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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
----------------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1998 COMMISSION FILE NUMBER 1-13817
BOOTS & COOTS INTERNATIONAL
WELL CONTROL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 11-2908692
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5151 SAN FELIPE, SUITE 450
HOUSTON, TEXAS 77056
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
(713) 621-7911
(REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE:)
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
The number of shares of the Registrant's Common Stock, par value .00001 per
share, outstanding at November 11 , 1998, was 32,933,000.
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BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
PART I. Item 1. Financial Statements.................................... 3
Condensed Consolidated Balance Sheets as of September 30, 1998
and December 31, 1997.......................................... 3
Condensed Consolidated Statements of Operations for the Three
Months and Nine Months Ended September 30, 1998 and 1997....... 4
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1998 and 1997....................... 5
Notes to Condensed Consolidated Financial Statements............ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 10
PART II. Item 2. Change in Securities and Use of Proceeds................ 12
Item 5. Other Information....................................... 12
Item 6. Exhibits and Reports on Form 8-K........................ 13
</TABLE>
2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER
DECEMBER 31, 30,
ASSETS 1997 1998
------ ------------ -----------
(UNAUDITED)
<S> <C> <C>
CURRENTS ASSETS:
Cash............................................... $ 1,718,000 $ 2,958,000
Receivables--net................................... 2,766,000 29,133,000
Inventories--net................................... 1,131,000 15,220,000
Prepaid expenses and other current assets.......... 427,000 1,177,000
----------- -----------
Total current assets............................. 6,042,000 48,488,000
PROPERTY, PLANT AND EQUIPMENT, net................... 6,948,000 33,747,000
OTHER ASSETS:
Deferred financing costs and other assets--net..... 87,000 4,316,000
Goodwill--net...................................... 984,000 8,892,000
----------- -----------
Total assets................................... $14,061,000 $95,443,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable................................... $ 1,679,000 $17,100,000
Accrued liabilities and customer advances.......... 486,000 8,249,000
Notes payable--current portion..................... 1,565,000 1,273,000
----------- -----------
Total current liabilities........................ 3,730,000 26,622,000
----------- -----------
NOTES PAYABLE--net of current portion................ 99,000 16,591,000
SENIOR SUBORDINATED NOTE ($30,000,000 face).......... -- 27,618,000
COMMITMENTS AND CONTINGENCIES........................ -- --
SHAREHOLDERS' EQUITY:
Preferred stock ($.00001 par, 5,000,000 shares
authorized, 0 and 196,000 shares issued and
outstanding at December 31, 1997 and September 30,
1998, respectively)............................... -- --
Common stock ($.00001 par, 50,000,000 shares
authorized, 29,998,662 and 32,658,082 shares
issued and outstanding at December 31, 1997 and
September 30, 1998, respectively)................. -- --
Additional paid-in capital......................... 11,213,000 25,673,000
Accumulated deficit................................ (981,000) (1,061,000)
----------- -----------
Total shareholders' equity....................... 10,232,000 24,612,000
----------- -----------
Total liabilities and shareholders' equity....... $14,061,000 $95,443,000
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1997 1998 1997 1998
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues..................... $2,095,000 $24,451,000 $3,920,000 $54,975,000
Costs and Expenses:
Operating expenses......... 1,191,000 16,879,000 2,053,000 38,462,000
Selling, general and
administrative............ 700,000 4,933,000 1,391,000 11,169,000
Depreciation and
amortization.............. 196,000 917,000 307,000 1,676,000
---------- ----------- ---------- -----------
2,087,000 22,729,000 3,751,000 51,307,000
---------- ----------- ---------- -----------
Operating Income............. 8,000 1,722,000 169,000 3,668,000
Other Expenses (Income):
Interest Expense........... 90,000 1,449,000 152,000 2,516,000
Other Expenses (Income)
Net....................... -- (51,000) -- 99,000
---------- ----------- ---------- -----------
Income (Loss) Before Income
Taxes....................... (82,000) 324,000 17,000 1,053,000
Income Tax Expense........... 6,000 219,000 18,000 494,000
---------- ----------- ---------- -----------
Net Income (Loss)............ (88,000) 105,000 (1,000) 559,000
Required Preferred Dividends. -- 391,000 -- 639,000
---------- ----------- ---------- -----------
Net Loss to Common
Shareholders................ $ (88,000) $ (286,000) $ (1,000) $ (80,000)
========== =========== ========== ===========
Basic Earnings (Loss) Per
Common Share................ $ 0.00 $ (0.01) $ 0.00 $ 0.00
========== =========== ========== ===========
Diluted Earnings (Loss) Per
Common Share................ $ 0.00 $ (0.01) $ 0.00 $ 0.00
========== =========== ========== ===========
Weighted Average Number of
Common Shares Outstanding... 18,423,000 32,453,000 14,164,000 31,181,000
========== =========== ========== ===========
Diluted Weighted Average
Number of Common Shares
Outstanding................. 19,129,000 33,603,000 14,680,000 32,331,000
========== =========== ========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1997 1998
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss to common shareholders...................... $ (1,000) $ (80,000)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization...................... 307,000 1,676,000
Warrants issued with financing..................... -- 516,000
Allowance for doubtful accounts.................... -- 221,000
Preferred stock dividends and related offering
costs............................................. -- 639,000
Changes in operating assets and liabilities, net of
assets acquired:
Receivables...................................... (2,786,000) (14,684,000)
Inventories...................................... -- (5,245,000)
Prepaid expenses and other current assets........ (132,000) (353,000)
Deferred costs and other assets (not current).... (166,000) (3,619,000)
Accounts payable................................. 979,000 8,624,000
Accrued liabilities and customer advances........ (393,000) 3,128,000
---------- -----------
Net cash used in operating activities............ (2,192,000) (9,177,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Boots & Coots, operating assets..... (1,051,000) --
Acquisition of ABASCO, Inc......................... (1,590,000) --
Acquisition of ITS Supply Corporation (net of
acquired cash).................................... -- (5,932,000)
Acquisition of Code 3, Inc. (net of acquired cash). -- (1,778,000)
Acquisition of Baylor Company (net of acquired
cash)............................................. -- (31,214,000)
Property and equipment additions................... (320,000) (1,738,000)
---------- -----------
Net cash used in investing activities............ (2,961,000) (40,662,000)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock options exercised..................... 247,000 442,000
Deferred financing cost............................ (155,000) (51,000)
Proceeds from issuance of debt..................... 1,555,000 55,632,000
Proceeds from issuance of common stock............. 6,323,000 --
Proceeds from issuance of preferred stock.......... -- 4,600,000
Debt repayments.................................... (62,000) (9,544,000)
---------- -----------
Net cash provided by financing activities........ 7,908,000 51,079,000
---------- -----------
NET INCREASE IN CASH................................. 2,755,000 1,240,000
CASH, beginning of period............................ -- 1,718,000
---------- -----------
CASH, end of period.................................. $2,755,000 $ 2,958,000
========== ===========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for acquisitions............... $1,240,000 $ 5,282,000
========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1998
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Generally Accepted Accounting Principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. They do not include all information and notes
required by Generally Accepted Accounting Principles for complete financial
statements. The accompanying condensed financial statements include all
adjustments, including normal recurring accruals, which in the opinion of
management are necessary in order to make the financial statements not be
misleading.
The accompanying consolidated financial statements should be read in
conjunction with the Audited Financial Statements for the Six Months Ended
December 31, 1997 and the notes thereto contained in the Company's Annual
Report on Form 10-KSB for the transition period from July 1, 1997 to December
31, 1997.
The results of operations for the three and nine months ended September 30,
1997 and the three and nine months ended September 30, 1998 are not
necessarily indicative of the results to be expected for the full year.
NOTE B--BUSINESS ACQUISITIONS AND RELATED FINANCING TRANSACTIONS
On July 31, 1997, Boots & Coots International Well Control, Inc. (the
"Company") acquired all of the operating assets, including stock of the
foreign subsidiaries, of Boots & Coots, L.P. ("Boots & Coots"), an oil and gas
well control firefighting, snubbing and industrial and marine firefighting
company. The consideration paid consisted of (i) $370,000 cash payable to
Boots & Coots, (ii) $681,000 placed in escrow to pay certain debts of Boots &
Coots, (iii) the issuance of secured promissory notes of the Company in the
aggregate principal amount of $4,761,000 and (iv) 260,000 shares of Common
Stock of the Company. The promissory notes were secured by the acquired assets
of Boots & Coots, and were paid in full on July 6, 1998. This transaction was
accounted for as a purchase and the acquired assets of Boots & Coots were
revalued at fair market value as of July 31, 1997 resulting in goodwill of
$50,000 which will be amortized over 15 years.
On September 25, 1997, the Company formed a wholly-owned subsidiary company,
ABASCO, Inc. ("ABASCO") to purchase the assets of ITS Environmental, a
manufacturer and distributor since 1975 of rapid response oil and chemical
spill containment and reclamation equipment and products. The Company paid
$1,590,000 cash and issued 300,000 shares of common stock to acquire the
manufacturing equipment, inventory and customer lists. This transaction was
accounted for as a purchase and the acquired assets of ABASCO were revalued at
fair market value effective as of September 12, 1997 resulting in goodwill of
approximately $749,000 which will be amortized over 25 years.
On January 2, 1998, the Company completed the funding of the acquisition,
effective as of December 31, 1997, of all of the capital stock of ITS Supply
Corporation ("ITS") for aggregate consideration of $6,000,000. Financing for
the acquisition of ITS was provided from working capital ($500,000); proceeds
from the issuance of 10% Senior Secured Notes due May 2, 1998 ($4,500,000);
and short-term bridge financing from the seller ($1,000,000). In connection
with the sale through private placement of the 10% Senior Secured Notes on
January 2, 1998, the Company entered into a financial advisory arrangement
pursuant to which the note holders are to provide a certain level of
financial, merger and acquisition advisory services over a three-year period
in consideration of an advance cash consulting fee of $500,000, all of which
was added to the principal balance of the Senior Secured Notes. The commitment
for the Senior Secured Notes by the note holders also required the
6
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BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
payment by the Company of a $50,000 commitment fee. The holders of the 10%
Senior Secured Notes were also issued warrants exercisable over a six year
term to purchase an aggregate of 2,000,000 shares of the Company's Common
Stock at a price of $2.62 per share. The ITS seller obligation of $1,000,000,
which bears interest at the rate of 10% per annum, was payable on March 31,
1998. This note was extended on a month to month basis. On June 8, 1998,
$700,000 of the seller's obligation was paid. On July 22, 1998 the remaining
$300,000 was paid. This transaction was accounted for as a purchase and the
acquired net assets of ITS have been revalued on a preliminary basis resulting
in goodwill of $4,440,000 which will be amortized over 25 years.
On February 20, 1998, the Company completed the acquisition of all of the
stock of Code 3, Inc. ("Code 3"). Consideration for the acquisition of Code 3,
with an effective date for audited purchase price adjustments as of December
31, 1997, was $570,568 cash; the repayment of Code 3 corporate secured debt
and interest thereon of approximately $1,250,000; the allotment of $550,000 of
Code 3 accounts receivable to the former shareholders; and the issuance of
488,136 shares of the Company's Common Stock, of which 158,646 shares were
delivered into escrow to secure the indemnification obligations of the
stockholders of Code 3. On March 5, 1998, the Company sold through private
placement to the note holders providing financing for the ITS acquisition an
additional $2,250,000 of 10% Senior Secured Notes due June 15, 1998. In
addition, these note holders were issued warrants, exercisable over a six year
term, to purchase an additional 500,000 shares of the Company's common stock
at a price of $4.50 per share. This transaction was accounted for as a
purchase and the acquired underlying net assets of Code 3 have been revalued
on a preliminary basis resulting in goodwill of $3,876,000 which will be
amortized over 25 years.
An estimated fair value of $516,000 has been attributed to the warrants
issued in connection with the 10% Senior Secured Notes. Of this amount
$332,000 was charged to operations as interest expense for the three months
ended March 31, 1998, and $184,000 was charged to operations for the three
months as interest expense for the three months ended June 30, 1998.
The Company's Chairman and Chief Executive Officer, Larry H. Ramming, was
granted a waiver of the lock-up restrictions on his shares of Common Stock
with respect to a pledge of such shares to secure a loan, the proceeds of
which were used by Mr. Ramming on April 30, 1998 to purchase the 10% Senior
Secured Notes issued by the Company, in the aggregate principal amount of
$7,250,000, of which $5,000,000 was due May 2, 1998 and $2,250,000 was due
June 15, 1998. Mr. Ramming agreed to extend the maturity dates of such notes
to October 1, 1998 and thereafter on a month-to-month basis, in exchange for a
fee of 1% of the principal balances of such notes. As of September 30, 1998,
the Company paid Mr. Ramming $3,803,000 to be applied toward repayment of the
10% Senior Secured Notes held by Mr. Ramming. Subsequent to September 30,
1998, an additional $1,420,000 was paid to Mr. Ramming toward this obligation.
On July 23, 1998, the Company completed the acquisition of 100% of the
outstanding shares of common stock of Elmagco, Inc., a Delaware Corporation
("Elmagco") from Begemann, Inc., a Delaware Corporation ("Begemann"). Elmagco
and its subsidiaries conduct business using the tradename Baylor Company
("Baylor"). Baylor is engaged in the design and manufacture of electrical
braking and control equipment predominantly used in the drilling and marine
markets, highly engineered specialty products such as SCR systems and custom
pedestal leg locking systems for the offshore market. Additionally, Baylor
designs and manufactures a broad line of custom AC generators, which are used
in a variety of industrial, commercial and governmental applications. Baylor
reported audited revenues of $31 million and net income of $3.5 million for
its most recent fiscal year ended December 31, 1997.
Consideration for the acquisition of Baylor, with a June 30, 1998 effective
date, was $25,000,000 in cash, retirement of $7,654,000 in secured
indebtedness of Baylor and the issuance at closing of 540,443 shares of the
Company's common stock. Concurrent with the acquisition, and to provide the
Company with cash to fund the acquisition and for other corporate purposes,
the Company completed the sale of $15,000,000 of Senior Secured Notes due
January 23, 1999 (the "Senior Notes") and $30,000,000 of 11.28% Senior
Subordinated Notes due
7
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
July 23, 2006 (the "Subordinated Notes") to The Prudential Insurance Company
of America ("Prudential"). Proceeds from these financing transactions were
used to fund the Baylor acquisition, repay $5,000,000 in bridge financing
provided through Prudential Securities Credit Corporation on July 6, 1998 and
provide working capital.
The Subordinated Note and Warrant Purchase Agreement relating to the
Subordinated Notes imposes restrictions on the Company's activities including,
without limitation, with respect to the payment of dividends or other
distributions on its capital stock; incurring additional indebtedness;
granting liens to secure any other indebtedness; making loans or advances to,
or investments in, other persons or entities; liquidating, dissolving or
merging with another company; dispositions of assets; transactions with
affiliates; changing the nature of its business; and the issuance of
additional shares of preferred stock. Further, the Company is required to meet
certain minimum financial tests so long as the Subordinated Notes are
outstanding. The Subordinated Note and Warrant Purchase Agreement also provide
for customary affirmative and negative covenants.
In conjunction with the sale of the Notes, the Company issued to Prudential
a warrant to purchase 3,165,396 shares of common stock (the "Warrant") of the
Company at an initial exercise price of $6.70 per share. The Warrant contains
anti-dilution and repricing provisions that may result in downward adjustments
to the exercise price upon the occurrence of certain events and a provision
for the "cashless" exercise of the Warrant. The Company granted Prudential a
one-time demand registration right and unlimited "piggyback" registration
rights for the shares of common stock issuable upon the exercise of the
Warrant. The Company and certain stockholders of the Company also agreed with
Prudential that in the event of significant sales of securities of the Company
by the Company or such stockholders, Prudential would be entitled to
participate in such sale.
On October 28, 1998, the Company entered into a Loan Agreement with Comerica
Bank Texas ("Comerica"), as agent and lender, providing for a $25,000,000
revolving loan facility (the "Loan Agreement"). The Company, subject to a
borrowing base formula, has drawn $20,000,000 under the Comerica Loan
Agreement to repay all of the interim $15,000,000 Prudential Senior Notes.
Advances under the Loan Agreement bear interest at the greater of Comerica's
daily prime rate or the federal funds rate plus .5%. Subject to certain
limitations, the Company has the option under the Loan Agreement to convert to
a LIBOR based interest rate calculation. The Company also pays a commitment
fee equal to .25% per annum on the unused portion of the commitment under the
Loan Agreement.
Advances under the Loan Agreement are secured by substantially all of the
assets of the Company and its subsidiaries. The Loan Agreement imposes certain
restrictions on the Company's activities, including, without limitation, a
prohibition on the payment of cash dividends on the Company's equity
securities; limitations on incurring additional borrowed money indebtedness;
limitations on incurring or permitting liens upon the assets of Company and
its subsidiaries; limitations on making loans or advances to, or investments
in, other persons or entities; limitations the Company or its subsidiaries
liquidating, dissolving or merging with another company; limitations on the
disposition of assets by the Company and its subsidiaries; a prohibition on
the Company changing the nature of its business; and a prohibition of the
Company repurchasing its equity securities.
The operations of the five acquired businesses (Boots & Coots, ABASCO, ITS,
Code 3 and Baylor Company) are included in the Company's consolidated
operations from the respective acquisition dates. The Company's revenues, net
income applicable to common shareholders, and net income per share on an
unaudited pro forma basis, assuming that the Boots & Coots, ABASCO, ITS
Supply, Code 3 and Baylor acquisitions occurred on January 1, 1997, would be
as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1997 1998
------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues................ $28,173,000 $25,978,000 $75,717,000 $81,594,000
Net Income.............. $ 176,000 $ 23,000 $ 166,000 $ 699,000
Net Earnings per common
share.................. $ 0.01 $ 0.00 $ 0.01 $ 0.02
</TABLE>
8
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BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE C--SUBSEQUENT EVENTS
On November 5, 1998 the Company announced it had reached an agreement to
acquire the Alert Disaster Control Group of Companies. ALERT, a privately held
company based in Singapore, provides emergency response and preventative
safety services to the aviation, construction, marine, military, petroleum and
petrochemical industries throughout the world, with particular focus on those
companies operating within the regions of Africa, the Middle East and
Asia/Pacific. The transaction is expected to close in December pending the
completion of certain definitive agreements and other requisite approvals.
On November 10, 1998 the Company announced that Boots & Coots Special
Services, Inc., its environmental clean up subsidiary formerly known as Code
3, Inc., had acquired HAZ-TECH Environmental Services, Inc., an emergency
prevention and response services company. Consideration for the HAZ-TECH
acquisition was $2.2 million, of which 81% was in the form of the Company's
common stock at a price of $5 per share with the balance represented by cash
and assumed liabilities.
9
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion is intended to assist in an understanding of the
unaudited consolidated financial position and results of operations of Boots &
Coots International Well Control, Inc. (the "Company") for the nine months
ended September 30, 1997 and 1998 and the three months ended September 30,
1997 and 1998. The following discussion should be read in conjunction with the
unaudited Consolidated Financial Statements and the notes thereto included
elsewhere herein. Certain forward-looking statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Investors are cautioned that all forward-looking statements involve
risks and uncertainties which may cause actual results to differ from
anticipated results, including risks associated with the timing and
development of, and market acceptance of, the Company's services and products
as well as risks of downturns in economic conditions generally, risks
associated with competition and competitive pricing pressures, and other risks
detailed from time to time in the Company's filings with the Securities and
Exchange Commission, including its latest Form 10-KSB for the six months ended
December 31, 1997.
As discussed in Note B, the Company completed the acquisitions of Boots and
Coots L.P. as of July 31, 1997; ABASCO, Inc. as of September 25, 1997; ITS
Supply Corporation as of January 1, 1998; Code 3, Inc. as of February 20, 1998
and Baylor Company as of July 28, 1998. The results of operation for such
acquisitions are included in the accompanying Statements of Operations from
the respective dates of acquisition through the reporting quarter ends.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND
SEPTEMBER 30, 1998
Revenues were $2,095,000 for the three months ended September 30, 1997
compared to $24,451,000 for the three months ended September 30, 1998. This
increase is attributed to increased market share of IWC Services' well control
and fire fighting client-base ($1,155,000) and business acquisitions
($21,201,000).
Operating expenses were $1,191,000 for the three months ended September 30,
1997 compared to $16,879,000 for the three months ended September 30, 1998.
This increase is attributable to projects resulting from increased market
share of IWC Services' well control and fire fighting client-base ($702,000)
and business acquisitions ($14,986,000).
Selling, general and administrative expenses were $700,000 for the three
months ended September 30, 1997 compared to $4,933,000 for the three months
ended September 30, 1998. This increase resulted from additional investments
in personnel, systems and infrastructure necessary to support the Company's
expanded scope of operations; new marketing and advertising programs to
increase market share and diversify the Company's well control customer base;
($499,000) and business acquisitions ($3,734,000).
Depreciation and amortization expense increased from $196,000 for the three
months ended September 30, 1997 to $917,000 for the three months ended
September 30, 1998 primarily due to the effect of business acquisitions
completed subsequent to June 30, 1997.
The increase in interest expense from $90,000 for the three months ended
September 30, 1997 to $1,449,000 for the three months ended September 30, 1998
is principally due to interest expense on increased debt incurred for business
acquisitions.
Other income of $51,000 for the three months ended September 30, 1998
consists primarily of foreign exchange adjustments.
Income taxes for both the three months ended September 30, 1997 and 1998
represents foreign taxes on international operations.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
Revenues were $3,920,000 for the nine months ended September 30, 1997
compared to $54,975,000 for the nine months ended September 30, 1998. This
increase was the result of increased market share from diversification of IWC
Services' well control and fire fighting client-base ($5,643,000) and business
acquisitions ($45,412,000).
Operating expenses were $2,053,000 for the nine months ended September 30,
1997 compared to $38,462,000 for the nine months ended September 30, 1998. The
increase was the result of expanded well control operations beginning in the
fourth quarter of fiscal 1997 ($3,273,000) and business acquisitions
($33,136,000).
10
<PAGE>
Selling, general and administrative expenses were $1,391,000 for the nine
months ended September 30, 1997 compared to $11,169,000 for the nine months
ended September 30, 1998. The increase resulted from additional investments in
personnel, systems and infrastructure necessary to support the Company's
expanded scope of operations; new marketing and advertising programs to
increase market share and diversify the Company's well control client base
($1,979,000); and business acquisitions ($7,799,000).
Depreciation and amortization expense increased from $307,000 for the nine
months ended September 30, 1997 to $1,676,000 for the nine months ended
September 30, 1998, primarily as the result of depreciation and amortization
relating to business acquisitions.
Interest expense was $152,000 for the nine months ended September 30, 1997
compared to $2,516,000 for the nine months ended September 30, 1998. The
increase is primarily from interest expense on increased debt incurred for
business acquisitions.
Other expenses of $99,000 for the nine months ended September 30, 1998
consist primarily of foreign exchange adjustments.
Income taxes for the nine months ended September 30, 1997, includes a credit
for the reversal of a deferred federal income tax provision of $66,000.
Substantially all of the balance of income taxes for both the nine months
ended September 30, 1997 and 1998 represents foreign taxes on international
operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash expenditures in connection with the acquisitions of Boots
& Coots L.P., Abasco, ITS and Code 3 required a substantial portion of the
Company's then existing cash reserves. Further, the terms upon which Abasco,
ITS and Code 3 were acquired allowed the sellers to retain most or all of the
working capital of such companies. To date, the Company has funded its
operations and acquisitions from: equity capital contributed by its officers,
directors and principal stockholders; proceeds from the sale in July 1997 of
$3,000,000 of the Company's 12% Senior Subordinated Notes due December 31,
2000 (the "Subordinated Notes") of which $2,900,000 has been converted into
3,867,000 shares of Common Stock; $6,481,000 in net proceeds from the private
placement, in September 1997, of 7,475,000 shares of Common Stock (the
"September Private Placement"); $4,500,000 in net proceeds from the private
placement, in January 1998, of the Company's 10% Senior Secured Notes due May
2, 1998 (the "Senior Notes"); $2,250,000 in net proceeds from the private
placement, in March 1998, of additional Senior Notes due June 15, 1998
("Additional Senior Notes"); seller financing on the acquired businesses in
the aggregate principal amount of $5,761,000 of which all has been retired as
of the date hereof; and approximately $4,678,000 in net proceeds from the
private placement of 196,000 Units of the Company's 10% Junior Redeemable
Convertible Preferred Stock, each Unit consisting of one share of the
Preferred Stock and one Unit Warrant representing the right to purchase five
shares of Common Stock of the Company at a price of $5.00 per share.
On July 23, 1998, the Company completed a $45 million private placement to
The Prudential Insurance Company of America ("Prudential") consisting of
$15,000,000 of Senior Secured Notes due January 23, 1999 (the "Prudential
Senior Notes") and $30,000,000 of 11.28% Senior Subordinated Notes due July
23, 2006 (the "Prudential Subordinated Notes"), the proceeds of which were
used to fund the acquisition of Baylor, repay $5,000,000 in bridge financing
provided through Prudential Securities Credit Corporation on July 6, 1998 and
to provide working capital.
On October 28, 1998, the Company entered into a Loan Agreement with Comerica
Bank Texas ("Comerica"), as agent and lender, providing for a $25,000,000
revolving loan facility (the "Loan Agreement"), subject to a borrowing base
determination. The Company used $15,457,995 of the initial draw of $20,000,000
from the Comerica loan facility to repay the Prudential Senior Notes which had
provided interim working capital. The balance of funds from the initial
Comerica loan draw was added to working capital.
The Company is exploring financing alternatives including a private
placement of preferred stock to serve as a lower coupon cost replacement for
the Company's 10% Junior Redeemable Convertible Preferred Stock; and, an
acquisition credit facility to provide interim financing for future
acquisitions. Although these financing initiatives are in process and not yet
completed, Management believes these actions, together with cash flows from
operations, will provide adequate funding for the Company business plan.
11
<PAGE>
PART II--OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds.
Senior Secured Notes and Subordinated Secured Notes
On July 23, 1998, the Company completed the sale of $15,000,000 of Senior
Secured Notes due January 23, 1999 (the "Senior Notes") to The Prudential
Insurance Company of America ("Prudential") and $30,000,000 of 11.28% Senior
Subordinated Notes due July 23, 2006 (the "Subordinated Notes") to The
Prudential Insurance Company of America.
The loan agreement relating to the Senior Notes and the purchase agreement
relating to the Subordinated Notes impose restrictions on the Company's
ability to pay dividends or other distributions on its capital stock.
ITEM 5. Other Information.
On October 28, 1998, the Company entered into a Loan Agreement with Comerica
Bank Texas ("Comerica"), as agent and lender, providing for a $25,000,000
revolving loan facility (the "Loan Agreement"). The Company used a portion of
the proceeds from the Comerica loan to repay all of the Prudential Senior
Notes. Contemporaneously with the closing of the Loan Agreement, Prudential
assigned to Comerica all security interests securing the Prudential Senior
Notes and the Prudential Subordinated Notes.
Advances under the Loan Agreement bear interest at the greater of Comerica's
daily prime rate or the federal funds rate plus .5%. Subject to certain
limitations, the Company has the option under the Loan Agreement to convert to
a LIBOR based interest rate calculation. The Company also pays a commitment
fee equal to .25% per annum on the unused portion of the commitment under the
Loan Agreement.
Advances under the Loan Agreement are secured by substantially all of the
assets of the Company and its subsidiaries. The Loan Agreement imposes certain
restrictions on the Company's activities, including, without limitation, a
prohibition on the payment of cash dividends on the Company's equity
securities; limitations on incurring additional borrowed money indebtedness;
limitations on incurring or permitting liens upon the assets of Company and
its subsidiaries; limitations on making loans or advances to, or investments
in, other persons or entities; limitations the Company or its subsidiaries
liquidating, dissolving or merging with another company; limitations on the
disposition of assets by the Company and its subsidiaries; a prohibition on
the Company changing the nature of its business; and a prohibition of the
Company repurchasing its equity securities.
The Loan Agreement also requires the Company to meet certain minimum
financial tests as follows: (i) tangible net worth plus subordinated
indebtedness of not less than (1) $33,535,000 and (2) as of the end of each
calendar quarter hereafter, the minimum tangible net worth plus subordinated
indebtedness required as of the end of the immediately preceding calendar
quarter plus 80% of the consolidated net income for the immediately preceding
calendar quarter plus 75% of the net proceeds realized from the issuance of
any equity securities during the immediately preceding calendar quarter; (ii)
a ratio of interest expense for the twelve preceding months plus consolidated
net income to interest expense for such twelve month period plus dividends of
not less than 1.10 to 1.00; (iii) a ratio of consolidated current assets plus
unused loan commitments to consolidated current liabilities of not less than
1.00 to 1.00; (iv) a ratio of total liabilities to tangible net worth and
subordinated indebtedness of not greater than 1.50 to 1.00; and (v)
consolidated net earnings (excluding any extraordinary gains) for each fiscal
quarter of not less than $0.
12
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
----------- --------
<C> <S>
2.1 --Stock Purchase Agreement dated June 22, 1998 by and among
Elegiac, Inc., Begemann, Inc. and Boots & Coots
International Well Control, Inc. (4)
2.2 --First Amendment to Stock Purchase Agreement dated June 22,
1998 by and among Elmagco, Inc., Begemann, Inc. and Boots &
Coots International Well Control,
Inc. (4)
2.3 --Second Amendment to Stock Purchase Agreement dated June 22,
1998 by and among Elmagco, Inc., Begemann, Inc. and Boots &
Coots International Well Control,
Inc. (4)
3.01 --Amended and Restated Certificate of Incorporation (1)
3.02 --Amendment to Certificate of Incorporation (1)
3.03 --Amended Bylaws (1)
4.01 --Specimen Certificate for the Registrant's Common Stock (1)
4.02 --Form of 12% Senior Subordinated Notes due December 31, 2000
(1)
4.03 --Form of Noteholders' Warrants to Purchase $3,000,000 of
Common Stock (1)
4.04 --Form of Employees Option to Purchase 690,000 Shares of
Common Stock (1)
4.05 --Form of Contractual Options to Purchase 1,265,000 Shares of
Common Stock (1)
4.06 --Note Purchase Agreement with Main Street/Geneva (2)
4.07 --First Amendment to Note Purchase Agreement with Main
Street/Geneva (2)
4.08 --Certificate of Designation of 10% Junior Redeemable
Convertible Preferred Stock (4)
9.01 --Voting Trust Agreement between Larry H. Ramming, Raymond
Henry, Richard Hatteberg, Danny Clayton and Brian Krause (as
amended) (2)
10.01 --Alliance Agreement between IWC Services, Inc. and
Halliburton Energy Services, a division of Halliburton
Company (1)
10.02 --Executive Employment Agreement of Larry H. Ramming (1)
10.03 --Executive Employment Agreement of Raymond Henry (1)
10.04 --Executive Employment Agreement of Brian Krause (1)
10.05 --Executive Employment Agreement of Richard Hatteberg (1)
10.06 --Executive Employment Agreement of Danny Clayton (1)
10.07 --Security Agreement and Financing Statement with Main
Street/Geneva (2)
10.08 --First Amendment to Security Agreement (2)
10.09 --Stock Pledge Agreement with Main Street/Geneva (2)
10.10 --First Amendment to Stock Pledge Agreement (2)
10.11 --Form of Warrant issued to Main Street/Geneva (2)
10.12 --Form of Registration Rights Agreement with Main
Street/Geneva (2)
10.13 --Form of First Amendment to Registration Rights Agreement (2)
10.14 --1997 Incentive Stock Plan (2)
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
----------- --------
<C> <S>
10.15 --Outside Directors' Option Plan (2)
10.16 --Executive Compensation Plan (2)
10.17 --Halliburton Center Sublease (2)
10.18 --Camac Plaza Sublease (2)
10.21 --Subordinated Note and Warrant Purchase Agreement dated July
23, 1998, between Boots & Coots International Well Control,
Inc., and The Prudential Insurance Company of America. (5)
10.22 --Registration Rights Agreement dated July 23, 1998, between
Boots & Coots International Well Control, Inc., and The
Prudential Insurance Company of
America. (5)
10.23 --Participation Rights Agreement dated July 23, 1998, by and
among Boots & Coots International Well Control, Inc., The
Prudential Insurance Company of America and certain
stockholders of Boots & Coots International Well Control,
Inc. (5)
10.24 --Common Stock Purchase Warrant dated July 23, 1998. (5)
*10.25 --Loan Agreement dated October 28, 1998, between Boots & Coots
International Well Control, Inc. and Comerica Bank-Texas.
*10.26 --Security Agreement dated October 28, 1998, between Boots &
Coots International Well Control, Inc. and Comerica Bank-
Texas.
*10.27 --Amendment No. 1 to Subordinated Note and Warrant Purchase
Agreement, between Boots & Coots International Well Control,
Inc., and the Prudential Insurance Company of America.
11.01 --Computation of Per Share Earnings (2)
21.01 --List of subsidiaries (3)
*27.01 --Financial Data Schedule
</TABLE>
- - --------
* Filed herewith.
(1) Incorporated herein by reference to the corresponding exhibit in the
Registrant's Form 8-K filed with the Commission on August 13, 1997.
(2) Incorporated herein by reference to the corresponding exhibit in the
Registrant's Report on Form 10-KSB filed with the Commission on March 31,
1998.
(3) Incorporated herein by reference to the corresponding exhibit in the
Registrant's Report on Form 10-KSB/A filed with the Commission on December
5, 1997.
(4) Incorporated herein by reference to the corresponding exhibit in the
Registrant's Report on Form 10-QSB filed with the Commission on May 19,
1998.
(5) Incorporated herein by reference to the corresponding exhibit in the
Registrant's Form 8-K filed with the Commission on August 7, 1998.
(b) Reports on Form 8-K.
On August 7, 1998, the Company filed Form 8-K, in which the Company reported
the acquisition of Baylor Company. The Form 8-K contained the financial
statements required in connection with such acquisition, including the
unaudited pro forma consolidated statements of operations of the Company for
the three months ended March 31, 1998, the six months ended December 31, 1997,
and the twelve months ended June 30, 1997; the unaudited pro forma
consolidated balance sheet of the Company as of March 31, 1998; and the
audited financial statements of Baylor Company, for the years ended December
31, 1996 and December 31, 1997, together with the auditor's report thereon.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Boots & Coots International Well
Control, Inc.
Date: November 13, 1998 By: /s/ Thomas L. Easley
----------------------------------
THOMAS L. EASLEY
VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER (PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
15
<PAGE>
LOAN AGREEMENT
($25,000,000.00 REVOLVING LOAN FACILITY)
DATED AS OF OCTOBER 28, 1998
AMONG
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.,
AS BORROWER,
COMERICA BANK-TEXAS,
AS AGENT AND AS A LENDER,
AND
THE OTHER LENDERS NOW OR HEREAFTER
PARTIES HERETO
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS............................................... 1
1.1 CERTAIN DEFINED TERMS............................... 1
1.2 MISCELLANEOUS....................................... 20
2. COMMITMENTS AND LOANS..................................... 21
2.1 LOANS............................................... 21
2.2 LETTERS OF CREDIT................................... 21
2.3 TERMINATIONS OR REDUCTIONS OF COMMITMENTS.......... 24
2.4 COMMITMENT FEES..................................... 25
2.5 SEVERAL OBLIGATIONS................................. 25
2.6 NOTES............................................... 25
2.7 USE OF PROCEEDS..................................... 26
3. BORROWINGS, PAYMENTS, PREPAYMENTS AND INTEREST OPTIONS.... 26
3.1 BORROWINGS.......................................... 26
3.2 PAYMENTS AND PREPAYMENTS............................ 26
3.3 INTEREST OPTIONS.................................... 27
4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS, ETC........... 31
4.1 PAYMENTS............................................ 31
4.2 PRO RATA TREATMENT.................................. 33
4.3 CERTAIN ACTIONS, NOTICES, ETC....................... 33
4.4 NON-RECEIPT OF FUNDS BY AGENT....................... 34
4.5 SHARING OF PAYMENTS, ETC............................ 34
5. CONDITIONS PRECEDENT...................................... 35
5.1 INITIAL LOANS AND LETTERS OF CREDIT................. 35
5.2 ALL LOANS AND LETTERS OF CREDIT..................... 36
6. REPRESENTATIONS AND WARRANTIES............................ 37
6.1 ORGANIZATION........................................ 37
6.2 FINANCIAL STATEMENTS................................ 37
6.3 ENFORCEABLE OBLIGATIONS; AUTHORIZATION.............. 37
6.4 OTHER DEBT.......................................... 38
6.5 LITIGATION.......................................... 38
6.6 TITLE............................................... 38
6.7 TAXES............................................... 38
6.8 REGULATIONS U AND X................................. 38
6.9 SUBSIDIARIES........................................ 38
<PAGE>
6.10 NO UNTRUE OR MISLEADING STATEMENTS.................. 38
6.11 ERISA............................................... 39
6.12 INVESTMENT COMPANY ACT.............................. 39
6.13 PUBLIC UTILITY HOLDING COMPANY ACT.................. 39
6.14 SOLVENCY............................................ 39
6.15 FISCAL YEAR......................................... 39
6.16 COMPLIANCE.......................................... 39
6.17 ENVIRONMENTAL MATTERS............................... 39
6.18 COLLATERAL COVERED.................................. 40
7. AFFIRMATIVE COVENANTS..................................... 40
7.1 TAXES, EXISTENCE, REGULATIONS, PROPERTY, ETC........ 40
7.2 FINANCIAL STATEMENTS AND INFORMATION................ 40
7.3 FINANCIAL TESTS..................................... 41
7.4 INSPECTION.......................................... 42
7.5 FURTHER ASSURANCES.................................. 42
7.6 BOOKS AND RECORDS................................... 42
7.7 INSURANCE........................................... 42
7.8 NOTICE OF CERTAIN MATTERS........................... 43
7.9 CAPITAL ADEQUACY.................................... 43
7.10 ERISA INFORMATION AND COMPLIANCE.................... 44
7.11 ADDITIONAL SECURITY DOCUMENTS....................... 44
8. NEGATIVE COVENANTS........................................ 45
8.1 BORROWED MONEY INDEBTEDNESS......................... 45
8.2 LIENS............................................... 45
8.3 CONTINGENT LIABILITIES.............................. 45
8.4 MERGERS, CONSOLIDATIONS AND DISPOSITIONS OF ASSETS.. 46
8.5 REDEMPTION, DIVIDENDS AND DISTRIBUTIONS............. 46
8.6 NATURE OF BUSINESS.................................. 46
8.7 TRANSACTIONS WITH RELATED PARTIES................... 46
8.8 LOANS AND INVESTMENTS............................... 46
8.9 SUBSIDIARIES........................................ 47
8.10 ORGANIZATIONAL DOCUMENTS............................ 47
8.11 UNFUNDED LIABILITIES................................ 47
8.12 OPERATING LEASE EXPENSES............................ 47
8.13 SALE/LEASEBACKS..................................... 47
8.14 SUBORDINATED INDEBTEDNESS........................... 47
8.15 NEGATIVE PLEDGES.................................... 47
8.16 ACQUISITIONS........................................ 48
9. DEFAULTS.................................................. 48
9.1 EVENTS OF DEFAULT................................... 48
II
<PAGE>
9.2 RIGHT OF SETOFF.................................... 50
9.3 COLLATERAL ACCOUNT................................. 51
9.4 PRESERVATION OF SECURITY FOR LETTER OF CREDIT
LIABILITIES....................................... 51
9.5 REMEDIES CUMULATIVE................................ 51
10. AGENT..................................................... 52
10.1 APPOINTMENT, POWERS AND IMMUNITIES................. 52
10.2 RELIANCE........................................... 53
10.3 DEFAULTS........................................... 53
10.4 MATERIAL WRITTEN NOTICES........................... 53
10.5 RIGHTS AS A LENDER................................. 53
10.6 INDEMNIFICATION.................................... 54
10.7 NON-RELIANCE ON AGENT AND OTHER LENDERS............ 54
10.8 FAILURE TO ACT..................................... 54
10.9 RESIGNATION OR REMOVAL OF AGENT.................... 55
10.10 NO PARTNERSHIP..................................... 55
10.11 AUTHORITY OF AGENT................................. 55
11. MISCELLANEOUS............................................. 56
11.1 WAIVER............................................. 56
11.2 NOTICES............................................ 56
11.3 EXPENSES, ETC...................................... 56
11.4 INDEMNIFICATION.................................... 57
11.5 AMENDMENTS, ETC.................................... 58
11.6 SUCCESSORS AND ASSIGNS............................. 58
11.7 LIMITATION OF INTEREST............................. 61
11.8 SURVIVAL........................................... 61
11.9 CAPTIONS........................................... 62
11,10 COUNTERPARTS....................................... 62
11.11 GOVERNING LAW; VENUE............................... 62
11.12 SEVERABILITY....................................... 62
11.13 TAX FORMS.......................................... 62
11.14 CONFLICTS BETWEEN THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS.................................. 63
11.15 LIMITATION ON CHARGES; SUBSTITUTE LENDERS;
NON-DISCRIMINATION............................. 63
11.16 CONFIDENTIALITY.................................... 64
11.17 JURY WAIVER........................................ 64
III
<PAGE>
EXHIBITS
- - --------
A -- Request for Extension of Credit
B -- Rate Designation Notice
C -- Revolving Note
D -- Assignment and Acceptance
E -- Compliance Certificate
F -- Borrowing Base Certificate
IV
<PAGE>
LOAN AGREEMENT
--------------
THIS LOAN AGREEMENT is made and entered into as of October 28, 1998 (the
"Effective Date"), by and among BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.,
a Delaware corporation (together with its permitted successors and assigns,
herein called the "Borrower"); each of the lenders which is or may from time to
time become a party hereto (individually, a "Lender" and, collectively, the
"Lenders")(the terms "Revolving Loan Lenders" and "Lenders" shall have the same
meaning hereunder), and COMERICA BANK-TEXAS ("Comerica"), as agent for the
Lenders (in such capacity, together with its successors in such capacity, the
"Agent").
The parties hereto agree as follows:
1. DEFINITIONS.
1.1 CERTAIN DEFINED TERMS.
In this Agreement, terms defined above shall have the meanings ascribed to
them above. Unless a particular term, word or phrase is otherwise defined or the
context otherwise requires, capitalized terms, words and phrases used herein or
in the Loan Documents (as hereinafter defined) have the following meanings (all
definitions that are defined in this Agreement or in the Loan Documents in the
singular have the same meanings when used in the plural and vice versa):
Accounts, Equipment, General Intangibles and Inventory shall have the
respective meanings assigned to them in the Uniform Commercial Code enacted in
the State of Texas as Sections 1 through 11 of the Texas Business and Commerce
Code, in force on the Effective Date.
Additional Interest means the aggregate of all amounts accrued or paid
pursuant to the Notes or any of the other Loan Documents (other than interest on
the Notes at the Stated Rate) which, under applicable laws, are or may be deemed
to constitute interest on the indebtedness evidenced by the Notes or any other
amounts owing under any Loan Document.
Additional Collateral shall have the meaning ascribed to such term in
Section 7.8 hereof.
Additional CollateraL Event shall have the meaning ascribed to such term in
Section 7.8 hereof.
Adjusted LIBOR means, with respect to each Interest Period applicable to a
LIBOR Borrowing, a rate per annum equal to the quotient, expressed as a
percentage, of (a) LIBOR with respect to such Interest Period divided by (b)
1.0000 minus the Eurodollar Reserve Requirement in effect on the first day of
such Interest Period.
Affiliate means any Person controlling, controlled by or under common
control with any other Person. For purposes of this definition, "control"
(including "controlled by" and "under
<PAGE>
common control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or otherwise.
Agreement means this Loan Agreement, as it may from time to time be
amended, modified, restated or supplemented.
Annual Financial Statements means the annual financial statements of a
Person, including all notes thereto, which statements shall include a balance
sheet as of the end of the fiscal year relating thereto and an income statement
and a statement of cash flows for such fiscal year, all setting forth in
comparative form the corresponding figures from the previous fiscal year, all
prepared in conformity with GAAP in all material respects, and accompanied by
the opinion of independent certified public accountants of recognized national
standing, which shall state that such financial statements present fairly in all
material respects the financial position of such Person and, if such Person has
any Subsidiaries, its consolidated Subsidiaries as of the date thereof and the
results of its operations for the period covered thereby in conformity with
GAAP. Annual Financial Statements shall also include unaudited consolidating
financial statements for Borrower and its Subsidiaries, in Proper Form,
certified by the chief financial officer or other authorized officer of Borrower
as presenting fairly in all material respects the consolidating financial
position of the applicable Person.
Applications means all applications and agreements for Letters of Credit,
or similar instruments or agreements, in Proper Form, now or hereafter executed
by any Person in connection with any Letter of Credit now or hereafter issued or
to be issued under the terms hereof at the request of Borrower.
Assignment and Acceptance shall have the meaning ascribed to such term in
Section 11.6(b) hereof.
Bankruptcy Code means the United States Bankruptcy Code, as amended, and
any successor statute.
Base Rate means for any day a rate per annum equal to the lesser of (a) the
greater of (1) the Prime Rate for that day and (2) the Federal Funds Rate for
that day plus 1/2 of 1% or (b) the Ceiling Rate. If for any reason Agent shall
have determined (which determination shall be conclusive and binding, absent
manifest error) that it is unable to ascertain the Federal Funds Rate for any
reason, including, without limitation, the inability or failure of Agent to
obtain sufficient quotations in accordance with the terms hereof, the Base Rate
shall, until the circumstances giving rise to such inability no longer exist, be
the lesser of (a) the Prime Rate or (b) the Ceiling Rate.
Base Rate Borrowing means that portion of the principal balance of the
Loans at any time bearing interest at the Base Rate.
Borrowed Money Indebtedness means, with respect to any Person, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by
2
<PAGE>
bonds, debentures, notes or similar instruments evidencing borrowed money, (iii)
all obligations of such Person under conditional sale or other title retention
agreements relating to Property purchased by such Person, (iv) all obligations
of such Person issued or assumed as the deferred purchase price of Property or
services (excluding trade debt and obligations of such Person to creditors for
raw materials, inventory, services and supplies and deferred payments for
services to employees and former employees incurred in the ordinary course of
such Person's business), (v) all lease obligations of such Person which have
been capitalized on the balance sheet of such Person in accordance with GAAP,
(vi) all obligations of others secured by any Lien on Property owned or acquired
by such Person, whether or not the obligations secured thereby have been
assumed, equal to the lesser of the amount of such obligation or the fair market
value of such Property, (vii) Interest Rate Risk Indebtedness of such Person,
(viii) all obligations of such Person in respect of outstanding letters of
credit issued for the account of such Person and (ix) all guarantees of such
Person.
Borrowing Base means, as at any date, the amount of the Borrowing Base
shown on the Borrowing Base Certificate then most recently delivered pursuant to
Section 7.2 hereof, determined by calculating the amount equal to:
(i) 80% of the aggregate amount of all Eligible Accounts of Borrower and
its Subsidiaries (other than Foreign Subsidiaries) at said date, plus
(ii) 50% of all Eligible Inventory of Borrower and its Subsidiaries (other
than Foreign Subsidiaries) at said date (determined at the lower of
cost or market on a consistent basis); provided that the amount
calculated pursuant to this clause (ii) shall not exceed
$10,000,000.00, plus
(iii)80% of the aggregate amount of all Eligible Equipment of Elmagco,
Inc. at said date; provided that no amounts shall be included in the
Borrowing Base by reason of this clause (iii) after November 20, 1998,
plus
(iv) prior to (but not after) November 20, 1998, $3,500,000.00.
In the absence of a current Borrowing Base Certificate, Agent shall determine
the Borrowing Base from time to time in its reasonable discretion, taking into
account all information reasonably available to it, and the Borrowing Base from
time to time so determined shall be the Borrowing Base for all purposes of this
Agreement until a current Borrowing Base Certificate, in Proper Form, is
furnished to and accepted by Agent.
Borrowing Base Certificate shall mean a certificate, duly executed by the
chief executive officer, chief financial officer, treasurer or controller of
Borrower, appropriately completed and in substantially the form of Exhibit F
hereto. Each Borrowing Base Certificate shall be effective only as accepted by
Agent (and with such revisions, if any, as Agent may reasonably require as a
condition to such acceptance).
3
<PAGE>
Business Day means any day other than a day on which commercial banks are
authorized or required to close in Dallas, Texas or Houston, Texas.
Ceiling Rate means, on any day, with respect to any Person, the maximum
nonusurious rate of interest permitted for that day by whichever of applicable
federal or Texas (or any jurisdiction whose usury laws are deemed to apply to
the Notes or any other Loan Documents despite the intention and desire of the
parties to apply the usury laws of the State of Texas) laws permits the higher
interest rate, stated as a rate per annum. On each day, if any, that Chapter 1D
establishes the Ceiling Rate, the Ceiling Rate shall be the "weekly rate
ceiling" (as defined in (S)303 of the Texas Finance Code ) for that day. Agent
may from time to time, as to current and future balances, implement any other
ceiling under the Texas Finance Code or Chapter 1D by notice to Borrower, if and
to the extent permitted by the Texas Finance Code or Chapter 1D. Without notice
to Borrower or any other person or entity, the Ceiling Rate shall automatically
fluctuate upward and downward as and in the amount by which such maximum
nonusurious rate of interest permitted by applicable law fluctuates.
Change of Control means a change resulting when any Unrelated Person or any
Unrelated Persons (other than any Person that Beneficially Owns at least 10% of
the aggregate voting power of all classes of Voting Stock of Borrower as of the
date hereof) acting together which would constitute a Group together with any
Affiliates or Related Persons thereof (in each case also constituting Unrelated
Persons) shall at any time either (i) Beneficially Own more than 50% of the
aggregate voting power of all classes of Voting Stock of Borrower or (ii)
succeed in having sufficient of its or their nominees elected to the Board of
Directors of Borrower such that such nominees, when added to any existing
directors remaining on the Board of Directors of Borrower after such election
who is an Affiliate or Related Person of such Person or Group, shall constitute
a majority of the Board of Directors of Borrower. As used herein (a)
"Beneficially Own" means "beneficially own" as defined in Rule 13d-3 of the
Securities Exchange Act of 1934, as amended, or any successor provision thereto;
provided, however, that, for purposes of this definition, a Person shall not be
deemed to Beneficially Own securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's Affiliates
until such tendered securities are accepted for purchase or exchange; (b)
"Group" means a "group" for purposes of Section 13(d) of the Securities Exchange
Act of 1934, as amended; (c) "Unrelated Person" means at any time any Person
other than Borrower or any Subsidiary of Borrower and other than any trust for
any employee benefit plan of Borrower or any Subsidiary of Borrower; (d)
"Related Person" of any Person shall mean any other Person owning (1) 5% or more
of the outstanding common stock of such Person or (2) 5% or more of the Voting
Stock of such Person; and (e) "Voting Stock" of any Person shall mean capital
stock of such Person which ordinarily has voting power for the election of
directors (or persons performing similar functions) of such Person, whether at
all times or only so long as no senior class of securities has such voting power
by reason of any contingency.
Chapter 1D means Chapter 1D of Title 79, Texas Rev. Civ. Stats. 1925, as
amended.
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Code means the Internal Revenue Code of 1986, as amended, as now or
hereafter in effect, together with all regulations, rulings and interpretations
thereof or thereunder by the Internal Revenue Service.
Collateral means all Property, tangible or intangible, real, personal or
mixed, now or hereafter subject to the Liens created pursuant to any of the
Security Documents.
Compliance Certificate shall have the meaning given to it in Section 7.2(c)
hereof.
Consolidated Current Assets means, on any date as of which the amount
thereof is to be determined, the total assets of Borrower and its Subsidiaries
which would be shown as current assets on a balance sheet of Borrower and its
Subsidiaries prepared in accordance with GAAP at such time.
Consolidated Current Liabilities means, on any date as of which the amount
thereof is to be determined, the total liabilities of Borrower and its
Subsidiaries which would be shown as current liabilities on a balance sheet of
Borrower and its Subsidiaries prepared in accordance with GAAP at such time.
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 Borrower, are treated as a single employer under Section
414 of the Code.
Corporation means any corporation, limited liability company, partnership,
joint venture, joint stock association, business trust and other business
entity.
Cover for Letter of Credit Liabilities shall be effected by paying to Agent
immediately available funds, to be held by Agent in a collateral account
maintained by Agent at its Principal Office and collaterally assigned as
security for the financial accommodations extended pursuant to this Agreement
using documentation reasonably satisfactory to Agent, in the amount required by
any applicable provision hereof. Such amount shall be retained by Agent in such
collateral account until such time as in the case of the Cover being provided
pursuant to Sections 2.2(a) or 9.3 hereof, the applicable Letter of Credit shall
have expired and the Reimbursement Obligations, if any, with respect thereto
shall have been fully satisfied; provided, however, that at such time if a
Default or Event of Default has occurred and is continuing, Agent shall not be
required to release such amount in such collateral account until such Default or
Event of Default shall have been cured or waived.
Debt to EBITDA Ratio means, as of any day, the ratio of (a) Borrowed Money
Indebtedness of Borrower and its consolidated Subsidiaries as of such date to
(b) EBITDA for the 12 months ending on such date; provided however, that for
purposes of this ratio only, so long as Borrower shall have delivered to Agent
financial information satisfactory to the Super Majority Lenders regarding the
Property acquired which disclose the prior operating results of such Property,
the pro forma effect of any acquisition by Borrower or any of its consolidated
Subsidiaries of any Subsidiary during such 12-month period shall be included in
EBITDA as if such acquisition occurred on the first day of such period.
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Default means an Event of Default or an event which with notice or lapse of
time or both would, unless cured or waived, become an Event of Default.
Dollars and $ means lawful money of the United States of America.
EBITDA means, without duplication, for any period the consolidated net
earnings (excluding any extraordinary gains) of Borrower and its Subsidiaries
plus, to the extent deducted in calculating consolidated net income,
depreciation, amortization, other non-cash items, Interest Expense, and federal,
state and foreign income tax expense.
Eligible Accounts shall mean, as at any date of determination thereof, each
Account of Borrower or any of its Subsidiaries (other than Foreign Subsidiaries)
which is subject to a Lien created by any Security Document and on which Agent
shall have a first-priority perfected Lien (subject only to Permitted Liens)
which is at said date payable to Borrower or any such Subsidiary and which
complies with the following requirements: (a) (i) the subject goods have been
sold to an account debtor on an absolute sale basis on open account and not on
consignment, on approval or on a "sale or return" basis or subject to any other
repurchase or return agreement and no material part of the subject goods has
been returned, rejected, lost or damaged (provided that the foregoing shall not
disqualify accounts arising from goods sold with usual and customary sales
warranties or having warranty claims which are not material), (ii) the Account
is stated to be payable in Dollars and is not evidenced by chattel paper or an
instrument of any kind (unless Agent has a perfected first priority Lien
(subject only to Permitted Liens) on such chattel paper or instrument) and said
account debtor is not insolvent or the subject of any bankruptcy or insolvency
proceedings of any kind unless Borrower or its applicable Subsidiary, as the
case may be, has received a letter of credit, bond or other financial guarantee
in an amount equal to or greater than such Account issued by a Qualified
Institution and otherwise in form and substance satisfactory to Agent; (b) the
account debtor must be located in the United States, except for (x) Accounts as
to which Borrower or its applicable Subsidiary, as the case may be, has received
a letter of credit, bond or other financial guarantee in an amount equal to or
greater than such Account issued by a Qualified Institution and otherwise in
form and substance satisfactory to Agent and (y) other Accounts approved in
writing by Agent from major U.S. international companies' foreign domiciled
subsidiaries and affiliates (such approval not to be unreasonably withheld so
long as the aggregate amount of such Accounts does not exceed $4,375,000.00);
(c) it is a valid obligation of the account debtor thereunder and is not subject
to any offset or other defense on the part of such account debtor or to any
claim on the part of such account debtor denying liability thereunder (provided
that the foregoing shall not disqualify accounts arising from goods sold with
usual and customary sales warranties or having warranty claims which are not
material); (d) it is subject to no Lien whatsoever, except for the Liens created
or permitted pursuant to the Loan Documents; (e) it is evidenced by an invoice
submitted to the account debtor in timely fashion and in the normal course of
business; (f) it has not remained unpaid beyond 90 days after the date of the
invoice; (g) it does not arise out of transactions with an employee, officer,
agent, director or stockholder of Borrower or any of its Subsidiaries or any
Affiliate of Borrower or any of its Subsidiaries; (h) not more than 20% (or such
higher percentage as Agent may approve in writing for any particular account
debtor) of the other Accounts of the applicable account debtor or any of its
Affiliates fail to satisfy all of the requirements of an "Eligible Account"; (i)
inclusion of the
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<PAGE>
applicable Account does not cause the total Eligible Accounts with respect to
the applicable account debtor and its Affiliates, in the aggregate, to exceed
10% of the total Eligible Accounts, and (j) each of the representations and
warranties set forth in the Security Documents executed by Borrower and its
Subsidiaries with respect thereto is true and correct in all material respects
on such date. In the event of any dispute under the foregoing criteria, about
whether an Account is or has ceased to be an Eligible Account, the decision of
Agent, made in good faith, shall be conclusive and binding, absent manifest
error.
Eligible Equipment shall mean, as at any date of determination thereof,
Equipment of Elmagco, Inc. which is subject to a Lien created by any Security
Documents and on which Agent shall have a first-priority perfected Lien (subject
only to Permitted Liens) and which complies with the following requirements:
(a) such Equipment shall be valued in accordance with GAAP and shall be within
the United States of America; (b) it is in good condition (ordinary wear and
tear excepted), meets all standards imposed by any Governmental Authority having
regulatory authority over it and/or its use and is currently usable in the
normal course of business of Elmagco, Inc.; (c) it is in the possession or
control of Elmagco, Inc., and (d) each of the representations and warranties set
forth in the Security Documents executed by Elmagco, Inc. with respect thereto
is true and correct in all material respects on such date. In the event of any
dispute under the foregoing criteria, about whether a portion of Equipment is or
has ceased to be Eligible Equipment, the decision of Agent, made in good faith,
shall be conclusive and binding, absent manifest error.
Eligible Inventory shall mean, as at any date of determination thereof,
Inventory of Borrower or any of its Subsidiaries (other than Foreign
Subsidiaries) which is subject to a Lien created by any Security Documents and
on which Agent shall have a first-priority perfected Lien (subject only to
Permitted Liens) and which complies with the following requirements: (a) such
Inventory shall be valued in accordance with GAAP and consist of (i) eligible
raw materials and (ii) finished goods, provided that all such Inventory shall be
within the United States of America; (b) it is in good condition, meets all
standards imposed by any Governmental Authority having regulatory authority over
it, its use and/or sale and is either currently usable or currently salable in
the normal course of business of the Borrower or its applicable Subsidiary, as
the case may be; (c) it is not in the possession or control of any warehouseman,
bailee, or any agent or processor for or customer of Borrower or any of its
Subsidiaries or, if it is, (i) Borrower or its applicable Subsidiary, as the
case may be, shall have notified, in a manner that effectively under applicable
law creates a valid and first priority Lien in favor of Agent in such Inventory,
such warehouseman, bailee, agent, processor or customer of Agent's Lien and (ii)
such warehouseman, bailee, agent, processor or customer has subordinated any
Lien it may claim therein and agreed to hold all such Inventory during the
continuance of an Event of Default for Agent's account subject to the Agent's
instructions, and (d) each of the representations and warranties set forth in
the Security Documents executed by Borrower and its Subsidiaries with respect
thereto is true and correct in all material respects on such date. In the event
of any dispute under the foregoing criteria, about whether a portion of
Inventory is or has ceased to be Eligible Inventory, the decision of Agent, made
in good faith, shall be conclusive and binding, absent manifest error.
7
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Environmental Claim means any third party (including Governmental
Authorities and employees) action, lawsuit, claim or proceeding (including
claims or proceedings at common law or under the Occupational Safety and Health
Act or similar laws relating to safety of employees) which seeks to impose
liability for (i) noise; (ii) pollution or contamination of the air, surface
water, ground water or land or the clean-up of such pollution or contamination;
(iii) solid, gaseous or liquid waste generation, handling, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Substances; (v) the
safety or health of employees or (vi) the manufacture, processing, distribution
in commerce or use of Hazardous Substances. An "Environmental Claim" includes,
but is not limited to, a common law action, as well as a proceeding to issue,
modify or terminate an Environmental Permit, or to adopt or amend a regulation
to the extent that such a proceeding attempts to redress violations of an
applicable permit, license, or regulation as alleged by any Governmental
Authority.
Environmental Liabilities means all liabilities arising from any
Environmental Claim, Environmental Permit or Requirement of Environmental Law
under any theory of recovery, at law or in equity, and whether based on
negligence, strict liability or otherwise, including but not limited to:
remedial, removal, response, abatement, investigative, monitoring, personal
injury and damage to Property or injuries to persons, and any other related
costs, expenses, losses, damages, penalties, fines, liabilities and obligations,
and all costs and expenses necessary to cause the issuance, reissuance or
renewal of any Environmental Permit including reasonable attorneys' fees and
court costs.
Environmental Permit means any permit, license, approval or other
authorization under any applicable Legal Requirement relating to pollution or
protection of health or the environment, including laws, regulations or other
requirements relating to emissions, discharges, releases or threatened releases
of pollutants, contaminants or hazardous substances or toxic materials or wastes
into ambient air, surface water, ground water or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or Hazardous Substances.
Equity Interests means equity interests in Borrower issued after the date
hereof upon terms issued on terms acceptable to Super Majority Lenders.
ERISA means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and all rules, regulations, rulings and interpretations
adopted by the Internal Revenue Service or the U.S. Department of Labor
thereunder.
Eurodollar Rate means for any day during an Interest Period for a LIBOR
Borrowing a rate per annum equal to the lesser of (a) the sum of (1) the
Adjusted LIBOR in effect on the first day of such Interest Period plus (2) the
then applicable Margin Percentage from time to time in effect and (b) the
Ceiling Rate. Each Eurodollar Rate is subject to adjustments as provided for in
Sections 3.3(c) and 11.15 hereof.
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<PAGE>
Eurodollar Reserve Requirement means, on any day, that percentage
(expressed as a decimal fraction and rounded, if necessary, to the next highest
one ten thousandth [.0001]) which is in effect on such day for determining all
reserve requirements (including, without limitation, basic, supplemental,
marginal and emergency reserves) applicable to "Eurocurrency liabilities," as
currently defined in Regulation D. Each determination of the Eurodollar Reserve
Requirement by Agent shall be conclusive and binding, absent manifest error, and
may be computed using any reasonable averaging and attribution method.
Event of Default shall have the meaning assigned to it in Section 9.1
hereof.
Federal Funds Rate means, for any day, a fluctuating interest rate per
annum equal for such day to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any such day which is a
Business Day, the average of the quotations for such day on such transactions
received by Agent from three Federal funds brokers of recognized standing
selected by Agent in its sole and absolute discretion.
Financing Statements means all such Uniform Commercial Code financing
statements as Agent shall reasonably require, in Proper Form, duly executed by
Borrower (or any other applicable Obligor) to give notice of and to perfect or
continue perfection of Agent's Liens in any applicable Collateral, as any of the
foregoing may from time to time be amended, modified, supplemented or restated.
Foreign Subsidiaries means Subsidiaries of Borrower which are organized
under the laws of a jurisdiction other than the United States of America, any
State of the United States or any political subdivision thereof.
Funding Loss means, with respect to (a) Borrower's payment of principal of
a LIBOR Borrowing on a day prior to the last day of the applicable Interest
Period; (b) Borrower's failure to borrow a LIBOR Borrowing on the date specified
by Borrower; (c) Borrower's failure to make any prepayment of the Loans (other
than Base Rate Borrowings) on the date specified by Borrower, or (d) any
cessation of a Eurodollar Rate to apply to the Loans or any part thereof
pursuant to Section 3.3, in each case whether voluntary or involuntary, any
loss, expense, penalty, premium or liability actually incurred by any Lender
(including but not limited to any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by any Lender to
fund or maintain a Loan).
GAAP means, as to a particular Person, such accounting practice as, in the
opinion of independent certified public accountants of recognized national
standing regularly retained by such Person, conforms at the time to generally
accepted accounting principles, consistently applied for all periods after the
Effective Date so as to present fairly the financial condition, and results of
operations and cash flows, of such Person. If any change in any accounting
principle or practice is required by the Financial Accounting Standards Board,
all reports and financial statements required
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<PAGE>
hereunder may be prepared in accordance with such change so long as Borrower
provides to Agent such disclosures of the impact of such change as Agent may
reasonably require. No such change in any accounting principle or practice
shall, in itself, cause a Default or Event of Default hereunder (but Borrower,
Agent and Lenders shall negotiate in good faith to replace any financial
covenants hereunder to the extent such financial covenants are affected by such
change in accounting principle or practice).
Governmental Authority means any foreign governmental authority, the United
States of America, any State of the United States, and any political subdivision
of any of the foregoing, and any central bank, agency, department, commission,
board, bureau, court or other tribunal having jurisdiction over Agent, any
Lender, any Obligor or their respective Property.
Guaranties means, collectively, (i) the Guaranties dated concurrently
herewith executed by each of the current Subsidiaries of Borrower (other than
Foreign Subsidiaries) in favor of Agent, for the benefit of Lenders, and (ii)
any and all other guaranties hereafter executed in favor of Agent, for the
benefit of Lenders, relating to the Obligations, as any of them may from time to
time be amended, modified, restated or supplemented.
Hazardous Substance means petroleum products and any hazardous or toxic
waste or substance defined or regulated as such from time to time by any law,
rule, regulation or order described in the definition of "Requirements of
Environmental Law".
Indebtedness means, without duplication, (a) all items which in accordance
with GAAP would be included in the liability section of a balance sheet (other
than trade accounts payable and accrued expenses (other than Interest Expense)
arising in the ordinary course of business) on the date as of which Indebtedness
is to be determined (excluding, to the extent applicable, capital stock,
surplus, surplus reserves and deferred credits); (b) all guaranties, letter of
credit contingent reimbursement obligations and other contingent obligations in
respect of, or any obligations to purchase or otherwise acquire, Indebtedness of
others, and (c) all Indebtedness secured by any Lien existing on any interest of
the Person with respect to which Indebtedness is being determined in Property
owned subject to such Lien whether or not the Indebtedness secured thereby shall
have been assumed, equal to the lesser of the amount of such obligation or the
fair market value of such Property; provided, that the term "Indebtedness" shall
not mean or include any Indebtedness in respect of which monies sufficient to
pay and discharge the same in full (either on the expressed date of maturity
thereof or on such earlier date as such Indebtedness may be duly called for
redemption and payment) shall be deposited with a depository, agency or trustee
reasonably acceptable to Agent in trust for the payment thereof.
Interest Coverage Ratio means, as of any day, the ratio of (a) the sum of
Interest Expense for the 12 months ending on such day plus net income of
Borrower and its consolidated Subsidiaries for such 12-month period to (b) the
sum of Interest Expense for such 12-month period plus Permitted Dividends paid
during such period.
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Interest Expense means, for any period, total interest expense accruing on
Borrowed Money Indebtedness of Borrower and its Subsidiaries during such period
(including interest expense attributable to capitalized leases and interest
incurred under interest rate swap, collar, cap or similar agreements providing
interest rate protection), determined in accordance with GAAP.
Interest Options means the Base Rate and each Eurodollar Rate, and
"Interest Option" means any of them.
Interest Payment Dates means (a) for Base Rate Borrowings, November 30,
1998 and the last day of each calendar month thereafter prior to the Maturity
Date and (b) for LIBOR Borrowings, the end of the applicable Interest Period and
the Maturity Date.
Interest Period means, for each LIBOR Borrowing, a period commencing on the
date such LIBOR Borrowing began and ending on the numerically corresponding day
which is, subject to availability as set forth in Section 3.3(c)(iii), 1, 2 or 3
months thereafter, as Borrower shall elect in accordance herewith; provided, (1)
unless Agent shall otherwise consent, no Interest Period with respect to a LIBOR
Borrowing shall commence on a date earlier than three (3) Business Days after
this Agreement shall have been fully executed; (2) any Interest Period with
respect to a LIBOR Borrowing which would otherwise end on a day which is not a
LIBOR Business Day shall be extended to the next succeeding LIBOR Business Day,
unless such LIBOR Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding LIBOR Business Day; (3) any
Interest Period with respect to a LIBOR Borrowing which begins on the last LIBOR
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last LIBOR Business Day of the appropriate calendar month, and
(4) no Interest Period shall ever extend beyond the Maturity Date.
Interest Rate Risk Agreement means an interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or similar
arrangement entered into by Borrower or any of its Subsidiaries for the purpose
of reducing Borrower's or such Subsidiary's exposure to interest rate
fluctuations and not for speculative purposes, as it may from time to time be
amended, modified, restated or supplemented.
Interest Rate Risk Indebtedness means all obligations of Borrower with
respect to the program for the hedging of interest rate risk provided for in any
Interest Rate Risk Agreement.
Investment means the purchase or other acquisition of any securities or
Indebtedness of, or the making of any loan, advance, transfer of Property (other
than transfers in the ordinary course of business) or capital contribution to,
or the incurring of any liability (other than Accounts arising in the ordinary
course of business), contingently or otherwise, in respect of the Indebtedness
of, any Person.
Issuer means the issuer (or, where applicable, each issuer) of a Letter of
Credit under this Agreement.
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Key Agreements means any document or paper evidencing, securing or
otherwise relating to any Subordinated Indebtedness.
Legal Requirement means any law, statute, ordinance, decree, requirement,
order, judgment, rule, or regulation (or interpretation of any of the foregoing)
of, and the terms of any license or permit issued by, any Governmental
Authority, whether presently existing or arising in the future.
Letter of Credit shall have the meaning assigned to such term in Section
2.2(a) hereof.
Letter of Credit Liabilities means, at any time and in respect of any
Letter of Credit, the sum of (i) the amount available for drawings under such
Letter of Credit plus (ii) the aggregate unpaid amount of all Reimbursement
Obligations at the time due and payable in respect of previous drawings made
under such Letter of Credit. For the purpose of determining at any time the
amount described in clause (i), in the case of any Letter of Credit payable in a
currency other than Dollars, such amount shall be converted by Agent to Dollars
by any reasonable method, and such converted amount shall be conclusive and
binding, absent manifest error.
LIBOR means, for each Interest Period for any LIBOR Borrowing, the rate per
annum (rounded upwards, if necessary, to the nearest 1/16th of 1%) equal to the
average of the offered quotations appearing on Telerate Page 3750 (or if such
Telerate Page shall not be available, any successor or similar service as may be
selected by Agent and Borrower) as of 11:00 a.m., Dallas, Texas time (or as soon
thereafter as practicable) on the day two LIBOR Business Days prior to the first
day of such Interest Period for deposits in United States dollars having a term
comparable to such Interest Period and in an amount comparable to the principal
amount of the LIBOR Borrowing to which such Interest Period relates. If none of
such Telerate Page 3750 nor any successor or similar service is available, then
"LIBOR" shall mean, with respect to any Interest Period for any applicable LIBOR
Borrowing, the rate of interest per annum, rounded upwards, if necessary, to the
nearest 1/16th of 1%, quoted by Agent at or before 11:00 a.m., Dallas, Texas
time (or as soon thereafter as practicable), on the date two LIBOR Business Days
before the first day of such Interest Period, to be the arithmetic average of
the prevailing rates per annum at the time of determination and in accordance
with the then existing practice in the applicable market, for the offering to
Agent by one or more prime banks selected by Agent in its sole discretion, in
the London interbank market, of deposits in United States dollars for delivery
on the first day of such Interest Period and having a maturity equal to the
length of such Interest Period and in an amount equal (or as nearly equal as may
be) to the LIBOR Borrowing to which such Interest Period relates. Each
determination by Agent of LIBOR shall be conclusive and binding, absent manifest
error, and may be computed using any reasonable averaging and attribution
method.
LIBOR Borrowing means each portion of the principal balance of the Loans at
any time bearing interest at a Eurodollar Rate.
LIBOR Business Day means a Business Day on which transactions in United
States dollar deposits between lenders may be carried on in the London interbank
market.
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Lien means any mortgage, pledge, charge, encumbrance, security interest,
collateral assignment or other lien or restriction of any kind, whether based on
common law, constitutional provision, statute or contract, and shall include
reservations, exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions and other title exceptions.
Loans means the Revolving Loans provided for by Section 2.1 hereof. The
terms "Revolving Loans" and "Loans" shall have the same meaning hereunder.
Loan Documents means, collectively, this Agreement, the Notes, the
Guaranties, all Applica tions, the Security Documents, the Notice of Entire
Agreement, all instruments, certificates and agreements now or hereafter
executed or delivered by any Obligor to Agent or any Lender pursuant to any of
the foregoing or in connection with the Obligations or any commitment regarding
the Obligations, and all amendments, modifications, renewals, extensions,
increases and rearrangements of, and substitutions for, any of the foregoing.
Majority Lenders means, at any time while no Loans are outstanding, Lenders
having greater than 50% of the aggregate amount of Revolving Loan Commitments,
and at any time while Loans are outstanding, Lenders having greater than 50% of
the aggregate amount of Loans plus available Revolving Loan Commitments.
Margin Percentage means (i) on any day prior to January 1, 1999, 2.50% and
(ii) on and after October 1, 1998, the applicable per annum percentage set forth
at the appropriate intersection in the table shown below, based on the Debt to
EBITDA Ratio as of the last day of the most recently ended fiscal quarter of
Borrower calculated by Agent as soon as practicable after receipt by Agent of
all financial reports required under this Agreement with respect to such fiscal
quarter (including a Compliance Certificate) (provided, however, that if the
Margin Percentage is increased as a result of the reported Debt to EBITDA Ratio,
such increase shall be retroactive to the date that Borrower was obligated to
deliver such financial reports to Agent pursuant to the terms of this Agreement
and provided further, however, that if the Margin Percentage is decreased as a
result of the reported Debt to EBITDA Ratio, and such financial reports are
delivered to Agent not more than ten (10) calendar days after the date required
to be delivered pursuant to the terms of this Agreement, such decrease shall be
retroactive to the date that Borrower was obligated to deliver such financial
reports to Agent pursuant to the terms of this Agreement):
Debt to LIBOR Borrowings
EBITDA Ratio Margin Percentage
--------------------------------- -----------------
Greater than or equal to 4.00 2.75
Greater than or equal to 3.50 but
less than 4.00 2.50
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Greater than or equal to 3.00 but
less than 3.50 2.25
Greater than or equal to 2.50 but
less than 3.00 2.00
Less than 2.50 1.75
Material Adverse Effect means any material and adverse effect on the
ability of an Obligor to perform its obligations under any Loan Document to
which it is a party or on the business, condition (financial or otherwise),
results of operations, assets, liabilities or prospects of Borrower and its
Subsidiaries on a consolidated basis.
Maturity Date means the maturity of the Revolving Notes, October 31, 2000.
Maximum Revolving Loan Available Amount means, at any date, an amount equal
to the lesser of (i) the aggregate of the Revolving Loan Commitments or (ii) the
then effective Borrowing Base.
Monthly Financial Statements means the monthly financial statements of a
Person, which statements shall include a balance sheet as of the end of such
fiscal month and an income statement and a statement of cash flows for such
fiscal month and for the fiscal year to date, subject to normal year-end
adjustments, prepared in accordance with GAAP in all material respects except
that such statements are condensed and exclude detailed footnote disclosures and
certified by the chief financial officer or other authorized officer of such
Person as fairly presenting, in all material respects, the financial condition
of such person as of such date. As to Borrower only, Monthly Financial
Statements shall also include unaudited consolidating financial statements for
Borrower and its Subsidiaries, in Proper Form, certified by the chief financial
officer or other authorized officer of Borrower as presenting fairly in all
material respects the consolidating financial position of the applicable Person.
Notes shall have the meaning assigned to such term in Section 2.6 hereof.
The terms "Revolving Notes" and "Notes" shall have the same meaning hereunder.
Notice of Entire Agreement means a notice of entire agreement, in Proper
Form, executed by Borrower, each other Obligor and Agent, as the same may from
time to time be amended, modified, supplemented or restated.
Obligations means, as at any date of determination thereof, the sum of the
following: (i) the aggregate principal amount of Loans outstanding hereunder on
such date, plus (ii) the aggregate amount of the outstanding Letter of Credit
Liabilities hereunder on such date, plus (iii) all other outstanding
liabilities, obligations and indebtedness of any Obligor under this Agreement,
any Note, the Guaranties, all applications and the Security Documents on such
date.
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Obligors means Borrower and each Person now or hereafter executing a
Guaranty and/or a Security Agreement.
Organizational Documents means, with respect to a corporation, the
certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a partnership, the partnership agreement
establishing such partnership and with respect to a trust, the instrument
establishing such trust and with respect to any other Person, the agreements or
instruments pursuant to which such Person was formed; in each case including any
and all modifications thereof and any and all future modifications thereof.
Past Due Rate means, on any day, a rate per annum equal to the lesser of
(i) the Ceiling Rate for that day or (ii) the Base Rate plus three percent (3%).
PBGC means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
Permitted Dividends means (i) dividends or distributions by a Subsidiary
of Borrower to Borrower or any other Subsidiary of Borrower, (ii) stock
dividends and (iii) so long as no Default or Event of Default shall have
occurred and be continuing (or would result therefrom), dividends payable under
the terms of the Equity Interests approved by the Super Majority Lenders.
Permitted Investments means: (a) readily marketable securities issued or
fully guaranteed by the United States of America with maturities of not more
than one year; (b) commercial paper rated "Prime 1" by Moody's Investors
Service, Inc. or "A-1" by Standard and Poor's Ratings Services with maturities
of not more than 180 days, and (c) certificates of deposit or repurchase
obligations issued by any U.S. domestic bank having capital surplus of at least
$100,000,000 or by any other financial institution acceptable to Agent, all of
the foregoing not having a maturity of more than one year from the date of
issuance thereof.
Permitted Liens means each of the following: (a) artisans' or mechanics'
Liens arising in the ordinary course of business, and Liens for taxes, but only
to the extent that payment thereof shall not at the time be due or if due, the
payment thereof is being diligently contested in good faith and adequate
reserves computed in accordance with GAAP have been set aside therefor; (b)
Liens in effect on the Effective Date and disclosed to the Lenders in the
financial statements delivered on or prior to the Effective Date pursuant to
Section 6.2 hereof or in a schedule hereto; (c) normal reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions, restrictions and
encumbrances which do not secure Borrowed Money Indebtedness and which do not
materially impair the value or utility of the applicable Property; (d) Liens in
favor of Agent or any Lender under the Loan Documents, including, without
limitation, Liens securing Interest Rate Risk Indebtedness owed to one or more
of the Lenders (but not to any Person which is not, at such time, a Lender); (e)
Liens incurred or deposits made in the ordinary course of business (1) in
connection with workmen's compensation, unemployment insurance, social security
and other like laws, or (2) to secure insurance in the ordinary course of
business, the performance of bids, tenders, contracts, leases, licenses,
statutory obligations, surety, appeal and performance bonds and other similar
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obligations incurred in the ordinary course of business, not, in any of the
cases specified in this clause (2), incurred in connection with the borrowing of
money, the obtaining of advances or the payment of the deferred purchase price
of Property; (f) attachments, judgments and other similar Liens arising in
connection with court proceedings, provided that the execution and enforcement
of such Liens are effectively stayed and the claims secured thereby are being
actively contested in good faith with adequate reserves made therefor in
accordance with GAAP; (g) Liens imposed by law, such as landlords', carriers',
warehousemen's, mechanics', materialmen's and vendors' liens, incurred in good
faith in the ordinary course of business and securing obligations which are not
yet due or which are being contested in good faith by appropriate proceedings if
adequate reserves with respect thereto are maintained in accordance with GAAP;
(h) zoning restrictions, easements, licenses, reservations, provisions,
covenants, conditions, waivers, and restrictions on the use of Property, and
which do not in any case singly or in the aggregate materially impair the
present value or utility of the applicable Property; (i) Liens securing purchase
money Indebtedness permitted under Section 8.1 hereof and covering the Property
so purchased; (j) capital leases and sale/leaseback transactions permitted under
the other provisions of this Agreement, and (k) extensions, renewals and
replacements of Liens referred to in clauses (a) through (j) of this definition;
provided that any such extension, renewal or replacement Lien shall be limited
to the Property or assets covered by the Lien extended, renewed or replaced and
that the Borrowed Money Indebtedness secured by any such extension, renewal or
replacement Lien shall be in an amount not greater than the amount of the
Indebtedness secured by the Lien extended, renewed or replaced.
Person means any individual, Corporation, trust, unincorporated
organization, Governmental Authority or any other form of entity.
Plan means an employee pension benefit plan which is covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code
and is either (a) maintained by Borrower or any member of the Controlled Group
for employees of Borrower or any member of the Controlled Group or (b)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
Borrower or any member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five plan years
made contributions.
Prime Rate means, on any day, the prime rate for that day as determined
from time to time by Comerica. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate or a favored rate, and Comerica,
Agent and each Lender disclaims any statement, representation or warranty to the
contrary. Comerica, Agent or any Lender may make commercial loans or other
loans at rates of interest at, above or below the Prime Rate.
Principal Office means the principal office of Agent in Dallas, Texas,
presently located at 1601 Elm Street, Dallas, Texas 75201.
Proper Form means in form and substance reasonably satisfactory to Agent.
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Property means any interest in any kind of property or asset, whether real,
personal or mixed, tangible or intangible.
Qualified Institution means (a) any bank or trust company which is
organized under the laws of any country which is a member of the Organization
for Economic Cooperation and Development or any political subdivision of any
such country; and having capital, surplus and undivided profits aggregating at
least $100,000,000.00 (or its equivalent in another currency) as of the date of
such Person's most recent financial reports, and (b) any other Person approved
in writing by Agent.
Quarterly Dates means the last day of each March, June, September and
December, provided that if any such date is not a Business Day, then the
relevant Quarterly Date shall be the next succeeding Business Day.
Rate Designation Date means that Business Day which is (a) in the case of
Base Rate Borrowings, 11:00 a.m., Dallas, Texas time, on the date one Business
Day preceding the date of such borrowing and (b) in the case of LIBOR
Borrowings, 11:00 a.m., Dallas, Texas time, on the date three LIBOR Business
Days preceding the first day of any proposed Interest Period.
Rate Designation Notice means a written notice substantially in the form of
Exhibit B.
Regulation D means Regulation D of the Board of Governors of the Federal
Reserve System from time to time in effect and includes any successor or other
regulation relating to reserve requirements applicable to member banks of the
Federal Reserve System.
Regulatory Change means, with respect to any Lender, any change on or after
the Effective Date in any Legal Requirement (including, without limitation,
Regulation D) or the adoption or making on or after such date of any
interpretation, directive or request applying to a class of lenders including
such Lender under any Legal Requirements (whether or not having the force of
law) by any Governmental Authority.
Reimbursement Obligations means, as at any date, the obligations of
Borrower then outstanding, or which may thereafter arise, in respect of Letters
of Credit under this Agreement, to reimburse the applicable Issuers for the
amount paid by such Issuers in respect of any drawing under such Letters of
Credit, which obligations shall at all times be payable in Dollars
notwithstanding any such Letter of Credit being payable in a currency other than
Dollars.
Request for Extension of Credit means a request for extension of credit
duly executed by any responsible officer, which may include the president, the
chief executive officer, the chief financial officer, any vice president or the
treasurer of Borrower, appropriately completed and substantially in the form of
Exhibit A attached hereto.
Requirements of Environmental Law means all requirements imposed by any law
(including for example and without limitation The Resource Conservation and
Recovery Act and The Comprehensive Environmental Response, Compensation, and
Liability Act), rule, regulation, or
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order of any federal, state or local executive, legislative, judicial,
regulatory or administrative agency, board or authority in effect at the
applicable time which relate to (i) noise; (ii) pollution, protection or clean-
up of the air, surface water, ground water or land; (iii) solid, gaseous or
liquid waste gener ation, treatment, storage, disposal or transportation; (iv)
exposure to Hazardous Substances; (v) the safety or health of employees or (vi)
regulation of the manufacture, processing, distribution in commerce, use,
discharge or storage of Hazardous Substances.
Revolving Loan means a Loan made pursuant to Section 2.1 hereof. The terms
"Revolving Loan" and "Loan" shall have the same meaning hereunder.
Revolving Loan Availability Period means, for each Revolving Loan Lender,
the period from and including the Effective Date to (but not including) the
Revolving Loan Termination Date.
Revolving Loan Commitment means, as to any Lender, the obligation, if any,
of such Lender to make Revolving Loans and incur or participate in Letter of
Credit Liabilities in an aggregate principal amount at any one time outstanding
up to (but not exceeding) the amount, if any, set forth opposite such Lender's
name on the signature pages hereof under the caption "Revolving Loan
Commitment", or otherwise provided for in an Assignment and Acceptance Agreement
(as the same may be reduced from time to time pursuant to Section 2.3 hereof).
Revolving Loan Commitment Percentage means, as to any Revolving Loan
Lender, the percentage equivalent of a fraction the numerator of which is the
amount of such Lender's Revolving Loan Commitment and the denominator of which
is the aggregate amount of the Revolving Loan Commitments of all Lenders.
Revolving Loan Lender means each Lender with (i) prior to the Revolving
Loan Termination Date, a Revolving Loan Commitment and (ii) on and after the
Revolving Loan Termination Date, any outstanding Revolving Loan Obligations. The
terms "Revolving Loan Lender" and "Lender" shall have the same meaning
hereunder.
Revolving Loan Obligations means, as at any date of determination thereof,
the sum of the following (determined without duplication): (i) the aggregate
principal amount of Revolving Loans outstanding hereunder plus (ii) the
aggregate amount of the Letter of Credit Liabilities hereunder.
Revolving Loan Termination Date means the earlier of (a) the Maturity Date
or (b) the date specified or deemed specified by Agent in accordance with
Section 9.1 hereof.
Revolving Notes means the Notes of Borrower evidencing the Revolving Loans,
in substantially the form of Exhibit C hereto.
Scheduled Principal Payments means scheduled principal payments due with
respect to Borrowed Money Indebtedness of Borrower or any of its Subsidiaries
(other than any amounts due upon the maturity of the respective Notes) whether
such scheduled payment is due because of amortization or maturity of such
Borrowed Money Indebtedness.
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Secretary's Certificate means a certificate, in Proper Form, of the
Secretary or an Assistant Secretary of a corporation certifying (a) that
attached thereto are true and correct copies of resolutions of the Board of
Directors of such corporation authorizing the execution, delivery and
performance of the Loan Documents to be executed by such corporation; (b) the
incumbency and signature of the officer of such corporation executing such Loan
Documents on behalf of such corporation, and (c) that attached thereto are true
and correct copies of the Organizational Documents of such corporation.
Security Agreements means security agreements, each in Proper Form,
executed or to be executed by Borrower (or any other applicable Obligor) in
favor of Agent covering all of the real Property (other than real Property owned
as of the Effective Date) and material personal Property of Borrower and its
Subsidiaries (other than Foreign Subsidiaries), as the same may from time to
time be amended, modified, restated or supplemented. Notwithstanding the
foregoing, Borrower shall not be required to grant a Lien to Agent on more than
65% of the issued and outstanding equity interests owned by Borrower in its
Foreign Subsidiaries.
Security Documents means, collectively, the Security Agreements, the
Financing Statements and any and all other security documents now or hereafter
executed and delivered by any Obligor to secure all or any part of the
Obligations, as any of them may from time to time be amended, modified, restated
or supplemented.
Stated Rate means, with respect to any Lender, the effective weighted per
annum rate of interest applicable to the Loans made by such Lender; provided,
that if on any day such rate shall exceed the Ceiling Rate for that day, the
Stated Rate shall be fixed at the Ceiling Rate on that day and on each day
thereafter until the total amount of interest accrued at the Stated Rate on the
unpaid principal balances of the Notes plus the Additional Interest equals the
total amount of interest which would have accrued if there had been no Ceiling
Rate. If the Notes mature (or are prepaid) before such equality is achieved,
then, in addition to the unpaid principal and accrued interest then owing
pursuant to the other provisions of the Loan Documents, Borrower promises to pay
on demand to the order of the holder of each Note interest in an amount equal to
the excess (if any) of (a) the lesser of (i) the total interest which would have
accrued on such Note if the Stated Rate had been defined as equal to the Ceiling
Rate from time to time in effect and (ii) the total interest which would have
accrued on such Note if the Stated Rate were not so prohibited from exceeding
the Ceiling Rate, over (b) the total interest actually accrued on such Note to
such maturity (or prepayment) date. Without notice to Borrower or any other
Person, the Stated Rate shall automatically fluctuate upward and downward in
accordance with the provisions of this definition.
Subordinated Indebtedness means all Indebtedness of Borrower and its
Subsidiaries which has been subordinated on terms and conditions satisfactory to
the Super Majority Lenders, in their sole discretion, to the Obligations,
whether now existing or hereafter incurred. Indebtedness shall not be
considered as "Subordinated Indebtedness" unless and until Agent shall have
received copies of the documentation evidencing or relating to such Indebtedness
together with a subordination agreement, in Proper Form, duly executed by the
holder or holders of such Indebtedness and evidencing the terms and conditions
of subordination required by the Super Majority Lenders.
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Subsidiary means, as to a particular parent Corporation, any Corporation of
which more than 50% of the indicia of equity rights (whether outstanding capital
stock or otherwise) is at the time directly or indirectly owned by, such parent
Corporation.
Super Majority Lenders means, at any time while no Loans are outstanding,
Lenders having greater than 66-2/3% of the aggregate amount of Revolving Loan
Commitments, and at any time while Loans are outstanding, Lenders having greater
than 66-2/3% of the aggregate amount of Loans plus available Revolving Loan
Commitments.
Tangible Net Worth shall mean total assets (valued at cost less normal
depreciation), less (a) all intangibles and (b) all liabilities (excluding
contingent and indirect liabilities), all determined in accordance with GAAP.
The term "intangibles" shall include, without limitation, (1) deferred charges;
(2) the amount of any write-up in the book value of any acquired assets in
excess of fair market value and (3) the aggregate of all amounts appearing on
the assets side of any such balance sheet for franchises, licenses, permits,
patents, patent applications, copyrights, trademarks, trade names, goodwill,
treasury stock, experimental or organizational expenses and other like
intangibles. The term "liabilities" shall include, without limitation, (1)
Indebtedness secured by Liens on Property of the Person with respect to which
Tangible Net Worth is being computed, whether or not such Person is liable for
the payment thereof; (2) deferred liabilities, and (3) Capital Lease
Obligations. Tangible Net Worth shall be calculated on a consolidated basis.
Taxes shall have the meaning ascribed to it in Section 4.1(d) hereof.
Total Liabilities to Tangible Net Worth and Subordinated Indebtedness Ratio
means, as of any day, the ratio of (a) total liabilities (other than
Subordinated Indebtedness) of Borrower and its consolidated Subsidiaries as of
such date to (b) the sum of Tangible Net Worth as such date plus Subordinated
Indebtedness of Borrower and its consolidated Subsidiaries as of such date.
Unfunded Liabilities means, with respect to any Plan, at any time, the
amount (if any) by which (a) the present value of all benefits under such Plan
exceeds (b) the fair market value of all Plan assets allocable to such benefits,
all determined as of the then most recent actuarial valuation report for such
Plan, but only to the extent that such excess represents a potential liability
of any member of the Controlled Group to the PBGC or a Plan under Title IV of
ERISA. With respect to multi-employer Plans, the term "Unfunded Liabilities"
shall also include contingent liability for withdrawal liability under Section
4201 of ERISA to all multi-employer Plans to which Borrower or any member of a
Controlled Group for employees of Borrower contributes in the event of complete
withdrawal from such plans.
1.2 Miscellaneous. The words "hereof," "herein," and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement.
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2. Commitments and Loans.
2.1 Loans. Each Lender severally agrees, subject to all of the terms and
conditions of this Agreement (including, without limitation, Sections 5.1 and
5.2 hereof), to make Loans under this Section to Borrower from time to time on
or after the Effective Date and during the Revolving Loan Availability Period,
in an aggregate principal amount at any one time outstanding (including its
Revolving Loan Commitment Percentage of all Letter of Credit Liabilities at such
time) up to but not exceeding such Lender's Revolving Loan Commitment Percentage
of the Maximum Revolving Loan Available Amount. Subject to the conditions in
this Agreement, any such Revolving Loan repaid prior to the Revolving Loan
Termination Date may be reborrowed pursuant to the terms of this Agreement;
provided, that any and all such Revolving Loans shall be due and payable in full
on the Revolving Loan Termination Date. Borrower, Agent and the Lenders agree
pursuant to Chapter 346 ("Chapter 346") of the Texas Finance Code, that Chapter
346 (which relates to open-end line of credit revolving loan accounts) shall not
apply to this Agreement, the Notes or any Obligation and that neither the Notes
nor any Obligation shall be governed by Chapter 346 or subject to its provisions
in any manner whatsoever. The aggregate of all Revolving Loans to be made by
the Lenders in connection with a particular borrowing shall be equal to the
lesser of (a) the remaining unused portion of the Revolving Loan Commitments or
(b) a multiple of $100,000.
2.2 Letters of Credit.
(a) Letters of Credit. Subject to the terms and conditions of this
Agreement, and on the condition that aggregate Letter of Credit Liabilities
shall never exceed $500,000, (i) Borrower shall have the right to, in addition
to Loans provided for in Section 2.1 hereof, utilize the Revolving Loan
Commitments from time to time during the Revolving Loan Availability Period by
obtaining the issuance of letters of credit for the account of Borrower if
Borrower shall so request in the notice referred to in Section 2.2(b)(i) hereof
(such letters of credit, as any of them may be amended, supplemented, extended
or confirmed from time to time, being herein collectively called the "Letters of
Credit)" and (ii) Comerica agrees to issue such Letters of Credit. Upon the
date of the issuance of a Letter of Credit, the applicable Issuer shall be
deemed, without further action by any party hereto, to have sold to each
Revolving Loan Lender, and each such Lender shall be deemed, without further
action by any party hereto, to have purchased from the applicable Issuer, a
participation, to the extent of such Lender's Revolving Loan Commitment
Percentage, in such Letter of Credit and the related Letter of Credit
Liabilities, which participation shall terminate on the earlier of the
expiration date of such Letter of Credit or the Revolving Loan Termination Date.
Any Letter of Credit that shall have an expiration date after the Revolving Loan
Termination Date shall be subject to Cover. Comerica or, with the prior
approval of Borrower and Agent, another Lender shall be the Issuer of each
Letter of Credit.
(b) Additional Provisions. The following additional provisions shall apply
to each Letter of Credit:
(i) Borrower shall give Agent notice requesting each issuance of a
Letter of Credit hereunder as provided in Section 4.3 hereof and shall
furnish such additional
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information regarding such transaction as Agent may reasonably request.
Upon receipt of such notice, Agent shall promptly notify each Revolving
Loan Lender of the contents thereof and of such Lender's Revolving Loan
Commitment Percentage of the amount of such proposed Letter of Credit.
(ii) No Letter of Credit may be issued if after giving effect thereto
the sum of (A) the aggregate outstanding principal amount of Revolving
Loans plus (B) the aggregate Letter of Credit Liabilities would exceed the
Maximum Revolving Loan Available Amount. On each day during the period
commencing with the issuance of any Letter of Credit and until such Letter
of Credit shall have expired or been terminated, the Revolving Loan
Commitment of each Revolving Loan Lender shall be deemed to be utilized for
all purposes hereof, including Section 2.4(a), in an amount equal to such
Lender's Revolving Loan Commitment Percentage of the amount then available
for drawings under such Letter of Credit (or any unreimbursed drawings
under such Letter of Credit).
(iii) Upon receipt from the beneficiary of any Letter of Credit of
any demand for payment thereunder, Agent shall promptly notify Borrower and
each Lender as to the amount to be paid as a result of such demand and the
payment date therefor. If at any time prior to the earlier of the
expiration date of a Letter of Credit or the Revolving Loan Termination
Date any Issuer shall have made a payment to a beneficiary of a Letter of
Credit in respect of a drawing under such Letter of Credit, each Revolving
Loan Lender will pay to Agent immediately upon demand by such Issuer at any
time during the period commencing after such payment until reimbursement
thereof in full by Borrower, an amount equal to such Lender's Revolving
Loan Commitment Percentage of such payment, together with interest on such
amount for each day from the date of demand for such payment (or, if such
demand is made after 11:00 a.m. Dallas time on such date, from the next
succeeding Business Day) to the date of payment by such Lender of such
amount at a rate of interest per annum equal to the Federal Funds Rate for
such period. To the extent that it is ultimately determined that the
Borrower is relieved of its obligation to reimburse the applicable Issuer
because of such Issuer's gross negligence or willful misconduct in
determining that documents received under any applicable Letter of Credit
comply with the terms thereof, the applicable Issuer shall be obligated to
refund to the paying Lenders all amounts paid to such Issuer to reimburse
Issuer for the applicable drawing under such Letter of Credit.
(iv) Borrower shall be irrevocably and unconditionally obligated
forthwith to reimburse Agent, on the date on which the Agent notifies
Borrower of the date and amount of any payment by the Issuer of any drawing
under a Letter of Credit, for the amount paid by any Issuer upon such
drawing, without presentment, demand, protest or other formalities of any
kind, all of which are hereby waived. Such reimbursement may, subject to
satisfaction of the conditions in Sections 5.1 and 5.2 hereof, the
limitation on size contained in Section 2.1 and to the Maximum Revolving
Loan Available Amount (after adjustment in the same to reflect the
elimination of the corresponding Letter of Credit Liability), be made by
the borrowing of Revolving Loans. Agent will pay to each Revolving Loan
Lender such Lender's Revolving Loan Commitment Percentage of all amounts
received from Borrower
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for application in payment, in whole or in part, of the Reimbursement
Obligation in respect of any Letter of Credit, but only to the extent such
Lender has made payment to Agent in respect of such Letter of Credit
pursuant to clause (iii) above.
(v) Borrower will pay to Agent at the Principal Office for the account
of each Revolving Loan Lender a letter of credit fee with respect to each
Letter of Credit equal to the greater of (x) $300 or (y) a per annum fee of
one percent (1%) multiplied by the face amount of each Letter of Credit
(and computed on the basis of the actual number of days elapsed in a year
composed of 360 days), in each case for the period from and including the
date of issuance of such Letter of Credit to and including the stated date
of expiration thereof, such fee to be due and payable in advance on the
date of the issuance thereof. Agent will pay to each Revolving Loan
Lender, promptly after receiving any payment in respect of letter of credit
fees referred to in this clause (v), an amount equal to the product of such
Lender's Revolving Loan Commitment Percentage times the amount of such
fees. In addition to and cumulative of the above described fees, Borrower
shall pay to Agent, for the account of the applicable Issuer, in advance on
the date of the issuance of the applicable Letter of Credit, a per annum
fronting fee in an amount equal to 1/8% of the face amount of the
applicable Letter of Credit (such fronting fee to be retained by the
applicable Issuer for its own account).
(vi) The issuance by the applicable Issuer of each Letter of Credit
shall, in addition to the conditions precedent set forth in Section 5
hereof, be subject to the conditions precedent (A) that such Letter of
Credit shall be in such form and contain such terms as shall be reasonably
satisfactory to Agent, and (B) that Borrower shall have executed and
delivered such Applications and other instruments and agreements relating
to such Letter of Credit as Agent shall have reasonably requested and are
not inconsistent with the terms of this Agreement. In the event of a
conflict between the terms of this Agreement and the terms of any
Application, the Agent, each Issuer, the Borrower and each Lender agree
that the terms hereof shall control.
(vii) Issuer will send to the Borrower and each Lender, immediately
upon issuance of any Letter of Credit issued by Issuer or any amendment
thereto, a true and correct copy of such Letter of Credit or amendment.
(c) Indemnification; Release. Borrower hereby indemnifies and holds
harmless Agent, each Revolving Loan Lender and each Issuer from and against any
and all claims, damages, losses, liabilities, costs or expenses which Agent,
such Lender or such Issuer may incur (or which may be claimed against Agent,
such Lender or such Issuer by any Person whatsoever), REGARDLESS OF WHETHER
CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES,
in connection with the execution and delivery of any Letter of Credit or
transfer of or payment or failure to pay under any Letter of Credit; provided
that Borrower shall not be required to indemnify or hold harmless any party
seeking indemnification for any claims, damages, losses, liabilities, costs or
expenses to the extent, but only to the extent, caused by (i) the willful
misconduct or gross negligence of the party seeking indemnification or
exoneration, or (ii) the failure by the party seeking indemnification to pay
under any Letter of Credit after the
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presentation to it of a request required to be paid under applicable law.
Borrower hereby releases, waives and discharges Agent, each Revolving Loan
Lender and each Issuer from any claims, causes of action, damages, losses,
liabilities, reasonable costs or expenses which may now exist or may hereafter
arise, REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY
OF THE INDEMNIFIED PARTIES, by reason of or in connection with the failure of
Agent, any Issuer or any other Revolving Loan Lender to fulfill or comply with
its obligations to the other parties hereunder (but nothing herein contained
shall affect any rights Borrower may have against such defaulting party).
Nothing in this Section 2.2(c) is intended to limit the obligations of Borrower
under any other provision of this Agreement.
(d) Additional Costs in Respect of Letters of Credit. Subject to Sections
11.7 and 11.15 hereof, if as a result of any Regulatory Change there shall be
imposed, modified or deemed applicable any tax (other than any tax based on or
measured by net income), reserve, special deposit or similar requirement against
or with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder or participations in such Letters of Credit, and the result
shall be to increase the cost to any Revolving Loan Lender of issuing or
maintaining any Letter of Credit or any participation therein, or materially
reduce any amount receivable by any Revolving Loan Lender hereunder in respect
of any Letter of Credit or any participation therein (which increase in cost, or
reduction in amount receivable, shall be the result of such Lender's reasonable
allocation of the aggregate of such increases or reductions resulting from such
event), then such Lender shall notify Borrower through Agent (which notice shall
be accompanied by a statement setting forth in reasonable detail the basis for
the determination of the amount due), and within 15 Business Days after demand
therefor by such Lender through Agent, Borrower shall pay to such Lender, from
time to time as specified by such Lender, such additional amounts as shall be
sufficient to compensate such Lender for such increased costs or reductions in
amount. Such statement as to such increased costs or reductions in amount
incurred by such Lender, submitted by such Lender to Borrower, shall be
conclusive as to the amount thereof, absent manifest error, and may be computed
using any reasonable averaging and attribution method. Each Lender will notify
Borrower through Agent of any event occurring after the date of this Agreement
which will entitle such Lender to compensation pursuant to this Section as
promptly as practicable after any executive officer of such Lender obtains
knowledge thereof and determines to request such compensation, and (if so
requested by Borrower through Agent) will designate a different lending office
of such Lender for the issuance or maintenance of Letters of Credit by such
Lender or will take such other action as Borrower may reasonably request if such
designation or action is consistent with the internal policy of such Lender and
legal and regulatory restrictions, can be undertaken at no additional cost
(unless Borrower agrees to pay such costs), will avoid the need for, or reduce
the amount of, such compensation and will not, in the sole opinion of such
Lender, be disadvantageous to such Lender (provided that such Lender shall have
no obligation so to designate a different lending office which is not located in
the United States of America).
2.3 Terminations or Reductions of Commitments.
(a) Mandatory. On the Revolving Loan Termination Date, all Revolving Loan
Commitments shall be terminated in their entirety.
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(b) Optional. Borrower shall have the right to terminate or reduce the
unused portion of the Revolving Loan Commitments at any time or from time to
time, provided that (i) Borrower shall give notice of each such termination or
reduction to Agent as provided in Section 4.3 hereof and (ii) each such partial
reduction shall be in an integral multiple of $500,000.
(c) No Reinstatement. No termination or reduction of the Revolving Loan
Commitments may be reinstated without the written approval of Agent and the
Lenders.
2.4 Commitment Fees.
(a) Borrower shall pay to Agent for the account of each Revolving Loan
Lender revolving loan commitment fees for the Revolving Loan Availability Period
at a rate per annum equal to 0.25%. Such revolving loan commitment fees shall
be computed (on the basis of the actual number of days elapsed in a year
composed of 360 days) on each day and shall be based on the excess of (x) the
aggregate amount of each Revolving Loan Lender's Revolving Loan Commitment for
such day over (y) the sum of (i) the aggregate unpaid principal balance of such
Lender's Revolving Note on such day plus (ii) the aggregate Letter of Credit
Liabilities as to such Lender for such day. Accrued revolving loan commitment
fees shall be payable in arrears on the Quarterly Dates prior to the Revolving
Loan Termination Date and on the Revolving Loan Termination Date.
(b) All past due fees payable under this Section shall bear interest at the
Past Due Rate.
2.5 Several Obligations. The failure of any Lender to make any Loan to be
made by it on the date specified therefor shall not relieve any other Lender of
its obligation to make its Loan on such date, but neither Agent nor any Lender
shall be responsible or liable for the failure of any other Lender to make a
Loan to be made by such other Lender or to participate in, or co-issue, any
Letter of Credit. Notwithstanding anything contained herein to the contrary, (a)
no Lender shall be required to make or maintain Revolving Loans at any time
outstanding if as a result the total Revolving Loan Obligations to such Lender
shall exceed the lesser of (1) such Lender's Revolving Loan Commitment
Percentage of all Revolving Loan Obligations and (2) such Lender's Revolving
Loan Commitment Percentage of the Maximum Revolving Loan Available Amount and
(b) if a Revolving Loan Lender fails to make a Revolving Loan as and when
required hereunder, then upon each subsequent event which would otherwise result
in funds being paid to the defaulting Lender, the amount which would have been
paid to the defaulting Lender shall be divided among the non-defaulting Lenders
ratably according to their respective shares of the outstanding Revolving Loan
Commitment Percentages until the Revolving Loan Obligations of each Revolving
Loan Lender (including the defaulting Lender) are equal to such Lender's
Revolving Loan Commitment Percentage of the total Revolving Loan Obligations.
2.6 Notes. The Revolving Loans made by each Lender shall be evidenced by
a single Revolving Note of Borrower in substantially the form of Exhibit C
hereto payable to the order of such Lender in a principal amount equal to the
Revolving Loan Commitment of such Lender, and otherwise duly completed. The
promissory notes described in this Section are each, together with all renewals,
extensions, modifications and replacements thereof and substitutions therefor,
called
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a "Note" and collectively called the "Notes". Each Lender is hereby authorized
by Borrower to endorse on the schedule (or a continuation thereof) that may be
attached to each Note of such Lender, to the extent applicable, the date,
amount, type of and the applicable period of interest for each Loan made by such
Lender to Borrower hereunder, and the amount of each payment or prepayment of
principal of such Loan received by such Lender, provided that any failure by
such Lender to make any such endorsement shall not affect the obligations of
Borrower under such Note or hereunder in respect of such Loan.
2.7 Use of Proceeds. The proceeds of the Revolving Loans shall be used to
refinance existing Borrowed Money Indebtedness of Borrower and for other working
capital and general corporate purposes. Neither Agent nor any Lender shall have
any responsibility as to the use of any proceeds of the Loans.
3. Borrowings, Payments, Prepayments and Interest Options.
3.1 Borrowings. Borrower shall give Agent notice of each borrowing to be
made hereunder as provided in Section 4.3 hereof and Agent shall promptly notify
each Lender of such request. Not later than 11:00 a.m. Dallas time on the date
specified for each such borrowing hereunder, each Lender shall make available
the amount of the Loan, if any, to be made by it on such date to Agent at its
Principal Office, in immediately available funds, for the account of Borrower.
Such amounts received by Agent will be held in an account maintained by Borrower
with Agent. The amounts so received by Agent shall, subject to the terms and
conditions of this Agreement, be made available to Borrower by wiring or
otherwise transferring, in immediately available funds, such amount to an
account designated by Borrower and approved by Agent.
3.2 Payments and Prepayments.
(a) Optional Prepayments. Except as provided in Section 3.3 hereof,
Borrower shall have the right to prepay, on any Business Day, in whole or in
part, without the payment of any premium, penalty or fee, any Loans at any time
or from time to time, provided that Borrower shall give Agent notice of each
such prepayment as provided in Section 4.3 hereof. Each optional prepayment on
a Loan shall be in an amount equal to an integral multiple of $100,000.
(b) Borrowing Base. Borrower shall from time to time on demand by Agent
prepay the Revolving Loans (or provide Cover for Letter of Credit Liabilities)
in such amounts as shall be necessary so that at all times the aggregate
outstanding amount of all Revolving Loan Obligations shall be less than or equal
to the Maximum Revolving Loan Available Amount.
(c) Interest Payments. Accrued and unpaid interest on the unpaid principal
balance of the Loans shall be due and payable on the Interest Payment Dates.
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(d) Payments and Interest on Reimbursement Obligations. Borrower will pay
to Agent for the account of each Lender the amount of each Reimbursement
Obligation as set forth in Section 2.2(b)(iv). Subject to Section 11.7 hereof,
Borrower will pay to Agent for the account of each Lender interest at the
applicable Past Due Rate on any Reimbursement Obligation and on any other amount
payable by Borrower hereunder to or for the account of such Lender (but, if such
amount is interest, only to the extent legally allowed), which shall not be paid
in full within five (5) days after the date due (whether at stated maturity, by
acceleration or otherwise), for the period commencing on the expiration of such
five (5) day period until the same is paid in full.
3.3 Interest Options
(a) Options Available. The outstanding principal balance of the Notes
shall bear interest at the Base Rate; provided, that (1) all past due amounts,
both principal and accrued interest, shall bear interest at the Past Due Rate,
and (2) subject to the provisions hereof, Borrower shall have the option of
having all or any portion of the principal balances of the Notes from time to
time outstanding bear interest at a Eurodollar Rate. The records of Agent and
each of the Lenders with respect to Interest Options, Interest Periods and the
amounts of Loans to which they are applicable shall be binding and conclusive,
absent manifest error. Interest on the Loans shall be calculated at the Base
Rate except where it is expressly provided pursuant to this Agreement that a
Eurodollar Rate is to apply. Interest on the amount of each advance against the
Notes shall be computed on the amount of that advance and from the date it is
made. Notwithstanding anything in this Agreement to the contrary, for the full
term of the Notes the interest rate produced by the aggregate of all sums paid
or agreed to be paid to the holders of the Notes for the use, forbearance or
detention of the debt evidenced thereby (including all interest on the Notes at
the Stated Rate plus the Additional Interest) shall not exceed the Ceiling Rate.
(b) Designation and Conversion. Borrower shall have the right to designate
or convert its Interest Options in accordance with the provisions hereof.
Provided no Event of Default has occurred and is continuing and subject to the
last sentence of Section 3.3(a) and the provisions of Section 3.3(c), Borrower
may elect to have a Eurodollar Rate apply or continue to apply to all or any
portion of the principal balance of the Notes. Each change in Interest Options
shall be a conversion of the rate of interest applicable to the specified
portion of the Loans, but such conversion shall not change the respective
outstanding principal balances of the Notes. The Interest Options shall be
designated or converted in the manner provided below:
(i) Borrower shall give Agent telephonic notice, promptly confirmed by a
Rate Designation Notice (and Agent shall promptly inform each Lender
thereof). Each such telephonic and written notice shall specify the
amount of the Loan which is the subject of the designation, if any;
the amount of borrowings into which such borrow ings are to be
converted or for which an Interest Option is designated; the proposed
date for the designation or conversion and the Interest Period or
Periods, if any, selected by Borrower. Such telephonic notice shall
be irrevocable and shall be given to Agent no later than the
applicable Rate Designation Date.
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(ii) No more than three (3) LIBOR Borrowings shall be in effect with
respect to the Revolving Loans at any time.
(iii) Each designation or conversion of a LIBOR Borrowing shall occur on a
LIBOR Business Day.
(iv) Except as provided in Section 3.3(c) hereof, no LIBOR Borrowing may be
converted to a Base Rate Borrowing or another LIBOR Borrowing on any
day other than the last day of the applicable Interest Period.
(v) Each request for a LIBOR Borrowing shall be in the amount equal to
$500,000 or an integral multiple of $100,000 in excess thereof.
(vi) Each designation of an Interest Option with respect to the Revolving
Notes shall apply to all of the Revolving Notes ratably in accordance
with their respective outstanding principal balances. If any Lender
assigns an interest in any of its Notes when any LIBOR Borrowing is
outstanding with respect thereto, then such assignee shall have its
ratable interest in such LIBOR Borrowing.
(c) Special Provisions Applicable to LIBOR Borrowings.
(i) Options Unlawful. If the adoption of any applicable Legal Requirement
after the Effective Date or any change after the Effective Date in any
applicable Legal Requirement or in the interpretation or administration thereof
by any Governmental Authority or compliance by any Lender with any request or
directive (whether or not having the force of law) issued after the Effective
Date by any central bank or other Governmental Authority shall at any time make
it unlawful or impossible for any Lender to permit the establishment of or to
maintain any LIBOR Borrowing, the commitment of such Lender to establish such
LIBOR Borrowing shall forthwith be canceled and Borrower shall on the last day
the Interest Period relating to any outstanding LIBOR Borrowing (or within such
earlier period as may be required by applicable law) (1) convert the LIBOR
Borrowing of such Lender to a Base Rate Borrowing; (2) pay all accrued and
unpaid interest to date on the amount so converted; and (3) pay any amounts
required to compensate each Lender for any additional cost or expense which any
Lender may incur as a result of such adoption of or change in such Legal
Requirement or in the interpretation or administration thereof and any Funding
Loss which any Lender may incur as a result of such conversion. If, when Agent
so notifies Borrower, Borrower has given a Rate Designation Notice specifying a
LIBOR Borrowing but the selected Interest Period has not yet begun, as to the
applicable Lender such Rate Designation Notice shall be deemed to be of no force
and effect, as if never made, and the balance of the Loans made by such Lender
specified in such Rate Designation Notice shall bear interest at the Base Rate
until a different available Interest Option shall be designated in accordance
herewith.
(ii) Increased Cost of Borrowings. Subject to Section 11.15, if the
adoption after the Effective Date of any applicable Legal Requirement or any
change after the Effective Date in any applicable Legal Requirement or in the
interpretation or administration thereof by any Governmental
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Authority or compliance by any Lender with any request or directive (whether or
not having the force of law) issued after the Effective Date by any central bank
or Governmental Authority shall at any time as a result of any portion of the
principal balances of the Notes being maintained on the basis of a Eurodollar
Rate:
(1) subject any Lender to any Taxes, or any deduction or withholding
for any Taxes, on or from any payment due under any LIBOR
Borrowing or other amount due hereunder, other than income and
franchise taxes of the United States or its political subdivisions
or such other jurisdiction in which the applicable Lender has its
principal office or applicable lending office; or
(2) change the basis of taxation of payments due from Borrower to any
Lender under any LIBOR Borrowing (otherwise than by a change in
the rate of taxation of the overall net income of such Lender); or
(3) impose, modify, increase or deem applicable any reserve
requirement (excluding that portion of any reserve requirement
included in the calculation of the applicable Eurodollar Rate),
special deposit requirement or similar requirement (including, but
not limited to, state law requirements) against assets of any
Lender, or against deposits with any Lender, or against loans made
by any Lender, or against any other funds, obligations or other
Property owned or held by any Lender; or
(4) impose on any Lender any other condition regarding any LIBOR
Borrowing;
and the result of any of the foregoing is to increase the cost to any Lender of
agreeing to make or of making, renewing or maintaining such LIBOR Borrowing, or
reduce the amount of principal or interest received by any Lender, then, within
15 Business Days after demand by Agent (accompanied by a statement setting forth
in reasonable detail the applicable Lender's basis therefor), Borrower shall pay
to Agent additional amounts which shall compensate each Lender for such
increased cost or reduced amount. The determination by any Lender of the amount
of any such increased cost, increased reserve requirement or reduced amount
shall be conclusive and binding, absent manifest error. Borrower shall have the
right, if it receives from Agent any notice referred to in this paragraph, upon
three Business Days' notice to Agent (which shall notify each affected Lender),
either (i) to repay in full (but not in part) any borrowing with respect to
which such notice was given, together with any accrued interest thereon, or (ii)
to convert the LIBOR Borrowing which is the subject of the notice to a Base Rate
Borrowing; provided, that any such repayment or conversion shall be accompanied
by payment of (x) the amount required to compensate each Lender for the
increased cost or reduced amount referred to in the preceding paragraph; (y) all
accrued and unpaid interest to date on the amount so repaid or converted, and
(z) any Funding Loss which any Lender may incur as a result of such repayment or
conversion. Each Lender will notify Borrower through
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Agent of any event occurring after the date of this Agreement which will entitle
such Lender to compensation pursuant to this Section as promptly as practicable
after it obtains knowledge thereof and determines to request such compensation,
and (if so requested by Borrower through Agent) will designate a different
lending office of such Lender for the applicable LIBOR Borrowing or will take
such other action as Borrower may reasonable request if such designation or
action is consistent with the internal policy of such Lender and legal and
regulatory restrictions, will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender (provided that such Lender shall have no
obligation so to designate a different lending office which is located in the
United States of America).
(iii) Inadequacy of Pricing and Rate Determination. If, for any reason with
respect to any Interest Period, Agent (or, in the case of clause 3 below, the
applicable Lender) shall have determined (which determination shall be
conclusive and binding upon Borrower, absent manifest error) that:
(1) Agent is unable through its customary general practices to
determine any applicable Eurodollar Rate, or
(2) by reason of circumstances affecting the applicable market,
generally, Agent is not being offered deposits in United States
dollars in such market, for the applicable Interest Period and in
an amount equal to the amount of any applicable LIBOR Borrowing
requested by Borrower, or
(3) any applicable Eurodollar Rate will not adequately and fairly
reflect the cost to any Lender of making and maintaining such
LIBOR Borrowing hereunder for any proposed Interest Period,
then Agent shall give Borrower notice thereof and thereupon, (A) any Rate
Designation Notice previously given by Borrower designating the applicable LIBOR
Borrowing which has not commenced as of the date of such notice from Agent shall
be deemed for all purposes hereof to be of no force and effect, as if never
given, and (B) until Agent shall notify Borrower that the circumstances giving
rise to such notice from Agent no longer exist, each Rate Designation Notice
requesting the applicable Eurodollar Rate shall be deemed a request for a Base
Rate Borrowing, and any applicable LIBOR Borrowing then outstanding shall be
converted, without any notice to or from Borrower, upon the termination of the
Interest Period then in effect with respect to it, to a Base Rate Borrowing.
(iv) Funding Losses. Borrower shall indemnify each Lender against and hold
each Lender harmless from any Funding Loss. Subject to Section 11.15, this
indemnity shall survive the payment of the Notes. Within 15 Business Days after
demand by Agent (accompanied by a certificate of such Lender setting forth in
reasonable detail the amount and calculation of the amount claimed as to any
Funding Losses, which shall be conclusive and binding upon Borrower, absent
manifest error), Borrower shall pay to Agent, for the account of such Lender,
the amount of such Funding Losses.
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(d) Funding Offices; Adjustments Automatic; Calculation Year. Any Lender
may, if it so elects, fulfill its obligation as to any LIBOR Borrowing by
causing a branch or affiliate of such Lender to make such Loan and may transfer
and carry such Loan at, to or for the account of any branch office or affiliate
of such Lender; provided, that in such event for the purposes of this Agreement
such Loan shall be deemed to have been made by such Lender and the obligation of
Borrower to repay such Loan shall nevertheless be to such Lender and shall be
deemed held by it for the account of such branch or affiliate. Without notice
to Borrower or any other Person, each rate required to be calculated or
determined under this Agreement shall automatically fluctuate upward and
downward in accordance with the provisions of this Agreement. Interest at the
Prime Rate shall be computed on the basis of the actual number of days elapsed
in a year consisting of 365 or 366 days, as the case may be. All other interest
required to be calculated or determined under this Agreement shall be computed
on the basis of the actual number of days elapsed in a year consisting of 360
days, unless the Ceiling Rate would thereby be exceeded, in which event, to the
extent necessary to avoid exceeding the Ceiling Rate, the applicable interest
shall be computed on the basis of the actual number of days elapsed in the
applicable calendar year in which accrued.
(e) Funding Sources. Notwithstanding any provision of this Agreement to
the contrary, each Lender shall be entitled to fund and maintain its funding of
all or any part of the Loans in any manner it sees fit, it being understood,
however, that for the purposes of this Agreement all determinations hereunder
shall be made as if each Lender had actually funded and maintained each LIBOR
Borrowing during each Interest Period through the purchase of deposits having a
maturity corresponding to such Interest Period and bearing an interest rate
equal to the Eurodollar Rate for such Interest Period.
4. Payments; Pro Rata Treatment; Computations, Etc.
4.1 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
Borrower hereunder, under the Notes and under the other Loan Documents shall be
made in Dollars, in immediately available funds, to Agent at the Principal
Office (or in the case of a successor Agent, at the principal office of such
successor Agent in the United States), not later than 11:00 a.m. Dallas time on
the date on which such payment shall become due (each such payment made after
such time on such due date to be deemed to have been made on the next succeeding
Business Day).
(b) Borrower shall, at the time of making each payment hereunder, under any
Note or under any other Loan Document, specify to Agent the Loans or other
amounts payable by Borrower hereunder or thereunder to which such payment is to
be applied. Each payment received by Agent hereunder, under any Note or under
any other Loan Document for the account of a Lender shall be paid promptly to
such Lender, in immediately available funds. If Agent fails to send to any
Lender the applicable amount by the close of business on the date any such
payment is received by Agent if such payment is received prior to 11:00 a.m.
Dallas time (or on the next succeeding Business Day
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with respect to payments which are received after 11:00 a.m. Dallas time), Agent
shall pay to the applicable Lender interest on such amount from such date at the
Federal Funds Rate.
(c) If the due date of any payment hereunder or under any Note falls on a
day which is not a Business Day, the due date for such payments (except as
otherwise provided in clause (2) of the definition of "Interest Period") shall
be extended to the next succeeding Business Day and interest shall be payable
for any principal so extended for the period of such extension.
(d) All payments by the Borrower hereunder or under any other Loan Document
shall be made free and clear of and without deduction for or on account of any
present or future income, stamp, or other taxes, fees, duties, withholding or
other charges of any nature whatsoever imposed by any taxing authority excluding
in the case of Agent, each Issuer and each Lender taxes imposed on or measured
by its net income or franchise taxes imposed by the jurisdiction in which it is
organized or through which it acts for purposes of this Agreement (such non-
excluded items being hereinafter referred to as "Taxes"). If as a result of any
change in law (or the interpretation thereof) after the date that Agent, the
applicable Issuer or the applicable Lender became a party to this Agreement, any
withholding or deduction from any payment to be made to, or for the account of,
such Person by any Obligor hereunder or under any other Loan Document is
required in respect of any Taxes pursuant to any applicable law, rule, or
regulation, then the Borrower will (i) pay to the relevant authority the full
amount required to be so withheld or deducted; (ii) to the extent available,
promptly forward to the Agent an official receipt or other documentation
reasonably satisfactory to the Agent evidencing such payment to such authority;
and (iii) pay to the Agent, for the account of each affected Person, such
additional amount or amounts as are necessary to ensure that the net amount
actually received by such Lender will equal the full amount such Person would
have received had no such withholding or deduction been required. Each such
Person shall determine such additional amount or amounts payable to it (which
determination shall, in the absence of manifest error, be conclusive and binding
on the Borrower). If Agent, any Issuer or any Lender becomes aware that any
such withholding or deduction from any payment to be made by any Obligor
hereunder or under any other Loan Document is required, then such Person shall
promptly notify the Agent and the Borrower thereof stating the reasons therefor
and the additional amount required to be paid under this Section. Each Lender
shall execute and deliver to the Agent and Borrower such forms as it may be
required to execute and deliver pursuant to Section 11.13 hereof. To the extent
that any such withholding or deduction results from the failure of a Lender to
provide a form required by Section 11.13 hereof (unless such failure is due to
some prohibition under applicable Legal Requirements), the Borrower shall have
no obligation to pay the additional amount required by clause (iii) above.
Anything in this Section notwithstanding, if any Lender elects to require
payment by the Borrower of any material amount under this Section, the Borrower
may, within 60 days after the date of receiving notice thereof and so long as no
Default shall have occurred and be continuing, elect to terminate such Lender as
a party to this Agreement; provided that, concurrently with such termination the
Borrower shall (i) if the Agent and each of the other Lenders shall consent, pay
that Lender all principal, interest and fees and other amounts owed to such
Lender through such date of termination or (ii) have arranged for another
financial institution approved by the Agent (such approval not to be
unreasonably withheld or delayed) as of such date, to become a substitute Lender
for all purposes under this Agreement in the manner provided in Section 11.6;
provided further that,
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prior to substitution for any Lender, the Borrower shall have given written
notice to the Agent of such intention and the Lenders shall have the option, but
no obligation, for a period of 60 days after receipt of such notice, to increase
their Commitments in order to replace the affected Lender in lieu of such
substitution.
4.2 Pro Rata Treatment. Except to the extent otherwise provided herein:
(a) each borrowing from the Lenders under Section 2.1 hereof shall be made
ratably from the Revolving Loan Lenders in accordance with their respective
Revolving Loan Commitments; (b) each payment of revolving loan commitment fees
shall be made for the account of the Revolving Loan Lenders, and each
termination or reduction of the Revolving Loan Commitments of the Revolving Loan
Lenders under Section 2.3 hereof shall be applied, pro rata, according to the
Revolving Loan Lenders' respective Revolving Loan Commitments; (c) each payment
by Borrower of principal of or interest on the Revolving Loans shall be made to
Agent for the account of the Lenders pro rata in accordance with the respective
unpaid principal amounts of the respective unpai principal amounts of such
Revolving Loans held by the Lenders, and (d) the Revolving Loan Lenders (other
than the applicable Issuer) shall purchase from the applicable Issuer
participations in each Letter of Credit to the extent of their respective
Revolving Loan Commitment Percentages.
4.3 Certain Actions, Notices, Etc. Notices to Agent of any termination or
reduction of Revolving Loan Commitments and of borrowings and optional
prepayments of Loans and requests for issuances of Letters of Credit shall be
irrevocable and shall be effective only if received by Agent not later than
11:00 a.m. Dallas time on the number of Business Days prior to the date of the
relevant termination, reduction, borrowing and/or prepayment specified below:
Number of Business Days
Prior Notice
-----------------------
Termination or Reduction of
Revolving Loan Commitments 5
Revolving Loan repayment same day
Borrowing at the Base Rate 1
Letter of Credit issuance 2
Prepayments required pursuant to
Section 3.2(b) same day
Selection of a Eurodollar Rate 3 LIBOR
Business Days
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Each such notice of termination or reduction shall specify the amount of the
applicable Revolving Loan Commitment to be terminated or reduced. Each such
notice of borrowing or prepayment shall specify the amount of the Loans to be
borrowed or prepaid and the date of borrowing or prepayment (which shall be a
Business Day). Agent shall promptly notify the affected Lenders of the contents
of each such notice.
4.4 Non-Receipt of Funds by Agent. Unless Agent shall have been notified
by a Lender or Borrower (the "Payor") prior to the date on which such Lender is
to make payment to Agent of the proceeds of a Loan (or funding of a drawing
under a Letter of Credit or reimbursement with respect to any drawing under a
Letter of Credit) to be made by it hereunder or Borrower is to make a payment to
Agent for the account of one or more of the Lenders, as the case may be (such
payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to Agent, Agent may assume that the Required Payment has been made and
may, in reliance upon such assumption (but shall not be required to), make the
amount thereof available to the intended recipient on such date and, if the
Payor has not in fact made the Required Payment to Agent, the recipient of such
payment (or, if such recipient is the beneficiary of a Letter of Credit,
Borrower and, if Borrower fails to pay the amount thereof to Agent forthwith
upon demand, the Lenders ratably in proportion to their respective Revolving
Loan Commitment Percentages) shall, on demand, pay to Agent the amount made
available by Agent, together with interest thereon in respect of the period
commencing on the date such amount was so made available by Agent until the date
Agent recovers such amount at a rate per annum equal to the Federal Funds Rate
for such period.
4.5 Sharing of Payments, Etc. If a Lender shall obtain payment of any
principal of or interest on any Loan made by it under this Agreement, on any
Reimbursement Obligation or on any other Obligation then due to such Lender
hereunder, through the exercise of any right of set-off (including, without
limitation, any right of setoff or Lien granted under Section 9.2 hereof),
banker's lien, counterclaim or similar right or otherwise, it shall promptly
purchase from the other Lenders participations in the Loans made, or
Reimbursement Obligations or other Obligations held, by the other Lenders in
such amounts, and make such other adjustments from time to time as shall be
equitable to the end that all the Lenders shall share the benefit of such
payment (net of any expenses which may be incurred by such Lender in obtaining
or preserving such benefit) pro rata in accordance with the unpaid Obligations
then due to each of them. To such end all the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if such payment is rescinded or must otherwise be restored. Borrower agrees, to
the fullest extent it may effectively do so under applicable law, that any
Lender so purchasing a participation in the Loans made, or Reimbursement
Obligations or other Obligations held, by other Lenders may exercise all rights
of set-off, bankers' lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Loans,
Reimbursement Obligations or other Obligations in the amount of such
participation. Nothing contained herein shall require any Lender to exercise
any such right or shall affect the right of any Lender to exercise, and retain
the benefits of exercising, any such right with respect to any other
indebtedness or obligation of Borrower.
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5. Conditions Precedent.
5.1 Initial Loans and Letters of Credit. The obligation of each Lender or
each Issuer to make its initial Loans or issue or participate in a Letter of
Credit (if such Letter of Credit is issued prior to the funding of the initial
Loans) hereunder is subject to the following conditions precedent, each of which
shall have been fulfilled or waived to the reasonable satisfaction of Agent:
(a) Authorization and Status. Agent shall have received (i) copies of the
Organizational Documents of each Obligor certified as true and correct by its
secretary, assistant secretary or other equivalent officer, (ii) evidence
reasonably satisfactory to Agent of all action taken by each Obligor authorizing
the execution, delivery and performance of the Loan Documents and all other
documents related to this Agreement to which it is a party (including, without
limitation, a certificate of the secretary, assistant secretary or other
equivalent officer of each such party which is a corporation setting forth the
resolutions of its Board of Directors authorizing the transactions contemplated
thereby), and (iii) such certificates as may be appropriate to demonstrate the
qualification and good standing of each Obligor in the jurisdiction of its
organization and in each other jurisdiction where the failure in which to
qualify could reasonably be expected to have a Material Adverse Effect.
(b) Incumbency. Each Obligor shall have delivered to Agent a certificate
in respect of the name and signature of each of the officers (i) who is
authorized to sign on its behalf the applicable Loan Documents to which it is a
party related to any Loan or the issuance of any Letter of Credit and (ii) who
will, until replaced by another officer or officers duly authorized for that
purpose, act as its representative for the purposes of signing documents and
giving notices and other communications in connection with any Loan or the
issuance of any Letter of Credit. Agent and each Lender may conclusively rely
on such certificates until they receive notice in writing from the applicable
Obligor to the contrary.
(c) Notes. Agent shall have received the appropriate Notes of Borrower for
each Lender, duly completed and executed.
(d) Loan Documents. Each Obligor shall have duly executed and delivered
the Loan Documents to which it is a party (in such number of copies as Agent
shall have requested). Each such Loan Document shall be in substantially the
form furnished to the Lenders prior to their execution of this Agreement,
together with such changes therein as Agent may approve.
(e) Security Matters. All such action as Agent shall have reasonably
requested to perfect the Liens created pursuant to the Security Documents which
are in effect as of the Effective Date shall have been taken, including, without
limitation, where applicable, the filing and recording of the Security Documents
with the appropriate Governmental Authorities. Agent shall also have received
evidence satisfactory to it that the Liens created by the Security Documents
constitute first priority Liens, except for the exceptions expressly provided
for herein or therein, including, without limitation, Uniform Commercial Code
search reports, satisfactory title evidence in form and substance acceptable to
Agent, and executed releases of any prior Liens (except as permitted by Section
8.2).
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(f) Fees and Expenses. Borrower shall have paid to Agent all unpaid fees in
the amounts previously agreed upon in writing among Borrower and Agent.
(g) Insurance. Borrower shall have delivered to Agent certificates of
insurance satisfactory to Agent evidencing the existence of all insurance
required to be maintained by each Obligor by this Agreement and the Security
Documents.
(h) Opinions of Counsel. Agent shall have received such opinions of
counsel to Obligors as Agent shall reasonably request with respect to Obligors
and the Loan Documents.
(i) Consents. Agent shall have received evidence satisfactory to the Super
Majority Lenders that all material consents of each Governmental Authority and
of each other Person, if any, reasonably required in connection with (a) the
Loans and the Letters of Credit and (b) the execution, delivery and performance
of this Agreement and the other Loan Documents have been satisfactorily
obtained.
(j) Key Agreements. Agent shall have received copies of the Key
Agreements, in Proper Form, and, where applicable, shall have received evidence
satisfactory to Agent that the transactions contemplated therein have been
consummated, subject only to the requested funding of Loans. Upon request of
Agent or the Majority Lenders, the copies of any designated Key Agreements shall
be certified as true, correct and complete by Borrower.
(k) Subordinated Indebtedness. Agent shall have received evidence
reasonably satisfactory to Agent that all Liens securing existing Subordinated
Indebtedness shall have been released and terminated.
(l) Other Documents. Agent shall have received such other documents
consistent with the terms of this Agreement and relating to the transactions
contemplated hereby as Agent may reasonably request.
5.2 All Loans and Letters of Credit. The obligation of each Lender to
make any Loan to be made by it hereunder or to issue or participate in any
Letter of Credit is subject to: (a) the accuracy, in all material respects, on
the date of such Loan or such issuance of all representations and warranties of
each Obligor contained in this Agreement and the other Loan Documents; (b) Agent
shall have received the following, all of which shall be duly executed and in
Proper Form: (1) a Request for Extension of Credit as to the Loan or the Letter
of Credit, as the case may be, no later than 11:00 a.m. Dallas time on the
Business Day on which such Request for Extension of Credit must be given under
Section 4.3 hereof, (2) in the case of a Letter of Credit, an Application; (3) a
Compliance Certificate prepared using current information and, to the extent the
applicable Loan is to be used for an acquisition, prepared on a pro forma basis
giving effect to such acquisition, and (4) such other documents as Agent may
reasonably require; (c) prior to the making of such Loan or the issuance of such
Letter of Credit, there shall have occurred no event which could reasonably be
expected to have a Material Adverse Effect; (d) no Default or Event of Default
shall have occurred and be continuing, and (e) the making of such Loan or the
issuance of such Letter of Credit shall
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not be illegal or prohibited by any Legal Requirement. The submission by the
Borrower of a Request for Extension of Credit shall be deemed to be a
representation and warranty that the conditions precedent to the applicable Loan
or Letter of Credit have been satisfied.
6. Representations and Warranties.
To induce Agent, the Issuers and the Lenders to enter into this Agreement
and to make the Loans and issue or participate in the Letters of Credit,
Borrower represents and warrants (such representations and warranties to survive
any investigation and the making of the Loans and the issuance of any Letters of
Credit) to the Lenders, the Issuers and Agent as follows:
6.1 Organization. Each Obligor (a) is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization; (b)
has all necessary power and authority to conduct its business as presently
conducted, and (c) is duly qualified to do business and in good standing in the
jurisdiction of its organization and in all jurisdictions in which the failure
to so qualify could reasonably be expected to have a Material Adverse Effect.
6.2 Financial Statements. Borrower has furnished to Agent (i) audited
financial statements (including a balance sheet) as to Borrower which fairly
present in all material respects, in accordance with GAAP, the consolidated
financial condition and the results of operations of Borrower and its
Subsidiaries as at the end of the fiscal year ended December 31, 1997 and (ii)
unaudited consolidated financial statements (including a balance sheet) as to
Borrower and its Subsidiaries which fairly present in all material respects, in
accordance with GAAP, the financial condition and the results of operations of
Borrower and its Subsidiaries, on a consolidated basis, as at the end of the
fiscal quarter ended June 30, 1998. No events, conditions or circumstances have
occurred from the date that the financial statements were delivered to Agent
through the Effective Date which would cause said financial statements to be
misleading in any material respect. There are no material instruments or
liabilities which should be reflected in such financial statements provided to
Agent which are not so reflected.
6.3 Enforceable Obligations; Authorization. The Loan Documents to which
the applicable Obligors are parties are legal, valid and binding obligations of
each applicable Obligor, enforceable in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency and other similar laws and
judicial decisions affecting creditors' rights generally and by general
equitable principles. The execution, delivery and performance of the Loan
Documents by the respective Obligors (a) have all been duly authorized by all
necessary action; (b) are within the power and authority of each applicable
Obligor; (c) do not and will not contravene or violate any Legal Requirement
applicable to any applicable Obligor or the Organizational Documents of any
applicable Obligor, the contravention or violation of which could reasonably be
expected to have a Material Adverse Effect; (d) do not and will not result in
the breach of, or constitute a default under, any material agreement or
instrument by which any Obligor or any of its Property may be bound which could
reasonably be expected to have a Material Adverse Effect, and (e) do not and
will not result in the creation of any Lien upon any Property of any Obligor,
except in favor of Agent or as expressly contemplated herein or therein. All
necessary permits, registrations and consents for such
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making and performance have been obtained. Except as otherwise expressly stated
in the Loan Documents, the Liens of the Security Documents, will constitute
valid and perfected first and prior Liens on the Property described therein,
subject to no other Liens whatsoever except Permitted Liens.
6.4 Other Debt. No Obligor is in default in the payment of any other
Indebtedness or under any agreement, mortgage, deed of trust, security agreement
or lease to which it is a party and which default could reasonably be expected
to have a Material Adverse Effect.
6.5 Litigation. There is no litigation or administrative proceeding, to
the knowledge of any executive officer of Borrower, pending or threatened
against, nor any outstanding judgment, order or decree against, any Obligor
before or by any Governmental Authority which does or could reasonably be
expected to have a Material Adverse Effect. No Obligor is in default with
respect to any judgment, order or decree of any Governmental Authority where
such default could reasonably be expected to have a Material Adverse Effect.
6.6 Title. Each Obligor has good title to the Collateral, if any, pledged
(or purported to be pledged) by such Obligor pursuant to the Security Documents,
free and clear of all Liens except Permitted Liens.
6.7 Taxes. Each Obligor has filed all tax returns required to have been
filed and paid all taxes shown thereon to be due, except those for which
extensions have been obtained and those which are being contested in good faith
or where the failure to make required filings or pay required taxes could not
reasonably be expected to have a Material Adverse Effect..
6.8 Regulations U and X. None of the proceeds of any Loan will be used
for the purpose of purchasing or carrying directly or indirectly any margin
stock or for any other purpose would constitute this transaction a "purpose
credit" within the meaning of Regulations U and X of the Board of Governors of
the Federal Reserve System, as any of them may be amended from time to time.
6.9 Subsidiaries. As of the Effective Date, Borrower has no Subsidiaries
other than Abasco, Inc., a Texas corporation, IWC Engineering, Inc., a Texas
corporation, IWC Services, Inc., a Texas corporation, Hell Fighters, Inc., a
Texas corporation, Code 3, Inc., a Texas corporation, ITS Supply Corporation, a
Delaware corporation, Elmagco, Inc., a Delaware corporation, Baylor Controls,
Inc., a Texas corporation, Baylor Electronics, Inc., a Texas corporation, Baylor
Company, Inc., a Texas corporation, Boots & Coots Overseas, Ltd. (British
Virgin Islands), International Well Control Services, Ltd. (Cayman Islands),
International Tool & Supply de Venezuela S.A. (Venezuela), International Tool &
Supply del Peru S.A. (Peru), ITS Supply & Logistics, Ltd. (United Kingdom) and
Baylor Limited (United Kingdom).
6.10 No Untrue or Misleading Statements. No document, instrument or other
writing furnished to the Lenders by or on behalf of any Obligor in connection
with the transactions contemplated in any Loan Document contains any untrue
material statement of fact or omits to state any such fact necessary to make the
representations, warranties and other statements contained herein or in such
other document, instrument or writing not misleading in any material respect.
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6.11 ERISA. With respect to each Plan, Borrower and each member of the
Controlled Group have fulfilled their obligations, including obligations under
the minimum funding standards of ERISA and the Code and are in compliance in all
material respects with the provisions of ERISA and the Code. No event has
occurred which could result in a liability of Borrower or any member of the
Controlled Group to the PBGC or a Plan (other than to make contributions in the
ordinary course) could reasonably be expected to have a Material Adverse Effect.
There have not been any nor are there now existing any events or conditions that
would cause the Lien provided under Section 4068 of ERISA to attach to any
Property of Borrower or any member of the Controlled Group. Unfunded Liabilities
as of the date hereof do not exceed $250,000. No "prohibited transaction" has
occurred with respect to any Plan.
6.12 Investment Company Act. No Obligor is an investment company within
the meaning of the Investment Company Act of 1940, as amended, or, directly or
indirectly, controlled by or acting on behalf of any Person which is an
investment company, within the meaning of said Act.
6.13 Public Utility Holding Company Act. No Obligor is an "affiliate" or a
"subsidiary company" of a "public utility company," or a "holding company," or
an "affiliate" or a "subsidiary company" of a "holding company," as such terms
are defined in the Public Utility Holding Company Act of 1935, as amended.
6.14 Solvency. After giving effect to the equity contributions required
under the provisions of Section 5.1(k), none of Borrower, any Obligor, or
Borrower and its Subsidiaries, on a consolidated basis, is "insolvent," as such
term is used and defined in (i) the Bankruptcy Code and (ii) the fraudulent
conveyance statutes of the State of Texas or of any jurisdiction in which any of
the Collateral may be located.
6.15 Fiscal Year. The fiscal year of each Obligor ends on December 31.
6.16 Compliance. Each Obligor is in compliance with all Legal Requirements
applicable to it, except to the extent that the failure to comply therewith
could not reasonably be expected to have a Material Adverse Effect.
6.17 Environmental Matters. Each Obligor has, to the best knowledge of
their respective executive officers, obtained and maintained in effect all
Environmental Permits (or the applicable Person has initiated the necessary
steps to transfer the Environmental Permits into its name or obtain such
permits), the failure to obtain which could reasonably be expected to have a
Material Adverse Effect. Each Obligor and its Properties, business and
operations have been and are, to the best knowledge of their respective
executive officers, in compliance with all applicable Requirements of
Environmental Law and Environmental Permits the failure to comply with which
could reasonably be expected to have a Material Adverse Effect. Each Obligor
and its Properties, business and operations are not subject to any (A)
Environmental Claims or (B), to the best knowledge of their respective executive
officers (after making reasonable inquiry of the personnel and records of their
respective Corporations), Environmental Liabilities, in either case direct or
contingent, arising from
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or based upon any act, omission, event, condition or circumstance occurring or
existing on or prior to the date hereof which could reasonably be expected to
have a Material Adverse Effect. None of the officers of any Obligor has received
any notice of any violation or alleged violation of any Requirements of
Environmental Law or Environmental Permit or any Environmental Claim in
connection with its Properties, liabilities, condition (financial or otherwise),
business or operations which could reasonably be expected to have a Material
Adverse Effect. Borrower does not know of any event or condition with respect to
currently enacted Requirements of Environmental Laws presently scheduled to
become effective in the future with respect to any of the Properties of any
Obligor which could reasonably be expected to have a Material Adverse Effect,
for which the applicable Obligor has not made good faith provisions in its
business plan and projections of financial performance.
6.18 Collateral Covered. As of the Effective Date, the Collateral covered
by the Security Documents constitutes substantially all material personal
Property owned by the Borrower and its Subsidiaries (other than Foreign
Subsidiaries). The book value of assets owned by Foreign Subsidiaries does not
exceed $10,000,000.
7. Affirmative Covenants.
Borrower covenants and agrees with Agent and the Lenders that prior to the
termination of this Agreement it will do or cause to be done, and cause each
other Obligor (unless limited by the language of the applicable provision to
less than all of the Obligors) to do or cause to be done, each and all of the
following:
7.1 Taxes, Existence, Regulations, Property, Etc. At all times, except
where failure or noncompliance could not reasonably be expected to have a
Material Adverse Effect: (a) pay when due all taxes and governmental charges of
every kind upon it or against its income, profits or Property, unless and only
to the extent that the same shall be contested diligently in good faith and
adequate reserves in accordance with GAAP have been established therefor; (b) do
all things necessary to preserve its existence, qualifications, rights and
franchises; (c) comply with all applicable Legal Requirements (including without
limitation Requirements of Environmental Law) in respect of the conduct of its
business and the ownership of its Property, and (d) cause its Property to be
protected, maintained and kept in good repair and make all replacements and
additions to such Property as may be reasonably necessary to conduct its
business properly and efficiently.
7.2 Financial Statements and Information. Furnish to Agent and each
Lender each of the following: (a) as soon as available and in any event within
120 days after the end of each applicable fiscal year, beginning with the fiscal
year ending on December 31, 1998, Annual Financial Statements of Borrower; (b)
as soon as available and in any event within 30 days after the end of each
fiscal month of each applicable fiscal year, Monthly Financial Statements of
Borrower; (c) concurrently with the financial statements provided for in
Subsection 7.2(a) and the financial statements provided for in Subsection (b)
hereof as to the fiscal months March, June, September and December, such
schedules, computations and other information, in reasonable detail, as may be
reasonably required by Agent to demonstrate compliance with the covenants set
forth herein or
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reflecting any non-compliance therewith as of the applicable date, all certified
and signed by a duly authorized officer of Borrower as true and correct in all
material respects to the best knowledge of such officer and, commencing with the
financial statement prepared as of September 30, 1998, a compliance certificate
("Compliance Certificate") substantially in the form of Exhibit E hereto, duly
executed by such authorized officer; (d) by December 31 of each fiscal year,
Borrower's annual business plan for the next fiscal year (including its proforma
balance sheet and income and cash flow projections for such fiscal year); (e)
promptly upon their becoming publicly available, each financial statement,
report, notice or definitive proxy statements sent by any Obligor to
shareholders generally and each regular or periodic report and each registration
statement, prospectus or written communication (other than transmittal letters)
in respect thereof filed by any Obligor with, or received by any Obligor in
connection therewith from, any securities exchange or the Securities and
Exchange Commission or any successor agency; (f) from time to time, at any time
upon the request of Agent, but at the cost of Borrower, a report of an
independent collateral field examiner approved by Agent in writing and
reasonably acceptable to Borrower (which may be, or be affiliated with, Agent or
one of the Lenders) with respect to the Accounts and Inventory of Borrower and
its Subsidiaries (provided, however, that so long as no Event of Default has
occurred and is continuing, Agent shall not require such a report more than once
per calendar year and during the continuance of an Event of Default, Agent shall
not require such a report more than once per calendar quarter), (g) (1) as of
the Effective Date and (2) within 30 days after (i) the end of each calendar
month or (ii) receipt of a request therefor (which may be given from time to
time) from Agent, a Borrowing Base Certificate as at the Effective Date or the
last day of such calendar month or the date of such receipt, as the case may be,
together with such supporting information as Agent may reasonably request; (h)
within 30 days after (i) the end of each calendar month or (ii) receipt of a
request therefor (which may be given from time to time) from Agent, (1) a
listing and aging of the Accounts of Borrower and its Subsidiaries (other than
Foreign Subsidiaries) as of the end of the most recently ended calendar month,
prepared in reasonable detail and containing such other information as Agent may
reasonably request and (2) a summary of the Inventory of Borrower and its
Subsidiaries (other than Foreign Subsidiaries) as of the end of the most
recently ended calendar month, prepared in reasonable detail and containing such
other information as Agent may reasonably request, and (i) such other
information relating to the condition (financial or otherwise), operations,
prospects or business of any Obligor as from time to time may be reasonably
requested by Agent. Each delivery of a financial statement pursuant to this
Section 7.2 shall constitute a restatement of the representations contained in
the last two sentences of Section 6.2.
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7.3 Financial Tests. Have and maintain:
(a) Tangible Net Worth - Tangible Net Worth plus Subordinated
Indebtedness of not less than (1) as of the date hereof, $33,535,000.00 and
(2) as of the end of each calendar quarter hereafter, the minimum Tangible
Net Worth plus Subordinated Indebtedness required as of the end of the
immediately preceding calendar quarter plus 80% of the net income of
Borrower and its Subsidiaries, on a consolidated basis (if positive), for
the immediately preceding calendar quarter plus 75% of the net proceeds
realized from the issuance of any equity securities by Borrower or its
Subsidiaries during the immediately preceding calendar quarter.
(b) Interest Coverage Ratio - an Interest Coverage Ratio of not less
than 1.10 to 1.00 at all times.
(c) Current Ratio - a ratio of (i)(a) Consolidated Current Assets plus
(b) the unused Revolving Loan Commitments, if any, to (ii) Consolidated
Current Liabilities of not less than 1.00 to 1.00 at all times.
(d) Total Liabilities to Tangible Net Worth and Subordinated
Indebtedness Ratio - a Total Liabilities to Tangible Net Worth and
Subordinated Indebtedness Ratio of not greater than 1.50 to 1.00 at all
times.
(e) No Quarterly Losses - consolidated net earnings (excluding any
extraordinary gains) of Borrower and its Subsidiaries for each fiscal
quarter of not less than $0.
7.4 Inspection. Permit Agent and each Lender upon 3 days' prior notice
(unless a Default or an Event of Default has occurred which is continuing, in
which case no prior notice is required) to inspect its Property in a manner
consistent with applicable safety requirements and policies of insurance, to
examine its files, books and records, except classified governmental material,
and make and take away copies thereof, and to discuss its affairs with its
officers and accountants, all during normal business hours and at such intervals
and to such extent as Agent may reasonably desire.
7.5 Further Assurances. Promptly execute and deliver, at Borrower's
expense, any and all other and further instruments which may be reasonably
requested by Agent to cure any defect in the execution and delivery of any Loan
Document in order to effectuate the transactions contemplated by the Loan
Documents, and in order to grant, preserve protect and perfect the validity and
priority of the Liens created by the Security Documents.
7.6 Books and Records. Maintain books of record and account which permit
financial statements to be prepared in accordance with GAAP.
7.7 Insurance. Maintain insurance on its Property with responsible
companies in such amounts, with such deductibles and against such risks as are
usually carried by owners of similar businesses and Properties in the same
general areas in which Borrower or such Subsidiary operates
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or as Agent may otherwise reasonably require, and furnish Agent satisfactory
evidence thereof promptly upon request. These insurance provisions are
cumulative of the insurance provisions of the Security Documents. Agent shall be
provided with a certificate showing coverages provided under the policies of
insurance and such policies shall be endorsed to the effect that they will not
be canceled for nonpayment of premium, reduced or affected in any material
manner without thirty (30) days' prior written notice to Agent.
7.8 Notice of Certain Matters. Give Agent written notice of the following
promptly after any executive officer of Borrower shall become aware of the same:
(a) the issuance by any court or governmental agency or authority of any
injunction, order or other restraint prohibiting, or having the effect of
prohibiting, the performance of this Agreement, any other Loan Document, or the
making of the Loans or the initiation of any litigation, or any claim or
controversy which would reasonably be expected to result in the initiation of
any litigation, seeking any such injunction, order or other restraint;
(b) the filing or commencement of any action, suit or proceeding, whether
at law or in equity or by or before any court or any Governmental Authority
involving claims in excess of $250,000 or which could reasonably be expected to
result in a Default hereunder; and
(c) any Event of Default or Default, specifying the nature and extent
thereof and the action (if any) which is proposed to be taken with the respect
thereto.
Borrower will also notify Agent in writing at least 30 days prior to the date
that it or any of its Subsidiaries changes its name or the location of its chief
executive office or principal place of business or the place where it keeps its
books and records. After the Effective Date, Borrower will notify Agent in
writing at least 45 days prior to Borrower's or any of its Subsidiaries' (other
than Foreign Subsidiaries') acquisition of any real Property or any material
personal Property, wherever located, other than the Collateral covered by the
Security Documents (such acquisition or ownership being herein called an
"Additional Collateral Event" and the Property so acquired or owned being herein
called "Additional Collateral").
7.9 Capital Adequacy. If any Lender shall have determined that the
adoption after the Effective Date or effectiveness after the Effective Date
(whether or not previously announced) of any applicable law, rule, regulation or
treaty regarding capital adequacy, or any change therein after the Effective
Date, or any change in the interpretation or administration thereof after the
Effective Date by any Governmental Authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by any
Lender with any request or directive after the Effective Date regarding capital
adequacy (whether or not having the force of law) of any such Governmental
Authority, central bank or comparable agency has or would have the effect of
reducing the rate of return on such Lender's capital as a consequence of its
obligations hereunder, under the Letters of Credit, the Notes or other
Obligations held by it to a level below that which such Lender could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's policies with respect to capital adequacy) by an amount deemed by
such Lender to be
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material, then from time to time, upon satisfaction of the conditions precedent
set forth in this Section, after demand by such Lender (with a copy to Agent) as
provided below, pay (subject to Sections 11.7 and 11.15 hereof) to such Lender
such additional amount or amounts as will compensate such Lender for such
reduction. The certificate of any Lender setting forth such amount or amounts as
shall be necessary to compensate it and the basis thereof and reasons therefor
shall be delivered as soon as practicable to Borrower and shall be conclusive
and binding, absent manifest error. Borrower shall pay the amount shown as due
on any such certificate within fifteen (15) Business Days after the delivery of
such certificate. In preparing such certificate, a Lender may employ such
assumptions and allocations of costs and expenses as it shall in good faith deem
reasonable and may use any reasonable averaging and attribution method.
7.10 ERISA Information and Compliance. Promptly furnish to Agent (i)
immediately upon receipt, a copy of any notice of complete or partial withdrawal
liability under Title IV of ERISA and any notice from the PBGC under Title IV of
ERISA of an intent to terminate or appoint a trustee to administer any Plan,
(ii) if requested by Agent, promptly after the filing thereof with the United
States Secretary of Labor or the PBGC or the Internal Revenue Service, copies of
each annual and other report with respect to each Plan or any trust created
thereunder, (iii) immediately upon becoming aware of the occurrence of any
"reportable event," as such term is defined in Section 4043 of ERISA, for which
the disclosure requirements of Regulation Section 2615.3 promulgated by the PBGC
have not been waived, or of any "prohibited transaction," as such term is
defined in Section 4975 of the Code, in connection with any Plan or any trust
created thereunder, a written notice signed by an authorized officer of Borrower
or the applicable member of the Controlled Group specifying the nature thereof,
what action Borrower or the applicable member of the Controlled Group is taking
or proposes to take with respect thereto, and, when known, any action taken by
the PBGC, the Internal Revenue Service or the Department of Labor with respect
thereto, (iv) promptly after the filing or receiving thereof by Borrower or any
member of the Controlled Group of any notice of the institution of any
proceedings or other actions which may result in the termination of any Plan,
and (v) each request for waiver of the funding standards or extension of the
amortization periods required by Sections 303 and 304 of ERISA or Section 412 of
the Code promptly after the request is submitted by Borrower or any member of
the Controlled Group to the Secretary of the Treasury, the Department of Labor
or the Internal Revenue Service, as the case may be. To the extent required
under applicable statutory funding requirements, Borrower will fund, or will
cause the applicable member of the Controlled Group to fund, all current service
pension liabilities as they are incurred under the provisions of all Plans from
time to time in effect, and comply with all applicable provisions of ERISA, in
each case, except to the extent that failure to do the same could not reasonably
be expected to have a Material Adverse Effect. Borrower covenants that it shall
and shall cause each member of the Controlled Group to (1) make contributions to
each Plan in a timely manner and in an amount sufficient to comply with the
contribution obligations under such Plan and the minimum funding standards
requirements of ERISA; (2) prepare and file in a timely manner all notices and
reports required under the terms of ERISA including but not limited to annual
reports; and (3) pay in a timely manner all required PBGC premiums, in each
case, except to the extent that failure to do the same could not reasonably be
expected to have a Material Adverse Effect.
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7.11 Additional Security Documents. As soon as practicable and in any
event within 30 days after an Additional Collateral Event, Borrower shall (a)
execute and deliver or cause to be executed and delivered Security Documents, in
Proper Form, in favor of Agent and duly executed by the applicable Obligor,
granting a first-priority Lien (except for Permitted Liens) upon the applicable
Additional Collateral securing all of the Obligations (except as the Super
Majority Lenders may otherwise agree in order to limit recording taxes or
similar charges based upon the amount secured), and such other documents
(including, without limitation, all items reasonably required by Agent in
connection with the applicable Security Documents previously executed hereunder,
all in Proper Form) as may be reasonably required by Agent in connection with
the execution and delivery of such Security Documents; (b) deliver or cause to
be delivered such other documents or certificates consistent with the terms of
this Agreement and relating to the transactions contemplated hereby as Agent may
reasonably request, and (c) pay in full all documentary stamps, filing and
recording fees, taxes and other fees and charges payable in connection with the
filing and recording of any such Security Document.
8. Negative Covenants.
Borrower covenants and agrees with Agent and the Lenders that prior to the
termination of this Agreement it will not, and will not suffer or permit any of
its Subsidiaries to, do any of the following:
8.1 Borrowed Money Indebtedness. Create, incur, suffer or permit to
exist, or assume or guarantee, directly or indirectly, or become or remain
liable with respect to any Borrowed Money Indebtedness, whether direct,
indirect, absolute, contingent or otherwise, except the following: (a)
Indebtedness under this Agreement and the other Loan Documents and Indebtedness
secured by Liens permitted by Section 8.2 hereof; (b) the liabilities existing
on the date of this Agreement and disclosed in the financial statements
delivered on or prior to the Effective Date pursuant to Section 6.2 hereof, and
subject to Section 8.10 hereof, all renewals, extensions and replacements (but
not increases) of any of the foregoing; (c) Interest Rate Risk Indebtedness
approved in writing by the Super Majority Lenders; (d) purchase money
Indebtedness to acquire Equipment obtained by Borrower or any of its
Subsidiaries in the ordinary course of business not exceeding $600,000 at any
one time outstanding, in the aggregate for all such Indebtedness; (e) pre-
existing Borrowed Money Indebtedness, not to exceed $5,000,000 in the aggregate
at any one time outstanding, of Subsidiaries of Borrower which are acquired
after the date hereof (provided, however, that no such Borrowed Money
Indebtedness was incurred in contemplation of the acquisition of such
Subsidiary), and (f) Subordinated Indebtedness.
8.2 Liens. Create or suffer to exist any Lien upon any of its Property
now owned or hereafter acquired, or acquire any Property upon any conditional
sale or other title retention device or arrangement or any purchase money
security agreement; or in any manner directly or indirectly sell, assign, pledge
or otherwise transfer any of its Accounts or General Intangibles; except: (a)
Liens created pursuant to any Loan Document; (b) Permitted Liens and (c) Liens
evidenced by capital leases permitted hereunder.
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8.3 Contingent Liabilities. Directly or indirectly guarantee the
performance or payment of, or purchase or agree to purchase, or assume or
contingently agree to become or be secondarily liable in respect of, any
obligation or liability of any other Person except for (a) the endorsement of
checks or other negotiable instruments in the ordinary course of business; (b)
obligations disclosed to Agent in the financial statements delivered on or prior
to the Effective Date pursuant to Section 6.2 hereof (and all renewals,
extensions and replacements--but not increases--of such obligations after the
Effective Date), (c) those liabilities permitted under Sections 8.1 or 8.2
hereof, (d) accounts payable incurred in the ordinary course of business and (e)
other contingent liabilities not exceeding $500,000 at any one time outstanding.
8.4 Mergers, Consolidations and Dispositions of Assets. In any single
transaction or series of transactions, directly or indirectly: (a) liquidate or
dissolve provided that any Subsidiary of Borrower may liquidate, dissolve or
take action to wind-up its operations if (i) Borrower determines such action to
be in the best interests of Borrower and its Subsidiaries, (ii) liquidating
dividends are paid to Borrower, and (iii) Borrower gives Agent written notice of
such action at least thirty (30) days prior to taking such action; (b) be a
party to any merger or consolidation unless and so long as (i) no Default or
Event of Default has occurred that is then continuing, (ii) immediately
thereafter and giving effect thereto, no event will occur and be continuing
which constitutes a Default or an Event of Default, (iii) an Obligor is the
surviving Person; (iv) the surviving Person ratifies and assumes each Loan
Document to which any party to such merger was a party, and (v) Agent is given
at least 30 days' prior notice of such merger or consolidation; (c) sell, convey
or lease all or any part of its assets, except for (i) sales of Property in the
ordinary course of business; (ii) sales or other dispositions of Property
expressly permitted by the other terms of this Agreement or any Loan Document,
and (iii) dispositions occurring as the result of a casualty event or
condemnation, or (d) except for Liens in favor of Agent, pledge, transfer or
otherwise dispose of any equity interest in any of Borrower's Subsidiaries or
any Indebtedness of any of Borrower's Subsidiaries or issue or permit any
Subsidiary of Borrower to issue any additional equity interest other than stock
dividends subject to a Lien in favor of Agent.
8.5 Redemption, Dividends and Distributions. At any time: (a) redeem,
retire or otherwise acquire, directly or indirectly, any equity interest in any
Obligor or (b) make any distributions of any Property or cash to the owner of
any of the equity interests in any Obligor other than Permitted Dividends.
8.6 Nature of Business. Change the nature of its business or enter into
any business which is substantially different from the business in which it is
presently engaged.
8.7 Transactions with Related Parties. Enter into any transaction or
agreement with any officer, director or holder of any equity interest in any
Obligor (or any Affiliate of any such Person) unless the same is upon terms
substantially similar to those obtainable from wholly unrelated sources (to the
best knowledge of Borrower, after making reasonable inquiry).
8.8 Loans and Investments. Make any loan, advance, extension of credit or
capital contribution to, or make or have any Investment in, any Person, or make
any commitment to make
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any such extension of credit or Investment, except (a) Permitted Investments;
(b) normal and reasonable advances in the ordinary course of business to
officers and employees; (c) accounts receivable and accounts payable arising in
the ordinary course of business; (d) deposits in money market funds investing
exclusively in Permitted Investments; (e) Investments disclosed in the financial
statements delivered pursuant to Section 6.1; (f) routine advances by any
Obligor to another Obligor (or any Subsidiary of an Obligor) in the ordinary
course of business other than Investments, not to exceed $500,000 in the
aggregate at any time; and (g) other Investments not to exceed $500,000 in the
aggregate at any time.
8.9 Subsidiaries. Form, create or acquire any Subsidiary, except that
Borrower may (subject to the other provisions of this Agreement) form, create or
acquire a wholly-owned Subsidiary so long as (a) immediately thereafter and
giving effect thereto, no event will occur and be continuing which constitutes a
Default; (b) if such Subsidiary is not a Foreign Subsidiary, such Subsidiary
(and, where applicable, Borrower) shall execute and deliver a Guaranty and such
Security Documents as the Majority Lenders may reasonably require; (c) the
certificates evidencing the equity interests owned by Borrower in such
Subsidiary (or 65% of such equity interests in the case of Foreign Subsidiaries)
shall be delivered to Agent and such equity interests shall be pledged to secure
the Obligations in a manner acceptable to Agent, and (d) Agent is given at least
30 days' prior notice of such formation, creation or acquisition.
8.10 Organizational Documents. Amend, modify, restate or supplement any of
its Organizational Documents if such action could reasonably be expected to have
a Material Adverse Effect.
8.11 Unfunded Liabilities. Incur any Unfunded Liabilities after the
Effective Date or allow any Unfunded Liabilities in excess of $250,000, in the
aggregate, to arise or exist.
8.12 Operating Lease Expenses. Aggregate operating lease expenses
(excluding lease payments under capital leases) shall not exceed, for Borrower
and its Subsidiaries in the aggregate in any fiscal year, $1,950,000.00.
8.13 Sale/Leasebacks. Borrower will not (and will not permit any of its
Subsidiaries to) enter into any sale/leaseback transactions without the prior
written consent of the Super Majority Lenders. Without limiting the foregoing,
any leasehold estate acquired pursuant to a permitted sale/leaseback shall
constitute Additional Collateral, and the closing of such sale/leaseback
transaction shall constitute an Additional Collateral Event, for all purposes
hereunder.
8.14 Subordinated Indebtedness. Except as expressly permitted in writing
by the Super Majority Lenders, Borrower will not (a) amend, modify or obtain or
grant a waiver of any provision of any document or instrument evidencing any
Subordinated Indebtedness in any manner which would have the effect of making
the same more stringent or restrictive as applied to Borrower or its
Subsidiaries or (b) except as provided under the present terms of the
documentation evidencing the Subordinated Indebtedness, purchase, redeem, retire
or otherwise acquire for value, deposit any
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monies with any Person with respect to or make any payment or prepayment of the
principal of or any other amount owing in respect of, any Subordinated
Indebtedness.
8.15 Negative Pledges. Except for (a) any of the Loan Documents, (b)
customary provisions in leases, licenses, asset sale agreements and other
customary agreements not related to the Borrowed Money Indebtedness and entered
into in the ordinary course of business, (c) restrictions imposed by agreements
governing Permitted Liens and (d) the present terms of the documentation
evidencing the Subordinated Indebtedness, enter into any agreement or contract
which limits or restricts in any way the granting of Liens by Borrower or any of
its Subsidiaries securing any of the Obligations.
8.16 Acquisitions. Acquire any real Property or any material personal
Property after the Effective Date with respect to which the aggregate
consideration for a single transaction (or a series of related transactions) in
the form of cash and assumed Indebtedness would exceed $5,000,000.
9. Defaults.
9.1 Events of Default. If any one or more of the following events (herein
called "Events of Default") shall occur, then Agent shall (at the direction of
(x) in the case of an Event of Default under Section 9.1(a) or in the case of
any other Event of Default which is not cured within seventy-five (75) calendar
days after notice to Lenders, the Majority Lenders or (y) in all other cases,
the Super Majority Lenders) do any or all of the following: (1) without notice
to Borrower or any other Person, declare the Revolving Loan Commitments
terminated (whereupon the Revolving Loan Commitments shall be terminated) and/or
accelerate the Revolving Loan Termination Date to a date as early as the date of
termination of the Revolving Loan Commitments; (2) terminate any Letter of
Credit allowing for such termination, by sending a notice of termination as
provided therein and require Borrower to provide Cover for outstanding Letters
of Credit; (3) declare the principal amount then outstanding of and the unpaid
accrued interest on the Loans and Reimbursement Obligations and all fees and all
other amounts payable hereunder, under the Notes and under the other Loan
Documents to be forthwith due and payable, whereupon such amounts shall be and
become immediately due and payable, without notice (including, without
limitation, notice of acceleration and notice of intent to accelerate),
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by Borrower; provided that in the case of the occurrence
of an Event of Default with respect to any Obligor referred to in clause (f),
(g) or (h) of this Section 9.1, the Revolving Loan Commitments shall be
automatically terminated and the principal amount then outstanding of and unpaid
accrued interest on the Loans and the Reimbursement Obligations and all fees and
all other amounts payable hereunder, under the Notes and under the other Loan
Documents shall be and become automatically and immediately due and payable,
without notice (including, without limitation, notice of acceleration and notice
of intent to accelerate), presentment, demand, protest or other formalities of
any kind, all of which are hereby expressly waived by Borrower, and (4) exercise
any or all other rights and remedies available to Agent or any of the Lenders
under the Loan Documents, at law or in equity:
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(a) Payments - (i) any Obligor shall fail to make any payment or
required prepayment of any installment of principal on the Loans or any
Reimbursement Obligation payable under the Notes, this Agreement or the
other Loan Documents when due or (ii) any Obligor fails to make any payment
or required payment of interest with respect to the Loans, any
Reimbursement Obligation or any other fee or amount under the Notes, this
Agreement or the other Loan Documents when due and such failure to pay
continues unremedied for a period of three (3) Business Days; or
(b) Other Obligations - any Obligor shall default in the payment when
due of any principal of or interest on any Indebtedness having an
outstanding principal amount of at least $500,000 (other than the Loans and
Reimbursement Obligations) and such default shall continue beyond any
applicable period of grace and shall give rise to a right on the part of
the holder of such Indebtedness to accelerate such Indebtedness; or any
event or condition shall occur which results in the acceleration of the
maturity of any such Indebtedness or enables (or, with the giving of notice
or lapse of time or both, would enable) the holder of any such Indebtedness
or any Person acting on such holder's behalf to accelerate the maturity
thereof and such event or condition shall not be cured within any
applicable period of grace; or
(c) Representations and Warranties - any representation or warranty
made or deemed made by or on behalf of any Obligor in this Agreement or any
other Loan Document or in any certificate furnished or made by any Obligor
to Agent or the Lenders in connection herewith or therewith shall prove to
have been incorrect, false or misleading in any material respect as of the
date thereof or as of the date as of which the facts therein set forth were
stated or certified or deemed stated or certified; or
(d) Affirmative Covenants - (i) default shall be made in the due
observance or performance of any of the covenants or agreements contained
in Section 7.3 hereof or (ii) default is made in the due observance or
performance of any of the other covenants and agreements contained in
Section 7 hereof or any other affirmative covenant of any Obligor contained
in this Agreement or any other Loan Document and such default continues
unremedied for a period of 30 days after (x) notice thereof is given by
Agent to Borrower or (y) such default otherwise becomes known to any
executive officer of Borrower, whichever is earlier; or
(e) Negative Covenants - default is made in the due observance or
performance by Borrower of any of the covenants or agreements contained in
Section 8 of this Agreement or of any other negative covenant of any
Obligor contained in this Agreement or any other Loan Document; or
(f) Involuntary Bankruptcy or Receivership Proceedings - a receiver,
conservator, liquidator or trustee of any Obligor or of any of its Property
is appointed by the order or decree of any court or agency or supervisory
authority having jurisdiction, and such decree or order remains in effect
for more than 90 days; or any Obligor is adjudicated bankrupt or
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insolvent; or any of such Person's Property is sequestered by court order
and such order remains in effect for more than 90 days; or a petition is
filed against any Obligor under any state or federal bankruptcy,
reorganization, arrangement, insolvency, readjustment or debt, dissolution,
liquidation or receivership law or any jurisdiction, whether now or
hereafter in effect, and is not dismissed within 90 days after such filing;
or
(g) Voluntary Petitions or Consents - any Obligor commences a
voluntary case or other proceeding or order seeking liquidation,
reorganization, arrangement, insolvency, readjustment of debt, dissolution,
liquidation or other relief with respect to itself or its debts or other
liabilities under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of its Property, or consents to any such relief or to the appointment
of or taking possession by any such official in an involuntary case or
other proceeding commenced against it, or fails generally to, or cannot,
pay its debts generally as they become due or takes any corporate action to
authorize or effect any of the foregoing; or
(h) Assignments for Benefit of Creditors or Admissions of Insolvency -
any Obligor makes an assignment for the benefit of its creditors, or admits
in writing its inability to pay its debts generally as they become due, or
consents to the appointment of a receiver, trustee, or liquidator of such
Obligor or of all or any substantial part of its Property; or
(i) Undischarged Judgments - a final non-appealable judgment or
judgments for the payment of money exceeding, in the aggregate, $250,000
(exclusive of amounts covered by insurance) is rendered by any court or
other governmental body against any Obligor and such Obligor does not
discharge the same or provide for its discharge in accordance with its
terms, or procure a stay of execution thereof within 30 days from the date
of entry thereof; or
(j) Security Documents - any Security Document after delivery thereof,
shall for any reason, except to the extent permitted by the terms of this
Agreement or such Security Document, ceases to create a valid and perfected
Lien of the first priority (subject to the Permitted Liens), required
thereby on any of the Collateral purported to be covered thereby and
securing that portion of the Obligations which is therein designated as
being secured, or any Obligor (or any other Person who may have granted or
purported to grant such Lien) will so state in writing or, after the
creation thereof as herein provided, Agent shall cease to have a first
priority Lien (subject to Permitted Liens) upon the equity interests in and
to Subsidiaries of Borrower (or 65% of such equity interests in the case of
Foreign Subsidiaries) securing the Obligations; or
(k) Ownership Change or Encumbrance - (i) any Person other than
Borrower shall own any equity interest in any Subsidiary of Borrower or any
Person other than Agent shall acquire any Lien on Borrower's interest in
and to the equity interest in any Subsidiary of Borrower; or (ii) any
Change of Control shall occur.
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9.2 Right of Setoff. Upon the occurrence and during the continuance of
any Event of Default, each Lender is hereby authorized at any time and from time
to time, without notice to any Obligor (any such notice being expressly waived
by Borrower and the other Obligors), to setoff and apply any and all deposits,
whether general or special, time or demand, provisional or final (but excluding
the funds held in accounts clearly designated as escrow or trust accounts held
by Borrower or any other Obligor for the benefit of Persons which are not
Affiliates of any Obligor), whether or not such setoff results in any loss of
interest or other penalty, and including without limitation all certificates of
deposit, at any time held, and any other funds or Property at any time held, and
other Indebtedness at any time owing by such Lender to or for the credit or the
account of Borrower or any other Obligor against any and all of the Obligations
irrespective of whether or not such Lender or Agent will have made any demand
under this Agreement, the Notes or any other Loan Document. Should the right of
any Lender to realize funds in any manner set forth hereinabove be challenged
and any application of such funds be reversed, whether by court order or
otherwise, the Lenders shall make restitution or refund to Borrower pro rata in
accordance with their Revolving Loan Commitments. Each Lender agrees to
promptly notify Borrower and Agent after any such setoff and application,
provided that the failure to give such notice will not affect the validity of
such setoff and application. The rights of Agent and the Lenders under this
Section are in addition to other rights and remedies (including without
limitation other rights of setoff) which Agent or the Lenders may have. This
Section is subject to the terms and provisions of Sections 4.5 and 11.7 hereof.
9.3 Collateral Account. Borrower hereby agrees, in addition to the
provisions of Section 9.1 hereof, that upon the occurrence and during the
continuance of any Event of Default, it shall, if requested by Agent or the
Majority Lenders (through Agent), pay to Agent an amount in immediately
available funds equal to the then aggregate amount available for drawings under
all Letters of Credit issued for the account of Borrower, which funds shall be
held by Agent as Cover.
9.4 Preservation of Security for Letter of Credit Liabilities. In the
event that, following (i) the occurrence of an Event of Default and the exercise
of any rights available to Agent or any Lender under the Loan Documents, and
(ii) payment in full of the principal amount then outstanding of and the accrued
interest on the Loans and Reimbursement Obligations and fees and all other
amounts payable hereunder and under the Notes and all other amounts secured by
the Security Documents, any Letter of Credit Liabilities shall remain
outstanding, Agent shall be entitled to hold (and Borrower and each other
Obligor hereby grants and conveys to Agent a security interest in and to) all
cash or other Property ("Proceeds of Remedies") realized or arising out of the
exercise of any rights available under the Loan Documents, at law or in equity,
including, without limitation, the proceeds of any foreclosure, as collateral
for the payment of such Letter of Credit Liabilities. Such Proceeds of Remedies
shall be held for the ratable benefit of the Lenders. The rights, titles,
benefits, privileges, duties and obligations of Agent with respect thereto shall
be governed by the terms and provisions of this Agreement and, to the extent not
inconsistent with this Agreement, the applicable Security Documents. Agent may,
but shall have no obligation to, invest any such Proceeds of Remedies in such
manner as Agent, in the exercise of its sole discretion, deems appropriate.
Such Proceeds of Remedies shall be applied to Reimbursement Obligations arising
in respect of any such Letters of Credit and/or the payment of any Lender's
obligations under any such Letter of Credit when such Letter of Credit is drawn
upon. Nothing in this Section shall cause or permit an increase
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in the maximum amount of the Revolving Loan Obligations permitted to be
outstanding from time to time under this Agreement.
9.5 Remedies Cumulative. No remedy, right or power conferred upon Agent
or any Lender is intended to be exclusive of any other remedy, right or power
given hereunder or now or hereafter existing at law, in equity, or otherwise,
and all such remedies, rights and powers shall be cumulative.
10. Agent.
10.1 Appointment, Powers and Immunities. Each Lender hereby irrevocably
appoints and authorizes Agent to act as its agent hereunder, under the Letters
of Credit and under the other Loan Documents with such powers as are
specifically delegated to Agent by the terms hereof and thereof, together with
such other powers as are reasonably incidental thereto. Any Loan Documents
executed in favor of Agent shall be held by Agent for the ratable benefit of the
Lenders. Agent ("Agent" as used in this Section 10 shall include reference to
its Affiliates and its own and its Affiliates' respective officers,
shareholders, directors, employees and agents) (a) shall not have any duties or
responsibilities except those expressly set forth in this Agreement, the Letters
of Credit, and the other Loan Documents, and shall not by reason of this
Agreement or any other Loan Document be a trustee or fiduciary for any Lender;
(b) shall not be responsible to any Lender for any recitals, statements,
representations or warranties contained in this Agreement, the Letters of Credit
or any other Loan Document, or in any certificate or other document referred to
or provided for in, or received by any of them under, this Agreement, the
Letters of Credit or any other Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability, execution, filing, registration,
collectibility, recording, perfection, existence or sufficiency of this
Agreement, the Letters of Credit, or any other Loan Document or any other
document referred to or provided for herein or therein or any Property covered
thereby or for any failure by any Obligor or any other Person to perform any of
its obligations hereunder or thereunder, and shall not have any duty to inquire
into or pass upon any of the foregoing matters; (c) shall not be required to
initiate or conduct any litigation or collection proceedings hereunder or under
the Letters of Credit or any other Loan Document except to the extent requested
by the Super Majority Lenders; (d) shall not be responsible for any mistake of
law or fact or any action taken or omitted to be taken by it hereunder or under
the Letters or Credit or any other Loan Document or any other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith, INCLUDING, WITHOUT LIMITATION, PURSUANT TO ITS OWN
NEGLIGENCE, except for its own gross negligence or willful misconduct; (e) shall
not be bound by or obliged to recognize any agreement among or between Borrower
and any Lender to which Agent is not a party, regardless of whether Agent has
knowledge of the existence of any such agreement or the terms and provisions
thereof; (f) shall not be charged with notice or knowledge of any fact or
information not herein set out or provided to Agent in accordance with the terms
of this Agreement or any other Loan Document; (g) shall not be responsible for
any delay, error, omission or default of any mail, telegraph, cable or wireless
agency or operator, and (h) shall not be responsible for the acts or edicts of
any Governmental Authority. Agent may employ agents and attorneys-in-fact and
shall not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Without in any way
limiting any of the foregoing, each Lender
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acknowledges that each Issuer shall have no greater responsibility in the
operation of the Letters of Credit than is specified in the Uniform Customs and
Practice for Documentary Credits (1993 Revision, International Chamber of
Commerce Publication No. 500). In any foreclosure proceeding concerning any
Collateral, each holder of an Obligation if bidding for its own account or for
its own account and the accounts of other Lenders is prohibited from including
in the amount of its bid an amount to be applied as a credit against the
Obligations held by it or the Obligations held by the other Lenders; instead,
such holder must bid in cash only. However, in any such foreclosure proceeding,
Agent may (but shall not be obligated to) submit a bid for all Lenders
(including itself) in the form of a credit against the Obligations, and Agent or
its designee may (but shall not be obligated to) accept title to such Collateral
for and on behalf of all Lenders.
10.2 Reliance. Agent shall be entitled to rely upon any certification,
notice or other communication (including any thereof by telephone, telegram or
cable) believed by it to be genuine and correct and to have been signed or sent
by or on behalf of the proper Person or Persons, and upon advice and statements
of legal counsel (which may be counsel for Borrower), independent accountants
and other experts selected by Agent. Agent shall not be required in any way to
determine the identity or authority of any Person delivering or executing the
same. As to any matters not expressly provided for by this Agreement, the
Letters of Credit, or any other Loan Document, Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder and thereunder in
accordance with instructions of the Super Majority Lenders, and any action taken
or failure to act pursuant thereto shall be binding on all of the Lenders.
Pursuant to instructions of the Majority Lenders, Agent shall have the authority
to execute releases of the Security Documents on behalf of the Lenders without
the joinder of any Lender. If any order, writ, judgment or decree shall be made
or entered by any court affecting the rights, duties and obligations of Agent
under this Agreement or any other Loan Document, then and in any of such events
Agent is authorized, in its sole discretion, to rely upon and comply with such
order, writ, judgment or decree which it is advised by legal counsel of its own
choosing is binding upon it under the terms of this Agreement, the relevant Loan
Document or otherwise; and if Agent complies with any such order, writ, judgment
or decree, then it shall not be liable to any Lender or to any other Person by
reason of such compliance even though such order, writ, judgment or decree may
be subsequently reversed, modified, annulled, set aside or vacated.
10.3 Defaults. Agent shall not be deemed to have knowledge of the
occurrence of a Default or Event of Default (other than the non-payment of
principal of or interest on Loans or Reimbursement Obligations) unless Agent has
received notice from a Lender or Borrower specifying such Default or Event of
Default and stating that such notice is a "Notice of Default." In the event
that Agent receives such a Notice of Default, Agent shall give prompt notice
thereof to the Lenders (and shall give each Lender prompt notice of each such
non-payment). Agent shall (subject to Section 10.7 hereof) take such action
with respect to such Notice of Default as shall be directed by the requisite
percentage of Lenders as specified herein and within its rights under the Loan
Documents and at law or in equity.
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10.4 Material Written Notices. In the event that Agent receives any
written notice of a material nature from the Borrower or any Obligor under the
Loan Documents, Agent shall promptly inform each of the Lenders thereof.
10.5 Rights as a Lender. With respect to its Revolving Loan Commitments
and the Loans made by it and Letter of Credit Liabilities, Comerica in its
capacity as a Lender hereunder shall have the same rights and powers hereunder
as any other Lender and may exercise the same as though it were not acting in
its agency capacity, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include Agent in its individual capacity. Agent
may (without having to account therefor to any Lender) accept deposits from,
lend money to and generally engage in any kind of banking, trust, letter of
credit, agency or other business with Borrower (and any of its Affiliates) as if
it were not acting as Agent; and Agent may accept fees and other consideration
from Borrower (in addition to the fees heretofore agreed to between Borrower and
Agent) for services in connection with this Agreement or otherwise without
having to account for the same to the Lenders.
10.6 Indemnification. The Lenders agree to indemnify Agent (to the extent
not reimbursed under Section 2.2(c), Section 11.3 or Section 11.4 hereof, but
without limiting the obligations of Borrower under said Sections 2.2(c), 11.3
and 11.4), ratably in accordance with the sum of the Lenders' respective Loans
and available Revolving Loan Commitments, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever, REGARDLESS OF
WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY INDEMNIFIED PARTIES,
which may be imposed on, incurred by or asserted against Agent in any way
relating to or arising out of this Agreement, the Letters of Credit or any other
Loan Document or any other documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby (including, without
limitation, the costs and expenses which Borrower is obligated to pay under
Sections 2.2(c), 11.3 and 11.4 hereof, interest, penalties, attorneys' fees and
amounts paid in settlement, but excluding, unless a Default has occurred and is
continuing, normal administrative costs and expenses incident to the performance
of its agency duties hereunder) or the enforcement of any of the terms hereof or
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 party to be indemnified. The obligations of the
Lenders under this Section 10.6 shall survive the termination of this Agreement
and the repayment of the Obligations.
10.7 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it
has received current financial information with respect to Borrower and each
other Obligor that it has, independently and without reliance on Agent or any
other Lender and based on such documents and information as it has deemed
appropriate, made its own credit analysis of Borrower and each other Obligor and
decision to enter into this Agreement and that it will, independently and
without reliance upon 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
analysis and decisions in taking or not taking action under this Agreement or
any of the other Loan Documents. Agent shall not be required to keep itself
informed as to the performance or observance by any Obligor of this Agreement,
the Letters of Credit or any of the other Loan Documents or any other document
referred to or provided for herein
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or therein or to inspect the Properties or books of any Obligor. Except for
notices, reports and other documents and information expressly required to be
furnished to the Lenders by Agent hereunder, under the Letters of Credit or the
other Loan Documents, Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the affairs,
financial condition or business of any Obligor (or any of their affiliates)
which may come into the possession of Agent.
10.8 Failure to Act. Except for action expressly required of Agent
hereunder, under the Letters of Credit or under the other Loan Documents, Agent
shall in all cases be fully justified in failing or refusing to act hereunder
and thereunder unless it shall receive further assurances to its satisfaction by
the Lenders of their indemnification obligations under Section 10.6 hereof
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action.
10.9 Resignation or Removal of Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, Agent may resign at any time
by giving notice thereof to the Lenders and Borrower, and Agent may be removed
at any time with or without cause by the Super Majority Lenders; provided, that
Agent shall continue as Agent until such time as any successor shall have
accepted appointment as Agent hereunder. Upon any such resignation or removal,
(i) the Super Majority Lenders without the consent of Borrower shall have the
right to appoint a successor Agent so long as such successor Agent is also a
Lender at the time of such appointment and (ii) the Super Majority Lenders shall
have the right to appoint a successor Agent that is not a Lender at the time of
such appointment so long as Borrower consents to such appointment (which consent
shall not be unreasonably withheld). If no successor Agent shall have been so
appointed by the Super Majority Lenders and accepted such appointment within 30
days after the retiring Agent's giving of notice of resignation or the Super
Majority Lenders' removal of the retiring Agent, then the retiring Agent may, on
behalf of the Lenders, appoint a successor Agent. Any successor Agent shall be
a bank which has an office in the United States and a combined capital and
surplus of at least $250,000,000. 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 retiring Agent and the retiring Agent shall be discharged from its duties
and obligations hereunder and under any other Loan Documents. Such successor
Agent shall promptly specify by notice to Borrower its Principal Office referred
to in Section 3.1 and Section 4 hereof. After any retiring Agent's resignation
or removal hereunder as Agent, the provisions of this Section 10 shall continue
in effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as Agent.
10.10 No Partnership. Neither the execution and delivery of this Agreement
nor any of the other Loan Documents nor any interest the Lenders, Agent or any
of them may now or hereafter have in all or any part of the Obligations shall
create or be construed as creating a partnership, joint venture or other joint
enterprise between the Lenders or among the Lenders and Agent. The relationship
between the Lenders, on the one hand, and Agent, on the other, is and shall be
that of principals and agent only, and nothing in this Agreement or any of the
other Loan Documents shall
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be construed to constitute Agent as trustee or other fiduciary for any Lender or
to impose on Agent any duty, responsibility or obligation other than those
expressly provided for herein and therein.
10.11 Authority of Agent. Each Lender acknowledges that the rights and
responsibilities of Agent under this Agreement and the Loan Documents with
respect to any action taken by Agent or the exercise or non-exercise by Agent of
any option, right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Agreement and/or the other Loan
Documents shall, as between Agent and the Lenders, be governed by this Agreement
and by such other agreements with respect thereto as may exist from time to time
among them, but, as between Agent and the Obligors, Agent shall be conclusively
presumed to be acting as agent for the Lenders with full and valid authority so
to act or refrain from acting; and each Obligor shall not be under any
obligation, or entitlement, to make any inquiry respecting such authority.
11. Miscellaneous.
11.1 Waiver. No waiver of any Default or Event of Default shall be a
waiver of any other Default or Event of Default. No failure on the part of
Agent or any Lender to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege under any Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The remedies
provided in the Loan Documents are cumulative and not exclusive of any remedies
provided by law or in equity.
11.2 Notices. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers or consents
under, this Agreement) shall be given or made by telegraph, telecopy (confirmed
by mail), cable or other writing and telecopied, telegraphed, cabled, mailed or
delivered to the intended recipient at the "Address for Notices" specified below
its name on the signature pages hereof (or provided for in an Assignment and
Acceptance); or, as to any party hereto, at such other address as shall be
designated by such party in a notice (given in accordance with this Section) (i)
as to Borrower, to Agent, (ii) as to Agent, to Borrower and to each Lender, and
(iii) as to any Lender, to Borrower and Agent. Except as otherwise provided in
this Agreement, all such notices or communications shall be deemed to have been
duly given when (i) transmitted by telecopier or delivered to the telegraph or
cable office, (ii) personally delivered (iii) one Business Day after deposit
with an overnight mail or delivery service, postage prepaid or (iv) three
Business Days' after deposit in a receptacle maintained by the United States
Postal Service, postage prepaid, registered or certified mail, return receipt
requested, in each case given or addressed as aforesaid.
11.3 Expenses, Etc. Whether or not any Loan is ever made or any Letter of
Credit ever issued, Borrower shall pay or reimburse within 10 Business Days
after written demand (a) Agent and each Lender for paying the reasonable fees
and expenses of legal counsel, together with the reasonable fees and expenses of
each local counsel, in connection with the preparation, negotiation, execution
and delivery of this Agreement (including the exhibits and schedules hereto),
the Security Documents and the other Loan Documents and the making of the Loans
and the issuance of Letters
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of Credit hereunder, and any modification, supplement or waiver of any of the
terms of this Agreement, the Letters of Credit or any other Loan Document; (b)
Agent and each Lender for any reasonable and customary lien search fees,
collateral audit fees, appraisal fees, survey fees, environmental study fees,
and title insurance costs and premiums; (c) Agent and each Lender for reasonable
out-of-pocket expenses incurred in connection with the preparation,
documentation, administration and syndication of the Loans or any of the Loan
Documents (including, without limitation, the advertising, marketing, printing,
publicity, duplicating, mailing and similar expenses) of the Loans and Letter of
Credit Liabilities; (d) Agent and each Lender for paying all transfer, stamp,
documentary or other similar taxes, assessments or charges levied by any
governmental or revenue authority in respect of this Agreement, any Letter of
Credit or any other Loan Document or any other document referred to herein or
therein; (e) Agent and each Lender for paying all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any Lien contemplated by this
Agreement, any Security Document or any document referred to herein or therein,
and (f) following the occurrence and during the continuation of an Event of
Default, any Lender or Agent for paying all amounts reasonably expended,
advanced or incurred by such Lender or Agent to satisfy any obligation of any
Obligor under this Agreement or any other Loan Document, to protect the
Collateral, to collect the Obligations or to enforce, protect, preserve or
defend the rights of the Lenders or Agent under this Agreement or any other Loan
Document, including, without limitation, fees and expenses incurred in
connection with such Lender's or Agent's participation as a member of a
creditor's committee in a case commenced under the Bankruptcy Code or other
similar law, fees and expenses incurred in connection with lifting the automatic
stay prescribed in (S) 362 of the Bankruptcy Code and fees and expenses incurred
in connection with any action pursuant to (S) 1129 of the Bankruptcy Code and
all other reasonable and customary out-of-pocket expenses incurred by such
Lender or Agent in connection with such matters, together with interest thereon
at the Past Due Rate on each such amount from the due date until the date of
reimbursement to such Lender or Agent.
11.4 Indemnification. Borrower shall indemnify each of Agent, the Lenders,
and each affiliate thereof and their respective directors, officers, employees
and agents from, and hold each of them harmless against, any and all losses,
liabilities, claims or damages to which any of them may become subject,
REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY
INDEMNIFIED PARTIES, insofar as such losses, liabilities, claims or damages
arise out of or result from any (i) actual or proposed use by Borrower of the
proceeds of any extension of credit (whether a Loan or a Letter of Credit) by
any Lender hereunder; (ii) breach by any Obligor of this Agreement or any other
Loan Document; (iii) violation by any Obligor of any Legal Requirement, or (iv)
investigation, litigation or other proceeding relating to any of the foregoing,
and Borrower shall reimburse Agent, each Lender, and each Affiliate thereof and
their respective directors, officers, employees and agents, upon demand for any
reasonable and customary expenses (including reasonable and customary legal
fees) incurred in connection with any such investigation or proceeding;
provided, however, that Borrower shall not have any obligations pursuant to this
Section with respect to any losses, liabilities, claims, damages or expenses
incurred by the Person seeking indemnification by reason of the gross negligence
or willful misconduct of that Person or with respect to any disputes between or
among any of Agent, Lenders and Issuers. Nothing in this Section is intended to
limit the obligations of Borrower under any other provision
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of this Agreement. Agent shall indemnify Borrower and hold Borrower harmless
from and against the gross negligence or willful misconduct of Agent and each
Lender shall indemnify Borrower and hold Borrower harmless from and against the
gross negligence or willful misconduct of such Lender. In the case of any
indemnification hereunder, Agent or the respective Lender, as appropriate, shall
give written notice to Borrower of any such claim or demand being made against
an indemnified person and Borrower shall have the non-exclusive right to join in
the defense against any such claim or demand, provided that if Borrower provides
a defense, the indemnified person shall bear its own cost of defense unless
there is a conflict of interests between Borrower and such indemnified person.
No Indemnified Person may settle any claim to be indemnified without the consent
of the Borrower, such consent not to be unreasonably withheld or delayed.
11.5 Amendments, Etc. No amendment or modification of this Agreement, the
Notes or any other Loan Document shall in any event be effective against
Borrower or any Obligor party thereto unless the same shall be agreed or
consented to in writing by such Person. No amendment, modification or waiver of
any provision of this Agreement, the Notes or any other Loan Document, nor any
consent to any departure by any Obligor therefrom, shall in any event be
effective against the Lenders unless the same shall be agreed or consented to in
writing by the Super Majority Lenders, and each such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, that no amendment, modification, waiver or consent shall,
unless in writing and signed by each Lender affected thereby, do any of the
following: (a) increase any Revolving Loan Commitment of any of the Lenders (or
reinstate any termination or reduction of the Revolving Loan Commitments) or
subject any of the Lenders to any additional obligations; (b) reduce the
principal of, or interest on, any Loan, Reimbursement Obligation or fee
hereunder; (c) postpone or extend the Maturity Date, the Revolving Loan
Termination Date, the Revolving Loan Availability Period or any scheduled date
fixed for any payment of principal of, or interest on, any Loan, Reimbursement
Obligation, fee or other sum to be paid hereunder or waive any Event of Default
described in Section 9.1(a) hereof; (d) change the percentage of any of the
Revolving Loan Commitments or of the aggregate unpaid principal amount of any of
the Loans and Letter of Credit Liabilities, or the percentage of Lenders, which
shall be required for the Lenders or any of them to take any action under this
Agreement; (e) change any provision contained in Sections 2.2(c), 7.9, 11.3 or
11.4 hereof or this Section 11.5; (f) release any Person from liability under a
Guaranty or release all or substantially all of the security for the Obligations
or release Collateral (exclusive of Collateral with respect to which Agent is
obligated to provide a release pursuant to this Agreement or any of the other
Loan Documents or by law) in any one (1) calendar year ascribed an aggregate
value on the most recent financial statements of Borrower delivered to Agent in
excess of $1,000,000, or (g) increase any of the fixed percentages to be
multiplied by the aggregate amounts of the components comprising the Borrowing
Base that are described in (i) and (ii) and (iii) of the definition of Borrowing
Base herein. Notwithstanding anything in this Section 11.5 to the contrary, no
amendment, modification, waiver or consent shall be made with respect to Section
10 without the consent of Agent to the extent it affects Agent, as Agent.
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11.6 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the benefit of
Borrower, Agent and the Lenders and their respective successors and assigns;
provided, however, that, except as permitted by Section 8.4 hereof, Borrower may
not assign or transfer any of its rights or obligations hereunder without the
prior written consent of all of the Lenders, and any such assignment or transfer
without such consent shall be null and void. Each Lender may sell
participations to any Person in all or part of any Loan, or all or part of its
Notes, Revolving Loan Commitments or interests in Letters of Credit, in which
event, without limiting the foregoing, the provisions of the Loan Documents
shall inure to the benefit of each purchaser of a participation; provided,
however, the pro rata treatment of payments, as described in Section 4.2 hereof
and rights to compensation under Section 3.3 hereof, shall be determined as if
such Lender had not sold such participation. Any Lender that sells one or more
participations to any Person shall not be relieved by virtue of such
participation from any of its obligations to Borrower under this Agreement
relating to the Loans. In the event any Lender shall sell any participation,
such Lender shall retain the sole right and responsibility to enforce the
obligations of Borrower relating to the Loans, including, without limitation,
the right to approve any amendment, modification or waiver of any provision of
this Agreement other than amendments, modifications or waivers with respect to
(i) any fees payable hereunder to the Lenders, (ii) the amount of principal or
the rate of interest payable on, or the dates fixed for the scheduled repayment
of principal of, the Loans and (iii) the release of the Liens on all or
substantially all of the Collateral.
(b) Each Lender may assign to one or more Lenders or any other Person all
or a portion of its interests, rights and obligations under this Agreement;
provided, however, that (i) the aggregate amount of the Loans and available
Revolving Loan Commitments of the assigning Lender subject to each such
assignment shall in no event be less than $2,000,000; (ii) other than in the
case of an assignment to another Lender (that is, at the time of the assignment,
a party hereto) or to an Affiliate of such Lender or to a Federal Reserve Bank,
Agent and, so long as no Event of Default shall have occurred and be continuing,
Borrower must each give its prior written consent, which consents shall not be
unreasonably withheld, and (iii) the parties to each such assignment shall
execute and deliver to Agent, for its acceptance an Assignment and Acceptance in
substantially the form of Exhibit D hereto (each an "Assignment and Acceptance")
with blanks appropriately completed, together with any Note or Notes subject to
such assignment and a processing and recording fee of $3,000 paid by the
assignee (for which Borrower will have no liability). Upon such execution,
delivery and acceptance, from and after the effective date specified in each
Assignment and Acceptance, (A) the assignee thereunder shall be a party hereto
and, to the extent provided in such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder and (B) the Lender thereunder shall, to
the extent provided in such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto except in respect of provisions of this Agreement which survive payment
of the Obligations and termination of the Commitments). Notwithstanding
anything contained in this Agreement to the contrary, any Lender may at any time
assign all or any portion of
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its rights under this Agreement and the Notes issued to it as collateral to a
Federal Reserve Bank; provided that no such assignment shall release such Lender
from any of its obligations hereunder.
(c) By executing and delivering an Assignment and Acceptance, the Lender
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim, such Lender
assignor makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or any of the other Loan Documents or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any of the other Loan Documents or any other instrument or
document furnished pursuant thereto; (ii) such Lender assignor makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Borrower or any Obligor or the performance or observance
by Borrower or any Obligor of any of its obligations under this Agreement or any
of the other Loan Documents to which it is a party or any other instrument or
document furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements most recently delivered under either Section 6.2 or Section 7.2
hereof and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance upon
Agent, such Lender assignor 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; (v) such assignee appoints and authorizes Agent to take
such action as agent on its behalf and to exercise such powers under this
Agreement and the other Loan Documents as are delegated to Agent by the terms
hereof, together with such powers as are reasonably incidental thereto; and (vi)
such assignee agrees that it will perform in accordance with their terms all
obligations that by the terms of this Agreement and the other Loan Documents are
required to be performed by it as a Lender.
(d) The entries in the records of Agent as to each Assignment and
Acceptance delivered to it and the names and addresses of the Lenders and the
Revolving Loan Commitments of, and principal amount of the Loans owing to, each
Lender from time to time shall be conclusive, in the absence of manifest error,
and Borrower, Agent and the Lenders may treat each Person the name of which is
recorded in the books and records of Agent as a Lender hereunder for all
purposes of this Agreement and the other Loan Documents.
(e) Upon Agent's receipt of an Assignment and Acceptance executed by an
assigning Lender and the assignee thereunder, together with any Note or Notes
subject to such assignment and the written consent to such assignment (to the
extent consent is required), Agent shall, if such Assignment and Acceptance has
been completed with blanks appropriately filled, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in its records and
(iii) give prompt notice thereof to Borrower. Within five Business Days after
receipt of notice, Borrower, at its own expense, shall execute and deliver to
Agent in exchange for the surrendered Notes new Notes to the order of such
assignee in an amount equal to the Loans and available Revolving Loan
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Commitments assumed by it pursuant to such Assignment and Acceptance and, if the
assigning Lender has retained Loans and available Revolving Loan Commitments
hereunder, new Notes to the order of the assigning Lender in an amount equal to
the Loans and available Revolving Loan Commitments retained by it hereunder.
Such new Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of the respective Note. Thereafter, such surrendered Notes shall be marked
renewed and substituted and the originals thereof delivered to Borrower (with
copies to be retained by Agent).
(f) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 11.6, disclose to
the assignee or participant or proposed assignee or participant, any information
relating to Borrower furnished to such Lender by or on behalf of Borrower;
provided such Person agrees to maintain the confidentiality of such information
in accordance with Section 11.16.
11.7 Limitation of Interest. The parties hereto intend to strictly comply
with all applicable federal and Texas laws, including applicable usury laws (or
the usury laws of any jurisdiction whose usury laws are deemed to apply to the
Notes or any other Loan Documents despite the intention and desire of the
parties to apply the usury laws of the State of Texas). Accordingly, the
provisions of this Section 11.7 shall govern and control over every other
provision of this Agreement or any other Loan Document which conflicts or is
inconsistent with this Section, even if such provision declares that it
controls. As used in this Section, the term "interest" includes the aggregate
of all charges, fees, benefits or other compensation which constitute interest
under applicable law, provided that, to the maximum extent permitted by
applicable law, (a) any non-principal payment shall be characterized as an
expense or as compensation for something other than the use, forbearance or
detention of money and not as interest, and (b) all interest at any time
contracted for, reserved, charged or received shall be amortized, prorated,
allocated and spread, in equal parts during the full term of the Obligations.
In no event shall Borrower or any other Person be obligated to pay, or Agent,
any Issuer or any Lender have any right or privilege to reserve, receive or
retain, (a) any interest in excess of the maximum amount of nonusurious interest
permitted under the laws of the State of Texas or the applicable laws (if any)
of the United States or of any other jurisdiction, or (b) total interest in
excess of the amount which such Person could lawfully have contracted for,
reserved, received, retained or charged had the interest been calculated for the
full term of the Obligations at the Ceiling Rate. The daily interest rates to
be used in calculating interest at the Ceiling Rate shall be determined by
dividing the applicable Ceiling Rate per annum by the number of days in the
calendar year for which such calculation is being made. None of the terms and
provisions contained in this Agreement or in any other Loan Document (including,
without limitation, Section 9.1 hereof) which directly or indirectly relate to
interest shall ever be construed without reference to this Section 11.7, or be
construed to create a contract to pay for the use, forbearance or detention of
money at an interest rate in excess of the Ceiling Rate. If the term of any
Obligation is shortened by reason of acceleration of maturity as a result of any
Default or by any other cause, or by reason of any required or permitted
prepayment, and if for that (or any other) reason Agent, any Issuer or any
Lender at any time, including but not limited to, the stated maturity, is owed
or receives (and/or has received) interest in excess of interest calculated at
the Ceiling Rate, then and in any such event all of any such
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excess interest shall be canceled automatically as of the date of such
acceleration, prepayment or other event which produces the excess, and, if such
excess interest has been paid to such Person, it shall be credited pro tanto
against the then-outstanding principal balance of Borrower's obligations to such
Person, effective as of the date or dates when the event occurs which causes it
to be excess interest, until such excess is exhausted or all of such principal
has been fully paid and satisfied, whichever occurs first, and any remaining
balance of such excess shall be promptly refunded to its payor.
11.8 Survival. The obligations of Borrower under Sections 2.2(c), 2.2(d),
7.9, 11.3 and 11.4 hereof and all other obligations of Borrower in any other
Loan Document (to the extent stated therein), the obligations of each Issuer
under the last sentence of Section 2.2(b)(iii) and the obligations of the
Lenders under Sections 4.1(d), 10.6, 11.7, 11.13 and 11.16 hereof, shall,
notwithstanding anything herein to the contrary, survive the repayment of the
Loans and Reimbursement Obligations and the termination of the Revolving Loan
Commitments and the Letters of Credit.
11.9 Captions. Captions and section headings appearing herein are included
solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
11.10 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
agreement and any of the parties hereto may execute this Agreement by signing
any such counterpart.
11.11 Governing Law; Venue. THIS AGREEMENT AND (EXCEPT AS THEREIN
PROVIDED) THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES
OF AMERICA FROM TIME TO TIME IN EFFECT. This Agreement and all of the other Loan
Documents are performable in Dallas County, Texas, which shall be a proper place
of venue for suit on or in respect of this note. Borrower hereby irrevocably
agrees that any legal proceeding in respect of this Agreement or any of the
other Loan Documents shall be brought in the district courts of Dallas County,
Texas, or in the United States District Court for the Northern District of
Texas, Dallas Division (collectively, the "Specified Courts"). Borrower hereby
irrevocably submits to the nonexclusive jurisdiction of the state and federal
courts of the State of Texas. Borrower hereby irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Agreement or any of the Loan Documents brought in any Specified Court, and
hereby further irrevocably waives any claims that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
Borrower further irrevocably consents to the service of process out of any of
the Specified Courts in any such suit, action or proceeding by the mailing of
copies thereof by certified mail, return receipt requested, postage prepaid, to
Borrower. Nothing herein shall affect the right of Agent or any Lender to
commence legal proceedings or otherwise proceed against Borrower in any
jurisdiction or to serve process in any manner permitted by applicable law.
Borrower agrees that a final judgment in any
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such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
11.12 Severability. Whenever possible, each provision of the Loan
Documents shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of any Loan Document shall be invalid, illegal
or unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions of such Loan Document shall not
be affected or impaired thereby.
11.13 Tax Forms. Each Lender which is organized under the laws of a
jurisdiction outside the United States shall, on the day of the initial
borrowing from each such Lender hereunder and from time to time thereafter if
requested by Borrower or Agent, provide Agent and Borrower with the forms
prescribed by the Internal Revenue Service of the United States certifying as to
such Lender's status for purposes of determining exemption from United States
withholding taxes with respect to all payments to be made to such Lender
hereunder or other documents satisfactory to such Lender, Borrower and Agent
indicating that all payments to be made to such Lender hereunder are not subject
to United States withholding tax or are subject to such tax at a rate reduced by
an applicable tax treaty. If a Lender determines, as a result of any change in
either (i) applicable law, regulation or treaty, or in any official application
thereof or (ii) its circumstances, that it is unable to submit any form or
certificate that it is obligated to submit pursuant to this Section, or that it
is required to withdraw or cancel any such form or certificate previously
submitted, it shall promptly notify Borrower and Agent of such fact. Unless
Borrower and Agent shall have received such forms or such documents indicating
that payments hereunder are not subject to United States withholding tax or are
subject to such tax at a rate reduced by an applicable tax treaty, Borrower or
Agent shall withhold taxes from such payments at the applicable statutory rate.
Each Lender agrees to indemnify and hold harmless from any United States taxes,
penalties, interest and other expenses, costs and losses incurred or payable by
(i) Agent as a result of such Lender's failure to submit any form or certificate
that it required to provide pursuant to this Section or (ii) Borrower or Agent
as a result of their reliance on any representation, form or certificate which
such Lender has provided to them pursuant to this Section.
11.14 Conflicts Between This Agreement and the Other Loan Documents. In
the event of any conflict between the terms of this Agreement and the terms of
any of the other Loan Documents, the terms of this Agreement shall control.
11.15 Limitation on Charges; Substitute Lenders; Non-Discrimination.
Anything in Sections 2.2(d), 3.3(c) or 7.9 notwithstanding:
(1) Borrower shall not be required to pay to any Lender reimbursement
or indemnification with regard to any costs or expenses described in such
Sections, unless such Lender notifies Borrower of such costs or expenses
within 90 days after the date paid or incurred;
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(2) none of the Lenders shall be permitted to pass through to Borrower
charges and costs under such Sections on a discriminatory basis (i.e.,
which are not also passed through by such Lender to other customers of such
Lender similarly situated where such customer is subject to documents
providing for such pass through); and
(3) if any Lender elects to pass through to Borrower any material
charge or cost under such Sections or elects to terminate the availability
of LIBOR Borrowings for any material period of time, Borrower may, within
60 days after the date of such event and so long as no Default shall have
occurred and be continuing, elect to terminate such Lender as a party to
this Agreement; provided that, concurrently with such termination Borrower
shall (i) if Agent and each of the other Lenders shall consent, pay that
Lender all principal, interest and fees and other amounts owed to such
Lender through such date of termination or (ii) have arranged for another
financial institution approved by Agent (such approval not to be
unreasonably withheld or delayed) as of such date, to become a substitute
Lender for all purposes under this Agreement in the manner provided in
Section 11.6; provided further that, prior to substitution for any Lender,
Borrower shall have given written notice to Agent of such intention and the
Lenders shall have the option, but no obligation, for a period of 60 days
after receipt of such notice, to increase their Revolving Loan Commitments
in order to replace the affected Lender in lieu of such substitution.
11.16 Confidentiality. Each Lender agrees to exercise its best efforts to
keep any information delivered or made available by any Obligor which is clearly
indicated to be confidential information, confidential from anyone other than
officers, directors and employees and other Persons employed or retained by such
Lender or any of its Affiliates who are or are expected to become engaged in
evaluating, approving, structuring or administering the Loans; provided that
nothing herein shall prevent any Lender from disclosing such information (a) to
any other Lender; (b) pursuant to subpoena or upon the order of any court or
administrative agency or if legally compelled; (c) upon the request or demand of
any regulatory agency or authority having jurisdiction over such Lender
(including the National Association of Insurance Commissioners); (d) which has
been publicly disclosed; (e) to the extent reasonably required in connection
with any litigation to which Agent, any Lender, any Obligor or their respective
Affiliates may be a party; (f) to the extent reasonably required in connection
with the exercise of any remedy hereunder; (g) to such Lender's counsel and
independent auditors; and (h) to any actual or proposed participant or assignee
of all or part of its rights hereunder which has agreed in writing to be bound
by the provisions of this Section.
11.17 Jury Waiver. BORROWER, AGENT AND LENDERS EACH WAIVE ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.
BOOTS & COOTS INTERNATIONAL WELL
CONTROL, INC., a Delaware corporation
By:__________________________________
Name:________________________________
Title:_______________________________
Address for Notices:
777 Post Oak, 8th Floor
Houston, Texas 77056
Attention: Mr. Tom Easley
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COMERICA BANK-TEXAS,
as Agent, Issuer and as a Lender
By:_____________________________
Name:___________________________
Title:__________________________
Address for Notices:
Revolving Loan Commitment: 1601 Elm Street
Dallas, Texas 75201
Attention: Mr. Gary W. Orr
$25,000,000.00 Telecopy No.: __________________
with a copy to:
Comerica Bank-Texas
P.O. Box 4167
Houston, Texas 77210-4167
Attention: Mr. Dan Evans
Telecopy No.: (713) 220-5650
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SECURITY AGREEMENT
(Boots & Coots International Well Control, Inc.)
This Security Agreement (as amended, supplemented or restated from time to
time, this "Agreement") dated as of October 28, 1998, is by and between BOOTS
& COOTS INTERNATIONAL WELL CONTROL, INC., a Delaware corporation ("Debtor"),
whose address is 777 Post Oak, 8th Floor, Houston, Texas 77056, Attn: Mr. Tom
Easley and whose taxpayer identification number is 11-2908692, and COMERICA
BANK-TEXAS ("Secured Party"), a national banking association, whose address is
1601 Elm Street, Dallas, Texas 75201, Attention: Mr. Gary W. Orr (with a copy
to Comerica Bank-Texas, P.O. Box 4167, Houston, Texas 77210-4167, Attention: Mr.
Dan Evans), in its capacity as agent under the Loan Agreement (as amended,
restated and supplemented from time to time, the "Loan Agreement") among Debtor,
each of the financial institutions which are signatories thereto or which may
become a party thereto from time to time (individually, a "Lender" and,
collectively, the "Lenders") and Secured Party of even date herewith.
Debtor and Secured Party agree as follows:
Any capitalized term used in this Agreement and not otherwise defined
herein shall have the meaning ascribed to such term in the Loan Agreement. All
principles of construction set forth in Section 1.2 of the Loan Agreement are
incorporated herein by reference for all purposes.
ARTICLE 1
CREATION OF SECURITY INTEREST
In order to secure the prompt and unconditional payment of the Debt (as
defined in Section 2.2), Debtor hereby grants to Secured Party on behalf of
Lenders a security interest in and mortgages, assigns, transfers, delivers,
pledges, sets over and confirms to Secured Party on behalf of Lenders all of
Debtor's remedies, powers, privileges, rights, titles and interests (including
all power of Debtor, if any, to pass greater title than it has itself) of every
kind and character now owned or hereafter acquired, created or arising in and to
the following:
ACCOUNTS
(a) all accounts, receivables, accounts receivable, general intangibles
regardless of form (including all choses or things in action, trade
names, trademarks, patents, patents pending, infringement claims,
service marks, licenses, copyrights, blueprints, draw ings, plans,
diagrams, schematics, computer programs, computer tapes, computer
discs, reports, catalogs, customer lists, purchase orders, goodwill,
route lists, monies due or recoverable from pension funds, tax refunds
and all rights to any of the foregoing), book debts, contract rights
and rights to payment no matter how evidenced;
<PAGE>
(b) all chattel paper, notes, drafts, acceptances, payments under leases of
equipment or sale of inventory, and other forms of obligations received
by or belonging to Debtor for goods sold or leased and/or services
rendered by Debtor;
(c) all purchase orders, instruments and other documents (including all
documents of title) evidencing obligations to Debtor, including those
for or representing obligations for goods sold or leased and/or
services rendered by Debtor;
(d) all monies due or to become due to Debtor under all contracts,
including those for the sale or lease of goods and/or performance of
services by Debtor no matter how evidenced and whether or not earned by
performance;
(e) all accounts, receivables, accounts receivable, contract rights, and
general intangibles arising as a result of Debtor's having paid
accounts payable (or having had goods sold or leased to Debtor or
services performed for Debtor giving rise to accounts payable) which
accounts payable were paid for or were incurred by Debtor on behalf of
any third parties pursuant to an agreement or otherwise;
(f) all goods, the sale and delivery of which give rise to any of the
foregoing, including any such goods which are returned to Debtor for
credit;
INVENTORY
all goods, merchandise, raw materials, work in process, finished goods, and
other tangible personal property of whatever nature now owned by Debtor or
hereafter from time to time existing or acquired, wherever located and held
for sale or lease, including those held for display or demonstration or out
on lease or consignment, or furnished or to be furnished under contracts of
service or used or usable or consumed or consumable in Debtor's business or
which are finished or unfinished goods and all accessions and appurtenances
thereto, together with all warehouse receipts and other documents
evidencing any of the same and all containers, packing, packaging, shipping
and similar materials;
EQUIPMENT
all goods, equipment, machinery, furnishings, fixtures, furniture,
appliances, accessories, leasehold improvements (to the extent assignable),
chattels and other articles of personal property of whatever nature
(whether or not the same constitute fixtures) now owned by Debtor or
hereafter acquired, and all component parts thereof and all appurtenances
thereto;
STOCK
(i) all of the investment securities listed on Exhibit A, hereto attached
and hereby made a part hereof;
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(ii) all dividends (cash or otherwise), rights to receive dividends, stock
dividends, dividends paid in stock, distributions upon redemption or
liquidation, distributions as a result of split-ups, recapitalizations
or rearrangements, stock rights, rights to subscribe, voting rights,
rights to receive securities, and all new securities and other
Property which Debtor may hereafter become entitled to receive on
account of the foregoing (Debtor hereby agreeing that in the event
Debtor receives any such new securities, Debtor will immediately
deliver the same to Secured Party to be held by Secured Party subject
to the terms and provisions of this Agreement);
all accessions, appurtenances and additions to and substitutions for any of the
foregoing; all products and proceeds of any of the foregoing; all renewals and
replacements of any of the foregoing; and all accounts, instruments, notes,
chattel paper, documents (including all documents of title), books, records,
contract rights and general intangibles relating to or arising in connection
with any of the foregoing (including all insurance and claims for insurance
affected or held for the benefit of Debtor or Secured Party in respect of any of
the foregoing) and together with all general intangibles now owned by Debtor or
existing or hereafter acquired, created or arising (whether or not related to
any of the foregoing Property). All of the Properties and interests described
in this Article are herein collectively called the "Collateral." The inclusion
of proceeds does not authorize Debtor to sell, dispose of or otherwise use the
Collateral in any manner not authorized herein.
ARTICLE 2
SECURED INDEBTEDNESS
2.1 This Agreement is made to secure all of the following debt and
obligations:
(a) All debt now and hereafter evidenced by the Revolving Notes, which are
in the aggregate maximum principal amount of $25,000,000.00 and have final
payment due on October 31, 2000.
(b) All obligations and Indebtedness of Debtor now or hereafter created or
incurred under, or in connection with the Loan Agreement.
(c) All other obligations, if any, undertaken by Debtor in any other place
in this Agreement.
(d) Any and all sums and the interest which accrues on them as provided in
this Agreement which Secured Party or any Lender may advance or which Debtor may
owe Secured Party or any Lender pursuant to this Agreement on account of
Debtor's failure to keep, observe or perform any of the covenants of Debtor
under this Agreement.
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(e) All present and future debts and obligations under or pursuant to (i)
any Loan Documents now or in the future governing, evidencing, guaranteeing or
securing or otherwise relating to payment of all or any part of the debt
evidenced by the Notes, including Interest Rate Risk Indebtedness approved in
writing by the Majority Lenders and the Letter of Credit Liabilities or (ii) all
supplements, amendments, restatements, renewals, extensions, rearrangements,
increases, expansions or replacements of them.
2.2 The term "Debt" means and includes all of the Indebtedness and other
obligations described or referred to in Section 21. The Debt includes interest
and other obligations accruing or arising after (a) commencement of any case
under any bankruptcy or similar laws by or against Debtor or any other Person
now or hereafter primarily or secondarily obligated to pay all or any part of
the Debt (Debtor and each such other Person being herein called individually an
"Obligor" and collectively, "Obligors") or (b) the obligations of any Obligor
shall cease to exist by operation of law or for any other reason. The Debt also
includes all reasonable attorneys' fees and any other reasonable expenses
incurred by Secured Party in enforcing any of the Loan Documents.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Debtor represents and warrants as follows:
(a) Debtor is the legal and equitable owner and holder of good and
marketable title to the Collateral free of any adverse claim and free of any
Lien except only for the Liens granted hereby and the Permitted Liens. Except
for matters which have previously been released or which are to be released
concurrently herewith, Debtor has not heretofore signed any financing statement
directly or indirectly affecting the Collateral or any part of it which has not
been completely terminated of record, and no such financing statement signed by
Debtor is now on file in any public office except as Secured Party may otherwise
consent in writing.
(b) Subject to Debtor's right to change its address in accordance with the
provisions of this Agreement, the location of Debtor is the address set forth at
the beginning of this Agreement; and in this regard, Debtor's location is
defined to mean (i) Debtor's place of business if Debtor has only one such place
of business or (ii) Debtor's chief executive office if Debtor has more than one
place of business. All books and records of Debtor with regard to the
Collateral are maintained and kept at such address of Debtor set forth at the
beginning of this Agreement.
(c) No part of the Collateral consists or will consist of consumer goods,
farm products, timber, minerals and the like (including oil and gas) or accounts
resulting from the sale thereof.
(d) As of the date hereof, Debtor does not own, have any rights in or hold
any registered trademarks, patents, applications for patents or licenses
associated with any patent, except as disclosed in writing to Secured Party.
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(e) Debtor has not changed its name within the last five (5) years.
(f) Debtor's correct taxpayer identification number is set forth in the
first paragraph of this Agreement.
(g) The Collateral described in Article 1 under the heading "Stock" (the
"Stock Collateral") is genuine, free from any restriction relating to the
granting of Liens, duly and validly authorized and issued, enforceable in
accordance with its terms, and fully paid, and is hereby duly and validly
pledged and hypothecated to Secured Party in accordance with applicable law.
ARTICLE 4
COVENANTS
4.1 Debtor covenants and agrees with Secured Party as follows:
(a) Debtor shall furnish to Secured Party such instruments as may be
reasonably required by Secured Party or any Lender to assure the transferability
of any Collateral in accordance with this Agreement when and as often as may be
reasonably requested by Secured Party or such Lender.
(b) If (i) the validity or priority of this Agreement or of any material
rights, titles, security interests or other interests created or evidenced
hereby shall be attacked, endangered or questioned or (ii) if any legal
proceedings are instituted with respect thereto, Debtor will give prompt written
notice thereof to Secured Party and at Debtor's own cost and expense will
diligently endeavor to cure any material defect that may be developed or
claimed, and will take all necessary and proper steps for the defense of such
legal proceedings; and if an Event of Default has or would result, Secured Party
(whether or not named as a party to legal proceedings with respect thereto) is
hereby authorized and empowered to take such additional steps as in its judgment
and discretion may be necessary or proper for the defense of any such legal
proceedings or the protection of the validity or priority of this Agreement and
the material rights, titles, security interests and other interests created or
evidenced hereby, and all reasonable and customary expenses so incurred of every
kind and character shall constitute sums advanced pursuant to Section 42 of this
Agreement.
(c) Debtor will, on request of Secured Party or any Lender, (i) promptly
correct any defect, error or omission which may be discovered in the contents of
this Agreement or in any other instrument executed in connection herewith or in
the execution or acknowledgment thereof; (ii) execute, acknowledge, deliver and
record or file such further instruments (including further security agreements,
financing statements and continuation statements) and do such further acts as
may be necessary, desirable or proper to carry out more effectively the purposes
of this Agreement and such other instruments and to subject to the Liens hereof
and thereof any Property intended by the terms hereof and thereof to be covered
hereby and thereby including specifically any renewals, additions,
substitutions, replacements or appurtenances to the then Collateral; and (iii)
execute, acknowledge, deliver, procure and record or file any document or
instrument (including specifically any financing statement) deemed advisable by
Secured Party or any Lender to protect the security
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interest hereunder against the rights or interests of third persons, and Debtor
will pay all reasonable and customary costs connected with any of the foregoing.
(d) Notwithstanding the security interest in proceeds granted herein,
Debtor will not, except as otherwise expressly permitted herein or in the Loan
Agreement, sell, lease, exchange, lend, rent, assign, license, transfer or
otherwise dispose of, or pledge, hypothecate or grant any Lien in, or permit to
exist any Lien against, all or any part of the Collateral or any interest
therein or permit any of the foregoing to occur or arise or permit title to the
Collateral, or any interest therein, to be vested in any other party, in any
manner whatsoever, by operation of law or otherwise, without the prior written
consent of Secured Party. Except as provided by the Loan Agreement or as
otherwise permitted herein, Debtor shall not, without the prior written consent
of Secured Party, (i) acquire any such Collateral under any arrangement whereby
the seller or any other Person retains or acquires any Lien in such Collateral
or (ii) return or give possession of any such Collateral to any supplier or any
other Person except in the ordinary course of business.
(e) Debtor shall at all times keep accurate and complete records of the
Collateral and its proceeds. Debtor shall, where applicable, at Debtor's own
expense take all reasonable and appropriate steps to enforce the collection of
the Collateral and items representing proceeds thereof.
(f) Debtor will not change its taxpayer identification number, address,
location, name, identity or, if applicable, structure unless Debtor shall have
(i) notified Secured Party of such change in writing at least thirty (30) days
before the effective date of such change and (ii) taken such action, reasonably
satisfactory to Secured Party, to have caused the Lien of Secured Party on
behalf of Lenders in the Collateral to be at all times perfected and in full
force and effect in the manner and to the extent set forth in the Loan
Agreement.
(g) Debtor shall at all times keep accurate books and records reflecting
all facts concerning the Collateral including those pertaining to the
warranties, representations and agreements of Debtor under this Agreement. Upon
reasonable request by Secured Party, Debtor will take reasonable steps to make
written designation on the books and records of Debtor to reflect thereon the
assignment to Secured Party of the Collateral covered by this Agreement;
provided, however, that the failure of Debtor to make such a written designation
shall not affect the rights of Secured Party to any of the Collateral.
(h) If the Collateral is evidenced by promissory notes, trade acceptances
or other instruments for the payment of money, Debtor will, at the request of
Secured Party during the continuation of an Event of Default, immediately
deliver any of the foregoing to Secured Party, appropriately endorsed to Secured
Party's order and regardless of the form of endorsement, Debtor waives
presentment, demand, notice of dishonor, protest and notice of protest. After
an Event of Default but prior to such delivery, such Collateral shall be held by
Debtor in trust for the benefit of Secured Party and Lenders and subject to the
Liens granted herein.
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(i) Debtor will not use, or allow the use of, the Collateral in any manner
which constitutes a public or private nuisance or which makes void, voidable or
cancelable any insurance then in force with respect thereto. Debtor will not do
or suffer to be done any act outside its ordinary course of business whereby the
value of any part of the Collateral may be lessened in any material respect.
(j) Debtor agrees to provide, maintain and keep in force casualty,
liability and other insurance for that portion of the Collateral which is
tangible personal property as required by the Loan Agreement. To the extent any
insurance policies covering any part of the Collateral, or any risk to or about
the Collateral, are transferable, and subject to the consent and requirements of
the applicable insurance companies or policies, foreclosure of this Agreement
shall automatically constitute foreclosure upon all policies of insurance
insuring any part of or risk to the Collateral and all claims thereunder arising
from post-foreclosure events. To the extent such policies are transferable, and
subject to the consent and requirements of the applicable insurance companies or
policies, the successful bidder or bidders for any Collateral at any
foreclosure, as their respective interests may appear, shall automatically
accede to all of Debtor's rights in, under and to such policies and all post-
foreclosure event claims, and such bidder(s) shall be named as insured(s) on
request, whether or not the bill of sale to any such successful bidder mentions
insurance. Unless Secured Party or Secured Party's representative reserves at
the foreclosure sale the right to collect any uncollected insurance proceeds
recoverable for events occurring before foreclosure (in which event the
successful bidder at the sale, if not Secured Party, shall have no interest in
such proceeds and Secured Party shall apply them, if and when collected, to the
Debt in such order and manner as Secured Party shall then elect and remit any
remaining balance to Debtor or to such other Person as is legally entitled to
them), all proceeds of all such insurance which are not so reserved by Secured
Party at the foreclosure sale and are not actually received by Secured Party
until after foreclosure shall be the property of the successful bidder or
bidders at foreclosure, as their interests may appear, and Debtor shall have no
interest in them and shall receive no credit for them. Neither Secured Party
nor any Lender shall have any duty to Debtor or anyone else to either require or
provide any insurance or to determine the adequacy or disclose any inadequacy of
any insurance. If Secured Party or any Lender elects at any time or for any
reason to purchase insurance relating to the Collateral, it shall have no
obligation to cause Debtor or anyone else to be named as an insured, to cause
Debtor's or anyone else's interests to be insured or protected or to inform
Debtor or anyone else that his or its interests are uninsured or underinsured,
and any such insurance shall be at Secured Party's or such Lender's sole cost.
(k) The Collateral is and shall remain in Debtor's possession or control at
all times at Debtor's risk of loss at Debtor's locations as described in writing
to Secured Party, where Secured Party may inspect it at any time, except for (i)
its temporary removal in connection with its ordinary use, (ii) any removal to
which Secured Party consents in writing in advance and (iii) dispositions
permitted hereby or by the Loan Agreement.
(l) The Collateral described in Article 1 under the caption "Equipment"
will be used in the business of Debtor and its Subsidiaries.
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(m) Until the occurrence of an Event of Default which has not been cured
or waived, Debtor may use the Collateral described in Article 1 under the
caption "Inventory" in any lawful manner not inconsistent with this Agreement or
with the terms or conditions of any policy of insurance thereon and may also
sell or lease such Collateral in the ordinary course of business. A sale in the
ordinary course of business does not include a transfer in partial or total
satisfaction of a debt. Until the occurrence of an Event of Default which has
not been cured or waived, Debtor may also use and consume any raw materials or
supplies, the use and consumption of which are necessary to carry on the
business of Debtor and its Subsidiaries.
(n) Should any material part of the Collateral become in default, Debtor,
at its sole expense, will promptly take all commercially reasonably necessary
and proper efforts to effect the collection thereof, either through legal
proceedings or otherwise, and if commercially reasonable, will proceed with the
foreclosure of any Liens securing the same and with enforcement of any
guaranties whereby payment of the same is guaranteed.
4.2 If Debtor fails to comply with any of its agreements, covenants or
obligations under this Agreement or any other Loan Document and such failure
continues for 30 days after Secured Party has given Debtor written notice
thereof, Secured Party (in Debtor's name or in Secured Party's own name as agent
for the Lenders) may perform them or cause them to be performed for the account
and at the expense of Debtor, but shall have no obligation to perform any of
them or cause them to be performed. Any and all reasonable and customary, out-
of-pocket expenses thus incurred or paid by Secured Party shall be Debtor's
obligations to Secured Party due and payable on demand, or if no demand is
sooner made, then they shall be due on or before four (4) years after the
respective dates on which they were incurred, and each shall bear interest from
the date Secured Party pays it until the date Debtor repays it to Secured Party,
at the Past Due Rate. Upon making any such payment or incurring any such
expense, Secured Party shall be fully and automatically subrogated to all of the
rights of the Person receiving such payment. Any amounts owing by Debtor to
Secured Party pursuant to this or any other provision of this Agreement shall
automatically and without notice be and become a part of the Debt and shall be
secured by this and all other instruments securing the Debt. The amount and
nature of any such expense and the time when it was paid shall be fully
established by the affidavit of Secured Party or any of Secured Party's officers
or agents. The exercise of the privileges granted to Secured Party in this
Section shall in no event be considered or constitute a cure of the Default or a
waiver of Secured Party's right at any time after an Event of Default to declare
the Debt to be at once due and payable, but is cumulative of such right and of
all other rights given by this Agreement, the Loan Agreement, the Notes and the
Loan Documents and of all rights given Secured Party by law.
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ARTICLE 5
ASSIGNMENT OF PAYMENTS; CERTAIN POWERS
OF SECURED PARTY; VOTING RIGHTS
5.1 During the continuation of an Event of Default, Debtor hereby
authorizes and directs each account debtor and each other Person (a "Collateral
Obligor") obligated to make payment in respect of any of the Collateral to pay
over to Secured Party or its designee, upon demand by Secured Party, all or any
part of the Collateral without making any inquiries as to the status or balance
of the Debt and without any notice to or further consent of Debtor. To
facilitate the rights of Secured Party hereunder, Debtor hereby authorizes
Secured Party, during the continuation of an Event of Default:
(a) to notify Collateral Obligors of Secured Party's security interest in
the Collateral and to collect all or any part of the Collateral without further
notice to or further consent by Debtor; and Debtor hereby constitutes and
appoints Secured Party the true and lawful attorney of Debtor (such agency being
coupled with an interest), irrevocably, with power of substitution, in the name
of Debtor or in its own name or otherwise, to take any of the actions described
in the following clauses (b), (c), (d), (e), (f) and (g);
(b) to ask, demand, collect, receive, give receipt for, sue for, compound
and give acquittance for any and all amounts which may be or become due or
payable under the Collateral and to settle and/or adjust all disputes and/or
claims directly with any Collateral Obligor and to compromise, extend the time
for payment, arrange for payment in installments, otherwise modify the terms of,
or release, any of the Collateral, on such terms and conditions as Secured Party
may determine (without thereby incurring responsibility to or discharging or
otherwise affecting the liability of Debtor to Secured Party or any Lender under
this Agreement or otherwise);
(c) to execute, sign, endorse, transfer and deliver (in the name of Debtor
or in its own name or otherwise) any and all receipts or other orders for the
payment of money drawn on the Collateral and all notes, acceptances, commercial
paper, drafts, checks, money orders and other instruments given in payment or in
partial payment thereof and all invoices, freight and express bills and bills of
lading, storage receipts, warehouse receipts and other instruments and documents
in respect of any of the Collateral and any other documents necessary to
evidence, perfect and realize upon the Liens created pursuant to this Agreement;
(d) in its discretion to file any claim or take any other action or
proceeding which Secured Party may deem necessary or appropriate to protect and
preserve the rights, titles and interests of Secured Party hereunder;
(e) to sign the name of Debtor to financing statements, drafts against any
Collateral Obligor, assignments or verifications of any of the Collateral and
notices to any Collateral Obligor;
(f) to station one or more representatives of Secured Party on Debtor's
premises for the purpose of exercising any rights, benefits or privileges
available to Secured Party hereunder or under
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any of the Loan Documents or at law or in equity, including receiving
collections and taking possession of books and records relating to the
Collateral; and
(g) to cause title to any or all of the Collateral to be transferred into
the name of Secured Party or any nominee or nominees of Secured Party.
5.2 Unless and until an Event of Default shall have occurred and be
continuing, Debtor shall be entitled to exercise all voting and consensual
powers and rights pertaining to the Stock Collateral or any part thereof for all
purposes not inconsistent with the terms of this Agreement and, except as herein
provided, shall be entitled to receive and retain all dividends on the Stock
Collateral or any part thereof. During the continuation of an Event of Default,
Secured Party shall have the right to the extent permitted by applicable law
(but shall not be obligated to exercise such right), and Debtor shall take all
such action as may be necessary or appropriate to give effect to such right, to
vote and give consents, ratifications and waivers, and take any other action
with respect to any or all of the Stock Collateral with the same force and
effect as if Secured Party were the owner thereof. All dividends in stock or
Property representing stock, and all subscription warrants or any other rights
or options issued in connection with the Stock Collateral, and all liquidating
dividends or distributions or return of capital upon or in respect of the Stock
Collateral or any part thereof, or resulting from any split, revision or
reclassification of the Stock Collateral or any part thereof or received in
exchange for the Stock Collateral or any part thereof as a result of a merger,
consolidation or otherwise, shall be paid or transferred directly to Secured
Party, or if paid to or received by Debtor, shall, immediately upon receipt
thereof, be paid over, transferred and delivered to Secured Party and shall be
Stock Collateral pledged under and subject to the terms of this Agree ment.
5.3 The powers conferred on Secured Party pursuant to this Article 5 are
conferred solely to protect Secured Party's interest in the Collateral and shall
not impose any duty or obligation on Secured Party or any Lender to perform any
of the powers herein conferred. No exercise of any of the rights provided for
in this Article 5 shall constitute a retention of Collateral in satisfaction of
the indebtedness as provided for in Article 9 of the Uniform Commercial Code of
Texas.
ARTICLE 6
EVENTS OF DEFAULT
An Event of Default under the Loan Agreement shall constitute an Event of
Default under this Agreement.
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ARTICLE 7
REMEDIES IN EVENT OF DEFAULT
7.1 During the continuation of an Event of Default:
(a) Secured Party shall have the option of declaring, without notice to any
Person, all Debt to be immediately due and payable.
(b) Secured Party is authorized, in any legal manner and without breach of
the peace, to take possession of the Collateral (Debtor hereby WAIVING all
claims for damages arising from or connected with any such taking, except as may
be caused by the gross negligence, bad faith or willful misconduct of Secured
Party) and of all books, records and accounts relating thereto and to exercise,
without interference from Debtor, any and all rights which Debtor has with
respect to the management, possession, operation, protection or preservation of
the Collateral, including the right to sell or rent the same for the account of
Debtor and to deduct from such sale proceeds or such rents all costs, expenses
and liabilities of every character incurred by Secured Party in collecting such
sale proceeds or such rents and in managing, operating, maintaining, protecting
or preserving the Collateral and to apply the remainder of such sales proceeds
or such rents on the Debt. Before any sale, Secured Party may, at its option,
complete the processing of any of the Collateral and/or repair or recondition
the same to such extent as Secured Party may deem advisable. Secured Party may
take possession of Debtor's premises to complete such processing, repairing
and/or reconditioning, using the facilities and other Property of Debtor to do
so, to store any Collateral and to conduct any sale as provided for herein, all
without compensation to Debtor. All costs, expenses, and liabilities incurred
by Secured Party in collecting such sales proceeds or such rents, or in
managing, operating, maintaining, protecting or preserving such Properties, or
in processing, repairing and/or reconditioning the Collateral if not paid out of
such sales proceeds or such rents as hereinabove provided, shall constitute a
demand obligation owing by Debtor and shall bear interest from the date of
expenditure until paid at the Past Due Rate, all of which shall constitute a
portion of the Debt. If necessary to obtain the possession provided for above,
Secured Party may invoke any and all legal remedies to dispossess Debtor,
including specifically one or more actions for forcible entry and detainer. In
connection with any action taken by Secured Party pursuant to this paragraph,
neither Secured Party nor any Lender shall be liable for any loss sustained by
Debtor resulting from any failure to sell or let the Collateral, or any part
thereof, or from any other act or omission of Secured Party or any Lender with
respect to the Collateral unless such loss is caused by the gross negligence,
willful misconduct or bad faith of Secured Party or any Lender, nor shall
Secured Party be obligated to perform or discharge any obligation, duty, or
liability under any sale or lease agreement covering the Collateral or any part
thereof or under or by reason of this instrument or the exercise of rights or
remedies hereunder.
(c) Secured Party may, without notice except as hereinafter provided, sell
the Collateral or any part thereof at public or private sale or at any broker's
board or on any securities exchange (with or without appraisal or having the
Collateral at the place of sale) for cash and at such price or prices as Secured
Party may deem best, and Secured Party or any Lender may be the purchaser of any
and all of the Collateral so sold and Secured Party may apply upon the purchase
price therefor any of the Debt and thereafter hold the same absolutely free from
any right or claim of whatsoever kind. Secured Party is authorized at any such
sale, if Secured Party deems it advisable or is required by applicable law so to
do, (i) to restrict the prospective bidders on or purchasers of any of the Stock
Collateral to a limited number of sophisticated investors who will represent and
agree that they are
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purchasing for their own account for investment and not with a view to the
distribution or resale of any of the Stock Collateral, (ii) to cause to be
placed on certificates for any or all of the Stock Collateral a legend to the
effect that such security has not been registered under the Securities Act of
1933 and may not be disposed of in violation of the provisions of said Act, and
(iii) to impose such other limitations or conditions in connection with any such
sale as Secured Party deems necessary or advisable in order to comply with said
Act or any other applicable law. In any such public or private sale, each Lender
if bidding for its own account or for its own account and the accounts of other
Lenders is prohibited from including in the amount of its bid an amount to be
applied as a credit against its Note or the Notes of the other Lenders; instead,
such Lender must bid in cash only. However, in any such public or private sale,
Secured Party may (but shall not be obligated to) submit a bid for all Lenders
(including itself) in the form of a credit against the Debt owed to all of the
Lenders, and Secured Party or its designee may (but shall not be obligated to)
accept title to Property purchased at such public or private sale for and on
behalf of all Lenders. Debtor covenants and agrees that it will execute and
deliver such documents and take such other action as Secured Party deems
necessary or advisable in order that any such sale may be made in compliance
with applicable law. Upon any such sale Secured Party shall have the right to
deliver, assign and transfer to the purchaser thereof the Collateral so sold.
Each purchaser at any such sale shall hold the Property sold absolutely free
from any claim or right of whatsoever kind, including any equity or right of
redemption, stay or appraisal which Debtor has or may have under any rule of law
or statute now existing or hereafter adopted. Secured Party shall give Debtor
written notice at the address set forth herein (which shall satisfy any
requirement of notice or reasonable notice in any applicable statute) of Secured
Party's intention to make any such public or private sale. Such notice shall be
personally delivered or mailed, postage prepaid, at least ten (10) calendar days
before the date fixed for a public sale, or at least (10) calendar days before
the date after which the private sale or other disposition is to be made, unless
the Collateral is of a type customarily sold on a recognized market, is
perishable or threatens to decline speedily in value. Such notice, in case of
public sale, shall state the time and place fixed for such sale or, in case of
private sale or other disposition other than a public sale, the time after which
the private sale or other such disposition is to be made. In case of sale at
broker's board or on a securities exchange, such notice shall state the board or
exchange at which such sale is to be made and the day on which the Collateral or
that portion thereof so being sold will first be offered for sale at such board
or exchange. Any public sale shall be held at such time or times, within the
ordinary business hours and at such place or places, as Secured Party may fix in
the notice of such sale. At any sale the Collateral may be sold in one lot as an
entirety or in separate parcels as Secured Party may determine. Secured Party
shall not be obligated to make any sale pursuant to any such notice. Secured
Party may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at any time and
place fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned. Each and every method of disposition
described in this Section shall constitute disposition in a commercially
reasonable manner. Each Obligor, to the extent applicable, shall remain liable
for any deficiency.
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(d) Secured Party shall have all the rights of a secured party after
default under the Uniform Commercial Code of Texas and in conjunction with, in
addition to or in substitution for those rights and remedies:
(i) Secured Party may require Debtor to assemble the Collateral and
make it available at a place Secured Party designates which is mutually
convenient to allow Secured Party to take possession or dispose of the
Collateral; and
(ii) it shall not be necessary that Secured Party or any Lender take
possession of the Collateral or any part thereof before the time that any
sale pursuant to the provisions of this Article is conducted and it shall
not be necessary that the Collateral or any part thereof be present at the
location of such sale; and
(iii) before application of proceeds of disposition of the Collateral
to the Debt, such proceeds shall be applied to the reasonable and
customary, out-of-pocket expenses of retaking, holding, preparing for sale
or lease, selling, leasing, licensing, sublicensing and the like and the
reasonable and customary out-of-pocket attorneys' fees and legal expenses
incurred by Secured Party, each Obligor, to the extent applicable, to
remain liable for any deficiency; and
(iv) the sale by Secured Party of less than the whole of the
Collateral shall not exhaust the rights of Secured Party hereunder, and
Secured Party is specifically empowered to make successive sale or sales
hereunder until the whole of the Collateral shall be sold; and, if the
proceeds of such sale of less than the whole of the Collateral shall be
less than the aggregate of the Debt, this Agreement and the Liens created
hereby shall remain in full force and effect as to the unsold portion of
the Collateral just as though no sale had been made; and
(v) in the event any sale hereunder is not completed or is defective
in the opinion of Secured Party, such sale shall not exhaust the rights of
Secured Party hereunder and Secured Party shall have the right to cause a
subsequent sale or sales to be made hereunder; and
(vi) any and all statements of fact made in any bill of sale or
assignment or other instrument evidencing any foreclosure sale hereunder
shall be taken as rebuttable evidence of the truth of the facts so stated;
and
(vii) Secured Party may appoint or delegate any one or more persons as
agent to perform any act or acts necessary or incident to any sale held by
Secured Party, including the sending of notices and the conduct of sale,
but in the name and on behalf of Secured Party; and
(viii) demand of performance, advertisement and presence of Property
at sale are hereby WAIVED and Secured Party is hereby authorized to sell
hereunder any evidence of
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debt it may hold as security for the Debt. Except as provided herein or in
any other Loan Document, all demands and presentments of any kind or nature
are expressly WAIVED by Debtor. Debtor WAIVES the right to require Secured
Party or any Lender to pursue any other remedy for the benefit of Debtor
and agrees that Secured Party or any Lender may proceed against any Obligor
for the amount of the Debt owed to Secured Party or any Lender without
taking any action against any other Obligor or any other Person and without
selling or otherwise proceeding against or applying any of the Collateral
in Secured Party's possession.
7.2 All remedies expressly provided for in this Agreement are cumulative
of any and all other remedies existing at law or in equity and are cumulative of
any and all other remedies provided for in any other instrument securing the
payment of the Debt, or any part thereof, or otherwise benefiting Secured Party
or any Lender, and the resort to any remedy provided for hereunder or under any
such other instrument or provided for by law shall not prevent the concurrent or
subsequent employment of any other appropriate remedy or remedies.
7.3 Secured Party or any Lender may resort to any security given by this
Agreement or to any other security now existing or hereafter given to secure the
payment of the Debt, in whole or in part, and in such portions and in such order
as may seem best to Secured Party or such Lender, as the case may be, in its
sole discretion, and any such action shall not in anywise be considered as a
waiver of any of the rights, benefits or security interests evidenced by this
Agreement.
7.4 To the full extent Debtor may do so, Debtor agrees that Debtor will
not at any time insist upon, plead, claim or take the benefit or advantage of
any law now or hereafter in force providing for any stay, extension or
redemption; and Debtor, for Debtor and for any and all Persons ever claiming any
interest in the Collateral, to the extent permitted by law, hereby WAIVES and
releases all rights of redemption, stay of execution, notice of intention to
mature or to declare due the whole of the Debt, notice of election to mature or
to declare due the whole of the Debt and all rights to a marshaling of the
assets of Debtor, including the Collateral, or to a sale in inverse order of
alienation in the event of foreclosure of the security interest hereby created.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Subject to the automatic reinstatement provisions of Section 8.22
below, upon full satisfaction of the Debt and final termination of each Lender's
Revolving Loan Commitment, all rights under this Agreement shall terminate and
the Collateral shall become wholly clear of the security interest evidenced
hereby, and upon written request by Debtor such security interest shall be
released by Secured Party in due form and at Debtor's cost.
8.2 Secured Party or any Lender may waive any default without waiving any
other prior or subsequent default. Secured Party or any Lender may remedy any
default without waiving the default remedied. The failure by Secured Party or
any Lender to exercise any right, power or remedy
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upon any default shall not be construed as a waiver of such default or as a
waiver of the right to exercise any such right, power or remedy at a later date.
No single or partial exercise by Secured Party or any Lender of any right, power
or remedy hereunder shall exhaust the same or shall preclude any other or
further exercise thereof, and every such right, power or remedy hereunder may be
exercised at any time and from time to time. No modification or waiver of any
provision hereof nor 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, if required by Section 11.5 of the Loan Agreement, the Lenders), and
then such waiver or consent shall be effective only in the specific instances,
for the purpose for which given and to the extent therein specified. No notice
to nor demand on Debtor in any case shall of itself entitle Debtor to any other
or further notice or demand in similar or other circumstances. Acceptance by
Secured Party or any Lender of any payment in an amount less than the amount
then due on the Debt shall be deemed an acceptance on account only and shall not
in any way affect the existence of a default hereunder.
8.3 Subject to Section 11.5 of the Loan Agreement, Secured Party may at
any time and from time to time in writing (a) waive compliance by Debtor with
any covenant herein made by Debtor to the extent and in the manner specified in
such writing; (b) consent to Debtor's doing any act which hereunder Debtor is
prohibited from doing, or consent to Debtor's failing to do any act which
hereunder Debtor is required to do, to the extent and in the manner specified in
such writing; (c) release any part of the Collateral, or any interest therein,
from the security interest of this Agreement; or (d) release any Person liable,
either directly or indirectly, for the Debt or for any covenant herein or in any
other instrument now or hereafter securing the payment of the Debt, without
impairing or releasing the liability of any other Person. No such act shall in
any way impair the rights of Secured Party or any Lender hereunder except to the
extent specifically agreed to by Secured Party or such Lender in such writing.
8.4 Neither Secured Party nor any Lender shall be required to take any
steps necessary to preserve any rights against prior parties to any of the
Collateral.
8.5 A carbon, photographic or other reproduction of this Agreement or of
any financing statement relating to this Agreement shall be sufficient as a
financing statement.
8.6 Debtor will cause all financing statements and continuation statements
relating hereto to be recorded, filed, re-recorded and refiled in such manner
and in such places as Secured Party shall reasonably request and will pay all
such recording, filing, re-recording, and refiling taxes, fees and other
charges.
8.7 In the event the ownership of the Collateral or any part thereof
becomes vested in a Person other than Debtor, Secured Party and each Lender may,
without notice to Debtor, deal with such successor or successors in interest
with reference to this Agreement and to the Debt in the same manner as with
Debtor, without in any way vitiating or discharging Debtor's liability hereunder
or upon the Debt. No sale of the Collateral, and no forbearance on the part of
Secured Party or any Lender and no extension of the time for the payment of the
Debt given by Secured Party or any
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Lender shall operate to release, discharge, modify, change or affect, in whole
or in part, the liability of Debtor hereunder for the payment of the Debt or the
liability of any other Obligor for the payment of the Debt, except as agreed to
in writing by Secured Party or as expressly provided in the Loan Agreement.
8.8 Any other or additional security taken for the payment of any of the
Debt shall not in any manner affect the security given by this Agreement.
8.9 To the extent that proceeds of the Debt are used to pay indebtedness
secured by any outstanding Lien against the Collateral, such proceeds have been
advanced by Lenders at Debtor's request, and Secured Party, on behalf of
Lenders, shall be subrogated to any and all rights and Liens owned by any owner
or holder of such outstanding Lien, irrespective of whether said Lien is
released.
8.10 If any part of the Debt cannot be lawfully secured by this Agreement,
or if the Liens of this Agreement cannot be lawfully enforced to pay any part of
the Debt, then and in either such event, at the option of Secured Party, all
payments on the Debt shall be deemed to have been first applied against that
part of the Debt.
8.11 Secured Party may assign this Agreement so that the assignee shall be
entitled to the rights and remedies of Secured Party hereunder.
8.12 Subject to Section 11.5 of the Loan Agreement, this Agreement shall
not be changed orally but shall be changed only by agreement in writing signed
by Debtor and Secured Party. No course of dealing between the parties, no usage
of trade and no parole or extrinsic evidence of any nature shall be used to
supplement or modify any of the terms or provisions of this Agreement.
8.13 Any notice, request or other communication required or permitted to be
given hereunder shall be given as provided in the Loan Agreement.
8.14 This Agreement shall be binding upon Debtor, and the trustees,
receivers, successors and assigns of Debtor, including all successors in
interest of Debtor in and to all or any part of the Collateral, and shall
benefit Secured Party and its successors and assigns.
8.15 If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws, the legality, validity and
enforceability of the remaining provisions of this Agreement shall not be
affected thereby, and this Agreement shall be liberally construed so as to carry
out the intent of the parties to it. Each waiver in this Agreement is subject
to the overriding and controlling rule that it shall be effective only if and to
the extent that (a) it is not prohibited by applicable law and (b) applicable
law neither provides for nor allows any material sanctions to be imposed against
Secured Party for having bargained for and obtained it.
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8.16 Secured Party and each Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral in its
possession if it takes such action for that purpose as Debtor requests in
writing, but failure of Secured Party or any Lender to comply with such request
shall not of itself be deemed a failure to have exercised reasonable care, and
no failure of Secured Party or any Lender to take any action so requested by
Debtor shall be deemed a failure to exercise reasonable care in the custody or
preservation of such Collateral. Neither Secured Party nor any Lender shall be
responsible in any way for any depreciation in the value of the Collateral, nor
shall any duty or responsibility whatsoever rest upon Secured Party or any
Lender to take any steps to preserve rights against prior parties or to enforce
collection of the Collateral by legal proceedings or otherwise, the sole duty of
Secured Party being to receive collections, remittances and payments on such
Collateral as and when made and received by Secured Party and to apply the
amount or amounts so received, after deduction of any collection costs incurred,
as payment upon any of the Debt or to hold the same for the account and order of
Debtor.
8.17 In the event Debtor instructs Secured Party or any Lender, in writing
or orally, to deliver any or all of the Collateral to a third Person, and
Secured Party or any Lender agrees to do so, the following conditions shall be
conclusively deemed to be a part of Secured Party's or such Lender's agreement,
whether or not they are specifically mentioned to Debtor at the time of such
agreement: (i) Neither Secured Party nor any Lender shall assume any
responsibility for checking the genuineness or authenticity of any Person
purporting to be a messenger, employee or representative of such third Person to
whom Debtor has directed Secured Party or any Lender to deliver the Collateral,
or the genuineness or authenticity of any document of instructions delivered by
such Person; (ii) Debtor will be considered by requesting any such delivery to
have assumed all risk of loss as to the Collateral; (iii) Secured Party's and
Lender's sole responsibility will be to deliver the Collateral to the Person
purporting to be such third Person described by Debtor, or a messenger, employee
or representative thereof; and (iv) Secured Party and Debtor hereby expressly
agree that the foregoing actions by Secured Party or any Lender shall constitute
reasonable care.
8.18 The pronouns used in this Agreement are in the masculine and neuter
genders but shall be construed as feminine, masculine or neuter as occasion may
require. "Secured Party", "Obligor" and "Debtor" as used in this Agreement
include the heirs, devisees, executors, administrators, personal
representatives, trustees, beneficiaries, conservators, receivers, successors
and assigns of those parties.
8.19 The section headings appearing in this Agreement have been inserted
for convenience only and shall be given no substantive meaning or significance
whatever in construing the terms and provisions of this Agreement. Terms used
in this Agreement which are defined in the Texas Uniform Commercial Code are
used with the meanings as therein defined. Wherever the term "including" or a
similar term is used in this Agreement, it shall be read as if it were written
"including by way of example only and without in any way limiting the generality
of the clause or concept referred to."
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8.20 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE APPLICABLE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA FROM
TIME TO TIME IN EFFECT.
8.21 Debtor agrees that, if at any time all or any part of any payment
previously applied by Secured Party or any Lender to the Debt is or must be
returned by Secured Party or any Lender--or recovered from Secured Party or any
Lender--for any reason (including the order of any bankruptcy court), this
Agreement shall automatically be reinstated to the same effect, as if the prior
application had not been made. Debtor hereby agrees to indemnify Secured Party
and Lenders against, and to save and hold Secured Party and Lenders harmless
from any required return by Secured Party or any Lender--or recovery from
Secured Party or any Lender--of any such payments because of its being deemed
preferential under applicable bankruptcy, receivership or insolvency laws, or
for any other reason.
8.22 This Agreement and the other Loan Documents embody the entire
agreement and understanding between Secured Party and Debtor with respect to
their subject matter and supersede all prior conflicting or inconsistent
agreements, consents and understandings relating to such subject matter. Debtor
acknowledges and agrees there is no oral agreement between Debtor and Secured
Party which has not been incorporated in this Agreement and the other Loan
Documents.
8.23 Secured Party may from time to time and at any time, without any
necessity for any notice to or consent by Debtor or any other Person, release
all or any part of the Collateral from the Liens created pursuant to of this
Agreement, with or without cause, including as a result of any determination by
Secured Party that the Collateral or any portion thereof contains or has been
contaminated by or releases or discharges any hazardous or toxic waste, material
or substance.
EXECUTED as of the date first set forth above.
"DEBTOR"
BOOTS & COOTS INTERNATIONAL WELL
CONTROL, INC., a Delaware corporation
By:
---------------------------------------
Name:
------------------------------------
Title:
------------------------------------
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"SECURED PARTY"
COMERICA BANK-TEXAS, as Agent
By:
---------------------------------------
Name:
------------------------------------
Title:
------------------------------------
Exhibit A - Stock (With Percentage of Issuer's Equity Pledged)
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EXECUTION COPY
AMENDMENT NO. 1 TO SUBORDINATED NOTE
AND WARRANT PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT
(this "AMENDMENT") is entered into as of October 28, 1998 by and between THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA ("PRUDENTIAL") and BOOTS & COOTS
INTERNATIONAL WELL CONTROL, INC., a Delaware corporation (the "COMPANY").
RECITALS
A. The Company and Prudential have entered into that certain Subordinated
Note and Warrant Purchase Agreement dated as of July 23, 1998 (as amended,
restated or modified from time to time, including as amended by this Amendment
below, the "NOTE AGREEMENT"), pursuant to which the Company has issued and sold
to Prudential $30,000,000 aggregate principal amount of its Senior Subordinated
Notes due July 23, 2006 (such Senior Subordinated Notes, together with each
such Senior Subordinated Note delivered in substitution or exchange for any
other such Senior Subordinated Note, are collectively referred to herein as the
"NOTES"). Capitalized terms used and not otherwise defined in this Amendment
shall have the respective meanings ascribed to them in the Note Agreement.
B. The Company has requested that, subject to the terms and conditions set
forth herein, the Note Agreement be amended to the effect and as set forth
herein to among other things, reflect the negotiated release of the Collateral
(as such term was defined in the Note Agreement prior to the effectiveness of
this Amendment) in connection with the prepayment of amounts due under the
Bridge Loan Agreement (as such term was defined in the Note Agreement prior to
the effectiveness of this Amendment.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Amendment to Paragraph 5F. Paragraph 5F of the Note Agreement is hereby
amended by deleting in its entirety the second sentence thereof.
2. Amendment to Paragraph 5I. paragraph 5I of the Note Agreement is hereby
amended by deleting the phrase and punctuation "after the earlier of (i) January
6, 1999 or (ii) the effective date of the initial Credit Agreement" contained
therein.
<PAGE>
3. Amendment to Paragraph 5J. Paragraph 5J of the Note Agreement is hereby
amended and restated to read in its entirety as follows:
"5J. NEW SUBSIDIARIES; FOREIGN SUBSIDIARIES.
(i) At the cost and expense of the Company, the Company will cause each
subsequently acquired or organized Domestic Subsidiary to execute and
deliver a Guaranty Agreement in favor of the holders of the Notes
contemporaneously with such Domestic Subsidiary possessing or acquiring any
tangible or intangible assets or properties.
(ii) At the cost and expense of the Company and upon the request of the
Required Holders, the Company will cause each Significant Foreign Subsidiary
(or, during the existence of a Default or an Event of Default, any Subsidiary)
to execute and deliver a Guaranty Agreement, in favor of the holder of the
Notes."
4. Amendment to Paragraph 6A(1). The table contained in paragraph 6A(1) of
the Note Agreement is hereby amended and restated to read in its entirety as
follows:
" Period Maximum Ratio
------ -------------
Date of Closing through the earlier of (i)
the closing date of the sale of the
Contemplated Preferred Stock and (ii)
June 30, 1999 4.75 to 1.00
If the closing date of the sale of the
Contemplated Preferred Stock is prior to
June 30, 1999, then from the closing date
of the sale of the Contemplated Preferred
Stock through June 30, 1999 4.25 to 1.00
July 1, 1999 through June 30, 2000 3.75 to 1.00
July 1, 2000 through June 30, 2001 3.50 to 1.00
July 1, 2001 until all Notes have been paid 3.25 to 1.00"
5. Amendment to Paragraph 6A(4). Paragraph 6A(4) of the Note Agreement is
hereby amended and restated to read in its entirety as follows:
"6A(4). EBITDA TO CONSOLIDATED INTEREST EXPENSE AND PREFERRED DIVIDENDS RATIO.
At any time, the ratio of EBITDA to Consolidated Interest Expense and Preferred
Dividends, each for the four fiscal quarters most recently ended, to be less
than 1.75 to 1.00."
-2-
<PAGE>
6. Amendment to Paragraph 6A(5). Paragraph 6A(5) of the Note Agreement
is hereby amended to read on its entirety as follows:
"6A(5). EBITDA TO CONSOLIDATED INTEREST EXPENSE AND PREFERRED DIVIDENDS
PLUS SCHEDULED PRINCIPAL PAYMENTS RATIO. At any time, the ratio of
EBITDA to Consolidated Interest Expense and Preferred Dividends, plus
Scheduled Principal Payments, each for the four fiscal quarters most
recently ended, to be less than 1.25 to 1.00."
7. Amendment to Paragraph 6C(1). Paragraph 6C(1) of the Note Agreement
is hereby amended by (a) deleting the phrase "the Collateral Agent" contained in
clause (i) thereof and replacing such phrase with the word "you", (b) deleting
the phrase "applicable Senior Loan Agreement" contained in clause (ii) thereof
and replacing such phrase with the phrase "Credit Agreement", (c) deleting the
phrase "Senior Loan Documents" contained in clause (ii) thereof and replacing
such phrase with the phrase "Credit Agreement Documents", (d) adding the word
"and" at the end of clause (iv) thereof, (e) deleting the punctuation and word
";and" at the end of clause (v) thereof and replacing such punctuation and word
with the punctuation "." and (f) deleting in its entirety clause (vi) thereof.
8. Amendment to Paragraph 6C(2). Paragraph 6C(2) of the Note Agreement
is hereby amended by (a) deleting the phrase "applicable Senior Loan Agreement"
contained in clause (ii) thereof and replacing such phrase with the phrase
"Credit Agreement" and (b) deleting the figure "$55,000,000" contained in clause
(ii) thereof and replacing such figure with the figure "$30,000,000".
9. Amendment to Paragraph 6C(4). Paragraph 6C(4) of the Note Agreement
is hereby amended by (a) deleting the phrase "and the Collateral Agent"
contained in clause (i)(a)(3) thereof, (b) deleting the phrase "and the
Collateral Agent are" contained in clause (i)(b)(5) thereof and replacing such
phrase with the word "is", (c) deleting the phrase "applicable Senior Loan
Agreement" contained in two separate instances in clause (i)(c) thereof and
replacing such phrase in each instance with the phrase "Credit Agreement", (d)
deleting the phrase "Senior Loan Documents" contained in two separate instances
in clause (i)(c) thereof and replacing such phrase in each instance with the
phrase "Credit Agreement Documents" and (e) deleting the phrase "the Collateral
Agent" found in two separate instances in clause (i)(c) thereof and replacing
such phrase in each instance with the word "you".
10. Amendment to Paragraph 6G. Paragraph 6G of the Note Agreement is
hereby amended by (a) deleting the phrase "applicable Senior Loan Agreement"
contained therein and replacing such phrase with the phrase "Credit Agreement"
and (b) deleting the phrase "Senior Loan Documents" contained therein and
replacing such phrase with the phrase "Credit Agreement Documents".
11. Amendment to Paragraph 6I. Paragraph 6I of the Note Agreement is
hereby amended by (a) deleting the phrase and punctuation "and such Security
Documents as the Required Holders may reasonably require," contained in clause
(iii)(b) thereof and (b) deleting in its entirety
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<PAGE>
clause (iii)(c) thereof and replacing such clause with the following: "(c) the
holder of each Note is given reasonable prior notice of such formation, creation
or acquisition, unless such Subsidiary has no tangible or intangible assets or
properties, in which case the holder of each Note shall be given reasonable
prior notice of the date upon which such Subsidiary is expected to first possess
or acquire any tangible or intangible assets or properties".
12. Amendment to Paragraph 7D. the definition of "Senior Debt" contained
in paragraph 7D of the Note Agreement is hereby amended by deleting the phrase
"applicable Senior Loan Agreement" contained therein and replacing such phrase
with the phrase "Credit Agreement".
13. Amendment to Paragraph 8A. Paragraph 8A of the Note Agreement is
hereby amended by (a) deleting the word "or" contained at the end of clause
(xvi) thereof and (b) deleting clause (xvii) thereof in its entirety.
14. Amendment to Paragraph 8D. Paragraph 8D of the Note Agreement is
hereby amended by (a) deleting the notation "(i)" appearing immediately after
the phrase and punctuation "be continuing," in the first sentence thereof, (b)
deleting the phrase and punctuation ", and (ii) both the Collateral Agent and
the holders of the Notes may exercise any rights or remedies in their respective
capacities under the Security Documents in accordance with the provisions
thereof" contained in the first sentence thereof and (c) deleting the phrase "or
the Collateral Agent" contained in the second sentence thereof.
15. Amendment to Paragraph 9H. Paragraph 9H of the Note Agreement is
hereby amended by deleting the parenthetical notation "(except Liens created
under the Security Documents)" contained in the second sentence thereof.
16. Amendment of Paragraph 11B to Amend and Restate Certain Definitions.
Paragraph 11B of the Note Agreement is hereby amended by amending and restating
the following definitions contained therein to read, in their entirety, as
follows:
"BANK" shall mean Comerica Bank - Texas, a Texas banking association, as
agent bank.
"CREDIT AGREEMENT" shall mean that certain Loan Agreement dated as of
October 28, 1998 by and among the Company and the Bank, as such credit agreement
may be amended, supplemented and otherwise modified from time to time.
"CREDIT AGREEMENT DOCUMENTS" shall mean the Credit Agreement, the other
Loan Documents (as such term is defined in the Credit Agreement) and all other
promissory notes, guaranty agreements, security agreements, pledge agreements,
mortgages or deeds of trust, financing statements, assignments, pledges, lien
entry forms, documents and other writings executed and delivered from time to
time to secure the Indebtedness incurred pursuant to the Credit Agreement and
the obligations owed to any lenders in connection with the Credit Agreement and
all other instruments, certificates, documents and other writings now or
hereafter executed and delivered by
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<PAGE>
any Transaction Party or any other Person pursuant to or in connection with any
of the foregoing or any of the transactions contemplated thereby, and any and
all amendments, restatements, supplements and other modifications to any of the
foregoing.
"PERMITTED SUBORDINATED DEBT" shall mean (i) subordinated Indebtedness
of the Company (and Guarantees thereof by any Domestic Subsidiary) that (a) has
principal payments and prepayments due on the same dates and in the same
relative amounts as the Notes, (b) is pari passu with the Indebtedness incurred
pursuant to this Agreement or the Guaranty Agreements, as applicable, (c) is
issued on terms (including, without limitation, interest rate, yield and voting
rights) substantially identical to the terms of this Agreement and the Guaranty
Agreements, respectively, (d) the issuance of which does not violate any term or
covenant of this Agreement or any other Subordinated Note Document and (e) in
connection therewith, the Required Holders and each Person to which the Company
has issued such subordinated Indebtedness shall have entered into an
intercreditor agreement with respect to such subordinated Indebtedness in form
and substance reasonably satisfactory to the Required Holders and (ii) until May
1, 1999 indebtedness of ITS Supply Corporation, a Delaware corporation and
Domestic Subsidiary of the Company, to Harbison-Fischer, Inc. evidenced by that
certain Subordinated Note due May 1, 1999 in the original principal amount of up
to $3,833,021.44 (and the Guarantee thereof by the Company).
"PRIORITY DEBT" shall mean, at any time, without duplication, an amount
equal to the sum of the amount of all Indebtedness of Subsidiaries, other than
Indebtedness in the form of Guarantees in respect of Indebtedness of the Company
outstanding pursuant to the Credit Agreement or this Agreement or the agreement
pursuant to which the Permitted Subordinated Debt is outstanding (in each case,
whether or not secured by any Lien), outstanding at such time plus the amount of
all Indebtedness of the Company and its Subsidiaries outstanding at such time
that is secured by one or more Liens not otherwise permitted under clauses (i),
(ii), or (iv) of paragraph 6C(1).
"SENIOR LENDER" shall mean the Bank, in its capacity as a lender under
the Credit Agreement, and any other lender or lenders from time to time party to
the Credit Agreement.
"TOTAL DEBT" shall mean the total Indebtedness of the Company and its
Subsidiaries on a consolidated basis, provided, that Total Debt shall not
include Indebtedness of the Company and its Subsidiaries permitted by clause
(iii) of paragraph 6C(2).
17. Amendment to Paragraph 11B to Delete Certain Definitions. Paragraph
11B of the Note Agreement is hereby amended by deleting, in their entirety, the
following definitions contained therein: "Bridge Loan Agreement"; "Bridge Loan
Documents"; "Collateral"; "Collateral Agent"; "Mortgages"; "Pledge Agreements";
"Security Agreements"; "Security Documents"; "Senior Loan Agreement"; and
"Senior Loan Documents".
18. Amendment to Paragraph 11B to Amend Certain Definitions. Paragraph
11B of the Note Agreement is hereby amended by (a) adding the parenthetical
"(but excluding accounts payable in the ordinary course of business)"
immediately after the phrase "group of Persons"
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<PAGE>
contained in clause (i) of the definition of "Indebtedness" contained therein,
(b) deleting the phrase and punctuation ", the Security Documents" contained in
the definition of "Obligations" contained therein, (c) deleting the phrase
"Senior Loan Agreement" contained in the definition of "Scheduled Principal
Payments" contained therein and replacing such phrase with the phrase "Credit
Agreement" and (d) deleting the phrase and punctuation ", the Security
Documents" contained in the definition of "Subordinated Note Documents"
contained therein.
19. Amendment to Paragraph 12B. Paragraph 12B of the Note Agreement is
hereby amended by (a) deleting the punctuation "," appearing in three separate
instances immediately after the word "you" contained therein and replacing such
punctuation in each instance with the word "and" and (b) deleting the phrase
"and the Collateral Agent" contained in three separate instances therein.
20. Amendment to Paragraph 12M. Paragraph 12M of the Note Agreement is
hereby amended by (a) deleting the punctuation "," appearing immediately after
the phrase "ACTIONS OF THE COMPANY" contained in clauses (i) and (ii) thereof
and replacing such punctuation with the word "OR" and (b) deleting the phrase
"OR THE COLLATERAL AGENT" contained in clauses (i) and (ii) thereof.
21. Amendment to the Purchaser Schedule to the Note Agreement. The
Purchase Schedule attached to the Note Agreement is hereby amended by deleting
the reference to "11.28% Senior Secured Subordinated Notes" contained in
paragraph (I) thereof and replacing such phrase with the phrase "Amended and
Restated 11.28% Senior Subordinated Notes".
22. Amendment to Exhibit A of the Note Agreement. Exhibit A of the Note
Agreement is hereby amended and restated in its entirety and replaced by Exhibit
A attached hereto.
23. Deletion of Exhibits F, H and J of the Note Agreement. Exhibit F of
the Note Agreement, Exhibit H of the Note Agreement and Exhibit J of the Note
Agreement are each hereby deleted in their entirety.
24. Effective Date. Each of the foregoing Sections of this Amendment
shall become effective on the date hereof (the "EFFECTIVE DATE"), subject in all
cases to the following having been received by and being satisfactory to
Prudential:
(i) duly executed counterparts of this Amendment;
(ii) certified copies of the Credit Agreement Documents, duly
executed by the parties thereto;
(iii) payment in full for all Indebtedness outstanding pursuant to
the Bridge Loan Agreement and the other Bridge Loan Documents (as such terms
were defined in the Note Agreement prior to the effectiveness of this
Amendment);
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<PAGE>
(iv) Amended and Restated Note, in the form attached hereto as
Exhibit A, duly executed by the Company;
(v) Consents, in the form attached hereto as Exhibit B, duly
executed by each Guarantor; and
(vi) without limiting the provisions of paragraph 12B of the Note
Agreement, Baker & Botts, L.L.P. shall have received its fees and expenses
incurred since the Date of Closing to the extent such fees and expenses are
reflected in a statement rendered to the Company at least one Business Day prior
to the Effective Date.
25. Representations and Warranties. The Company represents and warrants
as follows:
(i) Organization. The Company is a corporation duly organized and
existing in good standing under the laws of the State of Delaware.
(ii) Power and Authority. The Company has all requisite corporate
power to execute, deliver and perform its obligations under this Amendment and
the Note Agreement is amended hereby (collectively, the "AMENDMENT DOCUMENTS").
The execution, delivery and performance by the Company of the Amendment
Documents have been duly authorized by all requisite corporate action on the
part of the Company. The Company has duly executed and delivered each of the
Amendment Documents, and each of the Amendment Documents constitutes the legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its respective terms.
(iii) No Conflicts. Neither the execution and delivery of the
Amendment Documents by the Company, nor the consummation of the transactions
contemplated hereby or thereby, nor fulfillment of nor compliance with the terms
and provisions hereof or thereof will conflict with, or result in a breach of
the terms, conditions or provisions of, or constitute a default under, or result
in any violation of, or result in the creation of any security interest, lien or
other encumbrance upon any of the properties or assets of the Company pursuant
to, the charter or by-laws of the Company, any award of any arbitrator or any
agreement, instrument, order, judgment, decree, statute, law, rule or regulation
to which the Company is subject.
(iv) Consents. Neither the nature of the business conducted by the
Company, nor any of its properties, nor any relationship between the Company and
any other Person, nor any circumstance in connection with the transactions
contemplated by the Amendment Documents is such as to require any authorization,
consent, approval, exemption or other action by or notice to or filing with any
court or administrative or governmental body or any other Person in connection
with the execution and delivery of any Amendment Document or fulfillment of or
compliance with the terms and provisions hereof or thereof.
-7-
<PAGE>
(v) No Material Adverse Effect. Except as previously disclosed to
Prudential in writing, there has been no Material Adverse Effect since December
31, 1997.
(vi) No Event of Default or Default. Both immediately prior to and
immediately following the effectiveness of this Amendment, no Event of Default
or Default exists that has not been temporarily waived in writing by Prudential.
26. Miscellaneous.
(i) Upon and after the Effective Date, each reference to the Note
Agreement in the Note Agreement and each Note shall mean and be a reference to
the Note Agreement as amended by this Amendment.
(ii) Except as specifically amended herein, the Note Agreement shall
remain in full force and effect, and is hereby ratified and confirmed.
(iii) Other than as expressly set forth herein, the execution, delivery
and effectiveness of this Amendment shall not operate as a waiver of any right,
power or remedy of Prudential, nor constitute a waiver of any provision of the
Note Agreement, the Notes or any other document, instrument or agreement
executed and delivered in connection with the Note Agreement.
(iv) The Company confirms its agreement, pursuant to paragraph 12B of
the Note Agreement, to pay promptly all expenses of Prudential related to this
Amendment and all matters contemplated by the Amendment Documents, including
without limitation all fees and expenses of Prudential's special counsel.
(v) THIS AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW
YORK.
(vi) This Amendment may be executed in counterparts, each of which shall
be deemed an original and all of which taken together shall constitute one and
the same document. Delivery of this Amendment may be made by telecopy of a duly
executed counterpart copy hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute this Amendment as of the day and year first above written.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Signature appears here
___________________________
Vice President
BOOTS & COOTS INTERNATIONAL
WELL CONTROL, INC.
By:
____________________________
Title
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