan has a
Page 12 of 200
<PAGE>
principal amount of $1,362,000, is for a term of three years and bears interest
at the rate of 8.06%. Monthly principal and interest payments on the second term
loan total $43,000. The balance outstanding on this loan at August 12, 1996 was
$918,000. The Company expects to draw the remaining principal amount of $444,000
by the end of August, 1996.
Prior to the second quarter of 1996, the Company and two of its
wholly-owned subsidiaries obtained four separate term loans totaling $5,449,000,
three of which have a three year term and one which has a five year term. Two of
the loans bear interest at the rate of 8.413%, one at the rate of 7.61% and one
at the rate of 7.52%. The proceeds were used for the purchase of certain
property and equipment which secures the debt. Monthly principal and interest
payments total approximately $121,000. The balance outstanding on the loans at
August 12, 1996, was $2,726,000.
During 1994 and 1995, the Company and one of its wholly-owned
subsidiaries entered into three capital leases which relate to the purchase of a
second 3D seismic recording system and a seismic data processing center. These
lease agreements are for terms of three to five years. Monthly principal and
interest payments total approximately $125,000. The balance outstanding under
these capital lease obligations was $3,009,000 at August 12, 1996.
From January 1, 1996 through August 12, 1996, the Company received
$3,609,000 from the exercise of common stock purchase warrants and options and
the Company's 401(k) stock purchases. In connection with the exercises, the
Company will also receive approximately $489,000 in tax savings.
In February 1996, the Company called for the March 31, 1996 redemption
of its 9% convertible subordinated debentures, thereby eliminating future
interest and sinking fund payments. All remaining outstanding debentures
converted to common stock.
During the first six months of 1996, cash from operations and proceeds
from its Senior Notes, the exercise of common stock purchase warrants and
options, and the volumetric production payment funded the third party seismic
data creation costs borne by the Company and oil and gas exploration and
development costs, as well as taxes, interest expenses, cost of sales and
general and administrative expenses. The Company believes its revenues from
operating sources, remaining proceeds from its Senior Notes and proceeds from
the exercise of warrants and options, combined with its available line of
credit, should be sufficient to fund its capital expenditures for 1996, along
with expenditures for operating and general and administrative expenses. To the
extent these sources are not sufficient to cover the Company's expenses, it
would be necessary for the Company to arrange for additional debt or equity
financing. There can be no assurance that the Company would be able to
accomplish any such debt or equity financing on terms satisfactory to it.
PART II - OTHER INFORMATION
---------------------------
Item 1. LEGAL PROCEEDINGS.
- ---------------------------
As previously reported by the Company in its Quarterly Report or Form
10-Q for the quarter ended March 31, 1996, on May 25, 1995, Seitel Geophysical,
Inc. ("SGI"), a wholly-owned subsidiary of the Company, filed suit in United
States District Court for the Eastern District of Louisiana against Greenhill
Petroleum Corporation ("Greenhill") for breach of contract. SGI sought to
recover approximately $1.4 million owed by Greenhill to SGI for seismic data
acquisition services provided to Greenhill by SGI in 1994 in connection with a
3D seismic data shoot in southern Louisiana. Greenhill generally denied SGI's
allegations and asserted counter-claims against SGI. Prior to SGI bringing the
suit against Greenhill, Greenhill had already paid SGI in excess of $7 million
under the contract, and SGI had provided the seismic data acquired under the
contract to Greenhill. This lawsuit was tried in late May, 1996, and judgment
was entered on June 10, 1996 in favor of SGI for damages of approximately
$940,000, including legal fees, expenses, and pre-judgment interest. The trial
court denied all of Greenhill's counter-claims against SGI. Greenhill is
appealing this judgment. Post-judgment interest based on the rate of one year
Treasury Bills (currently 5.62%) is accruing on the full amount of the judgment.
While the outcome of this appeal cannot be predicted with certainty, the Company
believes that the trial court's award will be upheld.
Items 2., 3., 4., and 5. Not applicable.
- ------------------------
Page 13 of 200
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Item 6. Exhibits and Reports on Form 8-K.
- ------------------------------------------
(a) EXHIBITS
--------
10.1 Statement of Amendments effective November 29, 1995, to the Seitel,
Inc. 1993 Incentive Stock Option Plan.
10.2 Statement of Amendments effective April 22, 1996, to the Seitel, Inc.
1993 Incentive Stock Option Plan.
10.3 Seitel, Inc. Non-Employee Directors' Deferred Compensation Plan.
10.4 Loan and Security Agreement dated as of July 9, 1996, between Seitel
Geophysical, Inc. (Company's wholly-owned subsidiary) and NationsBanc
Leasing Corporation of North Carolina.
10.5 Revolving Credit Agreement dated as of July 22, 1996, among Seitel,
Inc. and The First National Bank of Chicago.
(b) Not applicable
Page 14 of 200
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEITEL, INC.
Dated: August 13, 1996 /s/ Paul A. Frame
-----------------
Paul A. Frame
President and Chief Executive Officer
Dated: August 13, 1996 /s/ Debra D. Valice
-------------------
Debra D. Valice
Chief Financial Officer
Dated: August 13, 1996 /s/ Marcia H. Kendrick
----------------------
Marcia H. Kendrick
Chief Accounting Officer
Page 15 of 200
<PAGE>
EXHIBIT INDEX Page
10.1 Statement of Amendments effective November 29, 1995, 17
to the Seitel, Inc. 1993 Incentive Stock Option Plan.
10.2 Statement of Amendments effective April 22, 1996, 18
to the Seitel, Inc. 1993 Incentive Stock Option Plan.
10.3 Seitel, Inc. Non-Employee Directors' Deferred 19
Compensation Plan.
10.4 Loan and Security Agreement dated as of July 9, 1996, 26
between Seitel Geophysical, Inc. (Company's wholly-owned
subsidiary) and NationsBanc Leasing Corporation
of North Carolina.
10.5 Revolving Credit Agreement dated as of July 22, 1996, 73
among Seitel, Inc. and The First National Bank of Chicago.
Ex-27 Financial Data Schedule for Quarter Ended June 30, 1996 200
Page 16 of 200
EXHIBIT 10.1
SEITEL, INC. 1993 INCENTIVE STOCK OPTION PLAN
Statement of Amendments Effective November 29, 1995
1. The definition of the term "Options" set forth in Section II is hereby
amended to read in its entirety as follows:
(7) Options shall mean the Incentive Stock Options and the
Non-Qualified Stock Options granted from time to time under the Plan. If
Options are not designated as Incentive Stock Options or Non-Qualified
Stock Options at the time of grant, the number of Options granted which
qualify for treatment as Incentive Stock Options under the Code will be
Incentive Stock Options, and the remainder of such Options, if any, will be
Non-Qualified Stock Options.
2. The following new definitions are hereby added to Section II:
(10) Incentive Stock Option shall mean a stock option granted under
the Plan that is intended to be an incentive stock option within the
meaning of Section 422 of the Code.
(11) Non-Qualified Stock Option shall mean a stock option granted
under the Plan that is not an incentive stock option within the meaning of
Section 422 of the Code.
3. The subsection of Section VII headed "Option Price" is hereby amended to
read in its entirety as follows:
The purchase price of each Share placed under an Incentive Stock
Option shall be determined by the Committee, but shall in no event be less
than one hundred percent (100%) of the Fair Market Value of such Share on
the date the Incentive Stock Option is granted. However, the purchase price
of each Share placed under an Incentive Stock Option to a Participant who
owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Subsidiary at
the time of the grant shall be at least one hundred and ten percent (110%)
of the Fair Market Value of such Share on the date the Option is granted.
The purchase price of each Share placed under a Non-Qualified Stock Option
shall be determined by the Committee, and may be less than, equal to, or
greater than the Fair Market Value of such Share on the date the
Non-Qualified Stock Option is granted.
4. The first two sentences of the subsection of Section VII headed "Option
Period and Terms" are hereby amended to read in their entirety as follows:
No option shall be exercisable after the expiration of ten (10) years
from the date such Option is granted. However, if the Participant to whom
an Incentive Stock Option is granted owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company or any Subsidiary at the time such Incentive Stock Option shall
not be exercisable after the expiration of five (5) years from the date
such Incentive Stock option is granted.
5. The subsection of Section VII headed "Maximum Annual Amount Per Employee"
is hereby amended to read in its entirety as follows:
The aggregate fair market value (determined as of the time the
Incentive Stock Option is granted) of the stock with respect to which
Incentive Stock Options are exercisable for the first time by any
Participant during any calendar year (under this and any other plans of the
Company or any Subsidiary) shall not exceed $100,000.
Page 17 of 200
EXHIBIT 10.2
SEITEL, INC. 1993 INCENTIVE STOCK OPTION PLAN
Statement of Amendments Effective April 22, 1996
1. The first sentence of Section V is hereby amended to read as follows:
Subject to adjustment as provided in Section VIII hereof, a total of
One Million One Hundred Fifty Thousand (1,150,000) shares of Common Stock
of the Company (the "Shares") shall be subject to the Plan.
Page 18 of 200
EXHIBIT 10.3
SEITEL, INC.
NON-EMPLOYEE DIRECTORS'
DEFERRED COMPENSATION PLAN
1. Purpose. The purpose of the Non-Employee Directors' Deferred Compensation
Plan (the "Plan") of Seitel, Inc., a Delaware corporation (the "Company"),
is to attract and retain highly qualified persons to serve as non-employee
Directors of the Company by providing such Directors with greater
flexibility in the form and timing of receipt of fees for services on the
Board of Directors, and an opportunity to obtain a greater proprietary
interest in the Company's success and progress through receipt of fees in
the form of options and deferral of fees in the form of Deferred Shares,
thereby aligning such Directors' interests more closely with the interests
of shareholders of the Company.
2. Definitions. In addition to terms defined elsewhere in the Plan, the
following are defined terms under the Plan:
(a) "Account" means the account established under Sections 8 and 9 for
Participants, which may include, as subaccounts, a Cash Account and
Deferred Share Account. Such Accounts, and deferred cash and Deferred
Shares credited thereto, are maintained solely as bookkeeping entries by
the Company evidencing unfunded obligations of the Company.
(b) "Agreement" means a written agreement between the Company and a
Participant setting forth the terms of an Option.
(c) "Board" means the Board of Directors of the Company.
(d) "Deferred Share" means a credit to a Participant's Deferred Share
Account under Section 9 which represents the right to receive one Share
upon settlement of the Account.
(e) "Director Fees" means annual director fees payable to a Director
in his or her capacity as such for service on the Board.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as
amended. References to any provision of the Exchange Act include rules
thereunder and successor provisions and rules thereto.
(g) "Fair Market Value" of a Share means, as of any given date, the
closing sales price of a Share reported in the table entitled "New York
Stock Exchange Composite Transactions" contained in The Wall Street Journal
(or an equivalent successor table) for such date or, if no such closing
sales price was reported for such date, for the most recent trading day
prior to such date for which a closing sales price was reported.
(h) "Option" means the right, granted to a Participant under Section 7
in payment of Director Fees, to purchase a specified number of Shares at
the specified exercise price for a specified period of time under the Plan.
All Options will be non-qualified stock options.
(i) "Option Value" means the value of an Option as of a given date
determined in accordance with the Black-Scholes option valuation model or
such other recognized option valuation model used by the Company in
preparing footnotes to the Company's financial statements. For this
purpose, the applicable option valuation model shall be based on
assumptions consistent with those then used in preparing footnotes to the
Company's financial statements in conformity with Statement of Financial
Accounting Standards No. 123.
(j) "Participant" means a person who has been granted an Option in
payment of Director Fees which remains outstanding, who has amounts of
deferred cash or Deferred Shares credited to his or her Account, or who has
elected to be granted Options in payment of Director Fees or to defer
payment of Director Fees in the form of deferred cash or Deferred Shares
under the Plan.
Page 19 of 200
<PAGE>
(k) "Plan Year" means, with respect to a Participant, the period
commencing at the time of election of the Director at an annual meeting of
shareholders (or the election of a class of Directors if the Company then
has a classified Board of Directors), or the Director's initial appointment
to the Board if not at an annual meeting of shareholders, and continuing
until the next annual meeting of shareholders.
(l) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(m) "Share" means a share of Common Stock, $.01 par value, of the
Company and such other securities as may be substituted for such Share or
such other securities pursuant to Section 11.
(n) "Valuation Date" means the last business day of a Plan Year and
the last business day preceding a date on which a distribution is made in
settlement of a Participant's Account.
3. Shares Available Under the Plan. The total number of Shares reserved and
available for issuance under the Plan is 30,000, subject to adjustment as
provided in Section 11. Such Shares may be authorized but unissued Shares,
treasury Shares, or Shares acquired in the market for the account of the
Participant. For purposes of the Plan, Shares that may be purchased upon
exercise of an Option or distributed in settlement of Deferred Shares will
not be considered to be available after such Option has been granted or
Deferred Share credited, except for purposes of issuance in connection with
such Option or Deferred Share; provided, however, that if an Option expires
for any reason without having been exercised in full, the Shares subject to
the unexercised portion of such Option will again be available for issuance
under the Plan.
4. Administration of the Plan. The Plan will be administered by the Board;
provided, however, that any action by the Board relating to the Plan will
be taken only if, in addition to any other required vote, such action is
approved by the affirmative vote of a majority of the Directors who are not
then eligible to participate in the Plan. Subject to the direction of the
Board, bookkeeping and other ministerial functions under the Plan shall be
performed by the Secretary and the Chief Accounting Officer of the Company.
5. Eligibility. Each non-employee Director of the Company who is paid Director
Fees for service on the Board may participate in the Plan. No person other
than those specified in this Section 5 will be eligible to participate in
the Plan.
6. Elections Relating to Participation. Each Director of the Company who is
eligible under Section 5 may elect, in accordance with this Section 6, to
be paid Director Fees in the form of Options under Section 7 or to defer
receipt of Director Fees in the form of deferred cash under Section 8 or in
the form of Deferred Shares under Section 9.
(a) Time of Filing of Elections; Irrevocability. A Director shall
elect to participate and the terms of such participation by filing an
election with the Secretary of the Company prior to the beginning of a Plan
Year (which generally will begin at each annual meeting of the
shareholders) or at such earlier time as may be specified by the Secretary
in order to ensure compliance with Rule 16b-3. Elections shall be deemed
continuing, and therefore applicable to Plan Years after the initial Plan
Year, until the election is modified or revoked by the Participant.
Elections other than those subject to Section 6(d) shall become irrevocable
at the commencement of the Plan Year to which an election relates, unless
the Secretary specifies an earlier time at which elections shall become
irrevocable in order to ensure compliance with Rule 16b-3. Elections
relating to the time of settlement of a Cash Account or Deferred Share
Account shall become irrevocable at the time specified in Section 6(d).
Elections may be modified or revoked by filing a new election prior to the
time the election to be modified or revoked has become irrevocable. The
latest election filed with the Secretary shall be deemed to revoke all
Page 20 of 200
<PAGE>
prior inconsistent elections that remain revocable at the time of filing of
the latest election. The Secretary will notify eligible Directors of any
date prior to the commencement of a Plan Year by which Directors must make
elections or upon which elections will become irrevocable in order to
ensure compliance with Rule 16b-3.
(b) Matters to be Elected. A Director's election must specify the
following:
(i) With respect to Director Fees, the percentage to be paid in
the form of Options under Section 7, the percentage to be deferred and
credited to the Participant's Cash Account under Section 8, and the
percentage to be deferred and credited to the Participant's Deferred
Share Account under Section 9. The sum of such percentages must not
exceed 100%; if such sum is less than 100%, the balance of Director
Fees will be paid in accordance with the Company's regular
non-employee Director compensation policies.
(ii) In the case of a deferral under Section 8 or 9, the period
or periods during which settlement of the Participant's Cash Account
or Deferred Share Account will be deferred, subject to Section 6(d),
and whether distribution will be in a lump sum or in annual
installments; provided, however, that not more than ten installments
may be elected, and any installment distributions must commence no
later than the first business day of the year following the year in
which the Participant ceases to serve as a Director. An election as to
the period or periods in which such settlement will be deferred may
relate to a given Plan Account or Deferred Share Account in respect of
such Plan Year and to any additional amounts credited as interest or
dividend equivalents in respect of such originally credited amounts
and previously credited amounts.
(c) Form of Election. Elections under the Plan shall be made in
writing on such form or forms as may be specified from time to time by the
Secretary.
(d) Modifying the Time of Settlement. A Participant may modify an
election as to the time at which a Participant's Cash Account will be
settled under Section 8 or Deferred Share Account will be settled under
Section 9 at any time prior to the earlier of (i) the calendar year in
which a lump sum settlement will occur or the first installment will
commence or (ii) the time the Participant ceases to serve as a Director of
the Company, except that such modification may only extend the date of
settlement to a date later than the previously elected settlement date.
Such modification shall be made by filing a new election with the
Secretary. The foregoing notwithstanding, the Secretary may disapprove or
limit elections under this Section 6(d) in order to ensure that the
Participant will not be deemed to have constructively received compensation
in respect of the Participant's Account prior to settlement.
(e) Delayed Effectiveness of Elections in Order to Comply with Rule
16b-3. Other provisions of this Section 6 notwithstanding, if any payment
of Director Fees in the form of Options under Section 7 or deferral of
receipt of Director Fees in the form of Deferred Shares under Section 9
would occur (i) less than six months after the Participant's election which
would result in such payment or deferral became irrevocable, (ii) at a time
when the Company's employee benefit plans are being operated in conformity
with Rule 16b-3 as in effect on and after May 1, 1991, and (iii) at a time
that Rule 16b-3 imposes a requirement with participant-director
transactions occur at least six months after the participant's making of an
irrevocable election in order for such transactions to be exempt from
Section 16(b) liability, then any Director Fees otherwise payable within
six months after such election became irrevocable shall instead accrue and
be payable at the date that is six months and one day after such election
became irrevocable.
(f) No Reallocation of Accounts. Amounts credited as cash to a
Participant's Cash Account may not be reallocated or switched to the
Participant's Deferred Share Account, and amounts credited to the
Participant's Deferred Share Account may not be reallocated or switched to
the Participant's Cash Account.
(g) Cessation of Service as a Director. If any Director Fees otherwise
subject to an election would be paid to a Participant after he or she has
ceased to serve as a Director, such payment shall not be subject to such
election, but shall instead be paid in accordance with the Company's
regular non-employee Director compensation policies.
Page 21 of 200
<PAGE>
7. Options Granted in Payment of Director Fees. A Participant who has elected
to be paid a specified amount of Director Fees in the form of Options shall
be granted, at the close of business on the day the Participant's Plan Year
commences (usually the day of the Company's annual meeting of
shareholders), an Option to purchase the number of whole Shares determined
by dividing the specified amount of Director Fees (as then in effect) that
would be payable for the full Plan Year by the Option Value as of that
date. The Fair Market Value of any fractional share resulting from the
foregoing calculation will be paid in cash to the Participant.
(a) Exercise Price. The exercise price per Share purchasable under an
Option will be equal to 100% of the Fair Market Value of a Share on the
date of grant of the Option.
(b) Option Term. Each Option will expire ten years after the date of
grant; provided, however, that any portion of an Option that is not yet
exercisable at the date a Participant ceases to serve as a Director will
expire at the date such service ceases.
(c) Exercisability. Each Option will become exercisable as to 25% of
the underlying shares on the last day of each calendar quarter following
the date of grant; provided, however, that any Option that is not fully
exercisable at the close of business on the last day of the Plan Year in
which it was granted shall become fully exercisable on such date.
(d) Method of Exercise. Each Option may be exercised, in whole or in
part, at such time as it has become exercisable and prior to its expiration
by giving written notice of exercise to the Secretary specifying the Option
to be exercised and the number of shares to be purchased, and accompanied
by payment in full of the exercise price in cash (including by check) or by
surrender of Shares (other than Shares acquired from the Company by
exercise of an option less than six months before the date of surrender)
having a Fair Market Value at the time of exercise equal to the exercise
price, or a combination of a cash payment and surrender of such Shares.
(e) Changes in Fees. If the amount of Director Fees is increased
during a Plan Year, the increase in such fees may not be paid in the form
of Options.
8. Deferral of Director Fees in the Form of Deferred Cash. If a Participant
has elected to defer receipt of a specified amount of Director Fees in the
form of deferred cash, an amount equal to such specified amount shall be
credited to the Participant's Cash Account as of the date such Director
Fees otherwise would have been payable to the Participant but for such
election to defer. As of the close of business on each Valuation Date,
interest shall be credited to such Cash Account in an amount equal to the
average daily balance in such Cash Account since the last Valuation Date
multiplied by the prime interest rate as published in The Wall Street
Journal and effective on the date of the last preceding annual meeting of
shareholders of the Company.
9. Deferral of Director Fees in the Form of Deferred Shares. If a Participant
has elected to defer receipt of a specified amount of Director Fees in the
form of Deferred Shares, a number of Deferred Shares shall be credited to
the Participant's Deferred Share Account, at the close of business on the
day the Participant's Plan Year commences, equal to the number of Shares
having an aggregate Fair Market Value on such date equal to such specified
amount. Such credit of Deferred Shares to the Participant's Deferred Share
Account will initially be unvested and subject to forfeiture, and shall
vest and become nonforfeitable as to 25% of such number of Deferred Shares
on the last day of each calendar quarter following the date of such credit,
except if all such shares have not become fully vested but the Director has
served through the end of the applicable Plan Year, the full number of such
Deferred Shares will become fully vested and nonforfeitable. Any Deferred
Shares credited to a Participant's Deferred Share Account that are unvested
at the time a Director ceases to serve as such will be forfeited at that
time, regardless of the reason for the Director's termination. The amount
of Deferred Shares credited to a Participant's Deferred Share Account shall
include fractional Shares calculated to at least three decimal places.
Page 22 of 200
<PAGE>
(a) Crediting of Dividend Equivalents - Cash and Non-Share Dividends.
If the Company declares and pays a dividend in the form of cash or property
other than Shares in respect of Shares, then a number of additional
Deferred Shares shall be credited to the Deferred Share Account as of the
payment date for such dividend equal to (i) the number of Deferred Shares
credited to such Account as of the record date for such dividend,
multiplied by (ii) the amount of cash plus the Fair Market Value of any
property other than Shares actually paid as a dividend on each Share at
such payment date, divided by (iii) the Fair Market Value of a Share at
such payment date.
(b) Crediting of Dividend Equivalents - Share Dividends and Splits. If
the Company declares and pays a dividend in the form of additional Shares
payable in respect of Shares, or there occurs a forward stock split of
Shares, then a number of additional Deferred Shares shall be credited to
the Participant's Deferred Share Account as of the payment date for such
dividend or forward stock split equal to (i) the number of Deferred Shares
credited to such Account as of the record date for such dividend or split
multiplied by (ii) the number of additional Shares actually paid as a
dividend or issued in such split in respect of each Share.
10. Settlement of Accounts. The Company will settle a Participant's Account by
making one or more distributions to the Participant (or his or her
designated beneficiary, upon the Participant's death) at the time or times,
in a lump sum or installments, as specified in the Participant's election
filed in accordance with Section 6; provided, however, that Accounts will
be settled at times earlier than those specified in such election in
accordance with Sections 10(b), 10(c), and 11.
(a) Form of Distribution. Distributions in respect of a Participant's
Cash Account shall be made only in cash. Distributions in respect of a
Participant's Deferred Share Account shall be made only in Shares, together
with cash in lieu of any fractional Share remaining at a time that less
than one whole Deferred Share is credited to such Deferred Share Account.
Shares may be delivered in certificate form to a Participant (or his or her
designated beneficiary) or to a nominee for the account of the Participant
(or his or her designated beneficiary), or in such other manner as the
Secretary may determine.
(b) Termination of Service as a Director; Death.
(i) Cessation of Service Other than Due to Death. If a
Participant ceases to serve as a Director due to any reason other than
death, the Company shall make distributions in respect of the
Participant's Account to such Participant in a lump sum or
installments, as previously elected by the Participant, except that
installment payments shall commence not later than the first business
day of the year following the year in which the Participant ceases to
serve as a Director.
(ii) Death. If a Participant ceases to serve as a Director due to
death or dies prior to distribution of all amounts from his or her
Account, the Company shall make a single lump sum distribution to the
beneficiary designated by such Participant in his or her most recent
beneficiary designation form filed with the Secretary. If there is no
beneficiary designation on file with the Secretary at the time of the
Participant's death or no surviving designated beneficiary, such
distributions shall be made to the executor or administrator of the
Director's estate. Any such distribution shall be made as soon as
practicable following notification to the Company of the Participant's
death.
(c) Financial Hardship. Other provisions notwithstanding, at the
written request of a Participant or his or her legal representative, the
Board, in its sole discretion, upon a finding that continued deferral will
result in financial hardship to the Participant, may authorize (i) the
distribution of all or a part of a Participant's Account in a single
installment or (ii) the acceleration of payment of any multiple
installments thereof.
11. Adjustment Provisions. In the event any recapitalization, reorganization,
merger, consolidation, spin-off, combination, repurchase, exchange of
Shares or other securities of the Company, stock split or reverse split,
Page 23 of 200
<PAGE>
extraordinary dividend (whether in the form of cash, Shares, or other
property), liquidation, dissolution, or other similar corporate transaction
or event affects the Shares such that an adjustment is appropriate in order
to prevent dilution or enlargement of a Participant's rights under the
Plan, then an adjustment shall be made, in a manner that is proportionate
to the change to the Shares and otherwise equitable, in (i) the number and
kind of Shares remaining reserved and available for issuance under Section
3, (ii) the number and kind of Shares issuable upon exercise of outstanding
Options, and the exercise price per Share thereof (provided that no
fractional Shares will be issued upon exercise of any Option), and (iii)
the number and kind of Shares to be issued upon settlement of Deferred
Shares under Section 9. Upon the effective date of the dissolution or
liquidation of the Company, or of a reorganization, merger, or
consolidation of the Company with one or more other corporations in which
the Company is not the surviving corporation, or of the transfer of
substantially all of the assets or shares of the Company to another
corporation, the Plan shall terminate and all distributions shall be
completed five business days before the scheduled completion of such
corporate event unless provision is made in writing in connection with such
corporate event for the continuance of the Plan and for the assumption of
Accounts maintained under the Plan immediately prior to the effectiveness
of such corporate event.
12. Changes to the Plan. The Board may amend, alter, suspend, discontinue, or
terminate the Plan without the consent of shareholders or Participants,
except that any amendment or alteration will be subject to the approval of
the Company's shareholders at or before the next annual meeting of
shareholders for which the record date is after the date of such Board
action if such shareholder approval is required by any federal or state law
or regulation or the rules of any stock exchange or automated quotation
system as then in effect, and the Board may otherwise determine to submit
other such amendments or alterations to shareholders for approval;
provided, however, that, without the consent of an affected Participant, no
such action may materially impair the rights of such Participant with
respect to any previously granted Option or any previous payment of fees in
the form of deferred cash or Deferred Shares; and, provided further, that
any provisions of this Plan relating to the amount, price, and timing of
awards under this Plan shall not be amended more than once every six
months, other than to comport with changes in the Internal Revenue Code,
the Employee Retirement Income Security Act, or the rules thereunder, if
such amendment would not comply with the requirements of Rule 16b-3.
13. General Provisions.
(a) Agreements; Account Statements. Options, Deferred Shares, and
other rights or obligations under the Plan may be evidenced by Agreements
or other documents executed by the Company and the Participant
incorporating the terms and conditions set forth in the Plan, together with
such other terms and conditions not inconsistent with the Plan, as the
Secretary may from time to time approve. The Secretary shall provide each
Participant, not less frequently than once per Plan Year, with an account
statement reflecting Account balances under the Plan, Account transactions
during the period covered by the statement, and such other information as
the Secretary may deem relevant.
(b) Compliance with Laws and Obligations. The Company will not be
obligated to issue or deliver Shares in connection with any Option or in
settlement of Deferred Shares in a transaction subject to the registration
requirements of the Securities Act of 1933, as amended, or any other
federal or state securities law, any requirement under any listing
agreement between the Company and any stock exchange or automated quotation
system, or any other law, regulation, or contractual obligation of the
Company, until the Company is satisfied that such laws, regulations, and
other obligations of the Company have been complied with in full.
Certificates representing Shares issued under the Plan will be subject to
such stop-transfer orders and other restrictions as may be applicable under
such laws, regulations, and other obligations of the Company, including any
requirement that a legend or legends be placed thereon.
(c) Limitations on Transferability. Options, Deferred Shares, and any
other rights under the Plan will not be transferable by a Participant
except by will or the laws of descent and distribution, or to a designated
beneficiary in the event of a Participant's death, and Options will be
exercisable during the lifetime of the Participant only by such Participant
or his or her guardian or legal representative; provided, however, that
Options, Deferred Shares, and related rights may be transferred to one or
more transferees during the lifetime of the Participant, but only if and to
the extent then permissible without loss of the exemption under Rule 16b-3
Page 24 of 200
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and consistent with the registration of the offer and sale of Shares
related thereto on Form S-8, Form S-3, or such other registration form of
the Securities and Exchange Commission as may then be filed and effective
with respect to the Plan. The Company may rely upon the beneficiary
designation last filed in accordance with this Section 13(c).
(d) Nonforfeitability. The interest of each Participant in deferred
cash or vested Deferred Shares credited to his or her Account at all times
will be nonforfeitable.
(e) Compliance with Rule 16b-3. It is the intent of the Company that
this Plan comply in all respects with applicable provisions of Rule 16b-3
in connection with any grant of Options or deferral in the form of Deferred
Shares. Accordingly, if any provision of this Plan or an Agreement does not
comply with the requirements of Rule 16b-3 as then applicable to any such
transaction, or would preclude a Director of the Company from being deemed
a "disinterested person" under then applicable provisions of Rule 16b-3,
such provision will be construed or deemed amended to the extent necessary
so that such Participant shall avoid liability under Section 16(b) and
ensure that the Director's status as a "disinterested person" is
unaffected.
(f) Continued Service as an Employee. If a Participant ceases to serve
as a Director and, immediately thereafter, is employed by the Company or
any subsidiary, then such Participant will not be deemed to have ceased to
serve as a Director or as Chairman or as a member of a Board committee at
that time, and his or her continued employment by the Company or any
subsidiary will be deemed to be continued service as a Director or Chairman
or a member of a Board committee; provided, however, that such former
Director will not be deemed to be a non-employee Director for purposes of
Section 5.
(g) No Right to Continue as a Director. Nothing contained in the Plan
or any Agreement will confer upon any Participant any right to continue to
serve as a Director of the Company or to be nominated for re-election as a
Director.
(h) No Shareholder Rights Conferred. Nothing contained in the Plan or
any Agreement will confer upon any Participant (or any person claiming
rights by or through a Participant) any rights of a shareholder of the
Company unless and until Shares are in fact issued to such Participant (or
person) or, in the case of an Option, such Option is validly exercised in
accordance with Section 7.
(i) Unfunded Status of Accounts. The Plan is intended to constitute an
"unfunded" plan to provide deferred compensation. With respect to any
rights to payment of a Participant under his or her Account, nothing
contained in the Plan or any Agreement shall give any such Participant any
rights that are greater than those of a general creditor of the Company.
(j) Nonexclusivity of the Plan. Neither the adoption of the Plan by
the Board nor its submission to the shareholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board to adopt such other compensatory arrangements for Directors as it may
deem desirable.
(k) Governing Law. The validity, construction, and effect of the Plan
and any Agreement will be determined in accordance with the laws of the
State of Delaware and applicable federal law.
14. Shareholder Approval, Effective Date, and Plan Termination. The Plan will
be effective as of the opening of business of the Company's 1996 Annual
Meeting of Shareholders if, and only if, the shareholders of the Company
approve the Plan at such Annual Meeting by the affirmative votes of the
holders of a majority of Shares present, or represented, and entitled to
vote on the matter at such Annual Meeting. Unless earlier terminated by
action of the Board or in accordance with Section 11, the Plan will remain
in effect until such time as no Shares remain available for issuance under
the Plan and the Company and Participants have no further rights or
obligations under the Plan.
Adopted By the Board of Directors effective May 22, 1996.
Page 25 of 200
EXHIBIT 10.4
LOAN AND SECURITY AGREEMENT
between
SEITEL GEOPHYSICAL, INC.,
as Debtor,
and
NATIONSBANC LEASING CORPORATION OF NORTH CAROLINA,
as Secured Party,
dated as of July 9, 1996
THIS LOAN AND SECURITY AGREEMENT dated as of July 9, 1996 (as amended,
modified, supplemented, restated and/or replaced from time to time, the
"Agreement"), between SEITEL GEOPHYSICAL, INC., a Delaware corporation
("Debtor"), and NATIONSBANC LEASING CORPORATION OF NORTH CAROLINA, a North
Carolina corporation ("Secured Party").
PRELIMINARY STATEMENTS:
(1) Debtor has requested that Secured Party make loans in the aggregate
principal amount of $7,264,211.13 to Debtor pursuant to the terms of the
Agreement as evidenced by promissory notes in such amount to finance Debtor's
acquisition of the Equipment (hereinafter defined).
(2) Secured Party has agreed to make the Loans to Debtor on the
condition, among other things, that Debtor shall have executed and delivered the
Notes (hereinafter defined) payable to Secured Party, this Agreement, any
required amendment or supplement hereto Granting (hereinafter defined) Secured
Party a first priority security interest in the Collateral (hereinafter
defined), related UCC-1 financing statements and other filings reasonably deemed
necessary or prudent by Secured Party to perfect such security interest.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor and Secured Party hereby agree as follows:
ARTICLE I
DEFINED TERMS; CREDIT FACILITIES; CONDITIONS PRECEDENT
SECTION 1.1 Definitions. When used in this Agreement, the following
capitalized terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Affiliate" means a Person (i) which directly or indirectly through one
or more intermediaries controls, or is controlled by, or is under common control
with, Debtor; (ii) which beneficially owns or holds 10% or more of any class of
the voting stock of Debtor, or (iii) of which 10% or more of the voting stock is
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<PAGE>
beneficially owned or held by Debtor or a Subsidiary.
"Assigned Agreements" has the meaning set forth in Section 2.1(b)
hereof.
"Beneficiary" has the meaning set forth in Section 6.1 hereof.
"Bills of Sale" means each warranty bill of sale in favor of the Debtor
duly executed by the Seller of the Equipment.
"Break-Funding Costs" means, in the case of any voluntary prepayment of
all or any portion of the unamortized balance of the Loans, an amount reasonably
determined by Secured Party as shall compensate Secured Party as a result of the
inability of Secured Party in its reasonable discretion to redeploy the amount
so prepaid at an interest rate equal to or greater than the interest rate on the
applicable Loan and for a term equal to the remaining average life of the
applicable Loan.
"Business Day" means any day other than a day on which banking
institutions in the states of North Carolina or Georgia are authorized or
required by law to close.
"Closing Date" means July 12, 1996.
"Collateral" shall have the meaning set forth in Section 2.1 hereof.
"Default" shall mean an event or occurrence which upon the giving of
notice and/or the lapse of time shall constitute an Event of Default.
"Equipment" means each item of marine-based or land-based seismic
recordation equipment as more specifically described in Exhibit A attached
hereto and made a part hereof.
"Equipment Cost" means, with respect to any item of Equipment, an
amount equal to the sum of (a) the total cost paid by Debtor for such item of
Equipment plus (b) all excise, sales and use taxes and registration fees paid by
Debtor on or with respect to the acquisition of such item of Equipment, both as
evidenced by invoices, appraisals and/or bills of sale in form and substance
reasonably satisfactory to Secured Party.
"ERISA" has the meaning set forth in Section 3.1(t) hereof.
"Event of Default" has the meaning set forth in Section 5.1 hereof.
"Event of Loss" with respect to an item of Equipment means any of the
following events: (i) loss of any item of Equipment or of the use thereof due to
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<PAGE>
theft or disappearance prior to the expiration or termination of this Agreement,
or the non-existence of any item of Equipment at the expiration or termination
of this Agreement, (ii) destruction, damage beyond repair, or rendition of any
item of Equipment permanently unfit for normal use for any reason whatsoever,
(iii) any damage to any item of Equipment which results in an insurance
settlement with respect to such item of Equipment on the basis of a total loss,
or (iv) the condemnation, confiscation, seizure, or requisition of use or title
to any item of Equipment by any governmental authority under the power of
eminent domain or otherwise.
"Event of Loss Payment Date" has the meaning set forth in Section 4.3
hereof.
"Grant" means to grant, bargain, sell, warrant, remise, release,
convey, assign, transfer, mortgage, pledge, deposit, set over, confirm or create
a security interest under the North Carolina UCC. A grant with respect to any
instrument, document or agreement shall include all rights, powers and options
(but none of the obligations) of the granting party thereunder, including
without limitation the right to generally do anything which the granting party
then is or thereafter may be entitled to do thereunder or with respect thereto.
"Guarantor" means Seitel, Inc., a Delaware corporation.
"Guaranty" means the Guaranty Agreement dated as of the date hereof, as
such may be amended, modified, supplemented, restated and/or replaced from time
to time, executed by Guarantor for the benefit of Secured Party.
"Installment Payment Date" means the last day of each monthly period
with respect to Term Loan A and Term Loan B.
"Lien" means any lien, claim, charge, security interest, mortgage
and/or other encumbrance.
"Loans" means each of Term Loan A and Term Loan B.
"North Carolina UCC" or "UCC" means the North Carolina Uniform
Commercial Code, N.C. Gen. Stat. Chapter 25, Articles 1-11, as now in effect and
as hereafter amended from time to time.
"Notes" means each of Secured Term Note A and Secured Term Note B.
"Notice of Borrowing" means a notice of borrowing delivered pursuant to
Section 1.3(b)(i) substantially in the form of Schedule 1.3(b)(i) hereto.
"PBGC" has the meaning set forth in Section 3.1(t) hereof.
"Permitted Contest" means any contest by Debtor with respect to any
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<PAGE>
Lien, tax or imposition referred to in Section 6.2 hereof, so long as Debtor
shall contest, in good faith and at its expense, the existence, the amount or
the validity thereof, the amount of the damages caused thereby, or the extent of
its liability therefor, by appropriate Proceedings which do not result in (i)
the collection of, or other realization upon, the tax, assessment, levy, fee,
rent or Lien so contested, (ii) the sale, forfeiture or loss of any item of
Equipment or any material part thereof, or (iii) any interference with the use
of any item of Equipment or any material part thereof.
"Permitted Encumbrances", with respect to the Collateral, means (i)
this Agreement and any assignment permitted hereby, (ii) any Lien affecting the
Collateral for work or service performed or materials furnished securing amounts
which are not yet due and payable or which are not otherwise delinquent and
(iii) any Lien which is the subject of a Permitted Contest and (iv) any other
Lien incurred in the ordinary course of business which such Lien does not exceed
$50,000.
"Permitted Lease" shall mean a lease of all the Equipment or any
portion thereof entered into between Debtor and a Permitted Lessee; provided,
that the following conditions shall be met with respect to each such lease: (i)
Secured Party shall have given its prior written consent to such lease; (ii)
upon the effective date of such lease, there shall exist no Default or Event of
Default and no Liens on any of the Collateral other than the Permitted
Encumbrances; (iii) each such lease shall specify explicitly as a condition to
the effectiveness of such lease that (A) Debtor shall remain fully obligated and
in compliance with the terms and conditions of this Agreement and (B) upon
Secured Party's delivery to the lessee of notice specifying that an Event of
Default has occurred and is continuing and that the Secured Party has commenced
the exercise of remedies with respect to the Equipment, such lease will
automatically terminate and be of no further force or effect and the lessee will
cause each item of Equipment then subject to such lease to be delivered to
Secured Party at a place to be designated by Secured Party. For purposes of this
definition, the subleases entered between Debtor, as lessor, and Seller, as
lessee, with respect to the Equipment shall be considered a "Permitted Lease."
"Permitted Lessee" shall mean any Person which (i) is domiciled in the
United States, (ii) in Debtor's reasonable opinion, is financially responsible
and (iii) at the time Debtor enters into such lease, is not the subject of any
filing by or against such Person of a petition under any federal bankruptcy law
or any federal law replacing or superseding such law or any state bankruptcy law
in which such Person is named as debtor. For purposes of this definition, Seller
shall be considered a "Permitted Lessee."
"Person" means an individual or a corporation, partnership, trust,
Page 29 of 200
<PAGE>
association, joint venture, joint stock company, firm or other enterprise or
government (or a political subdivision or any agency, department or
instrumentality thereof) or other entity of any kind.
"Plan" means any "employee benefit pension plan" or other "plan"
(including a "multiemployer plan" as defined in Section 3(37) of ERISA)
established or maintained, as to which contributions have been made, by Debtor
or any Affiliate for either of their respective employees and which is covered
by Title IV of ERISA or to which Section 412 of the Internal Revenue Code of
1986, as amended applies.
"Proceeding" means any suit in equity, action at law or other judicial
or administrative proceeding.
"Replacement Equipment" means an item (i) of comparable make, model and
manufacture as the item of Equipment with respect to which an Event of Loss has
occurred, (ii) selected by Debtor and consented to by Secured Party, such
consent not to be unreasonably withheld or delayed, (iii) owned by Debtor free
and clear of all Liens and other encumbrances other than Permitted Encumbrances
and (iv) having a value, utility and useful life at least equal to, and being in
as good operating condition as, the item of Equipment with respect to which the
Event of Loss occurred, assuming such item of Equipment was in the condition and
repair required by the terms hereof immediately prior to the occurrence of the
Event of Loss.
"Secured Obligations" has the meaning set forth in Section 2.2 hereof.
"Secured Party" means NationsBanc Leasing Corporation of North
Carolina, a North Carolina corporation, and its successors and assigns.
"Security Instrument" means each of this Agreement, and any other
instrument, document, financing statement or agreement with respect to which any
right or interest in or with respect to the Collateral has been Granted to
Secured Party or has been recorded with the appropriate filing office.
"Secured Term Note A" means the promissory note of the Debtor in favor
of the Secured Party dated the Closing Date evidencing Term Loan A as provided
pursuant to Section 1.3(a)(iii), as amended, modified, supplemented, extended,
renewed or replaced from time to time.
"Secured Term Note B" means the promissory note of the Debtor in favor
of the Secured Party dated the Closing Date evidencing Term Loan B as provided
pursuant to Section 1.3(b)(iii), as amended, modified, supplemented, extended,
renewed or replaced from time to time.
"Seller" means Horizon Exploration Ltd., a company organized and
existing under the laws of England.
Page 30 of 200
<PAGE>
"Subsidiary" means any corporation, limited liability company,
partnership, joint venture, trust or estate of which (i) more than 50% of the
outstanding capital stock having ordinary voting power to elect a majority of
the board of directors of such corporation; or (ii) the interest in the capital
or profits of such corporation, limited liability company, partnership or joint
venture; or (iii) the beneficial interest of such trust or estate is owned
directly or indirectly by Guarantor and/or one of its Subsidiaries.
"Taxes or Other Impositions" has the meaning set forth in Section 6.2
hereof.
"Term Loan A" means the term loan made pursuant to the provisions of
Section 1.3(a).
"Term Loan A Commitment" has the meaning set forth in Section 1.3(a)
hereof.
"Term Loan B" means the term loan made pursuant to the provisions of
Section 1.3(b).
"Term Loan B Commitment" has the meaning set forth in Section 1.3(b)
hereof.
"Term Loan B Draw Termination Date" has the meaning set forth in
Section 1.3(b) hereof.
"Termination Value" means, with respect to any or all item(s) of
Equipment, an amount equal to the Equipment Cost of such item(s) of Equipment
multiplied by the Termination Value Percentage as of such Installment Payment
Date.
"Termination Value Percentage" means the termination value percentage
as of each Installment Payment Date as set forth in Exhibit B hereto.
SECTION 1.2 Other Terms. Unless otherwise defined in this Agreement,
all terms defined in the North Carolina UCC and used in this Agreement have the
meanings set forth in the North Carolina UCC.
SECTION 1.3 Term Loans.
(a) Term Loan A. Subject to and upon the terms and conditions
and relying upon the representations and warranties herein set forth,
the Secured Party agrees to make a term loan ("Term Loan A") to the
Debtor on the Closing Date in the principal amount of FIVE MILLION NINE
HUNDRED TWO THOUSAND THREE HUNDRED AND SEVENTY-TWO DOLLARS ($5,902,372)
(the "Term Loan A Commitment") for the purposes hereinafter set forth.
Amounts repaid on Term Loan A may not be reborrowed. The Secured Party
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<PAGE>
will make Term Loan A available to the Debtor by deposit in U.S.
dollars of immediately available funds to the Debtor's account at the
offices of Compass Bank in Houston, Texas.
(i) Payment of Principal and Interest. Principal and
interest on Term Loan A shall be payable in sixty (60)
consecutive monthly installments on the last day of each
monthly period, beginning with the first of such dates to
occur after the Closing Date. Each installment shall be in
payments of principal and interest equal to 2.027639% of the
Term Loan A Commitment. Payments received on Term Loan A shall
be applied first to accrued interest and then to principal in
inverse order of maturity. In the event the actual rate of
interest exceeds the assumed rate, additional payments of
interest will be made in the amount of the excess thereof,
payable on demand.
(ii) Interest. Term Loan A shall bear interest at a
per annum rate equal to eight percent (8.0%); provided,
however, that upon the occurrence and during the continuation
of an Event of Default hereunder, the principal of and, to the
extent permitted by law, interest on Term Loan A hereunder
shall bear interest, payable on demand, at a rate equal to
2.0% per annum in excess of the rate otherwise applicable
hereunder.
(iii) Secured Term Note A. Term Loan A shall be
evidenced by a duly executed promissory note of the Debtor to
the Secured Party dated the Closing Date in an original
principal amount equal to the Term Loan A Commitment and
substantially in the form of Schedule 1.3(a) hereto.
(b) Term Loan B. Subject to and upon the terms and conditions
and relying upon the representations and warranties herein set forth,
the Secured Party agrees to make two (2) advances ("Term Loan B") to
the Debtor from time to time from the Closing Date until August 31,
1996 (as such date may be extended from time to time in the sole
discretion of the Secured Party, (the "Term Loan B Draw Termination
Date")) in an aggregate principal amount of up to ONE MILLION THREE
HUNDRED SIXTY-ONE THOUSAND EIGHT HUNDRED AND THIRTY-NINE AND 13/100
DOLLARS ($1,361,839.13) (the "Term Loan B Commitment") for the purposes
hereinafter set forth. Amounts repaid on Term Loan B may not be
reborrowed.
(i) Term Loan B Advances. So long as the conditions
to advances have been satisfied, the Secured Party will make
Term Loan B advances to the Debtor from time to time from the
Closing Date to the Term Loan B Draw Termination Date upon
submission of a Notice of Borrowing substantially in the form
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of Schedule 1.3(b)(i) to the Secured Party on the Business Day
prior to the date of the requested advance. Each such notice
shall specify (A) the date of the requested advance (which
shall be a Business Day), (B) shall not exceed, taking into
account all prior Term Loan B advances, the Term Loan B
Commitment and (C) shall be accompanied by any supporting
invoices and requisitions relating to the requested advance.
The Secured Party shall make such Term Loan B advances
available by deposit to the Debtor's account at the office of
Compass Bank in Houston, Texas.
(ii) Payment of Principal and Interest. Term Loan B
shall be subject to a draw period during which accrued
interest shall be payable monthly in arrears on the last day
of each monthly period beginning with the first of such dates
to occur after the Closing Date. Interest during such draw
period shall accrue at the daily equivalent rate of eight and
six hundredths percent (8.06%) per annum for the actual number
of days elapsed with respect to Term Loan B advances made on
the Closing Date and throughout the draw period. Beginning on
the last day of the first monthly period after the Term Loan B
Draw Termination Date, Debtor shall make payments of principal
and interest on Term Loan B in thirty-six (36) consecutive
monthly installments on the last day of each monthly period.
Each installment shall be in payments of principal and
interest equal to 3.136405% of the Term Loan B Commitment.
Payments received on Term Loan B shall be applied first to
accrued interest and then to principal in inverse order of
maturity. In the event the actual rate of interest exceeds the
assumed rate, additional payments of interest will be made in
the amount of the excess thereof, payable on demand.
(iii) Interest. Term Loan B shall bear interest at a
per annum rate equal to eight and six hundredths percent
(8.06%); provided, however, that upon the occurrence and
during the continuation of an Event of Default hereunder, the
principal of and, to the extent permitted by law, interest on
Term Loan B hereunder shall bear interest, payable on demand,
at a rate equal to 2.0% per annum in excess of the rate
otherwise applicable hereunder.
(iv) Secured Term Note B. Term Loan B shall be
evidenced by a duly executed promissory note of the Debtor to
the Secured Party dated the Closing Date in an original
principal amount equal to the Term Loan B Commitment and
substantially in the form of Schedule 1.3(b) hereto.
(c) Early Termination. (i) On any Installment Payment Date on
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or after the second anniversary of the Closing Date, Debtor may, upon
sixty (60) days' prior written notice to Secured Party, terminate the
Loans and this Agreement. Debtor shall pay to Secured Party on the
applicable Installment Payment Date the sum of: (A) the Termination
Value as of such Installment Payment Date, plus (B) any Break-Funding
Costs, plus (C) any accrued but unpaid interest with respect to either
Loan to the extent the Installment Payment Date for Term Loan A and
Term Loan B are not the same date each month, plus (D) all other
obligations owing under the Agreement on the termination date. Upon
receipt of the amounts set forth in (A)-(D) above, Secured Party shall
release its Lien on the Collateral.
(ii) On any Installment Payment Date on or after the second
anniversary of the Closing Date, Debtor may, upon sixty (60) days'
prior written notice to Secured Party, prepay a portion of the Loans in
accordance with the terms hereof. Debtor shall have the option to make
up to three (3) prepayments in the aggregate on the Loans, each
prepayment in an amount not less than $200,000. Debtor shall pay to
Secured Party on the applicable Installment Payment Date the sum of:
(A) the prepayment amount, plus (B) any Break-Funding Costs, plus (C)
any accrued but unpaid interest with respect to the prepayment. Amounts
so prepaid under this subsection (c)(ii) shall be applied to
outstanding obligations owing under this Agreement in the reasonable
discretion of the Secured Party.
SECTION 1.4 Conditions Precedent. The obligation of Secured Party to
make any Loan advance shall be subject to the following conditions, as
appropriate:
(a) Conditions to All Advances on Closing Date. Each Loan
advance on the Closing Date shall be subject to the delivery to Secured
Party of the following originally executed documents (unless otherwise
noted) each in form and substance satisfactory to Secured Party and the
satisfaction of the other conditions set forth herein:
(i) the Agreement;
(ii) the Notes;
(iii) the Guaranty;
(iv) evidence of payment (or evidence of exemption) of
any and all sales, transfer, use, documentation or similar
taxes due in connection with the acquisition of the
Equipment by Debtor;
(v) a secretarial certificate from Debtor: (A)
certifying Debtor's articles of incorporation, by-laws and
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resolutions, with such resolutions authorizing the overall
transaction and Debtor's execution, delivery and performance
of this Agreement and (B) containing an incumbency
certification of Debtor with the name(s), title(s) and
specimen signature(s) of the person or persons authorized on
behalf of Debtor to execute this Agreement.
(vi) an officer's certificate from Debtor: (A) stating
that no material adverse change has occurred in the
condition of Debtor (financial or otherwise) since the date
of the last financial statement of Guarantor which has been
delivered to Secured Party which would impair the ability of
Debtor to pay and perform its obligations under this
Agreement and (B) stating that no Default or Event of
Default shall have occurred and be continuing as of such
date;
(vii) a secretarial certificate from Guarantor: (A)
certifying Guarantor's articles of incorporation, by-laws
and resolutions, with such resolutions authorizing the
overall transaction and Guarantor's execution, delivery and
performance of the Guaranty and (B) containing an incumbency
certification of Guarantor with the name(s), title(s) and
specimen signature(s) of the person or persons authorized on
behalf of Guarantor to execute the Guaranty;
(viii) an officer's certificate from Guarantor: (A)
stating that no material adverse change has occurred in the
condition of Guarantor (financial or otherwise) since the
date of the last financial statement of Guarantor which has
been delivered to Secured Party which would impair the
ability of Guarantor to pay and perform its obligations
under the Guaranty and (B) stating that no Default or Event
of Default shall have occurred and be continuing as of such
date;
(ix) a written opinion of counsel for Debtor and
Guarantor;
(x) copies of the Bills of Sale;
(xi) certificates of insurance evidencing the coverages
required hereunder;
(xii) Uniform Commercial Code filings as deemed
appropriate by Secured Party's counsel duly executed by
Debtor and necessary third parties;
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(xiii) good standing certificates from the Secretary of
State of Debtor's state of incorporation and the state of
Debtor's chief executive office; and
(xiv) good standing certificates from the Secretary of
State of Guarantor's state of incorporation and Guarantor's
chief executive office.
(xv) UCC, tax and judgment lien searches as deemed
necessary or advisable by Secured Party;
(xvi) the absence on the date hereof of any Liens on
the Collateral, other than any Permitted Encumbrance in
favor of Secured Party; and
(xvii) Secured Party shall have received such other
documents, certificates, financing statements and other
items, in form and substance satisfactory to Secured Party,
as Secured Party may request.
(b) Term Loan B Advances. The obligation of the Secured
Party to make Term Loan B advances after the Closing Date is
subject to satisfaction of the following conditions:
(i) delivery to the Secured Party of a Notice of
Borrowing;
(ii) no material adverse change in the condition of the
Debtor (financial or otherwise) shall have occurred since
the Closing Date;
(iii) the absence on the date of such advance of any
Default or Event of Default; and
(iv) no Lien or other interest shall have been
permitted to attach to the Collateral superior or
subordinate to the interest of the Secured Party under this
Agreement, except for Permitted Encumbrances.
ARTICLE II
SECURITY INTEREST
SECTION 2.1 Grant of Security Interest. Debtor hereby Grants to Secured
Party a first priority security interest in the following (collectively, the
items described in subsections (a)-(d) may be referred to herein as the
"Collateral"):
(a) All right, title and interest of the Debtor in and to the
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Equipment as the same is now and will hereafter be constituted,
whether now owned by the Debtor or hereafter acquired, together with
all accessories, equipment, parts and appurtenances appertaining or
attached to the Equipment whether now owned or hereafter acquired, and
all substitutions, renewals and replacements of and additions,
improvements, accessions and accumulations to the Equipment together
with all the rents, issues, income, profits and avails thereof.
(b) All right, title, interest, claims and demands of Debtor in,
to and under the following (collectively the "Assigned Agreements"):
(i) the Bills of Sale;
(ii) the Permitted Leases; and
(iv) any and all other contracts and agreements (excluding
this Agreement and any supplement or modification thereto and the
Notes) relating to the Equipment or any rights or interests
therein to which Debtor is now or may hereafter be a party,
together with all rights, powers, privileges, licenses,
easements, options and other benefits of Debtor under each
thereof, including without limitation the right to make all
waivers and agreements, to give and receive all notices and other
instruments or communications, to take such action upon the
occurrence of a default thereunder, including the commencement,
conduct and consummation of legal, administrative or other
Proceedings, as shall be permitted thereby or by law, and to do
any and all other things which Debtor is or may be entitled to do
thereunder.
(c) The proceeds from a sale or transfer of any right, title or
interest of Debtor in the Equipment or any portion thereof.
(d) All proceeds of any and all of the foregoing Collateral,
whether now owned or hereafter acquired by Debtor and wherever
located, including without limitation:
(i) cash, accounts receivable, instruments, contract rights,
chattel paper, documents of title and any other obligation due to
Debtor with respect to or in connection with the foregoing
Collateral; and
(ii) to the extent not otherwise included, all payments
under any casualty insurance (whether or not Secured Party is the
loss payee thereof), condemnation award, indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise
with respect to any of the foregoing Collateral.
The Collateral shall mean and include all personal property and
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the proceeds of such personal property described in any and all
amendments to this Agreement hereafter executed by Debtor and Secured
Party in connection with the Loan.
SECTION 2.2 Security for Secured Obligations. This Agreement secures the
payment of all indebtedness and other obligations of Debtor to Secured Party
with respect to: the Loans, whether now or hereafter existing, including without
limitation Debtor's obligations to Secured Party under the Notes or any other
instrument and all amendments thereto and renewals and extensions thereof,
whether for principal, interest, fees, expenses or otherwise; all of Debtor's
obligations of payment and performance now or hereafter existing under this
Agreement, including, without limitation, all amendments hereto and renewals and
extensions hereof (all such obligations of Debtor described in this Section 2.2
being, collectively, the "Secured Obligations").
SECTION 2.3 Security Interest Absolute. All rights of Secured Party and
security interests hereunder and all Secured Obligations shall be absolute and
unconditional, irrespective of:
(i) any lack of validity or enforceability of the Notes, this
Agreement or any other Security Instrument or any other agreement or
instrument relating thereto;
(ii) any change in the time, manner, or place or payment of, or in any
other term of, all or any of the Secured Obligations or any other amendment
or waiver of or any consent to any departure from the Notes, this Agreement
or any other Security Instrument; or
(iii) any exchange, release or non-perfection of any other collateral,
or any release, amendment or waiver of or consent to departure from any
guaranty, for all or any of the Secured Obligations.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 3.1 Debtor's Representations and Warranties. Debtor hereby
represents and warrants to Secured Party that:
(a) Debtor is a corporation duly organized and validly existing under
the laws of the State of its incorporation and has all requisite corporate
power, authority and legal right to own its properties, including without
limitation the Collateral, to conduct its business as is now being
conducted and to execute, deliver and perform its obligations under the
Notes, this Agreement, each other Security Instrument to which it is a
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party and each other document or agreement related to the Collateral to
which it is a party. Debtor is fully qualified to do business and is in
good standing in each jurisdiction in which the failure to be in good
standing would have a material adverse effect on the business or operations
of Debtor.
(b) The execution, delivery and performance by Debtor of the Notes,
this Agreement and each other Security Instrument to which it is a party
are within Debtor's corporate powers, have been duly authorized by all
requisite corporate action, do not contravene Debtor's charter or by-laws
or any law, governmental rule or regulation, or any order, writ,
injunction, decree, determination or award currently in effect applicable
to, or any contractual restriction binding on or affecting, Debtor or any
of its properties, including without limitation the Collateral, and do not
result in or require the creation of any Lien, security interest, right of
acceleration, charge or encumbrance (other than pursuant to this Agreement)
upon or with respect to any of its properties.
(c) No authorization or approval or other action by, and no notice to
or filing (other than the filings referred to in subparagraph (f) below)
with, any governmental authority or regulatory body, shareholders or any
other Person is required for the due execution, delivery and performance by
Debtor of this Agreement or any other Security Instrument to which it is a
party.
(d) The Notes, this Agreement and each other Security Instrument to
which Debtor is a party are the legal, valid and binding obligations of
Debtor, enforceable against Debtor in accordance with their respective
terms, subject, in the case of enforceability, to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting creditors'
rights generally and to the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(e) The proceeds of the Loans will be used only to finance the
purchase by Debtor of the Equipment; Debtor owns good and marketable title
to the Equipment; the Collateral is free and clear of all Liens (except for
Permitted Encumbrances in favor of Secured Party); and the Equipment is in
good condition and ready for operation. The Equipment is and will retain
its character as personal property, and neither Debtor, Guarantor, or any
Affiliate or Subsidiary of either Debtor or Guarantor shall affix or attach
any item of Equipment in any manner so as to alter the character of the
Equipment as personal property subject to the UCC.
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(f) The filing of Uniform Commercial Code financing statements in the
office of the Secretary of State of the State of Texas will create a valid
perfected first priority security interest in the Collateral, securing the
payment of the Secured Obligations, and all filings and other actions
necessary or desirable to perfect and protect such security interests will
have been taken. No Person other than Secured Party holds any security
interest affecting the Collateral. No effective Security Instrument or
other instrument similar in effect covering all or any part of the
Collateral is on file in any recording office, except such as may have been
filed in favor of Secured Party relating to this Agreement.
(g) Debtor's chief executive office is located in Harris County,
Houston, Texas. The Debtor has not used any trade names or other names,
except for "Eagle Geophysical."
(h) Contemporaneously with the execution and delivery of this
Agreement, Debtor is delivering to Secured Party evidence of insurance
satisfying the requirements of Section 4.1 hereof.
(i) Debtor is not currently insolvent, as defined in 11 U.S.C. 101(32)
nor will it be rendered insolvent by virtue of entering into the Notes,
this Agreement or any other Security Instrument to which it is a party or
carrying out any of the transactions contemplated hereby or thereby.
(j) Each financial statement of Guarantor which has been furnished to
Secured Party fairly presents the financial condition of Guarantor as of
the date of such financial statement. There has been no material adverse
change in Guarantor's financial condition since the date of the most
current financial statement delivered to Secured Party.
(k) There is no pending, or to the Debtor's knowledge, threatened,
action or Proceeding affecting Debtor, Guarantor or any of their properties
before any court, governmental agency or arbitrator which may materially
and adversely affect the condition (financial or otherwise) or operations
of Debtor, Guarantor or any of their properties or which purports to affect
the validity or enforceability of the Notes, this Agreement or any other
Security Instrument to which Debtor is a party.
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(l) No Default or Event of Default has occurred and is continuing.
(m) All sales, transfer, use, documentation or similar taxes, fees or
other charges due and payable prior to or as of the date hereof have been
paid to the extent such are in connection with the sale to and purchase by
Debtor of the Equipment.
(n) Debtor is not a party to, nor bound by, any contract, agreement or
instrument that would conflict with this Agreement, the Notes or any other
contracts, agreements or instruments executed in connection with the
transactions contemplated by this Agreement.
(o) Debtor has agreed, and hereby acknowledges, to accept service of
process at its address set forth in Section 8.1 hereof in person or by
registered or certified mail return receipt requested, postage prepaid, in
connection with any Proceeding initiated by Secured Party in any of the
courts referenced in Section 8.11 hereof.
(p) The Debtor has no Subsidiaries, except for African Geophysical,
Inc., a corporation organized and existing under the laws of the Cayman
Islands.
(q) Debtor has not incurred any accumulated unfunded deficiency within
the meaning of the Employee Retirement Income Security Act of 1974, as
amended from time to time ("ERISA") nor has Debtor incurred any material
liability to the Pension Benefit Guaranty Corporation ("PBGC") established
under such Act (or any successor thereto under such Act) in connection with
any Plan. Debtor and its Affiliates are in compliance in all material
respects with those provisions of ERISA and the regulations and public
interpretations thereunder which are applicable to Debtor and its
Affiliates, except for such noncompliance as would not have a material
adverse effect on the financial condition of Debtor and its Affiliates,
taken as a whole.
(r) Debtor has filed all income tax returns required to be filed prior
to the date hereof with the various governmental entities having taxing
authority with respect to Debtor.
(s) Debtor (i) is not an "investment company" as such term is defined
in, or otherwise subject to regulations under, the Investment Company Act
of 1940 and (ii) is not a "holding company" as that term is defined in, and
is not otherwise subject to regulations under, the Public Utility Holding
Company Act of 1935.
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(t) Debtor has not sold, extended any offer to sell nor accepted any
offer to purchase regarding any of Debtor's interest in the Collateral or
with respect to the transactions described in the Security Instruments or
the Notes.
(u) Debtor has delivered true and accurate copies of the Bills of Sale
executed by Seller with respect to the transfer of the Equipment to Debtor.
SECTION 3.2 Affirmative Covenants. Until all the Secured Obligations shall
have been fully paid and satisfied, Debtor covenants and agrees that it shall,
unless Secured Party shall have otherwise consented in writing:
(a) promptly pay the principal of, interest on, and any other amounts
due under the Notes as and when the same become due, whether at maturity,
by acceleration or otherwise;
(b) (i) duly, punctually and faithfully perform its obligations under
the Notes, this Agreement and each other Security Instrument to which it is
a party; (ii) maintain the Liens and security interests created by this
Agreement and each other Security Instrument to which it is a party as
valid and perfected Liens on and security interests in all of the
Collateral, prior in right to any other Lien, security interest, claim or
other encumbrance; (iii) warrant and defend its interest in and to the
Collateral against the claims and demands of all Persons; and (iv) defend,
at Debtor's cost, any action, claim or Proceeding affecting the Collateral;
(c) use the proceeds of the Loans only to finance the purchase by
Debtor of the Equipment and maintain good and marketable title to the
Equipment, free and clear of any Liens, security interests, charges or
encumbrances except for the security interest created by this Agreement and
Permitted Encumbrances;
(d) notify Secured Party at least thirty (30) days prior to the
changing of the chief executive office of the Debtor from the location
specified in Section 3.1(g);
(e) at no expense to Secured Party, cause each item of Equipment to be
serviced, maintained and preserved in the same condition, repair and
working order as when new, ordinary wear and tear excepted, and in
accordance with any manufacturer's suggested or approved maintenance
program and warranty requirements, and shall, in the case of any loss or
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damage to any item of Equipment, promptly furnish to Secured Party a
statement respecting any such loss or damage and (unless an Event of Loss
shall have occurred with respect to an item of Equipment) as quickly as
practicable after the occurrence thereof make or cause to be made all
repairs, replacements and other improvements in connection therewith which
are necessary or desirable to keep each item of Equipment in proper working
order;
(f) permit Secured Party to inspect the Equipment during normal
business hours upon reasonable prior notice to Debtor;
(g) from time to time execute and deliver all such supplements and
amendments hereto and to any other Security Instrument, and all such
financing statements, continuation statements, instruments of further
assurance and other instruments, and take such other action, as the Secured
Party requests and reasonably deems necessary or advisable to: (i) further
Grant, maintain or preserve the Lien and security interest contemplated by
this Agreement or carry out more effectively the purposes hereof; (ii)
perfect or protect the validity of any Security Instrument or of any Grant
made or to be made by this Agreement; or (iii) enforce any Security
Instrument or preserve and defend title to the Collateral and the rights of
the Secured Party therein against the claims of all Persons and parties;
(h) comply with all of its representations, warranties and covenants
set forth in this Agreement, in the Notes and each Security Instrument to
which it is a party; and punctually perform and observe all of its
obligations and agreements contained in this Agreement, in the Notes and
each Security Instrument to which it is a party;
(i) promptly notify the Secured Party of any default by any Person
under any Security Instrument;
(j) remain a duly organized and validly existing corporation under the
laws of the state of its incorporation and remain duly qualified to do
business and in good standing in each jurisdiction in which the failure to
be in good standing would have a material adverse effect on the business or
operations of Debtor;
(k) comply in all material respects with all applicable laws, rules,
regulations and orders; and preserve and maintain all federal, state and
local licenses, privileges, franchises, certificates and other permits
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necessary for the operation of its business and the operation of each item
of Equipment;
(l) pay or cause to be paid promptly when due (i) (subject to the
right of Debtor, in accordance with the provisions of this Agreement to
obtain extensions of the date on which such taxes are due) all property and
other taxes (including without limitation income, sales, use, franchise and
gross receipts taxes) and governmental charges or levies which are at any
time or from time to time levied upon or assessed against it or any item of
Equipment or are otherwise associated with the ownership, use or operation
of any item of Equipment (except such taxes levied on the net income of
Secured Party) and (ii) all claims (including without limitation claims for
labor, materials and supplies) against any item of Equipment; provided,
that Debtor may contest any such tax or claim by appropriate Proceedings so
long as such Proceedings shall suspend the collection thereof, no part of
the Collateral would be subject to sale, forfeiture or diminution during
the pendency of such Proceedings, Debtor shall have furnished such security
as may be required in the Proceedings or reasonably requested by Secured
Party, Debtor conducts such contests in good faith and with due diligence,
and promptly after the final determination of each such contest, Debtor
pays all amounts which shall be determined to be payable in respect
thereof;
(m) within 120 days after the end of each fiscal year furnish to the
Secured Party unaudited year end financial reports of the Debtor including
without limitation (i) a balance sheet and (ii) statements of income and
retained earnings, all prepared in accordance with generally accepted
accounting principles consistently applied and certified by the president,
chief financial officer or any vice president of Debtor who prepared such
financial statements as being true and accurate and fairly representing the
financial condition of Debtor;
(n) promptly report to Secured Party the commencement of any
Proceeding against Debtor if such litigation reasonably would be expected
to, in the event of an unfavorable outcome, cause an Event of Default, have
a material adverse effect on Debtor's financial condition or operations,
affect the validity or enforceability of the Notes, this Agreement or any
of the Security Instruments or affect priority or enforceability of Secured
Party's security interest in any of the Collateral;
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(o) promptly notify Secured Party in writing if a Default or an Event
of Default has occurred;
(p) upon the replacement of an item of Equipment with Replacement
Equipment, Debtor, at its own expense, will promptly (i) cause a supplement
hereto, in form and substance satisfactory to Secured Party, subjecting
such Replacement Equipment to this Agreement, to be duly executed by
Debtor, (ii) furnish Secured Party with such evidence of Debtor's title to
such Replacement Equipment, of the condition of such Replacement Equipment,
and of compliance with the insurance provisions hereof with respect to such
Replacement Equipment and (iii) take such other action as Secured Party may
request in order that such Replacement Equipment be duly and properly
titled in Debtor and subject to this Agreement to the same extent as the
item of Equipment replaced thereby;
(q) (i) at all times, make prompt payment of all contributions
required under its Plans and required to meet the minimum funding standard
set forth in ERISA with respect to its Plans; (ii) notify Secured Party
immediately of any fact, including, but not limited to, any Reportable
Event (as defined in ERISA) arising in connection with any of its Plans,
which might constitute grounds for termination thereof by the PBGC or for
the appointment by the appropriate United States District Court of a
trustee to administer such Plan, together with a statement, if requested by
the Secured Party, as to the reason therefor and the action, if any,
proposed to be taken with respect therefor; and (iii) furnish to Secured
Party upon its request, such additional information concerning any of its
Plans as may be reasonably requested;
(r) Debtor shall pay, and save Secured Party harmless against, any and
all losses, judgments, decrees and costs (including, without limitation,
all reasonable attorneys' fees and expenses) in connection with any
Permitted Contest and shall promptly after the final settlement, compromise
or determination (including any appeals) of such contest, fully pay and
discharge the amounts which shall be levied, assessed, charged or imposed
or be determined to be payable therein or in connection therewith, together
with all penalties, fines, interest, costs and expenses thereof or in
connection therewith, and perform all acts, the performance of which shall
be ordered or decreed as a result thereof.
SECTION 3.3 Negative Covenants. Until the Secured Obligations shall have
been fully paid and satisfied, Debtor shall not, without the prior written
consent of Secured Party:
(a)(i) sell, lease, assign, transfer, convey, Grant an interest in,
exchange or otherwise dispose of any of the Collateral or any part thereof
or (ii) cause or permit any subleasing of any of the Equipment (except that
Debtor may lease any or all items of Equipment to a Permitted Lessee
pursuant to a Permitted Lease);
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(b) create or suffer to exist any Lien affecting the Collateral or any
part thereof, other than in favor of Secured Party or other Permitted
Encumbrances;
(c) use the Equipment for any unlawful purpose;
(d) dissolve, wind up or liquidate or seek or permit the dissolution
or liquidation of Debtor in whole or in part;
(e) [intentionally omitted];
(f) as against Secured Party, claim any credit on, or make any
deduction from, the principal or interest payable on the Notes, whether by
reason of the payment of any taxes levied or assessed upon any of the
Collateral, or otherwise;
(g) take or permit any action which would result in an Event of
Default;
(h) [intentionally omitted];
(i) [intentionally omitted];
(j) enter into any new line of business or operation not currently in
existence with respect to the Debtor or materially alter its existing
operations;
(k) consolidate with or merge into any other corporation or sell,
assign, convey, transfer or lease substantially all of its assets as an
entirety to any Person unless:
(i) Debtor is the surviving entity of any such consolidation or
merger; or
(ii) (A) the corporation formed by such consolidation or into
which Debtor is merged, or the Person which acquires by conveyance,
transfer or lease of substantially all of the assets of Debtor as an
entirety, shall be a solvent corporation organized and existing under
the laws of the United States or any state thereof or the District of
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Columbia and shall execute and deliver to Secured Party an agreement
containing an effective assumption by such successor, transferee or
lessee corporation of the due and punctual performance and observance
of each covenant and condition of this Agreement;
(B) immediately prior to and after giving effect to such
transaction, no Default or Event of Default shall have occurred
and be continuing;
(C) Debtor shall have delivered to Secured Party a
certificate signed by an officer of Debtor and an opinion of
Debtor's counsel satisfactory in form and substance to Secured
Party stating that such consolidation, merger, conveyance,
transfer or lease and the assumption agreement mentioned in
clause 3.3(k)(ii)(A) above comply with the requirements of this
Section 3.3(k) and that all conditions precedent herein provided
for relating to such transaction have been complied with.
Upon any consolidation or merger in which Debtor is not the surviving
corporation, or any conveyance, transfer or lease of substantially all the
assets of Debtor as an entirety in accordance with this Section 3.3(k), the
successor corporation formed by such consolidation or into which Debtor is
merged or to which such conveyance, transfer or lease is made (x) shall succeed
to, and be substituted for (but without release of Debtor from any of its
obligations hereunder) and (y) may exercise every right and power of, Debtor
under this Agreement with the same effect as if such successor corporation had
been named as a Debtor herein.
(l) attach or affix any item of Equipment in any manner so as to alter
the character of the Equipment as personal property subject to the UCC.
ARTICLE IV
INSURANCE, TRANSFER, CONDEMNATION AND EVENT OF LOSS
SECTION 4.1 Insurance.
(a) Property and Liability Insurance. So long as this Agreement is in
effect, Debtor shall maintain and keep in force, or cause to be maintained
and kept in force, without cost or expense to Secured Party, with respect
to all items of Equipment prior to the expiration or earlier termination of
this Agreement (i) all-risk property damage insurance in an amount not less
than the aggregate Termination Value for all items of Equipment of such
type as shall be satisfactory to Secured Party and (ii) comprehensive
general public liability insurance, including blanket contractual and
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personal injury insurance, covering any risks which Secured Party or Debtor
might incur by reason of the use or operation of the Equipment in or over
any area, in an amount not less than $6,000,000 per occurrence. Such
insurance policy or policies referenced to in clause (i) of the preceding
sentence will name Secured Party as a loss payee to the extent of its
interest; provided, that upon verification by Secured Party that all
amounts owing to Secured Party under the Agreement, the Notes or any other
Security Instrument have been paid in full, then Secured Party shall remit
all remaining property damage insurance proceeds, respecting any item of
Equipment, to the extent such proceeds are controlled by Secured Party, to
Debtor. Such insurance policy or policies referenced to in clause (ii) of
the preceding sentence will name Secured Party as an additional insured.
Each of the policies required by this Section 4.1 will provide that (A) the
same may not be invalidated against Secured Party by reason of (1) any
violation of a condition or breach of warranty of the policies or the
application therefor by any Person excepting Secured Party, (2) the use of
any item of Equipment for purposes not permitted by such policies by any
Person excepting Secured Party, (3) any foreclosure proceeding or notice of
sale regarding any item of Equipment or (4) the title or beneficial
ownership of any item of Equipment being held by a party other than Debtor;
(B) the policies may be canceled or materially amended by the insurer only
after thirty (30) days' prior written notice to Secured Party; (C) the
interests of Secured Party in such insurance policies are assignable and
(D) such insurance policies shall be primary insurance. Each of the
policies required by this Section 4.1 shall otherwise be reasonably
satisfactory to Secured Party. The policies of insurance required under
this Section shall be valid and enforceable policies issued by insurers of
recognized responsibility acceptable to Secured Party. On or before the
date hereof, and thereafter at intervals of not more than twelve months,
Debtor will furnish or cause to be furnished to Secured Party a certificate
or other evidence satisfactory to Secured Party signed by an independent
insurance broker certifying to Secured Party's satisfaction that Debtor has
insurance in place with respect to all items of Equipment which complies
with the insurance requirements of this Agreement. If Debtor shall fail to
cause the insurance required under this Section 4.1 to be carried and
maintained, Secured Party may, but shall have no obligation to, provide
such insurance and Debtor shall reimburse Secured Party upon demand for the
cost thereof as a supplemental payment hereunder in addition to other
amounts owing with respect to the Notes or this Agreement.
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SECTION 4.2 Transfer of Collateral. Except as otherwise expressly provided
by the provisions of this Loan and Security Agreement, Debtor will not (prior to
the satisfaction of all Obligations) lease, Grant or otherwise transfer the
Collateral or any part thereof or any interest therein to any party other than
Secured Party without Secured Party's prior written consent and any and all such
transfers shall be made under and subject to Secured Party's security interest
in such Collateral hereunder. Prior to or simultaneously with any such transfer,
the transferee shall accept, agree to and execute an agreement assuming Debtor's
Obligations to Secured Party, in form and substance satisfactory to Secured
Party.
SECTION 4.3 Condemnation. Immediately upon obtaining knowledge thereof,
Debtor shall notify Secured Party of any condemnation or other eminent domain
Proceedings with respect to any item of Equipment. Secured Party may participate
in any such Proceedings, and Debtor shall provide Secured Party with all
instruments required by it to permit such participation upon obtaining actual
knowledge thereof. Debtor shall pay all reasonable fees and expenses incurred by
Secured Party in connection with Secured Party's participation in any such
Proceedings. All proceeds arising from any such eminent domain Proceedings shall
be paid to and applied by the Secured Party as specified in Section 5.3 hereof.
SECTION 4.4 Certain Events of Loss. Upon the occurrence of an Event of Loss
with respect to any item of Equipment, Debtor shall pay Secured Party within
thirty (30) days after receipt of insurance proceeds after the occurrence of
such Event of Loss (but in no event shall such period extend 120 days beyond the
date of the occurrence of such Event of Loss) or, if such day is not a Business
Day, on the next occurring Business Day (the "Event of Loss Payment Date") an
amount equal to the sum of (a) the Termination Value (computed as of the
Installment Payment Date immediately preceding the Event of Loss Payment Date)
for the items of Equipment then subject to the Event of Loss, plus (b) all
accrued but unpaid interest, plus (c) any Break-Funding Costs with respect to
the items of Equipment then subject to the Event of Loss, plus (d) all other
obligations owing hereunder on the Event of Loss Payment Date. Upon payment of
the amounts set forth in (a)-(d) above, Secured Party shall release its Lien on
the items of Equipment then subject to the Event of Loss.
ARTICLE V
EVENTS OF DEFAULT AND REMEDIES
SECTION 5.1 Events of Default. Any of the following occurrences or acts
shall constitute an event of default under this Agreement (individually, an
"Event of Default"):
(a) Debtor shall fail to pay any principal of, or interest on, the
Notes or any other indebtedness of Debtor to Secured Party, now or
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hereafter existing, within five (5) Business Days from the date the same
shall be due and payable, whether at maturity, by acceleration or
otherwise; or
(b) Except as specified in Section 5.1(a), Debtor shall default in the
payment of any costs or expenses incurred by Secured Party in connection
herewith or any other amounts hereunder or under the Notes within ten (10)
Business Days from the date on which Secured Party notifies Debtor of such
default; or
(c) Debtor shall fail to observe the terms and covenants of Sections
3.2(b)(ii), 3.2(c), 3.2(l), 3.3(a)-(l) or 4.1; or
(d) Except as otherwise specified in Sections 5.1(a)-(c), Debtor shall
fail to perform or observe any other term, covenant or agreement contained
in the Notes, this Agreement or any other Security Instrument and such
failure shall remain unremedied for a period of thirty (30) days from
either the date Debtor first knows of such failure or the date on which
Secured Party notifies Debtor of such failure; or
(e) Any representation or warranty made by Debtor in the Notes, this
Agreement, any other Security Instrument or in any certificate or other
document delivered pursuant hereto or thereto shall prove to have been
incorrect or misleading in any material respect when made; or
(f) Debtor shall admit in writing its inability to pay its debts, or
shall make a general assignment for the benefit of creditors; or any
Proceeding shall be instituted by or against Debtor seeking to adjudicate
it bankrupt or insolvent, or seeking reorganization, liquidation,
arrangement, adjustment or composition of it or its debt under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors,
or seeking appointment of a receiver, custodian, trustee, or other similar
official for it or for any substantial part of its property, and, in the
case of any such Proceeding instituted against Debtor, it shall remain
undismissed for a period of sixty (60) days; or Debtor shall take any
action to authorize any of the actions set forth in this subsection (f); or
(g) This Agreement shall, for any reason, except to the extent
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permitted by the terms hereof, cease to create a valid first priority Lien
on and perfected first priority security interest in any of the Collateral
purported to be covered hereby; or
(h) Any provision of the Notes, this Agreement or the other Security
Instruments shall cease to be valid and binding on Debtor, as a signatory
thereto, or Debtor shall so state in writing; or Secured Party shall be
deprived of any of the benefits of the Note, this Agreement or any other
Security Instrument for any reason whatsoever; or
(i) For any reason whatsoever, Debtor is not entitled to or does not
possess the property rights or other rights regarding the Collateral which
have been assigned or transferred to Secured Party; or
(j) Debtor shall dissolve or any action shall be taken by Debtor to
wind up or liquidate Debtor's business, affairs or property or assets or
Debtor shall announce its intention to do so without Secured Party's prior
written consent; or
(k) Any sale, transfer, conveyance, abandonment, condemnation,
partition or change in ownership of any item or items of Equipment in
excess of $50,000, or any portion thereof shall occur, whether in one
transaction or a series of transactions without Secured Party's prior
written consent; or
(l) An attachment or other Lien shall be filed or levied against a
substantial part of the property of Debtor (or any Affiliate of Debtor) and
such judgment shall continue unstayed and in effect, or such attachment or
Lien shall continue undischarged or unbonded, for a period of sixty (60)
days; or
(m) Guarantor shall fail to make a payment under the Guaranty within
five (5) Business Days from the date such payment is due; or
(n) Except as specified in Section 5.1(m), Guarantor shall fail to
perform or observe any other term, covenant or agreement contained in the
Guaranty and such failure shall remain unremedied for a period of thirty
(30) days from either the date Guarantor first knows of such failure or the
date on which Secured Party notifies Guarantor of such failure; or
(o) Any representation or warranty made by Guarantor in the Guaranty
or in any certificate or other document delivered pursuant thereto shall
prove to have been incorrect or misleading in any material respect when
made; or
(p) Guarantor shall admit in writing its inability to pay its debts,
or shall make a general assignment for the benefit of creditors; or any
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Proceeding shall be instituted by or against Guarantor seeking to
adjudicate it bankrupt or insolvent, or seeking reorganization,
liquidation, arrangement, adjustment or composition of its finances or debt
under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking appointment of a receiver, custodian,
trustee, or other similar official for its finances or for any substantial
part of its property, and, in the case of any such Proceeding instituted
against Guarantor, it shall remain undismissed for a period of sixty (60)
days; or Guarantor shall take any action to authorize any of the actions
set forth in this subsection (p); or
(q) Guarantor (or any Affiliate of Guarantor) shall be in default (i)
under any lease, loan agreement or other agreement, instrument or document
respecting any such obligation of Guarantor (or any Affiliate of Guarantor)
in excess of $10,000,000, now or hereafter entered into between Guarantor
(or any Affiliate of Guarantor) and Secured Party, or between Guarantor (or
any Affiliate of Guarantor) and any parent, subsidiary or affiliate of
Secured Party, and such default shall have been declared by the party
entitled to declare the same, (ii) under any promissory note, now or
hereafter executed by Guarantor (or any Affiliate of Guarantor) and
delivered to any party referred to in clause (i) above evidencing a loan
made by any such party to Guarantor (or any Affiliate of Guarantor) or
(iii) in the payment of any single amount due by Guarantor (or any
Affiliate of Guarantor) to any Person (other than Secured Party, or any
parent, subsidiary or affiliate of Secured Party) in excess of $10,000,000
(excluding any such obligation which is being contested in good faith by
Guarantor (or any Affiliate of Guarantor) by appropriate proceedings, and
the liability for which has not been reduced to judgment) relating to the
payment of borrowed money or the payment of rent or hire under any lease
agreement and such default shall have continued for more than thirty (30)
days after the date Guarantor (or any Affiliate of Guarantor) obtained
knowledge or received notice thereof; or an attachment or other Lien shall
be filed or levied against a substantial part of the property of Guarantor
or Debtor and such judgment shall continue unstayed and in effect, or such
attachment or Lien shall continue undischarged or unbonded, for a period of
sixty (60) days; or
(r) Any provision of the Guaranty shall cease to be valid and binding
on Guarantor, as a signatory thereto, or Guarantor shall so state in
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writing; or Secured Party shall be deprived of any of the benefits of the
Guaranty for any reason whatsoever; or
(s) Any action shall be taken by Guarantor to wind up or liquidate
Guarantor's business, affairs or property or assets or Guarantor shall
announce his intention to do so without Secured Party's prior written
consent.
SECTION 5.2 Remedies. If any Event of Default shall have occurred and be
continuing:
(a) the Secured Party may do one or more of the following:
(i) declare the Notes and all interest thereon and all other
Secured Obligations to be forthwith due and payable, whereupon the
Notes, all such interest and all Secured Obligations shall become and
be forthwith due and payable, without presentation, demand, protest or
further notice of any kind, all of which are hereby expressly waived
by Debtor;
(ii) exercise, in respect of the Collateral, in addition to other
rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the
UCC and/or other applicable law and also (A) require Debtor to, and
Debtor hereby agrees that it will at its expense and upon the request
of Secured Party forthwith, assemble all or part of the Collateral as
directed by Secured Party and make it available to Secured Party at a
place to be designated by Secured Party and (B) without notice except
as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of Secured Party's
offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as Secured Party may deem commercially
reasonable. Debtor agrees that, to the extent notice of sale shall be
required by law, at least fifteen (15) days' notice to Debtor of the
time and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification. Secured
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Party shall not be obligated to make any sale of Collateral regardless
of notice of sale having been given. Secured Party may adjourn any
public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned;
(iii) to the extent permitted by applicable law, bring suit at
law, in equity or through other appropriate Proceedings, whether for
the specific performance of any covenant or agreement contained in
this Agreement or any of the other Security Instruments, for an
injunction against a violation of any of the terms hereof or thereof,
in aid of the exercise of any power Granted hereby or thereby, or by
law, to recover judgment for any and all amounts due on the Notes,
this Agreement, any of the other Security Instruments or otherwise,
including, without limitation, any deficiency remaining after
foreclosure hereunder;
(iv) exclude Debtor from the Collateral and take immediate
possession of interest therein, and, at the expense of Debtor,
maintain, repair, alter, use, add to, improve, insure, lease, operate
and manage the Collateral in such manner as Secured Party shall see
fit; and
(v) take any other appropriate action to protect and enforce the
rights and remedies of Secured Party hereunder, or under or in respect
of any other Security Instrument, or otherwise.
(b) Notwithstanding any provision to the contrary contained in this
Agreement, the Notes or any other Security Instrument, the unpaid principal
amount of the Notes and all accrued interest and other sums payable under
the Notes or under this Agreement shall be forthwith payable upon a sale of
any portion of the Collateral pursuant to subsection (a)(ii) of this
Section 5.2. All earnings, revenues, proceeds, rents, issues, profits and
income derived pursuant to subsection (a)(iv) of this Section 5.2 (after
deducting costs and expenses of operation and other proper charges), all
proceeds of any such sale and all other money and property received or
recovered by the Secured Party pursuant to this Section 5.2 shall be held
and applied as set forth in Section 5.3 hereof.
(c) The power to effect any sale under this Section 5.2 shall not be
exhausted by any one or more sales as to any portion of the Collateral
remaining unsold, but shall continue unimpaired until all of the Collateral
shall have been sold or all of the Secured Obligations shall have been paid
in full.
(d) Secured Party may bid for and acquire any portion of the
Collateral in connection with a sale thereof under this Section 5.2, and
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may pay all or part of the purchase price by crediting against amounts
owing on the Secured Obligations, all or part of the net proceeds of such
sale after deducting the costs, charges and expenses incurred by Secured
Party in connection with such sale. The Notes need not be produced in order
to complete any such sale or effect such credit. Secured Party may hold,
lease, operate, manage or otherwise deal with any property so acquired in
any manner permitted by law.
(e) Secured Party shall execute and deliver an appropriate instrument
of conveyance transferring its interest in any portion of the Collateral in
connection with a sale thereof under this Section 5.2. In addition, Debtor
hereby irrevocably appoints Secured Party as its agent and attorney-in-fact
to transfer and convey its interest in any portion of the Collateral in
connection with such a sale thereof and to take all action necessary to
effect such sale. No purchaser or transferee at such a sale shall be bound
to ascertain Secured Party's authority, inquire into the satisfaction of
any condition precedent or see to the application of any monies.
(f) Secured Party's right to seek and recover judgment on the Secured
Obligations shall not be affected by the seeking, obtaining or application
of any other relief under or with respect to this Agreement. Neither the
Lien of this Agreement nor any rights or remedies of Secured Party shall be
impaired by the recovery of any judgment by Secured Party against Debtor or
by the levy of an execution under such judgment upon any portion of the
Collateral.
(g) All rights and remedies from time to time conferred upon or
reserved to the Secured Party are cumulative, and none is intended to be
exclusive of another and shall be in addition to every other right or
remedy permitted by law. No delay or omission in insisting upon the strict
observance or performance of any provision of this Agreement, or in
exercising any right or remedy, shall be construed as a waiver or
relinquishment of such provision, nor shall it impair such right or remedy.
Every right and remedy may be exercised from time to time and as often as
deemed expedient in any combination and order desired by Secured Party;
provided, however, that Secured Party shall exercise none of the remedies
referenced in this Section 5.2 with respect to the Collateral unless and
until an Event of Default shall have occurred and be continuing.
(h) Anything contained in this Agreement to the contrary
notwithstanding, until an Event of Default shall occur and be continuing:
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(i) all rights, powers, privileges and other benefits of or accruing to
Debtor under the Assigned Agreements shall be exercisable only by Debtor,
without the consent or approval of the Secured Party, (ii) Debtor shall
retain full right to make all waivers and agreements, to give and receive
all notices and other instruments or communications, and to take all action
upon the occurrence of a default under any Assigned Agreement, including
the commencement, conduct and consummation of legal, administrative or
other proceedings, as shall be permitted thereby or by law, and to do any
and all other things which Debtor is or may be entitled to do under any
Assigned Agreement.
SECTION 5.3 Proceeds of Collateral. All cash proceeds received by Secured
Party in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral shall be held by Secured Party as collateral for,
and then promptly thereafter applied by Secured Party against, all or any part
of the amounts due under the Notes and the other Secured Obligations in such
order as Secured Party shall elect. Any surplus of such cash or cash proceeds
held by Secured Party and remaining after payment in full of all the Secured
Obligations shall be paid over to Debtor or to whomsoever may be lawfully
entitled to receive such surplus.
SECTION 5.4 Waiver of Rights; Receiver.
(a) Debtor consents to the appointment of one or more receivers of all
or part of the Collateral, upon the request of Secured Party, if an Event
of Default shall have occurred and be continuing.
(b) To the extent permitted by law, Debtor hereby waives its right to
seek, and hereby agrees that it will not seek or derive any benefit or
advantage from, any of the following whether now existing or hereafter in
effect:
(i) any stay, extension, moratorium or similar law with respect
to the Collateral or the Secured Obligations;
(ii) any law allowing for the redemption of any portion of the
Collateral after a sale thereof under Section 5.2 hereof; and
(iii) any right to have any portion of the Collateral after an
Event of Default shall have occurred.
Debtor covenants not to hinder, delay or impede the exercise of any right
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or remedy of Secured Party under or in respect of this Agreement and agrees
to suffer and permit the exercise of each such remedy.
ARTICLE VI
INDEMNITY AND EXPENSES
SECTION 6.1 General Indemnity. Debtor hereby assumes liability for, and
does hereby agree, whether or not any of the transactions contemplated hereby,
by the Security Instruments or the Notes are consummated, to indemnify, protect,
save, defend and hold harmless Secured Party and each of its officers,
directors, stockholders, successors, assigns, agents and servants (for purposes
of this Article VI, each of the foregoing may be referred to individually as a
"Beneficiary") from and against any and all obligations, fees, liabilities,
losses, damages, penalties, claims, demands, actions, suits, judgments, costs
and expenses, including, without limitation, reasonable legal fees and expenses,
of every kind and nature whatsoever imposed on, incurred by, or asserted against
any Beneficiary, in any way relating to or arising out of (a) the manufacture,
construction, ordering, purchase, acceptance or rejection, financing, ownership,
titling or retitling, registration or re-registration, acceptance, leasing,
subleasing, possession, use, operation, maintenance, storage, removal, sale,
delivery or other disposition of any item of Equipment, including, without
limitation, any of such as may arise from (i) loss or damage to any property or
death or injury to any person, (ii) patent or latent defects in any item of
Equipment (whether or not discoverable by Debtor or any Beneficiary), (iii) any
claims based on strict liability in tort or otherwise, (iv) any claims based on
patent, trademark or copyright infringement and (v) any claims based on
liability arising under the applicable environmental or noise or pollution
control law or regulation or (b) any failure on the part of Debtor to perform or
comply with any of the terms of the Security Instruments or the Notes or (c) any
Security Instrument or the Notes. Debtor shall not be required to indemnify any
Beneficiary for any claims resulting from acts which would constitute the
willful misconduct or gross negligence of such Beneficiary. Debtor shall give
Secured Party prompt notice of any occurrence, event or condition known to
Debtor as a consequence of which any Beneficiary is or is reasonably likely to
be entitled to indemnification hereunder. Debtor shall promptly upon demand of
any such Beneficiary reimburse such Beneficiary for amounts expended by it in
connection with any of the foregoing or pay such amounts directly. Debtor shall
be subrogated to a Beneficiary's rights in any matter with respect to which
Debtor has actually reimbursed such Beneficiary for amounts expended by it or
has actually paid such amounts directly pursuant to this Section 6.1. In case
any action, suit or Proceeding is brought against any Beneficiary in connection
with any claim indemnified against hereunder, such Beneficiary will, after
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receipt of notice of the commencement of such action, suit or Proceeding, notify
Debtor thereof, enclosing a copy of all papers served upon such Beneficiary.
Debtor may, and upon any Beneficiary's request will, at Debtor's expense, resist
and defend such action, suit or Proceeding, or cause the same to be resisted or
defended by counsel selected by Debtor and reasonably satisfactory to such
Beneficiary and in the event of any failure by Debtor to do so, Debtor shall pay
all costs, fees and expenses (including, without limitation, reasonable
attorney's fees and expenses) incurred by such Beneficiary in connection with
such action, suit or Proceeding.
SECTION 6.2 General Tax Indemnity. Debtor agrees to pay, and indemnify and
hold each Beneficiary harmless on an after-tax basis from, any and all federal,
state, local and foreign taxes, fees, withholdings, levies, imposts, duties,
assessments and charges of any kind and nature whatsoever, together with any
penalties, fines or interest therein (herein called "Taxes or Other
Impositions") howsoever imposed, whether levied or imposed upon or asserted
against such Beneficiary, Debtor, any item of Equipment or any part thereof, by
any federal, state or local government or taxing authority in the United States,
or by any taxing authority or governmental subdivision of a foreign country,
upon or with respect to (a) any item of Equipment (b) the manufacture,
construction, ordering, purchase, ownership, financing, delivery, leasing,
re-leasing, possession, use, maintenance, registration, titling, licensing,
documentation, return, sale (including, without limitation, sale to a third
party) or other application or disposition thereof, (c) the payments, receipts
or earnings arising from any item of Equipment or (d) the Bills of Sale, the
Security Instruments or the Notes, or upon the payments by Debtor under the
Bills of Sale, the Notes or the Security Instruments; provided, however, that
the foregoing indemnity shall not apply to any taxes or other impositions to the
extent based upon or measured by any Beneficiary's net income (unless such tax
or other imposition is a Covered Income Tax as hereinafter defined), and which
are imposed or levied by any federal, state or local taxing authority in the
United States. For purposes hereof, a "Covered Income Tax" shall mean an income
tax (including, without limitation, a tax imposed upon gross income or receipts)
imposed on any Beneficiary by any taxing authority (excluding the United States
federal government) in whose jurisdiction such Beneficiary (including for this
purpose all entities with which it is combined, integrated or consolidated in
such taxing authority's jurisdiction) would not engage in business, would not
maintain an office or other place of business and would not otherwise be located
therein, but for such Beneficiary's role in the transaction associated with the
financing of the Equipment, the operation of the Equipment in such jurisdiction,
the presence of Debtor or any use of the Equipment or the transactions
contemplated by the Bills of Sale, the Security Instruments or the Notes.
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Each Beneficiary shall furnish Debtor with copies of any requests for
information received by such Beneficiary from any taxing authority relating to
any taxes or other impositions with respect to which Debtor is required to
indemnify hereunder, and if a claim is made against such Beneficiary for any
such taxes or other impositions, with respect to which Debtor is liable for a
payment or indemnity hereunder, such Beneficiary shall give Debtor notice in
writing within (10) Business Days of such Beneficiary's receipt of such claim.
Debtor may, at its sole cost and expense, either in its own name or in the name
of any Beneficiary, contest the validity, applicability or amount of any such
tax or other imposition by means of a Permitted Contest. If any Beneficiary
shall obtain a refund of any amount paid by Debtor pursuant to this Section 6.2,
such Beneficiary shall pay to Debtor the amount of such refund, together with
the amount of any interest actually received by such Beneficiary on account of
such refund. Debtor will promptly notify Secured Party of all reports or returns
required to be made with respect to any tax or other imposition with respect to
which Debtor is required to indemnify hereunder and will promptly provide each
Beneficiary with all information necessary for the making and timely filing of
such reports or returns by such Beneficiary. If any Beneficiary requests that
any such reports or returns be prepared and filed by Debtor, Debtor will prepare
and file the same if permitted by applicable law to do so, and if not so
permitted, Debtor shall prepare such reports or returns for signature by such
Beneficiary, and shall forward the same, together with immediately available
funds for payment of any tax or other imposition due, to such Beneficiary, at
least ten (10) Business Days in advance of the date such payment is to be made.
Upon written request, Debtor shall furnish each Beneficiary with copies of all
paid receipts or other appropriate evidence of payment for all taxes or other
impositions paid by Debtor pursuant to this Section 6.2.
ARTICLE VII
FURTHER ASSURANCES; ATTORNEY-IN-FACT; DISCHARGE
SECTION 7.1 Further Assurances.
(a) Debtor agrees that from time to time, at the expense of Debtor,
Debtor will promptly execute and deliver all further instruments and
documents, and take all further action that Secured Party may reasonably
deem necessary or desirable, or that Secured Party may otherwise reasonably
request, in order to perfect and protect any security interest Granted or
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purported to be Granted hereby or to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, Debtor will cooperate to
execute and file financing or continuation statements, or amendments hereto
or thereto, and such other instruments or notices, as may be necessary or
reasonably desirable, or as Secured Party may reasonably request, in order
to perfect and preserve the security interests Granted or purported to be
Granted hereby.
(b) A carbon, photographic or other reproduction of this Agreement or
any financing statement covering the Collateral or any part thereof shall
be sufficient as a financing statement where permitted by law.
(c) Debtor will furnish to Secured Party from time to time statements
and schedules further identifying and describing the Collateral and such
other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
SECTION 7.2 Secured Party Appointed Attorney-in-Fact. Debtor hereby
irrevocably appoints Secured Party to serve as Debtor's attorney-in-fact
(provided, the parties hereto agree that Secured Party may not act as Debtor's
attorney-in-fact until the occurrence and during the continuation of an Event of
Default), with full authority in the place and stead of Debtor and in the name
of Debtor, Secured Party or otherwise, from time to time in Secured Party's
discretion, to take any action and to execute any instrument, including without
limitation financing statements or amendments thereto, which Secured Party may
deem necessary or advisable to accomplish the purposes of this Agreement,
including without limitation:
(a) to obtain and adjust insurance required to be paid to Secured
Party hereunder;
(b) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for monies due and to become due under or in
respect of any of the Collateral;
(c) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with subsections (a) or (b)
above; and
(d) to file any claims or take any action or institute any Proceedings
which Secured Party may deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce the rights of Secured Party
with respect to any of the Collateral.
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SECTION 7.3 Secured Party May Perform. If Debtor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Debtor under Section 6.1.
SECTION 7.4 Secured Party's Duties. The powers conferred on Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Secured Party shall have no
duty as to any Collateral or as to the taking of any necessary steps to preserve
rights against other parties or any other rights pertaining to any Collateral.
SECTION 7.5 Continuing Security Interest; Transfer of Note; Termination.
This Agreement shall: (a) create a continuing security interest in the
Collateral and shall remain in full force and effect until payment in full of
the Secured Obligations, be binding upon Debtor, its successors and assigns and
(b) inure to the benefit of Secured Party and its permitted successors,
transferees and assigns. Without limiting the generality of the foregoing
clause, Secured Party may assign or otherwise transfer all or any part of
Secured Party's interest in the Notes and/or the Security Instruments to one or
more persons or entities, and such other persons or entities shall thereupon
become vested with all the benefits in respect thereof Granted to Secured Party
herein. Upon the payment in full of the Secured Obligations, the security
interest Granted hereby shall terminate and all rights to the Collateral shall
revert to Debtor. Upon any such termination, Secured Party will execute and
deliver to Debtor such documents as Debtor shall reasonably request to evidence
such termination.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Notices. Except as expressly permitted herein to the contrary,
all notices and other communications provided for hereunder shall be in writing
(including communication by telecopier) and mailed (postage prepaid, by
registered or certified mail, return receipt requested), telecopied or hand
delivered:
if to Secured Party, at:
NationsBanc Leasing Corporation of
North Carolina
101 South Tryon Street, NC1-002-38-20
Charlotte, North Carolina 28255
Attention: Manager of Corporate Lease
Administration
Telecopy: (704) 386-0892
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or if to Debtor, at:
Seitel Geophysical, Inc.
50 Briar Hollow Lane, 7th Floor-West
Houston, Texas 77027
Attention: Debra D. Valice
Telecopy: (713) 627-1114
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party. All such notices and communications
shall be effective (a) five (5) days after such have been deposited in the mail
or (b) immediately (i) after such have been telecopied to the appropriate
telecopy number and (ii) after such have been hand delivered to the appropriate
address.
SECTION 8.2 Risk of Loss. Debtor shall bear all risk of any loss of or
damage to the Collateral and in no event shall Secured Party be liable for such
loss or damage.
SECTION 8.3 Powers and Agencies. Whenever in this Agreement Secured Party
is Granted the power of attorney or is appointed the agent and attorney-in-fact
with respect to any Person, such Grant or appointment is irrevocable and coupled
with an interest. Secured Party shall have full power of substitution and
delegation in respect of all such Grants and appointment.
SECTION 8.4 Entire Agreement. The Notes, this Agreement and the other
Security Instruments embody the entire agreement between the parties and
supersede all prior agreements and understandings, if any, relating to the
subject matter hereof.
SECTION 8.5 Lawful Interest. No provision in the Notes, this Agreement or
any Security Instrument or other document in favor of Secured Party shall
require or permit the collection of interest in excess of the maximum lawful
rate which Debtor may contract for, stipulate or agree to pay as determined by a
court of competent jurisdiction over the holder of the Notes or any such
document. In determining whether or not the interest paid or payable under any
specific contingency exceeds such maximum lawful rate, Debtor and Secured Party
shall, to the full extent permitted by applicable law, prorate, allocate and
spread, in equal parts, the total amount of interest throughout the entire
contemplated term of the Notes or other document, as the case may be, so that
the interest rate is uniform throughout the entire term of the Notes or such
document. If it is so determined that any interest in excess of such maximum
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lawful rate is provided for, such excess shall be applied first to any other
amounts not constituting interest due or which may become due and payable to
Debtor under the Notes or any of such other documents, and the balance, if any,
shall be refunded to Debtor; provided, however, that in no event shall Debtor be
obligated to pay, and Secured Party hereby waives payment of, the amount of
interest to the extent it is in excess of the amount permitted by applicable
law. SECTION 8.6 Survival; Severability. If any word, phrase, sentence,
paragraph, provision or section of this Agreement, the Notes or any other
Security Instrument shall be held, declared or pronounced void, voidable,
invalid, unenforceable or inoperative for any reason by any court of competent
jurisdiction, governmental authority or otherwise, such holding, declaration or
pronouncement shall not adversely affect any other word, phrase, sentence,
paragraph, provision or section of this Agreement, the Notes or any other
Security Instrument, which shall otherwise remain in full force and effect and
be enforced in accordance with their respective terms, and the effect of such
holding, declaration or pronouncement shall be limited to the territory or the
jurisdiction in which made. All agreements, covenants, representations,
warranties and conditions contained in this Agreement or made pursuant to the
provisions hereof shall survive the execution and delivery of this Agreement
until the Secured Obligations shall have been paid and performed in full. All
statements by Debtor contained in any certificate or other instrument delivered
pursuant to the provisions of this Agreement or any other Security Instrument
shall constitute the representations and warranties of Debtor.
SECTION 8.7 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of Debtor and Secured Party and their respective successors and
assigns, except that Debtor shall not have the right to assign its rights
hereunder of any interest herein without the prior written consent of Secured
Party. Secured Party may assign all or any part of, or any interest in, its
rights and benefits hereunder, under the Notes and any Security Instrument as
permitted under Section 7.5 hereof, and to the extent of such permitted
assignment each such assignee shall have the same rights and benefits against
Debtor as it would have had if it were Secured Party hereunder.
SECTION 8.8 Amendment and Waiver. No amendment or waiver of any provision
of the Notes, this Agreement or any of the other Security Instruments, or
consent to any departure by Debtor therefrom, shall in any event be effective
unless the same shall be in writing and signed by Secured Party and Debtor, and
such waiver and consent shall be effective only in the specific instance and for
the specific purpose for which given. No failure on the part of Secured Party to
exercise, and no delay in exercising, any right under the Notes, this Agreement
or any of the other Security Instruments shall operate as a waiver thereof; nor
shall any single or partial exercise of any right under any such instrument or
agreement preclude any other or further exercise thereof or the exercise of any
other right.
SECTION 8.9 Headings; Execution in Counterpart. The section and article
headings herein are for convenience of reference only, and shall not limit or
otherwise affect the meaning of any provision herein. This Agreement may be
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executed in counterparts, each of which shall constitute an original, but all of
which together shall constitute one and the same Agreement.
SECTION 8.10 Transaction Costs. Debtor shall pay all reasonable costs and
out-of-pocket expenses of Secured Party incurred in connection with preparation,
negotiation, execution, modification and/or enforcement of the Notes, this
Agreement, the other Security Instruments including without limitation (a) the
reasonable legal fees and expenses of Moore & Van Allen, PLLC, (b) all filing
and registration costs, (c) all fees and disbursements incurred by Secured Party
in connection with the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral, and (d)
all fees and disbursements incurred by Secured Party in connection with the
failure by Debtor to perform or observe any of the provisions hereof.
SECTION 8.11 APPLICABLE LAW; CONSENT TO JURISDICTION AND VENUE; WAIVER OF
JURY TRIAL. THIS AGREEMENT, THE NOTES AND THE OTHER SECURITY INSTRUMENTS AND ALL
MATTERS RELATING THERETO SHALL, EXCEPT TO THE EXTENT OTHERWISE REQUIRED BY
APPLICABLE LAW, BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NORTH CAROLINA WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES. DEBTOR HEREBY SUBMITS TO THE JURISDICTION AND VENUE OF THE STATE AND
FEDERAL COURTS OF MECKLENBURG COUNTY, NORTH CAROLINA AND AGREES THAT SECURED
PARTY MAY, AT ITS OPTION, ENFORCE ITS RIGHTS HEREUNDER AND UNDER THE NOTES AND
OTHER SECURITY INSTRUMENTS IN SUCH COURTS. DEBTOR HEREBY IRREVOCABLY WAIVES THE
DEFENSE OF AN INCONVENIENT FORUM TO MAINTENANCE OF ANY ACTION OR PROCEEDING BY
SECURED PARTY IN SUCH COURTS. DEBTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER SECURITY INSTRUMENT OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 8.12 Break-Funding Costs. Upon any early termination of this
Agreement and/or any early prepayment of the Notes for any reason which is not
expressly permitted under the Notes, Debtor shall promptly pay Secured Party (in
addition to all other amounts due and owing hereunder) an amount equal to the
Break-Funding Costs incurred by Secured Party, as such are (a) determined by
Secured Party at such time in its reasonable discretion and (b) specified in
writing to Debtor.
SECTION 8.13 Intention of the Parties. It is the intention of the parties
to this Agreement that the Equipment be and remain personal property, and at no
time (so long as any of the Secured Obligations remain outstanding) shall such
Equipment be attached, affixed or otherwise become a part of any vehicle or
vessel. Further, each of the parties hereto agree that it is their intent that
the provisions of the UCC govern the creation and perfection of a security
interest in the Collateral.
Page 64 of 200
<PAGE>
IN WITNESS WHEREOF, Debtor and Secured Party have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of the
date first above written.
SEITEL GEOPHYSICAL, INC., as Debtor
By: /s/ Horace A. Calvert
---------------------------------
Name: Horace A. Calvert
-------------------------------
Title: Executive Vice President
------------------------------
NATIONSBANC LEASING CORPORATION OF
NORTH CAROLINA, as Secured Party
By: /s/ George L. Robinson, Jr.
--------------------------------
Name: George L. Robinson, Jr.
------------------------------
Title: Senior Vice President
-----------------------------
Page 65 of 200
<PAGE>
SCHEDULE 1.3(a)
---------------
SECURED TERM NOTE A
Due July 12, 2001
$5,902,372.00 July 12, 1996
FOR VALUE RECEIVED, the undersigned SEITEL GEOPHYSICAL, INC., a
Delaware corporation ("Debtor") HEREBY PROMISES TO PAY to the order of
NATIONSBANC LEASING CORPORATION OF NORTH CAROLINA, a North Carolina corporation
("Secured Party"), the principal sum of FIVE MILLION NINE HUNDRED TWO THOUSAND
THREE HUNDRED AND SEVENTY-TWO DOLLARS ($5,902,372.00) (the "Original Amount")
pursuant to the terms and conditions of that certain Loan and Security Agreement
dated as of the date hereof between the Debtor and the Secured Party, as
amended, modified or replaced from time to time (as so amended, modified or
replaced, the "Agreement" - all the terms, conditions, definitions and covenants
of such Agreement are expressly made a part hereof in the same manner and with
the same effect as if set forth herein at length, any holder of this Secured
Term Note A (the "Note") being entitled to the benefits and remedies provided
for in the Agreement).
The Bank has made a term loan to the Borrower as provided in Section
1.3(a) of the Loan Agreement. The outstanding principal balance hereof shall be
due and payable as provided in Section 1.3(a)(i) of the Agreement.
Notwithstanding the foregoing, the final payment made on this Note shall be an
amount sufficient to discharge in full the unpaid Original Amount and all
accrued and unpaid interest on, and any other amounts due under this Note and
under the Agreement.
This Note shall bear interest on the outstanding balance hereof, and
such interest shall be payable hereunder, as provided in Section 1.3(a)(i) and
(a)(ii) of the Agreement.
In the event the amounts owing under this Note shall be accelerated in
accordance with the terms of the Agreement, the amounts owing hereunder shall
become immediately due and payable without presentation, demand, protest or
notice of any kind, all of which are hereby expressly waived. Further, in the
event amounts owing hereunder are not paid when due (including any stated or
accelerated maturity), the Debtor agrees to pay promptly upon demand, in
addition to principal, interest and other amounts owing hereunder, all costs of
collection, including reasonable attorneys' fees.
All payments shall be payable, in lawful money of the United States and
in immediately available funds without setoff or counterclaim, to Secured Party
Page 66 of 200
<PAGE>
at its office at NationsBank Plaza, 101 South Tryon Street, NC1-002-38-20,
Charlotte, North Carolina 28255 or such other address as the holder thereof
shall notify Debtor in writing.
In determining whether or not the interest paid or payable, under any
specific contingency, exceeds the maximum lawful rate permitted by law, Debtor
and Secured Party shall, to the full extent permitted by applicable law, exclude
voluntary prepayment and the effects thereof and amortize, prorate, allocate and
spread, in equal parts, the total amount of interest throughout the entire
contemplated term of this Note so that the interest rate is uniform throughout
the entire term of this Note. If it is so determined that any interest in excess
of such maximum lawful rate is provided for, then such excess shall be applied
first to any other amounts not constituting interest due or which may become due
under this Note or the Agreement and the balance, if any, shall be refunded to
Debtor; provided, however, that in no event shall Debtor be obligated to pay,
and Secured Party hereby waives payment of, the amount of interest to the extent
it is in excess of the amount permitted by applicable law. No provision in this
Note or the Agreement shall require or permit the collection of interest in
excess of the maximum lawful rate.
This Note may be prepaid by the Debtor in accordance with Section
1.3(c) of the Agreement only if all amounts owing with respect to this Note,
Agreement and the other Security Instruments are paid in full. Except as
otherwise provided for herein and in the Agreement, this Note shall not be
subject to prepayment.
THIS NOTE, THE AGREEMENT AND THE SECURITY INSTRUMENTS AND ALL MATTERS
RELATING THERETO SHALL, EXCEPT TO THE EXTENT OTHERWISE REQUIRED BY APPLICABLE
LAW, BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NORTH CAROLINA WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
DEBTOR HEREBY SUBMITS TO THE JURISDICTION AND VENUE OF THE STATE AND FEDERAL
COURTS OF NORTH CAROLINA AND AGREES THAT THE SECURED PARTY MAY, AT ITS OPTION,
ENFORCE ITS RIGHTS HEREUNDER AND UNDER THE AGREEMENT AND THE OTHER SECURITY
INSTRUMENTS IN SUCH COURTS. DEBTOR HEREBY IRREVOCABLY WAIVES THE DEFENSE OF AN
INCONVENIENT FORUM TO MAINTENANCE OF ANY ACTION OR PROCEEDING BY SECURED PARTY
IN SUCH COURTS. DEBTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS NOTE,
THE AGREEMENT OR ANY OTHER SECURITY INSTRUMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
Page 67 of 200
<PAGE>
IN WITNESS WHEREOF, the Debtor has caused this Note to be executed as
of the date appearing above.
SEITEL GEOPHYSICAL, INC.
By:
--------------------------------
Name (Printed):
--------------------
Title:
-----------------------------
Page 68 of 200
<PAGE>
SCHEDULE 1.3(b)
---------------
SECURED TERM NOTE B
Due August 31, 1999
$1,361,839.13 July 12, 1996
FOR VALUE RECEIVED, the undersigned SEITEL GEOPHYSICAL, INC., a
Delaware corporation ("Debtor") HEREBY PROMISES TO PAY to the order of
NATIONSBANC LEASING CORPORATION OF NORTH CAROLINA, a North Carolina corporation
("Secured Party"), the principal sum of ONE MILLION THREE HUNDRED SIXTY-ONE
THOUSAND EIGHT HUNDRED THIRTY-NINE AND 13/100 DOLLARS ($1,361,839.13) (the
"Original Amount") pursuant to the terms and conditions of that certain Loan and
Security Agreement dated as of the date hereof between the Debtor and the
Secured Party, as amended, modified or replaced from time to time (as so
amended, modified or replaced, the "Agreement" - all the terms, conditions,
definitions and covenants of such Agreement are expressly made a part hereof in
the same manner and with the same effect as if set forth herein at length, any
holder of this Secured Term Note B (the "Note") being entitled to the benefits
and remedies provided for in the Agreement).
The Bank has made a term loan to the Borrower as provided in Section
1.3(b) of the Loan Agreement. The outstanding principal balance hereof shall be
due and payable as provided in Section 1.3(b)(ii) of the Agreement.
Notwithstanding the foregoing, the final payment made on this Note shall be an
amount sufficient to discharge in full the unpaid Original Amount and all
accrued and unpaid interest on, and any other amounts due under this Note and
under the Agreement.
This Note shall bear interest on the outstanding balance hereof, and
such interest shall be payable hereunder, as provided in Section 1.3(b)(ii) and
(b)(iii) of the Agreement.
In the event the amounts owing under this Note shall be accelerated in
accordance with the terms of the Agreement, the amounts owing hereunder shall
become immediately due and payable without presentation, demand, protest or
notice of any kind, all of which are hereby expressly waived. Further, in the
event amounts owing hereunder are not paid when due (including any stated or
accelerated maturity), the Debtor agrees to pay promptly upon demand, in
addition to principal, interest and other amounts owing hereunder, all costs of
collection, including reasonable attorneys' fees.
Page 69 of 200
<PAGE>
All payments shall be payable, in lawful money of the United States and
in immediately available funds without setoff or counterclaim, to Secured Party
at its office at NationsBank Plaza, 101 South Tryon Street, NC1-002-38-20,
Charlotte, North Carolina 28255 or such other address as the holder thereof
shall notify Debtor in writing.
In determining whether or not the interest paid or payable, under any
specific contingency, exceeds the maximum lawful rate permitted by law, Debtor
and Secured Party shall, to the full extent permitted by applicable law, exclude
voluntary prepayment and the effects thereof and amortize, prorate, allocate and
spread, in equal parts, the total amount of interest throughout the entire
contemplated term of this Note so that the interest rate is uniform throughout
the entire term of this Note. If it is so determined that any interest in excess
of such maximum lawful rate is provided for, then such excess shall be applied
first to any other amounts not constituting interest due or which may become due
under this Note or the Agreement and the balance, if any, shall be refunded to
Debtor; provided, however, that in no event shall Debtor be obligated to pay,
and Secured Party hereby waives payment of, the amount of interest to the extent
it is in excess of the amount permitted by applicable law. No provision in this
Note or the Agreement shall require or permit the collection of interest in
excess of the maximum lawful rate.
This Note may be prepaid by the Debtor in accordance with Section
1.3(c) of the Agreement only if all amounts owing with respect to this Note, the
Agreement and the other Security Instruments are paid in full. Except as
otherwise provided for herein and in the Agreement, this Note shall not be
subject to prepayment.
THIS NOTE, THE AGREEMENT AND THE SECURITY INSTRUMENTS AND ALL MATTERS
RELATING THERETO SHALL, EXCEPT TO THE EXTENT OTHERWISE REQUIRED BY APPLICABLE
LAW, BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NORTH CAROLINA WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
DEBTOR HEREBY SUBMITS TO THE JURISDICTION AND VENUE OF THE STATE AND FEDERAL
COURTS OF NORTH CAROLINA AND AGREES THAT THE SECURED PARTY MAY, AT ITS OPTION,
ENFORCE ITS RIGHTS HEREUNDER AND UNDER THE AGREEMENT AND THE OTHER SECURITY
INSTRUMENTS IN SUCH COURTS. DEBTOR HEREBY IRREVOCABLY WAIVES THE DEFENSE OF AN
INCONVENIENT FORUM TO MAINTENANCE OF ANY ACTION OR PROCEEDING BY SECURED PARTY
IN SUCH COURTS. DEBTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS NOTE,
THE AGREEMENT OR ANY OTHER SECURITY INSTRUMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
Page 70 of 200
<PAGE>
IN WITNESS WHEREOF, the Debtor has caused this Note to be executed as
of the date appearing above.
SEITEL GEOPHYSICAL, INC.
By:
---------------------------------
Name (Printed):
---------------------
Title:
------------------------------
Page 71 of 200
<PAGE>
SCHEDULE 1.3(b)(i)
------------------
NOTICE OF BORROWING
NationsBanc Leasing Corporation of
North Carolina
101 South Tryon Street, NC1-002-38-20
Charlotte, North Carolina 28255
Attn: Manager of Corporate Lease Administration
Facsimile No.: (704) 386-0892
Re: Notice of Borrowing under Loan and Security Agreement dated as of July ,
---
1996 (the "Loan Agreement") between Seitel Geophysical, Inc. ("Debtor") and
NationsBanc Leasing Corporation of North Carolina ("Secured Party")
Dear Sir:
The Debtor hereby requests an advance under the above-referenced Loan Agreement
in accordance with the following information:
1. Debtor:
----------------------------------
2. Date of Requested Advance:
---------------
3. Amount of Requested Advance:
-------------
4. Bill of Sale Supporting Requested Advance: See Attached Rider
The Debtor hereby certifies that as of the date hereof no Default or Event of
Default currently exists under the Loan Agreement and no Default or Event of
Default shall exist as a result of the making of the Requested Advance.
Sincerely,
[DEBTOR]
Page 72 of 200
EXHIBIT 10.5
REVOLVING CREDIT AGREEMENT
among
SEITEL, INC.,
THE LENDERS PARTY HERETO,
and
THE FIRST NATIONAL BANK OF CHICAGO
as Agent
dated as of
JULY 22, 1996
Page 73 of 200
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS................................................... 1
ARTICLE II THE CREDITS.................................................. 18
2.1. Commitment................................................... 18
2.2. Facility Amount.............................................. 18
2.3. Termination ................................................. 18
2.4. Ratable Advances............................................. 18
2.4.1. Ratable Loans................................................ 18
2.4.2. Ratable Advance Rate Options................................. 19
2.4.3. Method of Selecting Types and Interest Periods
for New Ratable Advances................................ 19
2.4.4. Conversion and Continuation of Outstanding Ratable
Advances................................................ 19
2.5.1. Competitive Bid Option....................................... 20
2.5.2. Competitive Bid Quote Request................................ 20
2.5.3. Invitation for Competitive Bid Quotes........................ 21
2.5.4. Submission and Contents of Competitive Bid Quotes............ 21
2.5.5. Notice to Borrower........................................... 22
2.5.6. Acceptance and Notice by Borrower............................ 22
2.5.7. Allocation by Agent.......................................... 23
2.5.8. Competitive Bid Auction Fees................................. 23
2.6. Commitment Fee; Voluntary and Mandatory Reductions
in Aggregate Commitment................................. 23
2.7. Minimum Amount of Each Advance............................... 24
2.8. Optional Principal Payments.................................. 24
2.9. Changes in Interest Rate, etc................................ 24
2.10. Rates Applicable After Default............................... 25
2.11. Method of Payment............................................ 25
2.12. Notes; Telephonic Notices.................................... 25
2.13. Interest Payment Dates; Interest and Fee Basis............... 26
2.14. Notification of Advances, Interest Rates, Prepayments
and Commitment Reductions............................... 26
2.15. Lending Installations........................................ 26
2.16. Non-Receipt of Funds by the Agent............................ 26
2.17. Optional Increase in the Aggregate Commitment................ 27
i
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<PAGE>
ARTICLE III CHANGE IN CIRCUMSTANCES...................................... 29
3.1. Yield Protection............................................. 29
3.2. Changes in Capital Adequacy Regulations...................... 30
3.3. Availability of Types of Advances............................ 30
3.4. Funding Indemnification...................................... 30
3.5. Lender Statements; Survival of Indemnity..................... 31
ARTICLE IV CONDITIONS PRECEDENT; WITHHOLDING TAX EXEMPTION.............. 31
4.1. Initial Advance.............................................. 31
4.2. Each Advance................................................. 33
4.3. Withholding Tax Exemption.................................... 33
4.4. Replacement of Lenders....................................... 34
ARTICLE V REPRESENTATIONS AND WARRANTIES............................... 34
5.1. Organization; Power and Authority............................ 34
5.2. Authorization and Validity................................... 35
5.3. Accuracy of Information...................................... 35
5.4. Organization and Ownership of Shares of Restricted
Subsidiaries; Affiliates. .............................. 35
5.5. Financial Statements......................................... 36
5.6. Material Adverse Change...................................... 36
5.7 No Conflict or Violation..................................... 36
5.8. Governmental Authorizations.................................. 37
5.9. Litigation; Observance of Agreements, Statutes
and Orders.............................................. 37
5.10. Taxes. ...................................................... 37
5.11. Title to Property; Leases.................................... 37
5.12. Licenses, Permits, etc....................................... 38
5.13. Compliance with ERISA........................................ 38
5.14. Margin Regulations........................................... 39
5.15. Existing Debt; Future Liens.................................. 39
5.16. Status under Certain Statutes................................ 40
5.17. Environmental Matters........................................ 40
ii
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<PAGE>
ARTICLE VI COVENANTS.................................................... 41
6.1. Financial Reporting.......................................... 41
6.2. Officer's Certificate........................................ 45
6.3. Use of Proceeds.............................................. 46
6.4. Corporate or Partnership Existence; Conduct
of Business............................................. 46
6.5. Pari Passu. ................................................. 46
6.6. Subsidiary Guaranty. ........................................ 46
6.7. Payment of Taxes and Claims.................................. 47
6.8. Insurance.................................................... 47
6.9. Compliance with Laws......................................... 47
6.10. Maintenance of Properties.................................... 47
6.11. Inspection................................................... 48
6.12. Restricted Payments and Restricted Investments............... 48
6.13. Merger and Consolidation..................................... 49
6.14. Sale of Assets............................................... 50
6.15. Liens........................................................ 53
6.16. Limitations on Certain Restricted Subsidiary
Actions................................................. 55
6.17. Affiliate Transactions....................................... 56
6.18. Net Worth.................................................... 56
6.19. Interest Coverage............................................ 56
6.20. Debt Incurrence. ............................................ 57
ARTICLE VII DEFAULTS..................................................... 57
ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES............... 60
8.1. Acceleration................................................. 60
8.2. Amendments................................................... 60
8.3. Preservation of Rights....................................... 61
ARTICLE IX GENERAL PROVISIONS........................................... 61
9.1. Survival of Representations.................................. 61
9.2. Governmental Regulation...................................... 61
9.3. Taxes........................................................ 61
9.4. Headings..................................................... 61
9.5. Entire Agreement............................................. 61
9.6. Several Obligations; Benefits of this Agreement.............. 62
9.7. Expenses; Indemnification.................................... 62
9.8. Numbers of Documents......................................... 62
9.9. Accounting................................................... 62
9.10. Severability of Provisions................................... 62
9.11. Nonliability of Lenders...................................... 63
9.12. Confidentiality.............................................. 63
9.13. Nonreliance.................................................. 63
9.14. Maximum Rate................................................. 63
9.15. ERISA Representation by Lenders. ............................ 64
iii
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<PAGE>
ARTICLE X THE AGENT........................................................ 64
10.1. Appointment; Nature of Relationship.......................... 64
10.2. Powers....................................................... 65
10.3. General Immunity............................................. 65
10.4. No Responsibility for Loans, Recitals, etc................... 65
10.5. Action on Instructions of Lenders............................ 65
10.6. Employment of Agents and Counsel............................. 65
10.7. Reliance on Documents; Counsel............................... 66
10.8. Agent's Reimbursement and Indemnification.................... 66
10.9. Notice of Default............................................ 66
10.10. Rights as a Lender........................................... 66
10.11. Lender Credit Decision....................................... 67
10.12. Successor Agent.............................................. 67
10.13. Agent's Fee.................................................. 67
ARTICLE XI SETOFF; RATABLE PAYMENTS..................................... 68
11.1. Setoff....................................................... 68
11.2. Ratable Payments............................................. 68
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS............ 68
12.1. Successors and Assigns....................................... 68
12.2. Participations............................................... 69
12.2.1. Permitted Participants; Effect............................... 69
12.2.2. Voting Rights................................................ 69
12.2.3. Benefit of Setoff............................................ 69
12.3. Assignments.................................................. 70
12.3.1. Permitted Assignments........................................ 70
12.3.2. Effect; Effective Date....................................... 70
12.4. Dissemination of Information................................. 70
12.5. Tax Treatment................................................ 71
ARTICLE XIII NOTICES...................................................... 71
13.1. Notices...................................................... 71
13.2. Change of Address............................................ 71
ARTICLE XIV COUNTERPARTS................................................. 71
iv
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<PAGE>
ARTICLE XV CHOICE OF LAW, CONSENT TO JURISDICTION, WAIVER
OF JURY TRIAL........................................... 72
15.1. CHOICE OF LAW................................................ 72
15.2. CONSENT TO JURISDICTION...................................... 72
15.3. WAIVER OF JURY TRIAL......................................... 72
EXHIBIT "A" RATABLE NOTE................................................. 75
EXHIBIT "B" COMPETITIVE BID NOTE......................................... 77
EXHIBIT "C" COMPETITIVE BID QUOTE REQUEST................................ 79
EXHIBIT "D" INVITATION FOR COMPETITIVE BID QUOTES........................ 80
EXHIBIT "E" COMPETITIVE BID QUOTE........................................ 81
EXHIBIT "F" FORM OF OPINION.............................................. 83
EXHIBIT "G" COMPLIANCE CERTIFICATE....................................... 89
SCHEDULE I TO COMPLIANCE CERTIFICATE........................................ 91
SCHEDULE II TO COMPLIANCE CERTIFICATE
Rate Determination................................................. 92
SCHEDULE III TO COMPLIANCE CERTIFICATE
Reports and Deliveries............................................. 93
EXHIBIT "H" ASSIGNMENT AGREEMENT......................................... 94
SCHEDULE 1 to Assignment Agreement.......................................... 99
EXHIBIT "I" LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION.............. 103
EXHIBIT "J" FORM OF SUBSIDIARY GUARANTY................................. 104
ANNEX I [FORM OF JOINDER AGREEMENT]........................................ 114
EXHIBIT "K" FORM OF OPINION TO ACCOMPANY JOINDER AGREEMENT.............. 116
EXHIBIT "L" FORM OF LENDER ASSUMPTION AGREEMENT......................... 121
SCHEDULES.................................................................. 124
iv
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<PAGE>
SEITEL, INC. REVOLVING CREDIT AGREEMENT
This Agreement, dated as of July 22, 1996, is among Seitel, Inc., a
Delaware corporation, the Lenders and The First National Bank of Chicago, as
Agent. The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement:
"Absolute Rate" means, with respect to an Absolute Rate Loan made by a
given Lender for the relevant Absolute Rate Interest Period, the rate of
interest per annum (rounded to the nearest 1/100 of 1%) offered by such Lender
and accepted by the Borrower.
"Absolute Rate Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Absolute Rate Loans made by some or all of the
Lenders to the Borrower at the same time and for the same Absolute Rate Interest
Period.
"Absolute Rate Auction" means a solicitation of Competitive Bid Quotes
setting forth Absolute Rates pursuant to Section 2.5.
"Absolute Rate Interest Period" means, with respect to an Absolute Rate
Advance, a period of not less than one and not more than twenty-nine days,
commencing on a Business Day selected by the Borrower pursuant to this
Agreement. If such Absolute Rate Interest Period would end on a day which is not
a Business Day, such Absolute Rate Interest Period shall end on the next
succeeding Business Day, unless such next succeeding Business Day is after the
Facility Termination Date, in which case such Absolute Rate Interest Period
shall end on the next preceding Business Day.
"Absolute Rate Loan" means a Loan which bears interest at the Absolute
Rate.
"Acceptable Bank" means any bank or trust company (y) which is
organized under the laws of the United States of America or any State thereof
and (z) which has capital, surplus and undivided profits aggregating at least
Five Hundred Million Dollars ($500,000,000).
"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
Page 79 of 200
<PAGE>
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.
"Advance" means a borrowing hereunder (or conversion or continuation
thereof) consisting of the aggregate amount of the several Loans made by some or
all of the Lenders to the Borrower on the same Borrowing Date (or date of
conversion or continuation), at the same Rate Option and, in the case of Fixed
Rate Advances, for the same Interest Period.
"Affiliate" means, at any time, (i) with respect to any Person other
than the Borrower, any other Person that at such time directly or indirectly
through one or more intermediaries Controls, or is Controlled by, or is under
common Control with, such Person, and (ii) with respect to the Borrower, a
Person (other than a Wholly-Owned Restricted Subsidiary), (a) that at such time
directly or indirectly through one or more intermediaries Controls, or is
Controlled by, or is under common Control with, the Borrower, (b) that at such
time beneficially owns or holds, directly or indirectly, ten percent (10%) or
more of the Voting Stock of the Borrower, or (c) ten percent (10%) or more of
the Voting Stock of which is at such time beneficially owned or held by the
Borrower or any one or more of its Subsidiaries.
"Agent" means The First National Bank of Chicago in its capacity as
agent for 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 Commitment" means the aggregate of the Commitments of all
the Lenders, as reduced from time to time pursuant to the terms hereof.
"Agreement" means this credit agreement, as it may be amended or
modified and in effect from time to time.
"Agreement Accounting Principles" 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 5.5.
Page 80 of 200
<PAGE>
"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 Commitment Fee" means (i) during any Level 1 Period, 0.225%
per annum, (ii) during any Level 2 Period, 0.25% per annum, (iii) during any
Level 3 Period, 0.30% per annum and (iv) during any Level 4 Period, 0.375% per
annum, provided that all adjustments to the Applicable Commitment Fee shall be
effective commencing on the fifth Business Day after (x) the delivery of
financial statements showing the required ratio for the applicable Level or (y)
the Agent becomes aware that the Borrower or any Subsidiary has incurred
additional Indebtedness which would affect the calculation of the Debt to Cash
Flow from Operations Ratio, and provided further that in the event that the
Borrower shall at any time fail to furnish to the Agent the financial statements
required to be delivered pursuant to Sections 6.1(a) and (b) or fail to notify
the Agent, pursuant to Section 6.1(j), of the incurrence of any such
Indebtedness, the maximum Applicable Commitment Fee shall apply until such time
as such financial statements are so delivered or the Agent is notified of the
incurrence of such Indebtedness, as the case may be.
"Applicable Margin" means (i) during any Level 1 Period, 0.625% per
annum with respect to Eurodollar Loans and 0.00% with respect to Floating Rate
Loans, (ii) during any Level 2 Period, 0.75% per annum with respect to
Eurodollar Loans and 0.00% with respect to Floating Rate Loans, (iii) during any
Level 3 Period, 1.0% per annum with respect to Eurodollar Loans and 0.00% with
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respect to Floating Rate Loans and (iv) during any Level 4 Period, 1.50% per
annum with respect to Eurodollar Loans and 0.50% with respect to Floating Rate
Loans, provided that all adjustments to the Applicable Margin shall be effective
commencing on the fifth Business Day after (x) the delivery of financial
statements showing the required ratio for the applicable Level or (y) the Agent
becomes aware that the Borrower or any Subsidiary has incurred additional
Indebtedness which would affect the calculation of the Debt to Cash Flow from
Operations Ratio, and provided further that in the event that the Borrower shall
at any time fail to furnish to the Agent the financial statements required to be
delivered pursuant to Sections 6.1(a) and (b) or fail to notify the Agent,
pursuant to Section 6.1(j), of the incurrence of any such Indebtedness, the
maximum Applicable Margin for such Type of Advance shall apply until such time
as such financial statements are so delivered or the Agent is notified of the
incurrence of such Indebtedness, as the case may be.
"Article" means an article of this Agreement unless another document is
specifically referenced.
"Authorized Officer" means any of the President, Executive Vice
President, Chief Financial Officer or Chief Accounting Officer of the Borrower,
acting singly.
"Borrower" means Seitel, Inc., a Delaware corporation, and its
permitted successors and assigns.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" means a Ratable Borrowing Notice, a Competitive Bid
Borrowing Notice, or both, as the context may require.
"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 Chicago and New York for the conduct of
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substantially all of their commercial lending activities and on which 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 Chicago for the conduct of substantially all of their
commercial lending activities.
"Capital Lease" of a Person means any lease of Property by such Person
as lessee with respect to which the lessee is required concurrently to recognize
the acquisition of an asset and the incurrence of a liability in accordance with
Agreement Accounting Principles.
"Capital Lease Obligations" of a Person means the amount of the
obligations of such Person under Capital Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"Change in Control" means 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 Securities and Exchange Commission under the Securities Exchange
Act of 1934) of 30% or more of the outstanding shares of voting stock of the
Borrower.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment" means, for each Lender, the obligation of such Lender to
make Ratable Loans not exceeding the amount set forth opposite its signature
below 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.
"Competitive Bid Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Competitive Bid Loans made by some or all of the
Lenders to the Borrower at the same time and for the same Interest Period.
"Competitive Bid Borrowing Notice" is defined in Section 2.5.6.
"Competitive Bid Loan" means an Absolute Rate Loan.
"Competitive Bid Note" means a promissory note in substantially the
form of Exhibit "B" hereto, with appropriate insertions, duly executed and
delivered to the Agent by the Borrower for the account of a Lender and payable
to the order of such Lender, including any amendment, modification, renewal or
replacement of such promissory note.
"Competitive Bid Quote" means a Competitive Bid Quote substantially in
the form of Exhibit "E" hereto completed and delivered by a Lender to the Agent
in accordance with Section 2.5.4.
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"Competitive Bid Quote Request" means a Competitive Bid Quote Request
substantially in the form of Exhibit "C" hereto completed and delivered by the
Borrower to the Agent in accordance with Section 2.5.2.
"Consolidated Debt" means, as of any date of determination, the total
of all Debt of the Borrower and the Restricted Subsidiaries outstanding on such
date, after eliminating all offsetting debits and credits between the Borrower
and the Restricted Subsidiaries and all other items required to be eliminated in
the course of the preparation of consolidated financial statements of the
Borrower and the Restricted Subsidiaries prepared in accordance with Agreement
Accounting Principles.
"Consolidated Interest Expense" means, with respect to any period, the
sum (without duplication) of the following (in each case, eliminating all
offsetting debits and credits between the Borrower and the Restricted
Subsidiaries and all other items required to be eliminated in the course of the
preparation of consolidated financial statements of the Borrower and the
Restricted Subsidiaries in accordance with Agreement Accounting Principles): (i)
all interest in respect of Debt of the Borrower and the Restricted Subsidiaries
(including imputed interest on Capital Lease Obligations) deducted in
determining Consolidated Net Income for such period, and (ii) all debt discount
and expense amortized or required to be amortized in the determination of
Consolidated Net Income for such period.
"Consolidated Net Income" means, with reference to any period, the net
income (or loss) of the Borrower and the Restricted Subsidiaries for such period
(taken as a cumulative whole), as determined in accordance with Agreement
Accounting Principles, after eliminating all offsetting debits and credits
between the Borrower and the Restricted Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Borrower and the Restricted Subsidiaries in
accordance with Agreement Accounting Principles, provided that there shall be
excluded: (i) any gains resulting from any write-up of any assets (but not any
loss resulting from any write-down of any assets), (ii) the income (or loss) of
any Person accrued prior to the date it becomes a Restricted Subsidiary or is
merged into or consolidated with the Borrower or a Restricted Subsidiary, and
the income (or loss) of any Person, substantially all of the assets of which
have been acquired in any manner by the Borrower or any Restricted Subsidiary,
realized by such other Person prior to the date of acquisition, (iii) in the
case of a successor to the Borrower by consolidation or merger or as a
transferee of its assets, any earnings of the successor corporation prior to
such consolidation, merger or transfer of assets, (iv) any aggregate net gain
(but not any aggregate net loss) during such period arising from the sale,
conversion, exchange or other disposition of capital assets (such term to
include, without limitation, (1) all non-current assets and, without
duplication, (2) the following, whether or not current: all fixed assets,
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whether tangible or intangible, all inventory sold in conjunction with the
disposition of fixed assets, and all securities), (v) any portion of such net
income that cannot be freely converted into United States Dollars, (vi) the
income (or loss) of any Person (other than a Restricted Subsidiary) in which the
Borrower or any Restricted Subsidiary has an ownership interest, except to the
extent that any such income has been actually received by the Borrower or such
Restricted Subsidiary in the form of cash dividends or similar cash
distributions, (vii) any gain arising from the acquisition of any security, or
the extinguishment, under Agreement Accounting Principles, of any Debt, of the
Borrower or any Restricted Subsidiary, (viii) any net income or gain or any net
loss during such period from (1) any change in accounting principles in
accordance with Agreement Accounting Principles or (2) any prior period
adjustments resulting from any change in accounting principles in accordance
with Agreement Accounting Principles, and (ix) any net income or gain (but not
any net loss) during such period from (1) any extraordinary items or (2) any
discontinued operations or the disposition thereof.
"Consolidated Net Worth" means, at any time, the total stockholders'
equity which would be shown in consolidated financial statements of the Borrower
and the Restricted Subsidiaries prepared at such time in accordance with
Agreement Accounting Principles.
"Consolidated Tangible Assets" means, at any time, Consolidated Total
Assets at such time, minus (i) deferred assets, other than prepaid expenses
which are refundable; (ii) patents, copyrights, trademarks, trade names, service
marks, brand names, franchises, goodwill, experimental expenses and other
similar intangibles; (iii) unamortized debt discount and expense; and (iv) all
other Property which would be classified as intangible under Agreement
Accounting Principles.
"Consolidated Total Assets" means, at any time, the amount at which the
total assets of the Borrower and the Restricted Subsidiaries would be shown in
consolidated financial statements of the Borrower and the Restricted
Subsidiaries prepared at such time in accordance with Agreement Accounting
Principles, after deduction of depreciation, amortization and all other properly
deductible valuation reserves.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting Securities, by contract or otherwise.
"Controlled Group" means all members of a controlled group of
corporations 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.
"Conversion/Continuation Notice" is defined in Section 2.4.4.
"Corporate Base Rate" means a rate per annum equal to the corporate
base rate of interest announced by First Chicago from time to time, changing
when and as said corporate base rate changes.
"Debt" means, with respect to any Person, without duplication, (i) its
obligations for borrowed money; (ii) its obligations in respect of banker's
acceptances, other acceptances, letters of credit and other instruments serving
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a similar function issued or accepted by banks and other financial institutions
for the account of such Person (whether or not incurred in connection with the
borrowing of money); (iii) its obligations that are evidenced by bonds, notes,
debentures or similar instruments; (iv) its obligations for the deferred
purchase price of Property acquired by such Person (excluding accounts payable
arising in the ordinary course of business but including, without limitation,
all obligations created or arising under any conditional sale or other title
retention agreement with respect to any such Property); (v) its Capital Lease
Obligations; (vi) its obligations in respect of all mandatorily redeemable
preferred stock of such Person; (vii) its obligations for borrowed money secured
by any Lien with respect to any Property owned by such Person (whether or not it
has assumed or otherwise become liable for such obligations); and (viii) any
Guaranty of such Person with respect to liabilities of a type described in any
of clauses (i) through (vii) hereof. Debt of any Person shall include all
obligations of such Person of the character described in clauses (i) through
(viii) to the extent such Person remains legally liable in respect thereof
notwithstanding that any such obligation is deemed to be extinguished under
Agreement Accounting Principles.
"Debt to Cash Flow from Operations Ratio" means, for any fiscal quarter
of the Borrower and its Restricted Subsidiaries on a consolidated basis, the
ratio of (i) Debt outstanding on the last day of such quarter to (ii) the sum of
(a) Consolidated Net Income for such quarter, plus (b) to the extent deducted in
determining Consolidated Net Income, the amount of all depreciation, depletion
and amortization allowances of the Borrower and the Restricted Subsidiaries for
such quarter, plus (c) to the extent deducted in determining Consolidated Net
Income, deferred taxes of the Borrower and the Restricted Subsidiaries for such
quarter.
"Default" means an event described in Article VII.
"Designated Portion" is defined in Section 6.14.
"Disposition Value" is defined in Section 6.14.
"Distribution" means, in respect of any corporation, association or
other business entity: (i) dividends or other distributions or payments on
capital stock or other equity interest of such corporation, association or other
business entity (except distributions in such stock or other equity interest);
and (ii) the redemption or acquisition of such stock or other equity interests
or of warrants, rights or other options to purchase such stock or other equity
interests (except when solely in exchange for such stock or other equity
interests).
"EBITDA" means, in respect of any period, Consolidated Net Income for
such period minus (i) to the extent added in the computation of such
Consolidated Net Income, each of the following: (1) extraordinary gains, net of
extraordinary losses, and (2) gains, net of losses, arising from the disposition
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of Property other than in the ordinary course of business, plus (ii) to the
extent deducted in the computation of such Consolidated Net Income, each of the
following: (1) Consolidated Interest Expense, net of interest and other
investment income, (2) taxes imposed on or measured by income or excess profits
of the Borrower and the Restricted Subsidiaries, (3) the amount of all
depreciation, depletion and amortization allowances and other non-cash expenses
of the Borrower and the Restricted Subsidiaries, (4) extraordinary losses, net
of extraordinary gains, and (5) losses, net of gains, arising from the
disposition of Property other than in the ordinary course of business.
"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, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, hazardous
substances or wastes or the clean-up or other remediation thereof.
"Equity Interest" means (i) the outstanding Voting Stock of a
corporation or other business entity, (ii) the interest in the capital or
profits of a corporation, limited liability company, partnership or joint
venture, or (iii) the beneficial interest in a trust or estate.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Borrower
under section 414 of the Code.
"Eurodollar Advance" means an Advance which bears interest at the
Eurodollar Rate.
"Eurodollar Base Rate" means, with respect to a Eurodollar Advance for
the relevant Eurodollar Interest Period, the applicable London interbank offered
rate for deposits in U.S. dollars appearing on Telerate Page 3750 as of 11:00
a.m. (London time) two Business Days prior to the first day of such Eurodollar
Interest Period, and having a maturity approximately equal to such Eurodollar
Interest Period. If no London interbank offered rate of such maturity then
appears on Telerate Page 3750, then the Eurodollar Base Rate shall be equal to
the London interbank offered rate for deposits in U.S. dollars maturing
immediately before or immediately after such maturity, whichever is higher, as
determined by the Agent from Telerate Page 3750. If Telerate Page 3750 is not
available, the applicable Eurodollar Base Rate for the relevant Eurodollar
Interest Period shall be the rate determined by the Agent to be the rate at
which First Chicago 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 Eurodollar Interest Period, in
the approximate amount of First Chicago's relevant portion of the Eurodollar
Advance and having a maturity approximately equal to such Eurodollar Interest
Period.
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"Eurodollar Interest Period" means, with respect to a Eurodollar
Advance, a period of one, two, three or six months commencing on a Business Day
selected by the Borrower pursuant to this Agreement. Such Eurodollar Interest
Period shall end on the day which corresponds numerically to such date one, two,
three or six months thereafter, provided, however, that if there is no such
numerically corresponding day in such next, second, third or sixth succeeding
month, such Eurodollar Interest Period shall end on the last Business Day of
such next, second, third or sixth succeeding month. If a Eurodollar Interest
Period would otherwise end on a day which is not a Business Day, such Eurodollar
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 Eurodollar Interest Period shall end on the immediately preceding
Business Day.
"Eurodollar Loan" means a Loan which bears interest at a Eurodollar
Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Eurodollar Interest Period, the sum of (i) the quotient of (a) the
Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided by
(b) one minus the Reserve Requirement (expressed as a decimal) applicable to
such Eurodollar Interest Period, plus (ii) the Applicable Margin. The Eurodollar
Rate shall be rounded to the next higher multiple of 1/16 of 1% if the rate is
not such a multiple.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Transfer" is defined in Section 6.14.
"Facility Termination Date" means July 22, 1999 or any earlier date on
which the Aggregate Commitment is reduced to zero or otherwise terminated
pursuant to the terms hereof.
"Fair Market Value" means, at any time and with respect to any
Property, the sale value of such Property that would be realized in an arm's
length sale at such time between an informed and willing buyer and an informed
and willing seller (neither being under a compulsion to buy or sell,
respectively).
"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 a.m. (Chicago
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.
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"First Chicago" means The First National Bank of Chicago in its
individual capacity, and its successors.
"Fixed Rate" means the Eurodollar Rate or the Absolute Rate.
"Fixed Rate Advance" means an Advance which bears interest at a Fixed
Rate.
"Fixed Rate Loan" means a Loan which bears interest at a Fixed Rate.
"Floating Rate" means, for any day, a rate per annum equal to (i) 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 bears interest at the
Floating Rate.
"Floating Rate Loan" means a Loan which bears interest at the Floating
Rate.
"Friendly Acquisition" means an Acquisition which has been either (a)
not disapproved by the board of directors of the corporation, or the managing
body of the firm, which is the subject of such Acquisition after such board or
managing body has been given the opportunity to consider such Acquisition or (b)
recommended by such board to the shareholders of such corporation and, if
required by applicable law, approved by such shareholders, and excluding in any
event any Acquisition involving an "unfriendly" or contested tender offer.
"Governmental Authority" means (i) the government of (1) the United
States of America or any State or other political subdivision thereof, or (2)
any jurisdiction in which the Borrower or any Subsidiary conducts all or any
part of its business, or which asserts jurisdiction over any properties of the
Borrower or any Subsidiary, or (ii) any entity exercising executive,
legislative, judicial, regulatory or administrative functions of, or pertaining
to, any such government.
"Guaranty" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person: (i) to
purchase such indebtedness or obligation or any Property constituting security
therefor; (ii) to advance or supply funds (1) for the purchase or payment of
such indebtedness or obligation, or (2) to maintain any working capital or other
balance sheet condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or payment of such
indebtedness or obligation; (iii) to lease properties or to purchase properties
or services primarily for the purpose of assuring the owner of such indebtedness
or obligation of the ability of any other Person to make payment of the
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indebtedness or obligation; or (iv) otherwise to assure the owner of such
indebtedness or obligation against loss in respect thereof. In any computation
of the indebtedness or other liabilities of the obligor under any Guaranty, the
indebtedness or other obligations that are the subject of such Guaranty shall be
assumed to be direct obligations of such obligor.
"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
"Interest Period" means a Eurodollar Interest Period or an Absolute
Rate Interest Period.
"Invitation for Competitive Bid Quotes" means an Invitation for
Competitive Bid Quotes substantially in the form of Exhibit "D" hereto,
completed and delivered by the Agent to the Lenders in accordance with Section
2.5.3.
"Intergroup Transfer" is defined in Section 6.14.
"Investment" means any investment, made in cash or by delivery of
Property, by the Borrower or any of its Subsidiaries in any Person, whether by
acquisition of stock, indebtedness or other obligation or Security (including,
without limitation, any interests in any partnership or joint venture), or by
loan, Guaranty, advance, capital contribution or otherwise; provided that
"Investment" does not include trade credit to the extent extended in the
ordinary course of business.
"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,
any office, branch, subsidiary or affiliate of such Lender or the Agent.
"Level 1 Period" means any period during which the Debt to Cash Flow
from Operations Ratio for the most recently ended fiscal quarter was less than
1.0 to 1.0.
"Level 2 Period" means any period which does not qualify as a Level 1
Period during which the Debt to Cash Flow from Operations Ratio for the most
recently ended fiscal quarter was less than 2.0 to 1.0.
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"Level 3 Period" means any period which does not qualify as a Level 1
Period or a Level 2 Period during which the Debt to Cash Flow from Operations
Ratio for the most recently ended fiscal quarter was less than 2.5 to 1.0.
"Level 4 Period" means any period which does not qualify as a Level 1
Period, a Level 2 Period or a Level 3 Period.
"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, Capital Lease or other title retention
agreement).
"Loan" means, with respect to a Lender, such Lender's loan made
pursuant to Article II (or any conversion or continuation thereof).
"Loan Documents" means this Agreement, the Notes and the Subsidiary
Guaranty.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets or properties of the Borrower and the
Restricted Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (i) the
business, operations, affairs, financial condition, assets or properties of the
Borrower and the Restricted Subsidiaries, taken as a whole, (ii) the ability of
the Borrower to perform its obligations under this Agreement and the Notes,
(iii) the ability of any Restricted Subsidiary to perform its respective
obligations under the Subsidiary Guaranty, or (iv) the validity or
enforceability of this Agreement, the Subsidiary Guaranty or the Notes or the
rights or remedies of the Agent or the Lenders thereunder.
"Maximum Rate" is defined in Section 9.14.
"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.
"Net Asset Sale Proceeds Amount" means, with respect to any Transfer of
any Property by any Person, an amount equal to the difference of: (i) the
aggregate amount of the consideration (valued at the Fair Market Value of such
consideration at the time of the consummation of such Transfer) received by such
Person in respect of such Transfer, minus (ii) all ordinary and reasonable
out-of-pocket costs and expenses actually incurred by such Person in connection
with such Transfer.
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"Net Proceeds of Common Stock" means, with respect to any period, cash
proceeds (net of all costs and out-of-pocket expenses incurred in connection
therewith, including, without limitation, placement, underwriting and brokerage
fees and expenses) received by the Borrower and the Restricted Subsidiaries
during such period from the sale of all common stock of the Borrower, including
in such net proceeds: (i) the net amount paid upon issuance and exercise during
such period of any right to acquire any common stock, or paid during such period
to convert a convertible debt Security to common stock (but excluding any amount
paid to the Borrower upon issuance of such convertible debt Security); and (ii)
any amount paid to the Borrower upon issuance of any convertible debt Security
that is converted to common stock during such period.
"Notes" means, collectively, the Competitive Bid Notes and the Ratable
Notes; and "Note" means any one of the Notes.
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Notes, 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 hereunder arising under the
Loan Documents.
"Ordinary Course Transfer" is defined in Section 6.14.
"Participants" is defined in Section 12.2.1.
"Payment Date" means the fifth Business Day following the end of each
quarter.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Person" means any natural person, corporation, firm, joint venture,
partnership, 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 benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Borrower or any ERISA Affiliate or
with respect to which the Borrower or any ERISA Affiliate may have any
liability.
"Prepayment Transfer" is defined in Section 6.14.
"Priority Debt" means, without duplication, the sum of (i) all Debt of
the Borrower secured by a Lien permitted only by Section 6.15(j) and (ii) all
Debt of Restricted Subsidiaries (except (x) Debt held by the Borrower or a
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Wholly-Owned Restricted Subsidiary, (y) Debt of a Restricted Subsidiary that is
an unsecured Guaranty of Senior Debt and that ranks pari passu with the
obligations of the Restricted Subsidiaries under the Subsidiary Guaranty, and
(z) Debt of a Restricted Subsidiary secured by a Lien permitted by the
provisions of Section 6.15(a) through (i), inclusive).
"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.
"Purchasers" is defined in Section 12.3.1.
"Ratable Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Ratable Loans made by the Lenders to the
Borrower at the same time, at the same Rate Option and for the same Interest
Period.
"Ratable Borrowing Notice" is defined in Section 2.4.3.
"Ratable Loan" means a Loan made by a Lender pursuant to Section 2.4
hereof.
"Ratable Note" means a promissory note in substantially the form of
Exhibit "A" hereto, duly executed and delivered to the Agent by the Borrower for
the account of a Lender and payable to the order of such Lender in the amount of
its Commitment, including any amendment, modification, renewal or replacement of
such promissory note.
"Rate Option" means the Eurodollar Rate, the Floating Rate or the
Absolute Rate.
"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.
"Reinvested Transfer" is defined in Section 6.14.
"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 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
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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.
"Required Lenders" means Lenders in the aggregate having at least
66-2/3% of the Aggregate Commitment or, if the Aggregate Commitment has been
terminated, Lenders in the aggregate holding at least 66-2/3% of the aggregate
unpaid principal amount of the outstanding Advances.
"Reserve Requirement" means, with respect to a Eurodollar Interest
Period, the maximum aggregate reserve requirement (including all basic,
supplemental, marginal and other reserves) which is imposed under Regulation D
on Eurocurrency liabilities.
"Responsible Officer" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
"Restricted Investments" means all Investments except the following:
(i) cash; (ii) Investments in one or more Restricted Subsidiaries or any Person
engaged in the business referred to in Section 6.4 that concurrently with such
Investment becomes a Wholly-Owned Restricted Subsidiary; (iii) Investments in
United States Governmental Securities, provided that such obligations mature
within 365 days from the date of acquisition thereof; (iv) Investments in
certificates of deposit or banker's acceptances issued by an Acceptable Bank,
provided that such obligations mature within 365 days from the date of
acquisition thereof; (v) Investments in commercial paper given the highest
rating by a credit rating agency of recognized national standing and maturing
not more than 270 days from the date of creation thereof; and (vi) Investments
in money market mutual funds that invest solely in so-called "money market"
instruments maturing not more than one year after the acquisition thereof, which
funds have assets in excess of Five Hundred Million Dollars ($500,000,000). For
purposes of this Agreement, an Investment shall be valued at the lesser of (w)
cost and (x) the value at which such Investment is to be shown on the books of
the Borrower and the Restricted Subsidiaries in accordance with Agreement
Accounting Principles.
"Restricted Payment" means (i) any Distribution in respect of the
Borrower or any Restricted Subsidiary (other than on account of capital stock or
other equity interests of a Restricted Subsidiary owned legally and beneficially
by the Borrower or another Restricted Subsidiary), including, without
limitation, any Distribution resulting in the acquisition by the Borrower of
Securities which would constitute treasury stock; and (ii) any payment,
repayment, redemption, retirement, repurchase or other acquisition, direct or
indirect, by the Borrower or any Restricted Subsidiary of, on account of, or in
respect of, the principal of any Subordinated Debt (or any installment thereof)
prior to the regularly scheduled maturity date thereof (as in effect on the date
such Subordinated Debt was originally incurred). For purposes of this Agreement,
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the amount of any Restricted Payment made in Property shall be the greater of
(x) the Fair Market Value of such Property (as determined in good faith by the
board of directors (or equivalent governing body) of the Person making such
Restricted Payment) and (y) the net book value thereof on the books of such
Person, in each case determined as of the date on which such Restricted Payment
is made.
"Restricted Subsidiary" means and includes each and every Subsidiary
other than any Subsidiary which, at the time of any determination hereunder, has
been designated by the Board of Directors and by written notice of the Borrower
to the Agent to be an Unrestricted Subsidiary; provided, in any event, that each
of the following shall at all times constitute a Restricted Subsidiary: (i) each
Subsidiary identified on Schedule 1; and (ii) each Subsidiary which owns,
directly or indirectly, more than fifty percent (50%) of the Equity Interest of
a Restricted Subsidiary.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Securities Act" means the Securities Act of 1933, as amended.
"Security" means "security" as defined in Section 2(1) of the
Securities Act.
"Senior Debt" means any Debt of the Borrower that is not in any manner
subordinated in right of payment or security in any respect to the Obligations
or to any other Debt of the Borrower.
"Senior Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Borrower.
"Senior Notes" means, collectively, the Borrower's 7.17% Series A
Senior Notes due December 30, 2001, the Borrower's 7.17% Series B Senior Notes
due December 30, 2002 and the Borrower's 7.48% Series C Senior Notes due
December 30, 2002.
"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.
"Subordinated Debt" means any Debt of the Borrower other than Senior
Debt.
"Subsidiary" means, as to any Person, any corporation, limited
liability company, partnership, joint venture, trust or estate in which such
Person or one or more of the Subsidiaries or such Person and one or more of the
Subsidiaries own more than fifty percent (50%) of the Equity Interest. Unless
stated to the contrary or unless the context otherwise clearly requires, any
reference to a "Subsidiary" is a reference to a Subsidiary of the Borrower.
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"Subsidiary Guaranty" means that certain Subsidiary Guaranty dated as
of July 22, 1996 made by the Restricted Subsidiaries in favor of the Agent, for
the ratable benefit of the Lenders.
"Substantial Portion" is defined in Section 6.14.
"Total Capitalization" means, at any time, the sum of Consolidated Debt
plus Consolidated Net Worth, in each case at such time.
"Transfer" is defined in Section 6.14.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as a Floating
Rate Advance, Eurodollar Advance or Absolute Rate Advance.
"Unfunded Liabilities" means the amount (if any) by which the present
value of all (vested and unvested) aggregate accrued benefit liabilities under
all Single Employer Plans exceeds the aggregate current value of all such Plan
assets allocable to such benefit liabilities, all determined as of the then most
recent valuation date for such Plans using PBGC actuarial assumptions for single
employer plan terminations. As used in this definition, the term "benefit
liabilities" has the meaning specified in section 4001 of ERISA and the terms
"current value" and "present value" have the meaning specified in section 3 of
ERISA.
"United States Governmental Security" means any direct obligation of,
or obligation guaranteed by, the United States of America, or any agency
controlled or supervised by or acting as an instrumentality of the United States
of America pursuant to authority granted by the Congress of the United States of
America, so long as such obligation or guarantee shall have the benefit of the
full faith and credit of the United States of America which shall have been
pledged pursuant to authority granted by the Congress of the United States of
America.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"Unrestricted Subsidiary" means each Subsidiary of the Borrower other
than a Restricted Subsidiary.
"Voting Stock" shall mean the capital stock or similar interest of any
class or classes (however designated) of a corporation or other business entity,
the holders of which are ordinarily, in the absence of contingencies, entitled
to vote for the election of the members of the board of directors (or Persons
performing similar functions) of a corporation or other business entity.
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"Wholly-Owned Restricted Subsidiary" means, at any time, any Restricted
Subsidiary one hundred percent (100%) of all of the Equity Interests (except
directors' qualifying shares) and voting interests of which are owned by any one
or more of the Borrower and the Borrower's other Wholly-Owned Restricted
Subsidiaries at such time.
"Wholly-Owned Subsidiary" means, at any time, any Subsidiary one
hundred percent (100%) of all of the Equity Interests (except directors'
qualifying shares) and voting interests of which are owned by any one or more of
the Borrower and the Borrower's other Wholly-Owned Subsidiaries at such time.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
ARTICLE II
THE CREDITS
2.1. Commitment. From and including the date of this Agreement and
prior to the Facility Termination Date, (i) each Lender severally agrees,
on the terms and conditions set forth in this Agreement, to make Ratable
Loans to the Borrower in accordance with Section 2.4 from time to time in
amounts not to exceed in the aggregate at any one time outstanding the
amount of its Commitment and (ii) each Lender may, in its sole discretion,
make bids to make Competitive Bid Loans to the Borrower in accordance with
Section 2.5. Subject to the terms of this Agreement, the Borrower may
borrow, repay and reborrow at any time prior to the Facility Termination
Date. The Commitments to lend hereunder shall expire on the Facility
Termination Date.
2.2. Facility Amount. In no event may the aggregate principal amount
of all outstanding Advances (including both the Ratable Advances and the
Competitive Bid Advances) exceed the Aggregate Commitment. The Borrower
agrees that if at any time any such excess shall arise, it shall
immediately pay to the Agent the amount necessary to eliminate such excess,
without presentment, demand, protest or notice of any kind from the Agent
or any Lender, all of which the Borrower hereby expressly waives.
2.3. Termination. Any outstanding Advances and all other unpaid
Obligations shall be paid in full by the Borrower on the Facility
Termination Date.
2.4. Ratable Advances.
2.4.1 Ratable Loans. Each Ratable Advance hereunder shall
consist of Ratable Loans made from the several Lenders ratably in
proportion to the ratio that their respective Commitments bear to
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the Aggregate Commitment. The aggregate outstanding amount of
Competitive Bid Advances shall reduce the amount available for
borrowing under each Lender's Commitment ratably in the
proportion such Lender's Commitment bears to the Aggregate
Commitment regardless of which Lender or Lenders make such
Competitive Bid Advances. Ratable Advances shall be evidenced by
the Ratable Notes.
2.4.2 Ratable Advance Rate Options. The Ratable Advances may
be Floating Rate Advances or Eurodollar Advances, or a
combination thereof, selected by the Borrower in accordance with
Sections 2.4.3 and 2.4.4. No Ratable Advance may mature after the
Facility Termination Date.
2.4.3. Method of Selecting Types and Interest Periods for
New Ratable Advances. The Borrower shall select the Type of
Ratable Advance and, in the case of each Eurodollar Advance, the
Interest Period applicable to each Ratable Advance from time to
time. The Borrower shall give the Agent irrevocable notice (a
"Ratable Borrowing Notice") not later than 10:00 a.m. (Chicago
time) one Business Day before the Borrowing Date for each
Floating Rate Advance or three Business Days before the Borrowing
Date for each Eurodollar Advance, specifying:
(i) the Borrowing Date, which shall be a Business Day, of
such Ratable Advance,
(ii) the aggregate amount of such Ratable Advance,
(iii)the Type of Ratable Advance selected, and
(iv) in the case of each Eurodollar Advance, the Interest
Period applicable thereto.
Not later than noon (Chicago time) on each Borrowing Date, each
Lender shall make available its Loan or Loans, in funds
immediately available in Chicago to the Agent at its address
specified pursuant to Article XIII. Promptly after receipt of
such funds from the Lenders, the Agent will make such funds
available to the Borrower at the Agent's aforesaid address.
2.4.4. Conversion and Continuation of Outstanding Ratable
Advances. Floating Rate Advances shall continue as Floating Rate
Advances unless and until such Floating Rate Advances are
converted into Eurodollar Advances. 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
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Floating Rate Advance unless the Borrower shall have given the
Agent a Conversion/Continuation Notice requesting that, at the
end of such Interest Period, such Eurodollar Advance either
continue as a Eurodollar Advance for the same or another Interest
Period or be converted into a Floating Rate Advance. Subject to
the terms of Section 2.7, the Borrower may elect from time to
time to convert all or any part of any Ratable Advance of any
Type into any other Type or Types of Ratable Advances; provided
that any conversion of any Eurodollar Advance shall be made on,
and only on, the last day of the Interest Period applicable
thereto. The Borrower shall give the Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of a Ratable
Advance or continuation of a Eurodollar Advance not later than
10:00 a.m. (Chicago time) at least one Business Day, in the case
of a conversion into a Floating Rate Advance, or three Business
Days, in the case of a conversion into or continuation of a
Eurodollar Advance, 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 Ratable Advance
which is to be converted or continued; and
(iii)the amount and Type(s) of Ratable Advance(s) into which
such Ratable Advance is to be converted or continued
and, in the case of a conversion into or continuation
of a Eurodollar Advance, the duration of the Interest
Period applicable thereto.
2.5. Competitive Bid Advances.
2.5.1. Competitive Bid Option. In addition to Ratable
Advances pursuant to Section 2.4, but subject to the terms and
conditions of this Agreement (including, without limitation, the
limitation set forth in Section 2.2 as to the maximum aggregate
principal amount of all outstanding Advances hereunder), the
Borrower may, as set forth in this Section 2.5, request the
Lenders, prior to the Facility Termination Date, to make offers
to make Competitive Bid Advances. Each Lender may, but shall have
no obligation to, make such offers and the Borrower may, but
shall have no obligation to, accept any such offers in the manner
set forth in this Section 2.5. Competitive Bid Advances shall be
evidenced by the Competitive Bid Notes.
2.5.2. Competitive Bid Quote Request. When the Borrower
wishes to request offers to make Competitive Bid Loans under this
Section 2.5, it shall transmit to the Agent by telecopy a
Competitive Bid Quote Request substantially in the form of
Exhibit "C" hereto so as to be received no later than 9:00 a.m.
(Chicago time) at least one Business Day prior to the Borrowing
Date proposed therein, specifying:
(i) the proposed Borrowing Date, which shall be a Business
Day, for the proposed Competitive Bid Advance;
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(ii) the aggregate principal amount of such Competitive Bid
Advance; and
(iii)the Interest Period applicable thereto (which may not
extend past the Facility Termination Date).
The Borrower may request offers to make Competitive Bid Loans for
more than one Interest Period in a single Competitive Bid Quote
Request. No Competitive Bid Quote Request shall be given by the
Borrower within five Business Days of any other Competitive Bid
Quote Request from the Borrower. To the extent that a Competitive
Bid Quote Request does not conform substantially to the format of
Exhibit "C" hereto, it will be rejected.
2.5.3 Invitation for Competitive Bid Quotes. Promptly and in
any event before the close of business on the same Business Day
of receipt of a Competitive Bid Quote Request that is not
rejected pursuant to Section 2.5.2, the Agent shall send to each
of the Lenders by telecopy an Invitation for Competitive Bid
Quotes substantially in the form of Exhibit "D" hereto, which
shall constitute an invitation by the Borrower to each Lender to
submit Competitive Bid Quotes offering to make the Competitive
Bid Loans to which such Competitive Bid Quote Request relates in
accordance with this Section 2.5.
2.5.4. Submission and Contents of Competitive Bid Quotes.
(a) Each Lender may, in its sole discretion, submit a Competitive
Bid Quote containing an offer or offers to make Competitive Bid
Loans in response to any Invitation for Competitive Bid Quotes.
Each Competitive Bid Quote must comply with the requirements of
this Section 2.5.4 and must be submitted to the Agent by telecopy
at its offices specified in or pursuant to Article XIII not later
than 9:00 a.m. (Chicago time) on the proposed Borrowing Date;
provided that Competitive Bid Quotes submitted by First Chicago
may only be submitted if the Agent notifies the Borrower of the
terms of the offer or offers contained therein not later than 15
minutes prior to the latest time at which the relevant
Competitive Bid Quotes must be submitted by the other Lenders.
Subject to Articles IV and VIII, any Competitive Bid Quote so
made shall be irrevocable except with the written consent of the
Agent given on the instructions of the Borrower.
(b) Each Competitive Bid Quote shall be in substantially the
form of Exhibit "E" hereto and shall in any case specify:
(i) the proposed Borrowing Date, which shall be the
same as that set forth in the applicable Invitation for
Competitive Bid Quotes;
(ii) the principal amount of the Competitive Bid Loan
for which each such offer is being made, which principal
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amount (1) may be greater than, less than or equal to the
Commitment of the quoting Lender, (2) must be at least
$2,000,000 and an integral multiple of $1,000,000, and (3)
may not exceed the principal amount of Competitive Bid Loans
for which offers were requested;
(iii) the minimum amount, if any, of the Competitive
Bid Loan which may be accepted by the Borrower;
(iv) the Absolute Rate offered for each such
Competitive Bid Loan; and
(v) the identity of the quoting Lender.
(c) The Agent shall reject any Competitive Bid Quote that:
(i) is not substantially in the form of Exhibit "E"
hereto or does not specify all of the information required
by Section 2.5.4(b);
(ii) contains qualifying, conditional or similar
language, other than any such language contained in Exhibit
"E";
(iii)proposes terms other than or in addition to those
set forth in the applicable Invitation for Competitive Bid
Quotes; or
(iv) arrives after the time set forth in Section
2.5.4(a).
If any Competitive Bid Quote shall be rejected pursuant to this Section
2.5.4(c), then the Agent shall notify the relevant Lender of such
rejection as soon as practical.
2.5.5 Notice to Borrower. The Agent shall promptly notify the
Borrower of the terms (i) of any Competitive Bid Quote submitted by a
Lender that is in accordance with Section 2.5.4 and (ii) of any
Competitive Bid Quote that amends, modifies or is otherwise
inconsistent with a previous Competitive Bid Quote submitted by such
Lender with respect to the same Competitive Bid Quote Request. Any
such subsequent Competitive Bid Quote shall be disregarded by the
Agent unless such subsequent Competitive Bid Quote specifically states
that it is submitted solely to correct a manifest error in such former
Competitive Bid Quote. The Agent's notice to the Borrower shall
specify the aggregate principal amount of Competitive Bid Loans for
which offers have been received for each Interest Period specified in
the related Competitive Bid Quote Request and the respective principal
amounts and Absolute Rates so offered.
2.5.6. Acceptance and Notice by Borrower. Not later than 10:00
a.m. (Chicago time) on the proposed Borrowing Date, the Borrower shall
notify the Agent of its acceptance or rejection of the offers of which
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it received notification pursuant to Section 2.5.5. The failure by the
Borrower to give such notice to the Agent shall be deemed to be a
rejection of all such offers. In the case of acceptance, such notice
(a "Competitive Bid Borrowing Notice") shall specify the aggregate
principal amount of offers for each Interest Period that are accepted.
The Borrower may accept any Competitive Bid Quote in whole or in part
(subject to the terms of Section 2.5.4(b)(iii)); provided that:
(i) the aggregate principal amount of each Competitive Bid
Advance may not exceed the applicable amount set forth in
the related Competitive Bid Quote Request;
(ii) acceptance of offers may only be made on the basis of
ascending Absolute Rates; and
(iii)the Borrower may not accept any offer that is described in
Section 2.5.4(c) (and is not subsequently corrected by the
relevant Lender) or that otherwise fails to comply with the
requirements of this Agreement.
2.5.7. Allocation by Agent. If offers are made by two or more
Lenders with the same Absolute Rates for a greater aggregate principal
amount than the amount in respect of which offers are accepted for the
related Interest Period, the principal amount of Competitive Bid Loans
in respect of which such offers are accepted shall be allocated by the
Agent among such Lenders as nearly as possible (in such multiples, not
greater than $1,000,000, as the Agent may deem appropriate) in
proportion to the aggregate principal amount of such offers; provided,
however, that no Lender shall be allocated a portion of any
Competitive Bid Advance which is less than the minimum amount which
such Lender has indicated that it is willing to accept. Allocations by
the Agent of the amounts of Competitive Bid Loans shall be conclusive
in the absence of manifest error. The Agent shall promptly, but in any
event on the same Business Day, notify each Lender of its receipt of a
Competitive Bid Borrowing Notice and the aggregate principal amount of
such Competitive Bid Advance allocated to each participating Lender.
2.5.8. Competitive Bid Auction Fees. The Borrower hereby agrees
to pay to the Agent, for its own account, competitive bid auction fees
in the amounts set forth in a letter agreement between the Agent and
the Borrower dated July 22, 1996.
2.6. Commitment Fee; Voluntary and Mandatory Reductions in Aggregate
Commitment. (a) 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
Commitment Fee on the daily unused portion of such Lender's Commitment from
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the date hereof to and including the Facility Termination Date, payable on
each Payment Date hereafter and on the Facility Termination Date. Solely
for the purpose of calculating the amount of commitment fee due hereunder,
Competitive Bid Loans shall not constitute usage of the Commitment of the
Lender making such Loan or of any other Lender.
(b) The Borrower may permanently reduce the Aggregate Commitment in
whole, or in part ratably among the Lenders in integral multiples of
$5,000,000, 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 Commitment may not be reduced
below the aggregate principal amount of the outstanding Advances. All
accrued commitment fees shall be payable on the effective date of any
termination of the obligations of the Lenders to make Loans hereunder.
(c) At any time when the Aggregate Commitment exceeds $25,000,000, the
Aggregate Commitment shall be automatically reduced, on the date of any
repayment by the Borrower of any principal amount of the Senior Notes, by
an amount equal to the principal amount of such Senior Notes repaid,
provided that the Aggregate Commitment shall not be required to be reduced
below $25,000,000 as a result of this Section 2.6(c). If the provisions of
this Section 2.6(c) would otherwise cause the Aggregate Commitment to be
reduced below the aggregate principal amount of the outstanding Loans, then
the Borrower will make a pro rata prepayment of the outstanding Loans
(together with any funding indemnification payments required under Section
3.4) such that the aggregate principal amount of Loans outstanding does not
exceed the Aggregate Commitment, as so reduced.
2.7. Minimum Amount of Each Advance. Each Fixed Rate Advance shall be
in the minimum amount of $2,000,000 (and in multiples of $1,000,000 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 may be in the amount of
the unused Aggregate Commitment.
2.8. 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, any portion of the
outstanding Floating Rate Advances upon three Business Days' prior notice
to the Agent. The Borrower may from time to time pay all outstanding
Eurodollar Advances, or, in a minimum aggregate amount of $2,000,000, any
portion of the outstanding Eurodollar Advances upon three Business Days'
prior notice to the Agent, provided that the Borrower shall be required to
pay any amounts due under Section 3.4 in connection with such prepayment at
the time of such prepayment. Competitive Bid Advances may not be paid prior
to the last day of the applicable Interest Period.
2.9. Changes in Interest Rate, etc. 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 converted from a
Eurodollar Advance into a Floating Rate Advance
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pursuant to Section 2.4.4 to but excluding the date it becomes due or is
converted into a Eurodollar Advance pursuant to Section 2.4.4, 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 Rate. Each Fixed Rate 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 as applicable to such Fixed
Rate Advance. No Interest Period may end after the Facility Termination
Date.
2.10. Rates Applicable After Default. Notwithstanding anything to the
contrary contained in Section 2.4.3 or 2.4.4, 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 a Competitive Bid Advance or made as,
converted into or continued as a Eurodollar Advance. During the continuance
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 Fixed Rate
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 otherwise applicable to the Floating Rate
Advance plus 2% per annum.
2.11. 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 First Chicago for each payment of principal,
interest and fees as it becomes due hereunder.
2.12. Notes; Telephonic Notices. Each Lender is hereby authorized to
record the principal amount of each of its Loans and each repayment on the
schedule attached to its Ratable Note or its Competitive Bid Note, as the
case may be, provided, however, that neither the failure to so record nor
any error in such recordation shall affect the Borrower's obligations under
any such Note. The Borrower hereby authorizes
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the Lenders and the Agent to (i) extend, convert or continue Advances and
to effect selections of Types of Advances based on telephonic notices made
by any person or persons the Agent or any Lender in good faith believes to
be an Authorized Officer and (ii) to transfer funds based on telephonic
notices made by any person the Agent or Lender in good faith believes to be
acting on behalf of the Borrower. 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.
2.13. Interest Payment Dates; Interest and Fee Basis. The Agent will
give the Borrower notice of the amount of interest accrued on Floating Rate
Advances promptly (and in no event later than three Business Days)
following the end of each quarter. 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 each Fixed Rate Advance shall be payable on the last day of its
applicable Interest Period, on any date on which the Fixed Rate Advance is
prepaid, whether by acceleration or otherwise, and at maturity. Interest
accrued on each Fixed Rate 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 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.
2.14. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof, the Agent will
notify each Lender of the contents of each Aggregate Commitment reduction
notice, Borrowing Notice, Conversion/Continuation Notice, and repayment
notice received by it hereunder. The Agent will notify the Borrower and
each Lender of the interest rate applicable to each Fixed Rate Advance in
which such Lender is participating promptly upon determination of such
interest rate and will give each Lender prompt notice of each change in the
Alternate Base Rate.
2.15. 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 Notes shall be deemed held by each
Lender for the benefit of such Lending Installation. Each Lender may, by
written or telex notice to the Agent and the Borrower, designate a Lending
Installation through which Loans will be made by it and for whose account
Loan payments are to be made.
2.16. 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
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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 (i) in the case of
payment by a Lender, the Federal Funds Effective Rate for such day or (ii)
in the case of payment by the Borrower, the interest rate applicable to the
relevant Loan.
2.17. Optional Increase in the Aggregate Commitment. (a) The Borrower
may at any time, by notice to the Agent, propose that the Aggregate
Commitment be increased (the amount of such increase being a "Commitment
Increase"), effective as at a date prior to the Facility Termination Date
(an "Increase Date") as to which agreement is to be reached by an earlier
date specified in such notice (a "Commitment Date"); provided, however,
that (A) the Borrower may not propose more than two Commitment Increases in
any calendar year, (B) the minimum proposed Commitment Increase per notice
shall be $5,000,000, (C) in no event shall the Aggregate Commitment at any
time exceed $50,000,000, and (D) no Default or Unmatured Default shall have
occurred and be continuing on such Increase Date. The Agent shall notify
the Lenders thereof promptly upon its receipt of any such notice. The Agent
agrees that it will cooperate with the Borrower in discussions with the
Lenders and other lending institutions with a view to arranging the
proposed Commitment Increase through the increase of the Commitments of,
first, one or more of the Lenders (each such Lender that is willing to
increase its Commitment hereunder being an "Increasing Lender") and, if the
existing Lenders are not willing, in the aggregate, to increase their
Commitments by the amount of the requested Commitment Increase, then by the
addition of one or more other lending institutions (each an "Assuming
Lender") as Lenders and as parties to this Agreement; provided, however,
that it shall be in each Lender's sole discretion whether to increase its
Commitment hereunder in connection with the proposed Commitment Increase;
and provided further that the minimum Commitment of each Assuming Lender
that becomes a party to this Agreement pursuant to this Section 2.17 shall
be at least equal to $5,000,000. If the Increasing Lenders agree to
increase their respective Commitments by an aggregate amount in excess of
the proposed Commitment Increase, the proposed Commitment Increase shall be
allocated among such Increasing Lenders in proportion to their respective
Commitments immediately prior to the Increase Date. If agreement is reached
on or prior to the applicable Commitment Date with any Increasing Lenders
and Assuming Lenders as to a Commitment Increase (which may be less than
but not greater than specified in the applicable notice from the Borrower),
such agreement to be evidenced by a notice in reasonable detail from the
Borrower to the Agent on or prior to the applicable Commitment Date, such
Assuming Lenders, if any, shall become Lenders hereunder as of the
applicable Increase Date and the Commitments of such Increasing Lenders and
such Assuming Lenders shall become or be, as the case may be, as of the
Increase Date, the amounts specified in such notice; provided that:
(x) the Agent shall have received (with copies for each Lender,
including each such Assuming Lender) by no later than 10:00 A.M.
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(Chicago time) on the applicable Increase Date a certificate of a
Senior Financial Officer, (1) attaching and certifying resolutions
adopted by the Board of Directors of the Borrower on or prior to the
Increase Date authorizing the Borrower to borrow money pursuant to
this Agreement from time to time in an aggregate principal amount at
any one time outstanding not in excess of the Aggregate Commitment as
increased by the Commitment Increase, and certifying that such
resolutions remain in full force and effect and have not been modified
or rescinded or attaching and certifying, if applicable, any
amendments to such resolutions;
(y) each such Assuming Lender shall have delivered to the Agent,
by no later than 10:00 A.M. (Chicago time) on such Increase Date, an
appropriate Lender Assumption Agreement in substantially the form of
Exhibit "L" hereto, duly executed by such Assuming Lender and the
Borrower; and
(z) each such Increasing Lender shall have delivered to the
Agent, by no later than 10:00 A.M. (Chicago time) on such Increase
Date, (A) its existing Note and (B) confirmation in writing
satisfactory to the Agent as to its increased Commitment.
(b) In the event that the Agent shall have received notice from
the Borrower as to its agreement to a Commitment Increase on or prior
to the applicable Commitment Date and each of the actions provided for
in clauses (a)(x) through (a)(z) above shall have occurred prior to
10:00 A.M. (Chicago time) on the applicable Increase Date to the
satisfaction of the Agent, the Agent shall promptly notify the Lenders
(including any Assuming Lenders) and the Borrower of the occurrence of
such Commitment Increase and shall record in its records the relevant
information with respect to each Increasing Lender and Assuming
Lender. Each Increasing Lender and each Assuming Lender shall, before
2:00 P.M. (Chicago time) on the applicable Increase Date, make
available to the Agent in accordance with the provisions of this
Agreement, in same day funds, in the case of such Assuming Lender, an
amount equal to such Assuming Lender's ratable portion of the Ratable
Advances then outstanding (calculated based on its Commitment as a
percentage of the Aggregate Commitment after giving effect to the
relevant Commitment Increase) and, in the case of such Increasing
Lender, an amount equal to the excess of (i) such Increasing Lender's
ratable portion of the Ratable Advances then outstanding after giving
effect to the relevant Commitment Increase over (ii) such Increasing
Lender's ratable portion of the Ratable Advances then outstanding
before giving effect to the relevant Commitment Increase. After the
Agent's receipt of such funds from each such Increasing Lender and
each such Assuming Lender, the Agent will, if necessary, promptly
thereafter cause to be distributed like funds to the other Lenders for
the account of their respective applicable Lending Installations in an
amount to each other Lender such that the aggregate amount of the
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outstanding Ratable Advances owing to each Lender after giving effect
to such distribution equals such Lender's ratable portion of the
Ratable Advances then outstanding after giving effect to the relevant
Commitment Increase. After the Borrower receives notice from the
Agent, the Borrower, at its own expense, shall execute and deliver to
the Agent Ratable and Competitive Bid Notes payable to the order of
each Assuming Lender, if any, and a Ratable Note payable to the order
of each Increasing Lender, dated as of the applicable Increase Date,
in a principal amount equal to such Lender's Commitment after giving
effect to the relevant Commitment Increase, in the case of such
Ratable Note, and in the amount of the Aggregate Commitment, in the
case of such Competitive Bid Note, and substantially in the forms of
Exhibits "A" and "B", respectively. The Agent, upon receipt of such
Notes, shall promptly deliver such Notes to the respective Assuming
Lenders and Increasing Lenders.
(c) In the event that the Agent shall not have received notice
from the Borrower as to such agreement on or prior to the applicable
Commitment Date or the Borrower shall, by notice to the Agent prior to
the applicable Increase Date, withdraw its proposal for a Commitment
Increase or any of the actions provided for above in clauses (a)(x)
through (a)(z) shall not have occurred by 10:00 A.M. (Chicago time) on
the such Increase Date, such proposal by the Borrower shall be deemed
not to have been made. In such event, any actions theretofore taken
under clauses (a)(x) through (a)(z) above shall be deemed to be of no
effect and all the rights and obligations of the parties shall
continue as if no such proposal had been made.
ARTICLE III
CHANGE IN CIRCUMSTANCES
-----------------------
3.1. Yield Protection. If any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive
(whether or not having the force of law), or any interpretation thereof, or
the compliance of any Lender therewith,
(i) subjects any Lender or any applicable Lending Installation
to any tax, duty, charge or withholding on or from payments
due from the Borrower (excluding federal taxation of the
overall net income of any Lender or applicable Lending
Installation), or changes the basis of taxation of payments
to any Lender in respect of its Loans or other amounts due
it hereunder, 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 loans or
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reduces any amount receivable by any Lender or any applicable
Lending Installation in connection with loans, or requires any
Lender or any applicable Lending Installation to make any payment
calculated by reference to the amount of loans held or interest
received by it, by an amount deemed material by such Lender,
then,within 15 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an
amount received which such Lender determines in good faith is attributable
to making, funding and maintaining its Loans and its Commitment.
3.2. Changes in Capital Adequacy Regulations. If the amount of capital
required or expected to be maintained by a 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 in good faith is attributable to this
Agreement, its Loans or its obligation 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 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 Fixed Rate 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 Fixed Rate
Advances are not available or (ii) the interest rate applicable to a Type
of Advance does not accurately reflect the cost of making or maintaining
such Advance, then the Agent shall suspend the availability of the affected
Type of Advance and require any Fixed Rate Advances of the affected Type to
be repaid.
3.4. Funding Indemnification. If any payment of a Fixed Rate 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
Fixed Rate is not made on the date specified by the
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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 the Fixed Rate Advance.
3.5. Lender Statements; Survival of Indemnity. To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to its Loans to reduce any liability of the
Borrower to such Lender under Sections 3.1 and 3.2 or to avoid the
unavailability of a Type of Advance under Section 3.3, so long as such
designation is not 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 or 3.4.
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 and 3.4 shall survive payment of the Obligations
and termination of this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT; WITHHOLDING TAX EXEMPTION
-----------------------------------------------
4.1. Initial Advance. The Lenders shall not be required to make the
initial Advance hereunder unless the Borrower has furnished to the Agent
with sufficient copies for the Lenders:
(i) Copies of the articles of incorporation of the Borrower and of
each Restricted Subsidiary which is a corporation, together with
all amendments, and a certificate of good standing for each such
entity, each certified by the appropriate governmental officer in
its jurisdiction of incorporation, and copies of the partnership
agreement and any partnership certificate or other significant
governing document of each Restricted Subsidiary which is a
partnership, each certified by the Secretary or an Assistant
Secretary of each such partnership.
(ii) Copies, (x) certified by the Secretary or Assistant Secretary of
the Borrower and of each Restricted Subsidiary which is a
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corporation, respectively, of its by-laws and of its Board of
Directors' resolutions (and resolutions of other bodies, if any
are deemed necessary by counsel for any Lender) authorizing the
execution of the Loan Documents to which such entity is a party
and (y) certified by the Secretary or Assistant Secretary of each
Restricted Subsidiary which is a partnership, of any partnership
actions authorizing the execution of the Loan Documents to which
such entity is a party.
(iii)Incumbency certificates, executed by the Secretary or Assistant
Secretary of the Borrower and of each Restricted Subsidiary,
which shall identify by name and title and bear the signature of
the officers of such entity authorized to sign the Loan Documents
to which it is a party and (in the case of the Borrower) to make
borrowings hereunder, upon which certificates the Agent and the
Lenders shall be entitled to rely until informed of any change in
writing by the Borrower or by a Restricted Subsidiary, as the
case may be.
(iv) A certificate, signed by a Senior Financial Officer of the
Borrower, stating that on the initial Borrowing Date no Default
or Unmatured Default has occurred and is continuing and
demonstrating compliance, on and as of the initial Borrowing
Date, with the provisions of Sections 6.18, 6.19 and 6.20.
(v) A written opinion of the Borrower's counsel, addressed to the
Lenders in substantially the form of Exhibit "F" hereto.
(vi) Ratable Notes and Competitive Bid Notes payable to the order of
each of the Lenders.
(vii)Written money transfer instructions, in substantially the form
of Exhibit "I" hereto, 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)The Subsidiary Guaranty.
(ix) Complete copies of the indentures, loan agreements or other
material documents evidencing all Debt of the Borrower or any
Subsidiary exceeding $100,000 in aggregate principal amount or
aggregate commitment amount (in the case of revolving credit
facilities).
(x) A copy of the most recent reserve report of the type described in
Section 6.1(g).
(xi) Such other documents as any Lender or its counsel may have
reasonably requested.
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4.2. Each Advance. The Lenders shall not be required to make any
Advance (other than an Advance that, after giving effect thereto and to the
application of the proceeds thereof, does not increase the aggregate amount
of outstanding Ratable Advances), 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 be 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.
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 "G" hereto as a condition to making an Advance.
4.3. Withholding Tax Exemption. At least five Business Days prior to
the first date on which interest or fees are payable hereunder for the
account of any Lender, each Lender that is not incorporated under the laws
of the United States of America, or a state thereof, agrees that it will
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 and the Notes without deduction or withholding of any United
States federal income taxes. Each Lender which so delivers a Form 1001 or
4224 further undertakes to deliver to each of the Borrower and the Agent
two additional copies of such form (or a successor form) on or before the
date that such form expires (currently, three successive calendar years for
Form 1001 and one calendar year for Form 4224) or becomes obsolete or after
the occurrence of any event requiring a change in the most recent forms so
delivered by it, and such amendments thereto or extensions or renewals
thereof as may be reasonably requested by the Borrower or the Agent, in
each case certifying that such Lender is entitled to receive payments under
this Agreement and the Notes 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 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.
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4.4. Replacement of Lenders. In the event that any Lender shall have
advised the Borrower that it is not capable of receiving payments hereunder
without any deduction or withholding of United States federal income tax,
the Borrower shall have the right, at its own expense, upon notice to such
Lender and to the Agent, to:
(i) require such Lender to transfer and assign, at par and without
recourse (in accordance with and subject to the restrictions of
Section 12.3) all of its right, title, interests and obligations
under this Agreement and any Loans to another financial
institution approved by the Agent (which approval shall not be
unreasonably withheld), which assignee shall assume such
assigning Lender's obligations under this Agreement, provided
that no such assignment shall be required to the extent that it
would violate any law, rule, regulation or order of any
governmental authority; or
(ii) terminate the Commitment of such Lender and prepay all Loans made
by such Lender, subject to the payment of any funding
indemnification amounts required under Section 3.4.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower represents and warrants to the Lenders that:
5.1. Organization; Power and Authority. (a) The Borrower (i) is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware; (ii) is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to
which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; and (iii) has the corporate power and authority to own or
hold under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Notes and to perform its obligations
hereunder and thereunder.
(b) Each Restricted Subsidiary (i) is a corporation or a partnership
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization; (ii) is duly qualified as a
foreign corporation or partnership and is in good standing in each
jurisdiction in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in good
standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; and (iii) has the corporate or
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partnership power and authority to own or hold under lease the properties
it purports to own or hold under lease, to transact the business it
transacts and proposes to transact, to execute and deliver the Subsidiary
Guaranty and to perform the provisions hereof and thereof.
5.2. Authorization and Validity (a) The execution and delivery of this
Agreement and the Notes and the performance by the Borrower of its
obligations hereunder and thereunder have been duly authorized by all
necessary corporate action on the part of the Borrower, and this Agreement
constitutes, and upon execution and delivery thereof each Note will
constitute, a legal, valid and binding obligation of the Borrower
enforceable against the Borrower in accordance with its terms, except as
such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(b) The execution and delivery of the Subsidiary Guaranty and the
performance by each Restricted Subsidiary of its obligations thereunder has
been duly authorized by all necessary corporate or partnership action on
the part of each Restricted Subsidiary and the Subsidiary Guaranty
constitutes a legal, valid and binding obligation of each Restricted
Subsidiary enforceable against such Restricted Subsidiary in accordance
with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
(ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5.3. 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, as of the date of such information, exhibit or report,
any material misstatement of fact or omitted to state a material fact
necessary to make the statements contained therein not misleading, or any
other material fact required pursuant to the terms of this Agreement to be
contained therein.
5.4. Organization and Ownership of Shares of Restricted Subsidiaries;
Affiliates. (a) Schedule 1 contains (except as noted therein) complete and
correct lists of (i) the Restricted Subsidiaries, showing, as to each
Restricted Subsidiary, the correct name thereof, the jurisdiction of its
organization and the percentage of shares of each class of its outstanding
capital stock or similar equity interests owned by the Borrower and each
other Restricted Subsidiary, and (ii) the Borrower's Affiliates (other than
Restricted Subsidiaries).
(b) All of the outstanding shares of capital stock or similar equity
interests of each Restricted Subsidiary shown in Schedule 1 as being owned
by the Borrower and the Restricted Subsidiaries have been validly issued,
are fully paid and nonassessable and are owned by the Borrower or another
Restricted Subsidiary free and clear of any Lien (except as otherwise
disclosed in Schedule 1).
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(c) Each Restricted Subsidiary identified in Schedule 1 is a
corporation or other legal entity duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization, and is
duly qualified as a foreign corporation or other legal entity and is in
good standing in each jurisdiction in which such qualification is required
by law, other than those jurisdictions as to which the failure to be so
qualified or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Each such
Restricted Subsidiary has the corporate or other power and authority to own
or hold under lease the properties it purports to own or hold under lease
and to transact the business it transacts and proposes to transact.
(d) No Restricted Subsidiary is a party to, or otherwise subject to
any legal restriction or any agreement (other than this Agreement, the
agreements listed on Schedule 2 and customary limitations imposed by
corporate or partnership law statutes) restricting the ability of such
Restricted Subsidiary to pay dividends out of profits or make any other
similar distributions of profits to the Borrower or any of the Restricted
Subsidiaries that owns outstanding shares of capital stock or similar
equity or partnership interests of such Restricted Subsidiary.
5.5. Financial Statements. The March 31, 1996 consolidated financial
statements of the Borrower and the Restricted Subsidiaries heretofore
delivered to the Lenders (including in each case the related schedules and
notes) present fairly, in all material respects, the consolidated financial
position of the Borrower and the Restricted Subsidiaries as of the
respective dates specified therein and the consolidated results of their
operations and cash flows for the respective periods so specified and have
been prepared in accordance with generally accepted accounting principles
in effect on the date such statements were prepared consistently applied
throughout the periods involved except as set forth in the notes thereto
(subject, in the case of any interim financial statements, to normal year
end adjustments).
5.6. Material Adverse Change. Since March 31, 1996, there has been no
change in the business, Property, prospects, condition (financial or
otherwise) or results of operations of the Borrower and the Restricted
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect.
5.7 No Conflict or Violation. Neither the execution, delivery and
performance by the Borrower of this Agreement and the Notes, nor the
execution, delivery and performance by any Restricted Subsidiary of the
Subsidiary Guaranty, will (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in
respect of any Property of the Borrower or any Restricted Subsidiary under,
any indenture, mortgage, deed of trust, loan, purchase or credit agreement,
lease, corporate charter or by-laws, partnership agreement or other
significant governing document, or any other agreement or instrument to
which the Borrower or any Restricted Subsidiary is bound or by which the
Borrower or any Restricted Subsidiary or any of their respective properties
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may be bound or affected, (ii) conflict with or result in a breach of any
of the terms, conditions or provisions of any order, judgment, decree, or
ruling of any court, arbitrator or Governmental Authority applicable to the
Borrower or any Restricted Subsidiary or (iii) violate any provision of any
statute or other rule or regulation of any Governmental Authority
applicable to the Borrower or any Restricted Subsidiary.
5.8. Governmental Authorizations. No consent, approval or
authorization of, or registration, filing or declaration with, any
Governmental Authority is required in connection with the execution,
delivery or performance (i) by the Borrower of this Agreement or the Notes
or (ii) by any Restricted Subsidiary of the Subsidiary Guaranty.
5.9. Litigation; Observance of Agreements, Statutes and Orders. (a)
Except as disclosed in Schedule 3, there are no actions, suits or
proceedings pending or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any Restricted Subsidiary or any
Property of the Borrower or any Restricted Subsidiary in any court or
before any arbitrator of any kind or before or by any Governmental
Authority that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
(b) Neither the Borrower nor any Restricted Subsidiary is in default
under any term of any agreement or instrument to which it is a party or by
which it is bound, or any order, judgment, decree or ruling of any court,
arbitrator or Governmental Authority or is in violation of any applicable
law, ordinance, rule or regulation (including without limitation
Environmental Laws) of any Governmental Authority, which default or
violation, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
5.10. Taxes. The Borrower and the Restricted Subsidiaries have filed
all tax returns that are required to have been filed in any jurisdiction,
and have paid all taxes shown to be due and payable on such returns and all
other taxes and assessments levied upon them or their properties, assets,
income or franchises, to the extent such taxes and assessments have become
due and payable and before they have become delinquent, except for any
taxes and assessments (i) the amount of which is not individually or in the
aggregate Material or (ii) the amount, applicability or validity of which
is currently being contested in good faith by appropriate proceedings and
with respect to which the Borrower or a Restricted Subsidiary, as the case
may be, has established adequate reserves in accordance with generally
accepted accounting principles. The Borrower knows of no basis for any
other tax or assessment that could reasonably be expected to have a
Material Adverse Effect. The charges, accruals and reserves on the books of
the Borrower and the Restricted Subsidiaries in respect of Federal, state
or other taxes for all fiscal periods are adequate. The Federal income tax
liabilities of the Borrower and the Restricted Subsidiaries have been
determined by the Internal Revenue Service and paid for all fiscal years up
to and including the fiscal year ended December 31, 1989.
5.11. Title to Property; Leases. The Borrower and the Restricted
Subsidiaries have good and sufficient title to their respective properties
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that individually or in the aggregate are Material, in each case free and
clear of Liens prohibited by this Agreement. All leases that individually
or in the aggregate are Material are valid and subsisting and are in full
force and effect in all material respects.
5.12. Licenses, Permits, etc. Except as disclosed in Schedule 4:
(a) the Borrower and the Restricted Subsidiaries own or possess
all licenses, permits, franchises, authorizations, patents,
copyrights, service marks, trademarks and trade names, or rights
thereto, with respect to the business of the Borrower and/or any
Restricted Subsidiary as currently conducted, that individually or in
the aggregate are Material, without known conflict with the rights of
others;
(b) to the best knowledge of the Borrower, no product of the
Borrower or any Restricted Subsidiary infringes in any material
respect upon any license, permit, franchise, authorization, patent,
copyright, service mark, trademark, trade name or other right owned by
any other Person; and
(c) to the best knowledge of the Borrower, there is no violation
by any Person of any right of the Borrower or any Restricted
Subsidiary with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Borrower or
any Restricted Subsidiary which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
5.13. Compliance with ERISA. (a) The Borrower and each ERISA
Affiliate have operated and administered each Plan in compliance with
all applicable laws except for such instances of noncompliance as have
not resulted in and could not reasonably be expected to result in a
Material Adverse Effect. Neither the Borrower nor any ERISA Affiliate
has incurred any liability pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to employee
benefit plans (as defined in Section 3 of ERISA), and no event,
transaction or condition has occurred or exists that could reasonably
be expected to result in the incurrence of any such liability by the
Borrower or any ERISA Affiliate, or in the imposition of any Lien on
any of the rights, properties or assets of the Borrower or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to
such penalty or excise tax provisions or to Section 401(a)(29) or 412
of the Code, other than such liabilities or Liens as would not be
individually or in the aggregate Material.
(b) The present value of all (vested and unvested) aggregate
accrued benefit liabilities under each of the Single Employer Plans,
determined as of the end of such Plan's most recently ended plan year
on the basis of the actuarial assumptions specified for funding
purposes in such Plan's most recent actuarial valuation report, did
not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "benefit liabilities"
has the meaning specified in section 4001 of ERISA and the terms
"current value" and "present value" have the meaning specified in
section 3 of ERISA.
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(c) The Borrower and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that individually or in the aggregate are
Material.
(d) The expected postretirement benefit obligation (determined as
of the last day of the Borrower's most recently ended fiscal year in
accordance with Financial Accounting Standards Board Statement No.
106, without regard to liabilities attributable to continuation
coverage mandated by section 4980B of the Code) of the Borrower and
the Restricted Subsidiaries is not Material.
(e) 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).
The execution and delivery of this Agreement and the Notes and the
performance by the Borrower of its obligations hereunder and
thereunder will not involve any transaction that is subject to the
prohibitions of section 406 of ERISA or in connection with which a tax
could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code.
The representation by the Borrower in the first sentence of this
Section 5.13(e) is made in reliance upon and subject to the accuracy
of the representation by each Lender in Section 9.15 as to the sources
of the funds used to make Advances hereunder.
(f) Schedule 5 lists all ERISA Affiliates that are Restricted
Subsidiaries and that maintain one or more Plans and any employee
organizations in respect of any Multiemployer Plan or Plan. Schedule 5
sets forth all ERISA Affiliates and all "employee benefit plans" with
respect to which the Borrower or any "affiliate" of the Borrower is a
"party-in-interest" or in respect of which the Notes could constitute
an "employer security" ("employee benefit plan," "party-in-interest"
and "employee organization" have the meanings specified in section 3
of ERISA, "affiliate" has the meaning specified in section 407(d) of
ERISA and Section V of the Department of Labor Prohibited Transaction
Exemption 95-60 (60 FR 35925, July 12, 1995) and "employer security"
has the meaning specified in section 407(d) of ERISA).
5.14. Margin Regulations. Margin stock does not constitute more
than twenty percent (20%) of the value of the consolidated assets of
the Borrower and the Restricted Subsidiaries and the Borrower does not
have any present intention that margin stock will constitute more than
twenty percent (20%) of the value of such assets. As used in this
Section, the terms "margin stock" and "purpose of buying or carrying"
shall have the meanings assigned to them in said Regulation U.
5.15. Existing Debt; Future Liens. (a) Except as described
therein, Schedule 6 sets forth a complete and correct list of all
outstanding Debt (in excess of $100,000 outstanding) of the Borrower
and the Restricted Subsidiaries as of July 15, 1996, and as of the
date hereof there has been no material change in the amounts, interest
rates, sinking funds, installment payments or maturities of the Debt
of the Borrower or the Restricted Subsidiaries since July 15, 1996.
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(b) Except as disclosed in Schedule 6, neither the Borrower nor
any Restricted Subsidiary has agreed or consented to cause or permit
in the future (upon the happening of a contingency or otherwise) any
of its Property, whether now owned or hereafter acquired, to be
subject to a Lien not permitted by Section 6.15.
5.16. Status under Certain Statutes. Neither the Borrower nor any
Restricted Subsidiary is subject to regulation under the Investment
Company Act of 1940, as amended, the Public Utility Holding Company
Act of 1935, as amended, the Transportation Acts (49 U.S.C.), as
amended, or the Federal Power Act, as amended.
5.17. Environmental Matters. (a) Neither the Borrower nor any
Restricted Subsidiary has knowledge of any claim or has received any
notice of any claim, and no proceeding has been instituted raising any
claim against the Borrower or any of the Restricted Subsidiaries or
any of their respective real properties now or formerly owned, leased
or operated by any of them or other assets, alleging any damage to the
environment or violation of any Environmental Laws, except, in each
case, such as could not reasonably be expected to result in a Material
Adverse Effect. Except as otherwise disclosed to you in writing,
(i) neither the Borrower nor any of the Restricted
Subsidiaries has knowledge of any facts which would give rise to
any claim, public or private, of violation of Environmental Laws
or damage to the environment emanating from, occurring on or in
any way related to real properties now or formerly owned, leased
or operated by any of them or to other assets or their use,
except, in each case, such as could not reasonably be expected to
result in a Material Adverse Effect;
(ii) neither the Borrower nor any of the Restricted
Subsidiaries has stored any Hazardous Materials on real
properties now or formerly owned, leased or operated by any of
them or has disposed of any Hazardous Materials in a manner
contrary to any Environmental Laws in each case in any manner
that could reasonably be expected to result in a Material Adverse
Effect; and
(iii) all buildings on all real properties now owned, leased
or operated by the Borrower or any of the Restricted Subsidiaries
are in compliance with applicable Environmental Laws, except
where failure to comply could not reasonably be expected to
result in a Material Adverse Effect.
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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 generally accepted accounting principles, and furnish to the Lenders:
(a) Quarterly Statements - within forty-five (45) days after the end
of each quarterly fiscal period in each fiscal year of the Borrower (other
than the last quarterly fiscal period of each such fiscal year), duplicate
copies of,
(i) consolidated balance sheets of the Borrower and its
consolidated Subsidiaries, and of the Borrower and its Restricted
Subsidiaries, as at the end of such quarter, and
(ii) consolidated statements of operations, stockholders' equity
and cash flows of the Borrower and its consolidated Subsidiaries, and
of the Borrower and its Restricted Subsidiaries, for such quarter and
(in the case of the second and third quarters) for the portion of the
fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with Agreement Accounting Principles
applicable to quarterly financial statements generally, and certified by a
Senior Financial Officer as fairly presenting, in all material respects,
the financial position of the companies being reported on and their results
of operations and cash flows, subject to changes resulting from year end
adjustments, provided that, so long as the Borrower shall not have any
Unrestricted Subsidiaries, delivery within the time period specified above
of copies of the Borrower's Quarterly Report on Form 10-Q prepared in
compliance with the requirements therefor and filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of this
Section 6.1(a).
(b) Annual Statements - within ninety (90) days after the end of each
fiscal year of the Borrower, duplicate copies of,
(i) consolidated balance sheets of the Borrower and its
consolidated Subsidiaries, and of the Borrower and its Restricted
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Subsidiaries, as at the end of such year, and
(ii) consolidated statements of operations, stockholders' equity
and cash flows of the Borrower and its consolidated Subsidiaries, and
of the Borrower and its Restricted Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with Agreement Accounting Principles, and accompanied by
(A) an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall
state that such financial statements present fairly, in all
material respects, the financial position of the companies being
reported upon and their results of operations and cash flows and
have been prepared in conformity with Agreement Accounting
Principles (except for the exclusion of Unrestricted
Subsidiaries, if any, from the financial statements of the
Borrower and the Restricted Subsidiaries), and that the
examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted
auditing standards, and that such audit provides a reasonable
basis for such opinion in the circumstances, and
(B) a certificate of such accountants stating that they have
reviewed this Agreement and stating further whether, in making
their audit, they have become aware of any condition or event
that then constitutes a Default or an Unmatured Default, and, if
they are aware that any such condition or event then exists,
specifying the nature and period of the existence thereof (it
being understood that such accountants shall not be liable,
directly or indirectly, for any failure to obtain knowledge of
any Default or Unmatured Default unless such accountants should
have obtained knowledge thereof in making an audit in accordance
with generally accepted auditing standards or did not make such
an audit),
provided that, so long as the Borrower shall not have any Unrestricted
Subsidiaries, the delivery within the time period specified above of
the Borrower's Annual Report on Form 10-K for such fiscal year
(together with the Borrower's annual report to shareholders, if any,
prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in
accordance with the requirements therefor and filed with the
Securities and Exchange Commission, together with the accountants'
certificates described in clauses (A) and (B) above, shall be deemed
to satisfy the requirements of this Section 6.1(b).
(c) SEC and Other Reports - promptly upon their becoming available,
one copy of
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(i) each financial statement, report, notice or proxy statement
sent by the Borrower or any Restricted Subsidiary to public securities
holders generally, and
(ii) (A) each regular or periodic report, each registration
statement (without exhibits except as expressly requested by the
Agent or any Lender), and each prospectus and all amendments
thereto filed by the Borrower or any Restricted Subsidiary with
the Securities and Exchange Commission, and
(B) by facsimile only, all press releases and other
statements made available generally by the Borrower or any
Restricted Subsidiary to the public concerning developments that
are Material.
(d) Audit Reports - as soon as practicable after receipt thereof by
the Borrower or any Subsidiary, a copy of each other report submitted to
the Borrower or any Subsidiary by its independent accountants in connection
with any interim or special audit made by them of the books of the Borrower
or any Subsidiary.
(e) Litigation - within five (5) days after the Borrower obtains
knowledge thereof, written notice of any pending or threatened (in writing)
(i) litigation not fully covered by insurance or as to which an insurance
company has not accepted liability or (ii) governmental proceeding, in each
case against the Borrower or any Restricted Subsidiary, in which the
damages sought exceed One Million Dollars ($1,000,000), individually or in
the aggregate, or which otherwise could reasonably be expected to have a
Material Adverse Effect.
(f) Notice of Default or Unmatured Default - promptly, and in any
event within five (5) days after a Responsible Officer shall become aware
of the existence of any Default or Unmatured Default or that any Person has
given any notice or taken any action with respect to a claimed default
hereunder or that any Person has given any notice or taken any action with
respect to a claimed default of the type referred to in Section 7.5, a
written notice specifying the nature and period of existence thereof and
what action the Borrower is taking or proposes to take with respect
thereto.
(g) Oil and Gas Reserve Reports - promptly, and in any event no later
than April 1 in each year, engineering reports in form and substance
reasonably satisfactory to the Required Lenders, certified by Forrest A.
Garb & Associates, Inc. (or any other nationally or regionally recognized
independent consulting petroleum engineers) as fairly and accurately
setting forth:
(i) the proven and producing, shut-in, behind-pipe, and
undeveloped oil and gas reserves (separately classified as such) of
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the Borrower and its Restricted Subsidiaries as of January 1 of the
year for which such reserve reports are furnished,
(ii) the aggregate present value of the future net income with
respect to such reserves discounted at a stated per annum annual
discount rate,
(iii) projections of the annual rate of production, gross income,
and net income with respect to such proven and producing reserves, and
(iv) information with respect to the "take-or-pay," "prepayment,"
and gas-balancing liabilities of the Borrower and its Restricted
Subsidiaries.
(h) ERISA Matters - (i) promptly, and in any event within five (5)
days after a Responsible Officer shall become aware of any of the
following, a written notice setting forth the nature thereof and the
action, if any, that the Borrower or an ERISA Affiliate proposes to take
with respect thereto:
(A) with respect to any Plan, any reportable event, as
defined in section 4043(b) of ERISA and the regulations
thereunder, for which notice thereof has not been waived pursuant
to such regulations as in effect on the date hereof; or
(B) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan, or the receipt by the
Borrower or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan; or
(C) any event, transaction or condition that could result in
the incurrence of any liability by the Borrower or any ERISA
Affiliate pursuant to Title or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit
plans, or in the imposition of any Lien on any of the rights,
properties or assets of the Borrower or any ERISA Affiliate
pursuant to Title I or IV of ERISA or such penalty or excise tax
provisions, if such liability or Lien, taken together with any
other such liabilities or Liens then existing, could reasonably
be expected to have a Material Adverse Effect; and
(ii) within 270 days after the close of each fiscal year of the
Borrower, a statement of the Unfunded Liabilities of each Single
Employer Plan, certified as correct by an actuary enrolled under
ERISA.
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(i) Notices from Governmental Authority - promptly, and in any event
within thirty (30) Business Days of receipt thereof, copies of any notice
to the Borrower or any Subsidiary from any Federal or state Governmental
Authority relating to any order, ruling, statute or other law or regulation
(including, without limitation, (x) 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 (y) 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) that could reasonably be expected to
have a Material Adverse Effect.
(j) Incurrence of Debt - promptly, and in any event within ten (10)
Business Days of the incurrence thereof, notice of the incurrence by the
Borrower or any Restricted Subsidiary of any Debt which would be included
in the calculation of the Debt to Cash Flow from Operations Ratio, which
notice shall set forth the aggregate principal amount, maturity and other
significant terms of such Debt.
(k) Requested Information - with reasonable promptness, such other
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Borrower or any of the
Restricted Subsidiaries or relating to the ability of the Borrower to
perform its obligations hereunder and under the Notes as from time to time
may be reasonably requested by the Agent or any Lender including, without
limitation, information required by 17 C.F.R. ss.230.144A, as amended from
time to time.
6.2. Officer's Certificate. Each set of financial statements delivered
pursuant to Section 6.1(a) or Section 6.1(b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance - the information (including detailed
calculations) required in order to establish whether the Borrower was in
compliance with the requirements of Sections 6.12 through 6.15, inclusive,
and 6.18 through 6.20, inclusive, during the quarterly or annual period
covered by the statements then being furnished (including with respect to
each such Section, where applicable, the calculations of the maximum or
minimum amount, ratio or percentage, as the case may be, permissible under
the terms of such Sections, and the calculation of the amount, ratio or
percentage then in existence); and
(b) Default or Unmatured Default - a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and conditions
of the Borrower and the Subsidiaries from the beginning of the quarterly or
annual period covered by the statements then being furnished to the date of
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the certificate and that such review shall not have disclosed the existence
during such period of any condition or event that constitutes a Default or
an Unmatured Default or, if any such condition or event existed or exists
(including, without limitation, any such event or condition resulting from
the failure of the Borrower or any Subsidiary to comply with any
Environmental Law), specifying the nature and period of existence thereof
and what action the Borrower shall have taken or proposes to take with
respect thereto.
6.3. Use of Proceeds. The Borrower will apply the proceeds of Advances
hereunder for general corporate purposes. No part of the proceeds of Advances
hereunder will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation U or to make any
Acquisition other than a Friendly Acquisition.
6.4. Corporate or Partnership Existence; Conduct of Business. The Borrower
will at all times preserve and keep in full force and effect its corporate
existence. Subject to Sections 6.13 and 6.14, the Borrower will at all times
preserve and keep in full force and effect the corporate or partnership (as the
case may be) existence of each of the Subsidiaries (unless merged into the
Borrower or a Subsidiary) and all rights and franchises of the Borrower and the
Subsidiaries unless, in the good faith judgment of the Borrower, the termination
of or failure to preserve and keep in full force and effect such corporate
existence, right or franchise could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect (which term shall not
(for the purpose of this Section 6.4 only) include, with respect to any
Restricted Subsidiary, the termination of or failure to preserve and keep in
full force and effect such corporate or partnership existence, right or
franchise that would render such Restricted Subsidiary unable to perform its
obligations under the Subsidiary Guaranty, and therefore result in a Material
Adverse Effect, only under clause (iii) of the definition of such term). The
Borrower will not, and will not permit any of the Subsidiaries to, engage in any
business if, as a result, the Borrower and the Subsidiaries, taken as a whole,
would not be engaged primarily in the provision of (i) seismic data services,
(ii) exploration for, and development and ownership of, gas and oil reserves,
(iii) gas marketing and (iv) businesses related to the foregoing businesses.
6.5. Pari Passu. The Borrower covenants that its Obligations under this
Agreement and the Notes do and will rank at least pari passu with all its other
present and future unsecured Senior Debt.
6.6. Subsidiary Guaranty.. The Borrower will cause each Subsidiary which
becomes a Restricted Subsidiary after the date of this Agreement to execute and
deliver to the Agent, with a copy for each Lender, a copy of the Joinder
Agreement in the form attached to the Subsidiary Guaranty as Annex I, duly
executed by such Subsidiary, together with an opinion of counsel satisfactory to
the Required Lenders addressing with respect to such Subsidiary the issues
relating to Subsidiaries and the Subsidiary Guaranty in the form of opinion
attached hereto as Exhibit "K".
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6.7. Payment of Taxes and Claims. The Borrower will and will cause each of
the Subsidiaries to file all tax returns required to be filed in any
jurisdiction and to pay and discharge all taxes shown to be due and payable on
such returns and all other taxes, assessments, governmental charges, or levies
imposed on them or any of their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent and all claims for which sums have become due and payable
that have or might become a Lien on properties or assets of the Borrower or any
Subsidiary, provided that neither the Borrower nor any Subsidiary need pay any
such tax or assessment or claims if (i) the amount, applicability or validity
thereof is contested by the Borrower or such Subsidiary on a timely basis in
good faith and in appropriate proceedings, and the Borrower or such Subsidiary
has established adequate reserves therefor in accordance with generally accepted
accounting principles on the books of the Borrower or such Subsidiary or (ii)
the nonpayment of all such taxes and assessments in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
6.8. Insurance. The Borrower will and will cause each of the Subsidiaries
to maintain, with financially sound and reputable insurers, insurance with
respect to their respective properties and businesses against such casualties
and contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated, except to the extent that the failure to maintain such insurance could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
6.9. Compliance with Laws. The Borrower will and will cause each of the
Subsidiaries to comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
Environmental Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
6.10. Maintenance of Properties. The Borrower will and will cause each of
the Subsidiaries to maintain and keep, or cause to be maintained and kept, their
respective properties in good repair, working order and condition (other than
ordinary wear and tear), so that the business carried on in connection therewith
may be properly conducted at all times, provided that
(a) no violation of this Section 6.10 shall be deemed to have occurred
with respect to any Property of the Borrower or any Subsidiary damaged or
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destroyed by a casualty occurrence, so long as the Borrower or such
Restricted Subsidiary is proceeding diligently to repair or replace such
Property, and
(b) this Section shall not prevent the Borrower or any Subsidiary from
discontinuing the operation and the maintenance of any of its properties if
such discontinuance is desirable in the conduct of its business and the
Borrower has concluded that such discontinuance could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect
(which term shall not, for the purpose of this clause (b) only, include the
discontinuance of the operation and maintenance of a Restricted
Subsidiary's properties that would render such Restricted Subsidiary unable
to perform its obligations under the Subsidiary Guaranty, and therefore
result in a Material Adverse Effect, only under clause (iii) of the
definition of such term).
6.11. Inspection. The Borrower shall permit the Agent, each Lender and
their respective duly authorized representatives:
(a) No Default - if no Default or Unmatured Default then exists, at
the expense of the Agent or such Lender and upon reasonable prior notice to
the Borrower, to visit the principal executive office of the Borrower, to
discuss the affairs, finances and accounts of the Borrower and the
Subsidiaries with the Borrower's officers, and (with the consent of the
Borrower, which consent will not be unreasonably withheld) its independent
public accountants and its independent petroleum engineers, and (with the
consent of the Borrower, which consent will not be unreasonably withheld)
to visit the other offices and properties of the Borrower and each
Subsidiary, all at such reasonable times as may be reasonably requested in
writing, provided that any Lender or the Agent shall be permitted to make
only two inspections per calendar year pursuant to the provisions of this
subsection (a) (without limitation of the inspection rights of any other
Lender or the Agent); and
(b) Default - if a Default or an Unmatured Default then exists, at the
expense of the Borrower to visit and inspect any of the offices or
properties of the Borrower or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers, independent public
accountants and independent petroleum engineers (and by this provision the
Borrower authorizes said accountants and engineers to discuss the affairs,
finances and accounts of the Borrower and the Subsidiaries), all at such
times and as often as may be requested.
6.12. Restricted Payments and Restricted Investments. (a) Limitation. The
Borrower will not, and will not permit any of the Restricted Subsidiaries to,
directly or indirectly, declare, make or incur any liability to make any
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Restricted Payment or make or authorize any Restricted Investment unless
immediately after giving effect to such action:
(i) the sum of (x) the aggregate amount of outstanding
Restricted Investments (valued immediately after such action),
plus (y) the aggregate amount of Restricted Payments of the
Borrower and the Restricted Subsidiaries declared or made during
the period commencing on the date of this Agreement, and ending
on the date such Restricted Payment or Restricted Investment is
declared or made, inclusive, would not exceed the sum of
(A) Ten Million Dollars ($10,000,000), plus
(B) fifty percent (50%) of Consolidated Net Income for
the period commencing July 1, 1995 and ending on the date
such Restricted Payment or such Restricted Investment is
declared or made (or minus 100% of Consolidated Net Income
for such period if Consolidated Net Income for such period
is a loss), plus
(C) the aggregate amount of Net Proceeds of Common
Stock of the Borrower for such period; and
(ii) the Borrower could incur, pursuant to Section 6.20, at
least One Dollar ($1) of additional Debt owing to a Person other
than a Restricted Subsidiary; and
(iii) no Default or Unmatured Default would exist.
(b) Time of Payment. The Borrower will not, nor will it permit any of the
Restricted Subsidiaries to, authorize a Restricted Payment that is not payable
within sixty (60) days of authorization.
(c) Investments of Subsidiaries. Each Person which becomes a Restricted
Subsidiary after the date of this Agreement will be deemed to have made, on the
date such Person becomes a Restricted Subsidiary, all Restricted Investments of
such Person in existence on such date. Investments in any Person that ceases to
be a Restricted Subsidiary after the date of this Agreement (but in which the
Borrower or another Restricted Subsidiary continues to maintain an Investment)
will be deemed to have been made on the date on which such Person ceases to be a
Restricted Subsidiary.
6.13. Merger and Consolidation. The Borrower will not, and will not permit
any of the Restricted Subsidiaries to, consolidate with or merge with any other
corporation or other entity or convey, transfer, spin-off or lease substantially
all of its assets in a single transaction or series of transactions to any
Person, except that:
(a) a Restricted Subsidiary may consolidate or merge with, or convey,
transfer, spin-off or lease substantially all of its assets in a single
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transaction or series of transactions to, another Restricted Subsidiary or the
Borrower;
(b) a Restricted Subsidiary may convey, transfer, spin-off or lease all of
its assets in compliance with the provisions of Section 6.14; and
(c) the Borrower may consolidate or merge with any Person so long as:
(i) the Borrower is the surviving corporation in any such
consolidation or merger;
(ii) immediately prior to, and immediately after giving effect to,
such transaction, no Default or Unmatured Default would exist; and
(iii) immediately after giving effect to such transaction, the
Borrower would be permitted, pursuant to the provisions of Section 6.20, to
incur at least One Dollar ($1) of additional Debt owing to a Person other
than a Restricted Subsidiary.
6.14. Sale of Assets. (a) The Borrower will not, and will not permit any of
the Restricted Subsidiaries to, make any Transfer, provided that the foregoing
restriction does not apply to a Transfer if:
(i) the Property that is the subject of such Transfer constitutes
either:
(A) inventory held for sale, or
(B) equipment, fixtures, supplies or materials no longer required
in the operation of the business of the Borrower or such Restricted
Subsidiary or that is obsolete,
and, in the case of any Transfer described in clause (A) or clause (B),
such Transfer is in the ordinary course of business (an "Ordinary Course
Transfer");
(ii) either:
(A) such Transfer is from a Restricted Subsidiary to the Borrower
or a Wholly-Owned Restricted Subsidiary, or
(B) such Transfer is from the Borrower to a Wholly-Owned
Restricted Subsidiary,
so long as immediately before and immediately after the consummation of
such transaction, and after giving effect thereto, no Default or Unmatured
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Default exists or would exist (each such Transfer, an "Intergroup
Transfer," and, collectively with any Ordinary Course Transfers, "Excluded
Transfers"); or
(iii) such Transfer is not an Excluded Transfer and all of the
following conditions shall have been satisfied with respect thereto:
(A) such Transfer does not involve a Substantial Portion of the
Property of the Borrower and the Restricted Subsidiaries,
(B) in the good faith opinion of the Borrower, the Transfer is in
exchange for consideration with a Fair Market Value at least equal to
that of the Property exchanged, and is in the best interests of the
Borrower, and
(C) immediately after giving effect to such transaction no
Default or Unmatured Default would exist.
(b) Debt Prepayment Transfers and Reinvested Transfers.
(i) Notwithstanding the provisions of Section 6.14(a), the
determination of whether a Transfer involves a Substantial Portion of the
Property of the Borrower and the Restricted Subsidiaries, as provided in
Section 6.14(a)(iii)(A), shall be made without taking into account the same
proportion of the book value attributable to the Property subject to such
Transfer as shall be equal to the proportion of the Net Asset Sale Proceeds
Amount (the "Designated Portion") to be applied either (A) to a prepayment
of the Senior Notes pursuant to the terms thereof (a "Prepayment Transfer")
or (B) within one hundred eighty (180) days of the consummation of such
Transfer, to any acquisition of assets similar to the assets which were the
subject of such Transfer (a "Reinvested Transfer"), as specified in an
Officer's Certificate delivered to the Agent and each Lender prior to, or
contemporaneously with, the consummation of such Transfer.
(ii) If, notwithstanding the certificate referred to in the foregoing
clause (i), the Borrower shall fail to apply the entire amount of the
Designated Portion as specified in such certificate within the period
stated in Section 6.14(b)(i), the computation of whether such Transfer
involved a Substantial Portion of the Property of the Borrower and the
Restricted Subsidiaries shall be recomputed, as of the date of such
Transfer, by taking into account the same proportion of the book value
attributable to the Property subject to such Transfer as shall be equal to
the proportion of the Net Asset Sale Proceeds Amount actually applied to
either a Prepayment Transfer or a Reinvested Transfer within such period.
If, upon the recomputation provided for in the preceding sentence, such
Transfer involved a Substantial Portion of the Property of the Borrower and
the Restricted Subsidiaries, an Unmatured Default shall be deemed to have
existed as of the expiration of such period.
(c) Certain Definitions. The following terms have the following meanings:
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(i) "Disposition Value" means, at any time, with respect to any
Transfer of Property,
(A) in the case of Property that does not constitute capital
stock of a Restricted Subsidiary, the book value thereof, valued at
the amount taken into account (or which would be taken into account)
in the consolidated balance sheet of the Borrower then most recently
required to have been delivered to the Lenders pursuant to Section
6.1, and
(B) in the case of Property that constitutes capital stock of a
Restricted Subsidiary, an amount equal to that percentage of the book
value of the assets of the Restricted Subsidiary that issued such
capital stock as is equal to the percentage that the book value of
such capital stock represents of the book value of all of the
outstanding capital stock of such Restricted Subsidiary (assuming, in
making such calculations, that all Securities convertible into such
capital stock are so converted and giving full effect to all
transactions that would occur or be required in connection with such
conversion), determined as of the date of the balance sheet referred
to in the foregoing clause (A).
(ii) "Substantial Portion" means, at any time, any Property subject to
a Transfer if
(A) the Disposition Value of such Property, when added to the
Disposition Value of all other Property of the Borrower and the
Restricted Subsidiaries that has been the subject of a Transfer (other
than an Excluded Transfer and subject, with respect to both such
Property and all such other Property, to the provisions of Section
6.14(b)) during the then current fiscal year of the Borrower, exceeds
an amount equal to ten percent (10%) of Consolidated Total Assets as
reflected (or as would be reflected) in the consolidated balance sheet
of the Borrower then most recently required to have been delivered to
the Lenders pursuant to Section 6.1, or
(B) the Disposition Value of such Property, when added to the
Disposition Value of all other Property of the Borrower and the
Restricted Subsidiaries that has been the subject of a Transfer (other
than an Excluded Transfer and subject, with respect to both such
Property and all such other Property, to the provisions of Section
6.14(b)) during the period beginning on the date of this Agreement and
ending on and including the date of the consummation of such Transfer,
exceeds an amount equal to twenty percent (20%) of Consolidated Total
Assets as reflected (or as would be reflected) in the consolidated
balance sheet of the Borrower then most recently required to have been
delivered to the Lenders pursuant to Section 6.1 hereof.
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(iii) "Transfer" means, with respect to any Person, any transaction in
which such Person sells, conveys, transfers or leases (as lessor) any of
its Property, including, without limitation, capital stock of any other
Person.
6.15. Liens. The Borrower will not, and will not permit any of the
Restricted Subsidiaries to, directly or indirectly create, incur, assume or
permit to exist (upon the happening of a contingency or otherwise) any Lien on
or with respect to any Property (including, without limitation, any document or
instrument in respect of goods or accounts receivable) of the Borrower or any
Restricted Subsidiary, whether now owned or held or hereafter acquired, or any
income or profits therefrom (whether or not provision is made for the equal and
ratable securing of the Loans hereunder in accordance with the last paragraph of
this Section 6.15), or assign or otherwise convey any right to receive income or
profits, except:
(a) Liens for taxes, assessments or other governmental charges the
payment of which is not at the time required by Section 6.7;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other similar Liens, in each case, incurred in
the ordinary course of business for sums not yet due or the payment of
which is not at the time required by Section 6.7;
(c) Liens (other than any Lien imposed by ERISA) incurred or deposits
made in the ordinary course of business (i) in connection with workers'
compensation unemployment insurance and other types of social security or
retirement benefits, or (ii) to secure (or to obtain letters of credit that
secure) the performance of tenders, statutory obligations, surety bonds,
appeal and supersedeas bonds (not in excess of Two Million Dollars
($2,000,000)), bids, leases (other than Capital Leases), performance bonds,
purchase, construction or sales contracts and other similar obligations, in
each case not incurred or made in connection with the borrowing of money,
the obtaining of advances or credit or the payment of the deferred purchase
price of Property;
(d) leases or subleases granted to others, easements, rights-of-way,
restrictions and other similar charges or encumbrances, in each case
incidental to, and not interfering with, the ordinary conduct of the
business of the Borrower or any of the Restricted Subsidiaries, provided
that such Liens do not, in the aggregate, materially detract from the value
of such Property with respect to its then current use;
(e) Liens on Property of the Borrower or any of the Restricted
Subsidiaries securing Debt owing to the Borrower or to a Wholly-Owned
Restricted Subsidiary;
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(f) Liens existing on the date of this Agreement and securing the Debt
of the Borrower and the Restricted Subsidiaries identified as secured Debt
in Schedule 6, but not any refinancing of such Debt;
(g) Liens on Property acquired or constructed by the Borrower or any
Restricted Subsidiary after the date of this Agreement to secure Debt of
the Borrower or such Restricted Subsidiary incurred in connection with or
related to such acquisition or construction, and Liens existing on such
Property at the time of acquisition thereof, provided that
(i) no such Lien shall extend to or cover any Property other than
the Property being acquired or constructed (including contractual and
other rights related thereto and proceeds thereof),
(ii) the amount of Debt secured by any such Lien shall not exceed
an amount equal to the lesser of the total purchase or construction
price or Fair Market Value (as determined in good faith by the Board
of Directors or the board of directors of such Restricted Subsidiary)
of the Property being acquired or constructed, determined at the time
of such acquisition or at the time of substantial completion of such
construction,
(iii) such Lien shall be created concurrently with or within
twelve months after such acquisition or substantial completion of such
construction, and
(iv) no Default or Unmatured Default shall exist at the time of
creation, incurrence or assumption of such Lien;
(h) Liens existing on Property of a corporation or other entity at the
time it becomes a Restricted Subsidiary or is merged or consolidated with
the Borrower or a Restricted Subsidiary, provided that
(i) no such Lien shall extend to or cover any Property other than
the Property subject to such Lien at the time of any such transaction,
(ii) the amount of Debt secured by any such Lien shall not exceed
the Fair Market Value (as determined in good faith by the Board of
Directors or the board of directors of such Restricted Subsidiary) of
the Property subject thereto, determined at the time of such
transaction,
(iii) such Lien was not created in contemplation of any such
transaction, and
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(iv) no Default or Unmatured Default shall exist at the time of
any such transaction;
(i) Liens incidental to the conduct of the business referred to in
Section 6.4 (including, without limitation, licenses, participation rights,
rebate or revenue sharing obligations, or similar encumbrances), provided
that such Liens have not arisen in connection with the incurrence of Debt;
and
(j) Liens, not otherwise permitted by the provisions of this Section
6.15, on Property of the Borrower or any Restricted Subsidiary, provided
that on the date the Borrower or such Restricted Subsidiary becomes liable
with respect to the Debt secured by such Liens, and immediately after
giving effect thereto and the concurrent retirement of any other Debt
constituting Priority Debt,
(i) no Default or Unmatured Default exists, and
(ii) the aggregate amount of Priority Debt does not exceed ten
percent (10%) of Consolidated Tangible Assets.
In case any Property shall be subjected to a Lien in violation of this
Section 6.15, the Borrower will forthwith make or cause to be made, to the
fullest extent permitted by applicable law, provision whereby the
Obligations will be secured equally and ratably as to such Property with
all other obligations secured thereby pursuant to such agreements and
instruments as shall be approved by the Required Lenders, and the Borrower
will promptly cause to be delivered to the Agent and to each Lender an
opinion, reasonably satisfactory to the Required Lenders, of Gardere Wynne
Sewell & Riggs, L.L.P. or other independent counsel satisfactory to the
Required Lenders to the effect that such agreements and instruments are
enforceable in accordance with their terms, and in any event the Loans
hereunder shall have the benefit, to the full extent that, and with such
priority as, the Lenders may be entitled under applicable law, of an
equitable Lien on such Property (and any proceeds thereof) securing the
Loans hereunder. Such violation of this Section 6.15 will constitute an
Unmatured Default hereunder, whether or not any such provision is made or
any equitable Lien is created pursuant to this Section 6.15.
6.16. Limitations on Certain Restricted Subsidiary Actions. The Borrower
will not, and will not permit any of the Restricted Subsidiaries to, enter into
any agreement which would restrict any Restricted Subsidiary's legal ability or
right to: (a) pay dividends or make any other distributions on its common stock;
(b) pay any Debt owing to the Borrower or another Restricted Subsidiary (other
than waivers of subrogation); (c) make any Investment in the Borrower or another
Restricted Subsidiary; (d) transfer its Property to the Borrower or another
Restricted Subsidiary (except that any such agreement may (i) prohibit the
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assignment of contractual rights, (ii) include grants of contractual rights of
first refusal, and (iii) include similar contractual obligations not unusual in
the course of such Restricted Subsidiary's business); or (e) Guaranty the
Obligations or any renewals or refinancings thereof; provided, however, that
(i) the restrictions of this Section 6.16 shall not apply to
(A) any such agreement in existence on the date of this Agreement
and set forth in Schedule 2,
(B) this Agreement, or
(C) other agreements relating to the creation of Senior Debt
incurred in accordance with the terms of this Agreement, and
(ii) the restrictions of clause (d) of this Section 6.16 shall not
apply to any agreement relating to the creation of Priority Debt or Debt of
Restricted Subsidiaries secured by Liens permitted by Section 6.15(a) to
Section 6.15(i), inclusive, to the extent that such restrictions limit the
ability of any Restricted Subsidiary to transfer the Property that secures
such Priority Debt or such other Debt;
provided further that, in the case of the foregoing clauses (i) and (ii), such
agreement does not impose any limitations on any Restricted Subsidiary's ability
to perform its obligations under the Subsidiary Guaranty.
6.17. Affiliate Transactions.Affiliate Transactions. The Borrower will not,
and will not permit any of the Restricted Subsidiaries to, enter into any
transaction (other than transactions among the Borrower and its wholly-owned
Unrestricted Subsidiaries that are not, individually or in the aggregate,
Material), including, without limitation, the purchase, sale or exchange of
Property or the rendering of any service, with any Affiliate, except in the
ordinary course of business of the Borrower or such Restricted Subsidiary and
upon fair and reasonable terms no less favorable to the Borrower or such
Restricted Subsidiary than it would obtain in a comparable arm's length
transaction with a Person not an Affiliate.
6.18. Net Worth. The Borrower will not, at any time, permit
Consolidated Net Worth to be less than the sum of (a) Ninety Million Dollars
($90,000,000), plus (b) an aggregate amount equal to fifty percent (50%) of
Consolidated Net Income (but, in each case, only if a positive number) for each
completed fiscal year of the Borrower beginning with the fiscal year ending
December 31, 1995.
6.19. Interest Coverage. The Borrower will not, at any
time, permit (a) EBITDA for the period of four consecutive fiscal quarters of
the Borrower then most recently ended to be less than (b) five hundred percent
(500%) of Consolidated Interest Expense for such period.
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6.20. Debt Incurrence. (a) Borrower Debt. The Borrower will not, directly
or indirectly, create, incur, assume, guarantee, or otherwise become directly or
indirectly liable with respect to, any Debt (including, without limitation, any
extension, renewal or refunding of Debt), unless on the date the Borrower
becomes liable with respect to any such Debt and immediately after giving effect
thereto and the concurrent retirement of any other Debt,
(i) no Default or Unmatured Default exists, and
(ii) Consolidated Debt does not exceed fifty percent (50%) of
Total Capitalization.
(b) Restricted Subsidiary Debt. The Borrower will not permit any of
the Restricted Subsidiaries to, directly or indirectly, create, incur,
assume, guarantee, or otherwise become directly or indirectly liable with
respect to, any Debt (including, without limitation, any extension, renewal
or refunding of Debt), unless on the date such Restricted Subsidiary
becomes liable with respect to any such Debt and immediately after giving
effect thereto and the concurrent retirement of any Debt,
(i) no Default or Unmatured Default exists,
(ii) the aggregate amount of Priority Debt does not exceed ten
percent (10%) of Consolidated Tangible Assets, and
(iii) Consolidated Debt does not exceed fifty percent (50%) of
Total Capitalization.
(c) Time of Incurrence of Debt. For the purposes of this Section 6.20,
any Person becoming a Restricted Subsidiary after the date hereof shall be
deemed, at the time it becomes a Restricted Subsidiary, to have incurred
all of its then outstanding Debt, and any Person extending, renewing or
refunding any Debt shall be deemed to have incurred such Debt at the time
of such extension, renewal or refunding.
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
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connection with this Agreement, the Subsidiary Guaranty, 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 Note when due, or nonpayment of
interest upon any Note 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 of any of the terms or provisions of Sections 6.1(f),
6.1(i), or 6.12 through 6.20, inclusive, except for breaches of the terms of
Section 6.15 with respect to Liens which secure Debt in an aggregate principal
amount of less than $2,500,000.
7.4. The breach by the Borrower (other than a breach which constitutes a
Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of this
Agreement which is not remedied within thirty days after the earlier of (i) a
Responsible Officer obtaining actual knowledge of such default and (ii) the
Borrower receiving written notice of such default from the Agent or any Lender
(any such written notice to be identified as a "notice of default").
7.5. Failure of the Borrower or any of its Restricted Subsidiaries to pay
when due any Indebtedness aggregating in excess of $10,000,000 ("Material
Indebtedness"); or the default by the Borrower or any of its Restricted
Subsidiaries in the performance 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
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 Restricted 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 Restricted 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 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.
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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 sixty (60) days.
7.8. The Borrower or any of its Subsidiaries shall fail within forty-five
(45) days to pay, bond or otherwise discharge any judgment or order for the
payment of money in excess of $1,000,000, which is not stayed on appeal or
otherwise being appropriately contested in good faith.
7.9. The Unfunded Liabilities of all Single Employer Plans shall exceed in
the aggregate $5,000,000 or any Reportable Event shall occur in connection with
any Plan.
7.10. The Borrower or any other member of the Controlled Group shall have
been notified by the sponsor of a Multiemployer Plan that it has incurred
withdrawal liability to such Multiemployer Plan in an amount which, when
aggregated with all other amounts required to be paid to Multiemployer Plans by
the Borrower or any other member of the Controlled Group as withdrawal liability
(determined as of the date of such notification), exceeds $5,000,000 or requires
payments exceeding $2,000,000 per annum.
7.11. The Borrower or any other member of the Controlled Group shall have
been notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or is being terminated, within the meaning of Title IV
of ERISA, if as a result of such reorganization or termination the aggregate
annual contributions of the Borrower and the other members of the Controlled
Group (taken as a whole) to all Multiemployer Plans which are then in
reorganization or being terminated have been or will be increased over the
amounts contributed to such Multiemployer Plans for the respective plan years of
each such Multiemployer Plan immediately preceding the plan year in which the
reorganization or termination occurs by an amount exceeding $2,000,000.
7.12. Any Change in Control shall occur.
7.13. The Subsidiary Guaranty shall fail to remain in full force or effect
or any action shall be taken to discontinue or to assert the invalidity or
unenforceability of the Subsidiary Guaranty, or any Restricted Subsidiary shall
fail to comply with any of the terms or provisions of the Subsidiary Guaranty,
or any Restricted Subsidiary denies that it has any further liability under the
Subsidiary Guaranty, or gives notice to such effect.
7.14. The representations and warranties set forth in Section 5.13(a) shall
at any time not be true and correct.
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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 60 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 each Lender affected thereby:
(i) Extend the final maturity of any Loan or Note or forgive all or
any portion of the principal 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 Facility Termination Date, or increase the amount of
the Commitment of any Lender hereunder, or permit the Borrower to assign
its rights under this Agreement.
(iv) Amend this Section 8.2.
(v) Release any Restricted Subsidiary from its obligations under the
Subsidiary Guaranty.
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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 delivery of the Notes and 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. Taxes. Any stamp, documentary or recording taxes or charges or other
similar assessments or charges made by any governmental or revenue authority in
respect of the Loan Documents shall be paid by the Borrower.
9.4. 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.
9.5. 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
described in Section 10.13).
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9.6. 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.
9.7. Expenses; Indemnification. The Borrower shall reimburse the Agent for
any costs, charges and out-of-pocket expenses (including attorneys' fees of
attorneys for the Agent, which attorneys may be employees of the Agent) paid or
incurred by the Agent in connection with the preparation, negotiation,
execution, delivery, review, amendment, modification, and administration of the
Loan Documents. The Borrower also agrees to reimburse the Agent and the Lenders
for any costs, charges and out-of-pocket expenses (including attorneys' fees of
attorneys for the Agent and the Lenders, which attorneys may be employees of the
Agent or the Lenders) paid or incurred by the Agent or any Lender in connection
with the collection and enforcement of the Loan Documents. The Borrower further
agrees to indemnify the Agent and each Lender, its 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 or any Lender 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 by a court of competent
jurisdiction in a final and non-appealable order to have resulted from the gross
negligence or willful misconduct of the party seeking indemnification. The
obligations of the Borrower under this Section shall survive the termination of
this Agreement.
9.8. 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.
9.9. 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 Agreement Accounting Principles.
9.10. 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.
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9.11. Nonliability of Lenders. The relationship between the Borrower and
the Lenders and the Agent shall be solely that of borrower and lender. Neither
the Agent nor any Lender shall have any fiduciary responsibilities to the
Borrower. Neither the Agent 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 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 by
a court of competent jurisdiction in a final and non-appealable order that such
losses resulted from the gross negligence or willful misconduct of the party
from which recovery is sought. Neither the Agent 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.
9.12. 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 that Lender or to a Transferee, (iii) to regulatory
officials, (iv) to any Person as required by law, regulation, or legal process
and (v) permitted by Section 12.4.
9.13. 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.
9.14. Maximum Rate. It is the intention of the parties hereto to comply
with all applicable usury laws; accordingly, it is agreed that notwithstanding
any provision to the contrary herein or in the Notes, or in any of the documents
securing payment thereof or otherwise relating hereto, no such provision shall
require the payment or permit the collection of interest in excess of the
highest rate allowed by applicable law (the "Maximum Rate"). If any excess of
interest in such respect is provided for, or shall be adjudicated to be so
provided for, herein or in the Notes or in any of the documents securing payment
thereof or otherwise relating hereto, then in such event:
(a) the provisions of this Section 9.14 shall govern and control,
(b) neither the Borrower, the Restricted Subsidiaries, nor their
heirs, legal representatives, successors or assigns nor any other party
liable for the payment on the Loans, shall be obligated to pay the amount
of such interest to the extent that it is in excess of the Maximum Rate,
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(c) any such excess with respect to any such Loan which may have been
collected shall, at the election of each Lender, be either applied as a
credit against the then unpaid principal amount on such Lender's Loans or
refunded to the Borrower, and
(d) the provisions hereof and of the Notes and any documents securing
payment thereof shall be automatically reformed so that the effective rate
of interest shall be reduced to the Maximum Rate. For the purpose of
determining the Maximum Rate, all interest payments with respect hereto
shall be amortized, prorated and spread throughout the full term of this
Agreement so that the effective rate of interest charged hereunder is
uniform throughout the term hereof.
9.15. ERISA Representation by Lenders. Each Lender hereby represents,
warrants and confirms to the Agent, each other Lender and the Borrower that none
of the funds, monies, assets or other consideration being used to fund Advances
hereunder are or will be "plan assets" as defined under ERISA and that its
rights, benefits and interests in and under the Loan Documents will not be "plan
assets" under ERISA.
ARTICLE X
THE AGENT
---------
10.1. Appointment; Nature of Relationship. The First National Bank of
Chicago is hereby appointed by the Lenders 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 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.
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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
for its or their own gross negligence or willful misconduct.
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 (i) any statement, warranty or
representation made in connection with any Loan Document or any borrowing
hereunder; (ii) 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; (iii) the satisfaction of any condition specified in Article IV, except
receipt of items required to be delivered to the Agent; (iv) the validity,
enforceability, effectiveness, sufficiency or genuineness of any Loan Document
or any other instrument or writing furnished in connection therewith; or (v) the
value, sufficiency, creation, perfection or priority of any interest in any
collateral security. 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 and on all holders of
Notes. 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 pro rata 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
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<PAGE>
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 all matters pertaining to the agency
hereby created and its 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 ratably in proportion to their respective
Commitments (or, if the Commitments have been terminated, in proportion to their
Commitments immediately prior to such termination) (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 of the Loan Documents 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, or
the enforcement of any of the terms thereof or of any such other documents,
provided that no Lender shall be liable for any of the foregoing to the extent
they arise from the gross negligence or willful misconduct of the Agent. 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. In the event the Agent is a Lender, the Agent
shall have the same rights and powers hereunder and under any other Loan
Document as any 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 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. The
Agent, in its individual capacity, is not obligated to remain a Lender.
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10.11. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent 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 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 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 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. 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 $500,000,000.
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.
10.13. Agent's Fee. The Borrower agrees to pay to the Agent, for its own
account, the fees agreed to by the Borrower and the Agent pursuant to that
certain letter agreement dated May 17, 1996, or as otherwise agreed from time to
time.
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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 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 hereof, shall then be due.
11.2. Ratable Payments. If any Lender, whether by setoff or otherwise, has
payment made to it upon its Ratable Loans (other than payments received pursuant
to Section 3.1, 3.2 or 3.4) in a greater proportion than that received by any
other Lender, such Lender agrees, promptly upon demand, to purchase a portion of
the Ratable Loans held by the other Lenders so that after such purchase each
Lender will hold its ratable proportion of Ratable 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 Ratable 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. Notwithstanding clause (ii) of this Section, any Lender may
at any time, without the consent of the Borrower or the Agent, assign all or any
portion of its rights under this Agreement and its Notes to a Federal Reserve
Bank; provided, however, that no such assignment to a Federal Reserve Bank shall
release the transfer or Lender from its obligations hereunder. The Agent may
treat the payee of any Note as the owner thereof for all purposes hereof unless
and until such payee complies with Section 12.3 in the case of an assignment
thereof or, in the case of any other transfer, a written notice of the transfer
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is filed with the Agent. Any assignee or transferee of a Note agrees by
acceptance thereof 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 holder of any
Note, shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.
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 holder of any such Note 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, 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 any substantial portion of 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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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. Such assignment shall
be substantially in the form of Exhibit "H" hereto or in such other form as
may be agreed to by the parties thereto. The consent of the Borrower 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 shall be in an amount not less
than the lesser of (i) $5,000,000 or (ii) the remaining amount of the
assigning Lender's Commitment (calculated as at the date of such
assignment).
12.3.2. Effect; Effective Date. Upon (i) delivery to the Agent of a
notice of assignment, substantially in the form attached as Exhibit "I" to
Exhibit "H" hereto (a "Notice of Assignment"), together with any consents
required by Section 12.3.1, and (ii) payment of a $3,000 fee to the Agent
for processing such assignment, such assignment shall become effective on
the effective date specified in such Notice of Assignment. The Notice of
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 are "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 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 make appropriate arrangements so that 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 Commitment, 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 in such Lender's possession
concerning the creditworthiness of the Borrower and its Subsidiaries; provided
that each Transferee and prospective Transferee agrees to be bound by Section
9.12 of this Agreement.
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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 4.3.
ARTICLE XIII
NOTICES
-------
13.1. Notices. Except as otherwise permitted by Section 2.13 with respect
to borrowing notices, all notices, requests and other communications to any
party hereunder shall be in writing (including bank wire, facsimile transmission
or similar writing) and shall be given to such party: (x) in the case of the
Borrower or the Agent, at its address or facsimile number set forth on the
signature pages hereof, (y) in the case of any Lender, at its address or
facsimile number set forth below its signature hereto or (z) in the case of any
party, such other address or facsimile number as such party may hereafter
specify for the purpose by notice to the Agent and the Borrower. Each such
notice, request or other communication shall be effective (i) if given by
facsimile transmission, when transmitted to the facsimile number specified in
this Section 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 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 telex 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 (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, 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 ILLINOIS STATE
COURT SITTING IN CHICAGO 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 CHICAGO,
ILLINOIS.
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.
Page 151 of 200
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed
this Agreement as of the date first above written.
SEITEL, INC., as Borrower
By: /s/ Debra D. Valice
-----------------------------------
Print Name: Debra D. Valice
Title: Senior Vice President
------------------------------
50 Briar Hollow Lane W.
7th Floor
Houston, Texas 77027
Attention:Debra D. Valice
Vice President of Finance,
Chief Financial Officer,
Treasurer & Secretary
Telephone:(713)627-1990
FAX: (713)627-1114
Commitments
-----------
$25,000,000
THE FIRST NATIONAL BANK OF CHICAGO,
as a Lender and as Agent
By: /s/ Helen A. Carr
-----------------------------------
Print Name: Helen A. Carr
Title: Attorney in fact
------------------------------
One First National Plaza,
Suite 0634
Chicago, Illinois 60670
Attention:William P. Laird
Telephone:(312) 732-5635
FAX: (312) 732-3055
Page 152 of 200
<PAGE>
with a copy to:
The First National Bank of Chicago
1100 Louisiana, Suite 3200
Houston, Texas 77002
Attention: Helen A. Carr
Telephone: (713) 654-7335
FAX: (713) 654-7370
- -----------
$25,000,000
Page 153 of 200
<PAGE>
EXHIBIT "A"
RATABLE NOTE
$ July 22, 1996
-------------------
Seitel, Inc., a Delaware corporation (the "Borrower"), promises to pay to
the order of (the "Lender") the lesser of the principal sum
-------------------
of Dollars or the aggregate unpaid principal amount of all Ratable
- ------------
Loans made by the Lender to the Borrower pursuant to Section 2.4 of the
Agreement (as hereinafter defined), in immediately available funds at the main
office of The First National Bank of Chicago in Chicago, Illinois, as Agent,
together with interest on the unpaid principal amount hereof at the rates and on
the dates set forth in the Agreement. The Borrower shall pay the principal of
and accrued and unpaid interest on the Ratable Loans in full on the Facility
Termination Date.
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 each Ratable Loan and the date and amount of each
principal payment hereunder, provided that the failure by the Lender to so
record or any mistake in so recording shall not affect the obligations of the
Borrower hereunder.
This Ratable Note is one of the Notes issued pursuant to, and is subject to
the terms of and entitled to the benefits of, the Revolving Credit Agreement
dated as of July 22, 1996 (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 The First National Bank of
Chicago, as Agent, to which Agreement reference is hereby made for a statement
of the terms and conditions governing this Ratable Note, including the terms and
conditions under which this Ratable Note may be prepaid or its maturity date
accelerated. This Ratable Note is guaranteed pursuant to the Subsidiary
Guaranty, 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.
THIS RATABLE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
SEITEL, INC.
By:
Print Name:
Title:
Page 154 of 200
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
RATABLE NOTE OF SEITEL, INC.,
DATED JULY 22, 1996
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
- ---- --------- ----------- ------ ---------
Page 155 of 200
<PAGE>
EXHIBIT "B"
COMPETITIVE BID NOTE
$25,000,000 July 22, 1996
Seitel, Inc., a Delaware corporation (the "Borrower"), promises to pay to
the order of (the "Lender") the aggregate unpaid principal
----------------
amount of all Competitive Bid Loans made by the Lender to the Borrower pursuant
to Section 2.5 of the Agreement (as hereinafter defined) in immediately
available funds at the main office of The First National Bank of Chicago in
Chicago, Illinois, as Agent, together with interest on the unpaid principal
amount hereof at the rates and on the dates set forth in the Agreement. The
Borrower shall pay each Competitive Bid Loan in full on the last day of such
Competitive Bid Loan's applicable Interest Period.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or otherwise record in accordance with its usual practice, the
date and amount of each Competitive Bid Loan and the date and amount of each
principal payment hereunder, provided that the failure by the Lender to so
record or any mistake in so recording shall not affect the obligations of the
Borrower hereunder.
This Competitive Bid Note is one of the Notes issued pursuant to, and
is subject to the terms of and entitled to the benefits of, the Revolving Credit
Agreement dated as of July 22, 1996 (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 The First
National Bank of Chicago, as Agent, to which Agreement reference is hereby made
for a statement of the terms and conditions governing this Competitive Bid Note,
including the terms and conditions under which this Competitive Bid Note may be
prepaid or its maturity date accelerated. This Competitive Bid Note is
guaranteed pursuant to the Subsidiary Guaranty, 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.
THIS COMPETITIVE BID NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
SEITEL, INC.
By:
Print Name:
Title:
Page 156 of 200
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
COMPETITIVE BID NOTE
OF SEITEL, INC.
DATED JULY 22, 1996
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
- ---- --------- ----------- ------ ---------
Page 157 of 200
<PAGE>
EXHIBIT "C"
COMPETITIVE BID QUOTE REQUEST
(Section 2.5.2)
, 19
----- ---
To: The First National Bank of Chicago,
as agent (the "Agent")
From: Seitel, Inc. (the "Borrower")
Re: Revolving Credit Agreement dated as of July 22, 1996, among Seitel,
Inc., The First National Bank of Chicago, individually and as Agent
and the Lenders parties thereto
We hereby give notice pursuant to Section 2.5.2 of the Agreement that we
request Competitive Bid Quotes setting forth Absolute Rates for the following
proposed Competitive Bid Advance(s):
Borrowing Date: , 19
------------ ---
Principal Amount 1 Interest Period 2
- ---------------- ---------------
$
Upon acceptance by the undersigned of any or all of the Competitive Bid
Loans offered by Lenders in response to this request, the undersigned shall be
deemed to affirm as of such date that the representations and warranties made in
the Agreement are true and correct in all material respects. Capitalized terms
used herein have the meanings assigned to them in the Agreement.
SEITEL, INC.
By:
Print Name :
Title:
1 Amount must be at least $2,000,000 and an integral multiple of $1,000,000.
2 From 1 to 29 days, subject to the provisions of the definition of Absolute
Rate Interest Period.
Page 158 of 200
<PAGE>
EXHIBIT "D"
INVITATION FOR COMPETITIVE BID QUOTES
(Section 2.5.3)
, 19
------- ---
To: [Name of Lender]
Re: Invitation for Competitive Bid Quotes to Seitel, Inc. (the "Borrower")
Pursuant to Section 2.5.3 of the Revolving Credit Agreement dated as of
July 22, 1996 (the "Agreement"), among Seitel, Inc., The First National Bank of
Chicago, individually and as Agent, and the Lenders parties thereto, we are
pleased on behalf of the Borrower to invite you to submit Competitive Bid Quotes
setting forth Absolute Rates to the Borrower for the following proposed
Competitive Bid Advance(s):
Borrowing Date: , 19
------------ ---
Principal Amount Interest Period
- ---------------- ---------------
$
Your Competitive Bid Quote must comply with Section 2.5.4 of the Agreement
and the foregoing terms in which the Competitive Bid Quote Request was made.
Capitalized terms used herein have the meanings assigned to them in the
Agreement.
Please respond to this invitation by no later than 9:00 a.m. Chicago time
on , 19 .
-------- ---
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
By:
------------------------------
Authorized Officer
Page 159 of 200
<PAGE>
EXHIBIT "E"
COMPETITIVE BID QUOTE
(Section 2.5.4)
, 19
------ ---
To: The First National Bank of Chicago, as Agent Attn:
Re: Competitive Bid Quote to Seitel, Inc. (the "Borrower")
In response to your invitation on behalf of the Borrower dated , 19 , we hereby
make the following Competitive Bid Quote pursuant to Section 2.5.4 of the
Revolving Credit Agreement hereinafter referred to and on the following terms:
1. Quoting Lender:
----------------------
2. Person to contact at Quoting Lender:
--------------------
3. Borrowing Date: , 19 1
------ ---
4. We hereby offer to make Competitive Bid Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Absolute Minimum
Amount2 Period3 Rate4 Amount5
- --------- -------- -------- -------
$
- ------------------------------------------------
1 As specified in the related Invitation.
2 Principal amount bid for each Interest Period may not exceed principal
amount requested. Bids must be made for $2,000,000 and an integral multiple
of $1,000,000.
3 From 1 to 29 days, as specified in the related Invitation.
4 Specify rate of interest per annum (rounded to the nearest 1/100 of 1%).
5 Specify minimum amount which the Borrower may accept (see Section
2.3.4(b)(iv).
Page 160 of 200
<PAGE>
We understand and agree that the offer(s) set forth above, subject to the
satisfaction of the applicable conditions set forth in the Revolving Credit
Agreement dated as of July 22, 1996 (the "Agreement"), among Seitel, Inc., The
First National Bank of Chicago, individually and as Agent and the Lenders
parties thereto, irrevocably obligate(s) us to make the Competitive Bid Loan(s)
for which any offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF LENDER]
Dated: , 19 By:
-------- --- ------------------------------
Authorized Officer
Page 161 of 200
<PAGE>
EXHIBIT "F"
FORM OF OPINION
GARDERE WYNNE SEWELL & RIGGS, LLP
333 CLAY AVENUE
SUITE 800
HOUSTON, TEXAS 77002-4086
July 22, 1996
The First National Bank of Chicago,
individually and as Agent for Lenders
One First National Plaza
Chicago, Illinois 60670
Re: Seitel, Inc. (the "Borrower")
Our File No. 979275/094
-----------
Ladies and Gentlemen:
We have acted as counsel to the Borrower and Seitel Data Corp. ("SDC"),
Seitel Delaware, Inc. ("SDI"), Seitel Management, Inc. ("SMI"), Seitel
Geophysical, Inc. ("SGI"), DDD Energy, Inc. ("DDD"), Seitel Gas & Energy Corp.
("SGE"), Seitel Power Corp. ("SPC"), Seitel Natural Gas, Inc. ("SNG"), Matrix
Geophysical, Inc. ("Matrix"), Exsol, Inc. ("Exsol"), Datatel, Inc. ("Datatel"),
Seitel Offshore Corp. (SOC"), all Delaware corporations, Geo-Bank, Inc.
("Geo-Bank") and Alternative Communication Enterprises, Inc. ("ACE"), each a
Texas corporation, Seitel International, Inc. ("SII") and African Geophysical,
Inc. ("AGI"), each a Cayman Islands corporation, and Seitel Data Ltd., a Texas
limited partnership ("SDL", and collectively with SDC, SDI, SMI, SGI, DDD, SGE,
SPC, SNG, Matrix, Exsol, Datatel, SOC, Geo-Bank, ACE, SII, and AGI, the
"Subsidiary Guarantors," and such Subsidiary Guarantors collectively with the
Borrower, the "Seitel Companies") in connection with their execution and
delivery of (i) a Revolving Credit Agreement among the Borrower, The First
National Bank of Chicago, individually and as Agent, and the Lenders named
therein dated as of July 22, 1996 (the "Agreement") and (ii) a Subsidiary
Guaranty dated as of July 22, 1996 made by the Subsidiary Guarantors in favor of
the Agent, for the benefit of the Lenders. In acting as such counsel, we have
examined:
(a) the Agreement;
(b) the Notes of even date herewith; and
(c) the Subsidiary Guaranty.
Page 162 of 200
<PAGE>
The documents listed in paragraphs (a) through (c) above are referred to
herein as the "Loan Documents." The capitalized terms used herein and not
defined herein have the meanings specified in the Agreement.
In addition, we have examined such public records and documents, statutes,
certificates of officers of Borrowers, and certificates of public officials,
that we deem necessary for this opinion.
We advise you that we have previously represented the Borrower and certain
Subsidiary Guarantors only with respect to specific matters referred to us.
Consequently, there are matters of a legal nature concerning the Borrower and
the Subsidiary Guarantors of which we have no knowledge.
In rendering this opinion, we have assumed the following: (i) that Agent
and Lenders are duly organized, validly existing and in good standing under all
applicable laws and have all requisite corporate power and authority to execute
and deliver the Loan Documents and perform the applicable provisions thereof;
(ii) that all the Loan Documents to which Agent or Lenders are a party have been
duly authorized, executed and delivered by Agent and Lenders; (iii) that such
instruments are legal, valid, binding and enforceable in accordance with their
terms as to Agent and Lenders; (iv) that neither Agent nor any Lender is
involved in any court or administrative proceeding relating to or otherwise
affecting this transaction or subject to any order, writ, injunction or decree
of any court or governmental agency or commission which would prohibit the
execution or delivery of such documents or the consummation of any transaction
therein contemplated; (v) that there is no requirement of consent, approval or
authorization by any person or governmental authority regarding the Loan
Documents or the transactions contemplated thereby with respect to Agent or
Lenders; (vi) that all of the material terms and conditions of the loan
contemplated by the Agreement are correctly and completely embodied in the Loan
Documents; and (vii) that Agent and Lenders will comply with all the terms and
provisions of the Loan Documents including, without limitation, the usury
savings clause contained therein. We have also assumed the genuineness of all
signatures (except for the signatures of the Borrower and the Subsidiary
Guarantors), the authenticity of all documents submitted to us as originals and
the conformity to original documents of all documents submitted to us as
certified or photostatic copies, the correctness of all statements set forth in
certificates or written documents of governmental officials and certificates or
written documents of the Borrower or the Subsidiary Guarantors or
representatives of the Borrower or the Subsidiary Guarantors as to corporate or
partnership proceedings, incumbency of officers and other factual matters (which
statements, to our knowledge, are correct), and that none of the parties upon
whom we have relied for purposes of this opinion has perpetuated a fraud upon
any of the parties to the transactions contemplated by the Agreement or any of
the attorneys representing any of such parties.
Page 163 of 200
<PAGE>
Our opinions expressed below assume the acceptance of the Loan Documents by
Agent and Lenders so that such instruments have mutuality of binding effect, and
this opinion is to be effective only upon such occurrence.
Based upon the foregoing and subject to the limitations, qualifications and
exceptions set forth below, we are of the following opinions:
1. (a) The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own its property and
carry on its business as currently conducted.
(b) Each Subsidiary Guarantor incorporated under the laws of any
jurisdiction within the United States is a corporation duly
incorporated, validly existing and in good standing under the laws of
its state of incorporation and has all requisite corporate power and
authority to own its property and carry on its business as currently
conducted.
(c) SDL is a limited partnership duly organized and validly existing
under the laws of the state of Texas and has all requisite partnership
power and authority to own its property and carry on its business as
currently conducted.
2. (a) The Borrower has the requisite corporate power and authority to
execute and deliver the Agreement and the Notes, and the Borrower's
obligations under the Agreement and the Notes may be performed in a
manner which is within the Borrower's corporate power and authority.
(b) The obligations of each Subsidiary Guarantor organized under the
laws of any jurisdiction within the United States under the Subsidiary
Guaranty may be performed in a manner which is within such Subsidiary
Guarantor's corporate power and authority.
3. (a) The Loan Documents have been duly authorized by all necessary
corporate action on the part of the Borrower, have been executed and
delivered by duly authorized officers of the Borrower, and the
Agreement and the Notes constitute legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in
accordance with their terms.
(b) The Subsidiary Guaranty has been duly authorized by all necessary
corporate or partnership action on the part of the Subsidiary
Guarantors, has been executed and delivered by duly authorized
officers of the Subsidiary Guarantors that are corporations and by a
duly authorized officer of the general partner of SDL, and constitutes
a legal, valid and binding obligation of each Subsidiary Guarantor
organized under the laws of any jurisdiction within the United States,
enforceable against each such Subsidiary Guarantor in accordance with
its terms.
Page 164 of 200
<PAGE>
4. (a) The execution and delivery of the Agreement and the Notes by the
Borrower will not, and the obligations of the Borrower thereunder may
be performed in a manner which will not, conflict with, constitute a
violation of, result in a breach of any provision of, constitute a
default under, or result in the creation or imposition of any Lien or
encumbrance upon any of the property of the Borrower pursuant to, the
certificate of incorporation or by-laws of the Borrower, any
applicable statute, rule or regulation to which the Borrower is
subject, or any order, writ, judgment, injunction, decree, award,
agreement or instrument known to us to which the Borrower is a party
or by which its properties may be bound, except for (i) such
conflicts, violations, breaches, defaults or encumbrances under
agreements and instruments as may have been waived by the other party
thereto, or (ii) such conflicts, violations, breaches, defaults or
encumbrances under agreements and instruments which would not have,
alone or in the aggregate, a Material Adverse Effect.
(b) The obligations of each of the Subsidiary Guarantors organized
under the laws of any jurisdiction within the United States under the
Subsidiary Guaranty may be performed in a manner which will not
conflict with, constitute a violation of, result in a breach of any
provision of, constitute a default under, or result in the creation or
imposition of any Lien or encumbrance upon any of the property of any
such Subsidiary Guarantors pursuant to the certificate or articles of
incorporation or by-laws or limited partnership agreement of any such
Subsidiary Guarantor, any applicable statute, rule or regulation to
which any such Subsidiary Guarantor is subject, or any order, writ,
judgment, injunction, decree, award, agreement or instrument known to
us to which any such Subsidiary Guarantor is a party or by which its
respective properties may be bound, except for (i) such conflicts,
violations, breaches, defaults or encumbrances under agreements and
instruments as may have been waived by the other party thereto, or
(ii) such conflicts, violations, breaches, defaults or encumbrances
under agreements and instruments which would not have, alone or in the
aggregate, a Material Adverse Effect.
5. To the best of our knowledge, after inquiry of the lawyers at this
firm identified in the third from last paragraph of this opinion
letter, there is no judgment, order, action, suit, proceeding,
inquiry, order or investigation, at law or in equity, before any court
or Governmental Authority, arbitration board or tribunal pending or
threatened against a Seitel Company which, if adversely determined,
could reasonably be expected to have a Material Adverse Effect.
6. No approval, authorization, consent, adjudication or order of any
Governmental Authority, which has not been obtained by a Seitel
Company, is required to be obtained by a Seitel Company in connection
with the execution and delivery of the Loan Documents to which it is a
party or the performance of its obligations thereunder.
Page 165 of 200
<PAGE>
The foregoing opinions are subject to and are qualified in all
respects by the following:
(i) The enforceability of the Loan Documents may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium and similar laws
from time to time in effect and affecting creditors' rights or the
collection of debtors' obligations generally (including, without
limitation, laws generally defining and restricting fraudulent
conveyances), (b) principles of equity, (c) principles of public
policy and (d) requirements of commercial reasonableness and good
faith.
(ii) We express no opinion as to the availability or enforceability of
certain provisions or remedies set forth in the Loan Documents,
including but not limited to those (a) that purport to provide access
to or restrict legal or equitable remedies such as specific
performance and the appointment of a receiver, (b) that purport to
establish evidentiary standards, (c) that relate to waivers, or to
delays or omissions of enforcement of remedies or severance, (d) that
attempt to prohibit or restrict the transfer, alienation, mortgaging,
encumbering or hypothecation of any property described in the Loan
Documents, (e) that relate to subrogation rights or the waiver thereof
and (f) that attempt to establish proper venue for the filing and
maintenance of any claim, suit or action with respect to the Loan
Documents; provided, however, that such limitations on the
availability of remedies under the Loan Documents or the legality,
validity, binding effect or enforceability of the Loan Documents will
not, in our opinion, substantially interfere with the practical
realization of the benefits expressed in the Loan Documents except for
the economic consequences of any procedural delay which may result
from such laws.
(iii) We express no opinion as to the enforceability of provisions in
the Loan Documents attempting to establish choice of laws.
(iv) We express no opinion as to the enforceability of provisions in
the Loan Documents as they relate to the rights and obligations among
the Lenders and the Agent.
(v) We express no opinion as to whether the investment in the Notes
complies with any statutory, regulatory or other loan limits
applicable to any Lender or complies with any other statutes, laws,
rules or regulations which prescribe permissible and lawful
investments for the Lenders (either as to type, amount, percentage of
total investments or otherwise).
Page 166 of 200
<PAGE>
Our "knowledge" as to any matters in connection with this opinion is
limited to the actual knowledge of the lawyers in our firm who have participated
in the negotiation and preparation of the Loan Documents and such other lawyers
in the firm who have represented the Borrower and the Subsidiary Guarantors that
the lawyer in charge of the matter reasonably believes should be consulted, and
does not include constructive or imputed knowledge.
We are admitted to the Bar in the State of Texas. This opinion is limited
to United States federal law, laws of the State of Texas, and general corporate
law of the State of Delaware, all as now in effect, and we disclaim any
responsibility to inform you of any change thereto after the date hereof. No
opinion is expressed as to any matter that may be governed by the laws of any
other jurisdiction; provided, however, to the extent that the laws of any state
other than Texas govern the Loan Documents, you may rely on our opinion to the
extent that the laws of such state or states are the same as the laws of the
State of Texas, as to which sameness we express no opinion.
This opinion may be relied upon by the Agent, the Lenders and their
participants, and their assignees and other transferees.
Very truly yours,
GARDERE WYNNE SEWELL & RIGGS, L.L.P.
William Mark Young
Page 167 of 200
<PAGE>
EXHIBIT "G"
COMPLIANCE CERTIFICATE
To: The Lenders parties to the Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to that certain Credit
Agreement dated as of , 19 (as amended, modified, renewed or extended
------ ---
from time to time, the "Agreement") among Seitel, Inc. (the "Borrower"), the
lenders party thereto and The First National Bank of Chicago, as Agent for the
Lenders. Unless otherwise defined herein, capitalized terms used in this
Compliance Certificate have the meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected of the Borrower;
-----------
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of the Borrower and its Subsidiaries during the accounting period
covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or event which constitutes a
Default or Unmatured Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data and computations
evidencing the Borrower's compliance with certain covenants of the Agreement,
all of which data and computations are true, complete and correct.
[5. Schedule II attached hereto sets forth the determination of the
interest rate to be paid for Advances commencing the first day of the month
following the delivery hereof.]
[6. Schedule III attached hereto sets forth the various reports and
deliveries which are required under the Credit Agreement, the Security Agreement
and the other Loan Documents and the status of compliance.]
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower has taken, is taking, or proposes to
take with respect to each such condition or event:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
The foregoing certifications, together with the computations set forth in
Schedule I [and Schedule II] hereto and the financial statements delivered with
this Certificate in support hereof, are made and delivered this day of
------
, 19 .
- -------- ----
-----------------------------------
Page 168 of 200
<PAGE>
SCHEDULE I TO COMPLIANCE CERTIFICATE
Compliance as of , 199 with
--------- --
Provisions of and of
---------- ----------
the Agreement
Page 169 of 200
<PAGE>
SCHEDULE II TO COMPLIANCE CERTIFICATE
Rate Determination
Page 170 of 200
<PAGE>
SCHEDULE III TO COMPLIANCE CERTIFICATE
Reports and Deliveries
Page 171 of 200
<PAGE>
EXHIBIT "H"
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between
(the "Assignor") and (the "Assignee") is dated as of
- -------------- -----------
, 19 . The parties hereto agree as follows:
- ----------- ---
1. PRELIMINARY STATEMENT. The Assignor is a party to a Revolving Credit
Agreement (which, as it may be amended, modified, renewed or extended from time
to time is herein called the "Credit Agreement") described in Item 1 of Schedule
1 attached hereto ("Schedule 1"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings attributed to them in the
Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee shall
have purchased pursuant to this Assignment Agreement the percentage interest
specified in Item 3 of Schedule 1 of all outstanding rights and obligations
under the Credit Agreement relating to the facilities listed in Item 3 of
Schedule 1 and the other Loan Documents. The aggregate Commitment (or Loans, if
the applicable Commitment has been terminated) purchased by the Assignee
hereunder is set forth in Item 4 of Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the
"Effective Date") shall be the later of the date specified in Item 5 of Schedule
1 or two Business Days (or such shorter period agreed to by the Agent) after a
Notice of Assignment substantially in the form of Exhibit "I" attached hereto
has been delivered to the Agent. Such Notice of Assignment must include any
consents required to be delivered to the Agent by Section [12.3.1] of the Credit
Agreement. In no event will the Effective Date occur if the payments required to
be made by the Assignee to the Assignor on the Effective Date under Sections 4
and 5 hereof are not made on the proposed Effective Date. The Assignor will
notify the Assignee of the proposed Effective Date no later than the Business
Day prior to the proposed Effective Date. As of the Effective Date, (i) the
Assignee shall have the rights and obligations of a Lender under the Loan
Documents with respect to the rights and obligations assigned to the Assignee
hereunder and (ii) the Assignor shall relinquish its rights and be released from
its corresponding obligations under the Loan Documents with respect to the
rights and obligations assigned to the Assignee hereunder.
Page 172 of 200
<PAGE>
4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee
shall be entitled to receive from the Agent all payments of principal, interest
and fees with respect to the interest assigned hereby. The Assignee shall
advance funds directly to the Agent with respect to all Loans and reimbursement
payments made on or after the Effective Date with respect to the interest
assigned hereby. [In consideration for the sale and assignment of Loans
hereunder, (i) the Assignee shall pay the Assignor, on the Effective Date, an
amount equal to the principal amount of the portion of all Floating Rate Loans
assigned to the Assignee hereunder and (ii) with respect to each Fixed Rate Loan
made by the Assignor and assigned to the Assignee hereunder which is outstanding
on the Effective Date, (a) on the last day of the Interest Period therefor or
(b) on such earlier date agreed to by the Assignor and the Assignee or (c) on
the date on which any such Fixed Rate Loan either becomes due (by acceleration
or otherwise) or is prepaid (the date as described in the foregoing clauses (a),
(b) or (c) being hereinafter referred to as the "Payment Date"), the Assignee
shall pay the Assignor an amount equal to the principal amount of the portion of
such Fixed Rate Loan assigned to the Assignee which is outstanding on the
Payment Date. If the Assignor and the Assignee agree that the Payment Date for
such Fixed Rate Loan shall be the Effective Date, they shall agree to the
interest rate applicable to the portion of such Loan assigned hereunder for the
period from the Effective Date to the end of the existing Interest Period
applicable to such Fixed Rate Loan (the "Agreed Interest Rate") and any interest
received by the Assignee in excess of the Agreed Interest Rate shall be remitted
to the Assignor. In the event interest for the period from the Effective Date to
but not including the Payment Date is not paid by the Borrower with respect to
any Fixed Rate Loan sold by the Assignor to the Assignee hereunder, the Assignee
shall pay to the Assignor interest for such period on the portion of such Fixed
Rate Loan sold by the Assignor to the Assignee hereunder at the applicable rate
provided by the Credit Agreement. In the event a prepayment of any Fixed Rate
Loan which is existing on the Payment Date and assigned by the Assignor to the
Assignee hereunder occurs after the Payment Date but before the end of the
Interest Period applicable to such Fixed Rate Loan, the Assignee shall remit to
the Assignor the excess of the prepayment penalty paid with respect to the
portion of such Fixed Rate Loan assigned to the Assignee hereunder over the
amount which would have been paid if such prepayment penalty was calculated
based on the Agreed Interest Rate. The Assignee will also promptly remit to the
Assignor (i) any principal payments received from the Agent with respect to
Fixed Rate Loans prior to the Payment Date and (ii) any amounts of interest on
Loans and fees received from the Agent which relate to the portion of the Loans
assigned to the Assignee hereunder for periods prior to the Effective Date, in
the case of Floating Rate Loans or fees, or the Payment Date, in the case of
Fixed Rate Loans, and not previously paid by the Assignee to the Assignor.]* In
the event that either party hereto receives any payment to which the other party
hereto is entitled under this Assignment Agreement, then the party receiving
such amount shall promptly remit it to the other party hereto.
* Each Assignor may insert its standard payment provisions in lieu of the
payment terms included in this Exhibit.
Page 173 of 200
<PAGE>
5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the Assignor a
fee on each day on which a payment of interest or [commitment] fees is made
under the Credit Agreement with respect to the amounts assigned to the Assignee
hereunder (other than a payment of interest or commitment fees for the period
prior to the Effective Date or, in the case of Fixed Rate Loans, the Payment
Date, which the Assignee is obligated to deliver to the Assignor pursuant to
Section 4 hereof). The amount of such fee shall be the difference between (i)
the interest or fee, as applicable, paid with respect to the amounts assigned to
the Assignee hereunder and (ii) the interest or fee, as applicable, which would
have been paid with respect to the amounts assigned to the Assignee hereunder if
each interest rate was of 1% less than the interest rate paid by the Borrower or
if the commitment fee was of 1% less than the commitment fee paid by the
Borrower, as applicable. In addition, the Assignee agrees to pay % of the
recordation fee required to be paid to the Agent in connection with this
Assignment Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
LIABILITY. The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim created by the Assignor. It is
understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor nor
any of its officers, directors, employees, agents or attorneys shall be
responsible for (i) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectability of any Loan Document, including
without limitation, documents granting the Assignor and the other Lenders a
security interest in assets of the Borrower or any guarantor, (ii) any
representation, warranty or statement made in or in connection with any of the
Loan Documents, (iii) the financial condition or creditworthiness of the
Borrower or any guarantor, (iv) the performance of or compliance with any of the
terms or provisions of any of the Loan Documents, (v) inspecting any of the
Property, books or records of the Borrower, (vi) the validity, enforceability,
perfection, priority, condition, value or sufficiency of any collateral securing
or purporting to secure the Loans or (vii) any mistake, error of judgment, or
action taken or omitted to be taken in connection with the Loans or the Loan
Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it has
received a copy of the Credit Agreement, together with copies of the financial
statements requested by the Assignee and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment Agreement, (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information at it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Loan Documents, (iii) appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under the Loan Documents as
Page 174 of 200
<PAGE>
are delegated to the Agent by the terms thereof, together with such powers as
are reasonably incidental thereto, (iv) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender, (v) agrees that
its payment instructions and notice instructions are as set forth in the
attachment to Schedule 1, (vi) confirms that none of the funds, monies, assets
or other consideration being used to make the purchase and assumption hereunder
are "plan assets" as defined under ERISA and that its rights, benefits and
interests in and under the Loan Documents will not be "plan assets" under ERISA,
[and (vii) attaches the forms prescribed by the Internal Revenue Service of the
United States certifying that the Assignee is entitled to receive payments under
the Loan Documents without deduction or withholding of any United States federal
income taxes].*
* to be inserted if the Assignee is not incorporated under the laws of the
United States, or a state thereof.
8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor
in connection with or arising in any manner from the Assignee's non-performance
of the obligations assumed under this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall
have the right pursuant to Section [12.3.1] of the Credit Agreement to assign
the rights which are assigned to the Assignee hereunder to any entity or person,
provided that (i) any such subsequent assignment does not violate any of the
terms and conditions of the Loan Documents or any law, rule, regulation, order,
writ, judgment, injunction or decree and that any consent required under the
terms of the Loan Documents has been obtained and (ii) unless the prior written
consent of the Assignor is obtained, the Assignee is not thereby released from
its obligations to the Assignor hereunder, if any remain unsatisfied, including,
without limitation, its obligations under [Sections 4, 5 and 8] hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the Aggregate
Commitment occurs between the date of this Assignment Agreement and the
Effective Date, the percentage interest specified in Item 3 of Schedule 1 shall
remain the same, but the dollar amount purchased shall be recalculated based on
the reduced Aggregate Commitment.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice of
Assignment embody the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings between the parties
hereto relating to the subject matter hereof.
Page 175 of 200
<PAGE>
12. GOVERNING LAW. This Assignment Agreement shall be governed by the
internal law, and not the law of conflicts, of the State of Illinois.
13. NOTICES. Notices shall be given under this Assignment Agreement in the
manner set forth in the Credit Agreement. For the purpose hereof, the addresses
of the parties hereto (until notice of a change is delivered) shall be the
address set forth in the attachment to Schedule 1.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
[NAME OF ASSIGNOR]
By:
Title:
[NAME OF ASSIGNEE]
By:
Title:
Page 176 of 200
<PAGE>
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement: Revolving Credit Agreement dated
as of July 22, 1996 among Seitel,
Inc., the Lenders and The First
National Bank of Chicago, as
agent
2. Date of Assignment Agreement: , 19
-------- ----
3. Amounts (As of Date of Item 2 above):
a. Total of Commitments
(Loans)* under
Credit Agreement $
-------------------
b. Assignee's Percentage
of each Facility purchased
under the Assignment
Agreement** %
--------------------
c. Amount of Assigned Share in
each Facility purchased under
the Assignment
Agreement $
-------------------
4. Assignee's Aggregate (Loan
Amount)* Commitment Amount
Purchased Hereunder: $
-------------------
5. Proposed Effective Date:
--------------------
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: By:
Title: Title:
* If a Commitment has been terminated, insert outstanding Loans in place of
Commitment
** Percentage taken to 10 decimal places
Page 177 of 200
<PAGE>
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet,
which must include notice address for the Assignor
and the Assignee
Page 178 of 200
<PAGE>
EXHIBIT "I"
to Assignment Agreement
NOTICE
OF ASSIGNMENT
, 19
-------- ----
To: [NAME OF BORROWER]
-------------------
-------------------
[NAME OF AGENT]
-------------------
-------------------
From:[NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that Credit Agreement (the "Credit Agreement") described in
Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used
herein and not otherwise defined herein shall have the meanings attributed to
them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and delivered to the
Borrower and the Agent pursuant to Section 12.3.2 of the Credit Agreement.
3. The Assignor and the Assignee have entered into an Assignment Agreement,
dated as of , 19 (the "Assignment"), pursuant to which, among other
--------- ---
things, the Assignor has sold, assigned, delegated and transferred to the
Assignee, and the Assignee has purchased, accepted and assumed from the Assignor
the percentage interest specified in Item 3 of Schedule 1 of all outstandings,
rights and obligations under the Credit Agreement relating to the facilities
listed in Item 3 of Schedule 1. The Effective Date of the Assignment shall be
the later of the date specified in Item 5 of Schedule 1 or two Business Days (or
such shorter period as agreed to by the Agent) after this Notice of Assignment
and any consents and fees required by Sections 12.3.1 and 12.3.2 of the Credit
Agreement have been delivered to the Agent, provided that the Effective Date
shall not occur if any condition precedent agreed to by the Assignor and the
Assignee has not been satisfied.
4. The Assignor and the Assignee hereby give to the Borrower and the Agent
notice of the assignment and delegation referred to herein. The Assignor will
confer with the Agent before the date specified in Item 5 of Schedule 1 to
determine if the Assignment Agreement will become effective on such date
pursuant to Section 3 hereof, and will confer with the Agent to determine the
Effective Date pursuant to Section 3 hereof if it occurs thereafter. The
Assignor shall notify the Agent if the Assignment Agreement does not become
effective on any proposed Effective Date as a result of the failure to satisfy
the conditions precedent agreed to by the Assignor and the Assignee. At the
request of the Agent, the Assignor will give the Agent written confirmation of
the satisfaction of the conditions precedent.
Page 179 of 200
<PAGE>
5. The Assignor or the Assignee shall pay to the Agent on or before the
Effective Date the processing fee of $3,000 required by Section 12.3.2 of the
Credit Agreement.
6. If Notes are outstanding on the Effective Date, the Assignor and the
Assignee request and direct that the Agent prepare and cause the Borrower to
execute and deliver new Notes or, as appropriate, replacements notes, to the
Assignor and the Assignee. The Assignor and, if applicable, the Assignee each
agree to deliver to the Agent the original Note received by it from the Borrower
upon its receipt of a new Note in the appropriate amount.
7. The Assignee advises the Agent that notice and payment instructions are
set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of the funds,
monies, assets or other consideration being used to make the purchase pursuant
to the Assignment are "plan assets" as defined under ERISA and that its rights,
benefits, and interests in and under the Loan Documents will not be "plan
assets" under ERISA.
9. The Assignee authorizes the Agent to act as its agent under the Loan
Documents in accordance with the terms thereof. The Assignee acknowledges that
the Agent has no duty to supply information with respect to the Borrower or the
Loan Documents to the Assignee until the Assignee becomes a party to the Credit
Agreement.*
* May be eliminated if Assignee is a party to the Credit Agreement prior to
the Effective Date.
NAME OF ASSIGNOR NAME OF ASSIGNEE
By: By:
Title: Title:
ACKNOWLEDGED ACKNOWLEDGED AND CONSENTED TO
BY [NAME OF AGENT] BY SEITEL, INC.
By: By:
Title: Title:
[Attach photocopy of Schedule 1 to Assignment]
Page 180 of 200
<PAGE>
EXHIBIT "I"
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To: The First National Bank of Chicago, as Agent (the "Agent") under the Credit
Agreement Described Below.
Re: Credit Agreement, dated as of July 22, 1996 (as the same may be amended or
modified, the "Credit Agreement"), among Seitel, Inc. (the "Borrower"), the
Lenders named therein and the Agent. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned thereto in the
Credit Agreement.
The Agent is specifically authorized and directed to act upon the following
standing money transfer instructions with respect to the proceeds of Advances or
other extensions of credit from time to time until receipt by the Agent of a
specific written revocation of such instructions by the Borrower, provided,
however, that the Agent may otherwise transfer funds as hereafter directed in
writing by the Borrower in accordance with Section 13.1 of the Credit Agreement
or based on any telephonic notice made in accordance with Section 2.12 of the
Credit Agreement.
Facility Identification Number(s)
-----------------------------------------------
Customer/Account Name
-----------------------------------------------------------
Transfer Funds To
---------------------------------------------------------------
For Account No.
-----------------------------------------------------------------
Reference/Attention To
----------------------------------------------------------
Authorized Officer (Customer Representative) Date
------------------
- --------------------------------------------
(Please Print)
----------------------
Signature
Bank Officer Name Date
------------------
- --------------------------------------------
(Please Print)
----------------------
Signature
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
Page 181 of 200
<PAGE>
EXHIBIT "J"
FORM OF SUBSIDIARY GUARANTY
THIS SUBSIDIARY GUARANTY (this "Guaranty") is made as of the
------------
day of , 1996, by , a corporation,
----------- ------------------ -------------
, a corporation, , a
-------------- -------------- -------------- ----------------
corporation, , a corporation, , a
-------------- -------------- ---------------
corporation, a corporation, and ,
- --------------- -------------- ---------------
a corporation (collectively, the "Subsidiary Guarantors") in
--------------
favor of the Agent, for the ratable benefit of the Lenders, under the Credit
Agreement referred to below.
WITNESSETH:
WHEREAS, Seitel, Inc., a Delaware corporation (the "Principal"), THE FIRST
NATIONAL BANK OF CHICAGO, as a Lender and as Agent (the "Agent"), and certain
other Lenders from time to time party thereto have entered into a certain Credit
Agreement dated as of even date herewith (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;
WHEREAS, it is a condition precedent to the Agent and the Lenders executing
the Credit Agreement that each of the Subsidiary Guarantors execute and deliver
this Guaranty whereby each of the Subsidiary Guarantors shall guarantee the
payment when due, subject to Section 9 hereof, of all principal, interest and
other amounts that shall be at any time payable by the Principal under the
Credit Agreement, the Notes and the other Loan Documents; and
WHEREAS, 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 Guarantors, and in order to induce
the Lenders and the Agent to enter into the Credit Agreement, each of the
Subsidiary Guarantors is willing to guarantee the obligations of the Principal
under the Credit Agreement, the Notes, 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. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein.
Page 182 of 200
<PAGE>
SECTION 2. Representations and Warranties. Each of the Subsidiary
Guarantors represents and warrants (which representations and warranties shall
be deemed to have been renewed upon each Borrowing Date under the Credit
Agreement) that:
(a) such Subsidiary Guarantor (i) is a corporation or a partnership
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization; (ii) is duly qualified as a
foreign corporation or partnership and is in good standing in each
jurisdiction in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in good
standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; and (iii) has the corporate or
partnership power and authority to own or hold under lease the properties
it purports to own or hold under lease, to transact the business it
transacts and proposes to transact, to execute and deliver this Guaranty
and to perform the provisions hereof;
(b) the execution and delivery of this Guaranty and the performance by
such Subsidiary Guarantor of its obligations hereunder have been duly
authorized by all necessary corporate or partnership action and this
Guaranty constitutes a legal, valid and binding obligation of such
Subsidiary Guarantor enforceable against it in accordance with its terms,
except as such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law);
(c) the execution, delivery and performance by such Subsidiary
Guarantor of this Guaranty will not (i) contravene, result in any breach
of, or constitute a default under, or result in the creation of any Lien in
respect of any Property of the Borrower or any Restricted Subsidiary under,
any indenture, mortgage, deed of trust, loan, purchase or credit agreement,
lease, corporate charter or by-laws, partnership agreement or other
significant governing document, or any other agreement or instrument to
which the Borrower or any Restricted Subsidiary is bound or by which the
Borrower or any Restricted Subsidiary or any of their respective properties
may be bound or affected, (ii) conflict with or result in a breach of any
of the terms, conditions or provisions of any order, judgment, decree, or
ruling of any court, arbitrator or Governmental Authority applicable to the
Borrower or any Restricted Subsidiary or (iii) violate any provision of any
statute or other rule or regulation of any Governmental Authority
applicable to the Borrower or any Restricted Subsidiary;
(d) after giving effect to the transactions contemplated by the Credit
Agreement and this Guaranty and as of the date of its execution and
delivery of this Guaranty (i) the fair salable value of the assets of such
Subsidiary Guarantor, taken as a whole, exceeds its liabilities, taken as a
whole, (ii) such Subsidiary Guarantor is able to pay and discharge all of
its debts (including, without limitation, its current liabilities) as they
become due, (iii) such Subsidiary Guarantor will not be insolvent and will
not be engaged in any business or transaction for which it has unreasonably
small assets or capital and (iv) such Subsidiary Guarantor has no intent to
hinder, delay or defraud any entity to which it is, or will become,
indebted, or to incur debts that would be beyond its ability to pay as they
mature.
Page 183 of 200
<PAGE>
SECTION 3. The Guaranty. Subject to Section 9 hereof, each of the
Subsidiary Guarantors hereby unconditionally guarantees the full and punctual
payment (whether at stated maturity, upon acceleration or otherwise) of the
principal of and interest on each Note issued by the Principal pursuant to the
Credit Agreement, and the full and punctual payment of all other amounts payable
by the Principal under the Credit Agreement and the other Loan Documents
including, without limitation, the Obligations (all of the foregoing, 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, each of the Subsidiary Guarantors agrees that it shall forthwith on
demand pay the amount not so paid at the place and in the manner specified in
the Credit Agreement, any Note or the relevant Loan Document, as the case may
be.
SECTION 4. Guaranty Unconditional. Subject to Section 9 hereof, the
obligations of each of the Subsidiary Guarantors 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 obligation of the Principal under the Credit Agreement, any
Note, or any other Loan Document, by operation of law or otherwise or any
obligation of any other guarantor of any of the Obligations;
(ii) any modification or amendment of or supplement to the Credit
Agreement, any Note, 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, any Loan Document, or any obligations of any other guarantor of
any of the Obligations;
(iv) any change in the corporate or partnership existence, structure or
ownership of the Principal or any other guarantor of any of the
Obligations, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting the Principal, or any other guarantor of the
Obligations, or its assets or any resulting release or discharge of any
obligation of the Principal, or any other guarantor of any of the
Obligations;
(v) the existence of any claim, setoff or other rights which the Subsidiary
Guarantors may have at any time against the Principal, any other guarantor
of any of the Obligations, the Agent, any Lender or any other Person,
whether in connection herewith or any unrelated transactions;
Page 184 of 200
<PAGE>
(vi) any invalidity or unenforceability relating to or against the
Principal, or any other guarantor of any of the Obligations, for any reason
related to the Credit Agreement, 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 Obligations, of the principal of
or interest on any Note or any other amount payable by the Principal under
the Credit Agreement, the Notes, 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 Obligations, the Agent, any Lender or
any other Person or any other circumstance whatsoever which might, but for
the provisions of this Section, constitute a legal or equitable discharge
of any Subsidiary Guarantor's obligations hereunder.
SECTION 5. Discharge Only Upon Payment In Full: Reinstatement In Certain
Circumstances. Each of the Subsidiary Guarantor's obligations hereunder shall
remain in full force and effect until all Guaranteed Obligations shall have been
paid in full and the Commitments under the Credit Agreement shall 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 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, each of 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. Waiver of Notice. Each of the Subsidiary Guarantors 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 the Obligations, or any other Person.
SECTION 7. Subrogation. Each of the Subsidiary Guarantors 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 Obligations by any of the Subsidiary Guarantors unless and until
the Guaranteed Obligations are paid in full and any commitment to lend under the
Credit Agreement and other Loan Documents is terminated.
SECTION 8. Stay of Acceleration. If acceleration of the time for payment of
any amount payable by the Principal under the Credit Agreement, any Note or any
other Loan Document 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 or any other Loan Document shall
nonetheless be payable by each of the Subsidiary Guarantors hereunder forthwith
on demand by the Agent made at the request of the Required Lenders.
Page 185 of 200
<PAGE>
SECTION 9. Limitation on Obligations. (a) It is the intention of each of
the Subsidiary Guarantors and the Lenders that each of the Subsidiary
Guarantor's obligations hereunder shall be in, but not in excess of, as of any
date, the greater of the following (such greater amount determined hereunder
being the relevant Subsidiary Guarantor's "Maximum Liability"): (i) the
aggregate amount of all monies received by the Subsidiary Guarantor from the
Principal after the date hereof (whether by loan, capital infusion or other
means), or (ii) the maximum amount (such amount being the Subsidiary Guarantor's
"Alternative Limitation") not subject to avoidance under Title 11 of the United
States Code, as same may be amended from time to time, or any applicable state
law (collectively, the "Bankruptcy Code"). To that end, but as to the
Alternative Limitation of the Subsidiary Guarantors, only to the extent such
obligations would otherwise be subject to avoidance under the Bankruptcy Code if
the Subsidiary Guarantor is not deemed to have received valuable consideration,
fair value or reasonably equivalent value for its obligations hereunder, any
Subsidiary Guarantor's obligations hereunder shall be reduced to that amount
which, after giving effect thereto, would not render the Subsidiary Guarantor
insolvent, or leave the Subsidiary Guarantor with an unreasonably small capital
to conduct its business, or cause the Subsidiary Guarantor to have incurred
debts (or intended to have incurred debts) beyond its ability to pay such debts
as they mature, at the time such obligations are deemed to have been incurred
under the Bankruptcy Code. As used herein, the terms "insolvent" and
"unreasonably small capital" shall likewise be determined in accordance with the
Bankruptcy Code. This Section 9(a) with respect to the Alternative Limitation of
the Subsidiary Guarantor is intended solely to preserve the rights of the Agent
hereunder to the maximum extent not subject to avoidance under the Bankruptcy
Code, 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 Alternative
Limitation, except to the extent necessary so that the obligations of the
Subsidiary Guarantor hereunder shall not be rendered voidable under the
Bankruptcy Code.
(b) Each of the Subsidiary Guarantors 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
all other Subsidiary 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 any Subsidiary Guarantor's obligations hereunder
beyond its Maximum Liability.
(c) In the event any 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, each 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
Page 186 of 200
<PAGE>
Subsidiary Guarantor's Maximum Liability as of such date (without giving effect
to any right to receive, or obligation to make, any contribution hereunder) 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). Nothing in this Section 9 (c) shall affect any Subsidiary
Guarantor's several liability for the entire amount of the Guaranteed
Obligations (up to such Subsidiary Guarantor's Maximum Liability). Each of the
Subsidiary Guarantors 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 Guarantors and may be enforced by any one, or more, or all of
them in accordance with the terms hereof.
SECTION 10. 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 Section 13.1 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 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 11. 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, the
Notes, and the other Loan Documents shall be cumulative and not exclusive of any
rights or remedies provided by law.
SECTION 12. 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,
the Notes, or the other Loan Documents, the rights hereunder, to the extent
applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Guaranty shall be binding upon each of the Subsidiary
Guarantors and their respective successors and permitted assigns.
SECTION 13. Changes in Writing. Neither this Guaranty nor any provision
hereof may be changed, waived, discharged or terminated orally, but only in
Page 187 of 200
<PAGE>
writing signed by each of the Subsidiary Guarantors and the Agent with the
consent of the Required Lenders.
SECTION 14. 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 ILLINOIS. EACH OF THE SUBSIDIARY GUARANTORS HEREBY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS AND OF ANY ILLINOIS STATE COURT SITTING IN
CHICAGO, ILLINOIS AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS GUARANTY (INCLUDING, WITHOUT LIMITATION, ANY OF THE OTHER LOAN
DOCUMENTS) OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE SUBSIDIARY
GUARANTORS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH ANY OF THEM 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 GUARANTORS, 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 15. AGENT FOR SERVICE OF PROCESS. EACH SUBSIDIARY GUARANTOR HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT PROCESS SERVED EITHER PERSONALLY OR
BY REGISTERED MAIL SHALL CONSTITUTE, TO THE EXTENT PERMITTED BY LAW, ADEQUATE
SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS GUARANTY, OR ANY ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE
ANY JUDGMENT IN RESPECT OF ANY BREACH HEREUNDER, BROUGHT BY THE AGENT OR ANY
LENDER AGAINST SUCH SUBSIDIARY GUARANTOR OR ANY OF ITS PROPERTY. RECEIPT OF
PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS EVIDENCED BY A DELIVERY
RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR ANY COMMERCIAL DELIVERY
SERVICE. WITHOUT LIMITING THE FOREGOING, SUCH SUBSIDIARY GUARANTOR HEREBY
APPOINTS, IN THE CASE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN THE COURTS OR
IN THE STATE OF ILLINOIS:
CT CORPORATION SYSTEM
208 S. LASALLE STREET
CHICAGO, ILLINOIS 60604
TO RECEIVE, FOR IT AND ON ITS BEHALF, SERVICE OF PROCESS. EACH SUBSIDIARY
GUARANTOR SHALL AT ALL TIMES MAINTAIN AN AGENT FOR SERVICE OF PROCESS IN
CHICAGO, ILLINOIS AND MAY FROM TIME TO TIME APPOINT SUCCEEDING AGENTS FOR
Page 188 of 200
<PAGE>
SERVICE OF PROCESS BY NOTIFYING THE AGENT OF SUCH APPOINTMENT, WHICH AGENTS
SHALL BE ATTORNEYS, OFFICERS OR DIRECTORS OF SUCH SUBSIDIARY GUARANTOR, OR
CORPORATIONS WHICH IN THE ORDINARY COURSE OF BUSINESS ACT AS AGENTS FOR SERVICE
OF PROCESS. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OR
RIGHT OF THE AGENT OR ANY LENDER TO SERVE ANY WRIT, PROCESS OR SUMMONS IN ANY
MANNER PERMITTED BY APPLICABLE LAW.
SECTION 16. Taxes. etc. All payments required to be made by any of the
Subsidiary Guarantors 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,
provided, however, that if any of the Subsidiary Guarantors is required by law
to make such deduction or withholding, such Subsidiary Guarantor shall forthwith
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.
Page 189 of 200
<PAGE>
IN WITNESS WHEREOF, each of the Subsidiary Guarantors has caused this
Guaranty to be duly executed, under seal, by its authorized officer as of the
day and year first above written.
------------------------------
By:
-------------------------
Title:
------------------------
------------------------------
------------------------------
By:
-------------------------
Title:
------------------------
------------------------------
------------------------------
By:
-------------------------
Title:
------------------------
------------------------------
Page 190 of 200
<PAGE>
ANNEX I
[FORM OF JOINDER AGREEMENT]
JOINDER AGREEMENT
[DATE]
The First National Bank of Chicago, as agent for the Lenders party to the
Credit Agreement referred to below
Ladies and Gentlemen:
Reference is made to the Guaranty dated as of July , 1996 (as amended
----
or restated from time to time, the "Guaranty"), made by SEITEL DATA CORP., a
Delaware corporation, SEITEL GEOPHYSICAL, INC., a Delaware corporation, DDD
ENERGY, INC., a Delaware corporation, SEITEL GAS & ENERGY CORP., a Delaware
corporation, SEITEL POWER CORP., a Delaware corporation, SEITEL NATURAL GAS,
INC., a Delaware corporation, MATRIX GEOPHYSICAL, INC., a Delaware corporation,
EXSOL, INC., a Delaware corporation, DATATEL, INC., a Delaware corporation,
SEITEL OFFSHORE CORP., a Delaware corporation, POLYMER DYNAMICS, INC., a
Delaware corporation, SEITEL INTERNATIONAL, INC., a Cayman Islands corporation,
AFRICAN GEOPHYSICAL, INC., a Cayman Islands corporation, GEO-BANK, INC., a Texas
corporation and ALTERNATIVE COMMUNICATION ENTERPRISES, INC., a Texas corporation
(each a "Subsidiary Guarantor" and collectively, the "Subsidiary Guarantors"),
in favor of the Agent for the ratable benefit of the Lenders (as defined in the
Guaranty). Capitalized terms used herein and not otherwise defined have the
meanings ascribed to such terms in the Guaranty.
[NEW SUBSIDIARY GUARANTOR], a [jurisdiction of incorporation]
corporation/partnership (the "Company"), agrees with you as follows:
1. Guaranty. The Company hereby unconditionally and expressly agrees to
become a party to the Guaranty and to perform and observe each and every one of
the covenants, agreements, terms, conditions, obligations, duties and
liabilities of a Subsidiary Guarantor thereunder, and that all references to the
Subsidiary Guarantors in the Guaranty or any document, instrument or agreement
executed and delivered or furnished, or to be executed and delivered or
furnished, in connection therewith shall be deemed to be references which
include the Company, as a Subsidiary Guarantor.
Page 191 of 200
<PAGE>
2. Warranties and Representations. The Company hereby warrants and
represents that each of the warranties and representations set forth in Sections
2(a) through 2(d), inclusive, of the Guaranty, are true and correct with respect
to the Company as of the date hereof and such warranties and representations are
incorporated by reference herein in their entirety. Such representations and
warranties shall survive the execution and delivery hereof.
3. Further Assurances. The Company agrees to cooperate with the Agent and
the Lenders and execute such further instruments and documents as the Agent or
the Required Lenders shall reasonably request to effect, to the reasonable
satisfaction of the Agent and the Required Lenders, the purposes of this Joinder
Agreement.
4. Binding Effect. This Joinder Agreement shall be binding upon the Company
and shall inure to the benefit of the Agent and the Lenders and their respective
successors and assigns.
5. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial; Agent
for Service of Process. This Joinder Agreement shall be construed, interpreted
and enforced in accordance with, and governed by, the internal laws of the State
of Illinois. The provisions of Sections 14 and 15 of the Guaranty shall apply to
this Joinder Agreement as if each reference to "this Guaranty" therein was a
reference to this Joinder Agreement.
IN WITNESS WHEREOF, the Company has caused this Joinder Agreement to be
executed on its behalf by one of its duly authorized officers.
[NEW SUBSIDIARY GUARANTOR]
By:
Name:
Title:
Page 192 of 200
<PAGE>
EXHIBIT "K"
FORM OF OPINION TO ACCOMPANY
JOINDER AGREEMENT
[Date]
[To be delivered when a new Restricted Subsidiary organized under the laws of
any jurisdiction within the United States is formed or acquired by Borrower]
The First National Bank of Chicago,
individually and as Agent for Lenders
One First National Plaza
Chicago, Illinois 60670
Re: Joinder Agreement of New Restricted Subsidiary of Seitel, Inc. (the
"Borrower") Our File No. 979275/094
Ladies and Gentlemen:
Reference is hereby made to that certain Revolving Credit Agreement dated
July 22, 1996 among the Borrower, The First National Bank of Chicago,
individually and as Agent, and the Lenders named therein (the "Agreement") and
(ii) the Subsidiary Guaranty of even date therewith made by the Subsidiary
Guarantors (as defined therein) in favor of the Agent, for the benefit of the
Lenders (the "Subsidiary Guaranty"). We have acted as counsel to the Borrower
and the Subsidiary Guarantors in connection with their execution and delivery of
the Agreement and the Subsidiary Guaranty. This opinion is delivered to you in
connection with the execution and delivery to you of a Joinder Agreement
pursuant to which [new Restricted Subsidiary], a new Restricted Subsidiary of
the Borrower, has become subject to and bound by the terms of the Subsidiary
Guaranty. In acting as such counsel, we have examined:
(a) the Agreement;
(b) the Notes;
(c) the Subsidiary Guaranty; and
(d) a Joinder Agreement executed by [new Restricted Subsidiary] dated
, 199 .
--------------- ---
Page 193 of 200
<PAGE>
The documents listed in paragraphs (a) through (d) above are referred to
herein as the "Loan Documents." The capitalized terms used herein and not
defined herein have the meanings specified in the Agreement.
In addition, we have examined such public records and documents, statutes,
certificates of officers of Borrowers, and certificates of public officials,
that we deem necessary for this opinion.
We advise you that we have previously represented the Borrower and certain
Subsidiary Guarantors only with respect to specific matters referred to us.
Consequently, there are matters of a legal nature concerning the Borrower and
the Subsidiary Guarantors of which we have no knowledge.
In rendering this opinion, we have assumed the following: (i) that Agent
and Lenders are duly organized, validly existing and in good standing under all
applicable laws and have all requisite corporate power and authority to execute
and deliver the Loan Documents and perform the applicable provisions thereof;
(ii) that all the Loan Documents to which Agent or Lenders are a party have been
duly authorized, executed and delivered by Agent and Lenders; (iii) that such
instruments are legal, valid, binding and enforceable in accordance with their
terms as to Agent and Lenders; (iv) that neither Agent nor any Lender is
involved in any court or administrative proceeding relating to or otherwise
affecting this transaction or subject to any order, writ, injunction or decree
of any court or governmental agency or commission which would prohibit the
execution or delivery of such documents or the consummation of any transaction
therein contemplated; (v) that there is no requirement of consent, approval or
authorization by any person or governmental authority regarding the Loan
Documents or the transactions contemplated thereby with respect to Agent or
Lenders; (vi) that all of the material terms and conditions of the loan
contemplated by the Agreement are correctly and completely embodied in the Loan
Documents; and (vii) that Agent and Lenders will comply with all the terms and
provisions of the Loan Documents including, without limitation, the usury
savings clause contained therein. We have also assumed the genuineness of all
signatures (except for the signatures of the Borrower and the Subsidiary
Guarantors), the authenticity of all documents submitted to us as originals and
the conformity to original documents of all documents submitted to us as
certified or photostatic copies, the correctness of all statements set forth in
certificates or written documents of governmental officials and certificates or
written documents of the Borrower or the Subsidiary Guarantors or
representatives of the Borrower or the Subsidiary Guarantors as to corporate or
partnership proceedings, incumbency of officers and other factual matters (which
statements, to our knowledge, are correct), and that none of the parties upon
whom we have relied for purposes of this opinion has perpetuated a fraud upon
any of the parties to the transactions contemplated by the Agreement or any of
the attorneys representing any of such parties.
Our opinions expressed below assume the acceptance of the Loan Documents by
Agent and Lenders so that such instruments have mutuality of binding effect, and
this opinion is to be effective only upon such occurrence.
Page 194 of 200
<PAGE>
Based upon the foregoing and subject to the limitations, qualifications and
exceptions set forth below, we are of the following opinions:
1. [New Restricted Subsidiary] is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
and has all requisite corporate power and authority to own its
------------
property and carry on its business as currently conducted.
[or]
[New Restricted Subsidiary] is a limited partnership duly
organized and validly existing under the laws of the State of
-------------
and has all requisite partnership power and authority to own its property
and carry on its business as currently conducted.
2. The obligations of [new Restricted Subsidiary] under the Joinder
Agreement may be performed in a manner which is within such entity's
[corporate/partnership] power and authority.
3. The Joinder Agreement has been duly authorized by all necessary
[corporate/partnership] action on the part of [new Restricted Subsidiary],
has been executed and delivered by [a duly authorized officer of new
Restricted Subsidiary/a duly authorized officer of the general partner of
new Restricted Subsidiary], and constitutes a legal, valid and binding
obligation of [new Restricted Subsidiary], enforceable against [new
Restricted Subsidiary] in accordance with its terms.
4. The obligations of [new Restricted Subsidiary] under the Joinder
Agreement may be performed in a manner which will not conflict with,
constitute a violation of, result in a breach of any provision of,
constitute a default under, or result in the creation or imposition of any
Lien or encumbrance upon any of the property of [new Restricted Subsidiary]
pursuant to its [certificate or articles of incorporation or by-laws or
limited partnership agreement], any applicable statute, rule or regulation
to which it is subject, or any order, writ, judgment, injunction, decree,
award, agreement or instrument known to us to which it is a party or by
which its respective properties may be bound, except for (i) such
conflicts, violations, breaches, defaults or encumbrances under agreements
and instruments as may have been waived by the other party thereto, or (ii)
such conflicts, violations, breaches, defaults or encumbrances under
agreements and instruments which would not have, alone or in the aggregate,
a Material Adverse Effect.
5. To the best of our knowledge, after inquiry of the lawyers at this
firm identified in the third from last paragraph of this opinion letter,
there is no judgment, order, action, suit, proceeding, inquiry, order or
investigation, at law or in equity, before any court or Governmental
Authority, arbitration board or tribunal pending or threatened against [new
Restricted Subsidiary] which, if adversely determined, could reasonably be
expected to have a Material Adverse Effect.
Page 195 of 200
<PAGE>
6. No approval, authorization, consent, adjudication or order of any
Governmental Authority, which has not been obtained by [new Restricted
Subsidiary], is required to be obtained by [new Restricted Subsidiary] in
connection with the execution and delivery of the Joinder Agreement or the
performance of its obligations thereunder.
The foregoing opinions are subject to and are qualified in all
respects by the following:
(i) The enforceability of the Loan Documents may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium and similar
laws from time to time in effect and affecting creditors' rights or
the collection of debtors' obligations generally (including, without
limitation, laws generally defining and restricting fraudulent
conveyances), (b) principles of equity, (c) principles of public
policy and (d) requirements of commercial reasonableness and good
faith.
(ii) We express no opinion as to the availability or
enforceability of certain provisions or remedies set forth in the Loan
Documents, including but not limited to those (a) that purport to
provide access to or restrict legal or equitable remedies such as
specific performance and the appointment of a receiver, (b) that
purport to establish evidentiary standards, (c) that relate to
waivers, or to delays or omissions of enforcement of remedies or
severance, (d) that attempt to prohibit or restrict the transfer,
alienation, mortgaging, encumbering or hypothecation of any property
described in the Loan Documents, (e) that relate to subrogation rights
or the waiver thereof and (f) that attempt to establish proper venue
for the filing and maintenance of any claim, suit or action with
respect to the Loan Documents; provided, however, that such
limitations on the availability of remedies under the Loan Documents
or the legality, validity, binding effect or enforceability of the
Loan Documents will not, in our opinion, substantially interfere with
the practical realization of the benefits expressed in the Loan
Documents except for the economic consequences of any procedural delay
which may result from such laws.
(iii) We express no opinion as to the enforceability of
provisions in the Loan Documents attempting to establish choice of
laws.
(iv) We express no opinion as to the enforceability of provisions
in the Loan Documents as they relate to the rights and obligations
among the Lenders and the Agent.
(v) We express no opinion as to whether the investment in the
Notes complies with any statutory, regulatory or other loan limits
applicable to any Lender or complies with any other statutes, laws,
rules or regulations which prescribe permissible and lawful
investments for the Lenders (either as to type, amount, percentage of
total investments or otherwise).
Page 196 of 200
<PAGE>
Our "knowledge" as to any matters in connection with this opinion is
limited to the actual knowledge of the lawyers in our firm who have participated
in the negotiation and preparation of the Loan Documents and such other lawyers
in the firm who have represented the Borrower and the Subsidiary Guarantors that
the lawyer in charge of the matter reasonably believes should be consulted, and
does not include constructive or imputed knowledge.
We are admitted to the Bar in the State of Texas. This opinion is limited
to United States federal law, laws of the State of Texas, and general corporate
law of the State of Delaware, all as now in effect, and we disclaim any
responsibility to inform you of any change thereto after the date hereof. No
opinion is expressed as to any matter that may be governed by the laws of any
other jurisdiction; provided, however, to the extent that the laws of any state
other than Texas govern the Loan Documents, you may rely on our opinion to the
extent that the laws of such state or states are the same as the laws of the
State of Texas, as to which sameness we express no opinion.
This opinion may be relied upon by the Agent, the Lenders and their
participants, and their assignees and other transferees.
Very truly yours,
Page 197 of 200
<PAGE>
EXHIBIT "L"
FORM OF LENDER ASSUMPTION AGREEMENT
Dated:
------------------
Seitel, Inc.
50 Briar Hollow Lane W.
7th floor
Houston, Texas 77027
Attention: Debra D. Valice, Vice President of Finance
Chief Financial Officer, Treasurer and Secretary Treasurer
The First National Bank of Chicago, as agent
One First National Plaza
Chicago, Illinois 60670
Attention:
Ladies and Gentlemen:
Reference is made to the Revolving Credit Agreement dated as of July 22,
1996 among Seitel, Inc. (the "Borrower"), The First National Bank of Chicago,
individually and as Agent, and the Lenders named therein (the "Credit
Agreement"), terms defined therein being used herein as therein defined).
The undersigned (the "Assuming Lender") proposes to become an Assuming
Lender pursuant to Section 2.17 of the Credit Agreement and, in that connection,
hereby agrees that it shall become a Lender for purposes of the Credit Agreement
on [applicable Increase Date] and that its Commitment shall as of such date be
$ .
----------------
The undersigned (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 5.5 thereof, the most recent financial statements referred to in
Sections 6.1(a) and (b) thereof and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Lender Assumption Agreement; (ii) agrees that it will, independently
and without reliance upon the Agent 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 the Credit
Agreement; (iii) appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under the Credit Agreement as are
delegated to the Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (iv) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Lender; (v) agrees that its
payment instructions and notice instructions are as set forth in the attachment
to Schedule 1; and (vi) attaches, if it is not incorporated under the laws of
the United States of America or a state thereof, the forms prescribed by the
Internal Revenue Services of the United States required under Section 4.3 of the
Credit Agreement.
The Assuming Lender requests that the Borrower deliver to the Agent (to be
promptly delivered to the Assuming Lender) a Ratable Note and a Competitive Bid
Note payable to the order of the Assuming Lender, dated as of the [Increase
Date].
Page 198 of 200
<PAGE>
The effective date for this Lender Assumption Agreement shall be
[applicable Increase Date]. Upon delivery of this Lender Assumption Agreement to
the Company and the Agent, and satisfaction of all conditions imposed under
Section 2.17(a) as of [date specified above], the undersigned shall be a party
to the Credit Agreement and have the rights and obligations of a Lender
thereunder. As of [date specified above], the Agent shall make all payments
under the Credit Agreement in respect of the interest assumed hereby (including,
without limitation, all payments of principal, interest and commitment fees) to
the Assuming Lender.
This Lender Assumption Agreement may be executed in counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart by
telecopier shall be effective as delivery of a manually executed counterpart of
this Lender Assumption Agreement.
This Lender Assumption Agreement shall be governed by, and construed in
accordance with, the laws of the State of Illinois.
Very truly yours,
[NAME OF ASSUMING LENDER]
By:
Title:
Acknowledged and Agreed to:
SEITEL, INC.
By:
Title:
THE FIRST NATIONAL BANK OF CHICAGO, as agent
By:
Title:
Page 199 of 200
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 18,902
<SECURITIES> 0
<RECEIVABLES> 49,214
<ALLOWANCES> 800
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 99,165<F2>
<DEPRECIATION> 12,691
<TOTAL-ASSETS> 266,557
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 81,057
0
0
<COMMON> 98
<OTHER-SE> 130,766
<TOTAL-LIABILITY-AND-EQUITY> 266,557
<SALES> 47,446
<TOTAL-REVENUES> 47,446
<CGS> 7,669
<TOTAL-COSTS> 7,669
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,311
<INCOME-PRETAX> 11,460
<INCOME-TAX> 4,240
<INCOME-CONTINUING> 7,220
<DISCONTINUED> (988)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,232
<EPS-PRIMARY> 0.62
<EPS-DILUTED> 0.61
<FN>
<F1> The Company does not present a classified balance sheet; therefore, current
assets and current liabilities are not reflected in the Company's financial
statement.
<F2> PP&E does not include seismic data bank assets with a cost of $250,681,000
and related accumulated amortization of $142,823,000.
Page 200 of 200
</FN>
</TABLE>
