UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period ended
March 31, 1999
or
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from _____________________ to _____________________
Commission File Number 34-022552
RAILTEX, INC.
----------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 74-1948121
------------------------------ ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4040 BROADWAY, SUITE 200
SAN ANTONIO, TEXAS 78209
- ---------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (210) 841-7600
----------------------
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.
[X] YES [ ] NO
Indicate the number of shares outstanding of the Registrant's Common Stock as
of April 30, 1999: 9,286,126.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RAILTEX INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------------
1999 1998 (1)
---------- ----------
<S> <C> <C>
OPERATING REVENUES ............................................................................... $ 45,405 $ 38,412
OPERATING EXPENSES:
Transportation ................................................................................ 15,442 13,895
General and administrative .................................................................... 8,020 5,500
Equipment ..................................................................................... 5,387 4,414
Maintenance of way ............................................................................ 4,650 4,580
Depreciation and amortization ................................................................. 4,140 3,263
---------- ----------
Total operating expenses ................................................................... 37,639 31,652
---------- ----------
OPERATING INCOME ................................................................................. 7,766 6,760
INTEREST EXPENSE ................................................................................. (2,673) (2,688)
OTHER INCOME ..................................................................................... 633 345
---------- ----------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE ......................................... 5,726 4,417
INCOME TAXES ..................................................................................... (2,347) (1,779)
---------- ----------
NET INCOME BEFORE CUMULATIVE EFFECT OF
A CHANGE IN ACCOUNTING PRINCIPLE .............................................................. $ 3,379 $ 2,638
========== ==========
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE (NET OF INCOME TAXES) .................................................... -- (1,703)
NET INCOME ....................................................................................... $ 3,379 $ 935
========== ==========
BASIC EARNINGS PER SHARE:
BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE .................................. $ 0.36 $ 0.29
========== ==========
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE (NET OF INCOME TAXES) ................................................. $ -- $ (0.19)
========== ==========
TOTAL ......................................................................................... $ 0.36 $ 0.10
========== ==========
WEIGHTED AVERAGE NUMBER OF BASIC COMMON SHARES OUTSTANDING ....................................... 9,274 9,171
DILUTED EARNINGS PER SHARE:
BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE .................................. $ 0.36 $ 0.28
========== ==========
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE (NET OF INCOME TAXES) ................................................. $ -- $ (0.18)
========== ==========
TOTAL ......................................................................................... $ 0.36 $ 0.10
========== ==========
WEIGHTED AVERAGE NUMBER OF DILUTED COMMON SHARES OUTSTANDING ..................................... 9,323 9,231
</TABLE>
(1) Restated to reflect adoption of SOP 98-05 as of January 1, 1998.
The accompanying notes are an integral part of
these consolidated financial statements.
2
<PAGE>
RAILTEX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---------- ----------
ASSETS (UNAUDITED) (AUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ....................................................................... $ 2,234 $ 1,243
Accounts receivable, less doubtful receivables of $732; $844 in 1998 ............................ 34,887 33,866
Prepaid expenses and other current assets ....................................................... 3,098 4,848
Deferred tax assets, net ........................................................................ 1,906 1,906
---------- ----------
Total current assets ......................................................................... 42,125 41,863
---------- ----------
PROPERTY AND EQUIPMENT, NET ........................................................................ 292,325 291,779
---------- ----------
OTHER ASSETS:
Investments in Brazilian railroad companies ..................................................... 19,994 19,994
Other, net ...................................................................................... 13,928 8,709
---------- ----------
Total other assets ........................................................................... 33,922 28,703
---------- ----------
Total assets ................................................................................. $ 368,372 $ 362,345
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term notes payable ........................................................................ $ 108 $ 215
Current portion of long-term debt ............................................................... 10,573 8,568
Accounts payable ................................................................................ 25,990 20,574
Accrued liabilities ............................................................................. 14,844 17,729
---------- ----------
Total current liabilities .................................................................... 51,515 47,086
DEFERRED INCOME TAXES, NET ......................................................................... 28,929 30,294
LONG-TERM DEBT, LESS CURRENT PORTION ............................................................... 120,877 122,982
OTHER LIABILITIES .................................................................................. 8,287 6,835
---------- ----------
Total liabilities ............................................................................ 209,608 207,197
---------- ----------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST IN BRAZILIAN INVESTMENT .......................................................... 11,000 11,000
---------- ----------
SHAREHOLDERS' EQUITY:
Preferred stock; $1.00 par value; 10 million shares authorized;
no shares issued or outstanding ............................................................. -- --
Common stock; $.10 par value; 30 million shares authorized; issued and
outstanding 9,286,126; 9,273,963 in 1998 ..................................................... 929 927
Paid-in capital ................................................................................ 85,196 85,115
Retained earnings .............................................................................. 63,357 59,976
Deferred compensation .......................................................................... (893) (948)
Accumulated other comprehensive income ......................................................... (825) (922)
---------- ----------
Total shareholders' equity ................................................................... 147,764 144,148
---------- ----------
Total liabilities and shareholders' equity ................................................... $ 368,372 $ 362,345
========== ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
3
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------
1999 1998 (1)
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income .......................................................................................... $ 3,379 $ 935
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization .................................................................... 4,140 3,263
Deferred income taxes ............................................................................ (1,401) (414)
Amortization of deferred financing costs ......................................................... 97 97
Provision for losses on accounts receivable ...................................................... 41 103
Gain on sale of assets ........................................................................... (1,238) (243)
Cumulative effect of a change in accounting principle ............................................ -- 2,747
Changes in working capital:
Accounts receivable ........................................................................... (212) 2,169
Prepaid expenses .............................................................................. 1,284 (311)
Accounts payable and accrued liabilities ...................................................... (1,014) (6,281)
---------- ----------
Net cash provided by operating activities ........................................................ 5,076 2,065
---------- ----------
INVESTING ACTIVITIES:
Purchase of property and equipment .................................................................. (3,781) (6,567)
Proceeds from sale of property and equipment ........................................................ 414 279
Increase in other long-term assets .................................................................. (366) (177)
---------- ----------
Net cash used in investing activities ............................................................ (3,733) (6,465)
---------- ----------
FINANCING ACTIVITIES:
Payments of short-term notes payable, net ........................................................... (107) (342)
Proceeds from long-term debt ........................................................................ -- 3,000
Principal payments on long-term debt ................................................................ (2,324) (669)
Net increase in working capital facility ............................................................ 2,000 3,000
Sale of common stock pursuant to stock options ...................................................... 82 199
Other ............................................................................................... -- (1)
---------- ----------
Net cash provided (used) by financing activities ................................................. (349) 5,187
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH ................................................................ (3) (3)
---------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS ................................................................ 991 784
CASH AND CASH EQUIVALENTS, beginning of period ......................................................... 1,243 570
---------- ----------
CASH AND CASH EQUIVALENTS, end of period ............................................................... $ 2,234 $ 1,354
========== ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE>
1. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The interim consolidated financial statements presented herein include the
accounts of RailTex, Inc. and its wholly-owned subsidiaries. References to
"RailTex" or the "Company" mean RailTex, Inc. and, unless the context indicates
otherwise, its consolidated subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation. These interim
consolidated financial statements have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). All adjustments have been made to the accompanying interim
consolidated financial statements which are, in the opinion of the Company's
management, necessary for a fair presentation of the Company's operating
results. All adjustments are of a normal recurring nature. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. It is recommended that these
interim consolidated financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998. The
results of operations for any interim period are not necessarily indicative of
the results of operations for the entire year. Certain reclassifications have
been made in the prior period financial statements to conform with the current
period presentation.
2. RECENTLY ISSUED PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognizes all derivatives as either assets or
liabilities in the statement of financial position and measures those
instruments at fair value. This statement is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. Initial application of this
statement should be as of the beginning of an entity's fiscal quarter. Earlier
application of this statement is encouraged, but it is permitted only as of the
beginning of any fiscal quarter that begins after the issuance of this
statement. The Company believes the adoption of this statement will not have a
material impact on the financial condition or results of operations of the
Company.
In April 1998, the Accounting Standards Executive Committee issued SOP
98-5. SOP 98-5 requires costs associated with start-up activities to be expensed
as incurred. SOP 98-5 is effective for financial statements for fiscal years
beginning after December 15, 1998, although earlier application is encouraged.
The Company adopted SOP 98-5 for the year ended December 31, 1998. This adoption
resulted in the recognition of a non-recurring charge of approximately
$1,703,000 (net of income taxes) entitled, "Cumulative effect of a change in
accounting principle (net of income taxes)" in the accompanying consolidated
financial statements. Prior to the adoption of SOP 98-5, the Company capitalized
the costs associated with start-up activities, including the acquisition of new
railroad properties, and amortized those costs over five years. Prospectively,
the Company's results of operations will reflect higher costs associated with
the acquisition of new railroad properties in the period of acquisition.
5
<PAGE>
3. EARNINGS PER SHARE
The following is a reconciliation of the numerators and the denominators
of the basic and diluted earnings per share computations (in thousands, except
per share amounts).
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
NUMERATOR:
Net income before cumulative effect of a change in accounting principle ............................ $ 3,379 $ 2,638
Cumulative effect of a change in accounting principle (net of income taxes) ........................ -- (1,703)
---------- ----------
Net income ......................................................................................... $ 3,379 $ 935
========== ==========
DENOMINATOR:
Weighted average number of basic share of common stock outstanding ................................. 9,274 9,171
Effect of dilutive stock options ................................................................... 49 60
---------- ----------
Weighted average number of diluted shares of common stock outstanding .............................. 9,323 9,231
========== ==========
BASIC EARNINGS PER SHARE:
Before cumulative effect of a change in accounting principle ....................................... $ 0.36 $ 0.29
Cumulative effect of a change in accounting principle (net of income taxes) ........................ -- (0.19)
---------- ----------
Total .............................................................................................. $ 0.36 $ 0.10
========== ==========
DILUTED EARNINGS PER SHARE:
Before cumulative effect of a change in accounting principle ....................................... $ 0.36 $ 0.28
Cumulative effect of a change in accounting principle (net of income taxes) ........................ -- (0.18)
---------- ----------
Total .............................................................................................. $ 0.36 $ 0.10
========== ==========
</TABLE>
4. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Cash paid during the period for:
Interest ........................................................................................ $ 4,318 $ 4,551
Income taxes .................................................................................... 344 590
Non-cash investing and financing activities:
Capital leases .................................................................................. 31 554
Grants .......................................................................................... 5,185 107
Tax benefit from exercise of non-qualified stock options ........................................ 37 76
</TABLE>
6
<PAGE>
5. DERIVATIVE ACCOUNTING PRINCIPLES
The Company historically has hedged certain anticipated transactions.
Interest rate swaps and diesel fuel price collar contracts with third parties
are used to hedge interest rates and diesel fuel costs. Hedges of anticipated
transactions are accounted for under the deferral method with gains and losses
on these transactions recognized in interest expense and operating expenses when
the hedged transaction occurs. The Company does not currently hold or issue
financial instruments for trading purposes.
The Company is exposed to fluctuations in diesel fuel prices, as an
increase in the price of diesel fuel would result in lower earnings and
increased cash outflows. The Company had entered into several commodity collar
transactions to hedge market risks of diesel fuel prices. The first collar was
effective April 1, 1998 and terminated March 31, 1999 and represented notional
amounts totaling 225,000 gallons per month with a cap price of $0.5600 per
gallon and a floor price of $0.4375 per gallon. This transaction hedges
approximately 16% of the Company's estimated monthly diesel fuel consumption.
The second collar is effective July 1, 1998 and terminates June 30, 1999 and
represents notional amounts totaling 225,000 gallons per month with a cap price
of $0.5600 per gallon and a floor price of $0.4490 per gallon. This transaction
hedges approximately 16% of the Company's estimated monthly diesel fuel
consumption.
In February 1999, the Company entered into two additional contracts to
hedge its market risk from diesel fuel prices. The first consists of three
monthly swap agreements which fix the price of 725,000 gallons of diesel fuel in
April, May and June 1999 at $0.3215, $0.3280 and $0.3375 per gallon,
respectively. The second is a cap which fixes the price of 725,000 gallons of
diesel fuel per month for the period July 1999 to June 2000 at $0.4500 per
gallon. The cost of the cap was approximately $209,000, which will be amortized
over the period covered by the cap. These transactions hedge approximately 57%
of the Company's estimated monthly diesel fuel consumption.
6. RESTRICTED STOCK AWARDS
In 1998, the Company, under the 1993 Stock Plan, as amended ("Plan"),
granted 80,000 restricted shares in the form of the Company's common stock to
several key executives. The restricted shares vest ratably over three to five
years or immediately in the event of a change in control, death, disability or
termination, other than for cause. The unvested portion of the restricted shares
forfeit if the key executives are terminated for cause during the restriction
period. The awards were recorded at the fair market value of the Company's
common stock on the date of grant as deferred compensation and will be amortized
over the restriction period. For the three months ended March 31, 1999, the
Company recorded compensation expense of $55,704.
7. COMMITMENTS AND CONTINGENCIES
The Company has added railroad properties to its portfolio through the
purchase of track and roadbed, lease of such assets and contracts to operate
such assets under management agreements. These arrangements typically relate
only to the physical assets of the railroad property and, except for the
purchases of Central Properties, Inc. ("CPI") and Indiana & Ohio Rail Corp.
("IORC"), which were structured as acquisitions of stock, the Company typically
does not contractually assume any of the operations or liabilities of the
divesting carriers.
Rail properties operated by the Company under management agreements
typically have initial ten year terms followed by either a purchase option or
one or more renewal terms at the Company's option. These operating contracts
typically require that the Company assume all operating and financial
responsibilities for freight operations on the property, including maintenance,
payment of property taxes and regulatory compliance. Payments by the Company for
the right to conduct rail operations on these properties are typically
calculated as a percentage of revenues from the respective properties.
7
<PAGE>
In August 1995, the Company entered into a ten year Information Technology
Services Agreement ("ITS Agreement") with Electronic Data Systems Corporation
("EDS"). Under the ITS Agreement, EDS is responsible for the management
information systems of the Company, including developing, obtaining licenses for
and maintaining new software for the Company, coordinating the acquisition and
maintenance of computers and related equipment and coordinating the maintenance
of the Company's existing software. The Company currently pays EDS $2.0 million
annually which is subject to annual escalation based on the Consumer Price
Index. The ITS Agreement is subject to earlier termination under certain limited
conditions.
In October 1998, the Utah Transit Authority ("UTA") asserted a claim for
contribution against one of the Company's railroads under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") relating to
certain pollution existing at one of UTA's rail yards over which the Company has
an operating easement. The Company believes it is not a potentially responsible
party under CERCLA and believes it is contractually indemnified against such
claim. The amount of contribution being sought by the UTA is unknown at this
time.
Under certain limited circumstances, two of the Company's railroads may be
repurchased by the selling carrier for their original purchase prices. It is
management's opinion that the likelihood of these properties being repurchased
is remote.
In December 1996, a corporation filed a construction lien against one of
the Company's railroads in the amount of approximately $600,000. The alleged
basis for the construction lien is the provision by the plaintiff of labor and
materials to the Company's railroad in connection with a train derailment in
August 1996, which derailment the Company believes was caused primarily by the
plaintiff. In March 1997, the Company filed a complaint in Federal Court for
approximately $700,000 incurred by the Company in connection with such
derailment and the plaintiff's State claim was combined in the Federal
litigation. The Company is vigorously pursuing its claim and defending the
plaintiff's claim. Trial was originally scheduled for December 1998, but was
rescheduled to July 1999. The Company is unable to predict the outcome of the
trial; however, the Company believes it is adequately reserved to cover any
losses it may incur in connection with this matter. In addition, any loss in
excess of $600,000 will be covered by its insurance.
The Company is currently subject to a number of claims and legal actions
that arose in the ordinary course of business, including Federal Employers'
Liability Act claims by its employees and personal injury claims (including
wrongful death claims) by third parties. The Company believes these claims,
taking into account reserves and applicable insurance, will not have a material
adverse effect on the Company. However, adverse judgments in these claims,
individually or in the aggregate, in excess of related reserves and applicable
insurance, could have a materially adverse effect on the Company's financial
condition and results of its operations.
8. COMPREHENSIVE INCOME
The Company has chosen to disclose comprehensive income in the
Consolidated Statements of Shareholders' Equity. For purposes of SFAS 130, the
Company's other comprehensive income or loss was comprised of net currency
translation adjustments. Paragraph 9(f) of Statement 109 "prohibits recognition
of a deferred tax liability or asset for differences related to assets and
liabilities that under FASB Statement No. 52, `Foreign Currency Translation,'
are remeasured from the local currency into the functional currency using
historical rates". Therefore, other comprehensive income is not being shown net
of tax.
8
<PAGE>
9. SEGMENT INFORMATION
The following table presents information about the Company by geographic area
(in thousands).
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
-------------------------------
1999 1998
---------- ----------
<S> <C> <C>
Total Revenues:
United States ...................................................................... $ 40,170 $ 34,699
Canada ............................................................................. 4,982 3,629
Other foreign ...................................................................... 253 84
---------- ----------
Total ......................................................................... $ 45,405 $ 38,412
========== ==========
Operating Income:
United States ...................................................................... $ 6,485 $ 5,533
Canada ............................................................................. 1,037 1,176
Other foreign ...................................................................... 244 51
---------- ----------
Total ......................................................................... $ 7,766 $ 6,760
========== ==========
Assets:
United States ...................................................................... $ 286,167 $ 245,675
Canada ............................................................................. 19,311 19,447
Other foreign ...................................................................... 19,994 17,976
---------- ----------
Total ......................................................................... $ 325,472 $ 283,098
========== ==========
</TABLE>
10. SUBSEQUENT EVENTS
In April 1999, the Company completed the refinancing and expansion of its
senior revolving credit facility to $175 million. The three year agreement
consists of a syndicate of ten banks, led by Chase Bank of Texas, N.A., who
serves as administrative agent. The facility allows for an equivalent of U.S.
$20 million to be allocated for use in Canada. The facility will be used to
finance acquisitions, capital expenditures, working capital and other general
corporate purposes. Interest payment periods range from one month to six months
depending on the type of loan. Interest rates also vary depending on the type of
loan. All borrowings become due and payable in April 2002. The unused portion of
the Refinanced Senior Bank Facility is subject to a 0.30% to 0.50% commitment
fee based on certain ratios.
In April 1999, the Company transferred the operations of the Northeast
Kansas & Missouri Railroad ("NEKM") to Union Pacific ("UP"). The Company also
transferred the operations of the New Orleans Lower Coast Railroad ("NOLR") to
the New Orleans & Gulf Coast Railway Company.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE
IN THIS QUARTERLY REPORT ON FORM 10-Q.
This Form 10-Q contains certain "forward-looking" statements within the
meaning of The Private Securities Litigation Reform Act of 1995 and information
relating to RailTex, Inc. and its subsidiaries that are based on the beliefs of
the Company's management and that involve known and unknown risks and
uncertainties. When used in this report, the words "anticipate," "believe,"
"estimate," "expect" and "intend" and words or phrases of similar import, as
they relate to the Company or its subsidiaries or Company management, are
intended to identify forward-looking statements. Such statements reflect the
current risks, uncertainties and assumptions related to certain factors
including, without limitation, currency risks, competitive factors, general
economic conditions, customer relations, relationships with vendors, fuel costs,
the interest rate environment, governmental regulation and supervision,
seasonality, technological change, changes in industry practices, one-time
events and other factors described herein and in other filings made by the
Company with the Securities and Exchange Commission. Based upon changing
conditions, should any one or more of these risks or uncertainties materialize,
or should any underlying assumptions prove incorrect, actual results may vary
materially from those described herein as anticipated, believed, estimated,
expected or intended. The Company undertakes no obligation to update, and the
Company does not have a policy of updating or revising, these forward-looking
statements.
GENERAL
The Company has added railroad properties to its portfolio primarily
through purchase of track and roadbed, lease of such assets, contracts to
operate such assets under management agreements and purchase of railroad company
common stock, depending upon the economic and strategic considerations of the
divesting carriers. These arrangements typically relate only to the physical
assets of the railroad property; the Company typically does not contractually
assume any of the operations or liabilities of the divesting carriers. After
acquiring the right to operate a railroad property, the Company must arrange for
the purchase or lease of operating equipment and hire the workforce necessary to
operate the railroad. Accordingly, for any railroad property, the historical
results of operations of the railroad property as previously operated are not
necessarily indicative of the results of operations for the property following
commencement of operations by the Company.
Because of variations in the structure, timing and size of portfolio
additions and differences in economics among the Company's portfolio railroads
resulting from the unique terms, rates and other provisions for each railroad's
operation established through negotiation between RailTex and each divesting
carrier, the Company's results of operations in any reporting period may not be
directly comparable to (i) its results of operations in other reporting periods
or (ii) the results of operations of other railroad companies. Therefore, care
should be taken when using traditional measurements of railroad operating
performance, such as freight revenues per carload, operating ratio and labor
ratio, in assessing or comparing the Company's operating results.
"Comparable Railroad Properties" for each period are railroad properties
which the Company operated throughout both the full current year and the full
prior year, including any additions to those properties made during the year.
"New Railroad Properties" for each period are railroad properties which the
Company began operating after the start of the prior year.
For the quarter ended March 31, 1999 compared to the quarter ended March
31, 1998, New Railroad Properties include the Central Railroad of Indianapolis
("CERA") and the Central Railroad of Indiana ("CIND").
10
<PAGE>
RECENT DEVELOPMENTS
In April 1999, the Company successfully completed the refinancing and
expansion of its senior revolving credit facility to $175 million. The three
year agreement consists of a syndicate of ten banks, led by Chase Bank of Texas,
N.A., who serves as administrative agent. The facility allows for an equivalent
of U.S. $20 million to be allocated for use in Canada. The unused portion of the
Refinanced Senior Bank Facility is subject to a 0.30% to 0.50% commitment fee
based on certain ratios.
In April 1999, the Company completed the divestiture of the Northeast
Kansas & Missouri Railroad ("NEKM") to Union Pacific ("UP"), for approximately
$3.2 million. The Company also completed the divestiture of the assets of the
New Orleans Lower Coast Railroad ("NOLR") to the New Orleans & Gulf Coast
Railway Company for approximately $5.2 million.
In February 1999, Ronald A. Rittenmeyer was elected Chairman of the
Company's Board of Directors. Mr. Rittenmeyer joined the Company in August 1998
as President and Chief Executive Officer and replaces Bruce M. Flohr, who has
assumed the new title of Founder and Chairman Emeritus.
In January 1999, a wholly-owned subsidiary of the Company, the Dallas,
Garland and Northeastern Railroad ("DGNO") commenced operations on 89 miles of
rail line north of Dallas, Texas ("North Dallas Lines") under a lease
arrangement with Union Pacific Railroad. The North Dallas Lines connect to and
will be operated as a part of the DGNO.
The Company, through its wholly-owned subsidiary, RailTex International
Holdings ("RIHI"), currently owns equity interests in the Ferrovia Centro
Atlantica, S.A. ("FCA") and the Ferrovia Sul Atlantico, S.A. ("FSA"), which
operate railroads in Brazil. The continuing economic uncertainty existing in
Brazil has impacted the ability of FCA and FSA to finance short-term capital
needs. As a result, during the first quarter of 1999 the Board of Directors of
FSA implemented a call for additional capital contributions from existing
shareholders. The Company did not participate in the capital call and, as a
result, its equity percentage in FSA will be diluted. The respective Boards of
Directors of FCA and FSA may implement additional capital contribution calls
from existing shareholders in the future. The Company may or may not choose to
participate in such capital calls. In the event that the Company does not
participate, its equity percentage could be further diluted.
On December 31, 1998, RIHI closed the sale of 49.5% interest in its
Brazilian railroad investments to Global Environment Fund ("GEF"), a Washington,
D.C. based investment fund, for $11 million. RIHI retained the remaining 50.5%
interest; however, under a related agreement RIHI can be required to repurchase
GEF's interest (i) after five years at a price equal to the lower of 95% of the
appraised fair market value or certain collar amounts provided for in the
related agreement or (ii) at any time in the event RIHI and GEF disagree on any
matter requiring a unanimous decision, GEF offers to purchase RIHI's interest
and RIHI does not want to sell, in which case RIHI must purchase GEF's interest
at the same price GEF offered to purchase RIHI's interest.
As a result of the acquisition of Consolidated Rail Corporation
("Conrail") by CSX Transportation, Inc. ("CSX") and Norfolk Southern Railway
Company ("NS"), Conrail's rail lines will be divided between CSX and NS which
may cause revenue to be diverted from the New England Central Railroad, Inc.
("NECR") and the Indiana Southern Railroad, Inc. ("ISRR"), wholly-owned
subsidiaries of RailTex. In addition, the Indiana and Ohio Rail Corp. ("INOH"),
a wholly owned subsidiary of RailTex, believes the division of rail lines
between CSX and NS will cause operating inefficiencies for INOH. The Company
believes the effect on revenues and operating efficiencies will be immaterial.
11
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH
31, 1998
The Company's net income for the three months ended March 31, 1999
increased by approximately $2.4 million to $3.4 million from $0.9 million in the
prior year period and basic and diluted earnings per share increased to $0.36
per share from $0.10 per share in the prior year period.
OPERATING REVENUES. Operating revenues for the three months ended March
31, 1999 increased by $7.0 million, or 18%, to $45.4 million from $38.4 million
in the prior year period. Carloads transported increased by 28,608 carloads, or
23%, to 155,401 carloads from 126,793 carloads in the prior year period.
Freight revenues for the three months ended March 31, 1999 increased by
$4.9 million, or 14.9%, to $38.1 million from $33.2 million in the prior year
period. The following table compares freight revenues, traffic volume (in
carloads) and average freight revenues per carload by commodity group for the
three months ended March 31, 1999 and 1998.
FREIGHT REVENUES AND CARLOADS COMPARISON BY COMMODITY GROUP
(DOLLARS IN THOUSANDS, EXCEPT PER CARLOAD AMOUNTS)
<TABLE>
<CAPTION>
AVERAGE FREIGHT
REVENUES PER
FREIGHT REVENUES CARLOADS CARLOAD(1)
-------------------------------------- -------------------------------------- -----------------
1999 1998 1999 1998 1999 1998
----------------- ----------------- ----------------- ----------------- -------- -------
COMMODITY GROUP % OF % OF % OF % OF
- --------------- DOLLARS TOTAL DOLLARS TOTAL NUMBER TOTAL NUMBER TOTAL
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lumber and forest products .. $ 6,780 17.8% $ 6,648 20.0% 17,135 11.0% 16,847 13.3% $ 396 $ 395
Chemicals ................... 4,875 12.8 4,069 12.3 15,035 9.7 12,716 10.0 324 320
Coal ........................ 4,634 12.2 4,503 13.6 26,301 16.9 25,861 20.4 176 174
Farm products ............... 3,544 9.3 2,758 8.3 15,387 9.9 10,864 8.6 230 254
Scrap paper & paper products. 3,171 8.3 2,907 8.8 10,012 6.4 8,809 6.9 317 330
Scrap metal & metal products. 3,027 7.9 3,022 9.1 10,805 7.0 10,590 8.4 280 285
Railroad equipment .......... 2,938 7.7 1,060 3.2 22,514 14.5 7,001 5.5 131 151
Autos and auto parts ........ 1,946 5.1 1,406 4.2 10,012 6.4 7,914 6.2 194 178
Food products ............... 1,739 4.6 1,676 5.1 6,461 4.2 6,237 4.9 269 269
Non-metallic ores ........... 1,731 4.5 1,527 4.6 9,641 6.2 8,029 6.3 180 190
Minerals & stone ............ 1,547 4.1 1,232 3.7 4,808 3.1 3,596 2.8 322 343
Petroleum products .......... 1,101 2.9 1,311 4.0 3,242 2.1 3,569 2.8 340 367
Other ....................... 1,080 2.8 1,065 3.1 4,048 2.6 4,760 3.9 267 224
-------- ------- -------- ------- -------- ------- -------- -------
Total .................. $ 38,113 100.0% $ 33,184 100.0% 155,401 100.0% 126,793 100.0% $ 245 $ 262
======== ======= ======== ======= ======== ======= ======== =======
</TABLE>
- -------------------
(1) Calculated as freight revenues divided by carloads.
The increase in freight revenues and carloadings is primarily due to
increases in railroad equipment, farm products, chemicals and autos and auto
parts primarily as a result of increases in business for existing customers and
the acquisition of CERA and CIND.
Non-freight revenues for the three months ended March 31, 1999 increased
by approximately $2.1 million, or 39.5%, to $7.3 million from $5.2 million in
the prior year period. Non-freight revenues include joint facilities, switching,
demurrage, car hire and car repair services performed for third parties and
lease income. These non-freight revenues contributed 16.1% and 13.6% of
operating revenues in the three months ended March 31, 1999 and 1998,
respectively. The increase in non-freight revenues is primarily due to a gain on
sale of operating assets and increases in demurrage and car repair.
OPERATING EXPENSES. Operating expenses for the three months ended March
31, 1999 increased by $6.0 million, or 19%, to $37.6 million from $31.7 million
in the prior year period. The Company's operating ratio (operating expenses
divided by operating revenues) increased for the period to 82.9% from 82.4% in
the prior year period, primarily a result of increases in purchased services and
casualties and insurance.
12
<PAGE>
The following table sets forth a comparison of the Company's operating
expenses during the three month periods ended March 31, 1999 and 1998, in
dollars and as a percentage of operating revenues:
OPERATING EXPENSES COMPARISON
(dollars in thousands)
<TABLE>
<CAPTION>
1999 1998
-------------------------- --------------------------
% OF % OF
OPERATING OPERATING
DOLLARS REVENUES DOLLARS REVENUES
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Labor and benefits ............................................... $ 13,770 30.3% $ 11,841 30.8%
Equipment rents .................................................. 5,141 11.3 4,300 11.2
Depreciation and amortization .................................... 4,140 9.1 3,263 8.5
Diesel fuel ...................................................... 2,519 5.6 2,651 6.9
Purchased services ............................................... 3,257 7.2 2,256 5.9
Casualties and insurance ......................................... 2,226 4.9 1,520 4.0
Materials ........................................................ 1,535 3.4 1,396 3.6
Joint facilities ................................................. 1,240 2.7 1,263 3.3
Other ............................................................ 3,811 8.4 3,162 8.2
---------- ---------- ---------- ----------
Total ......................................................... $ 37,639 82.9% $ 31,652 82.4%
========== ========== ========== ==========
</TABLE>
Labor and benefits for the three months ended March 31, 1999 increased by
$1.9 million, or 16%, to $13.7 million from $11.8 million in the prior year
period. The increase in labor and benefits is primarily a result of increased
business on existing properties and the acquisition of new properties.
Equipment rents for the three months ended March 31, 1999 increased by
approximately $841,000, or 20%, to $5.1 million from $4.3 million in the prior
year period. The increase in equipment rents is primarily attributable to an
increase in locomotive leases and an increase in car hire expense at several of
the Company's properties.
Depreciation and amortization for the three months ended March 31, 1999
increased by approximately $877,000, or 27%, to $4.1 million from $3.3 million
in the prior year period. The increase in depreciation and amortization is
primarily a result of capital asset additions in 1998 and first quarter 1999.
Diesel fuel expense for the three months ended March 31, 1999 decreased by
approximately $132,000, or 5%, to $2.5 million from $2.6 million in the prior
year period. The decrease in diesel fuel expense is primarily a result of a
$0.10 per gallon decrease in average fuel prices as compared to the prior year
period.
Purchased services for the three months ended March 31, 1999 increased by
approximately $1.0 million, or 44%, to $3.3 million from $2.3 million in the
prior year period. The increase in purchased services is primarily a result of
increased legal expenses and expenses related to information technology.
Casualties and insurance expense for the three months ended March 31, 1999
increased by approximately $706,000, or 46%, to $2.2 million from $1.5 million
in the prior year period. The increase in casualties and insurance expense is a
result of increased derailment costs.
Materials expense for the three months ended March 31, 1999 increased by
approximately $139,000, or 10%, to $1.5 million from $1.4 million in the prior
year period. The increase in materials expense is primarily due to an increase
in locomotive materials.
13
<PAGE>
Joint facilities expense for the three months ended March 31, 1999
decreased by approximately $23,000 or 2%, due primarily to purchasing certain
track that trackage rights were being paid on in the first quarter of 1998.
Other expenses for the three months ended March 31, 1999 increased
approximately $649,000, or 21%, to $3.8 million from $3.2 million in the prior
year period. The increase in other expenses is primarily attributable to
increases in property taxes and crew transportation expenses.
INTEREST EXPENSE. Interest expense for the three months ended March 31,
1999 compared to the three months ended March 31, 1998 remained relatively flat,
decreasing approximately $14,000.
OTHER INCOME. For the three months ended March 31, 1999 other income was
approximately $633,000 as compared to approximately $345,000 in the prior year
period primarily as a result of interest income owed to the Company from a Class
I railroad and a net gain from the sale of non-operating assets for the three
months ended March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically relied primarily on cash generated from
operations to fund working capital and capital expenditure needs relating to
ongoing operations while relying on contributed capital and borrowed funds to
finance its acquisitions.
During the three months ended March 31, 1999, the Company generated cash
from operations of $5.1 million which was primarily used to fund capital
expenditures as follows (in thousands):
Track.......................................... $1,919
Locomotives.................................... 1,621
Technology..................................... 138
Other.......................................... 103
------
$3,781
======
At March 31, 1999, the Company had long-term senior debt, capital leases
and senior subordinated debt outstanding totaling, in U.S. Dollars, $131.5
million, which constituted 47.1% of its total capitalization. Comparable figures
at December 31, 1998 were $131.6 million and 47.7%, respectively.
At March 31, 1999, availability under the Company's $75.0 million U.S.
acquisition facility, $10.0 million U.S. working capital facility, CDN $25.0
million Canadian acquisition agreement, and CDN $5.0 million Canadian working
capital facility was, in U.S. dollars, $58.4 million, $6.0 million, $16.6
million and $1.3 million, respectively. The unused portion of all of the
Company's senior bank credit facilities are subject to a 0.25% commitment fee.
The Company currently anticipates that its maintenance capital expenditure
requirements in 1999 for track, locomotives and equipment will be approximately
$20.0 million. Additionally, computer hardware, software and related capital
expenditures are currently expected to be approximately $2.0 million.
Covenants contained in the agreements evidencing the Company's senior
bank, senior unsecured and senior subordinated debt prohibit the Company from
paying dividends on its capital stock and limit its ability to incur additional
indebtedness, create liens on its assets, make capital expenditures and
repurchase shares of its capital stock or any outstanding options or other
rights to acquire stock of the Company. The Company is also limited in its
ability to make loans, investments or guarantees. Additionally, the Company is
required to maintain a minimum tangible net worth and certain ratios of leverage
and cash flow to debt service. At March 31, 1999, the Company was in compliance
with all such covenants.
The Company believes its cash flow from operations together with the amounts
available under its Refinanced
14
<PAGE>
Senior Bank Facility will allow it to meet its liquidity and capital expenditure
requirements for railroads it currently operates through the expiration of the
facility in April 2002.
INFLATION
In recent years, inflation has not had a significant impact on the
Company's operations. The Company's contracts with connecting carriers typically
include clauses that adjust the Company's per car fees based on the Surface
Transportation Board's ("STB") cost or inflation indices.
SEASONALITY
Except for revenue from shipment of farm products, which represent less
than 10.0% of revenues, the Company's operating revenues from existing
operations have not historically been subject to significant seasonal changes.
ACCOUNTING MATTERS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognizes all derivatives as either assets or
liabilities in the statement of financial position and measures those
instruments at fair value. This statement is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. Initial application of this
statement should be as of the beginning of an entity's fiscal quarter. Earlier
application of this statement is encouraged, but it is permitted only as of the
beginning of any fiscal quarter that begins after the issuance of this
statement. The Company believes the adoption of this statement will not have a
material impact on the financial condition or results of operations of the
Company.
In April 1998, the Accounting Standards Executive Committee issued SOP
98-5. SOP 98-5 requires costs associated with start-up activities to be expensed
as incurred. SOP 98-5 is effective for financial statements for fiscal years
beginning after December 15, 1998, although earlier application is encouraged.
The Company adopted SOP 98-5 for the year ended December 31, 1998. This adoption
resulted in the recognition of a non-recurring charge of approximately
$1,703,000 (net of income taxes) entitled, "Cumulative effect of a change in
accounting principle (net of income taxes)" in the accompanying consolidated
financial statements. Prior to the adoption of SOP 98-5, the Company capitalized
the costs associated with start-up activities, including the acquisition of new
railroad properties, and amortized those costs over five years. Prospectively,
the Company's results of operations will reflect higher costs associated with
the acquisition of new railroad properties in the period of acquisition.
YEAR 2000 COMPLIANCE
The Company has completed its assessment of its Year 2000 compliance. This
assessment included a review of all of the Company's information technology
systems. The Company currently believes that its largest information technology
applications are Year 2000 compliant. However, the Company will continue to
conduct testing on certain of those systems through July 1999. The Company has
determined that certain components of its information technology infrastructure
are not Year 2000 compliant. These components include servers, components of its
wide area network and certain personal computer software packages. The Company
plans to upgrade all of these non-compliant components to make them Year 2000
compliant by November 1999. The total estimated external cost associated with
these upgrades are approximately $300,000, of which approximately $175,000 has
already been incurred. Internal costs associated with these upgrades primarily
consist of payroll and related costs for Company employees and the portion of
the EDS information technology outsourcing fees allocated to Year 2000
remediation. Such costs total approximately $650,000, of which about two-thirds
has not yet been incurred.
The Company has also evaluated its non-information technology systems that
use micro controllers, such as locomotives, railroad crossing signals, telephone
systems, dispatching systems and other railroad equipment, that
15
<PAGE>
may be subject to Year 2000 risk. The Company believes that its locomotives,
railroad crossing signals and the majority of its telephone systems, dispatching
systems and other railroad equipment are Year 2000 compliant. However, the
Company has determined that certain telephone systems, dispatching systems and
other railroad equipment are not Year 2000 compliant. The Company plans to
replace the non-compliant telephone systems, dispatching systems and other
railroad equipment by July 1999 at a total estimated external cost of $275,000,
none of which has yet been incurred. Internal costs associated with these
upgrades are not expected to be significant.
All affected systems of the Company are scheduled to be Year 2000
compliant, tested and verified by November 30, 1999; however, the Company cannot
guarantee that none of its systems will malfunction. As a precaution against
railroad crossing signals that may malfunction as a result of the Year 2000
problem, the first train through all railroad crossings on RailTex tracks after
12/31/99 will operate under a "Stop and Flag" order. This order requires the
train to stop at each railroad crossing, determine if the railroad crossing
signal is working and in the event that it is not working, have a person control
traffic through the crossing with the use of flags. Any malfunctioning railroad
crossing signals that are discovered as a result of this process will be
replaced by the Company.
As an additional part of its assessment, the Company has been
investigating the Year 2000 compliance status of its vendors and customers. The
Company has completed its assessment of the status of its product vendors and
the results of that compliance are included in the above disclosures. The
Company has not been able to determine the compliance status of the majority of
its service vendors due to unresponsiveness from the vendors. Should any of its
significant vendors fail to become Year 2000 compliant, the Company plans to
switch to vendors that are Year 2000 compliant. The Company has determined that
approximately 59% of its customers are or expect to become Year 2000 compliant.
The Company has been unable to determine the status of the remaining 41% of its
customers, again due to unresponsiveness. However, the Company is continuing to
contact the unresponsive service vendors and customers in order to determine
their Year 2000 compliance status. If any of the Company's significant vendors
or customers fail to successfully and timely achieve Year 2000 compliance, the
Company's business or operations may be adversely affected.
The Company is a member of the American Association of Railroad's Rail
Industry Year 2000 Coordination Task Force, which was formed to share Year 2000
issues related to the railroad industry, to help test for Year 2000 compliance
and to help implement Year 2000 compliance changes. The Company, and the
railroad industry as a whole, are susceptible to increased risks, including
significant business interruption, should any of the Class I railroads fail to
timely achieve Year 2000 compliance.
The above disclosure concerning the Company's Year 2000 compliance, and
that of its vendors and customers, contains "forward-looking" statements that
are based upon the beliefs of the Company's management and are subject to all of
the qualifications set forth at the beginning of Management's Discussion and
Analysis of Financial Condition and Results of Operations.
16
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A). EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
10.57 Loan Agreement, dated as of April 30, 1999, among RailTex, Inc.
and Chase Bank of Texas.
27.1 Financial Data Schedule.
(B). REPORTS ON FORM 8-K:
None.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in San Antonio,
Texas.
RAILTEX, INC.
Date: May 13, 1999 By:/s/ JOSEPH P. JAHNKE
Name: JOSEPH P. JAHNKE
Title: Vice President, Finance and
Chief Financial Officer
18
EXHIBIT 10.57
LOAN AGREEMENT
($155,000,000 U.S. LOAN FACILITY
AND
$20,000,000 CANADIAN LOAN FACILITY)
DATED AS OF APRIL 30, 1999
AMONG
RAILTEX, INC.,
AS U.S. BORROWER,
RAILTEX CANADA, INC.,
AS CANADIAN BORROWER,
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
AS U.S. AGENT AND AS A U.S. LENDER,
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION,
AS SYNDICATION AGENT AND AS A U.S. LENDER,
NATIONAL BANK OF CANADA,
AS A MANAGING AGENT, AS A U.S. LENDER AND AS A CANADIAN LENDER,
CREDIT LYONNAIS NEW YORK BRANCH,
AS A MANAGING AGENT AND AS A U.S. LENDER,
ABN AMRO BANK N.V.,
AS DOCUMENTATION AGENT AND AS A U.S. LENDER,
THE CHASE MANHATTAN BANK OF CANADA,
AS CANADIAN AGENT AND AS A CANADIAN 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.................................................23
2. COMMITMENTS; LOANS; BA'S AND LETTERS OF CREDIT........................23
2.1 LOANS AND BA'S................................................23
2.2 LETTERS OF CREDIT.............................................25
2.3 CERTAIN PROVISIONS RELATING TO BANKERS' ACCEPTANCES...........30
2.4 TERMINATIONS, REDUCTIONS OR REALLOCATIONS OF COMMITMENTS.....33
2.5 COMMITMENT FEES...............................................35
2.6 SEVERAL OBLIGATIONS...........................................35
2.7 NOTES.........................................................35
2.8 USE OF PROCEEDS...............................................36
2.9 CURRENCY FLUCTUATIONS.........................................36
3. BORROWINGS, PREPAYMENTS AND INTEREST OPTIONS..........................37
3.1 BORROWINGS....................................................37
3.2 PREPAYMENTS...................................................37
3.3 INTEREST OPTIONS..............................................38
4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS, ETC.......................43
4.1 PAYMENTS......................................................43
4.2 PRO RATA TREATMENT............................................44
4.3 CERTAIN ACTIONS, NOTICES, ETC.................................45
4.4 NON-RECEIPT OF FUNDS BY ANY AGENT.............................45
4.5 SHARING OF PAYMENTS, ETC......................................46
5. CONDITIONS PRECEDENT..................................................46
5.1 INITIAL LOANS, LETTERS OF CREDIT AND BANKERS' ACCEPTANCES.....46
5.2 ALL LOANS, LETTERS OF CREDIT AND BANKERS' ACCEPTANCES.........48
6. REPRESENTATIONS AND WARRANTIES........................................49
6.1 ORGANIZATION..................................................49
6.2 FINANCIAL STATEMENTS..........................................49
6.3 ENFORCEABLE OBLIGATIONS; AUTHORIZATION........................49
6.4 OTHER DEBT....................................................50
6.5 LITIGATION....................................................50
6.6 TAXES.........................................................50
<PAGE>
6.7 REGULATIONS U AND X...........................................50
6.8 SUBSIDIARIES..................................................50
6.9 NO UNTRUE OR MISLEADING STATEMENTS............................50
6.10 ERISA.........................................................51
6.11 INVESTMENT COMPANY ACT........................................51
6.12 PUBLIC UTILITY HOLDING COMPANY ACT............................51
6.13 SOLVENCY......................................................51
6.14 FISCAL YEAR...................................................51
6.15 COMPLIANCE....................................................51
6.16 ENVIRONMENTAL MATTERS.........................................51
6.17 ASSETS AND EARNINGS OF MATERIAL SUBSIDIARIES..................52
7. AFFIRMATIVE COVENANTS.................................................52
7.1 TAXES, EXISTENCE, REGULATIONS, PROPERTY, ETC..................52
7.2 FINANCIAL STATEMENTS AND INFORMATION..........................53
7.3 FINANCIAL TESTS...............................................53
7.4 INSPECTION....................................................54
7.5 FURTHER ASSURANCES............................................54
7.6 BOOKS AND RECORDS.............................................54
7.7 INSURANCE.....................................................54
7.8 NOTICE OF CERTAIN MATTERS.....................................54
7.9 CAPITAL ADEQUACY..............................................55
7.10 ERISA INFORMATION AND COMPLIANCE..............................55
7.11 YEAR 2000.....................................................56
7.12 GUARANTIES BY MATERIAL SUBSIDIARIES...........................56
8. NEGATIVE COVENANTS....................................................57
8.1 BORROWED MONEY INDEBTEDNESS...................................57
8.2 LIENS.........................................................57
8.3 CONTINGENT LIABILITIES........................................57
8.4 MERGERS, CONSOLIDATIONS AND DISPOSITIONS OF ASSETS............58
8.5 REDEMPTION, DIVIDENDS AND DISTRIBUTIONS.......................59
8.6 NATURE OF BUSINESS............................................59
8.7 TRANSACTIONS WITH RELATED PARTIES.............................59
8.8 LOANS AND INVESTMENTS.........................................59
8.9 SUBSIDIARIES..................................................59
8.10 ORGANIZATIONAL DOCUMENTS......................................60
8.11 UNFUNDED LIABILITIES..........................................60
8.12 SUBORDINATED INDEBTEDNESS.....................................60
8.13 ACQUISITIONS..................................................60
8.14 PROHIBITIONS OF LIENS OR SUBSIDIARY DIVIDENDS.................60
8.15 ASSETS AND EARNINGS OF MATERIAL SUBSIDIARIES..................60
<PAGE>
9. DEFAULTS..............................................................61
9.1 EVENTS OF DEFAULT.............................................61
9.2 RIGHT OF SETOFF...............................................63
9.3 COLLATERAL ACCOUNT............................................64
9.4 CURRENCY CONVERSION AFTER MATURITY............................64
9.5 REMEDIES CUMULATIVE...........................................64
10. AGENTS................................................................64
10.1 APPOINTMENT, POWERS AND IMMUNITIES............................64
10.2 RELIANCE......................................................66
10.3 DEFAULTS......................................................66
10.4 MATERIAL WRITTEN NOTICES......................................66
10.5 RIGHTS AS A LENDER............................................66
10.6 INDEMNIFICATION...............................................67
10.7 NON-RELIANCE ON AGENTS AND OTHER LENDERS......................67
10.8 FAILURE TO ACT................................................68
10.9 RESIGNATION OR REMOVAL OF AGENT...............................68
10.10 NO PARTNERSHIP................................................68
11. MISCELLANEOUS.........................................................69
11.1 WAIVER; CONFLICTS.............................................69
11.2 NOTICES.......................................................69
11.3 EXPENSES, ETC.................................................70
11.4 INDEMNIFICATION...............................................70
11.5 AMENDMENTS, ETC...............................................71
11.6 SUCCESSORS AND ASSIGNS........................................71
11.7 LIMITATION OF INTEREST........................................74
11.8 SURVIVAL......................................................74
11.9 CAPTIONS......................................................75
11.10 COUNTERPARTS..................................................75
11.11 VENUE; GOVERNING LAW..........................................75
11.12 SEVERABILITY..................................................76
11.13 TAX FORMS; NET PAYMENTS.......................................76
11.14 INTEREST ACT (CANADA).........................................77
11.15 JUDGMENT CURRENCY.............................................77
11.16 CONFLICTS BETWEEN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.77
11.17 LIMITATION ON CHARGES; SUBSTITUTE LENDERS; NON-DISCRIMINATION.77
<PAGE>
iv
<PAGE>
v
<PAGE>
EXHIBITS
- --------
A-1 -- Request for Extension of Credit (U.S. Borrower)
A-2 -- Request for Extension of Credit (Canadian Borrower)
B -- Rate Designation Notice
C -- Canadian Note
D -- U.S. Note E -- Assignment and Acceptance
F -- Compliance Certificate
G -- Bankers' Acceptance Notice
H -- Canadian Dollar Note
I -- Subsidiaries (Showing Percentage Ownership)
J -- Existing Borrowed Money Indebtedness
vi
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into as of April 30, 1999 (the
"EFFECTIVE DATE"), by and among RAILTEX, INC., a Texas corporation (the "U.S.
BORROWER"); RAILTEX CANADA, INC., an Ontario corporation (the "CANADIAN
BORROWER"); each of the lenders which is or may from time to time become a party
hereto (individually, a "LENDER" and, collectively, the "LENDERS", which terms
shall include U.S. Lenders and Canadian Lenders); CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION ("CHASE TEXAS"), a national banking association, as agent for the
U.S. Lenders (in such capacity, together with its successors in such capacity,
the "U.S. AGENT"), WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION, as
Syndication Agent, NATIONAL BANK OF CANADA and CREDIT LYONNAIS NEW YORK BRANCH,
as Managing Agents, ABN AMRO BANK N.V., as Documentation Agent, and THE CHASE
MANHATTAN BANK OF CANADA, as agent for the Canadian Lenders (in such capacity,
together with its successors in such capacity, the "CANADIAN AGENT").
The parties hereto agree as follows:
1. DEFINITIONS1. DEFINITIONS.
1.1 CERTAIN DEFINED TERMS1.1 CERTAIN DEFINED TERMS.
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 in the singular have the same
meanings when used in the plural and VICE VERSA):
ACCEPTANCE FEE means the fee payable in Canadian Dollars to each Canadian
Lender in respect of the Bankers' Acceptances accepted by such Canadian Lender
computed in accordance with SECTION 2.3(C).
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 and any Acceptance Fee) which, under applicable
laws, are or may be deemed to constitute interest on the indebtedness evidenced
by the Notes or the other Obligations.
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
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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.
AGENTS means U.S. Agent and Canadian Agent, collectively.
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 applicable fiscal year 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. Whenever an Annual Financial
Statement is required by the terms of this Agreement to be audited, it shall be
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. If an Annual Financial Statement is not
required by the terms of this Agreement to be audited, it shall be certified by
the chief financial officer or other authorized officer of such Person as true,
correct and complete in all material respects. All Annual Financial Statements
(whether or not required to be audited) shall include unaudited consolidating
financial statements for the applicable Person, in Proper Form, certified by the
chief financial officer or other authorized officer of such Person as true,
correct and complete in all material respects.
APPLICABLE BA DISCOUNT RATE means, as applicable to a Bankers' Acceptance
being purchased by any Canadian Lender on any day, the percentage discount rate
(expressed to two decimal places and rounded upward, if necessary, to the
nearest 1/100th of 1%) quoted by the Canadian Agent as that at which the
Canadian Agent would, in accordance with normal practice, at or about 10:00 a.m.
(Toronto, Ontario time), on such day, be prepared to purchase Bankers'
Acceptances in an amount and having a maturity date comparable to the amount and
maturity date of such Bankers' Acceptances.
APPLICABLE CANADIAN PENSION LEGISLATION means, at any time, any pension
legislation then applicable to the Canadian Borrower, including, without
limitation, the Pension Benefits Act (Ontario), all regulations made thereunder,
and all rules, regulations, rulings and interpretations made or issued by any
Governmental Authority having or asserting jurisdiction in respect thereof.
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
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connection with any Letter of Credit now or hereafter issued or to be issued
under the terms hereof at the request of any Person.
ASSIGNMENT AND ACCEPTANCE shall have the meaning ascribed to such term in
SECTION 11.6 hereof.
AVAILABILITY PERIOD means, for each Lender, the period from and including
the Effective Date to (but not including) the Termination Date.
BA DISCOUNT PROCEEDS means in respect of any Bankers' Acceptance being
purchased by a Canadian Lender on any day under SECTION 2.3, an amount (rounded
to the nearest whole Canadian cent, and with one-half of one Canadian cent being
rounded up) calculated on such day by multiplying:
(A) the face amount of such Bankers' Acceptance; by
(B) the quotient equal to one divided by the sum of one plus the
product of:
(i) the Applicable BA Discount Rate (expressed as a decimal)
applicable to such Bankers' Acceptance; and
(ii) a fraction, the numerator of which is the number of days
remaining in the term of such Bankers' Acceptance and the
denominator of which is 365;
with such quotient being rounded up or down to the nearest fifth
decimal place and .000005 being rounded up.
BANKERS' ACCEPTANCE or BA means a bill of exchange or a depository bill
governed by the Depository Bills and Notes Act (Canada) denominated in Canadian
Dollars drawn by the Canadian Borrower on and accepted by a Canadian Lender
pursuant to SECTION 2.3 hereof.
BANKERS' ACCEPTANCE LIABILITIES means, at any time and in respect of any
Bankers' Acceptance, the face amount thereof if still outstanding and unpaid or,
following maturity and payment thereof, the aggregate unpaid amount of all
Reimbursement Obligations at that time due and payable in respect of the payment
of such Bankers' Acceptance upon maturity.
BANKERS' ACCEPTANCE NOTICE has the meaning specified in SECTION 2.3(A).
BANKRUPTCY CODE means (i) the United States Bankruptcy Code, (ii) the
Bankruptcy and Insolvency Act (Canada) and (iii) the Companies' Creditors
Arrangement Act (Canada), as the same may be amended and together with any
successor statutes.
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BASE RATE means, for any day, a rate per annum equal to the lesser of (a)
the applicable Margin Percentage from time to time in effect plus the greater of
(1) the applicable 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 any
applicable 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, the Base Rate shall, until the circumstances giving
rise to such inability no longer exist, be the lesser of (a) the applicable
Prime Rate plus the applicable Margin Percentage from time to time in effect 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 bonds, debentures, notes or similar
instruments, (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 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 capital lease obligations of such Person, (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,
(vii) all contingent obligations (excluding, to the extent necessary to avoid
duplication under this definition, reimbursement obligations in respect of
amounts actually drawn under letters of credit or due and payable in respect of
matured bankers' acceptances) of such Person in respect of outstanding letters
of credit issued for the account of such Person or bankers' acceptances drawn by
such Person and (viii) all guarantees of such Person.
BORROWERS means U.S. Borrower and Canadian Borrower, collectively.
BUSINESS DAY means any day other than a day on which commercial banks are
authorized or required to close in San Antonio, Texas or Toronto, Ontario.
CALCULATION DATE means the last Business Day of each month.
CANADIAN COMMITMENT means, as to any Canadian Lender, the obligation, if
any, of such Canadian Lender to make Canadian Loans, incur or participate in
Letter of Credit Liabilities relating to Canadian Letters of Credit and accept
and purchase Bankers' Acceptances in an aggregate principal amount at any one
time outstanding up to (but not exceeding) the amount, if any, set forth
opposite such Canadian Lender's name on the signature pages hereof under the
caption "Canadian Commitment", or otherwise provided for in an Assignment and
Acceptance Agreement (as the same may be increased or reduced from time to time
pursuant to SECTION 2.4 hereof).
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CANADIAN DOLLARS or C$ means lawful money of Canada.
CANADIAN DOLLAR NOTES means the Notes of Canadian Borrower evidencing the
Canadian Loans denominated in Canadian Dollars, in the form of EXHIBIT H hereto.
CANADIAN LENDER means each lender signatory hereto with (i) prior to the
Termination Date, a Canadian Commitment and (ii) on and after the Termination
Date, any outstanding Canadian Obligations.
CANADIAN LETTER OF CREDIT has the meaning assigned to such term in SECTION
2.2(A) hereof.
CANADIAN LOAN means a Loan made pursuant to SECTION 2.1(B) hereof.
CANADIAN NOTES means the Notes of Canadian Borrower evidencing the
Canadian Loans denominated in Dollars, in the form of EXHIBIT C hereto.
CANADIAN OBLIGATIONS means, as at any date of determination thereof, the
sum of the following (determined without duplication): (i) the aggregate
principal amount of Canadian Loans outstanding hereunder on such date, PLUS (ii)
the aggregate amount of the Bankers' Acceptance Liabilities outstanding on such
date, PLUS (iii) the aggregate amount of Letter of Credit Liabilities
outstanding on such date relating to Canadian Letters of Credit.
CANADIAN PRIME LOANS means Loans made pursuant to SECTION 2.1(B) hereof
which are denominated in Canadian Dollars and which bear interest calculated on
the basis of the Canadian Prime Rate.
CANADIAN PRIME RATE means, on any day, as to Loans denominated in Canadian
Dollars made to Canadian Borrower, the sum of (x) the applicable Margin
Percentage from time to time in effect plus (y) the greater of (a) the annual
rate of interest announced from time to time by Chase Canada as its prime rate
then in effect at its Principal Office, being the reference rate used by Chase
Canada for determining interest rates on commercial loans denominated in
Canadian Dollars to borrowers in Canada, and (b) an annual rate of interest
equal to the sum of (i) the CDOR Rate and (ii) 1.00% per annum. The Canadian
Prime Rate is a reference rate and does not necessarily represent the lowest or
best rate or a favored rate, and Chase Texas, Chase Canada, each Agent and each
Lender disclaims any statement, representation or warranty to the contrary.
Chase Texas, Chase Canada, any Agent or any Lender may make commercial loans or
other loans at rates of interest at, above or below the Canadian Prime Rate.
CAPITAL EXPENDITURES means, with respect to any Person for any period,
expenditures in respect of fixed or capital assets by such Person, including
capital lease obligations payable during such period (to the extent not already
included), which would be reflected as additions to Property, plant or equipment
on a balance sheet of such Person and its consolidated Subsidiaries,
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if any, prepared in accordance with GAAP; but EXCLUDING expenditures during such
period for the repair or replacement of any fixed or capital asset which was
destroyed or damaged, in whole or in part, to the extent financed by the
proceeds of an insurance policy maintained by such Person. Capital Expenditures
shall not include Permitted Investments or the assets owned by any Person
acquired by way of a Permitted Investment or assets comprising substantially all
of an entire business which is acquired by the applicable Person.
CDOR RATE means, on any day, an annual rate of interest equal to the
average 30 day rate applicable to Canadian bankers' acceptances appearing on the
"Reuters Screen CDOR Page" (as defined in the International Swap Dealer
Association, Inc. (1991 ISDA) definitions, as modified and amended from time to
time) at or about 10:00 a.m. (Toronto, Ontario time) on such day, or if such day
is not a Business Day, then on the immediately preceding Business Day; PROVIDED,
however, if such rate does not appear on the Reuters Screen CDOR Page as
contemplated, then the CDOR Rate on any day shall be calculated as the
arithmetic mean of the 30 day rates applicable to Canadian bankers' acceptances
quoted by the Canadian Lenders which are listed in Schedule I to the Bank Act
(Canada) at or about 10:00 a.m. (Toronto, Ontario time) on such day, or if such
day is not a Business Day, then on the immediately preceding Business Day.
CEILING RATE means, on any day, the maximum nonusurious rate of interest
permitted for that day by whichever of applicable United States federal or Texas
laws or, in the case of advances made in Canada by Canadian Lenders to Canadian
Borrower, whichever of applicable Canada federal or Ontario laws (or the laws of
any other jurisdiction whose usury laws are deemed to apply to the Notes or any
other Loan Documents despite the intention and desire of the express choice of
law provisions set forth herein) 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 ceiling" (as defined in ss.303 of
the Texas Finance Code ) for that day. U.S. 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 Borrowers, if and to the extent permitted by the
Texas Finance Code or Chapter 1D. Without notice to Borrowers or any other
Person, 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 the U.S.
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
U.S. Borrower or (ii) succeed in having sufficient of its or their nominees
elected to the Board of Directors of U.S. Borrower such that such nominees, when
added to any existing directors remaining on the Board of Directors of U.S.
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 U.S.
Borrower. As used herein (a) "BENEFICIALLY OWN" means "beneficially own" as
defined in Rule 13d-3 of the
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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 U.S. Borrower or any Subsidiary of U.S. Borrower and other than any
trust for any employee benefit plan of U.S. Borrower or any Subsidiary of U.S.
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.
CHASE CANADA means The Chase Manhattan Bank of Canada.
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.
COMMITMENT FEE PERCENTAGE means (i) on any day prior to November 1, 1999,
0.375% per annum and (ii) on and after November 1, 1999, the applicable per
annum percentage set forth at the appropriate intersection in the table shown
below, based on the Total Debt to EBITDA Ratio as of the last day of the then
most recently ended fiscal quarter of U.S. Borrower calculated by U.S. Agent as
soon as practicable after receipt by U.S. Agent of all financial reports
required under this Agreement with respect to such fiscal quarter (including a
Compliance Certificate) (provided, however, that if the Commitment Fee
Percentage is increased as a result of the reported Total Debt to EBITDA Ratio,
such increase shall be retroactive to the date that U.S. Borrower was obligated
to deliver such financial reports to U.S. Agent pursuant to the terms of this
Agreement and provided further, however, that if the Commitment Fee Percentage
is decreased as a result of the reported Total Debt to EBITDA Ratio, and such
financial reports are delivered to U.S. 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 U.S. Borrower was
obligated to deliver such financial reports to U.S. Agent pursuant to the terms
of this Agreement):
TOTAL DEBT TO COMMITMENT
EBITDA RATIO FEE PERCENTAGE
------------- ---------------
Greater than or equal to
4.00 to 1.00 0.500
Greater than or equal to
3.00 to 1.00 but less than
4.00 to 1.00 0.375
Less than 3.00 to 1.00 0.300
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COMMITMENT PERCENTAGE means, as to any Lender, the percentage equivalent
of a fraction the numerator of which is the amount of such Lender's U.S.
Commitment or Canadian Commitment, as the case may be, and the denominator of
which is the aggregate amount of the U.S. Commitments or Canadian Commitments,
as the case may be, of all Lenders.
COMMITMENTS means, collectively, the Canadian Commitments and the U.S.
Commitments.
COMPLIANCE CERTIFICATE shall have the meaning given to it in Section 7.2
hereof.
CONTRIBUTION AGREEMENTS means those certain Contribution Agreements dated
concurrently herewith executed by and among, respectively, (i) U.S. Borrower and
the Material Subsidiaries in respect of the U.S. Obligations and (ii) Canadian
Borrower and the Material Subsidiaries in respect of the Canadian Obligations,
as they may from time to time be amended, modified, restated or supplemented.
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 any Borrower, are treated as a single employer under
Section 414 of the Code or under Applicable Canadian Pension Legislation.
CORPORATION means any corporation, limited liability company, partnership,
joint venture, joint stock association, business trust and other business
entity.
COVER means, with respect to any Letter of Credit Liabilities or any
Bankers' Acceptance Liabilities, the payment to U.S. Agent or Canadian Agent, as
the case may be, of immediately available funds, to be held by U.S. Agent or
Canadian Agent, as the case may be, in a collateral account maintained by U.S.
Agent or Canadian Agent, as the case may be, at its Principal Office and
collaterally assigned to U.S. Agent or Canadian Agent, as the case may be, as
security for the applicable Obligations using documentation reasonably
satisfactory to U.S. Agent or Canadian Agent, as the case may be, in the amount
required by any applicable provision hereof. Such amount shall be retained by
U.S. Agent or Canadian Agent, as the case may be, in such collateral account
until such time as the applicable Letter of Credit shall have expired and the
Reimbursement Obligations, if any, with respect thereto shall have been fully
satisfied or the applicable Bankers' Acceptance shall have matured and the
related Bankers' Acceptance Liabilities shall have been fully satisfied;
PROVIDED, HOWEVER, that at such time if a Default or
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Event of Default has occurred and is continuing, U.S. Agent or Canadian Agent,
as the case may be, shall not be required to release such amount in such
collateral account from the time of such collateral assignment until such
Default or Event of Default shall have been cured or waived.
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, US$ and $ means lawful money of the United States of America.
DOMESTIC SUBSIDIARY means any Subsidiary of U.S. Borrower which is not a
Foreign Subsidiary.
DUAL LENDER means any Lender which has both a U.S. Commitment and a
Canadian Commitment or a combination of a U.S. Lender that has a U.S. Commitment
and an affiliated Canadian Lender that has a Canadian Commitment.
EBITDA means, without duplication, for any period, the consolidated net
earnings (excluding results of extraordinary items, discontinued operations and
cumulative changes in accounting principles) PLUS, to the extent deducted in
calculating such consolidated net earnings, depreciation, amortization,
depletion, any loss from the sale or other disposition of assets (excluding any
loss from the sale or other disposition of real estate assets), Interest
Expense, and federal, state and provincial income tax expense and MINUS, to the
extent added in calculating such consolidated net earnings, any gain from the
sale or other disposition of assets (excluding any gain from the sale or other
disposition of real estate assets), in each case, for U.S. Borrower and its
Subsidiaries (on a consolidated basis).
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, contamination, protection or clean-up
of the air, surface water, ground water or land; (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, use, discharge or storage
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 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 includes all liabilities arising from any
Environmental Claim, Environmental Permit or Requirements 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,
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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.
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 and, as the context may require, Applicable Canadian Pension
Legislation.
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
applicable Margin Percentage from time to time in effect and (b) the Ceiling
Rate. Each Eurodollar Rate is subject to adjustments for reserves, insurance
assessments and other matters as provided for in SECTION 3.3 hereof.
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 any 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
hereof.
EXCHANGE RATE means, on any day, (a) with respect to Canadian Dollars in
relation to Dollars, the spot rate as quoted by the Bank of Canada as its noon
(Toronto, Ontario time) spot rate at which Dollars are offered on such day for
Canadian Dollars, (b) with respect to Dollars in relation to Canadian Dollars,
the spot rate as quoted by the Bank of Canada as its noon (Toronto, Ontario
time) spot rate at which Canadian Dollars are offered on such day for Dollars
and (c) with respect to all other currencies in relation to Dollars, the spot
rate quoted by the U.S. Agent or, if not quoted by the U.S. Agent, then as
quoted in a foreign currency market of recognized national standing selected by
U.S. Agent, as the noon (San Antonio, Texas time) spot rate at which Dollars are
offered on such day for such other currency.
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EXECUTIVE OFFICER means, when used with reference to a Person, such
Person's president, any vice president of such Person in charge of a principal
business unit, division or function (such as sales, administration or finance),
any other officer of such Person who performs a policy making function or any
other Person who performs similar policy making functions for such Person.
Executive Officers of Subsidiaries of any Person may be deemed Executive
Officers of such Person if they perform such policy making functions for such
Person.
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 U.S. Agent from three Federal funds brokers of recognized standing
selected by U.S. Agent in its sole and absolute discretion.
FOREIGN SUBSIDIARIES means any Subsidiary of U.S. Borrower which is
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) any Borrower's payment of
principal of a LIBOR Borrowing on a day other than the last day of the
applicable Interest Period; (b) any Borrower's failure to borrow a LIBOR
Borrowing or to borrow funds by way of Bankers' Acceptances on the date
specified by such Borrower; (c) any Borrower's failure to make any prepayment of
the Loans (other than Base Rate Borrowings and Canadian Prime Loans) on the date
specified by such Borrower, or (d) any cessation of a Eurodollar Rate to apply
to the Loans or any part thereof pursuant to SECTION 3.3 or by reason of a
required substitution under SECTIONS 4.1(D) OR 11.17, 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 United States 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
hereunder may be prepared in accordance with such change so long as the
applicable Person provides to Agents such disclosures of the impact of such
change as any 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 Borrowers, Agents 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).
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GOVERNMENTAL AUTHORITY means any governmental authority of the United
States of America, Canada, any State of the United States, any Province of
Canada, or of any other foreign jurisdiction and any political subdivision of
any of the foregoing, and any central bank, agency, department, commission,
board, bureau, court or other tribunal having or asserting jurisdiction over any
Agent, any Lender, any Obligor or their respective Property.
GUARANTIES means, collectively, (i) the Guaranties dated concurrently
herewith executed by each of the current Material Subsidiaries which are
Domestic Subsidiaries in favor of U.S. Agent, for the benefit of U.S. Lenders,
(ii) the Guaranties dated concurrently herewith executed by U.S. Borrower and
each of the current Material Subsidiaries in favor of Canadian Agent, for the
benefit of Canadian Lenders and (iii) any and all other guaranties hereafter
executed in favor of any Agent, for the benefit of U.S. Lenders or Canadian
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".
INTEREST COVERAGE RATIO means, as of any day, the ratio of (a) EBITDA for
the 12 months ending on the last day of the immediately preceding calendar month
LESS Capital Expenditures by U.S. Borrower and its Subsidiaries (on a
consolidated basis) during such period which were not financed PLUS federal,
state, provincial or local cash grants received by U.S. Borrower or its
Subsidiaries to the extent such grants are invested in Capital Expenditures
during such period to (b) cash Interest Expense for such period.
INTEREST EXPENSE means, for any period, total interest expense (including
interest expense attributable to capitalized leases and net costs under interest
rate swap, collar, cap or similar agreements providing interest rate
protection), determined on a consolidated basis in accordance with GAAP.
INTEREST OPTIONS means the Base Rate, each Eurodollar Rate and, as to
the Canadian Dollar Notes only, the Canadian Prime Rate, and "INTEREST
Option" means any of them.
INTEREST PAYMENT DATES means (a) FOR BASE RATE BORROWINGS BY U.S.
BORROWER, June 30, 1999 and the last day of each March, June, September and
December thereafter prior to the Maturity Date, and the Maturity Date; (b) FOR
BASE RATE BORROWINGS BY CANADIAN BORROWER AND FOR CANADIAN PRIME LOANS, June 30,
1999 and the last of each calendar month thereafter prior to the Maturity Date,
and the Maturity Date, and (c) FOR LIBOR BORROWINGS, the end of the applicable
Interest Period (and if such Interest Period exceeds three months' duration,
quarterly, commencing on the first quarterly anniversary of the first day of
such Interest Period) and the Maturity Date.
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<PAGE>
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,
3 or 6 months thereafter, as any Borrower shall elect in accordance herewith;
PROVIDED, (1) unless Agents 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; (4) no Interest Period for a Loan shall ever extend
beyond the Maturity Date, and (5) Interest Periods shall be selected by each
Borrower in such a manner that the Interest Period with respect to any portion
of the Loans which shall become due shall not extend beyond such due 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 U.S. Borrower for the purpose of reducing U.S.
Borrower'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 and Indebtedness of
U.S. 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 trade accounts payable 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.
KNOWLEDGE means the conscious awareness of facts or other information by
the applicable Person.
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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 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 or Canadian Dollars, such amount shall be converted
by the applicable Agent to Dollars by using the Exchange Rate in effect on such
day, and such converted amount shall be conclusive and binding, absent manifest
error.
LETTERS OF CREDIT means the U.S. Letters of Credit and the Canadian
Letters of Credit.
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 Agents and Borrowers) as of 11:00 a.m., San Antonio, Texas
time (in respect of a LIBOR Borrowing relating to the U.S. Loans) or 12:00 noon,
Toronto, Ontario time (in respect of a LIBOR Borrowing relating to the Canadian
Loans) (or, in either case, as soon thereafter as practicable) on the day two
LIBOR Business Days prior to the first day of such Interest Period for deposits
in 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 U.S. Agent
at or before 11:00 a.m., San Antonio, Texas time (in respect of a LIBOR
Borrowing relating to the U.S. Loans) or 12:00 noon, Toronto, Ontario time (in
respect of a LIBOR Borrowing relating to the Canadian Loans) (or, in either
case, 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
U.S. Agent or Canadian Agent, as the case may be, by one or more prime banks
selected by such Agent in its sole discretion, in the London interbank market,
of deposits in Dollars for delivery on the first day of such Interest Period and
having a maturity equal (or as nearly equal as may be) 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 any
Agent of LIBOR shall be conclusive and binding, absent manifest error, and may
be computed using any reasonable averaging and attribution method.
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<PAGE>
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 Dollar
deposits between lenders may be carried on in the London interbank market.
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 whether or not
consensual, and shall include reservations, exceptions, encroachments,
easements, rights of way, covenants, conditions, restrictions and other title
exceptions.
LOAN DOCUMENTS means, collectively, this Agreement, the Notes, the
Bankers' Acceptances, the Bankers' Acceptance Notices, the Guaranties, the
Contribution Agreements, all Applications, the Notice of Entire Agreement, all
instruments, certificates and agreements now or hereafter executed or delivered
by any Obligor to any 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.
LOANS means the loans provided for by SECTION 2.1(A) AND (B) hereof.
MAJORITY LENDERS means, at any time while the Commitments are outstanding,
Lenders having greater than 66-2/3% of the aggregate amount of Commitments, and
at any other time, Lenders having greater than 66-2/3% of the aggregate amount
of Obligations outstanding.
MARGIN PERCENTAGE means (i) on any day prior to November 1, 1999, 0.500%
per annum with respect to Base Rate Borrowings and Canadian Prime Loans and
1.50% per annum with respect to LIBOR Borrowings and Bankers' Acceptances and
(ii) on and after November 1, 1999, the applicable per annum percentage set
forth at the appropriate intersection in the table shown below, based on the
Total Debt to EBITDA Ratio as of the last day of the then most recently ended
fiscal quarter of U.S. Borrower calculated by U.S. Agent as soon as practicable
after receipt by U.S. 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 Total Debt to EBITDA Ratio, such increase shall be
retroactive to the date that U.S. Borrower was obligated to deliver such
financial reports to U.S. 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 Total Debt to EBITDA Ratio, and such financial reports
are delivered to U.S. 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 U.S. Borrower was obligated to deliver
such financial reports to U.S. Agent pursuant to the terms of this Agreement):
15
<PAGE>
<TABLE>
<CAPTION>
Bankers' Accept-
ances and LIBOR Canadian Prime
Loans/
Total Debt to Borrowings Base Rate Borrowings EBITDA RATIO MARGIN PERCENTAGE MARGIN PERCENTAGE
------------ ----------------- -----------------
<S> <C> <C>
Greater than or equal to
4.00 to 1.00 2.000 1.000
Greater than or equal to
3.50 to 1.00 but less than
4.00 to 1.00 1.750 0.750
Greater than or equal to
3.00 to 1.00 but less than
3.50 to 1.00 1.500 0.500
Less than 3.00 to 1.00 1.250 0.250
</TABLE>
MATERIAL ADVERSE EFFECT means a material adverse effect on the properties,
business, operations, assets or condition (financial or otherwise) of U.S.
Borrower and the other Obligors, taken as a whole, or on the ability of the
Obligors, taken as a whole, to perform their obligations under the Loan
Documents.
MATERIAL SUBSIDIARY means (i) the Canadian Borrower, (ii) any Subsidiary
of U.S. Borrower (other than (x) RailTex International Holdings, Inc., (y)
RailTex Global Investments, LLC and (z) any Subsidiary the assets of which are
composed solely of equity interests in and to other Subsidiaries of U.S.
Borrower) which owns assets the book value (net of intercompany accounts) of
which comprises five percent (5%) or more of the book value of all of the assets
of U.S. Borrower and its Subsidiaries (on a consolidated basis) or having gross
revenues for the immediately preceding fiscal year which comprises five percent
(5%) or more of the gross revenues of U.S. Borrower and its Subsidiaries for
such fiscal year (on a consolidated basis) and (iii) any other Subsidiary of
U.S. Borrower which any Borrower from time to time designates as a "Material
Subsidiary" by written notice to Agents. To the extent that any applicable
Subsidiary of U.S. Borrower ceases to constitute a Material Subsidiary under
CLAUSE (II) above or to the extent Borrowers elect to terminate a designation of
any applicable Subsidiary of U.S. Borrower as a Material Subsidiary under CLAUSE
(III) above, Borrowers may at any time thereafter, so long as no Event of
Default has occurred which is continuing and so long as a change in
characterization does not result in any Default or Event of Default, terminate
the designation of such Subsidiary as a Material Subsidiary hereunder by written
notice to Agents (and in the event any Subsidiary of U.S. Borrower ceases to be
a "Material Subsidiary" hereunder, such Person's Guaranty shall be promptly
released by Agents).
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<PAGE>
MATURITY DATE means the date of maturity of the Notes and the other
Obligations, being April 30, 2002. Upon written request from Borrowers at any
time after December 31, 2001 but prior to February 28, 2002, Agents shall make
request on the Lenders for approval of a one (1) year extension of the Maturity
Date; PROVIDED, HOWEVER, that no such extension shall be effective without the
unanimous written consent of the Lenders, which may be given or denied in their
sole discretion, with or without cause.
MAXIMUM CANADIAN AVAILABLE AMOUNT means $20,000,000. In connection with
the application of any provision hereof using the term "Maximum Canadian
Available Amount", any amounts denominated in Canadian Dollars shall be
converted to Dollars using the then current Exchange Rate. The Maximum Canadian
Available Amount is subject to change pursuant to SECTION 2.4(C) hereof.
MAXIMUM U.S. AVAILABLE AMOUNT means $155,000,000. The Maximum U.S.
Available Amount is subject to change pursuant to SECTION 2.4(C) hereof.
MEMORANDUM means that certain Confidential Information Memorandum dated
April 1999 that relates to the credit facilities provided for in this Agreement
and was provided to each of the Lenders.
NET WORTH means, without duplication, the sum of (i) capital stock (net of
treasury stock), (ii) preferred stock, (iii) paid-in capital and (iv) retained
earnings, in each case for U.S. Borrower and its Subsidiaries (on a consolidated
basis) and determined in accordance with GAAP.
NOTES shall have the meaning assigned to such term in SECTION 2.7 hereof.
NOTICE OF ENTIRE AGREEMENT means a notice of entire agreement, in Proper
Form, executed by Borrowers, each other Obligor and Agents, 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 on such date, PLUS (iii) the aggregate amount of outstanding
Bankers' Acceptance Liabilities on such date, PLUS (iv) all other outstanding
liabilities, obligations and indebtedness of any Obligor under any Loan Document
on such date.
OBLIGORS means each Borrower and each Material Subsidiary.
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; 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 and by which such Person is
governed; in each case including any and all modifications thereof as of the
date of the Loan Document referring to such Organizational Document and any and
all future modifications thereof.
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<PAGE>
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 applicable Base Rate or Canadian
Prime Rate, as the case may be, plus two percent (2%).
PBGC means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA and any pension commission
or similar body constituted under any Applicable Canadian Pension Legislation.
PERMITTED DIVIDENDS means dividends or distributions by a Subsidiary of a
Borrower to such Borrower or redemption by a Subsidiary of any of its stock held
by any Borrower.
PERMITTED INVESTMENTS means: (a) Investments owned 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;
(b) readily marketable securities issued or fully guaranteed by the full faith
and credit of the United States of America or of Canada with maturities of not
more than one year; (c) commercial paper rated no worse than "Prime 2" by
Moody's Investors Service, Inc. or "A-2" by Standard and Poor's Ratings Services
or the equivalent thereof by Dominion Bond Rating Service Limited with
maturities of not more than 180 days; (d) certificates of deposit or repurchase
obligations issued by any U.S. or Canadian domestic bank having capital surplus
of at least $100,000,000 or by any other financial institution acceptable to
Agents, all of the foregoing not having a maturity of more than one year from
the date of issuance thereof; (e) money market funds the assets of which consist
primarily of investments included in CLAUSES (B), (C) and (D) above; (f)
Investments by U.S. Borrower or by any Domestic Subsidiary in any Domestic
Subsidiary; (g) Investments by any Subsidiary of U.S. Borrower which is a
Foreign Subsidiary in any Subsidiary; (h) loans made to U.S. Borrower or any
Material Subsidiary which is a Domestic Subsidiary; (i) loans made to Canadian
Borrower or any Material Subsidiary by any Foreign Subsidiary; (j) Investments
in RailTex International Holdings, Inc. required to finance repurchase
obligations of RailTex International Holdings, Inc. for which U.S. Borrower has
contingent liability as of the date hereof, as disclosed in the Memorandum; (k)
Investments in Foreign Subsidiaries by U.S. Borrower or any Domestic Subsidiary
not to exceed, in the aggregate as of any applicable calculation date, two and
one-half percent (2-1/2%) of Net Worth as of the last day of the preceding
fiscal quarter, and (l) other Investments not to exceed, in the aggregate as of
any applicable calculation date, two and one-half percent (2-1/2%) of Net Worth
as of the last day of the preceding fiscal quarter.
18
<PAGE>
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, PROVIDED that neither the Borrowed
Money Indebtedness secured thereby nor the Property covered thereby shall
increase after the Effective Date without the prior written consent of the
Majority Lenders; (c) normal encumbrances and restrictions on title (and other
Liens affecting Property acquired by U.S. Borrower or its Subsidiaries which are
customarily treated as acceptable by Persons similarly situated acquiring or
owning similar Property) which do not secure Borrowed Money Indebtedness and
which do not have a Material Adverse Effect; (d) Liens under the Loan Documents
including, without limitation, Cover; (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 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 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 use or value of the Property subject to any such
restriction or materially interfere with the ordinary conduct of the business of
any Obligor; (i) Liens securing purchase money Borrowed Money Indebtedness
permitted under SECTION 8.1 hereof and covering only 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
Borrowed Money 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 or any Applicable Canadian Pension Legislation and is either (a) maintained
by any Borrower or any member of the Controlled Group for employees of any
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 any 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.
19
<PAGE>
PRIME RATE means, on any day, (a) as to Loans made to U.S. Borrower, the
prime rate for that day as determined from time to time by Chase Texas and (b)
as to Loans denominated in Dollars made to Canadian Borrower, the base rate for
that day for Loans denominated in Dollars quoted by Chase Canada. The Prime Rate
is, in each case, a reference rate and does not necessarily represent the lowest
or best rate or a favored rate, and Chase Texas, Chase Canada, each Agent and
each Lender disclaims any statement, representation or warranty to the contrary.
Chase Texas, Chase Canada, any 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 (a) as to Obligations of U.S. Borrower, the
principal office of U.S. Agent, presently located at 1020 NE Loop 410, First
Floor, San Antonio, Texas 78209 and (b) as to Obligations of Canadian Borrower,
the principal office of Canadian Agent, presently located at 1 First Canadian
Place, 100 King Street West, Suite 6900, Toronto, Ontario M5X 1A4.
PROPER FORM means in form and substance reasonably satisfactory to Agents.
PROPERTY means any interest in any kind of property or assets, whether
real, personal or mixed, tangible or intangible.
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.
QUARTERLY FINANCIAL STATEMENTS means the quarterly financial statements of
a Person, which statements shall include a balance sheet as of the end of the
applicable fiscal quarter and an income statement and a statement of cash flows
for such fiscal quarter and for the fiscal year to date, subject to normal
year-end adjustments, all setting forth in comparative form the corresponding
figures as of the end of and for the corresponding fiscal quarter of the
preceding year, 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. Quarterly Financial Statements shall also
include unaudited consolidating financial statements for the applicable Person,
in Proper Form, certified by the chief financial officer or other authorized
officer of such Person as true, correct and complete in all material respects.
RATE DESIGNATION DATE means that Business Day which is (a) in the case of
Base Rate Borrowings by the U.S. Borrower, 11:00 a.m., San Antonio, Texas time,
and, in the case of Base Rate Borrowings or Canadian Prime Loans by the Canadian
Borrower, 10:00 a.m., Toronto, Ontario time, in each case on the date of such
borrowing and (b) in the case of LIBOR Borrowings by the U.S. Borrower, 11:00
a.m., San Antonio, Texas time, and, in the case of LIBOR Borrowings by the
Canadian Borrower, 12:00 noon, Toronto, Ontario time, in each case, on the date
three LIBOR Business Days preceding the first day of any proposed Interest
Period.
20
<PAGE>
RATE DESIGNATION NOTICE means a written notice substantially in the form
of EXHIBIT B.
REFUNDING BANKERS' ACCEPTANCE has the meaning specified in SECTION 2.3.
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 date of this Agreement 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, (i) the obligations of
any Borrower then outstanding 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 and (ii) the
obligations of the Canadian Borrower then outstanding in respect of any Bankers'
Acceptance paid by any Canadian Lender on maturity thereof. Except for Canadian
Letters of Credit denominated in Canadian Dollars, Reimbursement Obligations in
respect of any Letter of Credit 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 the chief executive officer, chief financial officer or
treasurer of U.S. Borrower or Canadian Borrower, as the case may be, or any
other Person duly authorized by one of such officers, appropriately completed
and substantially in the form of EXHIBIT A-1 (U.S. Borrower) or EXHIBIT A-2
(Canadian Borrower) attached hereto, as the case may be.
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 order of any federal, state, provincial 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, contamination, protection or clean-up of the air, surface water,
ground water or land; (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, use, discharge or storage of Hazardous
Substances.
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RESET DATE has the meaning specified in SECTION 2.9(A).
SECRETARY'S CERTIFICATE means a certificate, in Proper Form, of the
Secretary or an Assistant Secretary of a corporation as to (a) the resolutions
of the Board of Directors of such corporation authorizing the execution,
delivery and performance of the documents to be executed by such corporation;
(b) the incumbency and signature of the officer of such corporation executing
such documents on behalf of such corporation, and (c) the Organizational
Documents of such corporation.
SENIOR DEBT TO EBITDA RATIO means, as of any day, the ratio of (a)
Borrowed Money Indebtedness (exclusive of Subordinated Indebtedness and
exclusive of the categories of Borrowed Money Indebtedness, other than
obligations in respect of bankers' acceptances, described in CLAUSES (VII) AND
(VIII) of the definition of "Borrowed Money Indebtedness" set forth in this
SECTION 1.1) for U.S. Borrower and its Subsidiaries (on a consolidated basis) as
of such date to (b) EBITDA for the 12 months ending on such date. So long as
Borrowers shall have delivered to Agents financial information, in form and
substance reasonably satisfactory to the Majority Lenders, regarding any
Property acquired which disclose the prior operating results of such Property,
the pro forma effect of any acquisition by U.S. Borrower or any of its
consolidated Subsidiaries of any Property or business during such 12-month
period shall be included in EBITDA under this definition as if such acquisition
occurred on the first day of such period.
STATED RATE means the effective weighted per annum rate of interest
applicable to the Obligations; 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 and the other Obligations plus the Additional Interest equals the total
amount of interest which would have accrued if there had been no Ceiling Rate.
If the Obligations 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, the applicable Borrower
promises to pay on demand to the order of the holder of the applicable
Obligations 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 Obligations 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 Obligations
if the Stated Rate were not so prohibited from exceeding the Ceiling Rate, over
(b) the total interest actually accrued on such Obligations to such maturity (or
prepayment) date. Without notice to any Borrower or any other Person, the Stated
Rate shall automatically fluctuate upward and downward in accordance with the
provisions of this definition.
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SUBORDINATED INDEBTEDNESS means all Borrowed Money Indebtedness of a
Person which has been subordinated on terms and conditions satisfactory to the
Majority Lenders, in their sole discretion, to all Borrowed Money Indebtedness
of such Person to Lenders, whether now existing or hereafter incurred. Borrowed
Money Indebtedness shall not be considered as "Subordinated Indebtedness" unless
and until Agents shall have received copies of the documentation evidencing or
relating to such Borrowed Money Indebtedness together with a subordination
agreement, in Proper Form, duly executed by the holder or holders of such
Borrowed Money Indebtedness and evidencing the terms and conditions of
subordination required by the Majority Lenders. Lenders and Agents acknowledge
that the subordination provisions relating to the Subordinated Indebtedness
described on EXHIBIT J hereto do not require prior approval by any Agent or any
Lender (provided, however, that the foregoing approval shall not be deemed to
constitute approval of such subordination provisions in connection with any
other Subordinated Indebtedness).
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.
TAXES shall have the meaning ascribed to it in SECTION 4.1(D).
TERMINATION DATE means the earlier of (a) the Maturity Date or (b) the
date specified by either Agent in accordance with SECTION 9.1 hereof.
TOTAL CANADIAN EXPOSURE means, at any time and without duplication, the
sum of the aggregate principal amounts of the then outstanding Canadian Loans,
then outstanding Bankers' Acceptance Liabilities and then outstanding Letter of
Credit Liabilities in respect of Canadian Letters of Credit, in each case
expressed in Dollars using, where applicable, the then current Exchange Rate.
TOTAL DEBT TO EBITDA RATIO means, as of any day, the ratio of (a) Borrowed
Money Indebtedness (exclusive of the categories of Borrowed Money Indebtedness,
other than obligations in respect of bankers' acceptances, described in CLAUSES
(VII) AND (VIII) of the definition of "Borrowed Money Indebtedness" set forth in
this SECTION 1.1) for U.S. Borrower and its Subsidiaries (on a consolidated
basis) as of such date to (b) EBITDA for the 12 months ending on such date. So
long as Borrowers shall have delivered to Agents financial information, in form
and substance reasonably satisfactory to the Majority Lenders, regarding any
Property acquired which disclose the prior operating results of such Property,
the pro forma effect of any acquisition by U.S. Borrower or any of its
consolidated Subsidiaries of any Property or business during such 12-month
period shall be included in EBITDA under this definition as if such acquisition
occurred on the first day of such period.
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 or under Applicable Canadian Pension Legislation. With respect to
multi-employer Plans, the term "Unfunded Liabilities" shall also include
contingent liability for withdrawal liability under Section 4201 of ERISA or
under Applicable Canadian Pension Legislation to all multi-employer Plans to
which any Borrower or any member of a Controlled Group for employees of any
Borrower contributes in the event of complete withdrawal from such plans.
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U.S. COMMITMENT means, as to any U.S. Lender, the obligation, if any, of
such U.S. Lender to make U.S. Loans and incur or participate in Letter of Credit
Liabilities relating to U.S. Letters of Credit in an aggregate principal amount
at any one time outstanding up to (but not exceeding) the amount, if any, set
forth opposite such U.S. Lender's name on the signature pages hereof under the
caption "U.S. Commitment", or otherwise provided for in an Assignment and
Acceptance Agreement (as the same may be increased or reduced from time to time
pursuant to SECTION 2.4 hereof).
U.S. LENDER means each lender signatory hereto with (i) prior to the
Termination Date, a U.S. Commitment and (ii) on and after the Termination
Date, any outstanding U.S. Obligations.
U.S. LETTER OF CREDIT shall have the meaning assigned to such term in
SECTION 2.2(A) hereof.
U.S. LOAN means a Loan made pursuant to SECTION 2.1(A) hereof.
U.S. NOTES means the Notes of U.S. Borrower evidencing the U.S. Loans,
in the form of EXHIBIT D hereto.
U.S. OBLIGATIONS means, as at any date of determination thereof, the
sum of the following (determined without duplication): (i) the aggregate
principal amount of U.S. Loans outstanding hereunder on such date PLUS (ii)
the aggregate amount of the Letter of Credit Liabilities outstanding on such
date relating to U.S. Letters of Credit.
1.2 MISCELLANEOUS1.2 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.
The term "ANNUALIZED" as used herein shall mean the multiplication of the
applicable amount for any given period by a fraction, the numerator of which is
365 and the denominator of which is the number of days elapsed in such period.
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2. COMMITMENTS; LOANS; BA'S AND LETTERS OF CREDIT2. COMMITMENTS; LOANS; BA'S AND
LETTERS OF CREDIT.
2.1 LOANS AND BA'S2.1 LOANS AND BA'S. 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 and, in the case of
Canadian Lenders, to accept and purchase Bankers' Acceptances, as follows:
(a U.S. LOANS. From time to time on or after the Effective Date and
during the Availability Period, each U.S. Lender shall make U.S. Loans under
this SECTION 2.1(A) to U.S. Borrower in an aggregate principal amount at any one
time outstanding (including such U.S. Lender's Commitment Percentage of all
Letter of Credit Liabilities relating to U.S. Letters of Credit at such time) up
to but not exceeding such U.S. Lender's Commitment Percentage of the Maximum
U.S. Available Amount. Subject to the conditions in this Agreement, any such
U.S. Loan repaid prior to the Termination Date may be reborrowed pursuant to the
terms of this Agreement; PROVIDED, that any and all such U.S. Loans shall be due
and payable in full on the Termination Date. Loans made under this SECTION
2.1(A) shall be made and denominated in Dollars. The aggregate of all U.S. Loans
to be made by the U.S. Lenders in connection with a particular borrowing shall
be equal to the lesser of (i) the unutilized portion of the U.S. Commitments or
(ii) $1,000,000 or any integral multiple of $100,000 in excess thereof.
(b CANADIAN LOANS. From time to time on or after the Effective Date and
during the Availability Period, each Canadian Lender shall make Canadian Loans
under this SECTION 2.1(B) to Canadian Borrower in an aggregate principal amount
at any one time outstanding (including such Canadian Lender's Commitment
Percentage of all Bankers' Acceptance Liabilities and all Letter of Credit
Liabilities relating to Canadian Letters of Credit at such time) up to but not
exceeding such Canadian Lender's Commitment Percentage of the Maximum Canadian
Available Amount. Subject to the conditions in this Agreement, any such Canadian
Loan repaid prior to the Termination Date may be reborrowed pursuant to the
terms of this Agreement; PROVIDED, that any and all such Canadian Loans shall be
due and payable in full on the Termination Date. Loans made under this SECTION
2.1(B) may, at the option of Canadian Borrower, be made and denominated either
in Dollars or in Canadian Dollars. The aggregate of all Canadian Loans to be
made by the Canadian Lenders in connection with a particular borrowing shall be
equal to the lesser of (i) the unutilized portion of the Canadian Commitments or
(ii) $1,000,000 or any integral multiple of $100,000 in excess thereof (if the
Canadian Loans are denominated in Dollars) or C$1,000,000 or any integral
multiple of C$100,000 in excess thereof (if the Canadian Loans are denominated
in Canadian Dollars).
(c BANKERS' ACCEPTANCES. From time to time on or after the Effective Date
and during the Availability Period, each Canadian Lender shall accept and
purchase Bankers' Acceptances drawn on it under SECTION 2.3 hereof by Canadian
Borrower in an aggregate principal amount at any one time outstanding (including
such Canadian Lender's Commitment Percentage of all Canadian Loans outstanding
at such time and all Letter of Credit Liabilities relating to Canadian Letters
of Credit at such time) up to but not exceeding such Canadian Lender's
Commitment Percentage of the Maximum Canadian Available Amount. No Bankers'
Acceptance may be made or accepted on or after the Termination Date and all
outstanding Bankers' Acceptances shall mature no later than the Maturity Date.
Canadian Loans made by way of Bankers' Acceptances shall be made and denominated
in Canadian Dollars.
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(d CHAPTER 346. Borrowers, Agents 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.
(e NATIONAL BANK OF CANADA'S EXISTING ACCEPTANCE. Each of the Canadian
Lenders hereby severally agrees to assume, from and after the Effective Date,
the obligations of National Bank of Canada under that certain bankers'
acceptance dated April 19, 1999 (the "NBC ACCEPTANCE") drawn by Canadian
Borrower and accepted by National Bank of Canada in the face amount of
C$3,000,000 having a maturity date of July 19, 1999. From and after the
Effective Date, the NBC Acceptance shall be deemed to constitute a Bankers'
Acceptance under this Agreement. National Bank of Canada agrees to pay to each
of the Canadian Lenders, on a pro rata basis in accordance with the Canadian
Lenders' respective Commitment Percentages of the Maximum Canadian Available
Amount, that portion of all stamping or acceptance fees previously received by
National Bank of Canada in respect of the NBC Acceptance, in an amount equal to
the aggregate amount of such stamping or acceptance fees multiplied by a
fraction, the numerator of which is the number of days from the day following
the Effective Date to, and including, July 19, 1999, and the denominator of
which is the number of days in the original term of the NBC Acceptance. Canadian
Borrower hereby acknowledges and agrees that the provisions of this Agreement
relating to Bankers' Acceptances shall apply MUTATIS MUTANDIS to the NBC
Acceptance from and after the Effective Date, including, without limitation, the
provisions in SECTION 2.3(B) of this Agreement.
2.2 LETTERS OF CREDIT2.2 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
relating to U.S. Letters of Credit shall never exceed $10,000,000 and that
aggregate Letter of Credit Liabilities relating to Canadian Letters of Credit
shall never exceed $5,000,000, (i) U.S. Borrower shall have the right, in
addition to U.S. Loans provided for in SECTION 2.1(A) hereof, to utilize the
U.S. Commitments from time to time during the Availability Period by obtaining
the issuance of standby letters of credit for the account of U.S. Borrower if
U.S. Borrower shall so request in the notice referred to in SECTION 2.2(B)(I)
hereof (such standby letters of credit as any of them may be amended,
supplemented, extended or confirmed from time to time, being herein collectively
called the "U.S. LETTERS OF CREDIT") and Canadian Borrower shall have the right,
in addition to Canadian Loans provided for in SECTION 2.1(B) hereof and Bankers'
Acceptances provided for in SECTION
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2.1(C) hereof, to utilize the Canadian Commitments from time to time during the
Availability Period by obtaining the issuance of standby letters of credit for
the account of Canadian Borrower if Canadian Borrower shall so request in the
notice referred to in SECTION 2.2(B)(I) hereof (such standby letters of credit
as any of them may be amended, supplemented, extended or confirmed from time to
time, being herein collectively called the "CANADIAN LETTERS OF CREDIT") and
(ii) Chase Texas agrees to issue U.S. Letters of Credit and National Bank of
Canada agrees to issue Canadian Letters of Credit. The Letters of Credit will,
at the request of the applicable Borrower, be issued in currencies other than
those expressly provided for in this Agreement so long as the applicable Agent
is reasonably satisfied that such currency is readily available in the required
amounts and that such currency selection is not otherwise disadvantageous to any
Agent or any Lender. 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 U.S. Lender or Canadian Lender, as the case may be, and
each such U.S. Lender or Canadian Lender, as the case may be, 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 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 Termination Date. Any Letter of
Credit that shall have an expiration date after the Termination Date shall be
subject to Cover or backed by a standby letter of credit in form and substance,
and issued by a Person, acceptable to the applicable Agent in its sole
discretion. Chase Texas or, with the prior approval of U.S. Borrower, U.S. Agent
and the applicable U.S. Lender, another U.S. Lender shall be the Issuer of each
U.S. Letter of Credit and National Bank of Canada or, with the prior approval of
Canadian Borrower, Canadian Agent and the applicable Canadian Lender, another
Canadian Lender shall be the Issuer of each Canadian Letter of Credit. Except as
provided above, all U.S. Letters of Credit shall be denominated in Dollars and
all Canadian Letters of Credit shall, at the option of Canadian Borrower, be
denominated in either Dollars or Canadian Dollars. Fees due in respect of a U.S.
Letter of Credit shall be payable in Dollars and fees due in respect of a
Canadian Letter of Credit shall be payable (i) in Dollars, if such Letter of
Credit is denominated in Dollars and (ii) in Canadian Dollars if such Letter of
Credit is denominated in Canadian Dollars or any other currency.
(b ADDITIONAL PROVISIONS. The following additional provisions shall
apply to each Letter of Credit:
(i) U.S. Borrower or Canadian Borrower, as the case may be, shall
give the appropriate Agent notice requesting each issuance of a Letter of
Credit hereunder as provided in SECTION 4.3 hereof and shall furnish such
additional information regarding such transaction as such Agent may
reasonably request. Upon receipt of such notice, such Agent shall promptly
notify each U.S. Lender or Canadian Lender, as the case may be, of the
contents thereof and of such Lender's Commitment Percentage of the amount
of such proposed Letter of Credit.
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(ii) No U.S. Letter of Credit may be issued if after giving effect
thereto the sum of (A) the aggregate outstanding principal amount of U.S.
Loans plus (B) the aggregate Letter of Credit Liabilities relating to U.S.
Letters of Credit would exceed the Maximum U.S. Available Amount. No
Canadian Letter of Credit may be issued if after giving effect thereto the
sum of (A) the aggregate outstanding principal amount of Canadian Loans
plus (B) the aggregate Letter of Credit Liabilities relating to Canadian
Letters of Credit plus (C) the aggregate Bankers' Acceptance Liabilities
would exceed the Maximum Canadian 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 U. S.
Commitment or Canadian Commitment, as the case may be, of each applicable
Lender shall be deemed to be utilized for all purposes hereof in an amount
equal to such Lender's Commitment Percentage of the amount then available
for drawings under such Letter of Credit (and 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, the applicable Issuer shall notify the
Agents and thereafter the U.S. Agent or the Canadian Agent, as the case
may be, shall promptly notify the applicable Borrower and each applicable
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 expiration date of a
Letter of Credit any applicable 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 applicable Lender will pay to the U.S. Agent or the
Canadian Agent, as the case may be, immediately upon demand by such Issuer
at any time during the period commencing after such payment until
reimbursement thereof in full by the applicable Borrower, an amount equal
to such Lender's U.S. Commitment Percentage or Canadian Commitment
Percentage, as the case may be, 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. San Antonio, Texas time (in the case
of a U.S. Letter of Credit) or 12:00 noon Toronto, Ontario time (in the
case of a Canadian Letter of Credit) 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 (i) in respect of U.S.
Letters of Credit, the Federal Funds Rate, (ii) in respect of Canadian
Letters of Credit which are denominated in Dollars, the Base Rate plus two
percent (2%) and (iii) in respect of Canadian Letters of Credit which are
denominated in Canadian Dollars, the Canadian Prime Rate plus two percent
(2%). To the extent required, the Exchange Rate on the date of any
applicable drawing under a Letter of Credit shall be used to determine the
amount of each Lender's payment obligations to the Issuers in respect of
such drawing. To the extent that it is ultimately determined that the
applicable 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.
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(iv) U.S. Borrower or the Canadian Borrower, as the case may be,
shall be irrevocably and unconditionally obligated forthwith to reimburse
the appropriate Agent, on the date on which such Agent notifies U.S.
Borrower or the Canadian Borrower, as the case may be, of the date and
amount of any payment by the applicable Issuer of any drawing under a
Letter of Credit, for the amount paid by such 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 and to the
Maximum U.S. Available Amount or Maximum Canadian Available Amount, as the
case may be (after adjustment in the same to reflect the elimination of
the corresponding Letter of Credit Liability), be made by the borrowing of
Loans or, in the case of the Canadian Borrower, also by the issuance,
acceptance and purchase of Bankers' Acceptances. The applicable Agent will
pay to each Lender such Lender's Commitment Percentage of all amounts
received from U.S. Borrower or the Canadian Borrower, as the case may be,
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 the applicable Agent in respect of such Letter
of Credit pursuant to CLAUSE (III) above.
(v) U.S. Borrower or the Canadian Borrower, as the case may be, will
pay to the appropriate Agent at the Principal Office of such Agent for the
account of each applicable Lender a letter of credit fee with respect to
each Letter of Credit equal to the greater of (x) $500 or (y) the Margin
Percentage applicable to LIBOR Borrowings multiplied by the daily average
amount available for drawings under 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 date of expiration or
termination thereof, such fee to be due and payable quarterly in advance.
After the occurrence of an Event of Default which has not been cured or
waived, the letter of credit fee provided for the preceding sentence shall
be increased by two percent (2%) per annum, such increased fee to be due
and payable upon demand by the applicable Agent. In the event any Letter
of Credit is drawn, that portion of the applicable letter of credit fee
provided for in the preceding sentence relating to the period beyond the
date of such drawing shall be credited to the applicable Borrower's
Reimbursement Obligations relating thereto. The applicable Agent will pay
to each applicable 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 U.S. Commitment Percentage or Canadian
Commitment Percentage, as the case may be, TIMES the amount of such fees.
In addition to and cumulative of the above described fees, U.S. Borrower
or the Canadian Borrower, as the case may be, shall pay to the appropriate
Agent, for the account of the applicable Issuer, in advance on the date of
the issuance of the applicable Letter of Credit, a fee in an amount equal
to 1/8% of the face amount of the applicable Letter of Credit (such fee to
be retained by the applicable Issuer for its own account).
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(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 the applicable Agent and the applicable Issuer, and (B)
that U.S. Borrower or the Canadian Borrower, as the case may be, shall
have executed and delivered such Applications and other instruments and
agreements relating to such Letter of Credit as the applicable Agent and
the applicable Issuer 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
terms hereof shall control.
(vii) Each Issuer will send to U.S. Borrower or the Canadian
Borrower, as the case may be, and each applicable Lender, immediately upon
issuance of any Letter of Credit issued by such Issuer or any amendment
thereto, a true and correct copy of such Letter of Credit or amendment.
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(c INDEMNIFICATION; RELEASE. U.S. Borrower or the Canadian Borrower, as
the case may be, hereby indemnifies and holds harmless each Agent, each Lender
and each Issuer from and against any and all claims and damages, losses,
liabilities, costs or expenses which such Agent, such Lender or such Issuer may
incur (or which may be claimed against such 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 U.S. Borrower or the Canadian
Borrower, as the case may be, shall not be required to indemnify 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 (ii) the
failure by the party seeking indemnification to pay under any Letter of Credit
after the presentation to it of a request required to be paid under applicable
law. U.S. Borrower or the Canadian Borrower, as the case may be, hereby
releases, waives and discharges each Agent, each 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 any other Lender to fulfill or
comply with its obligations to such Agent, such Lender or such Issuer, as the
case may be, hereunder (but nothing herein contained shall affect any rights
U.S. Borrower or the Canadian Borrower, as the case may be, may have against
such defaulting Lender or may have in respect of gross negligence or willful
misconduct). Nothing in this SECTION 2.2(C) is intended to limit the obligations
of U.S. Borrower or the Canadian Borrower, as the case may be, under any other
provision of this Agreement.
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(d ADDITIONAL COSTS IN RESPECT OF LETTERS OF CREDIT. 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 Lender of issuing or maintaining any Letter of Credit or any
participation therein, or materially reduce any amount receivable by any 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 U.S. Borrower or the
Canadian Borrower, as the case may be, through the appropriate 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 such Agent, U.S. Borrower or the
Canadian Borrower, as the case may be, 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 U.S. Borrower or the Canadian Borrower, as
the case may be, 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 U.S. Borrower or the Canadian Borrower, as the
case may be, through the appropriate Agent of any event occurring after
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 U.S. Borrower or the Canadian Borrower, as the case may be, through
the appropriate 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 U.S. Borrower or the Canadian Borrower, as the case may be,
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, 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 no such U.S. Lender shall have any
obligation so to designate a different lending office which is not located in
the United States of America and no such Canadian Lender shall have any
obligation so to designate a different lending office which is not located in
Canada).
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2.3 CERTAIN PROVISIONS RELATING TO BANKERS' ACCEPTANCES2.3 CERTAIN
PROVISIONS RELATING TO BANKERS' ACCEPTANCES.
(a Subject to the terms and conditions hereof, each Canadian Lender
severally agrees to accept and purchase Bankers' Acceptances drawn upon it by
the Canadian Borrower denominated in Canadian Dollars. The Canadian Borrower
shall notify the Canadian Agent by irrevocable written notice (each a "BANKERS'
ACCEPTANCE NOTICE") by 12:00 noon (Toronto, Ontario time) two (2) Business Days
prior to the proposed date of any borrowing by way of Bankers' Acceptances. Each
borrowing by way of Bankers' Acceptances shall be in a minimum aggregate face
amount of C$1,000,000 and integral multiples of C$100,000 in excess thereof. The
face amount of each Bankers' Acceptance shall be C$100,000 or any integral
multiple thereof. Each Bankers' Acceptance Notice shall be in the form of
EXHIBIT G.
(1 Bankers' Acceptances shall be issued and shall mature on a
Business Day. Each Bankers' Acceptance shall have a term of 30, 60, 90 or,
if available, 180 days excluding days of grace and shall mature on or
before the Maturity Date and shall be in form and substance reasonably
satisfactory to each Canadian Lender.
(2 To facilitate the acceptance of Bankers' Acceptances under this
Agreement, the Canadian Borrower shall, upon execution of this Agreement
and from time to time as required, provide to the Canadian Agent drafts,
in form satisfactory to the Canadian Agent, duly executed and endorsed in
blank by the Canadian Borrower in quantities sufficient for each Canadian
Lender to fulfill its obligations hereunder. In addition, the Canadian
Borrower hereby appoints each Canadian Lender as its attorney, with
respect to Bankers' Acceptances for which Canadian Borrower has provided a
Bankers' Acceptance Notice:
(i) to complete and sign on behalf of Canadian Borrower,
either manually or by facsimile or mechanical signature, the drafts
to create the Bankers' Acceptances (with, in each Canadian Lender's
discretion, the inscription "This is a depository bill subject to
the Depository Bills and Notes Act (Canada)");
(ii) after the acceptance thereof by any Canadian Lender, to
endorse on behalf of Canadian Borrower, either manually or by
facsimile or mechanical signature, such Bankers' Acceptances in
favor of the applicable purchaser or endorsee thereof including, in
such Canadian Lender's discretion, such Canadian Lender or a
clearing house (as defined by the Depository Bills and Notes Act
(Canada));
(iii) to deliver such Bankers' Acceptances to such purchaser
or to deposit such Bankers' Acceptances with such clearing house;
and
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(iv) to comply with the procedures and requirements
established from time to time by such Canadian Lender or such
clearing house in respect of the delivery, transfer and collection
of bankers' acceptances and depository bills.
The Canadian Borrower recognizes and agrees that all Bankers' Acceptances
signed, endorsed, delivered or deposited on its behalf by a Canadian
Lender shall bind the Canadian Borrower as fully and effectually as if
signed in the handwriting of and duly issued, delivered or deposited by
the proper signing officer of the Canadian Borrower. Each Canadian Lender
is hereby authorized to issue such Bankers' Acceptances endorsed in blank
in such face amounts as may be determined by such Canadian Lender provided
that the aggregate amount thereof is equal to the aggregate amount of
Bankers' Acceptances required to be accepted by such Canadian Lender. No
Canadian Lender shall be responsible or liable for its failure to accept a
Bankers' Acceptance if the cause of such failure is, in whole or in part,
due to the failure of the Canadian Borrower to provide duly executed and
endorsed drafts to the Canadian Agent on a timely basis nor shall any
Canadian Lender be liable for any damage, loss or other claim arising by
reason of any loss or improper use of any such instrument except loss or
improper use arising by reason of the gross negligence or willful
misconduct of such Canadian Lender, its officers, employees, agents or
representatives. Each Canadian Lender shall maintain a record with respect
to Bankers' Acceptances (i) received by it from the Canadian Agent in
blank hereunder, (ii) voided by it for any reason, (iii) accepted by it
hereunder, (iv) purchased by it hereunder and (v) canceled at their
respective maturities. Each Canadian Lender further agrees to retain such
records in the manner and for the statutory periods provided in the
various Canadian provincial or federal statutes and regulations which
apply to such Canadian Lender.
(3 Any drafts of the Canadian Borrower signed on behalf of the
Canadian Borrower (other than by a Canadian Lender as attorney) to be
accepted as Bankers' Acceptances hereunder shall be duly executed by a
duly authorized officer of the Canadian Borrower. Notwithstanding that any
person whose signature appears on any Bankers' Acceptance as a signatory
for the Canadian Borrower may no longer be an authorized signatory for the
Canadian Borrower at the date of issuance of a Bankers' Acceptance, such
signature shall nevertheless be valid and sufficient for all purposes as
if such authority had remained in force at the time of such issuance and
any such Bankers' Acceptance so signed shall be binding on the Canadian
Borrower.
(4 Promptly following receipt of a Bankers' Acceptance Notice, the
Canadian Agent shall so advise the Canadian Lenders and shall advise each
Canadian Lender of the face amount of each Bankers' Acceptance to be
accepted by it and the term thereof. The aggregate face amount of Bankers'
Acceptances to be accepted by a Canadian Lender shall be determined by the
Canadian Agent by reference to the respective Canadian Commitments of the
Canadian Lenders, except that, if the face amount of a Bankers'
Acceptance, which would otherwise be accepted by a Canadian Lender, would
not be C$100,000 or an integral multiple thereof, such face amount shall
be increased or reduced by the Canadian Agent in its sole and unfettered
discretion to the nearest integral multiple of C$100,000.
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(5 Each Bankers' Acceptance to be accepted by a Canadian Lender
shall be accepted at such Canadian Lender's office shown on the signature
pages hereof or as otherwise designated by such Canadian Lender from time
to time.
(6 On the relevant borrowing date, each Canadian Lender severally
agrees to purchase from the Canadian Borrower, at the face amount thereof
discounted by the Applicable BA Discount Rate, any Bankers' Acceptance
accepted by it and provide to the Canadian Agent, for the account of the
Canadian Borrower, the BA Discount Proceeds in respect thereof after
deducting therefrom the amount of the Acceptance Fee payable by the
Canadian Borrower to such Canadian Lender under SECTION 2.3(C) in respect
of such Bankers' Acceptance.
(7 Each Canadian Lender may at any time and from time to time hold,
sell, rediscount or otherwise dispose of any or all Bankers' Acceptances
accepted and purchased by it.
(8 The Canadian Borrower waives presentment for payment and any
other defense to payment of any amounts due to a Canadian Lender in
respect of a Bankers' Acceptance accepted by it pursuant to this Agreement
which might exist solely by reason of such Bankers' Acceptance being held,
at the maturity thereof, by such Canadian Lender in its own right and the
Canadian Borrower agrees not to claim any days of grace if such Canadian
Lender as holder sues the Canadian Borrower on the Bankers' Acceptances
for payment of the amount payable by the Canadian Borrower thereunder.
(b With respect to each Bankers' Acceptance, the Canadian Borrower, prior
to the occurrence and continuation of a Default, may give irrevocable telephone
or written notice (or such other method of notification as may be agreed upon
between the Canadian Agent and the Canadian Borrower) to the Canadian Agent at
or before 12:00 noon (Toronto, Ontario time) two (2) Business Days prior to the
maturity date of such Bankers' Acceptance followed by written confirmation
electronically transmitted to the Canadian Agent on the same day, of the
Canadian Borrower's intention to issue one or more Bankers' Acceptance on such
maturity date (each a "REFUNDING BANKERS' ACCEPTANCE") to provide for the
payment of such maturing Bankers' Acceptance (it being understood that payments
by the Canadian Borrower and fundings by the Canadian Lenders in respect of each
maturing Bankers' Acceptance and each related Refunding Bankers' Acceptance
shall be made on a net basis reflecting the difference between the face amount
of such maturing Bankers' Acceptance and the BA Discount Proceeds (net of the
applicable Acceptance Fee) of such Refunding Bankers' Acceptance). Any funding
on account of any maturing Bankers' Acceptance must be made at or before 12:00
noon (Toronto, Ontario time) on the maturity date of such Bankers' Acceptance.
If the Canadian Borrower fails to give such notice, then subject to satisfaction
of the conditions in SECTION 5 hereof and to the Maximum Canadian Available
Amount, the Canadian Borrower shall be irrevocably deemed to have requested and
to have been advanced a Canadian Prime Loan in the face amount of such maturing
Bankers' Acceptance on the maturity date of such Bankers' Acceptance from the
Canadian Lender which accepted such maturing Bankers' Acceptance, which Canadian
Prime Loan shall thereafter bear interest as such in accordance with the
provisions hereof until paid in full.
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(c An Acceptance Fee shall be payable by the Canadian Borrower to each
Canadian Lender in advance (in the manner specified in SECTION 2.3(a)(6)) in
respect of, and as a condition precedent to the acceptance by such Canadian
Lender of, a Bankers' Acceptance, calculated at the rate per annum equal to the
Margin Percentage applicable to LIBOR Borrowings, calculated on the face amount
of such Bankers' Acceptance and computed on the basis of the number of days in
the term of such Bankers' Acceptance and a year of 365 days.
2.4 TERMINATIONS, REDUCTIONS OR REALLOCATIONS OF COMMITMENTS2.4
TERMINATIONS, REDUCTIONS OR REALLOCATIONS OF COMMITMENTS.
(a MANDATORY. On the Termination Date, all Commitments shall be
terminated in their entirety.
(b OPTIONAL. U.S. Borrower or Canadian Borrower, as the case may be,
shall have the right, without the payment of any penalty or fee, to terminate or
reduce the unused portion of the U.S. Commitments or the Canadian Commitments,
as the case may be, at any time or from time to time, PROVIDED that (i) U.S.
Borrower or Canadian Borrower, as the case may be, shall give notice of each
such termination or reduction to the appropriate Agent as provided in SECTION
4.3 hereof and (ii) each such partial reduction shall be in an integral multiple
of $5,000,000. Notwithstanding the foregoing, U.S. Borrower may not reduce the
U.S. Commitments below the then outstanding principal balance of the U.S.
Obligations and Canadian Borrower may not reduce the Canadian Commitments below
the then outstanding principal balance of the Canadian Obligations. No
termination or reduction of the Commitments pursuant to this provision may be
reinstated without the prior written approval of Agents and the Lenders.
(c REALLOCATIONS. Any Dual Lender may agree with Borrowers to reallocate
its existing U.S. Commitment and Canadian Commitment, so long as the sum of such
U.S. Commitment and Canadian Commitment remains unchanged. In addition, with the
prior written consent of all of the Dual Lenders, any U.S. Lender may agree with
Borrowers to convert a portion of its U.S. Commitment into a Canadian Commitment
(to be taken by its Canadian Lender affiliate, if applicable), thereby becoming
a Dual Lender, and any Canadian Lender may agree with Borrowers to convert a
portion of its Canadian Commitment into a U.S. Commitment (to be taken by its
U.S. Lender affiliate, if applicable), in each case so long as (i) each Dual
Lender continues to be a U.S. Lender with a U.S. Commitment of at least
$1,000,000 and (ii) the sum of such Dual Lender's U.S. Commitment and Canadian
Commitment remains equal to the aggregate amount of such Dual Lender's U.S.
Commitment and Canadian Commitment prior to such reallocation. Borrowers shall
give written notice to the Agents of any reallocation pursuant to this provision
at least ten (10) Business Days prior to the effective date of any such
reallocation. No Dual Lender shall be required to agree to any such
reallocation, but may do so at its option, in its sole discretion. The following
conditions precedent must be satisfied prior to any such reallocation becoming
effective:
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(1 no Default or Event of Default shall have occurred and be
continuing;
(2 if, as a result of any such reallocation, the aggregate
U.S. Obligations would exceed the aggregate of all of the U.S.
Commitments, then the U.S. Borrower shall, on the effective date of
such reallocation, repay or prepay U.S. Loans (or provide Cover for
Letter of Credit Liabilities relating to U.S. Letters of Credit) in
accordance with this Agreement in an aggregate principal amount such
that, after giving effect thereto, the aggregate U.S. Obligations shall
not exceed the aggregate of all of the U.S. Commitments;
(3 if, as a result of any such reallocation, the Total Canadian
Exposure would exceed the aggregate of all of the Canadian Commitments,
then the Canadian Borrower shall, on the effective date of such
reallocation, repay or prepay Canadian Loans (or provide Cover for Letter
of Credit Liabilities relating to Canadian Letters of Credit or for
Bankers' Acceptance Liabilities) in accordance with this Agreement in an
aggregate principal amount such that, after giving effect thereto, the
Total Canadian Exposure shall not exceed the aggregate of all of the
Canadian Commitments;
(4 Borrowers shall have paid any amounts (or shall have provided
Cover) due under SECTIONS 2.9(C) or (D) hereof on the date of such
reallocation;
(5 The Maximum Canadian Available Amount shall be adjusted to equal
the sum of all of the Canadian Commitments after giving effect to such
reallocation and the Maximum U.S. Available Amount shall be adjusted to
equal the sum of all of the U.S. Commitments after giving effect to such
reallocation;
(6 participations by the Lenders in the outstanding Letters of
Credit and the Letter of Credit Liabilities and the outstanding Loans of
the Lenders shall be adjusted to give effect to such reallocation;
PROVIDED, HOWEVER, that in lieu of requiring any prepayment of any
Bankers' Acceptances in order to make appropriate adjustments to give
effect to such reallocations, Canadian Borrower shall be required to
provide additional Cover for any applicable portion of the Bankers'
Acceptance Liabilities;
(7 each Dual Lender whose U.S. Commitment or Canadian Commitment
shall be the subject of any reallocation shall have received from the
Borrowers a fee equal to the greater of $5,000 or 1/8% of the amount of
the increase or decrease, as the case may be, in its Canadian Commitment;
and
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(8 Borrowers shall execute and deliver to the applicable Dual
Lenders new Notes evidencing the reallocated Canadian Commitments and
U.S. Commitments.
2.5 COMMITMENT FEES2.5 COMMITMENT FEES.
(a U.S. Borrower shall pay (in Dollars) to U.S. Agent for the account of
each U.S. Lender, and Canadian Borrower shall pay (in Dollars or Canadian
Dollars) to Canadian Agent for the account of each Canadian Lender, commitment
fees for the period from the Effective Date to and including the Termination
Date at a rate per annum equal to the Commitment Fee Percentage. Such 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 Lender's Commitment for such day over (y) the sum
of (i) the aggregate unpaid principal balance (in Dollars) of such Lender's Note
or Notes on such day PLUS (ii) the aggregate Letter of Credit Liabilities as to
such Lender for such day PLUS, in the case of Canadian Lenders only, (iii) the
aggregate Bankers' Acceptance Liabilities outstanding on such day to such
Canadian Lender. Accrued commitment fees shall be payable in arrears on the
Quarterly Dates prior to the Termination Date and on the Termination Date, with
any Canadian Obligations converted to Dollars at the Exchange Rate on each such
date for the purposes of each such calculation.
(b All past due fees payable under this Section shall bear interest at
the Past Due Rate.
2.6 SEVERAL OBLIGATIONS2.6 SEVERAL OBLIGATIONS. The failure of any Lender
to make any Loan to be made by it or to accept and purchase any Bankers'
Acceptance required to be so accepted and purchased by it on the date specified
therefor shall not relieve any other Lender of its obligation to make its Loan
or to accept and purchase its Bankers' Acceptance on such date, but neither any
Agent nor any Lender shall be responsible or liable for the failure of any other
Lender to make a Loan or to accept and purchase any Bankers' Acceptance or to
participate in, or co-issue, any Letter of Credit. Notwithstanding anything
contained herein to the contrary, (i) if a U.S. Lender fails to make a U.S. Loan
as and when required hereunder, then upon each subsequent event which would
otherwise result in payments of principal being made to the defaulting U.S.
Lender, the amount which would have been paid to the defaulting U.S. Lender
shall be divided among the non-defaulting U.S. Lenders ratably according to
their respective Commitment Percentages until the Obligations of each U.S.
Lender (including the defaulting U.S. Lender) are equal to such U.S. Lender's
Commitment Percentage of the total U.S. Obligations and (ii) if a Canadian
Lender fails to make a Canadian Loan or accept and purchase any Bankers'
Acceptance as and when required hereunder, then upon each subsequent event which
would otherwise result in payments of principal being made to the defaulting
Canadian Lender, the amount which would have been paid to the defaulting
Canadian Lender shall be divided among the non-defaulting Canadian Lenders
ratably according to their respective Commitment Percentages until the
Obligations of each Canadian Lender (including the defaulting Canadian Lender)
are equal to such Canadian Lender's Commitment Percentage of the total Canadian
Obligations.
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2.7 NOTES2.7 NOTES. The U.S. Loans made by each U.S. Lender shall be
evidenced by a single U.S. Note of U.S. Borrower in substantially the form of
EXHIBIT D hereto payable to the order of such U.S. Lender in a principal amount
equal to the U.S. Commitment of such U.S. Lender, and otherwise duly completed.
The Canadian Loans made by each Canadian Lender which are denominated in Dollars
shall be evidenced by a single Canadian Note of Canadian Borrower in
substantially the form of EXHIBIT C hereto payable to the order of such Canadian
Lender in a principal amount equal to the Canadian Commitment of such Canadian
Lender, and otherwise duly completed. The Canadian Prime Loans made by each
Canadian Lender shall be evidenced by a single Canadian Dollar Note of Canadian
Borrower in substantially the form of EXHIBIT H hereto payable to the order of
such Canadian Lender in a principal amount equal to two times the Canadian
Commitment of such Canadian 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 a "NOTE" and collectively called the "NOTES". Each Lender is hereby
authorized by each 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 the applicable 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 any Borrower under such Note or hereunder in
respect of such Loan.
2.8 USE OF PROCEEDS2.8 USE OF PROCEEDS. The proceeds of the Loans and of
the acceptance and purchase of Bankers' Acceptances shall be used by the
Borrowers for acquisitions, capital expenditures and other working capital and
general corporate purposes. Neither any Agent nor any Lender shall have any
responsibility as to the use of any proceeds of the Loans or of the acceptance
and purchase of Bankers' Acceptances.
2.9 CURRENCY FLUCTUATIONS2.9 CURRENCY FLUCTUATIONS.
(a) Not later than 1:00 p.m. (San Antonio, Texas time) on each Calculation
Date, the U.S. Agent shall determine the Exchange Rate as of such Calculation
Date. The Exchange Rate so determined shall become effective on the first
Business Day immediately following the relevant Calculation Date (a "RESET
DATE") and shall remain effective until the next succeeding Calculation Date.
(b) Not later than 4:00 p.m. (San Antonio, Texas time) on each Reset Date,
the U.S. Agent shall consult with the Canadian Agent and the Agents shall
determine the Total Canadian Exposure and the aggregate U.S.
Obligations.
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(c) If, on any Reset Date or on the date of any reallocation of the U.S.
Commitments and the Canadian Commitments pursuant to SECTION 2.4(C) hereof, the
sum of the aggregate U.S. Obligations and the Total Canadian Exposure exceeds
the aggregate of all of the U.S. Commitments and the Canadian Commitments by
five percent (5%) or more, then (i) the Agents shall give notice thereof to the
Lenders and Borrowers and (ii) the Borrowers shall within two (2) Business Days
thereafter, repay or prepay Loans (or provide Cover for Letter of Credit
Liabilities or Bankers' Acceptance Liabilities) in accordance with this
Agreement in an aggregate principal amount sufficient to reduce the sum of the
aggregate U.S. Obligations and the Total Canadian Exposure to the aggregate of
all of the U.S. Commitments and the Canadian Commitments.
(d) If, on any day prior to the Termination Date, the Total Canadian
Exposure exceeds the aggregate of all of the Canadian Commitments by five
percent (5%) or more, then (i) the Canadian Agent shall give notice thereof to
the Canadian Borrower and the Canadian Lenders and (ii) within two (2) Business
Days thereafter, the Canadian Borrower shall repay or prepay Canadian Loans (or
provide Cover for Letter of Credit Liabilities relating to Canadian Letters of
Credit or Bankers' Acceptance Liabilities) in accordance with this Agreement in
an aggregate principal amount such that, after giving effect thereto, the Total
Canadian Exposure shall not exceed the aggregate of all of the Canadian
Commitments.
3. BORROWINGS, PREPAYMENTS AND INTEREST OPTIONS3. BORROWINGS, PREPAYMENTS AND
INTEREST OPTIONS.
3.1 BORROWINGS3.1 BORROWINGS. The applicable Borrower shall give the
applicable Agent notice of each borrowing to be made hereunder as provided in
SECTION 4.3 hereof (or, to the extent applicable, SECTION 2.3 hereof) and the
applicable Agent shall promptly notify each applicable Lender of such request.
Not later than 12:00 noon San Antonio, Texas time (in the case of U.S. Loans) or
1:00 p.m. Toronto, Ontario time (in the case of Canadian Loans which are not
same day fundings and Bankers' Acceptances) or 12:00 noon Toronto, Ontario time
(in the case of Canadian Loans which are same day fundings) on the date
specified for each such borrowing hereunder, each applicable Lender shall make
available the amount of the Loan, if any, to be made by it on such date and/or
the proceeds of the acceptance and purchase of any Bankers' Acceptances, if any,
to be so accepted and purchased by it on such date to the applicable Agent at
its Principal Office, in immediately available funds, for the account of the
applicable Borrower. Such amounts received by the applicable Agent will be held
in an account maintained by the applicable Borrower with the applicable Agent.
The amounts so received by the applicable Agent shall, subject to the terms and
conditions of this Agreement, be made available to the applicable Borrower by
wiring or otherwise transferring, in immediately available funds, such amount to
an account designated by the applicable Borrower and approved by the applicable
Agent.
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3.2 PREPAYMENTS3.2 PREPAYMENTS.
(aa OPTIONAL PREPAYMENTS. Except as provided in SECTION 3.3 hereof, each
Borrower shall have the right to prepay, on any Business Day, in whole or in
part, without the payment of any penalty or fee, any of the Obligations (other
than Obligations relating to Bankers' Acceptances) at any time or from time to
time, PROVIDED that the applicable Borrower shall give the applicable 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
$1,000,000 (in respect of Loans denominated in Dollars) or C$1,000,000 (in
respect of Loans denominated in Canadian Dollars). Bankers' Acceptances may not
be prepaid.
(b) INTEREST PAYMENTS. Accrued and unpaid interest on the unpaid principal
balance of the Notes shall be due and payable on the Interest Payment Dates.
(c) PAYMENTS AND INTEREST ON REIMBURSEMENT OBLIGATIONS. Each Borrower will
pay to the applicable Agent for the account of each applicable Lender the amount
of each Reimbursement Obligation with respect to such Borrower on the date on
which the applicable Agent notifies the applicable Borrower of the date and
amount of the applicable payment by the Issuer of any drawing under a Letter of
Credit or payment of any Bankers' Acceptance on maturity. The amount of any
Reimbursement Obligation may, if the applicable conditions precedent specified
in SECTIONS 5.1 and 5.2 hereof have been satisfied, be paid with the proceeds of
Loans or, in the case of Canadian Obligations, of the acceptance and purchase of
Bankers' Acceptances. Subject to SECTION 11.7 hereof, each Borrower will pay to
the applicable Agent for the account of each applicable Lender interest on any
Reimbursement Obligation at (i) the applicable Base Rate (with respect to
Reimbursement Obligations denominated in Dollars) or at the Canadian Prime Rate
(with respect to Reimbursement Obligations denominated in Dollars) from the date
such Reimbursement Obligation arises until the date five (5) Business Days
thereafter and (ii) the applicable Past Due Rate thereafter until the same is
paid in full.
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3.3 INTEREST OPTIONS3.3 INTEREST OPTIONS
(a) OPTIONS AVAILABLE. The outstanding principal balance of the Canadian
Dollar Notes shall bear interest at the Canadian Prime Rate plus the applicable
Margin Percentage from time to time in effect and the outstanding principal
balance of the other Notes shall bear interest at the applicable 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, each Borrower shall have the option of having all or any portion of the
principal balances of its Notes (other than the Canadian Dollar Notes) from time
to time outstanding bear interest at a Eurodollar Rate. The records of Agents
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 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. Each 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),
each Borrower may elect to have a Eurodollar Rate apply or continue to apply to
all or any portion of the principal balance of its Notes (other than the
Canadian Dollar 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
applicable Notes. The Interest Options shall be designated or converted in the
manner provided below:
(i) The applicable Borrower shall give the applicable Agent
telephonic notice, promptly confirmed by a Rate Designation
Notice (and the applicable Agent shall promptly inform each
applicable 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 borrowings 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 the applicable Borrower. Such telephonic notice shall be
irrevocable and shall be given to the applicable Agent no later
than the applicable Rate Designation Date.
(ii) No more than eight (8) LIBOR Borrowings shall be in effect with
respect to the U.S. Loans at any time and no more than five (5)
LIBOR Borrowings shall be in effect with respect to the Canadian
Loans at any time. No single LIBOR Borrowing may include both U.S.
Loans and Canadian Loans.
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(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
shall 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 an 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 U.S.
Notes shall apply to all of the U.S. Notes ratably in accordance
with their respective outstanding principal balances. Each
designation of an Interest Option with respect to the Canadian Notes
shall apply to all of the Canadian 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.
(vii) The entire outstanding principal balance of the Canadian Dollar
Notes shall bear interest at the Canadian Prime Rate plus the
applicable Margin Percentage from time to time in effect.
(c) SPECIAL PROVISIONS APPLICABLE TO LIBOR BORROWINGS.
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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 or
maintain such LIBOR Borrowing shall forthwith be canceled and the applicable
Borrower shall forthwith, upon demand by the applicable Agent to such Borrower,
(1) convert the LIBOR Borrowing of such Lender with respect to which such demand
was made 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 any Agent so notifies any
Borrower, such 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. 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 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 any 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 and
Regulation D) 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
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(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 any Agent (accompanied by a statement setting
forth in reasonable detail the applicable Lender's basis therefor), the
applicable Borrower shall pay to the applicable 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. Each Borrower shall have the right, if it receives from any
Agent any notice referred to in this paragraph, upon three Business Days' notice
to the applicable 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 the applicable Borrower through the
applicable 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 the applicable Borrower through the
applicable Agent) will designate a different lending office of such Lender for
the applicable LIBOR Borrowing or will take such other action as the applicable
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.
iii) INADEQUACY OF PRICING AND RATE DETERMINATION. If, for any reason with
respect to any Interest Period, any Agent (or, in the case of CLAUSE 2 below,
the applicable Lender) shall have determined (which determination shall be
conclusive and binding upon each Borrower, absent manifest error) that:
(1) any Agent is unable through its customary general practices to
determine any applicable Eurodollar Rate, or
(2) 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,
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then the applicable Agent shall give the applicable Borrower notice thereof and
thereupon, (A) any Rate Designation Notice previously given by such Borrower
designating the applicable LIBOR Borrowing which has not commenced as of the
date of such notice from any Agent shall be deemed for all purposes hereof to be
of no force and effect, as if never given, and (B) until the applicable Agent
shall notify such Borrower that the circumstances giving rise to such notice
from such 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 any Borrower, upon the termination of the Interest Period
then in effect with respect to it, to a Base Rate Borrowing.
iv) FUNDING LOSSES. Each Borrower shall indemnify each applicable Lender
against and hold each applicable Lender harmless from any Funding Loss relating
to Loans to such Borrower or relating to Bankers' Acceptances requested by such
Borrower. This indemnity shall survive the payment of the Notes. A certificate
of any Lender (explaining in reasonable detail the amount and calculation of the
amount claimed) as to any additional amounts payable pursuant to this paragraph
submitted to the applicable Borrower shall be conclusive and binding upon such
Borrower, absent manifest error.
(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
the applicable 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 any 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 Canadian Prime Rate or any applicable 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 and fees (including,
without limitation, commitment fees) 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 such
interest 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.
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4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS, ETC.4. PAYMENTS; PRO RATA
TREATMENT; COMPUTATIONS, ETC.
4.1 PAYMENTS4.1 PAYMENTS.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
any Borrower hereunder, under the Notes and under the other Loan Documents shall
be made (i) with respect to Bankers' Acceptance Liabilities, Canadian Prime
Loans and Reimbursement Obligations with respect to Letters of Credit
denominated in Canadian Dollars, in Canadian Dollars and (ii) in all other
cases, in Dollars, in immediately available funds, to the applicable Agent at
its Principal Office (or in the case of a successor U.S. Agent, at the principal
office of such successor U.S. Agent in the United States or in the case of a
successor Canadian Agent, at the principal office of such successor Canadian
Agent in Canada), not later than 11:00 a.m. San Antonio, Texas time (in the case
of any payment by the U.S. Borrower) or 12:00 noon Toronto, Ontario time (in the
case of any payment by the Canadian Borrower) 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) Each Borrower shall, at the time of making each payment hereunder,
under any Note or under any other Loan Document, specify to the applicable Agent
the Obligations payable by such Borrower hereunder or thereunder to which such
payment is to be applied. Each payment received by any 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 any Agent fails
to send to any Lender the applicable amount by the close of business on the date
any such payment is received by such Agent if such payment is received prior to
11:00 a.m. San Antonio, Texas time (in the case of any payment to a U.S. Lender)
or 12:00 noon Toronto, Ontario time (in the case of any payment to a Canadian
Lender) (or on the next succeeding Business Day with respect to payments which
are received after such time), such Agent shall pay to the applicable Lender
interest on such amount from such date at a rate of interest per annum equal to
(i) in respect of Obligations which are denominated in Dollars, the Federal
Funds Rate and (ii) in respect of Canadian Obligations which are denominated in
Canadian Dollars, the CDOR Rate.
(c) If the due date of any payment hereunder or under any other Loan
Document falls on a day which is not a Business Day, the due date for such
payments (except as otherwise provided in the definition of "Interest Period"
set forth in SECTION 1.1 hereof) 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.
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(d) All payments by any 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 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 the
applicable Lender became a "Lender" under this Agreement any withholding or
deduction from any payment to be made to, or for the account of, a Lender by any
Borrower hereunder or under any other Loan Document is required in respect of
any Taxes pursuant to any applicable law, rule, or regulation, then such
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
applicable Agent an official receipt or other documentation reasonably
satisfactory to such Agent evidencing such payment to such authority; and (iii)
pay to the applicable Agent, for the account of each affected Lender, 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 Lender would
have received had no such withholding or deduction been required. Each Lender
shall determine such additional amount or amounts payable to it (which
determination shall, in the absence of manifest error, be conclusive and binding
on each Borrower). If a Lender becomes aware that any such withholding or
deduction from any payment to be made by any Borrower hereunder or under any
other Loan Document is required, then such Lender shall promptly notify the
applicable Agent and the applicable 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 applicable Agent and the applicable
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 applicable 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 any Borrower of any
material amount under this Section, the applicable 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 applicable
Borrower shall (i) if the Agents 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 Agents (such approval not to be
unreasonably withheld) 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, the applicable Borrower
shall have given written notice to the Agents 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.
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4.2 PRO RATA TREATMENT4.2 PRO RATA TREATMENT. Except to the extent
otherwise provided herein: (a) each borrowing from the Lenders under SECTION 2.1
hereof shall be made (x) in the case of Canadian Loans, ratably from the
Canadian Lenders in accordance with their respective Canadian Commitments and
(y) in the case of U.S. Loans, ratably from the U.S. Lenders in accordance with
their respective U.S. Commitments; (b) each payment of commitment fees shall be
made for the account of the Lenders, and each termination or reduction of the
Commitments of the Lenders under SECTION 2.3 hereof shall be applied, PRO RATA,
according to the Lenders' respective Commitments; (c) each payment by any
Borrower of principal of or interest on the Loans or any Bankers' Acceptance
shall be made to the applicable Agent for the account of the applicable Lenders
PRO RATA in accordance with the respective unpaid principal amounts of the Loans
held by or Bankers' Acceptances accepted by such Lenders, and (d) the applicable
Lenders (other than the applicable Issuer) shall purchase from the applicable
Issuer participations in each Letter of Credit to the extent of their respective
U.S. Commitment Percentages or Canadian Commitment Percentages, as the case may
be.
4.3 CERTAIN ACTIONS, NOTICES, ETC.4.3 CERTAIN ACTIONS, NOTICES, Etc.
Notices to the applicable Agent of any termination or reduction of 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 the applicable Agent not later than 11:00 a.m. San Antonio, Texas
time (in the case of U.S. Loans and U.S. Letters of Credit), 10:00 a.m. Toronto,
Ontario time (in the case of Canadian Loans that are same day fundings) or 12:00
noon Toronto, Ontario time (in the case of Canadian Loans that are not same day
fundings and Canadian Letters of Credit)) 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
Commitments 5
Loan repayment same day
Base Rate Borrowings same day
and Canadian Prime Loans
Letter of Credit issuance 3
Selection of a Eurodollar Rate 3 LIBOR
Business Days
Bankers' Acceptances 2
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Each such notice of termination or reduction shall specify the amount of the
applicable 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). The
applicable Agent shall promptly notify the affected Lenders of the contents of
each such notice.
4.4 NON-RECEIPT OF FUNDS BY ANY AGENT4.4 NON-RECEIPT OF FUNDS BY ANY
AGENT. Unless the applicable Agent shall have been notified by a Lender or a
Borrower (the "PAYOR") prior to the date on which such Lender is to make payment
to such 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
or funding of a payment under a Bankers' Acceptance or reimbursement with
respect to any payment under a Bankers' Acceptance) to be made by it hereunder
or the applicable Borrower is to make a payment to such 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 such Agent, the applicable
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 such Agent, the recipient of such payment (or,
if such recipient is the beneficiary of a Letter of Credit, the applicable
Borrower and, if such Borrower fails to pay the amount thereof to the applicable
Agent forthwith upon demand, the applicable Lenders ratably in proportion to
their respective Commitment Percentages) shall, on demand, pay to such Agent the
amount made available by such Agent, together with interest thereon in respect
of the period commencing on the date such amount was so made available by such
Agent until the date Agent recovers such amount at a rate of interest per annum
equal to (i) in respect of U.S. Obligations, the Federal Funds Rate, (ii) in
respect of Canadian Obligations which are denominated in Dollars, the prime rate
per annum then in effect as quoted by Chase Canada for loans denominated in
Dollars, plus one percent (1%), and (iii) in respect of Canadian Obligations
which are denominated in Canadian Dollars, the prime rate per annum then in
effect as quoted by Chase Canada for loans denominated in Canadian Dollars, plus
one percent (1%).
4.5 SHARING OF PAYMENTS, ETC.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
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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. Each 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 any Borrower.
5. CONDITIONS PRECEDENT5. CONDITIONS PRECEDENT.
5.1 INITIAL LOANS, LETTERS OF CREDIT AND BANKERS' ACCEPTANCES5.1 INITIAL
LOANS, LETTERS OF CREDIT AND BANKERS' ACCEPTANCES. The obligation of each Lender
or each Issuer to make its initial Loans or issue or participate in the initial
Letter of Credit hereunder or to accept and purchase its initial Bankers'
Acceptance hereunder (whichever shall first occur) is subject to the following
conditions precedent, each of which shall have been fulfilled or waived to the
satisfaction of Agents:
(a) AUTHORIZATION AND STATUS. Agents shall have received from the
appropriate Governmental Authorities certified copies of the Organizational
Documents (other than by-laws) of each Obligor, and evidence satisfactory to
Agents 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 of each such party which is a corporation setting forth the
resolutions of its Board of Directors authorizing the transactions contemplated
thereby and attaching a copy of its bylaws), together with such certificates as
may be appropriate to demonstrate the qualification and good standing of and
payment of taxes by each Obligor in the jurisdiction of its organization and in
each other jurisdiction where the failure to qualify would have a Material
Adverse Effect.
(b) INCUMBENCY. Each Obligor shall have delivered to Agents 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 related to any
Loan, Letter of Credit and Bankers' Acceptance 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, Letter of Credit and Bankers'
Acceptance. Each Agent and each Lender may conclusively rely on such
certificates until they receive notice in writing from the applicable Obligor to
the contrary.
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(c) NOTES. Agents shall have received the appropriate Notes of Borrowers
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 Agents
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 Lenders may approve.
(e) FEES AND EXPENSES. Borrowers shall have paid to Agents all unpaid fees
in the amounts previously agreed upon in writing between any Borrower and any
Agent; and shall have in addition paid to Agents all amounts payable under
SECTION 11.3 hereof, on or before the date of this Agreement, except for amounts
which the applicable Agent, in its sole discretion, agrees may be paid at a
later date.
(f) INSURANCE. Borrowers shall have delivered to Agents evidence
satisfactory to Agents regarding the existence of all insurance required to be
maintained by each Obligor by this Agreement.
(g) OPINIONS OF COUNSEL. Agents shall have received such opinions of
counsel to Obligors as Agents shall reasonably request with respect to Obligors
and the Loan Documents.
(h) CONSENTS. Agents shall have received evidence satisfactory to the
Lenders that all material consents of each Governmental Authority and of each
other Person, if any, reasonably required in connection with (a) the Loans,
Letters of Credit and Bankers' Acceptances and (b) the execution, delivery and
performance of this Agreement and the other Loan Documents have been
satisfactorily obtained.
(i) PAYMENT OF CERTAIN OUTSTANDING INDEBTEDNESS. Agent shall have received
evidence satisfactory to Agent that all existing Indebtedness owing under the
credit facility provided to U.S. Borrower by a syndicate of lenders agented by
Wells Fargo Bank (Texas), National Association and under the credit facility
provided to Canadian Borrower by a syndicate of lenders agented by National Bank
of Canada shall have been paid in full (or will be paid in full out of the
initial advance hereunder) and that all rights to further advances under such
facility shall have been terminated. The provisions of this CLAUSE (I) are
subject to the provisions of SECTION 8.1 hereof regarding permitted Borrowed
Money Indebtedness after the Effective Date.
(j) OTHER DOCUMENTS. Agents shall have received such other documents
consistent with the terms of this Agreement and relating to the transactions
contemplated hereby as Agents may reasonably request.
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5.2 ALL LOANS, LETTERS OF CREDIT AND BANKERS' ACCEPTANCES5.2 ALL LOANS,
LETTERS OF CREDIT AND BANKERS' ACCEPTANCES. 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 or to accept and purchase any Bankers' Acceptance is subject to
(a) the accuracy, in all material respects, on the date of such Loan or such
issuance or such acceptance and purchase of all representations and warranties
of each Obligor contained in this Agreement and the other Loan Documents; (b)
the applicable 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, Letter of Credit or Bankers' Acceptance, as the case may be, by the
time and on the Business Day specified under SECTION 4.3 hereof, (2) in the case
of a Letter of Credit, an Application, and (3) such other documents as the
applicable Agent may reasonably require; (c) prior to the making of such Loan or
the issuance of such Letter of Credit or the acceptance and purchase of such
Bankers' Acceptance, 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; (e) the making of such Loan or
the issuance of such Letter of Credit or the acceptance and purchase of such
Bankers' Acceptance shall not be illegal or prohibited by any Legal Requirement,
and (f) Borrowers shall have paid all fees and expenses of the type described in
SECTION 11.3 hereof and all other fees owed to any Agent or any Lender under the
Loan Documents which are due and payable, in each case, prior to or on the date
of such Loan or such issuance or such acceptance and purchase. The submission by
any 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 or Bankers' Acceptance have been satisfied.
6. REPRESENTATIONS AND WARRANTIES6. REPRESENTATIONS AND WARRANTIES.
To induce the Lenders to enter into this Agreement and to make the Loans
and issue or participate in the Letters of Credit and accept and purchase
Bankers' Acceptances, U.S. Borrower and Canadian Borrower each 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 and the
acceptance and purchase of any Bankers' Acceptances) to the Lenders and Agents
as follows:
6.1 ORGANIZATION6.1 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 would reasonably be expected to have a Material
Adverse Effect.
6.2 FINANCIAL STATEMENTS6.2 FINANCIAL STATEMENTS. Borrowers have furnished
to Agents: (i) audited financial statements as to U.S. Borrower which fairly
present in all material respects, in accordance with GAAP, the consolidated
financial condition and the results of operations of U.S. Borrower as at the end
of the fiscal year ended December 31, 1998, (ii) unaudited financial statements
as to Canadian Borrower which fairly present in all material respects, in
accordance with GAAP only in the context that these statements are used in the
preparation of the annual audited consolidated financial statements of U.S.
Borrower which are
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in accordance with GAAP, the consolidated financial condition and the results of
operations of Canadian Borrower as at the end of the fiscal year ended December
31, 1998 and (iii) unaudited consolidating financial statements as to U.S.
Borrower and Canadian Borrower which fairly present in all material respects, in
accordance with GAAP only in the context that these statements are used in the
preparation of the annual audited consolidated financial statements of U.S.
Borrower which are in accordance with GAAP, the financial condition and the
results of operations of U.S. Borrower and Canadian Borrower, on a consolidating
basis, as at the end of the fiscal year ended December 31, 1998. No events,
conditions or circumstances have occurred from the date that such financial
statements were delivered to Agents through the Effective Date which would cause
such financial statements to be misleading in any material respect. There are no
material instruments or liabilities which should be reflected in such financial
statements which are not so reflected.
6.3 ENFORCEABLE OBLIGATIONS; AUTHORIZATION6.3 ENFORCEABLE OBLIGATIONS;
AUTHORIZATION. The Loan Documents 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 (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 would 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, and (e) do not and will not result
in the creation of any Lien upon any Property of any Obligor, except in favor of
U.S. Agent as expressly contemplated therein. All necessary permits,
registrations and consents for such making and performance have been obtained.
Notwithstanding anything to the contrary set forth in this Section, Lenders
acknowledge that the Guaranties dated concurrently herewith executed by Indiana
Southern Railroad, Inc., an Indiana corporation, in favor of U.S. Agent and
Canadian Agent, respectively, may be unenforceable under certain Indiana laws
applicable to such Person (but Borrowers covenant and agree that they shall, on
or before July 31, 1999, take such measures as shall be required in order to
ensure that such Guaranties conform with the representations set forth in this
Section).
6.4 OTHER DEBT6.4 OTHER DEBT. No Obligor is in default in the payment of
any other Borrowed Money Indebtedness or under any agreement, mortgage, deed of
trust, security agreement or lease to which it is a party and which default
would reasonably be expected to have a Material Adverse Effect.
6.5 LITIGATION6.5 LITIGATION. Except as disclosed in the Memorandum, there
is no litigation or administrative proceeding, to the Knowledge of any Executive
Officer of any Borrower, pending or threatened against, nor any outstanding
judgment, order or decree against, any Obligor before or by any Governmental
Authority which does or would 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 would have a Material Adverse
Effect.
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6.6 TAXES6.6 TAXES. Each Obligor has filed all material tax returns
required to have been filed and paid or made provision for the payment of all
taxes shown thereon to be due, except those for which extensions have been
obtained and those which are being contested in good faith.
6.7 REGULATIONS U AND X6.7 REGULATIONS U AND X. None of the proceeds of
any Loan or proceeds from the acceptance and purchase of Bankers' Acceptances
will be used for the purpose of purchasing or carrying directly or indirectly
any margin stock or for any other purpose that 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.
6.8 SUBSIDIARIES6.8 SUBSIDIARIES. As of the Effective Date, U.S. Borrower
has no Subsidiaries other than as set forth on EXHIBIT I hereto. The percentage
of the issued and outstanding equity interests in each applicable Subsidiary
which is owned by U.S. Borrower or one or more of its Subsidiaries is set forth
on EXHIBIT I hereto.
6.9 NO UNTRUE OR MISLEADING STATEMENTS6.9 NO UNTRUE OR MISLEADING
STATEMENTS. No representation or warranty made by any Obligor in any Loan
Document or in any 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 does or will contain any untrue material
statement of fact or will omit to state any such fact (of which any Executive
Officer of any Borrower has Knowledge) 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.
6.10 ERISA6.10 ERISA. With respect to each Plan, each 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,
except to the extent that the failure to comply therewith would not reasonably
be expected to have a Material Adverse Effect. No event has occurred which could
result in a liability of any Borrower or any member of the Controlled Group to
the PBGC or a Plan (other than to make contributions in the ordinary course)
that would reasonably be expected to have a Material Adverse Effect. To the
Knowledge of Borrowers' Executive Officers, there have not been any nor are
there now existing any events or conditions that would cause any Lien provided
under ERISA to attach to any Property of any Borrower or any member of the
Controlled Group. Unfunded Liabilities as of the date hereof do not exceed
$1,000,000. To the Knowledge of Borrowers' Executive Officers, no "prohibited
transaction" has occurred with respect to any Plan.
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6.11 INVESTMENT COMPANY ACT6.11 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.
6.12 PUBLIC UTILITY HOLDING COMPANY ACT6.12 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.
6.13 SOLVENCY6.13 SOLVENCY. None of U.S. Borrower, Canadian Borrower, any
other Obligor, U.S. Borrower and its Subsidiaries, on a consolidated basis, or
Canadian 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.
6.14 FISCAL YEAR6.14 FISCAL YEAR. The fiscal year of each Obligor ends on
December 31.
6.15 COMPLIANCE6.15 COMPLIANCE. To the Knowledge of the Executive Officers
of Borrowers, each Obligor is in compliance with all Legal Requirements
applicable to it, except to the extent that the failure to comply therewith
would not reasonably be expected to have a Material Adverse Effect.
6.16 ENVIRONMENTAL MATTERS6.16 ENVIRONMENTAL MATTERS. Each Obligor has, to
the Knowledge of the respective Executive Officers of Borrowers, obtained and
maintained in effect all applicable Environmental Permits (or the applicable
Person has initiated the necessary steps to transfer the applicable
Environmental Permits into its name or obtain such permits), except to the
extent that the failure to obtain the same would not reasonably be expected to
have a Material Adverse Effect. Each Obligor and its Properties, business and
operations have been and are, to the Knowledge of the respective Executive
Officers of Borrowers, in compliance with all applicable Requirements of
Environmental Law and applicable Environmental Permits, except to the extent
that the failure to comply with the same would not 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
Knowledge of the respective Executive Officers of Borrowers, Environmental
Liabilities, in either case direct or contingent, arising from or based upon any
act, omission, event, condition or circumstance occurring or existing on or
prior to the date hereof which would reasonably be expected to have a Material
Adverse Effect. Except to the extent disclosed in the Memorandum, none of the
Executive Officers of any Borrower has Knowledge that any Obligor has received
any notice of any violation or alleged violation of any applicable Requirements
of Environmental Law or applicable Environmental Permit or any Environmental
Claim in connection with its Properties, liabilities, condition (financial or
otherwise), business or operations which would reasonably be expected to have a
Material Adverse Effect. None of the Executive Officers of any Borrower has any
Knowledge of any event or condition with respect to currently enacted applicable
Requirements of Environmental Laws presently scheduled to become effective in
the future with respect to any of the Properties of any Obligor which would
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.
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6.17 ASSETS AND EARNINGS OF MATERIAL SUBSIDIARIES6.17 ASSETS AND EARNINGS
OF MATERIAL SUBSIDIARIES. The aggregate book value (net of intercompany
accounts) of the assets owned by U.S. Borrower and the Material Subsidiaries as
of December 31, 1998 was equal to or greater than seventy percent (70%) of the
aggregate consolidated book value of all of the assets of U.S. Borrower and its
Subsidiaries (on a consolidated basis) as of December 31, 1998 and the aggregate
gross revenues of U.S. Borrower and the Material Subsidiaries for the 1998
fiscal year were equal to or greater than seventy percent (70%) of the aggregate
consolidated gross revenues of U.S. Borrower and its Subsidiaries for the 1998
fiscal year (on a consolidated basis)
7. AFFIRMATIVE COVENANTS.. AFFIRMATIVE COVENANTS.
U.S. Borrower and Canadian Borrower each covenants and agrees with Agents
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.7.1 TAXES, EXISTENCE,
REGULATIONS, PROPERTY, ETC. At all times (a) pay when due all material 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 in all jurisdictions where such failure to
qualify would reasonably be expected to have a Material Adverse Effect; (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, the noncompliance with which would reasonably be
expected to have a Material Adverse Effect; and (d) cause its Property to be
protected, maintained and kept in good repair and make all replacements and
additions to such Property as Borrowers may reasonably determine to be necessary
to conduct its business properly and efficiently.
7.2 FINANCIAL STATEMENTS AND INFORMATION7.2 FINANCIAL STATEMENTS AND
INFORMATION. Furnish to Agents and each Lender each of the following: (a) as
soon as available and in any event within 90 days after the end of each
applicable fiscal year, beginning with the fiscal year ending on December 31,
1999, audited Annual Financial Statements of U.S. Borrower and unaudited Annual
Financial Statements of Canadian Borrower, (b) as soon as available and in any
event within 45 days after the end of each fiscal quarter of each applicable
fiscal year,
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Quarterly Financial Statements of U.S. Borrower and Canadian Borrower; (c)
concurrently with the financial statements provided for in SUBSECTIONS 7.2(A)
and (B) hereof, such schedules, computations and other information, in
reasonable detail, as may be required by Agents to demonstrate compliance with
the covenants set forth herein or reflecting any non-compliance therewith as of
the applicable date, all certified and signed by an authorized officer of U.S.
Borrower as true and correct in all material respects to the Knowledge of such
officer and, commencing with the quarterly financial statement prepared as of
June 30, 1999, a compliance certificate ("COMPLIANCE CERTIFICATE") in the form
of EXHIBIT F hereto, duly executed by such authorized officer; (d) by December
31 of each fiscal year, U.S. Borrower's and Canadian Borrower's annual business
plans for the next fiscal year (including their balance sheets and income and
cash flow projections for such fiscal year) (Agents and Lenders acknowledge that
such business plans shall be subject to review and approval and revision by the
Board of Directors of the applicable Person); (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, and (f) 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 any 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.
7.3 FINANCIAL TESTS7.3 FINANCIAL TESTS. Have and maintain:
(a) NET WORTH - Net Worth for U.S. Borrower and its Subsidiaries (on
a consolidated basis) at the end of each fiscal quarter (beginning on June
30, 1999) of not less than an amount equal to $122,000,000 PLUS 50% of the
Net Income (if positive) of U.S. Borrower and its Subsidiaries, on a
consolidated basis, for the period from December 31, 1998 through the last
day of such fiscal quarter PLUS 100% of the net proceeds realized from the
issuance of any equity securities by U.S. Borrower or its Subsidiaries
(other than the issuance of equity securities to the U.S. Borrower or any
of its Subsidiaries by any Subsidiary of U.S. Borrower) for the period
from December 31, 1998 through the last day of such fiscal quarter.
(b) INTEREST COVERAGE RATIO - an Interest Coverage Ratio of not less
than 1.50 to 1.00 at all times.
(c) SENIOR DEBT TO EBITDA RATIO - a Senior Debt to EBITDA Ratio of
not greater than 3.50 to 1.00 at all times; provided, that if U.S.
Borrower or any of its Subsidiaries acquires a railroad Person (either in
whole or in part and whether by way of an asset or an equity purchase)
then, for the period beginning on the date of such acquisition to (but not
including) the effective date of the third quarterly Compliance
Certificate required to be delivered after such acquisition, the Senior
Debt to EBITDA Ratio required under this provision shall be increased to
4.00 to 1.00 (but at the end of such period, the Senior Debt to EBITDA
Ratio required under this provision shall return to 3.50 to 1.00).
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(d) TOTAL DEBT TO EBITDA RATIO - a Total Debt to EBITDA Ratio of not
greater than 4.50 to 1.00 at all times.
7.4 INSPECTION7.4 INSPECTION. Permit each Agent and each Lender upon 3
Business 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, to examine its files, books and records, except privileged
communication with legal counsel and 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 any Agent may reasonably desire.
7.5 FURTHER ASSURANCES7.5 FURTHER ASSURANCES. Promptly execute and
deliver, at the expense of U.S. Borrower or Canadian Borrower, as the case may
be, any and all other and further instruments which may be reasonably requested
by any 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.
7.6 BOOKS AND RECORDS7.6 BOOKS AND RECORDS. Maintain books of record and
account which permit financial statements to be prepared in accordance with
GAAP.
7.7 INSURANCE7.7 INSURANCE. U.S. Borrower and Canadian Borrower will (and
will cause each other Obligor to) maintain insurance with such insurers, on such
of 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 the applicable
Obligor operates or as any Agent may otherwise reasonably require, and furnish
each Agent satisfactory evidence thereof promptly upon request. Each Agent shall
be provided with a certificate of the insurer that insurer shall endeavor to
provide thirty (30) days' prior written notice to Agents prior to any
cancellation, reduction or other alteration affecting any of the insurance
required by this Section in any material manner. Agents and Lenders acknowledge
that the current insurance coverage program of Borrowers, which has been
disclosed in writing to Agents and Lenders prior to the date hereof, has been
approved by Agents and Lenders for purposes of this Section.
7.8 NOTICE OF CERTAIN MATTERS7.8 NOTICE OF CERTAIN MATTERS. Give Agents
written notice of the following promptly after any Executive Officer of U.S.
Borrower or Canadian Borrower shall obtain Knowledge of the same:
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(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 acceptance and purchase of Bankers' Acceptances 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 with a specified amount in excess of $3,000,000 against any
Obligor or which may 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 respect
thereto.
7.9 CAPITAL ADEQUACY7.9 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 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 the appropriate Agent) as provided below, pay (subject to
SECTION 11.7 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
U.S. Borrower or Canadian Borrower, as the case may be, and shall be conclusive
and binding, absent manifest error. U.S. Borrower or Canadian Borrower, as the
case may be, 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.
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7.10 ERISA INFORMATION AND COMPLIANCE7.10 ERISA INFORMATION AND
COMPLIANCE. Promptly furnish to Agents: (i) immediately upon receipt, a copy of
any notice of complete or partial withdrawal liability under ERISA and any
notice from the PBGC under ERISA of an intent to terminate or appoint a trustee
to administer any Plan, (ii) if requested by any Agent, promptly after the
filing thereof with the United States Secretary of Labor or the PBGC or the
Internal Revenue Service or any Governmental Authority having jurisdiction under
Applicable Canadian Pension Legislation, copies of each annual and other report
with respect to each Plan or any trust created thereunder, (iii) immediately
upon an Executive Officer of a Borrower obtaining Knowledge of the occurrence of
any "reportable event," as such term is used under ERISA for which the
disclosure requirements 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 the
President or the principal financial officer of the applicable Borrower or the
applicable member of the Controlled Group specifying the nature thereof, what
action the applicable 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, the Department of Labor or any
other applicable Governmental Authority with respect thereto, (iv) promptly
after the filing or receiving thereof by any 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 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, the Internal Revenue Service or any other
applicable Governmental Authority. To the extent required under applicable
statutory funding requirements, each 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 would not reasonably be
expected to have a Material Adverse Effect. Each 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 would not reasonably
be expected to have a Material Adverse Effect.
7.11 YEAR 2000.11 YEAR 2000. Any reprogramming or testing required to
permit the proper functioning, in and following the year 2000, of (i) each
Obligors's computer systems, to the extent such systems are material to the
conduct of any Obligor's business and (ii) equipment owned by any of the
Obligors and containing embedded microchips (including systems and equipment
supplied by others or with which any Obligor's systems interface), to the extent
the proper functioning of such equipment owned by any of the Obligors is
material to the conduct of any Obligor's business, will be completed in all
material respects by November 30, 1999, to the extent failure to do so would
reasonably be expected to have a Material Adverse Effect. To the Knowledge of
the Borrowers' Executive Officers, the cost to Obligors of such reprogramming
and testing and of reasonably foreseeable consequences of year 2000 to Obligors
(including,
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without limitation, reprogramming errors and failure of others' systems or
equipment) will not result in an Event of Default and could not reasonably be
expected to have a Material Adverse Effect. Except for such of the reprogramming
referred to in the preceding sentence as may be necessary, the computer and
management systems of Obligors are and, with ordinary course upgrading and
maintenance, will continue for the term of this Agreement to be, sufficient to
permit Obligors to conduct their business without a Material Adverse Effect.
7.12 GUARANTIES BY MATERIAL SUBSIDIARIES7.12 GUARANTIES BY MATERIAL
SUBSIDIARIES. Borrowers will cause each Material Subsidiary which is a Domestic
Subsidiary to execute and deliver to each Agent a Guaranty in substantially the
same form as the Guaranties executed in favor of the applicable Agents by
certain Domestic Subsidiaries concurrently herewith and will cause each Material
Subsidiary which is a Foreign Subsidiary to execute and deliver to Canadian
Agent a Guaranty in substantially the same form as the Guaranties executed in
favor of Canadian Agent by certain Foreign Subsidiaries concurrently herewith.
8. NEGATIVE COVENANTS.. NEGATIVE COVENANTS.
U.S. Borrower and Canadian Borrower each covenants and agrees with Agents
and the Lenders that prior to the termination of this Agreement it will not, and
will not suffer or permit any other Obligor to, do any of the following:
8.1 BORROWED MONEY INDEBTEDNESS8.1 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) Borrowed Money Indebtedness under this Agreement and
the other Loan Documents and indebtedness secured by Liens permitted by SECTION
8.2 hereof; (b) Borrowed Money Indebtedness existing on the date of this
Agreement and listed on EXHIBIT J attached hereto, and all renewals, extensions
and replacements (but not increases) of any of the foregoing; (c) Interest Rate
Risk Indebtedness; (d) an unsecured line of credit provided by National Bank of
Canada not to exceed, at any one time outstanding, the principal amount of
$5,000,000; (e) intercompany loans that constitute Permitted Investments; (f)
capitalized leases so long as annual payments under all capitalized leases by
which Borrowers or their Subsidiaries are bound shall not exceed, as of any
calculation date, two percent (2%) of Net Worth as of the last day of the
preceding fiscal quarter, and (g) purchase money Borrowed Money Indebtedness not
to exceed, as of any calculation date and as to any one Subsidiary of U.S.
Borrower, $500,000 or as to U.S. Borrower and not to exceed, in the aggregate as
of any calculation date, two percent (2%) of Net Worth as of the last day of the
preceding fiscal quarter. Without limiting the foregoing, Borrowers agree that
all Borrowed Money Indebtedness owing by U.S. Borrower to any of its
Subsidiaries or owing by any Subsidiary of U.S. Borrower to U.S. Borrower or to
any other Subsidiary of U.S. Borrower shall be subordinated in a manner
acceptable to the Majority Lenders and pursuant to documentation in Proper Form.
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8.2 LIENS8.2 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;
PROVIDED, HOWEVER, that any Obligor may create or suffer to exist Permitted
Liens.
8.3 CONTINGENT LIABILITIES8.3 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 Agents in the financial statements
delivered on or prior to the Effective Date pursuant to SECTION 6.2 hereof or
disclosed in the Memorandum (but not increases of such obligations after the
Effective Date); (c) guaranties of performance (but not of any Borrowed Money
Indebtedness) by a Subsidiary provided in the ordinary course of business; (d)
guaranties by U.S. Borrower or by any Domestic Subsidiary of the purchase price
payable or receivable in connection with any purchase or sale agreement entered
into by any Domestic Subsidiary so long as the contemplated purchase or sale is
permitted under this Agreement; (e) guaranties by Canadian Borrower or by any
Foreign Subsidiary of the purchase price payable or receivable in connection
with any purchase or sale agreement entered into by any Foreign Subsidiary so
long as the contemplated purchase or sale is permitted under this Agreement; (f)
other guaranties which do not relate to Borrowed Money Indebtedness not to
exceed, in the aggregate as of any calculation date, two percent (2%) of Net
Worth as of the last day of the preceding fiscal quarter, and (g) those
liabilities permitted under SECTION 8.1 hereof.
8.4 MERGERS, CONSOLIDATIONS AND DISPOSITIONS OF ASSETS8.4 MERGERS,
CONSOLIDATIONS AND DISPOSITIONS OF ASSETS. In any single transaction or series
of transactions, directly or indirectly:
(a) liquidate or dissolve;
(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, (iii) if U.S. Borrower is a party thereto, U.S.
Borrower is the surviving Person, (iv) if a Domestic Subsidiary
is a party thereto (and U.S. Borrower is not), a Domestic
Subsidiary is the surviving Person, (v) if neither U.S. Borrower
nor any Domestic Subsidiary is a party thereto, a Subsidiary of
U.S. Borrower is the surviving Person; (vi) to the extent
reasonably required by the Majority Lenders, the surviving Person
ratifies and assumes each Loan Document to which any party to
such merger was a party, and (vii) Agents are given at least 30
days' prior written notice of such merger or consolidation;
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(c) sell, convey or lease all or any part of its assets, except for
(i) sales and leases of personal Property in the ordinary course
of business, (ii) the sale, lease or other disposition of any
Property by U.S. Borrower or any Domestic Subsidiary to U.S.
Borrower or any Domestic Subsidiary, (iii) the sale, lease or
other disposition of any Property by Canadian Borrower or any
Foreign Subsidiary to Canadian Borrower or any Foreign
Subsidiary, (iv) the sale, lease or other disposition of any
Property by any Subsidiary of U.S. Borrower which is not a
Material Subsidiary; (v) sales of Property (other than in
connection with a transaction covered by one of the other clauses
of this SECTION 8.4(C)) for cash so long as the aggregate value
of the Property so sold in any one fiscal year does not exceed,
as of any calculation date in the aggregate for the period from
and after the Effective Date, five percent (5%) of Net Worth as
of the preceding fiscal quarter and (vi) sale/leaseback
transactions not exceeding, as of any calculation date in the
aggregate for the period from and after the Effective Date, ten
percent (10%) of Net Worth as of the preceding fiscal quarter, or
(d) pledge, transfer or otherwise dispose of any equity interest in (or
voting rights in respect of) any Material Subsidiary of U.S.
Borrower or any indebtedness of any Material Subsidiary of U.S.
Borrower or issue or permit any Material Subsidiary of U.S. Borrower
to issue any additional equity interest other than to U.S. Borrower
or any of its Subsidiaries.
8.5 REDEMPTION, DIVIDENDS AND DISTRIBUTIONS8.5 REDEMPTION, DIVIDENDS AND
DISTRIBUTIONS. At any time: (a) redeem, retire or otherwise acquire, directly or
indirectly, any equity interest in any Obligor other than the repurchase of
equity interests in U.S. Borrower not exceeding, in the aggregate for the period
from and after the Effective Date, $5,000,000 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. The provisions of this Section shall not
prohibit or restrict the issuance of directors' qualifying shares.
8.6 NATURE OF BUSINESS8.6 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 PARTIES8.7 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 the result of arms-length negotiations or upon terms
substantially similar to those obtainable from wholly unrelated sources (to the
Knowledge of the Executive Officers of the applicable Obligor or Affiliate,
after making reasonable inquiry of the personnel and records of the applicable
Obligor or Affiliate). This Section shall not apply to employee benefits
provided under Borrower's 1993 Stock Plan (as it may be amended form time to
time) or to other employee benefits or agreements approved from time to time by
the Compensation Committee of the Board of Directors of the U.S. Borrower (which
is and shall remain wholly comprised of independent directors).
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8.8 LOANS AND INVESTMENTS8.8 LOANS AND INVESTMENTS. Make any loan,
advance, extension of credit or capital contribution to, or make or, except as
permitted by SECTIONS 8.4 or 8.9 hereof, have any Investment in, any Person, or
make any commitment to make any such extension of credit or Investment, except
(a) Permitted Investments and (b) normal and reasonable advances in the ordinary
course of business to current or future officers and employees.
8.9 SUBSIDIARIES8.9 SUBSIDIARIES. Form, create or acquire any Subsidiary,
except that U.S. Borrower (or any of its Subsidiaries) may form, create or
acquire a wholly-owned (other than directors' qualifying shares) 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 a
Material Subsidiary and is a Domestic Subsidiary, such Subsidiary shall execute
and deliver to each Agent a Guaranty in substantially the same form as the
Guaranties executed in favor of the applicable Agents concurrently herewith; (c)
if such Subsidiary is a Material Subsidiary and is a Foreign Subsidiary, such
Subsidiary shall execute and deliver to Canadian Agent a Guaranty in
substantially the same form as the Guaranties executed in favor of Canadian
Agent concurrently herewith; (d) no Foreign Subsidiary may form, create or
acquire a Domestic Subsidiary, and (e) Agents are given at least 30 days' prior
written notice following such formation, creation or acquisition.
8.10 ORGANIZATIONAL DOCUMENTS.10 ORGANIZATIONAL DOCUMENTS. Amend, modify,
restate or supplement any of its Organizational Documents if such action would
reasonably be expected to have a Material Adverse Effect, unless such action
shall be consented to in writing by Majority Lenders.
8.11 UNFUNDED LIABILITIES8.11 UNFUNDED LIABILITIES. Incur any Unfunded
Liabilities after the Effective Date or allow any Unfunded Liabilities in excess
of $1,000,000, in the aggregate, to arise or exist.
8.12 SUBORDINATED INDEBTEDNESS8.12 SUBORDINATED INDEBTEDNESS. Except as
expressly consented to in writing by the Majority Lenders (which consent shall
not be unreasonably withheld), Borrowers will not 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 reasonably be expected to
adversely affect the rights of Lenders or purchase, redeem, retire or otherwise
acquire for value, deposit any 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. Notwithstanding the foregoing,
Lenders acknowledge that the scheduled payments provided under the current
documentation relating to the the Subordinated Indebtedness described on EXHIBIT
J hereto shall not require prior approval by any Lender.
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8.13 ACQUISITIONS8.13 ACQUISITIONS. Except as expressly consented to in
writing by the Majority Lenders (which consent shall not be unreasonably
withheld), acquire any railroad (or any Person which owns, directly or
indirectly through its Subsidiaries, any railroad) after the Effective Date with
respect to which the aggregate consideration for a single transaction would
exceed, as of any calculation date, twenty percent (20%) of Net Worth of U.S.
Borrower and its Subsidiaries (on a consolidated basis) as of the last day of
preceding fiscal quarter or acquire any other Property after the Effective Date
with respect to which the aggregate consideration for a single transaction would
exceed, as of any calculation date, ten percent (10%) of Net Worth of U.S.
Borrower and its Subsidiaries (on a consolidated basis) as of the last day of
preceding fiscal quarter.
8.14 PROHIBITIONS OF LIENS OR SUBSIDIARY DIVIDENDS8.14 PROHIBITIONS OF
LIENS OR SUBSIDIARY DIVIDENDS. Enter into any agreement or contract which limits
or restricts in any way (i) the granting of Liens by any Obligor securing any of
the Obligations or (ii) any dividends or distributions by any Subsidiary of any
Borrower to such Borrower or to another Subsidiary of such Borrower.
8.15 ASSETS AND EARNINGS OF MATERIAL SUBSIDIARIES8.15 ASSETS AND EARNINGS
OF MATERIAL SUBSIDIARIES. Borrowers will not permit the aggregate book value
(net of intercompany accounts) of the assets owned by U.S. Borrower and the
Material Subsidiaries to be less than seventy percent (70%) of the aggregate
consolidated book value of all of the assets of U.S. Borrower and its
Subsidiaries (on a consolidated basis) and Borrowers will not permit the
aggregate gross revenues of U.S. Borrower and the Material Subsidiaries for the
1999 fiscal year or any subsequent fiscal year to be less than seventy percent
(70%) of the aggregate consolidated gross revenues of U.S. Borrower and its
Subsidiaries for such fiscal year (on a consolidated basis).
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9. DEFAULTS. DEFAULTS.
9.1 EVENTS OF DEFAULT9.1 EVENTS OF DEFAULT. If any one or more of the
following events (herein called "EVENTS OF DEFAULT") shall occur, then either
Agent may (and at the direction of the Majority Lenders, shall) do any or all of
the following: (1) without notice to U.S. Borrower, Canadian Borrower or any
other Person, declare the Commitments terminated (whereupon the Commitments
shall be terminated) and/or accelerate the Termination Date to a date as early
as the date of termination of the Commitments; (2) terminate any Letter of
Credit allowing for such termination, by sending a notice of termination as
provided therein and require the applicable 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 U.S. Borrower and Canadian 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 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 ill
automatically be required to provide Cover for outstanding Letters of Credit,
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 U.S. Borrower and Canadian
Borrower, and (4) exercise any or all other rights and remedies available to any
Agent or any Lenders under the Loan Documents, at law or in equity:
(a) PAYMENTS - (i) any Obligor shall fail to make any payment or
required prepayment of any installment of principal on the Loans payable
under this Agreement or the other Loan Documents when due or (ii) any
Obligor fails to make any payment or required prepayment of any
Reimbursement Obligation or any interest with respect to the Loans or any
other fee or amount under this Agreement or the other Loan Documents when
due and, in the case of CLAUSE (II) only, such failure to pay continues
unremedied for a period of five days; or
(b) OTHER OBLIGATIONS - any Obligor shall default in the payment
when due of any principal of or interest on any Borrowed Money
Indebtedness having an outstanding principal amount of at least $3,000,000
(other than the Loans and Reimbursement Obligations) and such default
shall continue beyond any applicable period of grace; or any event or
condition shall occur which results in the acceleration of the maturity of
any such Borrowed Money Indebtedness or enables (or, with the giving of
notice or lapse of time or both, would enable) the holder of any such
Borrowed Money 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
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(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 Agents 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, (ii) default shall be made in the due observance or
performance of any of the covenants or agreements contained in SECTIONS
7.2, 7.4, 7.7 or 7.8 hereof and, in each case, such default continues
unremedied for a period of 10 days after notice thereof is given by any
Agent to U.S. Borrower or to Canadian Borrower, or (iii) 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 20 days after notice
thereof is given by any Agent to U.S. Borrower or to Canadian Borrower; or
(e) NEGATIVE COVENANTS - default is made in the due observance or
performance by U.S. Borrower or Canadian 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,
receiver-manager, interim receiver, monitor, 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; or any Obligor is adjudicated bankrupt or insolvent; or any
of such Person's Property is sequestered by court order and such order
remains in effect for more than 60 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 60 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
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(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 insolvency (including any admission of its inability
to pay its debts generally as they become due), or consents to the
appointment of a receiver, receiver-manager, interim receiver, monitor,
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, $1,000,000
(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) GUARANTIES - any Guaranty for any reason ceases to be the valid
and binding obligation of the applicable Obligor, or any Obligor (or any
other Person who may have granted or purported to execute such Guaranty)
will so state in writing; PROVIDED, HOWEVER, that this CLAUSE (J) shall be
subject to the release rights set forth in the definition of "Material
Subsidiaries" in SECTION 1.1 hereof and to the exception set forth on the
last sentence of SECTION 6.3 hereof and provided further, however, that
Borrowers shall have a period of thirty (30) days after written notice of
U.S. Agent of a Default under this provision in order to cure the
applicable Default; or
(k) OWNERSHIP CHANGE OR ENCUMBRANCE - U.S. Borrower shall cease to
own, directly or indirectly, all of the issued and outstanding equity
interests in each Material Subsidiary or any Change of Control shall
occur.
9.2 RIGHT OF SETOFF9.2 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 U.S. Borrower, Canadian Borrower and the other Obligors), to
setoff and apply any and all deposits (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 U.S. Borrower, Canadian 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 U.S. Borrower, Canadian Borrower or any other Obligor against any and
all of the Obligations irrespective of whether or not such Lender or any Agent
will have made any demand under this
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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 U.S. Borrower or Canadian Borrower
or the applicable other Obligor, as the case may be, pro rata in accordance with
their U.S. Commitments or Canadian Commitments, as the case may be. Each Lender
agrees to promptly notify U.S. Borrower, Canadian Borrower and Agents 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 Agents and
the Lenders under this Section are in addition to other rights and remedies
(including without limitation other rights of setoff) which Agents or the
Lenders may have. This Section is subject to the terms and provisions of
SECTIONS 4.5 and 11.7 hereof. Any amounts realized under this Section which
constitute an asset of Canadian Borrower shall only be applied to the payment of
Canadian Obligations.
9.3 COLLATERAL ACCOUNT9.3 COLLATERAL ACCOUNT. U.S. 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
any Agent or by the Majority Lenders (through any Agent), pay to U.S. Agent an
amount in immediately available funds equal to the then aggregate amount
available for drawings under all outstanding U.S. Letters of Credit, which funds
shall be held by U.S. Agent as Cover. Canadian 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 any
Agent or by the Majority Lenders (through any Agent), pay to Canadian Agent an
amount in immediately available funds equal to the sum of the then aggregate
amount available for drawings under all outstanding Canadian Letters of Credit
plus the unpaid face amount of all outstanding Bankers' Acceptances, which funds
shall be held by Canadian Agent as Cover.
9.4 CURRENCY CONVERSION AFTER MATURITY9.4 CURRENCY CONVERSION AFTER
MATURITY. At any time following the occurrence of an Event of Default and the
acceleration of the maturity of the Obligations owed to the Canadian Lenders
hereunder, the Canadian Lenders shall be entitled to convert, with two (2)
Business Days' prior notice to Canadian Borrower, any and all or any part of the
then unpaid and outstanding LIBOR Borrowings and Base Rate Borrowings of the
Canadian Borrower to Canadian Prime Loans. Any such conversion shall be
calculated so that the resulting Canadian Prime Loans shall be the equivalent on
the date of conversion of the amount of Dollars so converted. Any accrued and
unpaid interest denominated in Dollars at the time of any such conversion shall
be similarly converted to Canadian Dollars, and such Canadian Prime Loans and
accrued and unpaid interest thereon shall thereafter bear interest in accordance
with the terms hereof.
9.5 REMEDIES CUMULATIVE9.5 REMEDIES CUMULATIVE. No remedy, right or power
conferred upon any 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.
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10. AGENTS10. AGENTS.
10.1 APPOINTMENT, POWERS AND IMMUNITIES10.1 APPOINTMENT, POWERS AND
IMMUNITIES. Each U.S. Lender hereby irrevocably appoints and authorizes U.S.
Agent to act as its agent hereunder, under the U.S. Letters of Credit and under
the other Loan Documents with such powers as are specifically delegated to U.S.
Agent by the terms hereof and thereof, together with such other powers as are
reasonably incidental thereto. Each Canadian Lender hereby irrevocably appoints
and authorizes Canadian Agent to act as its agent hereunder, under the Canadian
Letters of Credit and under the other Loan Documents with such powers as are
specifically delegated to Canadian Agent by the terms hereof and thereof,
together with such other powers as are reasonably incidental thereto. Any Loan
Documents executed in favor of any Agent shall be held by such Agent for the
ratable benefit of the applicable Lenders. None of the Agents ("Agents" as used
in this SECTION 10 shall include reference to their Affiliates and their own and
their Affiliates' respective officers, shareholders, directors, employees and
agents) (a) shall 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 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, or shall
have any duty to inquire into or pass upon any of the foregoing matters; (c)
shall 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 and adequately indemnified by the Majority
Lenders; (d) shall 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 be bound by or obliged to
recognize any agreement among or between any Borrower and any Lender to which
such Agent is not a party, regardless of whether such Agent has knowledge of the
existence of any such agreement or the terms and provisions thereof; (f) shall
be charged with notice or knowledge of any fact or information not herein set
out or provided to such Agent in accordance with the terms of this Agreement or
any other Loan Document; (g) shall be responsible for any delay, error, omission
or default of any mail, telegraph, cable or wireless agency or operator, or (h)
shall be responsible for the acts or edicts of any Governmental Authority. Any
Agent may employ agents and attorneys-in-fact and none of the Agents shall be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable
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care. Without in any way limiting any of the foregoing, each Lender acknowledges
that none of the Agents (nor any Issuer) shall have 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) or in the International Standby Practices 1998
(ISP98). 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, (i) U.S. Agent may (but shall
not be obligated to) submit a bid for all U.S. Lenders (including itself) in the
form of a credit against the U.S. Obligations, and U.S. Agent or its designee
may (but shall not be obligated to) accept title to such collateral for and on
behalf of all U.S. Lenders and (ii) Canadian Agent may (but shall not be
obligated to) submit a bid for all Canadian Lenders (including itself) in the
form of a credit against the Canadian Obligations, and Canadian Agent or its
designee may (but shall not be obligated to) accept title to such collateral for
and on behalf of all Canadian Lenders.
10.2 RELIANCE10.2 RELIANCE. Each Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telex, 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 any
Borrower), independent accountants and other experts selected by such Agent.
None of the Agents shall 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, each Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder and thereunder in accordance with instructions
of the Majority Lenders, and any action taken or failure to act by U.S. Agent
pursuant thereto shall be binding on all of the U.S. Lenders and any action
taken or failure to act by Canadian Agent pursuant thereto shall be binding on
all of the Canadian Lenders. If any order, writ, judgment or decree shall be
made or entered by any court affecting the rights, duties and obligations of any
Agent under this Agreement or any other Loan Document, then and in any of such
events such 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 such 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 DEFAULTS10.3 DEFAULTS. None of the Agents shall be deemed to have
knowledge of the occurrence of a Default (other than the non-payment of
principal of or interest on Loans or Reimbursement Obligations) unless such
Agent has received notice from a Lender or a Borrower specifying such Default
and stating that such notice is a "NOTICE OF DEFAULT." In the event that
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any Agent receives such a Notice of Default, such Agent shall give prompt notice
thereof to the Lenders (and shall give each Lender prompt notice of each such
non-payment). Each Agent shall (subject to SECTION 10.7 hereof) take such action
with respect to such Notice of Default as shall be directed by the Majority
Lenders and within its rights under the Loan Documents and at law or in equity,
PROVIDED that, unless and until an Agent shall have received such directions,
such Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, permitted hereby with respect to such Notice of Default as
it shall deem advisable in the best interests of the Lenders and within its
rights under the Loan Documents, at law or in equity.
10.4 MATERIAL WRITTEN NOTICES10.4 MATERIAL WRITTEN NOTICES. In the event
that any Agent receives any written notice of a material nature from any
Borrower or any Obligor under the Loan Documents, such Agent shall promptly
inform each of the Lenders thereof.
10.5 RIGHTS AS A LENDER10.5 RIGHTS AS A LENDER. With respect to its
Commitments and the Obligations, each of Chase Texas and Chase Canada, 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 each Agent in its individual capacity. Each
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 any Borrower (and any of their
Affiliates) as if it were not acting as an Agent, and each Agent may accept fees
and other consideration from any Borrower (in addition to the fees heretofore
agreed to between any Borrower and any Agent) for services in connection with
this Agreement or otherwise without having to account for the same to the
Lenders.
10.6 INDEMNIFICATION10.6 INDEMNIFICATION. The Canadian Lenders and the
U.S. Lenders, respectively, agree to indemnify Canadian Agent and U.S. Agent,
respectively (to the extent not reimbursed under SECTION 2.2(C), SECTION 11.3 or
SECTION 11.4 hereof, but without limiting the obligations of any Borrower under
said SECTIONS 2.2(C), 11.3 and 11.4), ratably in accordance with the sum of the
applicable Lenders' respective 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 the applicable 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 any 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.
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10.7 NON-RELIANCE ON AGENTS AND OTHER LENDERS10.7 NON-RELIANCE ON AGENTS
AND OTHER LENDERS. Each Lender agrees that it has received current financial
information with respect to each Borrower and each other Obligor and that it
has, independently and without reliance on any Agent or any other Lender and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of each Borrower and each other Obligor and decision to
enter into this Agreement and that it will, independently and without reliance
upon any 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. None of the Agents shall 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 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 an Agent
hereunder, under the Letters of Credit or the other Loan Documents, none of the
Agents shall 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 any Agent.
10.8 FAILURE TO ACT10.8 FAILURE TO ACT. Except for action expressly
required of an Agent hereunder, under the Letters of Credit or under the other
Loan Documents, each 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 AGENT10.9 RESIGNATION OR REMOVAL OF AGENT.
Subject to the appointment and acceptance of a successor U.S. Agent or Canadian
Agent, as the case may be, as provided below, U.S. Agent and Canadian Agent,
respectively, may resign at any time by giving notice thereof to the U.S.
Lenders and the Canadian Lenders, respectively, and to U.S. Borrower and
Canadian Borrower, respectively. Any Agent may be removed at any time with or
without cause by the Majority Lenders; PROVIDED, that such Agent shall continue
as U.S. Agent or Canadian Agent, as the case may be, until such time as any
successor shall have accepted appointment hereunder as U.S. Agent or Canadian
Agent, as the case may be. Upon any such resignation or removal, (i) the
Majority Lenders without the consent of Borrower shall have the right to appoint
a successor U.S. Agent or Canadian Agent, as the case may be, so long as such
successor U.S. Agent or Canadian Agent, as the case may be, is also a Lender at
the time of such appointment and (ii) the Majority Lenders shall have the right
to appoint a successor U.S. Agent or Canadian Agent, as the case may be, that is
not a Lender at the time of such appointment so long as Borrowers consent to
such appointment (which consent shall not be unreasonably withheld). If no
successor U.S. Agent or Canadian Agent, as the case may be, shall
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have been so appointed by the Majority Lenders and accepted such appointment
within 30 days after the retiring U.S. Agent's or Canadian Agent's, as the case
may be, giving of notice of resignation or the Majority Lenders' removal of the
retiring U.S. Agent or Canadian Agent, as the case may be, then the retiring
Agent may, on behalf of the applicable Lenders, appoint a successor U.S. Agent
or Canadian Agent, as the case may be, without the necessity of any consent on
the part of any Borrower or any Lender. Any successor U.S. 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 and any successor Canadian Agent shall be a bank which has
an office in Canada and a combined capital and surplus of at least
C$250,000,000. Upon the acceptance of any appointment as U.S. Agent or Canadian
Agent, as the case may be, 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 Borrowers
its Principal Office referred to in SECTION 3.1 and SECTION 4 hereof. After any
retiring Agent's resignation or removal hereunder as an 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 PARTNERSHIP10.10 NO PARTNERSHIP. Neither the execution and
delivery of this Agreement nor any of the other Loan Documents nor any interest
the Lenders, Agents 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
any Agent. The relationship between the Lenders, on the one hand, and any 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 be construed to
constitute any Agent as trustee or other fiduciary for any Lender or to impose
on any Agent any duty, responsibility or obligation other than those expressly
provided for herein and therein.
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11. MISCELLANEOUS11. MISCELLANEOUS.
11.1 WAIVER; CONFLICTS11.1 WAIVER; CONFLICTS. 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 any 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.
Borrowers acknowledge that each Agent and each Lender may provide debt
financing, equity capital or other services (including financial advisory
services) to other Persons in respect of which Borrowers may have conflicting
interests. Agents and Lenders agree that they will not use confidential
information obtained from Borrowers or any of their Subsidiaries by virtue of
the relationships under this Agreement and the other Loan Documents in
connection with the performance of services for such other Persons and Agents
and Lenders agree that they will not furnish any such confidential information
to such other Persons nor shall Lenders trade in any Borrower's stock on the
basis of such confidential, non-public information. Borrowers acknowledge that
no Agent and no Lender shall have any obligation to use, or to furnish to any
Borrower or any of their Subsidiaries, any confidential information obtained
from any other Person.
11.2 NOTICES11.2 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 telecopy (confirmed by
mail) or other writing and telecopied, 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 any Borrower, to
Agents, (ii) as to U.S. Agent, to U.S. Borrower and to each U.S. Lender, (iii)
as to Canadian Agent, to Canadian Borrower and to each Canadian Lender, (iv) as
to any U.S. Lender, to U.S. Borrower and Agents and (v) as to any Canadian
Lender, to Canadian Borrower and Agents. Except as otherwise provided in this
Agreement, all such notices or communications shall be deemed to have been duly
given when (a) received by telecopier, (b) personally delivered (c) one Business
Day after deposit with an overnight mail or delivery service, postage prepaid or
(d) three Business Days' after deposit in a receptacle maintained by the United
States Postal Service or Canada Post, as the case may be, postage prepaid,
registered or certified mail, return receipt requested, in each case given or
addressed as aforesaid.
11.3 EXPENSES, ETC.11.3 EXPENSES, ETC. Whether or not any Loan is ever
made or any Bankers' Acceptances ever accepted and purchased or any Letter of
Credit ever issued, Borrowers shall pay or reimburse within 10 days after
written demand (a) any Agent for paying the reasonable fees and expenses of
legal counsel to such Agent, together with the reasonable fees and expenses of
each local counsel to such Agent, in connection with the preparation,
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negotiation, execution and delivery of this Agreement (including the exhibits
and schedules hereto) and the other Loan Documents and the making of the Loans
and the acceptance and purchase of Bankers' Acceptances and the issuance of
Letters 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) any Agent for any reasonable Lien search fees, collateral audit
fees, appraisal fees, survey fees, environmental study fees, and title insurance
costs and premiums; (c) any Agent for reasonable out-of-pocket expenses incurred
in connection with the preparation, documentation, administration and
syndication of any of the Loan Documents (including, without limitation, the
advertising, marketing, printing, publicity, duplicating, mailing and similar
expenses) or any of the Obligations; (d) any Agent or any 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) any Agent for paying all reasonable costs, expenses,
taxes, assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated by
this Agreement or any document referred to herein, and (f) following the
occurrence and during the continuation of an Event of Default, any Lender or any
Agent for paying all amounts reasonably expended, advanced or incurred by such
Lender or such Agent to satisfy any obligation of any Obligor under this
Agreement or any other Loan Document, to protect collateral, to collect the
Obligations or to enforce, protect, preserve or defend the rights of the Lenders
or Agents under this Agreement or any other Loan Document, including, without
limitation, reasonable fees and expenses incurred in connection with such
Lender's or such 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
ss. 362 of the Bankruptcy Code and fees and expenses incurred in connection with
any action pursuant to ss. 1129 of the Bankruptcy Code and all other customary
out-of-pocket expenses incurred by such Lender or such Agent in connection with
such matters, together with interest thereon at the Past Due Rate applicable to
U.S. Loans on each such amount from the due date of payment until the date of
reimbursement to such Lender or such Agent.
11.4 INDEMNIFICATION11.4 INDEMNIFICATION. Borrowers, jointly and
severally, shall indemnify each Agent, each Lender 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 any Borrower of the proceeds of any extension of
credit (whether a Loan, a Bankers' Acceptance 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 Borrowers, jointly and severally, shall reimburse each Agent, each Lender,
and each Affiliate thereof and their respective directors, officers, employees
and agents, upon demand for any reasonable expenses (including reasonable legal
fees) incurred in
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connection with any such investigation or proceeding; PROVIDED, HOWEVER, that
none of the Borrowers shall 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
and all of Agents, Lenders and Issuers. Nothing in this Section is intended to
limit the obligations of any Borrower under any other provision of this
Agreement. Nothing in this Section shall render Canadian Borrower liable in
respect of the U.S. Obligations.
11.5 AMENDMENTS, ETC.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 any Borrower unless the same shall be agreed or consented to
in writing by the applicable Borrower. 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 Borrower therefrom, shall in any event be
effective against the Lenders unless the same shall be agreed or consented to in
writing by the 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 Commitment of any of the Lenders (or reinstate any
termination or reduction of the Commitments) or subject any of the Lenders to
any additional obligations; (b) reduce the principal of, or interest on, any
Loan, Reimbursement Obligation, fee or other amount due hereunder; (c) postpone
or extend the Maturity Date, the Termination Date, the 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 Commitments or of the aggregate unpaid principal amount
of Obligations, 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, or (f) release any Person from liability under a Guaranty. 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 U.S. Agent to the extent it affects U.S. Agent, as U.S. Agent or Canadian
Agent to the extent it affects Canadian Agent, as Canadian Agent.
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11.6 SUCCESSORS AND ASSIGNS11.6 SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the benefit of
Borrowers, Agents and the Lenders and their respective successors and assigns;
PROVIDED, HOWEVER, that no Borrower may 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
Bankers' Acceptance, or all or part of its Notes, Commitments or interests in
Letters of Credit or Bankers' Acceptances, 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, shall be determined as if such
Lender had not sold such participation. No Lender that sells one or more
participations to any Person shall be relieved by virtue of such participation
from any of its obligations to Borrowers under this Agreement. In the event any
Lender shall sell any participation, such Lender shall retain the sole right and
responsibility to enforce the obligations of Borrowers hereunder, 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 and (ii)
the amount of principal or the rate of interest payable on, or the dates fixed
for the scheduled repayment of principal of, any of the Obligations.
(b) Each U.S. Lender may assign to one or more U.S. 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 U.S.
Commitments of the assigning U.S. Lender subject to each such assignment shall
in no event be less than $5,000,000 unless such U.S. Lender is assigning all of
its U.S. Commitment and (ii) other than in the case of an assignment to another
U.S. Lender (that is, at the time of the assignment, a party hereto) or to an
Affiliate of such U.S. Lender or to a Federal Reserve Bank, Agents and, so long
as no Event of Default shall have occurred and be continuing, U.S. Borrower must
each give its prior written consent, which consents shall not be unreasonably
withheld. Each Canadian Lender may assign to one or more Canadian 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 Canadian
Commitments of the assigning Canadian Lender subject to each such assignment
shall in no event be less than $5,000,000 unless such Canadian Lender is
assigning all of its Canadian Commitment and (ii) other than in the case of an
assignment to another Canadian Lender (that is, at the time of the assignment, a
party hereto) or to an Affiliate of such Canadian Lender, Agents and, so long as
no Event of Default shall have occurred and be continuing, Canadian Borrower
must each give its prior written consent, which consents shall not be
unreasonably withheld. As a condition precedent to any such assignment, the
parties to each such assignment shall execute and deliver to the applicable
Agent, for its acceptance an Assignment and Acceptance in the form of EXHIBIT E
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 Borrowers
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
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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 its rights
under this Agreement and the other Loan Documents 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 assignor
and 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, the applicable 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) the applicable assignor makes no representation or warranty and
assumes no responsibility with respect to the financial condition of any
Borrower or the performance or observance by any Borrower of any of its
obligations under this Agreement or any of the other Loan Documents or any other
instrument or document furnished pursuant hereto; (iii) the applicable assignee
confirms that it has received a copy of this Agreement, together with copies of
the financial statements referred to in SECTION 6.2 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) the
applicable assignee will, independently and without reliance upon any Agent, the
applicable 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) the applicable assignee appoints and authorizes U.S.
Agent or Canadian Agent, as the case may be, 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 such Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vi) the applicable 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 each applicable Agent as to each
Assignment and Acceptance delivered to it and the names and addresses of the
Lenders and the Commitments of, and principal amount of the Obligations owing
to, each Lender from time to time shall be conclusive, in the absence of
manifest error, and Borrowers, Agents and the Lenders may treat each Person the
name of which is recorded in the books and records of the applicable Agent as a
Lender hereunder for all purposes of this Agreement and the other Loan
Documents.
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(e) Upon the applicable 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), such 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 the applicable
Borrower. Within five Business Days after receipt of notice, the applicable
Borrower, at its own expense, shall execute and deliver to the applicable Agent
new Notes payable to the order of such assignee in the appropriate amounts and,
if the assigning Lender has retained Commitments hereunder, new Notes to the
order of the assigning Lender in the appropriate amounts. Such new Notes shall
be dated the effective date of such Assignment and Acceptance and shall
otherwise be in the forms required hereunder.
(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 any Borrower furnished to such Lender by or on behalf of any
Borrower.
11.7 LIMITATION OF INTEREST11.7 LIMITATION OF INTEREST. Borrowers and the
Lenders intend to strictly comply with all applicable federal and Texas laws,
including applicable usury laws (or the usury laws of any jurisdiction,
including Canada, 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 Borrowers or any other Person be obligated
to pay, 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 applicable jurisdiction, or (b) total
interest in excess of the amount which such Lender 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
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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 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 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 Lender, it shall be credited PRO
TANTO against the then-outstanding principal balance of the applicable
Borrower's obligations to such Lender, 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 SURVIVAL11.8 SURVIVAL. The obligations of Borrowers under SECTIONS
2.2(C), 2.2(D), 7.9, 11.3 AND 11.4 hereof and all other obligations of Borrowers
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 SECTION 10.5 and 11.7 hereof, shall, notwithstanding
anything herein to the contrary, survive the repayment of the Loans and
Reimbursement Obligations and the termination of the Commitments and the Letters
of Credit.
11.9 CAPTIONS11.9 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 COUNTERPARTS11.10 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 VENUE; GOVERNING LAW11.11 VENUE; GOVERNING LAW. This Agreement and
(except as therein provided) the other Loan Documents are performable in Bexar
County, Texas, which shall be a proper place of venue for suit on or in respect
thereof. Each Borrower irrevocably agrees that any legal proceeding in respect
of this Agreement or the other Loan Documents shall be brought in the district
courts of Bexar County, Texas or the United States District Court for the
Western District of Texas, San Antonio Division (collectively, the "SPECIFIED
COURTS"). Each Borrower hereby irrevocably submits to the nonexclusive
jurisdiction of the state and federal courts of the State of Texas. Each
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 any Loan Document 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.
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Each Borrower further (1) agrees to designate and maintain an agent for service
of process in the State of Texas in connection with any such suit, action or
proceeding upon request by any Agent and to deliver to Agents evidence thereof
and (2) irrevocably consents to the service of process out of any of the
aforementioned courts in any such suit, action or proceeding by the mailing of
copies thereof by certified mail, return receipt requested, postage prepaid, to
such Borrower at its address as provided in this Agreement or as otherwise
provided by applicable law. Nothing herein shall affect the right of any Agent
or any Bank to commence legal proceedings or otherwise proceed against any
Borrower in any jurisdiction or to serve process in any manner permitted by
applicable law. Each Borrower agrees that a final judgment in any 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. 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; PROVIDED, HOWEVER, THAT,
EXCEPT AS MAY BE REQUIRED UNDER APPLICABLE LAWS, THE USURY LAWS OF THE STATE OF
TEXAS OR THE UNITED STATES OF AMERICA SHALL NOT APPLY TO ADVANCES MADE IN CANADA
BY CANADIAN LENDERS TO CANADIAN BORROWER, BUT RATHER THE USURY LAWS OF THE
PROVINCE OF ONTARIO AND THE FEDERAL LAWS OF CANADA APPLICABLE THEREIN SHALL
GOVERN IN SUCH CONTEXT.
11.12 SEVERABILITY11.12 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; NET PAYMENTS11.13 TAX FORMS; NET PAYMENTS.
(a) Each U.S. 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 U.S. Lender hereunder and from time to time thereafter if requested by U.S.
Borrower or U.S. Agent, provide U.S. Agent and U.S. Borrower with the forms
prescribed by the Internal Revenue Service of the United States certifying as to
such U.S. Lender's status for purposes of determining exemption from United
States withholding taxes with respect to all payments to be made to such U.S.
Lender hereunder or other documents satisfactory to such U.S. Lender, U.S.
Borrower and U.S. Agent indicating that all payments to be made to such U.S.
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. Unless U.S. Borrower
and U.S. Agent shall have received such forms or such documents indicating that
payments to such U.S. 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, U.S. Borrower and U.S. Agent shall be entitled to withhold taxes
from such payments at the applicable statutory rate.
83
<PAGE>
(b) Except as provided in SECTION 11.13(A), (i) all payments (whether of
principal, interest, fees, reimbursements or otherwise) by Borrowers under this
Agreement and the other Loan Documents shall be made without set-off or
counterclaim and shall be made free and clear of and without deduction for any
present or future tax, levy, impost or any other charge, if any, of any nature
whatsoever now or hereafter imposed by any taxing authority and (ii) if the
making of such payments by any Borrower is prohibited by law unless such a tax,
levy, impost or other charge is deducted or withheld therefrom, the applicable
Borrower shall pay to the relevant Agent, on the date of each such payment, such
additional amounts (without duplication of any amounts required to be paid by
the applicable Borrower hereunder) as may be necessary in order that net amounts
received by the Lenders after such deduction or withholding shall equal the
amounts which would have been received if such deduction or withholding were not
required. The applicable Borrower shall confirm that all applicable taxes, if
any, imposed on this Agreement or transactions hereunder shall have been
properly and legally paid by it to the appropriate taxing authorities by sending
official tax receipts or notarized copies of such receipts to the relevant Agent
within 30 days after payment of any applicable tax. Notwithstanding the
foregoing, in no event shall the compensation payable under this Section (to the
extent, if any, constituting interest under applicable laws) together with all
amounts constituting interest under applicable laws and payable in connection
with this Agreement and the other Loan Documents exceed the Ceiling Rate.
(c) Each Canadian Lender is a resident of Canada for purposes of the
Income Tax Act (Canada).
11.14 INTEREST ACT (CANADA)11.14 INTEREST ACT (CANADA). Whenever interest
is calculated on the basis of a year of 360 or 365 days, for the purposes of the
Interest Act (Canada), the yearly rate of interest which is equivalent to the
rate payable hereunder is the rate payable multiplied by the actual number of
days in the year and divided by 360 or 365, as the case may be. All interest
will be calculated using the nominal rate method and not the effective rate
method and the deemed reinvestment principle shall not apply to such
calculations.
11.15 JUDGMENT CURRENCY11.15 JUDGMENT CURRENCY. The obligation of each
Borrower to make payments on any Obligation to the Lenders or to any Agent
hereunder in any currency (the "FIRST CURRENCY") shall not be discharged or
satisfied by any tender or recovery pursuant to any judgment expressed in or
converted into any other currency (the "SECOND CURRENCY") except to the extent
to which such tender or recovery shall result in the effective receipt by the
applicable Lender or the applicable Agent of the full amount of the first
currency payable, and accordingly the primary obligation of each Borrower shall
be enforceable as an alternative or additional cause of action for the purpose
of recovery in the second currency of the amount (if any) by which such
effective receipt shall fall short of the full amount of the full currency
payable and shall not be affected by a judgment being obtained for any other sum
due hereunder.
84
<PAGE>
11.16 CONFLICTS BETWEEN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS11.16
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.
11.17 LIMITATION ON CHARGES; SUBSTITUTE LENDERS; NON-DISCRIMINATION.17
LIMITATION ON CHARGES; SUBSTITUTE LENDERS; NON-DISCRIMINATION. Anything in
SECTIONS 3.3(C) or 7.9 notwithstanding:
(1) No Borrower shall be required to pay to any Lender reimbursement
with regard to any costs or expenses described in such Sections, unless
such Lender notifies the applicable Borrower of such costs or expenses
within 90 days after the date paid or incurred;
(2) none of the Lenders shall be permitted to pass through to any
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 any Borrower any
material charge or cost under such Sections or elects to terminate the
availability of LIBOR Borrowings for any material period of time, the
applicable 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 such Borrower shall (i) if Agents 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 Agents (such approval not to be unreasonably withheld) 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, the applicable Borrower shall have
given written notice to Agents 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.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
85
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.
RAILTEX, INC.,
a Texas corporation,
as U.S. Borrower
By: ______________________________
Name: ____________________________
Title: ___________________________
RAILTEX CANADA, INC.,
an Ontario corporation,
as Canadian Borrower
By: ______________________________
Name: ____________________________
Title: ___________________________
Address for Notices:
RailTex, Inc.
4040 Broadway, Suite 200
San Antonio, Texas 78209
Attention: Mr. Joseph Jahnke
Telecopy No.:210-841-7604
86
<PAGE>
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as U.S. Agent and as a U.S.
Lender
By: ______________________________
Name: ____________________________
Title: ___________________________
Address for Notices:
U.S. Commitment: 1020 NE Loop 410, First Floor
San Antonio, Texas 78209
$20,000,000 Attention: Ms. Lori Vetters,
President-San Antonio
Region
Telecopy No.: 210-829-6109
Canadian Commitment:
with a copy to:
$0
Mr. Muniram Appanna
Agency Services
One Chase Manhattan Plaza
8th Floor
New York, New York 10081
Telecopy No.: 212-552-7490
87
<PAGE>
THE CHASE MANHATTAN BANK OF CANADA,
as Canadian Agent and as a Canadian Lender
By: ________________________________
Name: ______________________________
Title: _____________________________
Address for Notices:
U.S. Commitment: First Canadian Place
100 King Street West, Suite 6900
$0 Toronto, Ontario M5X 1A4
Attention: Ms. Christine Chan
Telecopy No.: (416) 216-4161
Canadian Commitment:
$5,000,000
88
<PAGE>
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION, as Syndication Agent and as a U.S.
Lender
By: ________________________________
Name: ______________________________
Title: _____________________________
Address for Notices:
U.S. Commitment: 700 N St. Mary's Street, Ste. 300
San Antonio, TX 78205
$25,000,000 Attention: Mr. Ron Mercer
Telecopy No.: 210-554-0734
Canadian Commitment:
$0
89
<PAGE>
NATIONAL BANK OF CANADA,
as Managing Agent and as a U.S. Lender
By: _______________________________
Name: _____________________________
Title: ____________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
Address for Notices:
U.S. Commitment: 2121 San Jacinto, Suite 1850
Dallas, TX 75201
$12,500,000 Attention: Mr. Doug Clark
Telecopy No.: 214-871-2015
Canadian Commitment:
$0
90
<PAGE>
NATIONAL BANK OF CANADA,
as a Canadian Lender
By: ____________________________
Name: __________________________
Title: _________________________
By: ____________________________
Name: __________________________
Title: _________________________
Address for Notices:
U.S. Commitment: 150 York Street
Toronto, CN M5H 3S5
$0 Attention: Ms. Karen Koury
Telecopy No.: 416-864-7682
Canadian Commitment:
$9,000,000
91
<PAGE>
ABN AMRO BANK N.V., as Documentation Agent
and as a U.S. Lender
By: ________________________________
Name: ______________________________
Title: _____________________________
By: ________________________________
Name: ______________________________
Title: _____________________________
Address for Notices:
U.S. Commitment: 3 Riverway, Suite 1700
Houston, TX 77056
$22,500,000 Attention: Ms. Laurie Tuzo
Telecopy No.: 713-961-1699
Canadian Commitment:
$0
92
<PAGE>
NATIONAL CITY BANK OF KENTUCKY
By: ________________________________
Name: ______________________________
Title: _____________________________
Address for Notices:
U.S. Commitment: 101 South Fifth St., 31-T-08 J
Louisville, KY 40202
$13,000,000 Attention: Mr. Don Pullen
Telecopy No.: 502-581-5122
Canadian Commitment:
$0
93
<PAGE>
BANK ONE TEXAS, N.A.
By: _______________________________
Name: _____________________________
Title: ____________________________
Address for Notices:
U.S. Commitment: 105 S. St. Marys Street, 2nd Floor
San Antonio, Texas 78205
$12,500,000 Attention: Mr. Charles T. Bridgman
Telecopy No.: 210-271-6588
Canadian Commitment:
$0
94
<PAGE>
GUARANTY FEDERAL BANK, F.S.B.
By: ________________________________
Name: ______________________________
Title: _____________________________
Address for Notices:
U.S. Commitment: 1100 N.E. Loop 410
San Antonio, TX 78209
$12,500,000 Attention: Mr. Jim Hamilton
Telecopy No.: 210-930-1783
Canadian Commitment:
$0
95
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By: _________________________________
Name: _______________________________
Title: ______________________________
Address for Notices:
U.S. Commitment: 1600 Market Street, 21st Floor
Philadelphia, PA 19103
$12,500,000 Attention: Mr. Daniel Fitzpatrick
Telecopy No.: 215-585-5972
Canadian Commitment:
$0
96
<PAGE>
THE BANK OF NOVA SCOTIA,
as a U.S. Lender
By: ____________________________
Name: __________________________
Title: _________________________
Address for Notices:
U.S. Commitment: 1100 Louisiana - Suite 3000
Houston, TX 77002
$9,500,000 Attention: Mr. Greg George
Telecopy No.: 713-752-2425
Canadian Commitment:
$0
97
<PAGE>
THE BANK OF NOVA SCOTIA,
as a Canadian Lender
By: ______________________________
Name: ____________________________
Title: ___________________________
Address for Notices:
U.S. Commitment: 44 King Street West
Toronto, Ontario M5H 1H1
$0 CANADA
Attention: Ms. Judy McKay
Telecopy No.: 416-866-2009
Canadian Commitment:
$6,000,000
98
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By: ______________________________
Name: ____________________________
Title: ___________________________
Address for Notices:
U.S. Commitment: 2200 Ross Avenue - Suite 4400 W.
Dallas, TX 75201
$15,000,000 Attention: Mr. Brian Brown
Telecopy No.: 214-220-2323
Canadian Commitment:
$0
99
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1999
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,234
<SECURITIES> 0
<RECEIVABLES> 35,619
<ALLOWANCES> 732
<INVENTORY> 0
<CURRENT-ASSETS> 42,125
<PP&E> 350,733
<DEPRECIATION> 58,408
<TOTAL-ASSETS> 368,372
<CURRENT-LIABILITIES> 51,515
<BONDS> 131,450
0
0
<COMMON> 929
<OTHER-SE> 146,835
<TOTAL-LIABILITY-AND-EQUITY> 368,372
<SALES> 0
<TOTAL-REVENUES> 45,405
<CGS> 0
<TOTAL-COSTS> 37,639
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,673
<INCOME-PRETAX> 5,726
<INCOME-TAX> 2,347
<INCOME-CONTINUING> 3,379
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,379
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
