SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) JUNE 30, 1998
INDUSTRIAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
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TEXAS 1-9580 76-0289495
(State of other jurisdiction (Commission File Number) (IRS Employer Identification No.)
of incorporation)
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7135 ARDMORE HOUSTON, TEXAS 77054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 747-1025
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) Acquisition of Beaird Industries, Inc.
Effective the close of business on June 30, 1998, Industrial
Holdings, Inc. (the "Company") acquired all of the outstanding Common Stock of
Beaird Industries, Inc. ("Beaird") from its sole shareholder, Trinity
Industries, Inc. ("Trinity") for $28 million cash (subject to certain post
closing purchase price adjustments) a $5 million convertible promissory note
payable to Trinity and an earnout of up to $4 million. Beaird, located in
Shreveport, Louisiana, manufactures large and heavy pressure vessels and storage
tanks for the hydrocarbon/petrochemical processing industry, digesters and
associated vessels for the pulp and paper industry, as well as evaporators, heat
recovery and emission control products and a variety of silencers. The purchase
price was determined through arm's length negotiations between the Company and
Trinity which had no pre-existing relationship with the Company or any of its
affiliates, directors, officers or associates. The cash portion purchase price
was financed as described below.
(b) Comerica Bank-Texas ("Comerica") Credit Agreement
In connection with the transaction, the Company increased its credit
agreement (the "Facility") with Comerica from $23 million to $35 million. The
Facility allows the Company to borrow funds based on 80% of eligible accounts
receivable and 50% of eligible inventory. The Facility extends through June 2000
and bears interest at either the prime rate or libor + 2 1/2%. $1 million of the
Facility was used to fund the acquisition of Beaird.
(c) Comerica Leasing Corporation ("Comerica Leasing") Lease Agreement
In connection with the transaction, the Company entered into a $12
million equipment lease facility (the "Lease Agreement") with Comerica Leasing.
The facility bears interest at libor + 2 3/4% and is payable in 60 monthly
installments of $142,857 plus interest, followed by a final principal
installment of $3,571,429 plus interest.
(e) EnSerCo, L.L.C. ("EnSerCo") Promissory Note
In connection with the transaction, the Company entered into a $15
million promissory note with EnSerCo. The promissory note bears interest at the
prime or libor rate plus 5% and matures December 31, 1999.
ITEM 7.FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements for Acquired Companies
At this time, it is impracticable to provide the required financial
statements for Beaird. Therefore, the required financial statements
will be filed as soon as they are
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available and in any event within seventy-five days after the
consummation of the acquisition.
(b) Pro Forma Financial Information
At this time, it is impracticable to provide the required pro forma
financial information for Beaird. Therefore, the required pro forma
financial information will be filed as soon as they are available
and in any event within seventy-five days after the consummation of
the acquisition.
(c) Exhibits
Exhibit No.
2 Stock Purchase Agreement by and between Industrial Holdings,
Inc. and Trinity Industries, Inc.
10.1 Comerica Bank-Texas Credit Agreement
10.2 Comerica Leasing Corporation Lease Agreement
10.3 EnSerCo Loan, L.L.C. Promissory Note
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned hereunto duly authorized.
INDUSTRIAL HOLDINGS, INC.
By: /s/CHRISTINE A. SMITH
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Date: July 14, 1998
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EXHIBIT INDEX
Exhibit No.
2 Stock Purchase Agreement by and between Industrial Holdings,
Inc. and Trinity Industries, Inc.
10.1 Comerica Bank-Texas Credit Agreement
10.2 Comerica Leasing Corporation Lease Agreement
10.3 EnSerCo Loan, L.L.C. Promissory Note
EXHIBIT 2
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
INDUSTRIAL HOLDINGS, INC.
AND
TRINITY INDUSTRIES, INC.
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TABLE OF CONTENTS
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PAGE
ARTICLE I
PURCHASE AND SALE....................................................................1
1.1 PURCHASE OF STOCK..........................................................1
1.2 POST-CLOSING ADJUSTMENT....................................................3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER ............................................5
2.1 ORGANIZATION AND AUTHORIZATION OF SELLER...................................5
2.2 EXISTENCE AND GOOD STANDING OF THE COMPANY.................................5
2.3 CAPITAL STOCK OF THE COMPANY...............................................6
2.4 INITIAL FINANCIAL STATEMENTS; ACCOUNTING AND OTHER SYSTEMS; DISCLOSURE.....7
2.5 TAXES......................................................................9
2.6 ASSETS AND PROPERTIES.....................................................11
2.7 ENVIRONMENTAL LAWS AND REGULATIONS........................................13
2.8 MATERIAL CONTRACTS........................................................14
2.9 NO VIOLATIONS.............................................................16
2.10 CONSENTS..................................................................17
2.11 LITIGATION AND RELATED MATTERS............................................17
2.12 COMPLIANCE WITH LAWS......................................................18
2.13 INTELLECTUAL PROPERTY.....................................................19
2.14 EMPLOYEE BENEFIT PLANS....................................................20
2.15 EMPLOYEES; EMPLOYEE RELATIONS.............................................24
2.16 INSURANCE.................................................................25
2.17 ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE..................................25
2.18 INVENTORIES...............................................................26
2.19 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC....................................26
2.20 OFFICERS, DIRECTORS AND EMPLOYEES.........................................26
2.21 BANK ACCOUNTS AND POWERS OF ATTORNEY......................................27
2.22 AVAILABILITY OF DOCUMENTS.................................................27
2.23 BROKERAGE, FINANCIAL ADVISOR OR FINDER FEES...............................27
2.24 ABSENCE OF CERTAIN CHANGES OR EVENTS......................................28
2.25 LIABILITIES AND OBLIGATIONS...............................................28
2.26 RELATIONS WITH GOVERNMENTS, ETC...........................................29
2.27 RELATED PARTY AGREEMENTS..................................................29
2.28 ACKNOWLEDGMENT REGARDING CERTAIN OPERATIONS...............................30
2.29 ABSENCE OF CLAIMS.........................................................30
2.30 ACQUISITION OF NOTE FOR INVESTMENT........................................30
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER.............................................31
3.1 ORGANIZATION AND AUTHORIZATION OF BUYER...................................31
3.2 NO VIOLATIONS.............................................................31
3.3 CONSENTS..................................................................31
3.4 ACQUISITION OF SHARES FOR INVESTMENT......................................32
3.5 FINANCING COMMITMENT......................................................32
3.6 LITIGATION................................................................32
3.7 BROKERAGE, FINANCIAL ADVISOR OR FINDER FEES...............................32
3.8 DUE DILIGENCE.............................................................33
3.9 TERMINATION OF INSURANCE..................................................33
ARTICLE IV
COVENANTS OF SELLER.................................................................33
4.1 COURSE OF CONDUCT BY THE COMPANY..........................................33
4.2 APPROVALS AND CONSENTS....................................................35
4.3 [INTENTIONALLY OMITTED]...................................................35
4.4 SETTLEMENT OF ACCOUNTS; PAYMENT OF PRE-CLOSING PAYABLES; TERMINATION OF
CERTAIN GUARANTIES........................................................36
4.5 INVESTIGATIONS............................................................36
4.6 ENVIRONMENTAL INSPECTION..................................................37
4.7 TAX MATTERS...............................................................40
4.8 TRINITY PLANS.............................................................40
ARTICLE V
COVENANTS OF BUYER..................................................................41
5.1 RETENTION OF RECORDS......................................................41
5.2 APPROVALS AND CONSENTS....................................................41
5.3 MATTERS PERTAINING TO EMPLOYMENT..........................................41
5.4 COURSE OF CONDUCT BY THE COMPANY..........................................42
5.5 OFCCP AUDIT...............................................................43
5.6 GUARANTIES AND BONDS......................................................43
ARTICLE VI
CLOSING.............................................................................43
6.1 CLOSING...................................................................43
6.2 CONDITIONS TO CLOSING.....................................................44
ARTICLE VII
TERMINATION PRIOR TO CLOSING........................................................48
7.1 TERMINATION...............................................................48
7.2 NOTIFICATION OF CERTAIN MATTERS...........................................50
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ARTICLE VIII
INDEMNIFICATION AND POST-CLOSING COVENANTS..........................................50
8.1 BUYER'S LOSSES............................................................50
8.2 ENVIRONMENTAL INDEMNITY...................................................51
8.3 SELLER'S LOSSES...........................................................53
8.4 NOTICE OF LOSS............................................................54
8.5 RIGHT TO DEFEND...........................................................54
8.6 COOPERATION...............................................................57
8.7 LIMITATION ON INDEMNIFICATION.............................................58
8.8 EXCLUSIVE REMEDIES........................................................59
8.9 IDENTIFIED REMEDIATION COVENANT...........................................59
8.10 CLEANUP STANDARDS.........................................................60
8.11 PERFORMANCE OF IDENTIFIED REMEDIATION.....................................60
8.12 ASHLAND LITIGATION........................................................61
8.13 RECEIVABLES...............................................................62
8.14 LIMITATION AS TO INDEMNIFIED PARTIES' OWN NEGLIGENCE......................63
8.15 PENSION PLANS.............................................................63
ARTICLE IX
TAX MATTERS.........................................................................64
9.1 SECTION 338(H)(10) ELECTION...............................................64
9.2 LIABILITY FOR TAXES AND RELATED MATTERS...................................64
9.3 ASSISTANCE AND COOPERATION................................................66
9.4 PAYMENT...................................................................67
9.5 SURVIVAL OF OBLIGATIONS...................................................67
ARTICLE X
MISCELLANEOUS.......................................................................68
10.1 ENTIRE AGREEMENT..........................................................68
10.2 SUCCESSORS AND ASSIGNS....................................................68
10.3 COUNTERPARTS..............................................................68
10.4 HEADINGS..................................................................69
10.5 CONSTRUCTION..............................................................69
10.6 MODIFICATION AND WAIVER...................................................69
10.7 SCHEDULES, ETC............................................................69
10.8 NOTICES...................................................................69
10.9 GOVERNING LAW.............................................................71
10.10 SURVIVAL OF COVENANTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES.........71
10.11 INVALID PROVISIONS........................................................72
10.12 EXPENSES..................................................................72
10.13 THIRD PARTY BENEFICIARIES.................................................72
10.14 NUMBER AND GENDER OF WORDS................................................72
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10.15 FURTHER ASSURANCES........................................................73
10.16 PUBLICITY.................................................................73
10.17 CONFIDENTIALITY AGREEMENT.................................................73
10.18 MEANING OF "TO THE KNOWLEDGE OF SELLER"...................................73
10.19 RELEASE...................................................................73
10.20 ACCESS TO RECORDS.........................................................75
10.21 HART-SCOTT-RODINO ACT.....................................................76
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Exhibit A Definitions
Exhibit B Convertible Promissory Note and Registration Rights Agreement
Exhibit C Non-Competition Agreement
Exhibit D Brighton Manufacturing Agreement
Exhibit E Head Manufacturing Agreement
Exhibit F Transition Agreement
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into as of the 20th day of May, 1998 by and between Industrial Holdings, Inc., a
Texas corporation ("BUYER"), and Trinity Industries, Inc., a Delaware
corporation ("SELLER").
W I T N E S S E T H:
WHEREAS, Seller owns all of the issued and outstanding shares of capital
stock of Beaird Industries, Inc., a Delaware corporation (the "COMPANY"); and
WHEREAS, Seller desires to sell and convey to Buyer, and Buyer desires
to purchase from Seller, all of the outstanding capital stock of the Company.
NOW, THEREFORE, for and in consideration of the premises and of the
mutual representations, warranties, covenants and agreements contained herein,
and of other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and upon the terms and subject to the conditions
hereinafter set forth, the parties do hereby agree as follows (capitalized terms
used herein and not otherwise defined herein shall have the meanings set forth
in EXHIBIT A hereto):
ARTICLE I
PURCHASE AND SALE
1.1 PURCHASE OF STOCK.
(a) Subject to the terms and conditions hereof, on the Closing
Date (as defined below), Buyer agrees to purchase from Seller, and Seller agrees
to sell to Buyer, all of the issued and outstanding shares of common stock,
$1.00 par value, of the Company (the "SHARES").
(b) The aggregate purchase price for the Shares shall be the
sum of subparagraphs (i), (ii), (iii) and (iv) below (the "PURCHASE PRICE"),
subject to adjustment pursuant to Section 1.2 below. The Purchase Price shall be
payable at the Closing, or as provided below, and shall consist of:
(i) $28,000,000.00 (the "CASH AMOUNT") in cash. The Cash
Amount shall be paid to the Seller at the Closing in immediately
available funds by confirmed wire transfer to a
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bank account to be designated by the Seller (such designation to occur
no later than the second Business Day prior to the Closing Date).
(ii) The convertible promissory note of the Buyer in the
amount of $5,000,000 and Registration Rights Agreement substantially in
the form of EXHIBIT B attached hereto(collectively, the "NOTE").
(iii) The conveyance on or before Closing to Seller of
$7,000,000 of the Company's accounts receivable, such accounts
receivable to be regular trade accounts anticipated to be collected
within their terms on a thirty (30) day basis but not to include any
contract retainage of long term contracts, such accounts receivable and
any other accounts receivable of the Company to be collected by Seller
with any proceeds over and above the $7,000,000 to be paid to the
Company upon collection; provided however, that if the Seller does not
receive cash payments from all accounts receivable of the Company of at
least $7,000,000 within thirty (30) days of the Closing, the Buyer shall
pay any such shortfall to Seller in cash and Seller shall convey to the
Company any then unpaid accounts receivable.
(iv) An amount equal to the product of $4,000,000 multiplied
by the quotient of (x) the amount by which EBITDA of the Company for the
Earn Out Period exceeds $3,000,000 up to and including $6,500,000 as the
numerator divided by (y) $3,500,000, such amount to be calculated by the
Buyer and to be paid to the Seller on the thirtieth (30th) day following
the end of the Earn Out Period. If Seller objects to the calculation of
the Earn Out, it shall notify Buyer within twenty (20) days following
receipt thereof, setting forth in specific detail the basis for its
objection and its proposal for any adjustments to the Earn Out. Buyer
and Seller shall undertake in good faith to reach agreement as to any
such proposed adjustment or that no such adjustment is necessary. If
agreement is reached as to all proposed further adjustments, the parties
shall make such adjustments and the Earn Out shall be based thereon. If
Buyer and Seller are unable to reach agreement within thirty (30) days,
then such "Big 6" accounting firm as agreed upon by Buyer and Seller
(the "THIRD PARTY ACCOUNTING FIRM") shall be engaged to review the
proposed adjustments as to which agreement has not been reached and
shall make a determination as to the resolution of the proposed
adjustments to cause the Earn Out to have been properly calculated in
accordance with the provisions of this Agreement. All such resolutions
shall relate only to such matters as are still in dispute and were
properly included in the notice of Seller's objection and represent
either agreement with the position taken by Seller or by Buyer or a
compromise between such positions. The determination of the Third Party
Accounting Firm shall be final, conclusive and binding upon Buyer and
Seller. Thereafter, not later than ten (10) days following a
determination of adjustments by the Third Party Accounting Firm, Buyer
shall pay to Seller an amount in cash equal to the additional Earn Out,
if any, as determined by the Third Party Accounting Firm. Buyer and
Seller shall share equally the costs of the Third Party Accounting Firm
under this Section 1.1(b)(iv).
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1.2 POST-CLOSING ADJUSTMENT.
(a) Subsequent to the Closing (as defined below), Seller shall
prepare a balance sheet of the Company at the close of business on the Closing
Date (the "CLOSING BALANCE SHEET"). The Closing Balance Sheet shall be prepared
in accordance with generally accepted accounting principles ("GAAP") used by the
Company for financial reporting to Seller consistently applied. Based on the
Closing Balance Sheet, Seller shall calculate (i) the total value of the
accounts receivable, cost and related earnings in excess of billings and
inventory (which shall not be written down below net realizable value) of the
Company as of the Closing Date (the "CLOSING VALUE"), which for purposes hereof
shall exclude any cash and intercompany accounts and (ii) the post- Closing
adjustment, which shall be the difference between the Closing Value and the
Adjustment Amount (the "POST-CLOSING ADJUSTMENT"). Upon completion of the same,
but not later than thirty (30) days after the Closing Date, Seller shall deliver
a copy of the Closing Balance Sheet and the calculations of the Closing Value
and the Post-Closing Adjustment to Buyer.
(b) If the Closing Value exceeds the Adjustment Amount, Buyer
shall owe the Post-Closing Adjustment to Seller. If the Closing Value is less
than the Adjustment Amount, the $4,000,000 amount set forth in Section
1.1(b)(iv) above shall be reduced by the Post-Closing Adjustment and, to the
extent the Post-Closing Adjustment exceeds $4,000,000, the balance shall be
treated as a payment of principal on the Note. If Buyer does not object to the
amount of the Post-Closing Adjustment within twenty (20) days of receipt
thereof, (i) Buyer shall pay to Seller, no later than the second Business Day
after the twentieth day following receipt of the Post-Closing Adjustment, an
amount in cash equal to the Post-Closing Adjustment owed by Buyer to Seller or
(ii) the $4,000,000 amount set forth in Section 1.1(b)(iv) above shall be
reduced by the Post-Closing Adjustment.
(c) If Buyer objects to the Post-Closing Adjustment, it shall
notify Seller within twenty (20) days following receipt thereof, setting forth
in specific detail the basis for its objection and its proposal for any
adjustments to the Post-Closing Adjustment. Buyer and Seller shall undertake in
good faith to reach agreement as to any such proposed adjustment or that no such
adjustment is necessary. If agreement is reached as to all proposed further
adjustments, the parties shall make such adjustments and the Post-Closing
Adjustment shall be based thereon. If Buyer and Seller are unable to reach
agreement within thirty (30) days, then a Third Party Accounting Firm shall be
engaged to review the proposed adjustments as to which agreement has not been
reached and shall make a determination as to the resolution of the proposed
adjustments to cause the Post-Closing Adjustment to have been properly prepared
in accordance with the provisions of this Agreement. All such resolutions shall
relate only to such matters as are still in dispute and were properly included
in the notice of Buyer's objection and represent either agreement with the
position taken by Seller or by Buyer or a compromise between such positions. The
determination of the Third Party Accounting Firm shall be final, conclusive and
binding upon Buyer and Seller. Thereafter, not later than ten (10) days
following a determination of adjustments by the Third Party Accounting Firm,
either Buyer shall pay to Seller an amount in cash equal to the Post-Closing
Adjustment, as determined by the Third Party Accounting Firm, or the $4,000,000
amount set forth
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in Section 1.1(b)(iv) above shall be reduced by the Post-Closing Adjustment, as
determined by the Third Party Accounting Firm. Buyer and Seller shall share
equally the costs of the Third Party Accounting Firm under this Section 1.2(c).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
2.1 ORGANIZATION AND AUTHORIZATION OF SELLER. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware with all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Seller has all requisite corporate power, capacity and authority to execute and
deliver this Agreement, the Transaction Documents and all other agreements and
documents contemplated hereby. The execution and delivery by Seller of this
Agreement, the Transaction Documents and such other agreements and documents and
the consummation by Seller of the transactions contemplated hereby and thereby
have been duly authorized by Seller and no other corporate action on the part of
Seller is necessary to authorize the transactions contemplated hereby and
thereby. This Agreement has been (and upon execution and delivery, the other
Transaction Documents will be) duly executed and delivered by Seller and each
constitutes the valid and binding obligation of Seller, enforceable in
accordance with their respective terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by principles of equity regarding the availability of
remedies.
2.2 EXISTENCE AND GOOD STANDING OF THE COMPANY.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware with all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted.
(b) The Company does not have any Subsidiaries. Except as set
forth in SCHEDULE 2.2, the Company does not own, of record or beneficially,
directly or indirectly through any Person, and does not control, directly or
indirectly through any Person or otherwise, any Capital Stock or any option,
warrant or right to acquire Capital Stock of any Entity.
(c) The Company is duly qualified or licensed as a foreign
corporation and in good standing in each jurisdiction in which the character or
location of the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary. Set forth on
SCHEDULE 2.2 is a list of all of the jurisdictions in which the Company is
qualified or licensed to do business as a foreign corporation.
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(d) SCHEDULE 2.2 lists all the legal and assumed names of all
predecessor companies for the past five (5) years of the Company. Except as
disclosed in SCHEDULE 2.2, during the past five (5) years the Company has not
been a Subsidiary or division of another corporation or a part of an acquisition
that later was rescinded.
2.3 CAPITAL STOCK OF THE COMPANY.
(a) The Company's authorized capital stock consists of 1,000
shares of common stock, $1.00 par value, of which all 1,000 shares are issued,
outstanding and owned of record and beneficially by Seller. All of the Shares
have been duly authorized and validly issued and are fully paid and
nonassessable and no holder thereof is entitled to any preemptive or other right
of any kind (including any right of first offer or refusal) to acquire any
Shares. There are no outstanding conversion or exchange rights, subscriptions,
options, warrants or other arrangements or commitments obligating the Company to
issue any Shares or other securities. No outstanding options, warrants or rights
to acquire any shares exist. Seller has good title to the Shares, free and clear
of any and all Liens, and has the right to vote the Shares on any matters as to
which any shares of the Company common stock are entitled to be voted under the
laws of the State of Delaware and the Company's certificate of incorporation and
bylaws, free of any right of any other Person. The Company has not issued or
sold any of its outstanding Shares in breach or violation of (a) any applicable
statutory or contractual preemptive rights, or any other rights of any kind
(including any rights of first offer or refusal), of any Person, which rights
have not been irrevocably waived in writing, or (b) the terms of any options,
warrants or rights to acquire Shares which then were outstanding. No Person has,
otherwise than solely by reason of that Person's right, if any, to vote the
Shares it holds, any right to vote on any matter with the holders of the Shares.
(b) (i) The Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire or reacquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof; and (ii) no transaction has been effected and
no action in contemplation of the transactions described in this Agreement has
been taken, respecting the equity ownership of the Company.
2.4 INITIAL FINANCIAL STATEMENTS; ACCOUNTING AND OTHER SYSTEMS;
DISCLOSURE.
(a) SCHEDULE 2.4(A) contains a copy of the unaudited balance
sheet of the Company as of December 31, 1997 and the related statements of
income and stockholder's equity and cash flow statements for such period (the
"INITIAL FINANCIAL STATEMENTS"). The Initial Financial Statements fairly present
the financial position of the Company and the results of operations as of the
indicated date and for the indicated period and have been prepared in accordance
with GAAP consistently applied, excluding any footnotes and have been prepared
consistent with the preparation of Seller's audited financial statements.
(b) The Company had no outstanding Indebtedness to any Person
or any liabilities of any kind (including contingent obligations, tax
assessments or unusual forward or
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long-term commitments), or any unrealized or anticipated loss, which in the
aggregate then were Material to the Company and required to be reflected in the
Initial Financial Statements in accordance with GAAP which were not so
reflected.
(c) Copies of all material financial reports prepared by the
Company or the Seller for management of the Company since December 31, 1997 have
been provided to Buyer. Since December 31, 1997, no change has occurred in the
business, operations, properties or assets, liabilities, condition (financial or
other) or results of operations of the Company that has or could reasonably be
expected, either alone or together with all other such changes, to have a
Material Adverse Effect. A true and correct listing of all open orders equal to
or greater than $50,000 for products and services received by the Company has
been provided to Buyer.
(d) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for assets,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded accountability for cash,
accounts receivable and inventory is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company records a fixed asset at cost at the time of its acquisition and removes
a fixed asset upon its sale or transfer if the fixed asset had a positive net
book value at the time of the sale or transfer. The Company recently has made a
series of entries to the fixed asset subsidiary ledger removing certain assets,
the original cost of such assets and the accumulated depreciation of such assets
from the fixed asset subsidiary ledger; such assets were fully depreciated,
without salvage value and having an original cost of less than $1,500.
Corresponding adjustments were made to the general ledger, the fixed asset
original cost control account and the fixed asset accumulated depreciation
account. The Company is in the process of converting its accounting software and
other business application systems to the Enterprise Resource Planning system
("ERP"). The ERP system is currently fully and, to the knowledge of Seller,
successfully operated at Halter Marine (including the basic accounting
functions). The ERP system is currently fully operational at the Company for the
purpose of performing labor reporting, and within the next six (6) to eight (8)
months is scheduled to be fully operational on all remaining modules including
scheduling and shop floor control, engineering computer assisted design/bill of
material, purchasing material requirement orders/bill of material and accounting
functions. All necessary hardware and software is owned, leased or licensed and
installed, and completion of implementation is primarily dependent on
preparation of manuals, documentation and training of personnel. Seller makes no
representation or warranty as to the performance or adequacy of the ERP system.
(e) Set forth in SCHEDULE 2.4 is a list of all computer
software programs owned by the Company (the "OWNED SOFTWARE"). Set forth in
SCHEDULE 2.4 is a list of all computer software programs licensed by the
Company, as licensee (the "LICENSED SOFTWARE"). The Owned Software and the
Licensed Software are sufficient to conduct the business and operations of the
Company as presently being conducted.
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(f) The Company owns its customer list and trade secrets free
and clear of any Liens. The Company has taken commercially reasonable steps to
protect the confidentiality of its customer lists.
(g) All Information that has been made available to Buyer by
Seller or the Company through Harry Hinkle, F. Dean Phelps, Craig Wien or Locke
Purnell Rain Harrell in connection with the transactions contemplated hereby is,
taken together, true and correct in all material respects and does not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which those statements were made;
PROVIDED, HOWEVER Seller makes no representation or warranty to Buyer with
respect to any projections, estimates or budgets heretofore delivered to or made
available to Buyer of future revenues, expenses or expenditures or future
results of operations.
2.5 TAXES. Except as set forth on SCHEDULE 2.5,
(a) Seller and the Company have completed and timely filed
(taking into account any extensions) all federal and all material state, local
and foreign returns, declarations, reports, including claims for refunds,
estimates, information returns and statements ("RETURNS") required to be filed
in respect of any Tax, and all Taxes that are shown by such Returns to be due
and payable have been paid. Such Returns correctly and accurately reflect in all
material respects the facts and other information required to be shown thereon,
and the Company has complied with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes.
(b) SCHEDULE 2.5 sets forth the last period through which the
federal income Tax Returns of Seller and of the Company have been examined by
the IRS. Except to the extent being contested in good faith as described on
SCHEDULE 2.5, all deficiencies and proposed adjustments and assessments asserted
as a result of such examinations or by any applicable state, local or foreign
taxing authority have been paid or fully settled. No federal, state, local or
foreign income or franchise tax audits, other administrative proceedings or
court proceedings are presently pending or have been threatened with regard to
any Taxes for which the Company may be held liable, and no deficiency for any
such Taxes for which the Company could be liable which has not yet been paid has
been proposed, asserted or assessed.
(c) There is no agreement by which the Company or its assets
is bound (i) extending the period for assessment or collection of any Tax for
which the Company is liable or (ii) which is a closing agreement pursuant to
Section 7121 of the Code or any similar provision of state, local or foreign
law.
(d) The Company has not made an election under Section 341(f)
of the Code and has not agreed to have Section 341(f)(2) of the Code apply to
any disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by the Company. The Company is not a party to, is
not bound by and has no obligation under any tax allocation or sharing
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agreement or similar agreement or arrangement. The Company is not a party to any
agreement or other arrangement that would result separately or in the aggregate
in the payment of any "excess parachute payments" within the meaning of Section
280G of the Code.
(e) There are no Liens for Taxes (other than for current Taxes
not yet due and payable) on the assets of the Company.
(f) Except for the affiliated group (within the meaning of
Section 1504 of the Code) of which the Company is presently a member, the
Company has never been a member of any affiliated group, or of any other group
which would cause the Company to be liable under applicable law for any Tax
which was not determined solely with respect to the results of operation or
property of the Company.
(g) None of the assets of the Company is property that the
Company is required to treat as being owned by any other person pursuant to the
"safe harbor lease" provisions of former Section 168(f)(8) of the Code. None of
the assets of the Company directly or indirectly secures any debt, the interest
on which is tax-exempt under Section 103(a) of the Code. None of the assets of
the Company is "tax-exempt use property" within the meaning of Section 168(h) of
the Code.
(h) The Company has not agreed to make nor is it required to
make any adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise which will have any adverse effect on any Tax for
which the Company is liable for a period which ends after December 31, 1997.
(i) The Company has not participated in an international
boycott within the meaning of Section 999 of the Code. The Company has not had a
permanent establishment in any foreign country, as defined in any applicable tax
treaty or convention between the United States and such foreign country.
(j) SCHEDULE 2.5 identifies each arrangement to which the
Company is a party and which is a partnership for federal income tax purposes
and which was required to file an income tax return for a taxable year of such
partnership which ended in 1997.
(k) Seller is a United States person within the meaning of
Section 7701 of the Code.
(l) The Company is not a party to any agreement, contract or
other arrangement that would result, separately or in the aggregate, in the
Company being required to pay any "excess parachute payments" within the meaning
of Section 280G of the Code.
2.6 ASSETS AND PROPERTIES.
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(a) REAL PROPERTY. SCHEDULE 2.6 lists and correctly sets forth
legal descriptions of all real properties owned by the Company (including,
without limitation, all Easements) and, for each of those properties, the
address thereof and the use thereof in the business of the Company (the "REAL
PROPERTY"). The Company has good and marketable fee simple title to all Real
Property and none of the Real Property is subject to any Lien, except for
Permitted Liens.
(b) PERSONAL PROPERTY.
(i) Except for inventory and supplies disposed of or consumed,
and accounts receivable collected or written off, and cash utilized, all
in the ordinary course of business consistent with past practice, and as
set forth in SCHEDULE 2.6, the Company owns all of its inventory,
equipment and other personal property (both tangible and intangible)
free and clear of any Liens, except for Permitted Liens.
(ii)SCHEDULE 2.6 discloses all leases, including capital
leases, that are Material to the Company under which the Company is
leasing its property, plant and equipment and other tangible assets
other than Real Property. Each of those leases is binding on the Company
and, to the knowledge of Seller, valid and binding on the other parties
thereto. To the knowledge of Seller, the lessee party thereto has not
sublet any of the leased property to any Person other than the Company.
The Company is not in default under any such lease and to the knowledge
of Seller, no other party thereto is in default thereunder.
(iii)Except as set forth in SCHEDULE 2.6, the property, plant
and equipment owned or leased by the Company (other than Real Property)
currently being utilized in production are in working order and adequate
to meet the Company's current production. SCHEDULE 2.6 also identifies
those major pieces of equipment owned or leased by the Company which are
not being currently utilized in production.
(c) REAL PROPERTY LEASES. SCHEDULE 2.6 lists and correctly
sets forth (i) all leases and subleases under which the Company is lessor or
lessee or sublessor or sublessee of any real property, together with all
amendments, supplements, nondisturbance agreements, brokerage and commission
agreements and other agreements pertaining thereto ("REAL PROPERTY LEASES")
(including its expiration date and any renewal options) and (ii) legal
descriptions of all real properties of which the Company is the lessee and, for
each of those properties, the address thereof (the "LEASED PROPERTY"). True,
correct and complete copies of all Real Property Leases have been delivered by
Seller to Buyer. The Company has not assigned any Real Property Leases. There
are no Liens on the Company's interest in the Real Property Leases, except for
only Permitted Liens. The Real Property Leases are in full force and effect and
constitute binding obligations of the Company and, to the knowledge of Seller,
on the other parties thereto. To the knowledge of Seller, (i) no party to any
Real Property Lease is in default thereunder and (ii) the lessee party thereto
has not sublet any of the leased space to any Person other than the Company.
Subject to the terms and conditions of the Real Property Leases, the Company has
good and marketable leasehold interests to all real property subject to the Real
Property Leases.
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(d) REPORTS, ETC. Seller has provided Buyer with true,
complete and correct copies of all title reports, title insurance policies (if
any), surveys and appraisals owned or in the possession of the Company and
relating to any of the Real Properties.
(e) FIXED ASSETS. The fixed assets of the Company are located
on either the Real Property or the Leased Property and are maintained in
accordance with reasonable commercial operating practices and adequate for the
purposes for which they presently are being used or held for use, ordinary wear
and tear excepted.
(f) SUFFICIENCY OF ASSETS. The Company owns or leases or will
own or lease prior to Closing all property, plant and equipment necessary for
the continued ownership, operation and maintenance of the Company's business as
currently conducted.
2.7 ENVIRONMENTAL LAWS AND REGULATIONS.
(a) Since the Seller's ownership of the Company (and prior to
such time, to the knowledge of the Seller), except as set forth on SCHEDULE 2.7,
the ownership and operation of the Subject Property and any use, storage,
treatment, disposal, or transportation of Hazardous Substances that has occurred
in, on or under the Subject Property have been in compliance with Environmental
Requirements except for noncompliance that would not, singly or in the
aggregate, have a Material Adverse Effect; (b) except as set forth on SCHEDULE
2.7, during the ownership, occupancy and operation of the Subject Property by
the Company, no release, leak, discharge, spill, disposal, pumping, pouring,
emptying, injecting, escape, leaching, dumping or emission ("RELEASE") of
Hazardous Substances has occurred in, on, under or from the Subject Property or
arrangement for any of the foregoing to any other property in a quantity or
manner that violates or requires further investigation or remediation under
Environmental Requirements, except for a Release that would not, singly or in
the aggregate, have a Material Adverse Effect; (c) except as set forth on
SCHEDULE 2.7, there is no pending, or, to the knowledge of Seller, threatened
Litigation or administrative investigation or proceeding concerning the Subject
Property involving Hazardous Substances or Environmental Requirements; (d)
except as set forth on SCHEDULE 2.7, the Company has all of the permits or
similar authorizations required for its operations under Environmental
Requirements except for permits or similar authorizations in which the failure
to have would not, singly or in the aggregate, have a Material Adverse Effect;
and (e) to the knowledge of Seller, except as set forth on SCHEDULE 2.7, the
Company has never owned, operated or leased any real property other than the
Subject Property that could reasonably be anticipated to result in substantial
"Environmental Costs," as defined in Section 8.2(c).
2.8 MATERIAL CONTRACTS. (a) Set forth on SCHEDULE 2.8 is a complete list
of all contracts, arrangements and commitments to which the Company is a party
or by which the Company's assets or business are bound that relate to (i) the
sale, lease or other disposition by the Company of assets (excluding inventory
in the ordinary course of business) of the Company in each case involving more
than $100,000; (ii) the purchase or lease by the Company of assets (excluding
inventory in the ordinary course of business) in each case involving more than
$100,000; (iii) the supply by the
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Company of any customer's requirements for any item or the purchase by the
Company of its requirements for any item or of a vendor's output of any item
which in each case involves more than $100,000; (iv) licenses and grants to or
from the Company relating to any Intellectual Property; (v) each partnership,
joint venture or cost-sharing agreement; (vi) each guaranty or suretyship,
indemnification or contribution agreement or performance bond outside the
ordinary course of business; (vii) each instrument, agreement or other
obligation evidencing or relating to Indebtedness of the Company or to money
lent or to be lent to another Person involving more than $10,000; (viii) each
contract to purchase or sell real property; (ix) each contract containing any
noncompetition agreement, covenant or undertaking; (x) each agreement providing
for the purchase from a supplier of all or substantially all the requirements of
the Company of a particular product or service which in each case involves more
than $100,000 in the aggregate; (xi) all agreements granting any Person a Lien
on any property or asset of the Company, including any factoring agreement or
agreement for the assignment of receivables or inventory; (xii) all agreements
with any manufacturer or supplier with respect to discounts or allowances or
extended payment terms, to the extent any such agreement involves $100,000 or
more; (xiii) all agreements which restrict the Company from doing any kind of
business or from doing business in any jurisdiction or from competing with any
Person; (xiv) all shareholders' agreements, proxies, voting trusts or powers of
attorney to act on behalf of the Company or in connection with the properties or
business affairs of the Company other than such powers to so act as normally
pertain to corporate officers and excluding any power of attorney to customs
offices; (xv) all agreements for the construction or material modification of
any building or structure or for the incurring of any other material capital
expenditure, to the extent any such agreement involves $50,000 or more; (xvi)
all advertising agreements; (xvii) all brokerage agreements, finder's
agreements, custodial account agreements and agreements with respect to pension
administration, investment management and investment advisory services; (xviii)
all contracts for the provision of data processing services; (xix) all
agreements for environmental inspections, consulting, reporting, testing and/or
remediation; (xx) all interest rate, commodity and currency hedges, swaps and
similar agreements; or (xxi) any other matter that involves the payment of
consideration in excess of $100,000 per fiscal year (each such item hereafter
referred to as a "MATERIAL CONTRACT").
(b) True, correct and complete copies of all written items
listed above, and true, correct and complete written descriptions of all oral
items listed above, have heretofore been delivered or made available by Seller
to Buyer. Except as set forth in SCHEDULE 2.8, as of the date hereof and after
giving effect to the transactions contemplated hereby, (i) except for such
matters that, singly or in the aggregate would not have a Material Adverse
Effect on the Company, there are no existing or asserted defaults, events of
default or events, occurrences, acts or omissions that, with the giving of
notice or lapse of time or both, would constitute defaults or events of default
by the Company under any Material Contract, or, to the knowledge of Seller, by
any other party thereto; (ii) no penalties have been incurred, nor are
amendments pending, with respect to any Material Contract; and (iii) each order
placed by a third party with the Company prior to the Closing that is a Material
Contract has been fully satisfied (or is subject to full satisfaction) within
the time period requested by that third party. As of the date hereof and after
giving effect to the transactions contemplated hereby, the Material Contracts
are in full force and effect and are valid and
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enforceable obligations of the Company and, to the knowledge of Seller, valid
and enforceable obligations of the other parties thereto, enforceable in
accordance with their respective terms, and no defenses, off-sets or
counterclaims have been asserted or, to the knowledge of Seller, may be made by
any party thereto (other than by the Company), nor has the Company waived any
rights thereunder.
2.9 NO VIOLATIONS. (a) The execution, delivery and performance in
accordance with their respective terms by Seller of this Agreement and the other
Transaction Documents do not and will not (i) violate, breach or constitute a
default under or result in the termination or suspension of (A) the Charter
Documents of the Company or Seller, (B) any Governmental Requirement applicable
to the Company or Seller, not including any Environmental Requirements, which
are covered by Section 2.7 or (C) any Material Contract, (ii) breach or
constitute a default under any agreement or instrument to which Seller is a
party or by which Seller or any of the Shares is bound, (iii) result in the
acceleration or mandatory prepayment of any Indebtedness, or any Guaranty not
constituting Indebtedness, of the Company or afford any holder of any of that
Indebtedness, or any beneficiary of any of those Guaranties, the right to
require the Company to redeem, purchase or otherwise acquire, reacquire or repay
any of that Indebtedness, or to perform any of those Guaranties, (iv) cause or
result in the imposition of, or afford any Person the right to obtain, any Lien
upon any property or assets of the Company or Seller (or upon any revenues,
income or profits of the Company or Seller therefrom), (v) result in the
creation or imposition of, or afford any Person the right to obtain, any Lien
upon any of the Shares (or upon any revenues, income or profits of Seller
therefrom) or (vi) result in the revocation, cancellation, suspension or
material modification, in any single case or in the aggregate, of any
Governmental Approval possessed by the Company at the date hereof and necessary
for the ownership or lease or the operation of its properties or the carrying on
of its business as now conducted, not including any necessary Governmental
Approval under any applicable Environmental Requirements, which is covered by
Section 2.7.
(b) As of the date hereof and after giving effect to the transactions
contemplated hereby, no condition or state of facts exists, or, with the giving
of notice or the lapse of time or both, would exist, which (i) entitles any
holder of any outstanding Indebtedness, or any Guaranty not constituting
Indebtedness, of the Company, or a representative of that holder, to accelerate
the maturity, or require a mandatory prepayment, of that Indebtedness or
Guaranty, or affords that holder or its representative, or any beneficiary of
that Guaranty, the right to require the Company to redeem, purchase or otherwise
acquire, reacquire or repay any of that Indebtedness, or to perform that
Guaranty, in whole or in part, or (ii) entitles any Person to obtain any Lien
(other than a Permitted Lien) upon any properties or assets of the Company (or
upon any revenues, income or profits of the Company therefrom) or upon the
Shares (or upon any revenues, income or profits of Seller therefrom).
2.10 CONSENTS. Except for Hart-Scott-Rodino clearance and as set forth
on SCHEDULE 2.10, no consent, approval or other authorization of any Person or
any Governmental Authority or under any Material Contract or other material
agreement or commitment to which the Company or Seller is a party or by which
its respective assets are bound is required as a result of or in connection
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with the transactions contemplated hereby (including, without limitation, for
the execution, delivery or performance by Seller of any of the Transaction
Documents, the enforcement against Seller of its obligations thereunder or the
effectuation of the transactions contemplated thereby).
2.11 LITIGATION AND RELATED MATTERS. Set forth on SCHEDULE 2.11 is a
list of all Litigation pending or, to the knowledge of Seller, overtly
threatened against the Company or any property or rights of the Company. There
is not a reasonable likelihood of an adverse determination of any pending
Litigation set forth on SCHEDULE 2.11 which would, individually or in the
aggregate, result in an adjustment, award or other liability in excess of the
amount reserved in the Initial Financial Statements or have a Material Adverse
Effect. The Company is not in default with respect to any judgment, order, writ,
injunction or decree of any Governmental Authority, and there are no unsatisfied
judgments against the Company that, singly or in the aggregate, would have a
Material Adverse Effect on the Company. No Litigation is pending or, to the
knowledge of Seller, threatened, to which Seller or the Company is or is
reasonably likely to become a party which (i) questions or involves the validity
or enforceability of Seller's obligations under any of the Transaction Documents
or (ii) seeks or reasonably may be expected to seek (A) to prevent or delay the
consummation by Seller or the Company of the transactions contemplated by this
Agreement and the other Transaction Documents or (B) damages in connection with
any consummation by Seller or the Company of the transactions contemplated by
this Agreement and other Transaction Documents. All issues, conditions and
matters related to Environmental Requirements or Hazardous Substances are
excluded from the first sentence of this Section 2.11.
2.12 COMPLIANCE WITH LAWS.
(a) Except as disclosed in SCHEDULE 2.12: (i) the Company
possesses all Governmental Approvals necessary for the ownership or lease and
the operation of its properties (including all the facilities and sites it owns
or holds under any lease) and the carrying on of its business as now conducted,
except where the failure to possess such Governmental Approvals would not,
singly or in the aggregate, have a Material Adverse Effect on the Company, and
(ii) the Company is in compliance in all respects with the terms and conditions
of all such Governmental Approvals except where the noncompliance with such
terms and conditions, singly or in the aggregate, would not have a Material
Adverse Effect on the Company. All of such Governmental Approvals are valid and
in full force and effect and, except as disclosed in SCHEDULE 2.12, the Company
has not received any notice from any Governmental Authority of its intention to
cancel, terminate or not renew any of such Governmental Approvals.
(b) Except as disclosed in SCHEDULE 2.12 and except for such
matters that, singly or in the aggregate, would not have a Material Adverse
Effect on the Company, the Company (i) has been and continues to be in
compliance in all respects with all Governmental Requirements applicable to it
or any of its presently or previously owned or operated properties (including
all the facilities and sites now or previously owned or held by it under any
lease), businesses or operations and (ii)(A) has not received any written notice
from any Governmental Authority which asserts, or raises the possibility of
assertion of, any noncompliance with any of those Governmental
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Requirements and (B) to the knowledge of Seller, no condition or state of facts
exists which would reasonably be expected to provide a valid basis for any such
assertion.
(c) Except as referred to in SCHEDULE 2.12, the Company is not
a subject of or a party to any judgment, order, injunction or decree of any
Governmental Authority (excluding those not directed specifically to or at the
Company), nor, to Seller's knowledge, the subject of any investigation by any
Governmental Authority. Neither the Company nor any officer or director of the
Company is permanently or temporarily enjoined or barred by any Governmental
Requirement from engaging in or continuing any conduct or practice related to
the current business of the Company. Except as referred to in SCHEDULE 2.12,
there is not in existence at present any Governmental Requirement enjoining or
requiring the Company or Seller to take any action of any kind with respect to
the Company (excluding Governmental Requirements not specifically directed to or
at Seller or the Company).
(d) Notwithstanding the language of Section 2.12(a), (b) and
(c) above, all issues, conditions and matters related to Taxes, Returns, the
Beaird Plans, the Trinity Plans, the employment of Beaird Employees,
Environmental Requirements or Hazardous Substances are excluded from this
Section 2.12.
2.13 INTELLECTUAL PROPERTY. Except as set forth in SCHEDULE 2.13, the
Company owns, free and clear of all Liens other than Permitted Liens, or has the
legal right to use, all Intellectual Property that is necessary to the conduct
of its business as now conducted, in each case free of any claims or
infringements. SCHEDULE 2.13 (a) lists such Intellectual Property and the
expiration dates, if any, with respect thereto, and (b) indicates those owned by
the Company and, for those not listed as so owned, the agreement or other
arrangement pursuant to which they are possessed. Except as set forth in
SCHEDULE 2.13, (a) no consent of any Person will be required for the use of any
of such Intellectual Property rights by the Company following the Closing and
the consummation of the transactions contemplated hereby will not result in the
loss or material impairment of any of the rights of the Company in the
Intellectual Property and (b) no governmental registration of any of such
Intellectual Property has lapsed or expired or been canceled, abandoned, opposed
or the subject of any reexamination request. Except as stated in SCHEDULE 2.13,
there are no pending proceedings or, to the knowledge of Seller, threatened
against the Company with respect to the Intellectual Property. On or before
Closing, the Company shall have received a conveyance from TRN Business Trust, a
Delaware business trust, of the intellectual property described on SCHEDULE 2.13
as being owned by TRN Business Trust as of the date of this Agreement.
2.14 EMPLOYEE BENEFIT PLANS.
(a) The Company maintains, for the benefit of certain
hourly-paid Beaird Employees (as defined in Section 5.3 hereof), the following
employee pension benefit plans, within the meaning of Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"): the
Beaird Industries, Inc. Pension Plan and the Beaird Industries, Inc. Savings
Plan (the "BEAIRD PLANS"). In addition, the Seller maintains, for the benefit of
its employees including certain
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non-hourly paid Beaird Employees, the following employee pension benefit plans,
within the meaning of Section 3(2) of ERISA: the Trinity Industries, Inc.
Standard Pension Plan and the Profit Sharing Plan for Employees of Trinity
Industries, Inc. and Certain Affiliates (collectively, the "TRINITY PLANS" and
respectively, the "TRINITY PENSION PLAN" and "TRINITY PROFIT SHARING PLAN").
(b) The Internal Revenue Service has issued, with respect to
each of the above Beaird Plans and Trinity Plans, a determination letter
indicating that each such Plan is qualified under Section 401 of the Internal
Revenue Code of 1986, as amended (the "CODE") and that the trusts maintained
pursuant thereto are exempt from federal income taxation under Section 501 of
the Code. To the best knowledge of Seller as of the date hereof, nothing has
occurred or failed to occur with respect to the operation or the form of such
Plans that could reasonably be expected to cause the loss of such qualification
or exemption or the imposition of any liability, penalty or tax under ERISA or
the Code.
(c) Seller has previously delivered to Buyer true and correct
copies of the following:
(i) each Beaird and Trinity Plan (collectively the "PLANS"),
all amendments thereto as of the date hereof and all current summary
plan descriptions provided to employees regarding the Plans;
(ii)each trust agreement and annuity contract (or any other
funding instruments) pertaining to any of the Plans, including all
amendments to such documents to the date hereof and the most recent
actuarial reports or valuations relating to those Plans subject to Title
IV of ERISA; and
(iii)a complete description of each other plan, policy,
contract or arrangement, maintained by the Seller and/or the Company for
the benefit of the Beaird Employees, providing for bonuses, deferred
compensation, retirement payments, profit sharing, incentive pay,
commissions, hospitalization, severance payments or medical expenses or
insurance for any Beaird Employee or members of his or her respective
family (other than directors' and officers' liability policies), whether
or not insured and whether or not subject to ERISA (a "BENEFIT
PROGRAM").
(d) To the best knowledge of Seller as of the date hereof,
each Plan and Benefit Program has been maintained and administered in material
compliance with the terms of the documents concerning each such Plan and Benefit
Program and the requirements of all applicable laws. In addition --
(i) neither the Seller nor the Company has terminated,
suspended, discontinued contribution to or withdrawn from any Plan;
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(ii)to the best knowledge of Seller as of the date hereof,
there has been no "reportable event" as that term is defined in Section
4043 of ERISA and the regulations thereunder with respect to those Plans
subject to Title IV of ERISA that would require the giving of notice or
any event requiring disclosure under Section 4041(c)(3)(C) or 4063(a) of
ERISA;
(iii)with respect to those Plans subject to Title IV of ERISA,
and to the best knowledge of the Seller as of the date hereof -- (A)
there has been no event or condition which presents a material risk of
termination, no notice of intent to terminate has been given under
Section 4041 of ERISA and no proceeding has been instituted under
Section 4042 of ERISA to terminate, such that would have a Material
Adverse Effect on Seller or the Company; (B) no liability to the Pension
Benefit Guaranty Corporation ("PBGC") has been incurred which would
result in a Material Adverse Effect on Seller or the Company; (C) no
accumulated funding deficiency, whether or not waived, within the
meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred which would result in a Material Adverse Effect on Seller or
the Company; and (D) the assets of each Plan equal or exceed the
actuarial present value of the benefit liabilities, within the meaning
of Section 4041 of ERISA, under such Plan, based upon reasonable
actuarial assumptions and the asset valuation principles established by
the PBGC;
(iv)with respect to each Plan and Benefit Program and to the
best knowledge of the Seller as of the date hereof, there is no
violation of ERISA with respect to the filing of applicable reports,
documents, and notices with the Secretary of Labor and the Secretary of
the Treasury or the furnishing of such documents to the Beaird
participants or beneficiaries of the Plans and Benefit Programs required
to be furnished under ERISA, the Code or the terms of the Plans and
Benefit Programs;
(v) to the best knowledge of Seller as of the date hereof --
(A) each Plan and Benefit Program has been maintained, in all material
respects, in accordance with its terms and with all provisions of ERISA
(including rules and regulations thereunder) and other applicable
Federal and state law; (B) all contributions to the Plans and Benefit
Programs have been timely made pursuant to their terms; (C) there is no
liability for breaches of fiduciary duty in connection with the Seller
which would result in a Material Adverse Effect on Seller or the
Company, and there have been no defaults, violations, actions, suits or
claims pending (except ordinary claims for benefits), or to the
knowledge of the Seller, threatened respecting the Plans and Benefit
Programs which would result in a Material Adverse Effect on Seller or
the Company; and (D) neither the Seller nor the Company has engaged in a
"prohibited transaction" within the meaning of Section 4975 of the Code
or Section 406 of ERISA with respect to the Plans and Benefit Programs
which would result in a Material Adverse Effect on Seller or the
Company;
(vi)except as disclosed or referenced on SCHEDULE 2.14,
neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby
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will (A) result in any payment becoming due to any Beaird Employee, (B)
increase any benefits otherwise payable under any Plan or (C) result in
the acceleration of the time of payment or vesting of any such benefits;
(vii) neither Seller nor any Plan or Benefit Program provides
for the continuation of medical or health benefits after a Beaird
Employees' termination of employment except for continuation coverage
required pursuant to Section 4980B of the Code and Part 6 of Title I of
ERISA and the regulations thereunder ("COBRA"); and
(viii) neither Seller nor any Plan or Benefit Program has any
obligation to make any payments to Beaird Employees which would be
"excess parachute payments" under Section 280G of the Code.
(e) To the best knowledge of the Seller as of the date hereof,
no person or entity that was engaged by the Company as an independent contractor
can or will be characterized or deemed to be an employee of the Company under
applicable laws, statutes, rules, regulations and administrative proceedings for
any purpose whatsoever, including, without limitation, for purposes of federal,
state and local income taxation, workers' compensation and unemployment
insurance and eligibility for the Plans or any Benefit Program.
(f) Neither the Company nor the Seller has participated in any
voluntary compliance or self-correction programs established by the Internal
Revenue Service, or entered into a closing agreement with the Internal Revenue
Service with respect to the form or operation of any of the Plans or any Benefit
Program.
(g) To the best knowledge of the Seller as of the date hereof,
the Company does not, and will not in the future, have any liability under the
Code, ERISA or the terms of a collective bargaining agreement arising from or
relating to any employee benefit plan, arrangement, or policy, including an
employee benefit plan as defined in Section 3(3) of ERISA, maintained, or
contributed to, by the Seller or any entity that is or has been a member of the
same controlled group of businesses as the Seller, determined under Section 414
of the Code.
2.15 EMPLOYEES; EMPLOYEE RELATIONS.
(a) Except as disclosed on SCHEDULE 2.15, the Company is not a
party to, nor bound by, the terms of any union contract, collective bargaining
or other labor agreement, employment agreement, severance plan, or stock option,
stock purchase, vacation, deferred compensation, bonus or other incentive plan
or arrangement. Except as set forth on SCHEDULE 2.15, there are no labor
disputes involving the employees of the Company.
(b) Seller is in compliance in all material respects with all
applicable laws respecting the employment and employment practices, terms and
conditions of employment and wages and hours of the Beaird Employees and, with
respect to such Beaird Employees, is not
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engaged in any unfair labor practice. All of the Beaird Employees who work in
the United States are lawfully authorized to work in the United States according
to Federal immigration laws.
(c) All obligations of Seller relating to the Beaird
Employees, whether arising by operation of law or by contract, for payments to
trusts or other funds or to any governmental agency with respect to workers'
compensation, unemployment compensation, social security or any other benefits
for such Beaird Employees with respect to employment of said Beaird Employees
through the date hereof or, if the date hereof is not a regularly scheduled
employee compensation payment date, through the most recent regularly scheduled
employee compensation payment date, have been substantially paid or adequate
accruals therefor have been made or, to the extent that such payments relate to
a period of time after December 31, 1997, are recorded on Seller's books and
records. All obligations of Seller with respect to such Beaird Employees,
whether arising by operation of law or by contract for salaries, vacation and
holiday pay, sick pay, bonuses, other forms of compensation or other benefits
payable to such Beaird Employees in respect of the services rendered by any of
them prior to the date hereof or, if the date hereof is not a regularly
scheduled employee compensation payment date, prior to the most recent regularly
scheduled employee compensation payment date, have been substantially paid or
adequate accruals therefor have been made or, to the extent that such
obligations relate to a period of time after December 31, 1997, are recorded on
Seller's books and records.
2.16 INSURANCE. SCHEDULE 2.16 sets forth a list of all
insurance policies carried by the Company on March 31, 1998. Seller has
previously provided Buyer with: (a) a complete list of all insurance loss runs
and worker's compensation claims received for the most recently ended three
policy years; and (b) true, complete and correct copies of all certificates for
insurance carried by the Company which are in effect, all of which (i) have been
issued by insurers of recognized responsibility and (ii) currently are in full
force and effect and will remain in full force and effect through the Closing
Date. Except as set forth in SCHEDULE 2.16: (a) no insurance carried by the
Company has been canceled by the insurer during the past five (5) years, and the
Company has not been denied coverage during the Seller's ownership of the
Company; and (b) neither the Company nor Seller has received any notice or other
communication from any issuer of any such insurance policy of any material
increase in any deductibles, retained amounts or the premiums payable
thereunder, and, to the knowledge of Seller, no such increase in deductibles,
retainages or premiums is threatened. Except as disclosed on SCHEDULE 2.16, to
the knowledge of Seller, no pending claims made by or on behalf of the Company
under such policies have been denied or are being defended against third parties
under a reservation of rights by an insurer of the Company. All premiums due and
payable prior to the Closing have been or will be paid prior to the Closing.
2.17 ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. All the accounts and
notes or other accounts receivable of the Company reflected on the Initial
Financial Statements and those accruing through the Closing Date (the
"RECEIVABLES") represent valid and bona fide sales to third parties incurred in
the ordinary course of business, were collected, or are valid and enforceable
claims and are collectible, in the respective amounts so reflected, net of
allowances for doubtful accounts, if
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any, reflected on SCHEDULE 2.17. The reserve for doubtful accounts has been
determined based on the past collection experience of the Company and is
consistent with its prior accounting and collection practices. Except as
disclosed on SCHEDULE 2.17, no counterclaims or offsetting claims with respect
to such accounts receivable are pending or threatened. Except as disclosed on
SCHEDULE 2.17, the accounts payable reflected in the Initial Financial
Statements and all accounts payable arising thereafter and prior to the date
hereof arose from bona fide transactions in the ordinary course of business.
2.18 INVENTORIES. The inventories reflected in the Initial Financial
Statements and inventories acquired since December 31, 1997 consist of items of
a quality and quantity which are useable or saleable in the ordinary course of
business of the Company, and inventories of below standard quality or not
useable in the business of the Company have been written down in value in
accordance with good business practices to estimated net realizable market
values or adequate reserves have been provided therefor. SCHEDULE 2.18 sets
forth, as of December 31, 1997, as to such inventory the acquisition cost,
amount of write-down and net amount thereof. Such inventories are not excessive
in kind or amount in light of the business of the Company. All such inventories
are carried on the books of the Company at the lower of average cost or market
pursuant to the normal inventory valuation policy of the Company.
2.19 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except to the extent set
forth on SCHEDULE 2.19, to the knowledge of Seller, none of Seller, any Seller
Affiliate or any shareholder, officer or director of the Company possesses,
directly or indirectly, 20% or more interest in, or is a partner of, or is a
director, officer or employee of, any corporation, firm, association or business
organization that is a client, supplier, customer, lessor, lessee or competitor
of the Company.
2.20 OFFICERS, DIRECTORS AND EMPLOYEES.
(a) Set forth on SCHEDULE 2.20 is a complete list of all of
the current officers and directors of the Company;
(b) SCHEDULE 2.20 sets forth the name, current rate of wages
or salary, and term of engagement of (i) each director and officer of the
Company and (ii) each other employee of or consultant to the Company with
current annual wages, salary, bonus and deferred compensation in excess of
$50,000; and
(c) SCHEDULE 2.20 sets forth the name of each retired key
employee, officer or director of the Company who is receiving or is entitled to
receive any payments from the Company whether or not covered by any funded
Employee Benefit Plan and his or her age, sex, social security number and
current unfunded pension benefits.
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2.21 BANK ACCOUNTS AND POWERS OF ATTORNEY. SCHEDULE 2.21 sets
forth:
(a) the name of each financial institution in which the
Company has borrowing or investment arrangements, deposit or checking
accounts or safe deposit boxes;
(b) the types of those arrangements and accounts, including,
as applicable, names in which accounts or boxes are held, the account or
box numbers and the name of each Person authorized to draw thereon or
have access thereto;
(c) the name of each bank or institution which has issued to
the Company or any of its officers and employees, in such capacity,
credit or charge cards, the account numbers of all such cards and the
outstanding balances of such cards to the extent any individual balance
exceeds $10,000; and
(d) the name of each Person holding a general or special power
of attorney from the Company and a description of the terms of each such
power, other than powers of attorney involving customs offices.
2.22 AVAILABILITY OF DOCUMENTS. Seller has made available for inspection
by Buyer and its representatives true, correct and complete copies of the
Charter Documents of the Company, all written agreements, arrangements,
commitments, and documents referred to in the SCHEDULES attached hereto, and the
corporate minute books of the Company.
2.23 BROKERAGE, FINANCIAL ADVISOR OR FINDER FEES. No agent, advisor,
broker, person or firm acting on behalf of Seller is, or will be, entitled to
any commission or broker's, advisor's or finder's fees from any of the parties
hereto, or from any of their affiliates, in connection with any of the
transactions contemplated hereby.
2.24 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
SCHEDULE 2.24, since December 31, 1997, there has not been (a) any damage,
destruction or casualty loss to the physical properties of the Company, which
has had or could reasonably be expected to have a Material Adverse Effect, (b)
any entry into any transaction, commitment or agreement material to the Company,
except transactions, commitments or agreements in the ordinary course of
business consistent with past practice, (c) any material increase in the
compensation payable or to become payable by the Company to its directors,
officers, employees or agents or any material increase in the rate or terms of
any bonus, pension or other employee benefit plan, payment or arrangement made
to, for or with any such directors, officers, employees or agents, (d) any sale,
transfer or other disposition of, or the creation of any Lien upon, any material
part of the Company's assets, tangible or intangible, except for sales of
inventory and use of supplies and collections of account receivables in the
ordinary course of business consistent with past practice, or any cancellation
or forgiveness of any debts or claims by the Company, or (e) any change in the
relations of the Company with or loss of its customers or suppliers, of any loss
of business or material increase in the cost of inventory items or change in the
terms offered to customers, which would have a Material Adverse Effect.
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Except as referred to in SCHEDULE 2.24, since December 31, 1997, there has been
no termination, cancellation or change in the business relationship of the
Company with any customer or group of customers, distributor or group of
distributors, or sales agent or group of sales agents which individually or in
the aggregate provided more than five percent (5%) of the gross revenues of the
Company for the fiscal year ended March 31, 1998.
2.25 LIABILITIES AND OBLIGATIONS. SCHEDULE 2.25 lists all present
liabilities of every kind, character and description and whether accrued,
absolute, fixed, contingent or otherwise, of the Company which (a) exceed or
reasonably could be expected to exceed $100,000 and (b) (i) had been incurred
prior to December 31, 1997, but are not reflected on the Initial Financial
Statements, or (ii) were incurred after December 31, 1997. To the extent
required by GAAP or this Agreement, the Company has established adequate
accruals with respect to all such items. SCHEDULE 2.25 also lists and describes
each of the Company's outstanding secured and unsecured Guaranties not
constituting its Indebtedness and, for each of those Guaranties, whether any
Seller or Related Person of Seller is a Person whose obligation is covered by
that Guaranty, and if that item is secured by any property or asset of the
Company, the nature of that security. As of December 31, 1997, the Company had
no liability with respect to product warranty claims (whether contingent or not)
in excess of the amounts specifically reserved therefor and reflected on the
Initial Financial Statements; and, since December 31, 1997, the Company has not
incurred any liability with respect to product warranty claims (whether
contingent or not) in excess of the amount reserved for such claims in the
Initial Financial Statements.
2.26 RELATIONS WITH GOVERNMENTS, ETC. The Company has never made,
offered or agreed to offer anything of value to any governmental official,
political party or candidate for governmental office which would cause the
Company to be in violation of the Foreign Corrupt Practices Act of 1977 or any
Governmental Requirement to a similar effect. The Company has never entered into
any commercial transaction with any Person in violation of the Export
Administration Act, the Iran-Libya Sanctions Act or any other Governmental
Requirement applicable to the Company that limits or imposes restrictions on (a)
agreements with one or more foreign countries (or their subjects) or (b) doing
business in one or more foreign countries.
2.27 RELATED PARTY AGREEMENTS. SCHEDULE 2.27 sets forth all Related
Party Agreements in effect on the date hereof. Except as set forth in SCHEDULE
2.27, there is no outstanding Indebtedness owed by the Company to Seller or any
subsidiary of Seller or any partnership of which Seller is a partner or any
other Entity in which the Seller directly or indirectly owns at least a 20%
equity interest (each a "SELLER AFFILIATE"). Except for those Related Party
Agreements specifically referred to in SCHEDULE 2.27 as "Retained Related Party
Agreements" (the "RETAINED RELATED PARTY AGREEMENTS"), each Related Party
Agreement in effect on the date hereof has been terminated, and all Indebtedness
of Seller and any Seller Affiliate owed to the Company has been paid in full,
prior to the Closing, and no Related Party Agreement then will exist. Except as
set forth in SCHEDULE 2.27, the terms and conditions of each of the Retained
Related Party Agreements are materially no less favorable to the Company than
the Company reasonably could have expected to obtain in an arm's-length
transaction with a Person other than an affiliate of the Company, the
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rentals provided for in the Retained Related Party Agreements constituting
leases of property to the Company do not and will not materially exceed fair
market rentals of the properties being rented or leased under those Retained
Related Party Agreements and the payments provided to be made by the Company in
the other Retained Related Party Agreements do not materially exceed the fair
market value of the goods or other property provided to or the services
performed for the Company.
2.28 ACKNOWLEDGMENT REGARDING CERTAIN OPERATIONS. Seller
acknowledges and confirms that the Company's silencer operation are part of the
transactions contemplated hereby.
2.29 ABSENCE OF CLAIMS. To the Seller's knowledge, there exist no
Pre-Acquisition Claims against Seller or any Seller Affiliate of the type which
would be subject to the release described in Section 10.19(b).
2.30 ACQUISITION OF NOTE FOR INVESTMENT. Seller (i) is acquiring the
Note solely for its account for investment purposes, and not with a view toward,
or for offer or sale in connection with, any distribution thereof in violation
of the Securities Act of 1933, as amended (the "SECURITIES ACT"), or any
applicable state securities laws, and (ii) has received certain information
concerning the Buyer and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and risks inherent in
holding the Note. Seller acknowledges and understands that the Note has not been
registered under the Securities Act or under any state securities laws and is
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, and that Seller cannot offer for
sale, sell, pledge, transfer or otherwise dispose of the Note without
registration under the Securities Act and any applicable state securities laws,
except pursuant to an exemption from such registration available thereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
3.1 ORGANIZATION AND AUTHORIZATION OF BUYER. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas with all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. Buyer has
all requisite corporate power, capacity and authority to execute and deliver
this Agreement, the Transaction Documents and all other agreements and documents
contemplated hereby. The execution and delivery by Buyer of this Agreement, the
Transaction Documents and such other agreements and documents and the
consummation by Buyer of the transactions contemplated hereby and thereby have
been duly authorized by Buyer and no other corporate action on the part of Buyer
is necessary to authorize the transactions contemplated hereby and thereby. This
Agreement (and upon execution and delivery the other Transaction Documents) have
been duly executed and delivered by Buyer and each constitutes the valid and
binding obligation of Buyer, enforceable in accordance with their respective
terms, except to the extent that
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the enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by principles of equity regarding the availability of
remedies.
3.2 NO VIOLATIONS. The execution, delivery and performance in accordance
with their respective terms by Buyer of this Agreement and the other Transaction
Documents do not and will not (a) violate any provision of the Charter Documents
of Buyer, (b) violate any Governmental Requirement by which Buyer or its
properties or assets are bound or (c) result in a violation or breach of, or
constitute a default under or result in the creation of any encumbrance upon, or
create any rights of termination, cancellation or acceleration in any Person
with respect to any agreement, contract, indenture, mortgage or instrument to
which Buyer is a party or any of its properties or assets is bound.
3.3 CONSENTS. Except for Hart-Scott-Rodino clearance and as set forth in
SCHEDULE 3.3, no consent, approval or other authorization of any Person or any
Governmental Authority or under any material agreement or commitment to which
the Buyer is a party or by which its assets are bound is required as a result of
or in connection with the transactions contemplated hereby (including, without
limitation, for the execution, delivery or performance by Buyer of any of the
Transaction Documents, the enforcement against Buyer of its obligations
thereunder or the effectuation of the transactions contemplated thereby).
3.4 ACQUISITION OF SHARES FOR INVESTMENT. Buyer is acquiring the Shares
for investment purposes and not with a view toward, or for offer or sale in
connection with, any distribution thereof in violation of the Securities Act or
any applicable state securities laws. Buyer acknowledges that the Shares have
not been registered under the Securities Act or under any state securities laws,
and that Buyer cannot offer for sale, sell, pledge, transfer or otherwise
dispose of the Shares without registration under the Securities Act and any
applicable state securities laws, except pursuant to an exemption from such
registration available thereunder.
3.5 FINANCING COMMITMENT. Buyer has, or will have prior to the Closing,
sufficient cash, available lines of credit or other sources of immediately
available funds to enable it to make payment of the Purchase Price.
3.6 LITIGATION. No Litigation is pending or, to the knowledge of Buyer,
threatened, to which Buyer is or is reasonably likely to become a party which
(i) questions or involves the validity or enforceability of Buyer's obligations
under any Transaction Document or (ii) seeks or reasonably may be expected to
seek (A) to prevent or delay the consummation by Buyer of the transactions
contemplated by this Agreement and the other Transaction Documents or (B)
damages in connection with any consummation by Buyer of the transactions
contemplated by this Agreement and other Transaction Documents.
3.7 BROKERAGE, FINANCIAL ADVISOR OR FINDER FEES. Except for
Cureton & Co., Incorporated (whose fees will be paid by Buyer), no agent,
advisor, broker, person or firm acting
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on behalf of Buyer is, or will be, entitled to any commission or broker's,
advisor's or finder's fees from any of the parties hereto, or from any of their
affiliates, in connection with any of the transactions contemplated hereby.
3.8 DUE DILIGENCE. Buyer acknowledges that (a) Seller shall not be
deemed to have made to Buyer any representation or warranty other than as
expressly made by Seller in Article II hereof, (b) it has had the opportunity to
visit the facilities of the Company and meet its officers and other
representatives to discuss the business, assets, liabilities, financial
condition, cash flow and operations of the Company, (c) all materials and
information requested by Buyer have been provided to Buyer to Buyer's
satisfaction and (d) it has made its own independent examination, investigation,
analysis and evaluation of the Company, including Buyer's own estimate of the
value of the Company; however, none of the foregoing shall in any way modify,
limit or restrict any of the representations, warranties, covenants and
indemnities of the Seller contained in this Agreement, it being understood and
agreed among the parties that Buyer is relying upon such representations,
warranties, covenants and indemnities and Buyer would not enter into this
Agreement without such representations, warranties, covenants and indemnities,
but subject in all respects to the provisions of Section 3.8.
3.9 TERMINATION OF INSURANCE. Buyer acknowledges that the Company's
insurance coverages listed in SCHEDULE 2.16 shall terminate at Closing.
ARTICLE IV
COVENANTS OF SELLER
4.1 COURSE OF CONDUCT BY THE COMPANY. From the date hereof through and
until the Closing Date, except as approved in writing by Buyer or as otherwise
expressly permitted or contemplated by this Agreement, Seller shall cause the
Company's business to be conducted only in the ordinary course of business
consistent with past practice, and Seller shall cause the Company to comply with
the following covenants.
(a) REPRESENTATIONS AND WARRANTIES. Seller shall not take any
action, or permit the Company to take any action, which would cause any
of Seller's representations and warranties to be untrue as if made
immediately after such action was taken.
(b) Goodwill. Seller shall cause the Company to maintain its
operations, employees and advantageous business relationships, with the
end that its goodwill and going business shall be unimpaired at the
Closing Date.
(c) CAPITAL EXPENDITURES. Without the prior written consent of
Buyer, such consent not to be unreasonably withheld, the Company shall
not make any capital expenditures for capital commitments made after
March 31, 1998 or commitments therefor
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which, when combined with capital commitments made after March 27, 1998,
would exceed $250,000.
(d) CHARTER DOCUMENTS. The Company shall not make any change
in its Charter Documents.
(e) STOCK ISSUANCE; REDEMPTIONS; REORGANIZATIONS. The Company
shall not (i) issue, grant or dispose of or make any agreement,
arrangement or commitment obligating the Company to issue, grant or
dispose of any capital shares or other securities of the Company, (ii)
redeem or acquire, or make any agreement, arrangement or commitment
obligating the Company to redeem or acquire, any shares of capital stock
or other securities of the Company, (iii) authorize or effect or make
any agreement, arrangement or commitment obligating the Company to
effect any reorganization, recapitalization or split-up of such capital
stock of the Company or (iv) declare, set aside, pay or make any
dividend or other distribution or payment (other than in cash) with
respect to any shares of its capital stock or purchase or redeem any
shares of its capital stock.
(f) EMPLOYEE MATTERS. The Company shall not (i) except for
increases in compensation of employees required under any collective
bargaining agreement (including any renewal thereof) or incentive plan
or pursuant to merit promotions in the ordinary course of business, make
any increase that is material in the compensation payable or to become
payable to any of the officers, employees or agents of the Company or
(ii) except to the extent necessary to comply with applicable law, make,
amend or enter into any employment contract or any bonus, incentive,
stock option, profit sharing, pension, retirement, stock purchase,
hospitalization, medical reimbursement, insurance, severance benefit or
other similar plan or arrangement or make any voluntary contribution to
any such plan or arrangement.
(g) INSURANCE COVERAGE. The Company shall maintain, or have
maintained on its behalf, insurance coverage for the benefit of the
Company on the same basis as, or on a substantially equivalent basis to,
the current insurance coverage described in SCHEDULE 2.16.
(h) LIENS. The Company will not, and will not commit to,
mortgage, pledge, encumber, create or allow any Liens not existing on
the date hereof upon any of its properties or assets, tangible or
intangible, except Permitted Liens created in the ordinary course of
business, consistent with past practice.
(i) DISPOSITION OF ASSETS. The Company will not, and will not
commit to, sell, transfer or otherwise dispose of any of its tangible or
intangible property or assets, except for inventory and supplies sold,
disposed of or consumed and accounts receivable collected or written off
in the ordinary course of business, consistent with past practice.
Except as contemplated by Section 4.4, the Company will not cancel or
forgive any debts or claims except or in the ordinary course of
business, consistent with past practice.
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(j) ACCOUNTING PRACTICES. The Company will not make any
material changes in its accounting methods, principles or practices,
except as required by GAAP.
4.2 APPROVALS AND CONSENTS. Seller shall use all commercially reasonable
efforts (a) to cause all conditions to the obligations of Buyer under this
Agreement over which it is able to exercise influence or control to be satisfied
prior to the Closing Date and (b) to obtain promptly and to comply with all
requisite statutory, regulatory or court approvals, third party releases and
consents, and other requirements necessary for the valid and legal consummation
of the transactions contemplated hereby.
4.3 [INTENTIONALLY OMITTED]
4.4 SETTLEMENT OF ACCOUNTS; PAYMENT OF PRE-CLOSING PAYABLES;
TERMINATION OF CERTAIN GUARANTIES.
(a) At or prior to the Closing, Seller will and will cause the
Company to satisfy and settle in full all intercompany accounts and dividend or
distribute to Seller all cash in the Company's accounts as of the Closing Date.
(b) Seller shall be responsible to pay and discharge all
accrued Indebtedness, accounts payable and other liabilities of the Company that
accrue prior to the Closing Date ("PRE-CLOSING PAYABLES"). To the extent the
Company receives an invoice or other demand for payment after Closing for a
Pre-Closing Payable, Buyer shall cause the Company to promptly remit such
invoice to Seller, which shall discharge the same. If the invoice includes both
Pre-Closing Payables and post-Closing matters, Seller shall remit to the Company
the amount of the Pre-Closing Payable. Seller shall have the right to pay such
Pre-Closing Payables consistent with past practice.
(c) At or prior to the Closing, Seller will and will cause the
Company to terminate any Guaranties by the Company, if any (other than letters
of credit identified in SCHEDULE 2.25, if any).
4.5 INVESTIGATIONS. Seller shall provide Buyer, the Persons requested to
provide financing to Buyer with respect to the transactions contemplated hereby
and their respective representatives and agents such access to the books and
records of the Company and furnish to Buyer and the Persons providing financing
such financial and operating data and other information with respect to the
business and property of the Company as they may reasonably request from time to
time, and permit Buyer, the Persons providing financing and their respective
representatives and agents to make such inspections of the Company's real and
personal properties as they may reasonably request. Seller shall arrange for
Buyer, the Persons providing financing and their respective representatives and
agents to meet with such directors, officers, employees and agents of the
Company as requested. Buyer, the Persons providing financing and their
respective representatives and agents shall comply with such other reasonable
limitations on such investigation as are established by the Company.
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4.6 ENVIRONMENTAL INSPECTION.
(a) Seller shall provide Buyer with access to the Subject
Property for the purposes of performing, at the sole expense of Buyer, an
environmental assessment and environmental audit of the Subject Property (the
"INSPECTION"). One objective of this Inspection shall be to evaluate the
existing contamination at the Subject Property, and it is understood and agreed
that this may entail the utilization of intrusive sampling. The extent of the
Inspection shall not affect Buyer's enforcement of its rights under this
Agreement. Seller agrees to collect in a centralized location the following
information which shall be provided to Buyer for its review as a part of its
Inspection: notices to and from and correspondence with any Governmental
Authorities regarding Environmental Requirements; all environmental assessments
or audits in the possession of Seller regarding Environmental Requirements of
the Company, whether or not performed by Seller and whether or not limited to
the Subject Property; all environmental permits and permit applications, and
compliance plans, including but not limited to Stormwater Pollution Prevention
Plans, Spill Prevention Control and Countermeasure Plans, and Waste
Minimization/Pollution Prevention Plans, involving the Subject Property; and a
listing of all sites used by Company for the disposal of Hazardous Substances.
(b) The Inspection shall analyze the extent to which: (i) the
Identified Property, and the Use of the Identified Property, complies with, and
does not deviate from, all Environmental Requirements; (ii) the Identified
Property contains any Hazardous Substances; (iii) the Identified Property is, or
has been, the subject of any past, existing or threatened investigation, inquiry
or proceeding concerning environmental matters by any Governmental Authorities;
(iv) any notice or submission concerning Environmental Activity has been given
or should be given with regard to the Identified Property to Governmental
Authorities; (v) the Identified Property is subject to, or covered by, the
requirements of Title III of the Superfund Amendments and Reauthorization Act of
1986, 42 U.S.C. 11001 ET SEQ. The Environmental Information shall also include a
"Disclosure Summary" that specifically addresses any exceptions to the
representations and warranties set forth in Section 2.7 hereof.
(c) Buyer shall treat confidentially any information generated
in connection with such Inspection, including without limitation all reports
prepared for Buyer by its consultant or other technical representative (the
"CONSULTANT"), any other reports prepared by the Consultant regarding the
Subject Property and their contents, any analyses, compilations, studies or
other documents prepared by Buyer, its affiliates or its Consultant containing
or otherwise reflecting the results of such Inspection (collectively, the
"ENVIRONMENTAL INFORMATION"). The Environmental Information may only be used in
connection with the transaction contemplated by this Agreement. Buyer agrees
that the Inspection shall be conducted in strict compliance with the following:
(i) prior to conducting the Inspection, Buyer will provide Seller with an
original counterpart of its agreements with the Consultant relating to the
Subject Property, which agreement shall conform to the terms of this Section
4.6; (ii) Seller shall have the right to have a representative or
representatives accompany the Consultant at all times during the Inspection;
(iii) Buyer acknowledges the competitive value and sensitive and confidential
nature of the Environmental Information and the damage that could result
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to Seller if it is misused by Buyer or disclosed to any third party except as
permitted by this Section 4.6 and, except as otherwise permitted by this Section
4.6 or required by law, Buyer shall not disclose the Environmental Information
to any third party other than the Persons requested to provide financing to, or
investment in, Buyer (and their respective legal counsel and other professional
counsel) with respect to the transactions contemplated hereby and its
representatives and agents that are directly involved in the transaction
contemplated by this Agreement; (iv) Buyer shall be responsible for any breach
of this Section 4.6 by the Consultant, Buyer's representatives or any third
party to whom Buyer transmits the Environmental Information; (v) if the
transactions contemplated by this Agreement are not consummated for any reason,
all Environmental Information, including all copies of any Consultant's reports
and test results, if any, in written or other recorded form shall be delivered
to Seller and Buyer shall not retain any copies; (vi) in the event that Buyer or
anyone to whom Buyer transmits the Environmental Information becomes legally
compelled to disclose any of the Environmental Information, and if Buyer becomes
aware of such potential disclosure, Buyer shall provide Seller with prompt
notice prior to any such disclosure so that Seller may seek a protective order
or other appropriate remedy and/or waive compliance with any applicable
provisions of this Section 4.6; (vii) unless legally compelled to do so, prior
to the Closing Date Buyer shall not disclose any Environmental Information to
any regulatory agencies concerning the Subject Property, without the express
prior written consent of Seller, such consent not to be unreasonably withheld or
delayed; provided, however, that Seller understands and agrees that Buyer or its
representatives may find it appropriate to contact Governmental Authorities in
connection with their analysis of the Environmental Information and Seller
hereby consents to and authorizes such contact; (viii) Buyer shall promptly
disclose and provide copies to Seller (at no cost to Buyer) all Environmental
Information prepared by or for Buyer or any of its representatives; (ix) subject
to Article VIII hereof, Buyer shall indemnify Seller and the Company from and
against any and all damages to persons or property caused by Buyer or its
representatives during the course of performing the Inspection and (x) the
Inspection shall not commence until the Seller has approved a written sampling
plan (the "SAMPLING PLAN") developed by the Consultant for the performance of
the Inspection, which to be approved must conform to the following requirements:
(A) QUALITY ASSURANCE/QUALITY CONTROL: The plan should identify the number and
type of quality assurance samples, specifically the number of blanks,
duplicates, or spikes that will be taken; the specific QA/QC guidelines to be
followed should be described; (B) EQUIPMENT DECONTAMINATION: The sampling plan
should identify the reagents and any special procedures associated with
equipment decontamination; (C) CHAIN-OF-CUSTODY: All samples collected
(including blanks and spikes) must be maintained under chain-of-custody
procedures; (D) FIELD OPERATION: The sampling plan should discuss the sequence
and the standard operating procedures for conducting the field activities,
including the use of a sampling and field logbook, which should include:
personnel performing the sampling; times of personnel arrival and departure and
initialization and conclusion of the component sampling efforts; results of
field measurements; factual descriptions of structures and features; sketches of
the property layout and sample collection locations; (E) SAMPLING
LOCATIONS/RATIONALE: As precisely as possible, the sampling plan should identify
the location of each sample; a site map should be prepared to guide the
investigator to the appropriate locations; specific sampling methods, the number
of samples, the parameters being sampled, and a description of the objectives
for each sampling activity should be included in the
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sampling plan; (F) ANALYTICAL REQUIREMENTS: The sampling plan should discuss the
technique and level of detection that will be used to analyze each sample; (G)
LABORATORY REQUIREMENTS: The sampling plan should name the laboratory to be
utilized to analyze samples and their qualifications; (H) SAMPLE HANDLING:
Sample preservation and other handling practices should be described; Health and
Safety Plan: The Sampling Plan shall also include a description of the Health
and Safety Plan of the Consultant addressing suspected hazards and risks; levels
of protective clothing or equipment to be worn; decontamination procedures; and
documentation of the appropriate health and safety training given to the
sampling crew; (I) SPLIT SAMPLES: The Sampling Plan will include a requirement
to take and provide identical split samples of all sampling done on the property
to the Seller; (J) SCHEDULE, RESTORATION, AND DISPOSAL: the Sampling Plan will
provide for a date for the commencement and completion of the Inspection, will
describe the timing and method for restoring the property to its substantially
similar condition as before the Inspection, and will obligate the Buyer to
immediately dispose of any cuttings or other waste generated from the
Inspection; the Sampling Plan will not be approved if it provides for an
Inspection that will materially interfere with business at the property or
damages any improvements on the property, except for minor damage that the
Sampling Plan described and for which the Sampling Plan sets forth a restoration
procedure.
4.7 TAX MATTERS. No new elections with respect to Taxes or any changes
in current elections with respect to Taxes affecting the Company shall be made
after the date of this Agreement without the prior written consent of Buyer.
After Closing, Seller shall not pursue with the Internal Revenue Service the
Code Section 481(a) adjustment described in SCHEDULE 2.5.
4.8 TRINITY PLANS. Effective as of the close of business on the Closing
Date, the Seller shall take such action as may be necessary to cause the Beaird
Employees participating in the Trinity Profit Sharing Plan to cease to
participate in the Trinity Profit Sharing Plan and to cause the Company to
terminate its status as a participating employer thereunder. Each such Beaird
Employee shall be treated as having terminated employment for all purposes of
such Plan and shall be entitled to the payment of benefits on the same basis as
other terminated employees similarly situated. Effective as of the close of
business on the Closing Date, the Seller shall take such action as may be
necessary to cause the Beaird Employees participating in the Trinity Pension
Plan to cease to participate in the Trinity Pension Plan and to cause the
Company to terminate its status as a participating employer thereunder. Each
such Beaird Employee shall be treated as having terminated employment for all
purposes of such Plan and shall be entitled to the payment of benefits on the
same basis as other terminated employees similarly situated. Effective as of the
close of business on the Closing Date, the Seller shall take such action as may
be necessary to cause the Beaird Employees participating in the Supplemental
Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain
Affiliates (the "Supplemental Plan") to cease to participate in the Supplemental
Plan and to cause the Company to terminate its status as a participating
employer thereunder. Each such Beaird Employee shall be treated as having
terminated employment for all purposes of such Plan and shall be entitled to the
payment of benefits on the same basis as other terminated employees similarly
situated.
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ARTICLE V
COVENANTS OF BUYER
Buyer hereby covenants and agrees with Seller as follows:
5.1 RETENTION OF RECORDS. Buyer shall, for a period of seven (7) years
after the Closing Date, neither dispose of nor destroy any of the business
records and files of the Company which are transferred in connection herewith
without first offering to turn over possession thereof to Seller by written
notice to Seller at least sixty (60) days prior to the proposed date of such
disposition or destruction.
5.2 APPROVALS AND CONSENTS. Buyer shall use all commercially reasonable
efforts (a) to cause all conditions to the obligations of Seller under this
Agreement over which it is able to exercise influence or control to be satisfied
prior to the Closing Date and (b) to obtain promptly and to comply with all
requisite statutory, regulatory or court approvals, third party releases and
consents, and other requirements necessary for the valid and legal consummation
of the transactions contemplated hereby.
5.3 MATTERS PERTAINING TO EMPLOYMENT. Pursuant to Article VIII hereof,
Buyer shall indemnify and hold harmless Seller from any liability that Seller
incurs under the Worker Adjustment and Retraining Notification Act or similar
state laws which results from the Company failing to offer employment to
employees of Seller or the Company that devote substantially all of their
working time to the business operations of the Company (the "BEAIRD EMPLOYEES")
or reducing the workforce by such number that results in liability. Seller shall
provide all Beaird Employees terminated by Seller with health insurance
continuation to the extent required by COBRA.
5.4 COURSE OF CONDUCT BY THE COMPANY. From the Closing Date through and
until the date Seller receives cash payment of the Earn Out, except as approved
in writing by Seller or as otherwise expressly permitted or contemplated by this
Agreement, Buyer shall cause the Company's business to be conducted only in the
ordinary course of business consistent with past practice, including, without
limitation the Company's maintenance of the same GAAP as utilized by Seller
before the Closing Date. During the period set forth in the preceding sentence,
(i) Seller shall have appropriate rights to review, monitor and comment on the
operations of the Company and the results thereof, (ii) Buyer shall provide
Seller and its representatives and agents such access to the books and records
of the Company and furnish to Seller such financial and operating data and other
information with respect to the business and property of the Company as it may
reasonably request from time to time, and permit Seller and its respective
representatives and agents to make such inspections of the Company's real and
personal properties as they may reasonably request with regard to the
determination of the Earn Out and (iii) if Buyer desires to operate in a manner
that is different from the standard set forth in the preceding sentence, then
Buyer and Seller shall undertake in good faith to reach agreement as to the
adjustment, if any, in the calculation of the Earn Out in Section 1.1(b)(iv)
above to compensate Seller for the financial impact of the proposed different
manner of operation. If agreement is reached as to the adjustment, if any, in
the calculation of the
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Earn Out, then the language of Section 1.1(b)(iv) above shall be so amended and
the Earn Out shall be based thereon. If Buyer and Seller are unable to reach
agreement within thirty (30) days, then a Third Party Accounting Firm shall be
engaged to review the proposed change in operation and shall make a
determination as to the adjustment, if any, in the calculation of the Earn Out
in Section 1.1(b)(iv) to compensate Seller for the financial impact of the
proposed different manner of operation. The determination of the Third Party
Accounting Firm shall be final, conclusive and binding upon Buyer and Seller.
Buyer and Seller shall share equally the costs of the Third Party Accounting
Firm under this Section 5.4.
5.5 OFCCP AUDIT. Buyer agrees that Seller shall manage the pending audit
by the Office of Federal Contract Compliance Program, provided that the
resolution of any matters affecting the operation of the Company after Closing
shall require the consent of Buyer, such consent not to be unreasonably
withheld.
5.6 GUARANTIES AND BONDS. At Closing, Buyer shall provide sufficient
guaranties and bonds so as to allow Seller and its affiliates to be released
from any and all liability relating to any guaranties or bonds issued to secure
an agreement, obligation or liability of the Company, all of which are described
on SCHEDULE 2.25.
ARTICLE VI
CLOSING
6.1 CLOSING.
(a) Unless this Agreement is first terminated as provided in
Section 7.1, and subject to the satisfaction or waiver of all the conditions set
forth in Section 6.2, the closing of the transactions contemplated hereby (the
"CLOSING") shall take place at the offices of Locke Purnell Rain Harrell (A
Professional Corporation), Dallas, Texas, or such other location as is agreed to
by Buyer and Seller, on (i) June 30, 1998 or (ii) such other date as the parties
may agree upon in writing (the "CLOSING DATE").
(b) Buyer hereby agrees to pay to Seller on the date of this
Agreement $150,000 as a nonrefundable, noninterest bearing deposit (the
"Deposit"). If a Closing occurs on or before June 30, 1998, then the Deposit
shall be applied to the Purchase Price as a partial payment of the Cash Amount.
If a Closing does not occur on or before June 30, 1998, then the Deposit shall
be retained by Seller as liquidated damages (and not as a penalty) for all
losses, costs and expenses incurred by Seller and the Company in connection with
the transactions contemplated by this Agreement. Seller on behalf of itself and
the Company shall have no right to claim or seek from Buyer any other damages,
costs or expenses arising out of a failure to close the transactions
contemplated by this Agreement.
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6.2 CONDITIONS TO CLOSING.
(a) CONDITIONS TO BUYER'S OBLIGATIONS. The obligation of Buyer
to purchase the Shares, and to cause the other transactions contemplated hereby
to occur at the Closing, shall be subject to the satisfaction of each of the
following conditions at or prior to the Closing:
(i) REPRESENTATIONS, WARRANTIES AND COVENANTS. Each
representation and warranty of Seller contained in this Agreement and in
any Schedule shall be true and correct when made, and shall be true and
correct in all material respects on and as of the Closing Date with the
same effect as though such representation and warranty had been made on
and as of the Closing Date. All of the covenants and agreements herein
on the part of Seller to be complied with or performed on or before the
Closing Date shall have been fully complied with and performed. There
shall be delivered to Buyer a certificate dated the Closing Date and
signed by the President or a Vice President of Seller to the foregoing
effect.
(ii)PROCEEDINGS. No court of competent jurisdiction or any
governmental authority or agency shall have issued any order, decree or
ruling, or taken any other action restraining, enjoining or otherwise
prohibiting any of the transactions contemplated hereby, and there shall
not be pending before any governmental body or agency any investigation
or proceeding with respect to the transactions contemplated hereby of
which Seller or Buyer has notice.
(iii) CONSENTS AND APPROVALS. All material authorizations,
consents, approvals, waivers and releases, if any, necessary for Seller
to consummate the transactions contemplated hereby shall have been
obtained.
(iv)CERTIFICATES. Seller shall have (A) furnished to Buyer (x)
a copy, certified by the Secretary of State of Delaware as of a date not
more than thirty (30) days prior to the Closing Date, of the certificate
of incorporation and all amendments thereto of the Company and (y)
copies, certified by the Secretary of the Company, as of the Closing
Date, of the bylaws of the Company, (B) furnished to Buyer certificates
of good standing issued with respect to the Company by the appropriate
governmental and taxing officials of the State of Delaware as of a date
not more than thirty (30) days prior to the Closing Date, and (C)
executed and delivered to Buyer a certificate of the Secretary of Seller
relating to incumbency and corporate proceedings in connection with the
consummation of the transactions contemplated hereby.
(v) OPINION OF COUNSEL. Buyer shall have received an opinion
of Locke Purnell Rain Harrell (A Professional Corporation), counsel to
Seller, dated the Closing Date and in form and substance reasonably
satisfactory to Buyer.
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(vi) NO MATERIAL ADVERSE CHANGE. There shall not have been any
material adverse change since December 31, 1997 in respect of the
financial condition, results of operations, business or assets of the
Company.
(vii) NONCOMPETITION AGREEMENT. Seller and the Company shall
have executed and delivered to Buyer a noncompetition agreement in the
form attached hereto as EXHIBIT C (the "NONCOMPETITION AGREEMENT").
(viii) BRIGHTON MANUFACTURING AGREEMENT. Seller shall have
executed and delivered to the Company a supply agreement in the form
attached hereto as EXHIBIT D (the "BRIGHTON MANUFACTURING AGREEMENT").
(ix) STOCK CERTIFICATES. Seller shall have tendered
certificates representing the Shares, duly endorsed in blank or
accompanied by appropriate stock powers, in proper form for transfer,
with all transfer taxes paid.
(x) RESIGNATIONS AND RELEASES OF DIRECTORS AND OFFICERS. To
the extent requested by Buyer, Buyer shall have received the
resignations of and releases from such directors and officers of the
Company, effective as of the Closing.
(xi)TRANSITION AGREEMENT. Seller and the Company shall have
executed and delivered to Buyer a transition agreement in the form
attached hereto as EXHIBIT F (the "TRANSITION AGREEMENT").
(xii) LANDLORD ESTOPPEL LETTER. Seller shall have provided
Buyer with a landlord estoppel letter, in form and substance
satisfactory to Buyer, for the Shreveport Lease.
(xiii) TERMINATION UNDER HART-SCOTT-RODINO ACT. The
termination or early termination of the applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvement Act shall have occurred.
(xiv) HEAD MANUFACTURING AGREEMENT. Seller shall have executed
and delivered to the Company an agreement in the form attached hereto as
EXHIBIT E (the "HEAD MANUFACTURING AGREEMENT").
(b) CONDITIONS TO SELLER'S OBLIGATIONS. The obligation of
Seller to sell the Shares, and to cause the other transactions contemplated
hereby to occur at the Closing, shall be subject to the satisfaction of each of
the following conditions at or prior to the Closing:
(i) REPRESENTATIONS, WARRANTIES AND COVENANTS. Each
representation and warranty of Buyer contained in this Agreement and in
any Schedule shall be true and correct when made, and shall be true and
correct in all material respects on and as of the Closing Date with the
same effect as though such representation and warranty had been made on
and as
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of the Closing Date. All of the covenants and agreements herein on the
part of Buyer to be complied with or performed on or before the Closing
Date shall have been fully complied with and performed. There shall be
delivered to Seller a certificate dated the Closing Date and signed by
the President or a Vice President of Buyer to the foregoing effect.
(ii)PROCEEDINGS. No court of competent jurisdiction or any
governmental authority or agency shall have issued any order, decree or
ruling, or taken any other action restraining, enjoining or otherwise
prohibiting any of the transactions contemplated hereby, and there shall
not be pending before any governmental body or agency any investigation
or proceeding with respect to the transactions contemplated hereby of
which Seller or Buyer has notice.
(iii) CONSENTS AND APPROVALS. All material authorizations,
consents, approvals, waivers and releases, if any, necessary for Buyer
to consummate the transactions contemplated hereby shall have been
obtained.
(iv) OPINION OF COUNSEL. Seller shall have received an opinion
of Gardere Wynne Sewell & Riggs, L.L.P., counsel to Buyer, dated the
Closing Date and in form and substance reasonably satisfactory to
Seller.
(v) CERTIFICATES. Buyer shall have delivered to Seller (A) a
certificate of the appropriate governmental authority, dated as of a
date not more than thirty (30) days prior to the Closing Date, attesting
to the existence and good standing of Buyer in the State of Texas; (B)
copies, certified by the Secretary of State of Texas as of a date not
more than thirty (30) days prior to the Closing Date, of the articles of
incorporation and all amendments thereto of Buyer; (C) a copy, certified
by the Secretary of Buyer, dated the Closing Date, of the bylaws of
Buyer; and (D) a certificate, dated the Closing Date, of the Secretary
of Buyer relating to the incumbency and corporate proceedings in
connection with the consummation of the transactions contemplated
hereby.
(vi) DELIVERY OF CONSIDERATION. Buyer shall have (a) wire
transferred to Seller the Cash Amount and (b) executed and delivered the
Note.
(vii) NONCOMPETITION AGREEMENT. Buyer and the Company shall
have executed and delivered to Seller the Noncompetition Agreement.
(viii) BRIGHTON MANUFACTURING AGREEMENT. The Company shall
have executed and delivered to Seller the Brighton Manufacturing
Agreement.
(ix) TRANSITION AGREEMENT. Buyer and the Company shall have
executed and delivered to Seller the Transition Agreement.
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(x) HEAD MANUFACTURING AGREEMENT. The Company shall have
executed and delivered to Seller the Head Manufacturing Agreement.
(xi) TERMINATION UNDER HART-SCOTT-RODINO ACT. The termination
or early termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvement Act shall have occurred.
(xii) INDEMNIFICATION AGREEMENT. Buyer shall have executed and
delivered to Seller an Indemnification Agreement in form and substance
satisfactory to Seller in its sole discretion pursuant to which Buyer
unconditionally and irrevocably indemnifies, defends and holds harmless
Seller from any loss, liability, cost or expense (including attorney
fees and court costs) arising from the letters of credit described in
Schedule 2.25.
ARTICLE VII
TERMINATION PRIOR TO CLOSING
7.1 TERMINATION.
(a) This Agreement may be terminated and abandoned at any time
prior to the Closing:
(i) By the written mutual consent of Buyer and Seller;
(ii)By Buyer on the Closing Date if any of the conditions set
forth in Article 6.2(a) shall not have been fulfilled on or prior to the
Closing Date;
(iii) By Seller on the Closing Date if any of the conditions
set forth in Article 6.2(b) shall not have been fulfilled on or prior to
the Closing Date;
(iv)By either Buyer or Seller if the Closing shall not have
occurred on or before June 30, 1998 or such later date as the parties
may agree upon in writing;
(v) By Buyer or Seller if as a result of the Environmental
Information, or other investigations conducted by Buyer or Seller, Buyer
or Seller reasonably determine that, together with any liability
identified pursuant to Section 7.1(a)(vi), a contingent or actual
liability in excess of $1,000,000 potentially exists with respect to the
Identified Property or the operations of the Company for Environmental
Costs, Environmental Noncompliance or as a result of potential third
party claims based on Environmental Activity, excluding the Identified
Remediation. In addition, if Buyer reasonably determines that any
remedial or response work that may be necessitated by Governmental
Requirements will potentially materially adversely affect the operations
of the business to be conducted on the Real and
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Leased Property, then Buyer shall have the right to terminate this
Agreement by written notice to Seller at any time prior to the Closing;
and
(vi)By Buyer on the Closing Date if any representation or
warranty of the Seller contained in this Agreement and in any Schedule
which is qualified by the phrase "Material Adverse Effect" shall,
without giving effect to such qualification, fail to be true and correct
when made, or shall, without giving effect to such qualification, fail
to be true and correct in all material respects on and as of the Closing
Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date, if Buyer reasonably
determines that, together with any liability identified pursuant to
Section 7.1(a)(v), a contingent or actual liability in excess of
$1,000,000 potentially exists as a result of such failure.
(b) Any termination pursuant to this Article VII shall not
affect the obligations of the parties under Sections 10.16 and 10.17 and shall
be without prejudice to the terminating party's rights and remedies under this
Agreement by reason of any violation of this Agreement occurring prior to such
termination. In the event of a termination pursuant to this Article VII, each
party shall bear its own costs and expenses incurred with respect to the
transactions contemplated hereby; PROVIDED, HOWEVER if the conditions set forth
in Section 6.2(a)(i) are unsatisfied as of the Closing Date and Seller has not
cured such matter (which it shall have no obligation to do) within twenty (20)
days following written notice thereof by Buyer, the parties agree that, in the
event Buyer terminates this Agreement due to such circumstances, the only
recourse Buyer shall have against Seller is Seller's agreement to reimburse
Buyer for fees, costs and expenses of outside accountants, attorneys and
environmental consultants and out-of-pocket expenses actually incurred by or on
behalf of Buyer up to $150,000. Any amounts paid by Seller pursuant to the
previous sentence shall be liquidated damages (and not a penalty) for all
losses, costs and expenses incurred by Buyer in connection with the transactions
contemplated by this Agreement. Buyer shall have no right to claim or seek from
Seller any other damages, costs or expenses arising out of a failure to close
the transactions contemplated by this Agreement.
7.2 NOTIFICATION OF CERTAIN MATTERS.
(a) From the date hereof through the Closing Date, Seller, on
the one hand, and Buyer, on the other hand, shall give prompt written notice (a
"SPECIAL NOTICE") to the other after it has obtained knowledge of the
occurrence, or failure of occurrence, of any event, which occurrence or failure
to occur would cause or be reasonably likely to cause a breach of their
respective representations, warranties, covenants and agreements contained in
this Agreement.
(b) If Buyer gives such Special Notice and Seller fails to
cure any material defect prior to the Closing Date, Buyer shall have the right
either to terminate this Agreement pursuant to Section 7.1 hereof or to waive
such defect, but, subject to Section 7.1(b) hereof, Buyer shall not be entitled
to exercise any other remedy against Seller with respect to any such defect.
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(c) If Seller gives such notice and Buyer fails to cure any
material defect prior to the Closing Date, Seller shall have the right either to
terminate this Agreement pursuant to Section 7.1 hereof or to waive such defect,
but Seller shall not be entitled to exercise any other remedy against Buyer with
respect to any such defect.
ARTICLE VIII
INDEMNIFICATION AND POST-CLOSING COVENANTS
8.1 BUYER'S LOSSES.
(a) From and after the Closing Date, subject to the other
provisions of this Article VIII, Seller agrees to indemnify and hold harmless
Buyer and the Company and their respective directors, officers, employees,
representatives, agents and attorneys ("BUYER INDEMNITEES") from, against and in
respect of any and all Buyer's Losses (as defined below) suffered, sustained,
incurred or required to be paid by any of them by reason of (i) any
representation or warranty made by Seller in Article II (other than those
identified in Section 8.2(a)(v)) of this Agreement (which such representations
and warranties identified in Section 8.2(a)(v), for purposes of this Article
VIII, shall be read as if they contained no qualification for Material Adverse
Effect) being untrue or incorrect in any material respect; (ii) any failure by
Seller to observe or perform its covenants and agreements set forth in this
Agreement in any respect; (iii) events occurring on or prior to the Closing
Date; (iv) any claim, action, or proceeding made or brought by or obligations
owed by the Company to any person formerly employed by the Company who is not so
employed as of the Closing Date whether by reason of retirement, death,
incapacity, discharge, severance or otherwise; (v) product liability, litigation
or claims against the Company or any of its directors, officers, employees,
representatives, agents or attorneys in connection with, arising out of, or
relating to products completed by the Company on or prior to the Closing Date;
and (vi) any matter identified in part (b) clause (i) of SCHEDULE 2.8, SCHEDULE
2.11, SCHEDULE 2.12, SCHEDULE 2.13 or part (b) clause (i) of SCHEDULE 2.25;
except in any instance to the extent Buyer's Losses result from a Buyer
Indemnitee's own ordinary or gross negligence or willful misconduct.
(b) "BUYER'S LOSSES" shall mean all (i) Damages, (ii) Damage
Claims and (iii) liabilities and obligations for any Company Indebtedness and
all other liabilities and obligations of the Company outstanding as of the
Closing Date. Buyer's Losses shall not include Environmental Costs (as defined
in Section 8.2), which are addressed in Section 8.2.
8.2 ENVIRONMENTAL INDEMNITY.
(a) Seller agrees to indemnify and hold harmless Buyer and the
Company and their respective directors, officers, employees, representatives,
agents and attorneys from and against, and in respect of any and all third party
claims for, Environmental Costs arising in any manner in connection with: (i)
the presence at or on any property now or formerly owned, operated or leased by
the Company at any time on or prior to the Closing Date of any Hazardous
Substances or the release, leak, discharge, spill, disposal, migration or
emission of Hazardous Substances from
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any such property on or prior to the Closing Date; (ii) the failure of the
Company to comply with any applicable Environmental Requirements prior to the
Closing Date; (iii) the transportation to, disposal at, or migration onto or
into adjacent property or any off-site location of any Hazardous Substances from
property now or formerly owned, operated or leased by the Company at any time on
or prior to the Closing Date, whether or not the transportation or disposal was
conducted in full compliance with Environmental Requirements; (iv) any matter
identified in SCHEDULE 2.7, (v) any representation or warranty made by Seller
which relates expressly or by necessary implication to the Identified
Remediation, the environment or Environmental Requirements (which, for purposes
of this Article VIII, shall be read as if they contained no qualification for
Material Adverse Effect) being untrue or incorrect in any material respect, or
(vi) any failure by Seller to observe or perform its covenants set forth in
Sections 8.9, 8.10, 8.11 or 8.12 in any respect. Without limitation of the
foregoing, it is hereby recognized and agreed that all Environmental Costs or
other costs and expenses of the Identified Remediation shall be paid by the
Seller, including, without limitation, the charges of such consulting engineer,
all power and utility costs, all capital expenditures and any and all taxes or
fees that may be applicable to such activities. None of the Environmental Costs
or other costs and expenses paid or incurred by the Seller in connection with
the Identified Remediation shall (i) be subject to reimbursement from either the
Company or Buyer or (ii) be reflected as an asset on the Closing Balance Sheet
on the Initial Financial Statements.
(b) The obligations under this Section 8.2 shall include the
obligation to defend the Indemnified Parties (as defined below) against any
claim or demand for Environmental Costs, the obligation to pay and discharge any
Environmental Costs imposed on the Indemnified Parties, and the obligation to
reimburse the Indemnified Parties for any Environmental Costs incurred or
suffered, provided in each instance that the claim for Environmental Costs
arises in connection with a matter for which Indemnified Parties are entitled to
indemnification under this Agreement. The obligation to reimburse the
Indemnified Parties shall also include the costs and expenses (including,
without limitation, reasonable attorneys' fees) to establish or enforce Buyer's
or such other Person's right to indemnification hereunder, but shall exclude
reimbursement to the extent Environmental Costs result from a Buyer Indemnitee's
own ordinary or gross negligence or willful misconduct.
(c) "ENVIRONMENTAL COSTS" shall mean any of the following that
arise in any manner regardless of whether based in contract, common law, tort,
implied or express warranty, strict liability, Environmental Requirement or
otherwise: all liabilities, losses, judgments, damages, punitive damages, treble
damages, natural resource damages, costs and expenses (including, without
limitation, reasonable attorneys' fees and fees and disbursements of
environmental consultants, all costs related to the performance of any required
or necessary assessments, investigations, remediation, response, containment,
closure, restoration, repair, cleanup or detoxification of any impacted
property, the preparation and implementation of any maintenance, monitoring,
closure, remediation, abatement or other plans required by any governmental
agency or by Environmental Requirements and any other costs recovered or
recoverable under any Environmental Requirement), fines, penalties, or monetary
sanctions. Environmental Costs shall not (except in connection with a
Third-Party Claim) include (i) loss of earnings or profits attributable to the
consequential loss of future business or contracts or (ii) business interruption
losses, together with business interruption
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losses subject to Section 8.1, in excess of $2,500,000 in the aggregate (such
monetary limitation being intended to qualify clause (ii) only).
8.3 SELLER'S LOSSES.
(a) From and after the Closing Date, subject to the other
provisions of this Article VIII, Buyer agrees to indemnify and hold harmless
Seller and its directors, officers, employees, representatives, agents and
attorneys ("SELLER INDEMNITEES") from, against, for and in respect of any and
all Seller's Losses (as defined below) suffered, sustained, incurred or required
to be paid by Seller by reason of (i) any representation or warranty made by
Buyer in Article III of this Agreement being untrue or incorrect in any material
respect; (ii) any failure by Buyer to observe or perform its covenants and
agreements set forth in this Agreement in any respect; or (iii) product
liability, litigation or claims against Seller or any of its directors,
officers, employees, representatives, agents or attorneys in connection with,
arising out of, or relating to products completed by the Company from and after
the Closing Date; except in any instance to the extent Seller's Losses result
from a Seller Indemnitee's own ordinary or gross negligence or willful
misconduct.
(b) "SELLER'S LOSSES" shall mean all Damages and Damage
Claims.
8.4 NOTICE OF LOSS. An Indemnified Party claiming indemnification under
this Agreement shall promptly (i) notify the party from whom indemnification is
sought (the "INDEMNIFYING PARTY") of any third party claim or claims asserted
against the Indemnified Party ("THIRD PARTY CLAIM") that could give rise to a
right of indemnification under this Agreement and (ii) transmit to the
Indemnifying Party a written notice ("CLAIM NOTICE") describing in reasonable
detail the nature of the Third Party Claim, a copy of all papers served with
respect to that claim (if any), an estimate of the amount of damages
attributable to the Third Party Claim to the extent feasible (which estimate
shall not be conclusive of the final amount of that claim) and the basis for the
Indemnified Party's request for indemnification under this Agreement.
Notwithstanding the preceding sentence, failure of the Indemnified Party to give
notice hereunder shall not release the Indemnifying Party from its obligations
under this Article VIII, except to the extent the Indemnifying Party is actually
prejudiced by such failure to give notice. Within fifteen (15) days after
receipt of any Claim Notice (the "ELECTION PERIOD"), the Indemnifying Party
shall notify the Indemnified Party (i) whether the Indemnifying Party disputes
its potential liability to the Indemnified Party under this Article VIII with
respect to that Third Party Claim and (ii) if the Indemnifying Party does not
dispute its potential liability to the Indemnified Party with respect to that
Third Party Claim, whether the Indemnifying Party desires, at the sole cost and
expense of the Indemnifying Party, to defend the Indemnified Party against that
Third Party Claim. With respect to Buyer's Losses and Environmental Costs,
Seller shall be the "INDEMNIFYING PARTY" and Buyer and the Company and its
respective directors, officers, employees, representatives, agents and attorneys
shall be the "INDEMNIFIED PARTIES." With respect to Seller's Losses, Buyer shall
be the "INDEMNIFYING PARTY" and Seller and its directors, officers, employees,
representatives, agents and attorneys shall be the "INDEMNIFIED PARTY."
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8.5 RIGHT TO DEFEND.
(a) If the Indemnifying Party does not dispute its potential
liability to the Indemnified Party and notifies the Indemnified Party within the
Election Period that the Indemnifying Party elects to assume the defense of the
Third Party Claim, then the Indemnifying Party shall be entitled to defend,
contest or otherwise protect against any such Third Party Claim at its sole cost
and expense, and the Indemnified Party must cooperate in any such defense or
other action.
(b) The Indemnified Party shall have the right, but not the
obligation, to participate at its own expense in defense or settlement thereof
by counsel of its own choosing, but the Indemnifying Party shall be entitled to
control the defense unless the Indemnified Party has relieved the Indemnifying
Party from liability with respect to the particular matter or the Indemnifying
Party fails to assume defense of the matter; PROVIDED, HOWEVER, (i) that the
Indemnifying Party shall not enter into any settlement with respect to any Third
Party Claim that purports to limit the activities of, or otherwise restrict in
any way, any Indemnified Party without the prior consent of that Indemnified
Party (which consent may be withheld in the sole discretion of that Indemnified
Party) and (ii) if the named parties to any such action (including any impleaded
parties) include both the Indemnifying Party and the Indemnified Party, and the
Indemnified Party has been advised in writing by its counsel that there may be
one or more legal defenses available to it which are different from or
additional to those available to the Indemnifying Party, and a copy of any such
written advice is provided to the Indemnifying Party, then the Indemnified Party
may employ separate counsel at the expense of the Indemnifying Party, and, on
its written notification of that employment, the Indemnifying Party shall not
have the right to assume or continue the defense of such action on behalf of the
Indemnified Party.
(c) If the Indemnifying Party (i) within the Election Period
(A) disputes its potential liability to the Indemnified Party under this Article
VIII, (B) elects not to defend the Indemnified Party pursuant to this Article
VIII or (C) fails to notify the Indemnified Party that the Indemnifying Party
elects to defend the Indemnified Party pursuant to this Article VIII or (ii)
elects to defend the Indemnified Party pursuant to this Article VIII but fails
diligently and promptly to prosecute or settle the Third Party Claim, then the
Indemnified Party shall have the right, but not the obligation, thereafter to
defend, contest or otherwise protect against the same and make any compromise or
settlement thereof and recover the entire cost thereof from the Indemnifying
Party including, without limitation, reasonable attorneys' fees, disbursements
and all amounts paid as a result of such suit, action, investigation, claim or
proceeding or the compromise or settlement thereof. The Indemnified Party shall
have full control of such defense and proceedings. Notwithstanding the
foregoing, if the Indemnifying Party has delivered a written notice to the
Indemnified Party to the effect that the Indemnifying Party disputes its
potential liability to the Indemnified Party under this Article VIII and if that
dispute is resolved in favor of the Indemnifying Party, the Indemnifying Party
shall not be required to indemnify the Indemnified Party for any Damages or
Damage Claims that would otherwise be deemed to be an Indemnified Loss, or to
bear the costs and expenses of the Indemnified Party's defense pursuant to this
Section 8.5 or of the
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Indemnifying Party's participation therein at the Indemnified Party's request,
and the Indemnified Party shall reimburse the Indemnifying Party in full for all
reasonable costs and expenses incurred by the Indemnifying Party in connection
with any such participation and any litigation or other proceeding relating to
the resolution of any such dispute. The Indemnifying Party may participate in,
but not control, any defense or settlement controlled by the Indemnified Party
pursuant to this Section 8.5(c), and the Indemnifying Party shall bear its own
costs and expenses with respect to that participation.
(d) In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder that does not involve a Third Party
Claim, the Indemnified Party shall transmit to the Indemnifying Party a written
notice (the "INDEMNITY NOTICE") describing in reasonable detail the nature of
the claim, an estimate of the amount of Damages attributable to that claim to
the extent feasible (which estimate shall not be conclusive of the final amount
of that claim) and the basis of the Indemnified Party's request for
indemnification under this Agreement. If the Indemnifying Party does not notify
the Indemnified Party in writing within thirty (30) days from its receipt of the
Indemnity Notice that the Indemnifying Party disputes the claim specified by the
Indemnified Party in the Indemnity Notice, that claim shall be deemed a
liability of the Indemnifying Party hereunder. If the Indemnifying Party has
timely disputed that claim, as provided above, that dispute shall be resolved
through litigation; provided, that upon either party receiving an Indemnity
Notice, but prior to a party initiating litigation against the other party
(unless such initiation is required to prevent the expiration of the applicable
survival periods set forth in Section 10.10), Buyer and Seller agree to cause
their respective senior managements to meet to attempt in good faith to reach a
settlement on the disputed claim. If the parties do not reach a settlement of
that dispute within thirty (30) days after notice of that dispute is given, the
parties may proceed to litigation.
(e) Payments of all amounts owing by an Indemnifying Party
pursuant to this Article VIII relating to a Third Party Claim shall be made
within thirty (30) days after the latest of (i) the settlement of that Third
Party Claim, (ii) the expiration of the period for appeal of a final
adjudication of that Third Party Claim or (iii) the expiration of the period for
appeal of a final adjudication of the Indemnifying Party's liability to the
Indemnified Party under this Agreement in respect of that Third Party Claim.
Payments of all amounts owing by an Indemnifying Party pursuant to Section
8.5(d) shall be made within thirty (30) days after the later of (i) the
expiration of the thirty (30) day Indemnity Notice period, (ii) the expiration
of the period for appeal of a final adjudication of that claim or (iii) the
expiration of the period for appeal of a final adjudication of the Indemnifying
Party's liability to the Indemnified Party under this Agreement in respect of
that claim.
8.6 COOPERATION. Buyer and Seller shall cooperate with each other (and
Buyer shall cause the Company to cooperate) in the defense of any Third Party
Claim and, to the extent required by Section 8.11(d), in the Identified
Remediation (as defined in Section 8.9) and, during normal business hours, shall
afford each other access to their books and records and employees relating to
such suit, action, investigation, proceeding or claim and shall furnish each
other all such further
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information that they have the right and power to furnish as may reasonably be
necessary to defend such suit, action, investigation, proceeding or claim,
including, without limitation, reports, studies, correspondence and other
documentation relating to Environmental Protection Agency, Occupational Safety
and Health Administration, and Equal Employment Opportunity Commission matters.
In the event either Buyer and the Company on the one hand or Seller on the other
hand fails to reasonably cooperate with the other party pursuant to this Section
8.6 in any suit, action, investigation, proceeding, claim or remediation, the
party's right to indemnification or remediation with respect to such matter
shall be reduced by the cost to the indemnifying party caused by such failure to
cooperate.
8.7 LIMITATION ON INDEMNIFICATION.
(a) To the extent a Buyer's Loss related to a breach of a
representation, warranty or covenant by Seller as to the total value of the
accounts receivable and inventory as of the Closing Date that has been taken
into account in determining the Closing Value, Seller shall not have liability
to Buyer related to such breach to the extent of the Post-Closing Adjustment.
(b) Seller shall not have any liability or obligation to an
Indemnified Party under Section 8.1 and 8.2 unless and until the amount of
Buyer's Losses and Environmental Costs incurred by Buyer exceed the sum of
$390,000 in the aggregate (the "BUYER THRESHOLD AMOUNT"), whereupon Seller shall
be liable for all of Buyer's Losses and Environmental Costs only to the extent
such Buyer's Losses and Environmental Costs in the aggregate exceed the Buyer
Threshold Amount; PROVIDED HOWEVER, that the following items shall not be
subject to this Section 8.7(b): (i) any Buyer's Losses suffered, sustained,
incurred or required to be paid by reason of the items identified in Section
8.1(a)(vi), (ii) the reduction of the $4,000,000 amount set forth in Section
1.1(b)(iv) to the extent required by Section 1.2, (iii) Seller's violation of
any provision set forth in Section 4.4, 8.9, 8.10, 8.11, 8.12, 8.13, (iv)
Seller's indemnity obligations under Article IX and (v) Seller's violation of
representations and warranties hereunder, and any Buyer's Losses and
Environmental Costs, in each case which relate expressly or by necessary
implication to the Identified Remediation (but not otherwise to the environment
or Environmental Requirements).
(c) Buyer shall not have any liability or obligation to an
Indemnified Party under Section 8.1 unless and until the amount of Seller's
Losses incurred by Seller exceed the sum of $390,000 in the aggregate (the
"SELLER THRESHOLD AMOUNT"), whereupon Buyer shall be liable for all of Seller's
Losses only to the extent such Seller's Losses in the aggregate exceed the
Seller Threshold Amount; PROVIDED HOWEVER, that the following items shall not be
subject to this Section 8.7(c): (i) payment of the Post-Closing Adjustment in
the event Buyer owes the Post-Closing Adjustment to Seller, (ii) Buyer's
indemnity obligations under Section 5.3, (iii) Buyer's obligations under
Sections 5.4 and 5.6, (iv) Buyer's obligations under the Indemnification
Agreement delivered pursuant to Section 6.2(b)(xii), and (v) Buyer's indemnity
obligations under Article IX.
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(d) In no event shall Seller's aggregate liability under this
Agreement for Buyer's Losses under Section 8.1 and Environmental Costs under
Section 8.2 or Buyer's aggregate liability under this Agreement for Seller's
Losses under Section 8.1 exceed an amount equal to the Purchase Price (as
adjusted up or down, as the case may be, by the amount of the Post-Closing
Adjustment). This limitation shall not apply to Seller's obligations under
Section 8.9 or Buyer's obligations under the Indemnification Agreement delivered
pursuant to Section 6.2(b)(xii).
8.8 EXCLUSIVE REMEDIES. The rights of indemnification provided by this
Article VIII shall be the exclusive remedy of (a) Buyer with respect to matters
resulting in Buyer's Losses and Environmental Costs arising under or relating to
this Agreement or the transactions contemplated hereby and (b) Seller with
respect to matters resulting in Seller's Losses arising under or relating to
this Agreement or the transactions contemplated hereby; and neither Buyer nor
Seller shall have any other recourse for money damages against the other party
under equity, law, contract or any other theory of recovery such that in no
event shall any liability or obligation of Buyer or Seller exceed or extend
beyond the rights set forth in this Article VIII; PROVIDED that such rights
shall not be exclusive of any rights or remedies available to any party with
respect to equitable relief concerning the matters set forth in the
Confidentiality Agreement, the Noncompetition Agreement and Section 2.13.
8.9 IDENTIFIED REMEDIATION COVENANT. Seller shall perform any and all
testing, sampling, response, clean-up, containment, restoration, removal,
transport or disposal of Hazardous Substances or other remedial work which is
required to be performed, whether on-site or off-site, by applicable
Environmental Requirements arising in connection with the presence of the
Hazardous Substances at the locations and at the concentration levels that are
or become the subject matter of Sellers' claims under any Litigation referred in
Section 8.12 ("IDENTIFIED REMEDIATION"). If Seller shall fail to timely
commence, or cause to be commenced, or fail to diligently prosecute to
completion, such Identified Remediation, Buyer may cause such Identified
Remediation to be performed, and all Environmental Costs or other reasonable
costs and expenses incurred in connection with the Identified Remediation, shall
be due and payable by Seller upon demand therefor by Buyer; PROVIDED, HOWEVER,
to the extent that Buyer performs Identified Remediation under this Section 8.9,
Buyer shall comply with the requirements that would otherwise be applicable to
Seller's performance of remediation under Sections 8.10 and 8.11 of this
Agreement and provided further that Buyer shall not commence Identified
Remediation prior to providing Seller with thirty (30) days written notice of
its intent to do so. The costs of any Identified Remediation performed by Buyer
prior to the expiration of this thirty (30) day period except as required by any
Governmental Authority to be performed within such thirty (30) day period shall
not be subject to reimbursement by Seller.
8.10 CLEANUP STANDARDS. Notwithstanding any provision in this Agreement
to the contrary, the Identified Remediation performed by Seller under this
Agreement shall in all cases be performed in accordance with the requirements
necessary to achieve cleanup levels consistent with the current industrial use
of the Subject Property as allowed by the appropriate agency after reasonable
negotiation, including the use of institutional controls, such as deed
recordation rather
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than total removal or treatment and engineering controls to the extent they do
not materially and adversely impact the then current industrial use of the
Subject Property or impose material post closure unreimbursed costs on Buyer,
provided that the use of engineering controls shall not be used without the
Buyer's prior written consent, not to be unreasonably withheld.
8.11 PERFORMANCE OF IDENTIFIED REMEDIATION. All Identified
Remediation shall be performed by Seller as follows:
(a) All Identified Remediation shall be performed and
conducted: (i) continuously with reasonable diligence and in accordance with all
applicable Environmental Requirements; (ii) in a good, safe and workmanlike
manner and shall minimize any impact on the business conducted at the Subject
Property; (iii) pursuant to a detailed written remediation plan ("IDENTIFIED
REMEDIATION ACTION PLAN"), which shall be provided to Buyer for its review
before work is undertaken; the Identified Remediation Action Plan shall be
consistent with sound industry practices and in compliance with applicable
Environmental Requirements, and shall be approved by the appropriate
Governmental Authorities, if such approval is required by Environmental
Requirements; (iv) with such insurance coverage pertaining to liabilities
arising out of the work as is customarily maintained with respect to such
activities; and (v) only upon receipt of all required permits, licenses or
approvals from Governmental Authorities.
(b) Promptly upon completion of the Identified Remediation,
Seller shall permanently seal or cap all monitoring wells, test holes and other
intrusions to industrial standards in compliance with Environmental
Requirements, remove all associated equipment, and restore the Subject Property
to its condition prior to the performance of the Identified Remediation, which
shall include, without limitation, the repair of any surface damage, and paving,
and the repair, restoration or reconstruction of any damaged improvements caused
by such investigation or remediation.
(c) Seller shall promptly provide to the Buyer copies of
testing results and reports that are generated in connection with the activities
described in this Section and all related correspondence or filings with any
Governmental Authorities (collectively the "ENVIRONMENTAL REPORTS").
(d) After the Closing Date, Seller and its agents shall be
provided with reasonable access to the Subject Property for the sole and
exclusive purposes of performing the Identified Remediation.
(e) Notwithstanding anything else in this Agreement to the
contrary, Seller shall be responsible for any damages to persons or property
caused by it or its agents or representatives in performing any of the
Identified Remediation.
8.12 ASHLAND LITIGATION. With respect to any claim that Seller and
the Company presently have or hereafter may have against Ashland Oil, Inc.
("ASHLAND") and ATEC, Inc. ("ATEC") under the Purchase and Sale Agreement dated
January 12, 1990, as amended, among
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Ashland, ATEC and Seller, Seller shall continue to prosecute, control and defend
such claims (or with respect to future matters, initiate, prosecute and control
any such claim). Buyer and Seller acknowledge and agree that Seller shall be
entitled to retain any monetary award and/or settlement the Seller shall obtain
against Ashland and/or ATEC in favor of Seller and the Company. The Seller shall
provide the Buyer with copies of all pleadings and other papers filed in
connection with the litigation. Any counterclaims, cross-claims or other claims
by Ashland against the Company shall be treated as Third Party Claims. Seller
agrees that any settlement of the Ashland litigation may not purport to limit
the actions of, or otherwise restrict in any way the Company, or require any
payment by the Company, without the Buyer's prior written consent which consent
shall not be unreasonably withheld. The Seller shall fully indemnify the Buyer
and the Company for all Buyer's Losses and Environmental Costs associated with
the Ashland litigation.
8.13 RECEIVABLES. To the extent any Receivables (other than Long Term
Receivables and any Receivables collected by Buyer pursuant to Section
1.1(b)(iii)) are not collected within ninety (90) days following the Closing
Date, Seller shall purchase from the Company such uncollected Receivables for a
cash price equal to the aggregate face amount thereof less the reserve for such
doubtful accounts reflected on the Closing Balance Sheet. Such purchase shall be
concluded not more than five Business Days following the conclusion of such
ninety (90) day period. To the extent any Long Term Receivables are not
collected when due following the Closing Date, Seller shall purchase from the
Company such uncollected Long Term Receivables for a cash price equal to the
aggregate face amount thereof less the reserve for such doubtful accounts
reflected on the Closing Balance Sheet. Such purchase shall be concluded not
more than five Business Days following Buyer's demand. All uncollected
Receivables purchased pursuant to this Section 8.13 are herein called the
"REACQUIRED RECEIVABLES". Buyer will cause the Company to apply all credits and
payments against the oldest invoices, consistent with the Company's past
practice. Buyer covenants and agrees that it will cause the Company to use all
diligent efforts in the collection of the Receivables and will assist Seller in
such collection efforts of the Reacquired Receivables as are consistent with
past collection practices of the Company. Seller shall have the right to audit
the Company's handling of the Reacquired Receivables after Closing. Seller shall
not have any liability for a breach of the representation and warranty in
Section 2.17 with respect to the Reacquired Receivables. All Long Term
Receivables outstanding on the date of this Agreement are identified by account
debtor, amount, invoice date and due date in SCHEDULE 8.13, which the Seller
shall update on the Closing Date.
8.14 LIMITATION AS TO INDEMNIFIED PARTIES' OWN NEGLIGENCE. The
obligations of the Indemnifying Parties under this Article VIII to indemnify the
Indemnified Parties shall be limited to the extent the cause or alleged cause
(in whole or in part) of the Buyer's Losses, Seller's Losses or Environmental
Costs for which a claim for indemnification is made hereunder is also the result
of the concurrent, active or passive, imputed technical or other negligence, or
fault of the party seeking indemnification.
8.15 PENSION PLANS. It is acknowledged and agreed by the parties
hereto that, except as otherwise provided in this Section 8.15, on and after the
Closing neither Seller nor any affiliate
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of Seller shall have any responsibility whatsoever for the maintenance,
administration, and payment of benefits from the Beaird Plans. As soon as
practicable after the Closing, Buyer shall establish a trust qualified under
Section 501(a) of the Code to fund benefits payable under the Beaird Industries,
Inc. Pension Plan (the "Beaird Pension Plan"), and Seller shall cause the
trustee of the Trinity Industries, Inc. Master Retirement Trust (the "Master
Trust") to transfer all assets thereunder attributable to the Beaird Pension
Plan (as determined by such trustee in accordance with its books and records
maintained for the purpose of providing separate accounting for the assets of
each plan participating in such trust) to the trust so established by Buyer;
provided, however, that the amount so transferred shall first be reduced by the
allocable share of fees and expenses incurred by the Beaird Pension Plan under,
and payable to the trustee of, the Master Trust during the period from the
Closing Date to the date of such transfer. Buyer and Seller agree to take any
and all action, including the filing of any documents required by Federal law,
necessary to facilitate such transfer of assets.
ARTICLE IX
TAX MATTERS
9.1 SECTION 338(H)(10) ELECTION.
(a) Buyer and Seller covenant and agree to make an election
under Section 338(h)(10) of the Code for federal income tax purposes with
respect to the acquisition of the stock of the Company pursuant to this
Agreement and to make a similar election for the purpose of any provision of
state or local income tax law which is comparable to Section 338(h)(10) of the
Code. Buyer shall prepare the form or forms which are required to make each such
election ("FORMS") and subject to the approval of the Forms by Seller (such
approval not to be unreasonably withheld), Seller shall execute such Forms after
which Buyer shall file such Forms as required by law.
(b) In preparing the Forms, Buyer will allocate the amount
deemed to have been paid for the Company's assets for federal income tax
purposes in accordance with applicable law and in doing so the fair market
values of those assets will be determined by Buyer, subject to the approval of
Seller (which approval shall not be unreasonably withheld). Upon approval by
Seller, such allocation will be binding absent manifest error. Buyer and Seller
recognize that the Purchase Price does not include the acquisition expenses of
Buyer and agree that Buyer will allocate those expenses appropriately in its
discretion. Each of Seller and Buyer agrees (i) to file its federal income and
other Tax Returns reflecting such allocations, (ii) to take no position contrary
thereto unless required to do so pursuant to a "determination" (as defined in
Section 1313(a) of the Code) and (iii) to cooperate in the preparation of any
forms or reports required to be filed in connection with the transactions
effected pursuant to this Agreement.
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9.2 LIABILITY FOR TAXES AND RELATED MATTERS.
(a) Seller shall be liable for and timely pay(i) all Taxes
which are imposed on or incurred by the Company for any period for purpose of
computing Taxes ending on or before the Closing Date (including any Taxes which
are solely attributable to the election under Section 338(h)(10) of the Code for
the Company or any analogous elections under state law), (ii) (A) all Taxes for
which the Company is liable by reason of having been a member of an affiliated,
combined, unitary or other group, and (B) income Taxes of another Person for
which the Company is liable as transferee or successor or by contract, for any
period ending on or before the Closing Date and (iii) a portion, determined as
described below, of any other Taxes which are imposed on or incurred by the
Company for any period for purposes of computing Taxes which begins before and
ends after the Closing Date (a "STRADDLE PERIOD"). Buyer shall be liable for all
other Taxes which are imposed on or incurred by the Company and for any Taxes
incurred as the result of Buyer causing any sale, exchange, or distribution of
the assets of the Company on the Closing Date other than Taxes resulting solely
from an election under Section 338(h)(10) of the Code or analogous elections
under state law. Should any other Taxes be imposed on or incurred by the Company
for any Straddle Period, Seller shall be liable for only the portion of such
Taxes (which shall in no event exceed the amount of Taxes being apportioned)
which is attributable to the taxable events and activities (including based upon
or related to income or receipts) which occurred during the Straddle Period and
on or before the Closing Date; provided that ad valorem Taxes and state
franchise Taxes (other than franchise Taxes measured by net income) and any
other Taxes computed in a similar manner as ad valorem Taxes and state franchise
Taxes (other than franchise Taxes measured by net income) ("SIMILAR TAXES")
shall be determined by prorating such Taxes for a Straddle Period on a daily
basis. Any allocation of income, deductions or other Tax items required to
determine any Taxes attributable to any period including or ending on the
Closing Date shall be made by means of a closing of the books of the Company as
of the Closing Date.
(b) Seller shall indemnify Buyer and the Company, and Buyer
shall indemnify Seller, in respect of the Taxes for which the indemnifying party
is liable pursuant to Section 9.2(a) and for the reasonable fees and expenses of
the indemnitee's advisors which are incurred thereby in connection with
obtaining such payment. In addition, the amount of such payment shall be
increased by the amount if any which is necessary so that after the payment by
the indemnitee of Taxes which the indemnitee incurs as a result of receipt of
the payments pursuant to this Section 9.2(b) such indemnitee will retain the
amount which is described in the first sentence of this Section 9.2(b).
(c) If Buyer or any affiliate of Buyer receives a refund of
any Taxes described in the first sentence of Section 9.2(a), then Buyer shall
cause the amount of such refund to be paid to Seller promptly after receipt of
such refund. If Seller or any affiliate of Seller receives a refund of any Taxes
described in the second sentence of Section 9.2(a), then Seller shall cause the
amount of such refund to be paid to Buyer promptly after receipt of such refund.
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(d) Seller shall be responsible for the preparation (in
accordance with past practices) and filing of all Tax Returns for the Company
for periods for purposes of computing Taxes ending on or before the Closing
Date. Seller shall include the Company in the filing of its consolidated federal
income Tax Return and shall cause the Company to be included in any combined,
unitary or consolidated state, local or foreign Tax Returns required or
permitted to be filed by the Seller for the Company's periods or portions
thereof ending on or including the Closing Date. Buyer shall be responsible for
the preparation and filing of all other Tax Returns which relate to the Company.
(e) Any tax sharing or allocation agreement between the
Company and either Seller or another member of the Seller's Group is terminated
as of the Closing Date and will have no further effect for any taxable year
(whether the current taxable year, a future taxable year or a past taxable
year).
9.3 ASSISTANCE AND COOPERATION. After the Closing Date, each of Seller
and Buyer agree:
(a) To assist (and cause their respective affiliates to
assist) the other party in preparing any Tax Returns which such other party is
responsible for preparing and filing in accordance with Section 9.2(d),
cooperate fully in preparing for any audits of, or disputes with taxing
authorities regarding, any Tax Returns or Tax of the Company and make available
to the other and to any taxing authority as reasonably requested all
information, records, and documents relating to the Tax liabilities of the
Company as set forth herein. Seller and Buyer shall also make available to the
other, as reasonably requested and available, personnel responsible for
preparing or maintaining information, records and documents in connection with
Taxes as well as related litigation.
(b) To preserve all such information, records and documents
until the expiration of any applicable statutes of limitation or extensions
thereof and as otherwise required by law.
(c) To provide timely notice to the other in writing of any
pending or threatened tax audits or assessments related to the Company for
periods beginning prior to the Closing Date and furnish the other with copies of
all correspondence received from any taxing authority in connection with any tax
audit or information request with respect to any such period.
(d) In the event of an audit or dispute with a taxing
authority concerning Taxes for which a party is liable pursuant to Section
9.2(a), that party will be entitled to control the proceedings related to such
Taxes (including action taken to pay, compromise or settle such Taxes), except
that Seller will in any event be entitled to control any proceedings which
relate to or impact a consolidation or combined return filed by Seller and one
or more of its subsidiaries. The party which is not entitled to control any such
proceedings shall be afforded a reasonable opportunity to participate in such
proceedings at its own expense.
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9.4 PAYMENT.
(a) All Taxes (including Taxes owed after a compromise or
settlement of an audit or dispute with a taxing authority) shall be paid to the
taxing authority by the party which is legally responsible therefor.
(b) Upon payment of any Taxes with respect to which a party is
entitled to receive indemnification hereunder, such party shall submit an
invoice to the indemnifying party stating that such Taxes have been paid and
giving in reasonable detail the particulars relating thereto. The indemnifying
party shall remit payment for such Taxes promptly upon receipt of such invoice.
9.5 SURVIVAL OF OBLIGATIONS. Subject to the limitations set forth in
Section 10.10(b), the obligations of the parties set forth in this Article IX
shall be unconditional and absolute and shall remain in effect without
limitation as to time.
ARTICLE X
MISCELLANEOUS
10.1 ENTIRE AGREEMENT. This Agreement and the other Transaction
Documents (including the exhibits and schedules hereto and thereto) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, between the parties hereto with respect to the subject
matter hereof.
10.2 SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any
rights, interests or obligations hereunder may be assigned by any party hereto
without the prior written consent of all other parties hereto, and any purported
assignment in violation of this Section 10.2 shall be null and void; PROVIDED,
HOWEVER, that Buyer may (a) collaterally assign its rights and obligations
hereunder in connection with the financing of the acquisition, and (b) assign
its rights and obligations hereunder to any direct or indirect owner of all of
the outstanding equity interests thereof or to any successor in interest whether
by merger or consolidation. If any party, in a single transaction or series of
related transactions, sells, leases, exchanges, or otherwise disposes of all or
substantially all of its property and assets, such party (the "SELLING PARTY")
shall, as a condition precedent to any such transaction, cause effective
provision to be made so that the Person acquiring such property and assets (the
"ACQUIRING PARTY") shall become bound by and replace said Selling Party under
this Agreement; and each other party (each "NON-SELLING PARTY") hereby agrees
that such Non-Selling Party shall in such event continue to be bound by the
terms hereof and recognize such Acquiring Party in replacement of said Selling
Party. Notwithstanding the foregoing, any assignment by Buyer (other than
pursuant to clause (a) above in this Section to a lender that neither directly
or indirectly competes with Seller in the "Trinity Business", as defined in the
Noncompetition Agreement, nor is owned or controlled by a party that
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directly or indirectly competes with Seller in the Trinity Business) shall
require the prior written consent of Seller, which consent shall not be
unreasonably withheld.
10.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
10.4 HEADINGS. The headings of the articles and sections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
10.5 CONSTRUCTION. As used in this Agreement, the words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular article, section, paragraph or
other subdivision thereof.
10.6 MODIFICATION AND WAIVER. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof, and this Agreement may be modified or amended by a written
instrument executed by Buyer and Seller. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by all
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
10.7 SCHEDULES, ETC. All exhibits and schedules annexed hereto are
expressly made a part of this Agreement as though fully set forth herein.
Throughout the Schedules furnished by Seller to Buyer, Seller has attempted to
recite the text of the representations and warranties of Seller contained in
this Agreement so as to provide a context for the response of Seller in the
Schedules. Accordingly, other than in those instances where this Agreement notes
that exceptions to a representation or warranty of Seller may be listed on a
corresponding schedule, and such exceptions are specifically noted, if any
language contained on any schedule modifies or in any way conflicts with a
representation or warranty of Seller contained in this Agreement, the terms of
such representation and warranty shall govern exclusively and such language in
the schedules shall be disregarded.
10.8 NOTICES. Any notice, request, instruction, document or other
communication to be given hereunder by any party hereto to any other party
hereto shall be in writing and validly given if (a) delivered personally, (b)
sent by telecopy with electronic confirmation of receipt, (c) delivered by
overnight express or (d) sent by registered or certified mail, postage prepaid,
as follows:
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If to Buyer, to:
Industrial Holdings, Inc.
7135 Ardmore
Houston, TX 77054
Attention: Robert E. Cone
Telecopy No.: (713) 749-9642
with a copy to:
David Jungman, Esq.
Gardere Wynne Sewell & Riggs, L.L.P.
333 Clay Avenue, Suite 800
Houston, TX 77002
Telecopy No.: (713) 308-5555
If to Seller, to:
Trinity Industries, Inc.
2525 Stemmons Freeway
Dallas, Texas 75207
Attention: F. Dean Phelps
Telecopy No.: (214) 589-8824
with a copy to:
Charles C. Reeder, Esq.
Locke Purnell Rain Harrell, A Professional Corporation
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
Telecopy No.: (214) 740-8800
or at such other address for a party as shall be specified by like notice. Any
notice that is delivered personally or sent by telecopy or overnight express in
the manner provided herein shall be deemed to have been duly given to the party
to whom it is directed upon actual receipt by such party. Any notice that is
addressed and mailed in the manner herein provided shall be conclusively
presumed to have been given to the party to whom it is addressed at the close of
business, local time of the recipient, on the fourth day after the day it is so
placed in the mail.
10.9 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED, ENFORCED AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO ITS
CHOICE OF LAW PRINCIPLES).
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10.10 SURVIVAL OF COVENANTS, AGREEMENTS, REPRESENTATIONS AND
WARRANTIES.
(a) COVENANTS AND AGREEMENTS. Except as provided in Section
10.10(b) below, all covenants and agreements made hereunder or pursuant hereto
or in connection with the transactions contemplated hereby shall survive the
Closing and shall continue in full force and effect thereafter according to
their terms without limit as to duration.
(b) REPRESENTATIONS AND WARRANTIES. All the provisions of this
Agreement will survive the Closing indefinitely notwithstanding any
investigation at any time made by or on behalf of any party hereto, provided
that the representations and warranties set forth in Articles II and III and in
any certificate delivered in connection herewith with respect to any of those
representations and warranties will terminate and expire on the earlier of (A)
November 30, 2000 or (B) two years after the Company's first audit following the
Closing Date, except as follows: (i) the representations and warranties of
Seller which relate expressly or by necessary implication to Taxes and the
parties' obligations under Article IX will survive until the expiration of the
applicable statute of limitations (including all periods of extension and
tolling); (ii) the representations and warranties of Seller which relate
expressly or by necessary implication to the environment or Environmental
Requirements and the Seller's obligations under Section 8.2 (except in each case
which relate to the Identified Remediation) will survive for a period of four
(4) years from the Closing Date; (iii) the representations and warranties of
Seller and the Seller's obligations under Section 8.2 (in each case which relate
expressly or by necessary implication to the Identified Remediation) and the
Seller's obligations under Sections 8.9, 8.10 and 8.11 shall survive until two
(2) years after the issuance by all applicable Governmental Authorities of a
final closure letter regarding all soil and ground water remediation associated
with the Identified Remediation; (iv) the representations and warranties of
Seller set forth in Section 2.6(a) and the last sentence of Section 2.6(c) will
survive forever; and (v) the representations and warranties set forth in
Sections 2.1, 2.2 and 2.3 will survive for a period of four (4) years from the
Closing Date. After a representation and warranty has terminated and expired, no
indemnification will or may be sought pursuant to Article VIII on the basis of
that representation and warranty by any Person who would have been entitled
pursuant to Article VIII to indemnification on the basis of that representation
and warranty prior to its termination and expiration, PROVIDED THAT, in the case
of each representation and warranty that will terminate and expire as provided
in this Section 10.10, no Claim Notice or Indemnity Notice presented pursuant to
Article VIII on the basis of that representation and warranty prior to its
termination and expiration will be affected in any way by that termination and
expiration.
10.11 INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable, this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement, and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this
Agreement.
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10.12 EXPENSES. Except as otherwise set forth in Section 7.1(b), each
party shall be solely responsible for their respective costs and expenses
including all filing fees incurred in connection with the transactions
contemplated hereby and, in the case of Seller, such costs and expenses will not
be paid from the funds of the Company.
10.13 THIRD PARTY BENEFICIARIES. Except as otherwise specifically
provided in Articles VIII and IX, no individual or firm, corporation,
partnership or other entity shall be a third party beneficiary of the
representations, warranties, covenants and agreements made by any party hereto.
10.14 NUMBER AND GENDER OF WORDS. Whenever the singular number is used,
the same shall include the plural where appropriate, and words of any gender
shall include each other gender where appropriate.
10.15 FURTHER ASSURANCES. From time to time after the Closing, at the
request of any other party but at the expense of the requesting party, Buyer or
Seller, as the case may be, will execute and deliver (and Buyer will cause the
Company to execute and deliver) any such other instruments of conveyance,
assignment and transfer, and take such other action as the other party may
reasonably request in order to consummate or evidence the transactions
contemplated hereby.
10.16 PUBLICITY. Without the prior written consent of the other party
hereto, neither party shall make any press release or public announcement with
respect to the transactions contemplated by this Agreement prior to the Closing;
PROVIDED, HOWEVER, that the parties hereto shall be entitled, following
reasonable prior written notice to the other party, to issue such press releases
and to make such public statements as are, in the opinion of its legal counsel,
required by applicable law.
10.17 CONFIDENTIALITY AGREEMENT. The parties hereto acknowledge and
agree that the Confidentiality Agreement dated December 15, 1997 between Buyer
and Seller shall remain in full force and effect pursuant to its terms
notwithstanding the execution and delivery of this Agreement. Subject to the
previous sentence, if this Agreement is terminated, all documents received by
any party in connection herewith (including any copies or extracts made of them)
shall be returned to the other party promptly after such termination.
10.18 MEANING OF "TO THE KNOWLEDGE OF SELLER". As used in this
Agreement, "to the knowledge of Seller" and similar phrases shall refer to the
collective knowledge of all of the executive officers of Seller and the officers
and directors of the Company, with such Persons having made all reasonable
inquiries of employees of Seller and the Company and such other Persons as may
be appropriate in the circumstances of the matter in question.
10.19 RELEASE.
(a) Subject to the limitations set forth in the last sentence
of this Section 10.19(a), Seller hereby unconditionally and irrevocably releases
and forever discharges, effective as of and forever after the Closing, to the
fullest extent permitted by applicable law, all past, present and
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future Buyer Indemnified Parties (collectively, including, after the Closing,
the Company and any successor-by-merger to the Buyer and/or the Company, the
"BUYER RELEASED PARTIES") from any and all debts, liabilities, obligations,
claims, demands, actions or causes of action, suits, judgments or controversies
of any kind whatsoever (collectively, "PRE-ACQUISITION CLAIMS") against the
Company, if any, or any of them that arises out of or is based on any agreement
or understanding or act or failure to act (INCLUDING ANY ACT OR FAILURE TO ACT
THAT CONSTITUTES ORDINARY OR GROSS NEGLIGENCE OR RECKLESS, WILLFUL OR WANTON
MISCONDUCT), misrepresentation, omission, transaction, fact, event or other
matter occurring prior to the Closing (whether based at law or in equity or
otherwise, foreseen or unforeseen, matured or unmatured, known or unknown,
accrued or not accrued) (collectively, "PRE-ACQUISITION MATTERS"), including:
(a) claims by Seller with respect to repayment of loans or indebtedness; (b) any
rights, titles and interests in, to or under any agreements, arrangements or
understandings to which Seller is a party; and (c) claims by Seller with respect
to dividends, violation of preemptive rights, or payment of salaries or other
compensation. Seller further agrees not to file or bring any Litigation before
any Governmental Authority on the basis of or respecting any Pre-Acquisition
Claim concerning any Pre-Acquisition Matter against any Buyer Released Party.
Seller (a) acknowledges that it fully comprehends and understands all the terms
of this Section 10.19(a) and their legal effects and (b) expressly represents
and warrants that (i) it is competent to effect the release made in this Section
10.19(a) knowingly and voluntarily and without reliance on any statement or
representation of any Buyer Released Party or its representatives and (ii) it
had the opportunity to consult with an attorney of its choice regarding this
Section 10.19(a). This Section 10.19(a) shall not affect the rights of Seller
under this Agreement or any other of the Transaction Documents.
(b) At the Closing, Seller shall cause the Company to execute
and deliver to Seller a release substantially as follows: Subject to the
limitations set forth in the last sentence of this Section 10.19(b), the Company
hereby unconditionally and irrevocably releases and forever discharges,
effective as of and forever after the Closing, to the fullest extent permitted
by applicable law, all past, present and future Seller Indemnified Parties and
Seller Affiliates (collectively, the "SELLER RELEASED PARTIES") from any and all
Pre-Acquisition Claims against Seller or any Seller Affiliate if any, or any of
them that arises out of or is based on any Pre-Acquisition Matters, including:
(a) claims by the Company with respect to repayment of loans or indebtedness;
(b) any rights, titles and interests in, to or under any agreements,
arrangements or understandings to which the Company is a party; and (c) claims
by the Company with respect to dividends, violation of preemptive rights, or
payment of salaries or other compensation. The Company further agrees not to
file or bring any Litigation before any Governmental Authority on the basis of
or respecting any Pre-Acquisition Claim concerning any Pre-Acquisition Matter
against any Seller Released Party. The Company (a) acknowledges that it fully
comprehends and understands all the terms of this Section 10.19(b) and their
legal effects and (b) expressly represents and warrants that (i) it is competent
to effect the release made in this Section 10.19(b) knowingly and voluntarily
and without reliance on any statement or representation of any Seller Released
Party or its representatives and (ii) it had the opportunity to consult with an
attorney of its choice regarding this Section 10.19(b). This Section 10.19(b)
shall not affect the rights of the Buyer under this Agreement or any other of
the Transaction Documents.
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10.20 ACCESS TO RECORDS. From and after the Closing, each party, at the
request of the other party and at the requesting party's expense, will provide
the other party with reasonable access to those books and records relating to
matters identified from time to time to the other party involving the
preparation or examination of Tax returns and financial statements and the
conduct of any litigation or regulatory matter with regard to the business of
the Company prior to the Closing Date. Access to such books and records shall be
at the requesting party's expense and may not unreasonably interfere with
business operations. Seller may also retain after the Closing Date duplicate
copies of any information in the possession of the Company required in
connection with the preparation of Tax returns and financial statements of
Seller and its Subsidiaries. The party receiving or retaining copies of any
information covered by this Section 10.20 shall treat such information, if not
in the public domain, as confidential and shall not disclose such information to
others, or use any such information for any purpose, unless such information is
(i) in the public domain, or thereafter enters the public domain through no
violation by such party of its obligations hereunder, (ii) required to be
disclosed by any applicable law, rule or regulation of any Governmental
Authority or (iii) lawfully obtained from a source (other than a party hereto)
in accordance with the terms and conditions, if any, imposed upon such party by
such source respecting the use and disclosure thereof, PROVIDED, HOWEVER, that
to such party's knowledge, such source was not at the time bound by a
confidentiality agreement or duty with such other party.
10.21 HART-SCOTT-RODINO ACT. The Buyer and the Seller will file the
Notification and Report Forms and related material that they are required to
file with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the Hart-Scott-Rodino Antitrust Improvement
Act, will use their reasonable efforts to obtain an early termination of the
applicable waiting period, and will make any further filings pursuant thereto
that may be necessary, proper, or advisable, provided, however, that the
reasonable efforts of the Buyer shall not include (a) proffering the Buyer's
willingness to accept an order providing for the divestiture of such of the
properties, assets, operations, or business of the Company (or, in lieu thereof,
such properties, assets, operations or business of the Buyer or any of the
Buyer's affiliates) as are necessary to permit the consummation of the
transactions contemplated by this Agreement, including an offer to hold separate
such properties, assets, operations or businesses pending any such divestiture,
(b) proffering the Buyer's willingness to accept any other conditions,
restrictions, limitations or agreements affecting the full rights of ownership
of the Company's assets (or any portion thereof) as may be necessary to permit
the consummation of the transactions contemplated by this Agreement, or (c)
entering into or continuing any litigation relating to this Agreement or the
transactions contemplated hereby. The Seller shall also not be required to enter
into or continue any litigation relating to this Agreement or the transactions
contemplated hereby.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
BUYER:
INDUSTRIAL HOLDINGS, INC.
By:__________________________
Title:_______________________
SELLER:
TRINITY INDUSTRIES, INC.
By:__________________________
Title:_______________________
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EXHIBIT A
"ADJUSTMENT AMOUNT" shall mean $19,591,091.
"AGREEMENT" shall have the meaning provided in the first
paragraph of this Agreement.
"ASHLAND" shall have the meaning provided in Section 8.12.
"ATEC" shall have the meaning provided in Section 8.12.
"BEAIRD EMPLOYEES" shall have the meaning provided in Section
5.3.
"BEAIRD PARTICIPANTS" shall have the meaning provided in
Section 2.14(a).
"BEAIRD PENSION PLAN" shall have the meaning provided in
Section 8.15.
"BEAIRD PLANS" shall have the meaning provided in Section
2.14(a).
"BENEFITS VALUE" shall have the meaning provided in Section
2.14(a).
"BENEFIT PROGRAM" shall have the meaning provided in Section
2.14(c)(iii).
"BRIGHTON MANUFACTURING AGREEMENT" shall have the meaning
provided in Section 6.2(a)(viii).
"BUSINESS DAY" means a day other than a Saturday or a Sunday
or other day on which banks are authorized or required to close in the
State of Texas.
"BUYER INDEMNITEES" shall have the meaning provided in Section
8.1(a).
"BUYER RELEASED PARTIES" shall have the meaning provided in
Section 10.19(a).
"BUYER THRESHOLD AMOUNT" shall have the meaning provided in
Section 8.7(b).
"BUYER" shall have the meaning provided in the first paragraph
of this Agreement.
"BUYER'S DB PLAN" shall have the meaning provided in Section
2.14(a).
"BUYER'S DC PLAN" shall have the meaning provided in Section
2.14(a).
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"CAPITAL STOCK" means, with respect to: (a) any corporation,
any share, or any depositary receipt or other certificate representing
any share, of an equity ownership interest in that corporation; and (b)
any other Entity, any share, membership or other percentage interest,
unit of participation or other equivalent (however designated) of an
equity interest in that Entity.
"CASH AMOUNT" shall have the meaning provided in Section
1.1(b)(i).
"CHARTER DOCUMENTS" means, with respect to any Entity at any
time, in each case as amended, modified and supplemented at that time,
the articles or certificate of formation, incorporation or organization
(or the equivalent organizational documents) of that Entity, (b) the
bylaws or limited liability company agreement or regulations (or the
equivalent governing documents) of that Entity and (c) each document
setting forth the designation, amount and relative rights, limitations
and preferences of any class or series of that Entity's Capital Stock or
of any rights in respect of that Entity's Capital Stock.
"CLAIM NOTICE" shall have the meaning provided in Section 8.4.
"CLOSING" shall have the meaning provided in Section 6.1.
"CLOSING BALANCE SHEET" shall have the meaning provided in
Section 1.2.
"CLOSING DATE" shall have the meaning provided in Section 6.1.
"CLOSING VALUE" shall have the meaning provided in Section
1.2.
"CODE" shall have the meaning provided in Section 2.14(b).
"COMPANY" shall have the meaning provided in the first Whereas
clause of this Agreement.
"CONSULTANT" shall have the meaning provided in Section 4.6.
"DAMAGE" to any specified Person means any cost, damage or
expense (including reasonable fees and actual disbursements by
attorneys, consultants, experts or other representatives and Litigation
costs) to, any fine of or penalty on or any liability of any other
nature of that Person, to the extent such damage is available as a
remedy under the applicable circumstances under applicable law, but
specifically excluding (except in connection with a Third-Party Claim)
(i) exemplary, punitive, speculative or remote consequential damages,
(ii) loss of earnings or profits attributable to the consequential loss
of future business or contracts or (iii) business interruption losses,
together with business interruption losses subject to Section 8.2, in
excess of $2,500,000 in the aggregate (such monetary limitation being
intended to qualify clause (iii) only). Any Damages shall be net
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of insurance proceeds actually received by the Indemnified Party and Tax
savings to the Indemnified Party resulting from any loss, but shall
include any Taxes owing by the Indemnified Party as a result of the
receipt of proceeds recovered for such loss.
"DAMAGE CLAIM" means, as asserted (a) against any specified
Person, any claim, demand or Litigation made or pending against the
specified Person for Damages to any other Person, or (b) by the
specified Person, any claim or demand of the specified Person against
any other Person for Damages to the specified Person.
"EARN OUT" shall mean the cash payment from Buyer to Seller
pursuant to Section 1.1(b(iv).
"EARN OUT PERIOD" means the one (1) year period commencing on
the Closing Date and ending on the first anniversary of the Closing
Date.
"EASEMENTS" means all easements, licenses, rights of way,
surface leases, privileges, franchises, servitude, prescriptions and
similar real property interests necessary in connection with the
ownership, operation and maintenance of the Company's business as
currently conducted.
"EBITDA" means net income before interest, taxes, depreciation
and amortization without any allocation of the expenses of any other
party.
"ELECTION PERIOD" shall have the meaning provided in Section
8.4.
"ENTITY" means any sole proprietorship, corporation,
partnership of any kind having a separate legal status, limited
liability company, business trust, unincorporated organization or
association, mutual company, joint stock company or joint venture.
"ENVIRONMENTAL ACTIVITY" shall mean any actual, proposed or
threatened storage, holding, existence, manufacture, release, emission,
discharge, generation, processing, treatment, abatement, removal,
disposition, handling, transportation or disposal of any "Hazardous
Substances" from, under, into or on any Subject Property or otherwise
relating to any Subject Property or the "Use" of any Subject Property.
"ENVIRONMENTAL INFORMATION" shall have the meaning provided in
Section 4.6.
"ENVIRONMENTAL NONCOMPLIANCE" shall mean failure to comply
prior to the Closing with any existing Environmental Requirement.
"ENVIRONMENTAL REPORTS" shall have the meaning provided in
Section 8.11(c).
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"ENVIRONMENTAL REQUIREMENTS" means all laws, statutes, rules,
regulations, ordinances, guidance documents, judgments, decrees, orders,
agreements and other restrictions and requirements (whether or not now
in effect) of any Governmental Authority, including, without limitation,
federal, state and local authorities, relating to the regulation or
protection of human health and safety, natural resources, conservation,
the environment, or the storage, treatment, disposal, transportation,
handling or other management of industrial or solid waste, hazardous
waste, or Hazardous Substances.
"ERISA" shall have the meaning provided in Section 2.14(a).
"ERP" shall have the meaning provided in Section 2.4(d).
"FORMS" shall have the meaning provided in Section 9.1(a).
"GAAP" shall have the meaning set forth in Section 1.2.
"GOVERNMENTAL APPROVAL" means at any time any authorization,
consent, approval, permit, franchise, certificate, license, implementing
order or exemption of, or registration or filing with, any Governmental
Authority, including any certification or licensing of a natural person
to engage in a profession or trade or a specific regulated activity, at
that time.
"GOVERNMENTAL AUTHORITY" means (a) any national, state,
county, municipal or other government, domestic or foreign, or any
agency, board, bureau, commission, court, department or other
instrumentality of any such government, or (b) any Person having the
authority under any applicable Governmental Requirement to assess and
collect Taxes for its own account.
"GOVERNMENTAL REQUIREMENT" means at any time (a) any law,
statute, code, ordinance, order, rule, regulation, judgment, decree,
injunction, writ, edict, award, authorization or other requirement of
any Governmental Authority in effect at that time or (b) any obligation
included in any certificate, certification, franchise, permit or license
issued by any Governmental Authority or resulting from binding
arbitration, including any requirement under common law, at that time.
"GUARANTY" means, for any specified Person, without
duplication, any liability, contingent or otherwise, of that Person
guaranteeing or otherwise becoming liable for any obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any liability of the specified Person, direct
or indirect, (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) that obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of that
obligation, (b) to purchase property, securities or services for the
purpose of assuring the owner of that obligation of its payment or (c)
to maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so
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<PAGE>
as to enable the primary obligor to pay that obligation; PROVIDED that
the term "Guaranty" does not include endorsements for collection or
deposit in the ordinary course of the endorser's business.
"HAZARDOUS SUBSTANCE" means (a) any "hazardous substance" as
defined in ss. 101(14) of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time to time
(42 U.S.C. ss.ss. 9601 et seq.) ("CERCLA"), or any regulations
promulgated thereunder; (b) petroleum and petroleum by-products; (c)
asbestos or asbestos-containing material ("ACM"); or (d) any additional
substances or materials that have been or are currently classified or
considered to be pollutants or hazardous or toxic substances under any
applicable Environmental Requirement.
"HEAD MANUFACTURING AGREEMENT" shall have the meaning provided
in Section 6.2(a)(xvii).
"IDENTIFIED PROPERTY" shall mean the Real Property, the Leased
Property, all real property previously owned or leased by the Company
and all improvements, fixtures, equipment and personal property now or
hereafter located on the Real Property, the Leased Property or any real
property previously owned or leased by the Company.
"IDENTIFIED REMEDIATION" shall have the meaning provided in
Section 8.9.
"IDENTIFIED REMEDIATION ACTION PLAN" shall have the meaning
provided in Section 8.11(a).
"INDEBTEDNESS" of any Person means, without duplication, (a)
any liability of that Person (i) for borrowed money or arising out of
any extension of credit to or for the account of that Person (including
reimbursement or payment obligations with respect to surety bonds,
letters of credit, banker's acceptances and similar instruments), for
the deferred purchase price of property or services or arising under
conditional sale or other title retention agreements, other than trade
payables arising in the ordinary course of business, (ii) evidenced by
notes, bonds, debentures or similar instruments, (iii) in respect of
capital leases or (iv) in respect of interest rate protection
agreements, (b) any liability secured by any Lien (other than a
Permitted Lien) upon any property or assets of that Person (or upon any
revenues, income or profits of that Person therefrom), whether or not
that Person has assumed that liability or otherwise become liable for
the payment thereof or (c) any liability of others of the type described
in the preceding clause (a) or (b) in respect of which that Person has
incurred, assumed or acquired a liability by means of a Guaranty.
"INDEMNIFIED PARTIES" shall have the meaning provided in
Section 8.4.
"INDEMNIFYING PARTY" shall have the meaning provided in
Section 8.4.
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"INDEMNIFYING PARTY" shall have the meaning provided in
Section 8.4.
"INDEMNITY NOTICE" shall have the meaning provided in Section
8.5(d).
"INFORMATION" means written information, including (a) data,
certificates, reports and statements (excluding financial statements)
and (b) summaries of unwritten agreements, arrangements, contracts,
plans, policies, programs or practices or of unwritten amendments or
modifications of, supplements to or waivers under any of the foregoing
documents.
"INITIAL FINANCIAL STATEMENTS" shall have the meaning provided
in Section 2.4(a).
"INSPECTION" shall have the meaning provided in Section 4.6.
"INTELLECTUAL PROPERTY" shall mean trademarks, patents,
registered copyrights, service marks, and applications for registration
thereof.
"INTEREST RATE" shall have the meaning provided in Section
2.14(a).
"INTERIM PERIOD" shall have the meaning provided in Section
2.14(a).
"LEASED PROPERTY" shall have the meaning set for in Section
2.6(c).
"LICENSED SOFTWARE" shall have the meaning provided in Section
2.4(e).
"LIEN" means, with respect to any property or asset of any
Person (or any revenues, income or profits of that Person therefrom) (in
each case whether the same is consensual or nonconsensual or arises by
contract, operation of law, legal process or otherwise), (a) any
mortgage, lien, security interest, pledge, attachment, levy or other
charge or encumbrance of any kind thereupon or in respect thereof or (b)
any other arrangement under which the same is transferred, sequestered
or otherwise identified with the intention of subjecting the same to, or
making the same available for, the payment or performance of any
liability in priority to the payment of the ordinary, unsecured
creditors of that Person, including any "adverse claim" (as defined in
the applicable Uniform Commercial Code) in the case of any Capital
Stock. For purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any asset that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to that asset.
"LITIGATION" means any action, case, proceeding, claim,
grievance, suit or investigation or other proceeding conducted by or
pending before any Governmental Authority or any arbitration proceeding.
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"LONG TERM RECEIVABLE" means any Receivable with a due date 90
days or more from the invoice date.
"MATERIAL" means, as applied to any Entity, material to the
business, operations, property or assets, liabilities, financial
condition or results of operations of that Entity.
"MATERIAL ADVERSE EFFECT" means, with respect to the
consequences to any Entity of any fact or circumstance (including the
occurrence or non-occurrence of any event), that such fact or
circumstance has caused, is causing or will cause, directly, indirectly
or consequentially, singly or in the aggregate with other facts and
circumstances, any Damages in excess of $10,000.
"MASTER TRUST" shall have the meaning provided in Section
8.15.
"MATERIAL CONTRACT" shall have the meaning provided in Section
2.8(a).
"NONCOMPETITION AGREEMENT" shall have the meaning provided in
Section 6.2(a)(vii).
"NOTE" shall have the meaning provided in Section 1.1(b)(ii).
"OWNED SOFTWARE" shall have the meaning provided in Section
2.4(e).
"PBGC" shall have the meaning provided in Section
2.14(d)(iii).
"PERMITTED LIENS" means, as applied to the property or assets
of any Person (or any revenues, income or profits of that Person
therefrom): (a) Liens for Taxes if the same are not at the time due and
delinquent; (b) non-consensual Liens imposed by operation of law of
carriers, warehousemen, mechanics, laborers and materialmen for sums not
yet due; (c) Liens incurred in the ordinary course of that Person's
business in connection with workmen's compensation, unemployment
insurance and other social security legislation (other than pursuant to
ERISA or Section 412(n) of the Code), in each case not incurred or made
in connection with the borrowing of money, the obtaining of advances or
credit or the payment of the deferred purchase price of property; (d)
Liens incurred in the ordinary course of that Person's business in
connection with deposit accounts or to secure the performance of bids,
tenders, trade contracts, statutory obligations, surety bonds,
performance and return-of-money bonds and other obligations of like
nature, in each case not incurred or made in connection with the
borrowing of money, the obtaining of advances or credit or the payment
of the deferred purchase price of property; (e) easements,
rights-of-way, reservations, restrictions and other similar encumbrances
incurred in the ordinary course of that Person's business or existing on
property and not materially interfering with the ordinary conduct of
that Person's business or the use of that property or materially
impairing the value of such property subject thereto; (f) defects or
irregularities in that Person's title
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<PAGE>
to its real properties which do not materially (i) diminish the value of
the surface estate or (ii) interfere with the ordinary conduct of that
Person's business or the use, occupation and enjoyment of any of such
properties; (g) any interest or title of a lessor of assets being leased
by any Person pursuant to any capital lease disclosed in SCHEDULE 2.6 or
any lease that, pursuant to GAAP, would be accounted for as an operating
lease; and (h) any Lien or Easement on either the Real Property or the
Leased Property if such Lien or Easement is reflected on either that
certain survey of the Real Property and the Leased Property dated April
6, 1990 performed by Ben D. Atchley, Jr., Registered Land Surveyor or
that certain title report on the Real Property and the Leased Property
dated January 30, 1990, as supplemented by letter dated April 6, 1990,
prepared by W. James Hill, III, of the law firm of Smitherman, Lunn,
Chastain & Hill.
"PERSON" means any natural person, Entity, estate, trust,
union or employee organization or Governmental Authority or, for the
purpose of the definition of "ERISA Affiliate," any trade or business.
"PLAN ACTUARY" shall have the meaning provided in Section
2.14(a).
"PLANS" shall have the meaning provided in Section 2.14(c)(i).
"POST-CLOSING ADJUSTMENT" shall have the meaning provided in
Section 1.2.
"PRE-ACQUISITION MATTERS" shall have the meaning provided in
Section 10.19(a).
"PRE-ACQUISITION CLAIMS" shall have the meaning provided in
Section 10.19(a).
"PRE-CLOSING PAYABLES" shall have the meaning provided in
Section 4.4(b).
"PROPERTY" shall have the meaning provided in Section 8.11.
"PROPRIETARY RIGHTS" means (a) patents, applications for
patents and patent rights, (b) in each case, whether registered,
unregistered or under pending registration, trademark rights, trade
names, trade name rights, corporate names, business names, trade styles
or dress, service marks and logos and other trade designations and
copyrights and (c), in the case of the Company, all agreements relating
to the technology, know-how or processes used in any business of the
Company.
"PURCHASE PRICE" shall have the meaning provided in Section
1.1.
"REACQUIRED RECEIVABLES" shall have the meaning provided in
Section 8.13.
"REAL PROPERTY LEASES" shall have the meaning provided in
Section 2.6(c).
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"REAL PROPERTY" shall have the meaning provided in Section
2.6(a).
"RECEIVABLES" shall have the meaning provided in Section 2.17.
"RELATED PARTY AGREEMENT" means any contract or other
agreement, written or oral, (a) to which the Company is a party or is
bound or by which any property of the Company is bound or may be subject
and (b) (i) to which Seller or any Seller Affiliate also is a party or
(ii) of which Seller or any Seller Affiliate is a beneficiary.
"RELEASE" shall have the meaning provided in Section 2.7.
"RETAINED RELATED PARTY AGREEMENTS" shall have the meaning
provided in Section 2.27.
"RETURNS" shall have the meaning provided in Section 2.5(a).
"SALE TRANSACTION" shall mean a merger, consolidation, sale of
shares of capital stock or similar transaction involving the Company in
which the Company or any successor thereto is not a wholly-owned
subsidiary of Seller, or a sale of all or substantially all the assets
of the Company.
"SECURITIES ACT" shall have the meaning provided in Section
3.4.
"SELLER AFFILIATE" shall have the meaning provided in Section
2.27.
"SELLER RELEASED PARTIES" shall have the meaning provided in
Section 10.19(b).
"SELLER THRESHOLD AMOUNT" shall have the meaning provided in
Section 8.7(c).
"SELLER" shall have the meaning provided in the first
paragraph of this Agreement.
"SELLER'S INDEMNITEES" shall have the meaning provided in
Section 8.3(a).
"SHARES" shall have the meaning provided in Section 1.1.
"SIMILAR TAXES" shall have the meaning provided in Section
9.2(a).
"SPECIAL NOTICE" shall have the meaning provided in Section
7.2(a).
"STRADDLE PERIOD' shall have the meaning provided in Section
9.2(a).
"SUBJECT PROPERTY" means the Real Property and all Leased
Property.
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"SUBSIDIARY" of any specified Person at any time means any
Entity a majority of the Capital Stock of which is at that time owned or
controlled, directly or indirectly, by the specified Person.
"TAX" or "TAXES" means any and all taxes, fees, levies,
duties, tariffs, imposts and other charges of any kind (together with
any and all interest, penalties, additions to tax and additional amounts
imposed with respect thereto) imposed by any government or taxing
authority, including, without limitation: taxes or other charges on or
with respect to income, franchises, windfall profits, severance, gross
receipts, property, sales, use, capital stock, payroll, employment,
social security, workers' compensation, unemployment compensation,
disability or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value added or gains taxes;
license, registration and documentation fees; and custom duties, tariffs
and similar charges whether or not disputed.
"THIRD PARTY CLAIM" shall have the meaning provided in Section
8.4.
"THIRD PARTY ACCOUNTING FIRM" shall have the meaning provided
in Section 1.2(c).
"TRANSACTION DOCUMENTS" means this Agreement and the other
written agreements, documents, instruments and certificates executed
pursuant to or in connection with this Agreement, including those
specified or referred to in Article VI to be delivered at the Closing,
all as amended, modified or supplemented from time to time.
"TRANSITION AGREEMENT" shall have the meaning provided in
Section 6.2(a)(xi).
"TRINITY BUSINESS" shall have the meaning provided in Section
10.2.
"TRINITY PENSION PLAN" shall have the meaning provided in
Section 2.14(a).
"TRINITY PLANS" shall have the meaning provided in Section
2.14(a).
"TRINITY PROFIT SHARING PLAN" shall have the meaning provided
in Section 2.14(a).
"USE" shall mean use, ownership, development, construction,
maintenance, management, operation or occupancy.
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EXHIBIT 10.1
INDUSTRIAL HOLDINGS, INC.
CREDIT AGREEMENT
DATED AS OF JUNE 30, 1998
$35,000,000
COMERICA BANK - TEXAS
AS AGENT
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TABLE CONTENTS
(Continued)
TABLE CONTENTS
<TABLE>
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<S> <C>
ARTICLE I
Definitions..........................................................................1
Section 1.1 Definitions.............................................................1
Section 1.2 Other Definitional Provisions..........................................14
ARTICLE II
Advances/Letters of Credit..........................................................15
Section 2.1 Commitments.............................................................15
Section 2.2 Notes...................................................................15
Section 2.3 Repayment of Advances...................................................15
Section 2.4 Interest................................................................15
Section 2.5 Borrowing Procedure.....................................................16
Section 2.6 Conversions and Continuations...........................................16
Section 2.7 Use of Proceeds.........................................................17
Section 2.8 Fees....................................................................17
Section 2.9 Reduction or Termination of Commitments.................................17
Section 2.10 Letter of Credit Commitment...........................................17
Section 2.11 Issuance, Amendment and Renewal of Letters of Credit..................18
Section 2.12 Risk Participation, Drawings and Reimbursements.......................20
Section 2.13 Indemnification.......................................................21
Section 2.14 Role of the Issuing Bank..............................................22
Section 2.15 Obligations Absolute..................................................22
Section 2.16 Cash Collateral Pledge................................................23
Section 2.17 Letter of Credit Fees.................................................24
Section 2.18 Uniform Customs and Practice..........................................24
Section 2.19 Existing Letters of Credit............................................24
ARTICLE III
Payments...........................................................................24
Section 3.1 Method of Payment.......................................................24
Section 3.2 Prepayment..............................................................25
Section 3.3 Pro Rata Treatment......................................................25
Section 3.4 Non-Receipt of Funds by the Agent.......................................26
Section 3.5 Withholding Taxes.......................................................26
Section 3.6 Withholding Tax Exemption...............................................26
Section 3.7 Computation of Interest.................................................27
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TABLE CONTENTS
(Continued)
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ARTICLE IV
Yield Protection and Illegality....................................................27
Section 4.1 Additional Costs........................................................27
Section 4.2 Limitation on Types of Advances.........................................28
Section 4.3 Illegality..............................................................29
Section 4.4 Treatment of Affected Advances..........................................29
Section 4.5 Compensation............................................................30
Section 4.6 Capital Adequacy........................................................30
ARTICLE V
Security............................................................................31
Section 5.1 Collateral..............................................................31
Section 5.2 Setoff..................................................................32
ARTICLE VI
Conditions Precedent................................................................32
Section 6.1 Initial Advance and Letters of Credit...................................32
Section 6.2 All Advances and Letters of Credit......................................34
ARTICLE VII
Representations and Warranties......................................................35
Section 7.1 Corporate Existence.....................................................35
Section 7.2 Financial Statements....................................................35
Section 7.3 Corporate Action; No Breach.............................................35
Section 7.4 Operation of Business...................................................36
Section 7.5 Litigation and Judgments................................................36
Section 7.6 Rights in Properties, Liens.............................................36
Section 7.7 Enforceability..........................................................36
Section 7.8 Approvals...............................................................36
Section 7.9 Debt....................................................................36
Section 7.10 Taxes.................................................................36
Section 7.11 Use of Proceeds: Margin Securities....................................37
Section 7.12 ERISA.................................................................37
Section 7.13 Disclosure............................................................37
Section 7.14 Subsidiaries..........................................................37
Section 7.15 Agreements............................................................38
</TABLE>
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TABLE CONTENTS
(Continued)
<TABLE>
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Section 7.16 Compliance with Laws..................................................38
Section 7.17 Inventory.............................................................38
Section 7.18 Investment Company Act................................................38
Section 7.19 Public Utility Holding Company Act...................................38
Section 7.20 Year 2000 Compliance..................................................38
Section 7.21 Environmental Matters.................................................39
Section 7.22 EnSerCo Loan Agreement................................................40
Section 7.23 Board of Directors....................................................40
ARTICLE VIII
Positive Covenants..................................................................40
Section 8.1 Reporting Requirements..................................................40
Section 8.2 Maintenance of Existence, Conduct of Business...........................42
Section 8.3 Maintenance of Properties...............................................42
Section 8.4 Taxes and Claims........................................................42
Section 8.5 Insurance...............................................................43
Section 8.6 Inspection Rights.......................................................43
Section 8.7 Keeping Books and Records...............................................43
Section 8.8 Subsidiary Guaranties/Security Agreement/Pledge Agreement...............43
Section 8.9 Compliance with Laws....................................................43
Section 8.10 Compliance with Agreements............................................44
Section 8.11 Further Assurances....................................................44
Section 8.12 ERISA.................................................................44
Section 8.13 Year 2000 Compliant...................................................44
Section 8.14 Certain Post Closing Covenants........................................44
ARTICLE IX
Negative Covenants.................................................................45
Section 9.1 Debt....................................................................45
Section 9.2 Limitation on Liens.....................................................45
Section 9.3 Mergers, Etc............................................................46
Section 9.4 Restricted Payments.....................................................46
Section 9.5 Investments.............................................................46
Section 9.6 Transactions With Affiliates............................................47
Section 9.7 Disposition of Assets...................................................47
Section 9.8 Sale and Leaseback......................................................47
Section 9.9 Prepayment of Debt......................................................47
Section 9.10 Nature of Business....................................................48
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TABLE CONTENTS
(Continued)
<TABLE>
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Section 9.11 Environmental Protection..............................................48
Section 9.12 Accounting............................................................48
Section 9.13 Restrictions on Dividends or Prepayment...............................48
Section 9.14 Inactive Subsidiaries.................................................48
ARTICLE X
Financial Covenants................................................................48
Section 10.1 Current Ratio.........................................................49
Section 10.2 Consolidated Net Worth................................................49
Section 10.3 Funded Debt/EBITDA Ratio..............................................49
Section 10.4 Cash Flow Coverage Ratio..............................................49
Section 10.5 Leverage Ratio........................................................49
Section 10.6 Operating Leases......................................................49
Section 10.7 Capital Expenditures..................................................49
ARTICLE XI
Default............................................................................49
Section 11.1 Events of Default.....................................................49
Section 11.2 Remedies..............................................................52
Section 11.3 Performance by the Agent..............................................53
ARTICLE XII
The Agent..........................................................................53
Section 12.1 Appointment, Powers and Immunities....................................53
Section 12.2 Rights of Agent as a Bank.............................................55
Section 12.3 Sharing of Payments, Etc..............................................55
Section 12.4 Indemnification.......................................................55
Section 12.5 Independent Credit Decisions..........................................56
Section 12.6 Several Commitments...................................................56
Section 12.7 Successor Agent.......................................................56
ARTICLE XIII
Miscellaneous......................................................................57
Section 13.1 Expenses.............................................................57
Section 13.2 Indemnification......................................................57
Section 13.3 Limitation of Liability..............................................58
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TABLE CONTENTS
(Continued)
<TABLE>
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Section 13.4 No Duty..............................................................58
Section 13.5 No Fiduciary Relationship............................................58
Section 13.6 Equitable Relief.....................................................58
Section 13.7 No Waiver; Cumulative Remedies.......................................58
Section 13.8 Successors and Assigns...............................................59
Section 13.9 Survival.............................................................61
Section 13.10 ENTIRE AGREEMENT.....................................................61
Section 13.11 Amendments, Etc......................................................61
Section 13.12 Maximum Interest Rate................................................62
Section 13.13 Notices..............................................................62
Section 13.14 Governing Law; Venue; Service of Process.............................63
Section 13.15 Counterparts.........................................................63
Section 13.16 Severability.........................................................63
Section 13.17 Headings.............................................................63
Section 13.18 Non-Application of Chapter 346 of Texas Finance Code.................63
Section 13.19 Construction.........................................................63
Section 13.20 Independence of Covenants............................................63
Section 13.21 WAIVER JURY TRIAL...................................................64
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<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (the "Agreement"), dated as of June 30, 1998, is
among INDUSTRIAL HOLDINGS, INC., a corporation duly organized and validly
existing under the laws of the State of Texas ("Borrower"), each of the banks or
other lending institutions which is or which may from time to time become a
signatory hereto or any successor or assignee thereof (individually, a "Bank"
and, collectively, the "Banks"), and COMERICA BANK-TEXAS, a Texas banking
association ("Comerica"), as agent for itself and the other Banks (in such
capacity, together with its successors in such capacity, the "Agent").
R E C I T A L S:
The Borrower has requested that the Banks make a revolving credit loan
to the Borrower with advances thereunder not to exceed an aggregate principal
amount of Thirty-Five Million and No/100 Dollars ($35,000,000) outstanding at
any time. The Banks are willing to make such loan to the Borrower upon the terms
and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. As used in this Agreement, the following terms
have the following meanings:
"ACQUISITION" means the Borrower's acquisition of the common stock of
Beaird pursuant to the terms of the Acquisition Documents.
"ACQUISITION DOCUMENTS" means the Purchase Agreement and all other
material agreements, instruments, certificates and documents delivered in
connection with the arrangement, negotiation, or consummation of the
Acquisition.
"ADDITIONAL COSTS" has the meaning specified in Section 4.1.
"ADJUSTED EURODOLLAR RATE" means, for any Eurodollar Advance for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/16 of 1%) determined by the Agent to be equal to the Eurodollar
Rate for such Eurodollar Advance for such Interest Period divided by 1 minus the
Reserve Requirement for such Eurodollar Advance for such Interest Period.
"ADVANCE" means an advance of funds by the Banks or any of them to the
Borrower pursuant to Article II.
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<PAGE>
"ADVANCE REQUEST FORM" means a certificate, in substantially the form of
Exhibit "B" hereto, properly completed and signed by the Borrower requesting an
Advance.
"AFFILIATE" means, as to any Person, any other Person (a) that directly
or indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, such Person; (b) that directly or indirectly
beneficially owns or holds five percent (5%) or more of any class of voting
stock of such Person; or (c) five percent (5%) or more of the voting stock of
which is directly or indirectly beneficially owned or held by the Person in
question. The term "control" means the possession, directly or indirectly, of
the power to direct or cause direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise; provided, however, in no event shall the Agent or any Bank be deemed
an Affiliate of the Borrower or any of its Subsidiaries.
"APPLICABLE LENDING OFFICE" means for each Bank and each Type of
Advance, the Lending Office of such Bank (or of an Affiliate of such Bank)
designated for such Type of Advance below its name on the signature pages hereof
or such other office of such Bank (or of an Affiliate of such Bank) as such Bank
may from time to time specify to the Borrower and the Agent as the office by
which its Advances of such Type are to be made and maintained.
"APPLICABLE RATE" means: (a) during the period that an Advance is a Base
Rate Advance, the Base Rate and; (b) during the period that an Advance is a
Eurodollar Advance, the Adjusted Eurodollar Rate plus two and one-half percent
(2 1/2%).
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered
into by a Bank and its assignee and accepted by the Agent pursuant to Section
13.8, in substantially the form of Exhibit "H" hereto.
"BASE RATE" means, at any time, the rate of interest per annum then most
recently established by Comerica Bank-Texas as its prime rate, which rate may
not be the lowest rate of interest charged by Comerica Bank-Texas to its
borrowers. Each change in any interest rate provided for herein based upon the
Base Rate resulting from a change in the Base Rate shall take effect without
notice to the Borrower at the time of such change in the Base Rate.
"BASE RATE ADVANCES" means Advances that bear interest at rates based
upon the Base Rate.
"BASLE ACCORD" means the proposals for risk-based capital framework
described by the Basle Committee on Banking Regulations and Supervisory
Practices in its paper entitled "International Convergence of Capital
Measurement and Capital Standards" dated July 1988, as amended, supplemented and
otherwise modified and in effect from time to time, or any replacement thereof.
"BORROWING BASE" means, at any particular time, an amount equal to the
sum of (a) eighty percent (80%) of Eligible Accounts, plus (b) fifty percent
(50%) of Eligible Inventory; provided that the amount of Eligible Inventory
included in the Borrowing Base shall not constitute more than the lesser of (i)
50% of the Borrowing Base or (ii) Twelve Million and No/100 Dollars
($12,000,000) at any time.
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"BUSINESS DAY" means (a) any day on which commercial banks are not
authorized or required to close in Dallas, Texas, and, (b) with respect to all
borrowings, payments, Conversions Continuations, Interest Periods, and notices
in connection with Eurodollar Advances, any day which is a Business Day
described in clause (a) above and which is also a day on which dealings in
Dollar deposits are carried out in the London interbank market.
"CAPITAL EXPENDITURE" shall mean all expenditures and liabilities
incurred for the acquisition of any fixed assets or improvements, replacements,
substitutions, or additions thereto which have a useful life of more than one
(1) year, including the direct or indirect acquisition of such assets by way of
increased product or service charges, offset items or otherwise the principal
portion of payments with respect to Capital Lease Obligations.
"CAPITAL LEASE OBLIGATIONS" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property, which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP. For purposes of this Agreement, the amount of
such Capital Lease Obligations shall be the capitalized amount thereof,
determined in accordance with GAAP.
"CASH COLLATERAL" means Dollars or marketable securities acceptable to
the Agent in its sole discretion that have been Cash Collateralized for the
benefit of Banks.
"CASH COLLATERALIZE" means to pledge and deposit with or deliver to the
Agent, for the benefit of Agent, the Issuing Bank and the Banks, Cash Collateral
as collateral for the Obligations pursuant to documentation in form and
substance satisfactory to the Agent (which documents are hereby consented to by
Banks).
"CASH FLOW COVERAGE RATIO" means, as calculated on a consolidated basis,
the ratio of (a) EBITDA for the 12-month period immediately preceding the date
of calculation, divided by (b) the sum of (i) the aggregate Debt Service of the
Borrower and its Subsidiaries for the 12-month period immediately preceding the
date of calculation plus (ii) the aggregate amount of cash dividends paid by
Borrower during the 12-month period immediately preceding the date of
calculation plus (iii) the aggregate amount of cash taxes paid by the Borrower
and its Subsidiaries during the 12 month period immediately preceding the date
of calculation. The Cash Flow Ratio shall be tested quarterly at the end of each
fiscal quarter of the Borrower for the twelve (12) month period then ended. The
foregoing ratio may be expressed in the following fraction:
EBITDA
Debt Service + Cash Dividends + Cash Taxes
"CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"COLLATERAL" has the meaning specified in Section 5.1.
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"COMMITMENT" means, as to each Bank, the obligation of such Bank to make
Advances and issue Letter of Credit hereunder in an aggregate principal amount
at any one time outstanding up to but not exceeding the amount set forth
opposite the name of such Bank on the signature pages hereto under the heading
"Commitment," as the same may be reduced pursuant to Section 2.9 or terminated
pursuant to Section 2.9 or 11.2.
"CONSOLIDATED CURRENT ASSETS" means, at any particular time, all amounts
which, in conformity with GAAP, would be included as current assets on a
consolidated balance sheet of the Borrower and the Subsidiaries.
"CONSOLIDATED CURRENT LIABILITIES" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as current liabilities
on a consolidated balance sheet of the Borrower and the Subsidiaries.
"CONSOLIDATED LIABILITIES" means, at any particular time, all amounts
which, in conformity with GAAP, would be included as liabilities on a
consolidated balance sheet of the Borrower and the Subsidiaries.
"CONSOLIDATED NET WORTH" means, at any particular time, all amounts
which, in conformity with GAAP, would be included as stockholders' equity on a
consolidated balance sheet of the Borrower and the Subsidiaries.
"CONSOLIDATED TANGIBLE NET WORTH" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as stockholders'
equity on a consolidated balance sheet of the Borrower and the Subsidiaries;
provided, however, there shall be excluded therefrom: (a) any amount at which
shares of capital stock of the Borrower appear as an asset on the Borrower's
balance sheet, (b) goodwill, including any amounts, however designated, that
represent the excess of the purchase price paid for assets or stock over the
value assigned thereto, (c) patents, trademarks, trade names, and copyrights,
(d) deferred expenses, (e) loans and advances to any stockholder, director,
officer, or employee of the Borrower or any Affiliate of the Borrower, and (f)
all other assets which are properly classified as intangible assets.
"CONSOLIDATED WORKING CAPITAL" means, at any particular time, the amount
by which Consolidated Current Assets exceed Consolidated Current Liabilities.
"CONTINGENT OBLIGATION" means, as to any Person, without duplication,
any direct or indirect liability of that Person, with or without recourse, (a)
with respect to any Debt, lease, dividend, letter of credit or other obligation
(the " primary obligations") of another Person (the " primary obligor"),
including any obligation of that Person (i) to purchase, repurchase or otherwise
acquire such primary obligations or any security therefor, (ii) to advance or
provide funds for the payment or discharge of any such primary obligation, or to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency or any balance sheet item, level of income
or financial condition of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation, or (iv) otherwise to assure or hold
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<PAGE>
harmless the holder of any such primary obligation against loss in respect
thereof (each, a "Guaranty Obligation"); (b) with respect to any Surety
Instrument issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings or payments; (c) to purchase any
materials, supplies, or other property from, or to obtain the services of,
another Person if the relevant contract another related document or obligation
requires that payment for such materials, supplies or other property, or for
such services, shall be made regardless of whether delivery of such materials,
supplies or other property is ever made or tendered, or such services are ever
performed or tendered, or (d) in respect of any Swap Contract.
"CONTINUE," "CONTINUATION," and "CONTINUED" shall refer to the
continuation pursuant to Section 2.6 of an Eurodollar Advance as an Eurodollar
Advance of the same Type from one Interest Period to the next Interest Period.
"CONTRIBUTION AGREEMENT" means the contribution and indemnification
agreement of the Borrower and the Guarantors in favor of the Agent and the
Banks, in substantially the form of Exhibit "I" hereto, as the same may be
amended, supplemented, or modified from time to time.
"CONVERT," "CONVERSION," and "CONVERTED" shall refer to a conversion
pursuant to Section 2.6 or Article IV of one Type of Advance into another Type
of Advance.
"CURRENT RATIO" means, at any particular time, the ratio of Consolidated
Current Assets to Consolidated Current Liabilities.
"DEBT" means as to any Person at any time (without duplication): (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, notes, debentures, or other similar instruments, (c)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable of such Person arising in the ordinary
course of business that are not past due by more than ninety (90) days, (d) all
Capital Lease Obligations of such Person, (d) all obligations secured by a Lien
existing on property owned by such Person, whether or not the obligations
secured thereby have been assumed by such Person or are non-recourse to the
credit of such Person, (f) all reimbursement obligations of such Person (whether
contingent or otherwise) in respect of letters of credit, bankers' acceptances,
surety or other bonds and similar instruments, (g) all liabilities of such
Person in respect of unfunded vested benefits under any Plan; and (h) all
obligations with respect to Swap Contracts; and all Guaranty Obligations in
respect of indebtedness of others of the kinds referred to in clauses (a)
through (h) above.
"DEBT SERVICE" means the sum of (a) all aggregate scheduled principal
payments owed by the Borrower and its Subsidiaries during the 12-month period
preceding the date of calculation plus (b) cash Interest Expense for the
12-month period immediately preceding the date of calculation, plus (c) all
regularly scheduled payments on account of Capital Lease Obligations that became
due and owing during the 12-month period immediately preceding the date of
calculation.
"DEEDS OF TRUST" collectively means those three (3) certain deeds of
trust, security agreements and financing statements executed, respectively, by
GHX (2 Deeds of Trust) and LSS
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(1 Deed of Trust) in favor of the Agent and the Banks, as to the liens on the
GHX Real Property and the LSS Real Property, in substantially the forms of
Exhibits "J-1," "J-2," and "J-3" hereto, respectively, as the same may be
amended, supplemented, or modified from time to time.
"DEFAULT" means an Event of Default or the occurrence of an event or
condition which with notice or lapse of time or both would become an Event of
Default.
"DEFAULT RATE" means the Maximum Rate or, if no Maximum Rate exists, the
sum of the Base Rate in effect from day to day plus three percent (3%).
"DOLLARS" and "$" mean lawful money of the United States of America.
"EBITDA" means, for any period, the consolidated pre-tax income of the
Borrower and the Subsidiaries for such period, plus the aggregate amount which
was deducted for such period determining such consolidated, pre-tax income for
(a) interest expense (including amortization of debt discount, imputed interest
and capitalized interest), (b) depreciation, and (c) amortization, PROVIDED,
HOWEVER, that there shall be excluded therefrom (without duplication) (i) net
income (of loss) of any Person (other than a consolidated Subsidiary of such
Person) in which any other Person (other than such Person or any of its
consolidated Subsidiaries) has a joint interest, except to the extent of the
amount of dividends or other distributions actually paid to such Person or
(subject to subclause (iii) below) any of its consolidated Subsidiaries by such
other Person during such period, (ii) the income (or loss) of any Person during
such period accrued prior to the date it becomes a consolidated Subsidiary of
such Person or is merged into or consolidated with such Person or any of its
consolidated Subsidiaries, (iii) the income of any consolidated Subsidiary of
the Borrower to the extent attributable to minority interests held therein by
Persons other than the Borrower and its wholly-owned Subsidiaries, and (iv) the
income of any consolidated Subsidiary of the Borrower during such period to the
extent that the declaration or payment of dividends or similar distributions by
such consolidated Subsidiary of such income is not at the time permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order statute, rule or governmental regulation applicable to such
Subsidiary or any of its other Subsidiaries; PROVIDED FURTHER that, only for
purposes of the Funded Debt/EBITDA Ratio, EBITDA of any consolidated Subsidiary
acquired by the Borrower or any other Subsidiary, to the extent twelve (12)
months have not elapsed since its acquisition, shall be calculated on a proforma
basis acceptable to the Required Banks based on historical performance for the
periods in question.
"ELIGIBLE ACCOUNTS" means the aggregate of all accounts receivable of
the Borrower and the Guarantors that are acceptable to Agent in its sole
discretion and satisfy the following conditions: (i) are due and payable within
thirty (30) days; (ii) have been outstanding less than ninety (90) days past the
original date of invoice; (iii) have arisen in the ordinary course of business
from services performed by Borrower or any of the Guarantors to or for the
account debtor or the sale by Borrower or any of the Guarantors of goods in
which such Person had sole ownership where such goods have been shipped or
delivered to the account debtor; (iv) represent complete bona fide transactions
which require no further act under any circumstances on the part of Borrower or
any of the Guarantors to make such accounts receivable payable by the account
debtor; (v) the goods sold which gave rise to such accounts receivable were
shipped or delivered to the account debtor
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<PAGE>
on an absolute sale basis and not on a consignment, a sale or return basis, a
guaranteed sale basis, a bill and hold basis, or on the basis of any similar
understanding; (vi) the goods sold which gave rise to such accounts receivable
were not, at the time of sale thereof, subject to any Lien, except the security
interest in favor of Agent created by the Loan Documents; (vii) are not subject
to any provision prohibiting assignment or requiring notice of or consent to
such assignment; (viii) are subject to a perfected, first priority security
interest in favor of Agent and are not subject to any other Lien; (ix) are not
subject to setoff, counterclaim, defense, allowance, dispute, or adjustment
other than normal discounts for prompt payment, and the goods sold which gave
rise to such accounts receivable have not been returned, rejected, repossessed,
lost, or damaged; (x) the account debtor is not insolvent or the subject of any
bankruptcy or insolvency proceeding and has not made an assignment for the
benefit of creditors, suspended normal business operations, dissolved,
liquidated, terminated its existence, ceased to pay its debts as they become
due, or suffered a receiver or trustee to be appointed for any of its assets or
affairs; (xi) are not evidenced by chattel paper or an instrument of any kind;
(xii) are owed by a Person or Persons that are citizens of or organized under
the laws of the United States or any State and are not owed by any Person
located outside of the United States of America; (xiii) if any accounts
receivable are owed by the United States of America or any department, agency,
or instrumentality thereof, the Federal Assignment of Claims Act shall have been
complied with; and (xiv) are not owed by an Affiliate of Borrower. No account
receivable owed by an account debtor to Borrower shall be included as an
Eligible Account if more than twenty-five percent (25%) of the balances then
outstanding on accounts receivable owed by such account debtor and its
Affiliates to Borrower and the Guarantors have remained unpaid for more than
eighty-nine (89) days from the dates of their original invoices. The amount of
any Eligible Accounts owed by an account debtor to Borrower or the Guarantors
shall be reduced by the amount of all "contra accounts" and other obligations
owed by such Person to such account debtor.
"ELIGIBLE ASSIGNEE" means any commercial bank, savings and loan
association, savings bank, finance company, insurance company, pension fund, or
other financial institution (whether a corporation, partnership, or other
entity) acceptable to the Agent.
"ELIGIBLE INVENTORY" means, at any time, all inventory then owned by
(and in the possession or under the control of) Borrower or the Guarantors and
held for sale or disposition in the ordinary course of such Person's business,
in which Agent has a perfected, first priority security interest, valued at the
lower of actual cost or fair market value. Eligible Inventory shall not include
(i) inventory that has been shipped or delivered to a customer on consignment, a
sale or return basis, or on the basis of any similar understanding, (ii)
inventory with respect to which a claim exists disputing Borrower's or such
Guarantor's title to or right to possession of such inventory, (iii) inventory
that is not in good condition or does not comply with any applicable laws,
rules, or regulations or the standards imposed by any governmental authority
with respect to its manufacture, use, or sale, and (iv) inventory that Agent, in
its sole discretion, has determined to be unmarketable.
"ENVIRONMENTAL LAWS" means any and all federal, state, and local laws,
regulations, and requirements pertaining to health, safety, or the environment,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601 et seq., the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. ss. 6901 et seq., the
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<PAGE>
Occupational Safety and Health Act, 29 U.S.C. ss. 651 et seq., the Clean Air
Act, 42 U.S.C. ss. 7401 et seq., the Clean Water Act, 33 U.S.C. ss. 1251 et
seq., and the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq., as such
laws, regulations, and requirements may be amended or supplemented from time to
time.
"ENVIRONMENTAL LIABILITIES" means, as to any Person, all liabilities,
obligations, responsibilities, Remedial Actions, losses, damages, punitive
damages, consequential damages, treble damages, costs, and expenses (including,
without limitation, all reasonable fees, disbursements and expenses of counsel,
expert and consulting fees and costs of investigation and feasibility studies),
fines, penalties, sanctions, and interest incurred as a result of any claim or
demand, by any Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, including any
Environmental Law, permit, order or agreement with any Governmental Authority or
other Person, arising from environmental, health or safety conditions or the
Release or threatened Release of a Hazardous Material into the environment,
resulting from the past, present, or future operations of such Person or its
Affiliates.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereunder.
"ERISA AFFILIATE" means any corporation or trade or business which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower or is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower.
"EURODOLLAR ADVANCES" means Advances the interest rates on which are
determined on the basis of the rates referred to in the definition of "Adjusted
Eurodollar Rate" in this Section 1.1.
"EURODOLLAR RATE" means, for any Eurodollar Advance for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) quoted by the Reference Bank at approximately 11:00 a.m.
London time (or as soon thereafter as practicable) two Business Days prior to
the first day of such Interest Period for the offering by the Reference Bank to
leading banks in the London interbank market of Dollar deposits in immediately
available funds having a term comparable to such Interest Period and in an
amount comparable to the principal amount of the Eurodollar Advance made by the
Reference Bank to which such Interest Period relates. If the Reference Bank is
not participating in any Eurodollar Advances during any Interest Period therefor
(pursuant to Section 4.4 or for any other reason), the Adjusted Eurodollar Rate
for such Advances for such Interest Period shall be determined by reference to
the amount of the Advances which the Reference Bank would have made had it been
participating in such Advances.
"ENSERCO LOAN AGREEMENT" means the Credit Agreement dated as of June 30,
1998, between the Borrower and EnSerCo, L.L.C., a Delaware limited liability
company, as Lender, as the same may be modified from time to time.
"ENSERCO LOAN DOCUMENTS" means the EnSerCo Loan Agreement and each other
agreement, instrument, or document executed at any time in connection therewith.
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"EVENT OF DEFAULT" has the meaning specified in Section 11.1.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/16 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that (a) if the day for which such rate is to be determined is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (b) if such rate is not so published on such next
succeeding Business Day, the Federal Funds Rate for any day shall be the average
rate charged to Comerica Bank-Texas on such day on such transactions as
determined by the Agent.
"FUNDED DEBT" means all indebtedness for borrowed money (including,
without limitation, the unpaid amount of the purchase price of any property)
evidenced by a written document and subject to required payments of interest
and/or principal including, without limitation, Capital Lease Obligations and
any Contingent Obligations related to any of the foregoing.
"FUNDED DEBT/EBITDA RATIO" means, on any date of determination, the
ratio of (a) the Funded Debt of the Borrower and its Subsidiaries as of the date
of determination to (b) EBITDA of the Borrower and its consolidated Subsidiaries
for the period in question.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent basis" when the accounting principles
applied in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.
"GHX REAL PROPERTY" means the real property and interests in real
property described in those two (2) certain Deeds of Trust executed by GHX.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government.
"GUARANTORS" collectively means The Rex Group, Inc., a Texas corporation
(the "Rex Group"), Rex Machinery Sales, Inc., a Texas corporation d/b/a
Rex/Paul's Machine/Sales ("Rex Sales"), Rex Machinery Movers, Inc., a Texas
corporation ("Rex Movers"), U.S. Crating, Inc., a Texas corporation (f/k/a Rex
Export Crating, Inc. ("U.S. Crating"), First Texas Credit Corporation, a Texas
corporation ("First Texas"), Landreth Engineering Company, a Texas corporation
("Landreth"), Pipeline Valve Specialty, Inc., a Texas corporation (f/k/a
Industrial Municipal Supply Company) ("Pipeline"), Bolt Manufacturing Co., Inc.,
a Texas corporation, d/b/a Walker Bolt Manufacturing Co., Inc. ("Bolt"),
LSS-Lone Star-Houston, Inc., a Texas corporation ("LSS"),
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American Rivet Company, Inc., an Illinois corporation ("Rivet"), Manifold Valve
Services, Inc., a Delaware corporation d/b/a Rogers Equipment & Supply Company
("Manifold"), Philform, Inc., a Michigan corporation ("Philform"), GHX,
Incorporated, a Texas corporation ("GHX"), Regal Machine Tool, Inc., a Texas
corporation, f/k/a/ Rex Machine Tool, Inc. ("Regal"), WHIR Acquisition, Inc., a
Texas corporation d/b/a Ameritech Fastener Manufacturing ("WHIR"), Moores Pump
and Supply, Inc., a Louisiana corporation ("Moores"), GHX, Incorporated of
Louisiana, a Louisiana corporation ("GHX Louisiana"), and Beaird Industries,
Inc., a Delaware corporation ("Beaird"), and individually, each a "Guarantor."
The term "Guarantor" and "Guarantors" shall include any Person becoming a party
to the Guaranty after the date hereof.
"GUARANTY" means the joint and several guaranty of the Guarantors in
favor of the Agent and the Banks, in substantially the form of Exhibit "E"
hereto, as the same may be amended, supplemented, or modified from time to time.
"HAZARDOUS MATERIAL" means any substance, product, waste, pollutant,
material, chemical, contaminant, constituent, or other material which is or
becomes listed, regulated, or addressed under any Environmental Law, including,
without limitation, asbestos, petroleum, and polychlorinated biphenyls.
"INACTIVE SUBSIDIARIES" collectively means XSUP Corporation, a Texas
corporation (f/k/a Rex Supply Corporation) ("XSUP"), Rex International
Corporation, a Texas corporation ("Rex International"), XTEL Corporation, a
Texas corporation ("XTEL") and Losco, Inc., a Texas corporation ("Losco"), and
individually, each an "Inactive Subsidiary").
"INTEREST EXPENSE" means, for any period, the total consolidated
interest expense (including, without limitation, attributable to Capital Lease
Obligations) of the Borrower and its consolidated subsidiaries for such period,
determined in accordance with GAAP.
"INTEREST PERIOD" means with respect to any Eurodollar Advances, each
period commencing on the date such Advances are made or Converted from Advances
of another Type or, in the case of each subsequent, successive Interest Period
applicable to a Eurodollar Advance, the last day of the next preceding Interest
Period with respect to such Advance, and ending on the numerically corresponding
day in the first, second or third calendar month thereafter, as the Borrower may
select as provided in Section 2.5 or 2.6 hereof, except that each such Interest
Period which commences on the last Business Day of a calendar month (or on any
day for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month.
Notwithstanding the foregoing: (a) each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, in the case of an Interest Period for Eurodollar
Advances if such succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day); (b) any Interest Period which would
otherwise extend beyond the Termination Date shall end on the Termination Date;
(c) no more than five (5) Interest Periods for Eurodollar Advances shall be in
effect at the same time; and (d) no Interest Period for any Eurodollar Advances
shall have a duration of less than one (1) month
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and, if the Interest Period for any Eurodollar Advances would otherwise be a
shorter period, such Advances shall not be available hereunder.
"ISSUING BANK" initially means Comerica, in its capacity as the issuer
of one or more Letters of Credit hereunder, together with any replacement letter
of credit issuer arising under Section 12.7 hereof.
"LETTER OF CREDIT" means any standby letter of credit issued by the
Issuing Bank for the account of the Borrower pursuant to Article II.
"LETTER OF CREDIT COMMITMENT" means the commitment of the Issuing Bank
to issue, and the commitment of the Banks severally to participate in Letters of
Credit from time to time issued or outstanding under Article II, in an aggregate
amount not to exceed on any date the amount of Seven Million and No/100 Dollars
($7,000,000); provided that the Letter of Credit Commitment is a part of the
combined Commitments, rather than a separate independent commitment.
"LETTER OF CREDIT LIABILITIES" means, at any time, the aggregate face
amount of all outstanding Letters of Credit.
"LETTER OF CREDIT REQUEST FORM" means a certificate, in substantially
the form of Exhibit "L" hereto, properly completed and signed by the Borrower
requesting issuance of a Letter of Credit.
"LEVERAGE RATIO" means, at any time, the ratio of Consolidated
Liabilities to Consolidated Tangible Net Worth.
"LIEN" means any lien, mortgage, security interest, tax lien, financing
statement, pledge, charge, hypothecation, assignment, preference, priority, or
other encumbrance of any kind or nature whatsoever (including, without
limitation, any conditional sale or title retention agreement), whether arising
by contract, operation of law, or otherwise.
"LOAN DOCUMENTS" means this Agreement and all promissory notes, security
agreements, deeds of trust, assignments, guaranties, and other instruments,
documents, mortgages and agreements executed and delivered pursuant to or in
connection with this Agreement, as such instruments, documents, and agreements
may be amended, modified, renewed, extended, or supplemented from time to time.
"LSS REAL PROPERTY" means the real property and interests in real
property described in that certain Deed of Trust executed by LSS.
"MAXIMUM RATE" means, at any time and with respect to any Bank, the
maximum rate of interest under applicable law that such Bank may charge the
Borrower. The Maximum Rate shall be calculated in a manner that takes into
account any and all fees, payments, and other charges in respect of the Loan
Documents that constitute interest under applicable law. Each change in any
interest rate provided for herein based upon the Maximum Rate resulting from a
change in the Maximum Rate shall take effect without notice to the Borrower at
the time of such change in the
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Maximum Rate. For purposes of determining the Maximum Rate under Texas law, the
applicable rate ceiling shall be the indicated rate ceiling described in, and
computed in accordance with, Article 5069-1D.001, et. seq., Vernon's Texas Civil
Statutes.
"MONTHLY PAYMENT DATE" means the last day of each calendar month of each
year, the first of which shall be the second such day after the date of this
Agreement.
"MORTGAGE" means the Collateral Mortgage of Beaird in favor of the
Agent, for the benefit of the Banks, in substantially the form of Exhibit "C"
hereto, as the same may be amended, supplemented, or modified from time to time.
"MULTIEMPLOYER PLAN" means a multiemployer plan defined as such in
Section 4001(a)(3) of ERISA to which contributions have been made by the
Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA.
"NOTE" means a promissory note of the Borrower payable to the order of a
Bank, in substantially the form of Exhibit "A" hereto, and all extensions,
renewals, and modifications thereof and all substitutions therefor.
"OBLIGATED PARTY" means any Guarantor or any other Person who is or
becomes party to any agreement that guarantees or secures payment and
performance of the Obligations or any part thereof.
"OBLIGATIONS" means all obligations, indebtedness, and liabilities of
the Borrower to the Agent and the Banks, or any of them, arising pursuant to any
of the Loan Documents, now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated, unliquidated,
joint, several, or joint and several, including, without limitation, the
obligations, indebtedness, and liabilities of the Borrower under this Agreement
and the other Loan Documents, and all interest accruing thereon and all
attorneys' fees and other expenses incurred in the enforcement or collection
thereof.
"OPERATING LEASE" means any lease (other than a lease constituting a
Capital Lease Obligation) of real or personal property.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"PERSON" means any individual, corporation, business trust, association,
company, partnership, joint venture, Governmental Authority, or other entity.
"PLAN" means any employee benefit or other plan established or
maintained by the Borrower or any ERISA Affiliate and which is covered by Title
IV of ERISA.
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"PLEDGE AGREEMENT" means the pledge agreement of the Borrower, The Rex
Group and GHX in favor of the Agent and the Bank, in substantially the form of
Exhibit "K" attached hereto, as the same may be amended, supplemented or
modified from time to time.
"PRINCIPAL OFFICE" means the principal office of the Agent, presently
located at 1508 West Mockingbird, Dallas, Texas, 75235.
"PROHIBITED TRANSACTION" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Code.
"PRO RATA SHARE" means, as to any Bank at any time, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal place) at such
time of such Bank's Commitment divided by the combined Commitments of the Banks.
"PURCHASE AGREEMENT" means the Stock Purchase Agreement dated May 20,
1998, between the Borrower and Trinity Industries, Inc.
"REAL PROPERTY" means the real property and interests in real property
identified on Schedule 1.1 attached hereto and all improvements and fixtures
thereon and all appurtenances thereto.
"REFERENCE BANK" means Comerica Bank, 39200 Six Mile Road, Livonia,
Michigan 48152- 7576.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"REGULATORY CHANGE" means, with respect to any Bank, any change after
the date of this Agreement in United States federal, state, or foreign laws or
regulations (including Regulation D) or the adoption or making after such date
of any interpretations, directives, or requests applying to a class of banks
including such Bank of or under any United States federal or state, or any
foreign, laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"RELEASE" means, as to any Person, any release, spill, emission,
leaking, pumping, injection, deposit, disposal, disbursement, leaching, or
migration of Hazardous Materials into the indoor or outdoor environment or into
or out of property owned by such Person, including, without limitation, the
movement of Hazardous Materials through or in the air, soil, surface water,
ground water, or property.
"REMEDIAL ACTION" means all actions required to (a) clean up, remove,
treat, or otherwise address Hazardous Materials in the indoor or outdoor
environment, (b) prevent the Release or threat of Release or minimize the
further Release of Hazardous Materials so that they do not migrate or endanger
or threaten to endanger public health or welfare or the indoor or outdoor
environment, or (c) perform pre-remedial studies and investigations and
post-remedial monitoring and care.
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"REQUIRED BANKS" means at any time while no Advances are outstanding,
Banks having at least sixty-six percent (66%) of the aggregate amount of the
Commitments and, at any time while Advances are outstanding, Banks holding at
least sixty-six percent (66%) of the outstanding aggregate principal amount of
the Advances.
"REPORTABLE EVENT" means any of the events set forth in Section 4043 of
ERISA.
"RESERVE REQUIREMENT" means, for any Fixed Rate Advance for any Interest
Period therefor, the average maximum rate at which reserves (including any
marginal, supplemental or emergency reserves) are required to be maintained
during such Interest Period under Regulation D by member banks of the Federal
Reserve System in New York City with deposits exceeding one billion Dollars
against "Eurocurrency Liabilities" as such term is used in Regulation D. Without
limiting the effect of the foregoing, the Reserve Requirement shall reflect any
other reserves required to be maintained by such member banks by reason of any
Regulatory Change against (i) any category of liabilities which includes
deposits by reference to which the Adjusted Eurodollar Rate is to be determined,
or (ii) any category of extensions of credit or other assets which include
Eurodollar Advances.
"RICO" means the Racketeer Influenced and Corrupt Organization Act of
1970, as amended from time to time.
"SECURITY AGREEMENT" means the joint and several Security Agreement of
the Borrower and the Guarantors in favor of the Agent for the benefit of the
Banks, in substantially the form of Exhibit "D" hereto, as the same may be
amended, supplemented, or modified.
"SUBSIDIARY" means any corporation, association, partnership, limited
liability company, joint venture or other business entity of which at least more
than fifty percent (50%) of the voting stock or other equity interests (in the
case of Persons other than corporations) is at the time directly or indirectly
owned or controlled by the Borrower or one or more of the Subsidiaries or by the
Borrower and one or more of the Subsidiaries.
"SURETY INSTRUMENTS" means all letters of credit (including standby and
commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds
and similar instruments.
"SWAP CONTRACT" means any agreement, whether or not in writing, relating
to any transaction that is a rate swap, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap or option, bond,
note or bill option, interest rate option, forward foreign exchange transaction,
cap, collar or floor transaction, currency swap, cross-currency swap, swaption,
currency option or any other similar transaction (including any option to enter
into any of the foregoing) or any combination of the foregoing, and, unless the
context otherwise clearly requires, any master agreement relating to or
governing any or all of the foregoing.
"TERMINATION DATE" means 11:00 a.m. Houston, Texas time on June 30,
2000, or such earlier date and time on which the Commitments terminate as
provided in this Agreement.
"TYPE" means any type of Advance (i.e., Base Rate Advance or Eurodollar
Advance).
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"UCC" means the Uniform Commercial Code as in effect in the State of
Texas.
Section 1.2 Other Definitional Provisions. All definitions contained in
this Agreement are equally applicable to the singular and plural forms of the
terms defined. The words "hereof," "herein," and "hereunder" and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Unless otherwise
specified, all Article and Section references pertain to this Agreement. All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP. Terms used herein that are defined in the UCC, unless
otherwise defined herein, shall have the meanings specified in the UCC.
ARTICLE II
ADVANCES/LETTERS OF CREDIT
Section 2.1 COMMITMENTS. Subject to the terms and conditions of this
Agreement, each Bank severally agrees to make one or more Advances to the
Borrower from time to time from the date hereof to and including the Termination
Date in an aggregate principal amount at any time outstanding up to but not
exceeding the amount of such Bank's Commitment as then in effect provided that
the aggregate amount of all Advances at any time outstanding shall not exceed
the lesser of (i) the Commitment minus the sum of the outstanding Letter of
Credit Liabilities, or (ii) the Borrowing Base minus the sum of the outstanding
Letter of Credit Liabilities. Subject to the foregoing limitations, and the
other terms and provisions of this Agreement, the Borrower may borrow, repay,
and reborrow hereunder the amount of the Commitments by means of Base Rate
Advances, and Eurodollar Advances and, until the Termination Date, the Borrower
may Convert Advances of one Type into Advances of another Type. Advances of each
Type made by each Bank shall be made and maintained at such Bank's Applicable
Lending Office for Advances of such Type.
Section 2.2 NOTES. The obligation of the Borrower to repay each Bank for
Advances made by such Bank and interest thereon shall be evidenced by a Note
executed by the Borrower, payable to the order of such Bank, in the principal
amount of such Bank's Commitment as originally in effect, and dated the date
hereof.
Section 2.3 REPAYMENT OF ADVANCES. The Borrower shall repay the unpaid
principal amount of all Advances on the Termination Date.
Section 2.4 INTEREST. The unpaid principal amount of the Advances shall
bear interest at a varying rate per annum equal from day to day to the lesser of
(a) the Maximum Rate, or (b) the Applicable Rate. If at any time the Applicable
Rate for any Advance shall exceed the Maximum Rate, thereby causing the interest
accruing on such Advance to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate for such Advance shall not reduce the rate of
interest on such Advance below the Maximum Rate until the aggregate amount of
interest accrued on such Advance equals the aggregate amount of interest which
would have accrued on such Advance if the Applicable Rate had at all times been
in effect. Accrued and unpaid interest on the Advances shall be due and payable
as follows:
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(a) in the case of Base Rate Advances, on each Monthly Payment
Date and on the Termination Date;
(b) in the case of each Eurodollar Advance, on the last day of
the Interest Period with respect thereto;
(c) Upon the payment or prepayment of any Advance or the
Conversion of any Advance to an Advance of another Type (but only on the
principal amount so paid, prepaid, or Converted); and
(d) on the Termination Date.
Notwithstanding the foregoing, any outstanding principal of any Advance and (to
the fullest extent permitted by law) any other amount payable by the Borrower
under this Agreement or any other Loan Document that is not paid in full when
due (whether at stated maturity, by acceleration, or otherwise) shall bear
interest at the Default Rate for the period from and including the due date
thereof to but excluding the date the same is paid in full. Interest payable at
the Default Rate shall be payable from time to time on demand.
Section 2.5 BORROWING PROCEDURE. The Borrower shall give the Agent
notice by means of an Advance Request Form of each requested Advance at least
three (3) Business Day before the requested date of each Eurodollar Advance,
specifying: (a) the requested date of such Advance (which shall be a Business
Day), (b) the amount of such Advance, (c) the Type of the Advance, and (d) the
duration of the Interest Period for such Advance. Borrower authorizes and
directs Agent to make Base Rate Advances in accordance with the sweep
authorizations currently and hereafter in effect between the Borrower and the
Agent and the Guarantors and the Agent, or alternatively, as directed by
Borrower pursuant to an Advance Request Form given to the Agent, at least one
(1) Business Day before the requested date of such Base Rate Advances. The Agent
at its option may accept telephonic requests for Advances, provided that such
acceptance shall not constitute a waiver of the Agent's right to delivery of an
Advance Request Form in connection with subsequent Advances. Any telephonic
request for an Advance by the Borrower shall be promptly confirmed by submission
of a properly completed Advance Request Form to the Agent. Each Eurodollar
Advance shall be in a minimum principal amount of $500,000 or an integral
multiple thereof. The aggregate principal amount of Eurodollar Advances having
the same Interest Period shall be at least equal to $500,000. The Agent shall
notify each Bank of the contents of each such notice and, as applicable, with
respect to Base Rate Advances to be made in connection with sweep
authorizations. Not later than 10:00 a.m. Dallas, Texas time on the date
specified for each Advance hereunder, each Bank will make available to the Agent
at the Principal Office in immediately available funds, for the account of the
Borrower, its pro rata share of each Advance. After the Agent's receipt of such
funds and subject to the other terms and conditions of this Agreement, the Agent
will make each Advance available to the Borrower by depositing the same, in
immediately available funds, in an account of the Borrower (designated by the
Borrower) maintained with the Agent at the Principal Office. All notices under
this Section shall be irrevocable and shall be given not later than 11:00 a.m.
Dallas, Texas, time on the day which is not less than the number of Business
Days specified above for such notice.
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Section 2.6 CONVERSIONS AND CONTINUATIONS. The Borrower shall have the
right from time to time to Convert all or part of an Advance of one Type into an
Advance of another Type or to Continue Eurodollar Advances as Eurodollar
Advances by giving the Agent written notice at least one (1) Business Day before
Conversion into a Base Rate Advance, at least three (3) Business Days before
Conversion into or Continuation of a Eurodollar Advance, specifying: (a) the
Conversion or Continuation date, (b) the amount of the Advance to be Converted
or Continued, (c) in the case of Conversions, the Type of Advance to be
Converted into, and (d) in the case of a Continuation of or Conversion into an
Eurodollar Advance, the duration of the Interest Period applicable thereto;
provided that (i) Eurodollar Advances may only be Converted on the last day of
the Interest Period, and (ii) except for Conversions into Base Rate Advances, no
Conversions shall be made while a Default has occurred and is continuing. The
Agent shall promptly notify each Bank of the contents of each such notice. All
notices under this Section shall be irrevocable and shall be given not later
than 11:00 a.m. Houston, Texas time on the day which is not less than the number
of Business Days specified above for such notice. If the Borrower shall fail to
give the Agent the notice as specified above for Continuation or Conversion of
an Eurodollar Advance prior to the end of the Interest Period with respect
thereto, such Eurodollar Advance shall be Converted automatically into a Base
Rate Advance on the last day of the then current Interest Period for such
Eurodollar Advance.
Section 2.7 USE OF PROCEEDS. The proceeds of Advances shall be used by
the Borrower for working capital in the ordinary course of business and in
connection with the acquisition of Beaird.
Section 2.8 FEES.
(a) The Borrower agrees to pay to the Agent for the account of
each Bank a commitment fee on the daily average unused amount of such
Bank's Commitment for the period from and including the date of this
Agreement to and including the Termination Date, at the rate of
one-fourth of one percent (0.25%) per annum based on a 360 day year and
the actual number of days elapsed. Accrued commitment fee shall be
payable in arrears on each Quarterly Payment Date and on the Termination
Date.
(b) The Borrower agrees to pay to the Agent such agent fees as
may be separately agreed to in writing by the Borrower and the Agent.
Section 2.9 REDUCTION OR TERMINATION OF COMMITMENTS. The Borrower shall
have the right to terminate in whole or reduce in part the unused portion of the
Commitments upon at least three (3) Business Days' prior notice (which notice
shall be irrevocable) to the Agent specifying the effective date thereof,
whether a termination or reduction is being made, and the amount of any partial
reduction, provided that each partial reduction shall be in the amount of
$1,000,000 or an integral multiple thereof and the Borrower shall simultaneously
prepay the amount by which the unpaid principal amount of the Advances exceeds
the Commitments (after giving effect to such notice) plus accrued and unpaid
interest on the principal amount so prepaid. The Commitments may not be
reinstated after they have been terminated or reduced.
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Section 2.10 LETTER OF CREDIT COMMITMENT. Subject to the terms and
conditions of this Agreement, (a) the Issuing Bank agrees to issue one or more
Letters of Credit for the account of the Borrower from time to time from the
date hereof to and including the Termination Date and to honor drafts under the
Letters of Credit, and (b) Banks severally agree to participate in Letters of
Credit issued by the Issuing Bank for the account of the Borrower; provided,
however, that the Issuing Bank shall not be obligated to issue, and no Bank
shall be obligated to participate in, any Letter of Credit if as of the date of
issuance of such Letter of Credit (the "Issuance Date"), the outstanding Letter
of Credit Liabilities (taking into account such proposed Letter of Credit)
exceeds the lesser of (i) the Letter of Credit Commitment, (ii) an amount equal
to the Commitment minus the sum of the outstanding Advances, or (iii) the
Borrowing Base minus the sum of the outstanding Advances; provided, further,
that no Bank shall be obligated to participate in such Letter of Credit if the
participation of such Bank in the Letter of Credit Liabilities, plus the amount
of such Bank's Advances would exceed such Bank's Commitment. Each Letter of
Credit shall have an expiration date not to exceed the Termination Date, shall
be payable in Dollars, shall have a minimum face amount of Ten Thousand and
No/100 Dollars ($10,000), must support a transaction that is entered into in the
ordinary course of the Borrower's business, must otherwise be satisfactory in
form and substance to the Issuing Bank, and shall be issued pursuant to such
documents and instruments (including, without limitation, the Issuing Bank's
standard application for issuance of letters of credit as then in effect) as the
Issuing Bank may require. No Letter of Credit shall require any payment by the
Issuing Bank to the beneficiary thereunder pursuant to a drawing prior to the
third Business Day following presentment of a draft and any related documents to
the Issuing Bank.
Section 2.11 ISSUANCE, AMENDMENT AND RENEWAL OF LETTERS OF CREDIT.
(a) Each Letter of Credit shall be issued upon the irrevocable
written request of the Borrower received by the Issuing Bank (with a copy sent
by the Borrower to the Agent) at least five (5) days (or such shorter time as
the Issuing Bank may agree in a particular instance in its sole discretion)
prior to the proposed date of issuance. Each such request for issuance of a
Letter of Credit shall be sent by electronic transfer or facsimile, confirmed
immediately in an original writing, in the form of a Letter of Credit Request
Form, and shall specify in form and detail satisfactory to the Issuing Bank: (i)
the proposed date of issuance of the Letter of Credit (which shall be a Business
Day); (ii) the face amount of the Letter of Credit; (iii) the expiry date of the
Letter of Credit; (iv) the name and address of the beneficiary thereof; (v) the
conditions permitting a drawing or drawings thereunder; (vi) the form of the
standby letter of credit; (vii) whether such Letter of Credit shall permit a
single drawing or multiple drawings; and (viii) such other matters as the
Issuing Bank may reasonably require.
(b) At least one (1) Business Day prior to the Issuance of any
Letter of Credit, the Issuing Bank will confirm with the Agent (by telephone or
in writing) that the Agent has received a copy of the Letter of Credit Request
from the Borrower and, if not, the Issuing Bank will provide the Agent with a
copy thereof. Unless the Issuing Bank has received notice on or before the
Business Day immediately preceding the date the Issuing Bank is to Issue a
requested Letter of Credit from the Agent (A) directing the Issuing Bank not to
issue such Letter of Credit because such Issuance is not then permitted under
subsection 2.10; or (B) that one or more conditions specified in Article VI are
not then satisfied; then, subject to the terms and conditions hereof, the
Issuing Bank
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shall, on the requested date, issue a Letter of Credit for the account of the
Borrower in accordance with the Issuing Bank's usual and customary business
practices.
(c) From time to time while a Letter of Credit is outstanding
and prior to the Termination Date, the Issuing Bank will, upon the written
request of the Borrower received by the Issuing Bank (with a copy sent by the
Borrower to the Agent) at least five (5) business days (or such shorter time as
the Issuing Bank may agree in a particular instance in its sole discretion)
prior to the proposed date of amendment, amend any Letter of Credit issued by
it. Each such request for amendment of a Letter of Credit shall be made by
electronic transfer or facsimile, confirmed immediately in an original writing
or by electronic transfer, made in the form of a Letter of Credit Request Form
and shall specify in form and detail satisfactory to the Issuing Bank: (i) the
Letter of Credit to be amended; (ii) the proposed date of amendment of the
Letter of Credit (which shall be a Business Day); (iii) the nature of the
proposed amendment; and (iv) such other matters as the Issuing Bank may require.
The Issuing Bank shall be under no obligation to amend any Letter of Credit if:
(A) the Issuing Bank would have no obligation at such time to issue such Letter
of Credit in its amended form under the terms of this Agreement; or (B) the
beneficiary of any such Letter of Credit does not accept the proposed amendment
to the Letter of Credit. The Agent will promptly notify the Banks of the receipt
by it of any Letter of Credit Request Form.
(d) The Issuing Bank and the Banks agree that, while a Letter
of Credit is outstanding and prior to the Termination Date, at the option of the
Borrower and upon the written request of the Borrower received by the Issuing
Bank (with a copy sent by the Borrower to the Agent) at least five (5) days (or
such shorter time as the Issuing Bank may agree in a particular instance in its
sole discretion) prior to the proposed date of notification of renewal, the
Issuing Bank shall be entitled to authorize the automatic renewal of any Letter
of Credit issued by it. Each such request for renewal of a Letter of Credit
shall be made by electronic transfer or facsimile, confirmed immediately in an
original writing or by electronic transfer, in the form of a Letter of Credit
Request Form, and shall specify in form and detail reasonably satisfactory to
the Issuing Bank: (i) the Letter of Credit to be renewed; (ii) the proposed date
of notification of renewal of the Letter of Credit (which shall be a Business
Day); (iii) the revised expiry date of the Letter of Credit; and (iv) such other
matters as the Issuing Bank may reasonably require. The Issuing Bank shall be
under no obligations to renew any Letter of Credit if: (A) the Issuing Bank
would have no obligation at such time to issue or amend such Letter of Credit in
its renewed form under the terms of this Agreement; or (B) the beneficiary of
any such Letter of Credit does not accept the proposed renewal of the Letter of
Credit. If any outstanding Letter of Credit shall provide that it shall be
automatically renewed unless the beneficiary thereof receives notice from the
Issuing Bank that such Letter of Credit shall not be renewed, and if at the time
of renewal the Issuing Bank would be entitled to authorize the automatic renewal
of such Letter of Credit in accordance with this subsection 2.11(d) upon the
request of the Borrower but the Issuing Bank shall not have received any Letter
of Credit Request Form from the Borrower with respect to such renewal or other
written direction by the Borrower with respect thereto, the Issuing Bank shall
nonetheless be permitted to allow such Letter of Credit to renew, and the
Borrower and the Banks hereby authorize such renewal, and, accordingly, the
Issuing Bank shall be deemed to have received a Letter of Credit Request Form
from the Borrower requesting such renewal.
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(e) This Agreement shall control in the event of any conflict
with any Letter of Credit related document (other than any Letter of Credit).
(f) The Issuing Bank will also deliver to the Agent,
concurrently or promptly following its delivery of a Letter of Credit, or
amendment to or renewal of a Letter of Credit, to an advising Bank or a
beneficiary, a true and complete copy of each such Letter of Credit or amendment
to or renewal of a Letter of Credit.
Section 2.12 RISK PARTICIPATION, DRAWINGS AND REIMBURSEMENTS.
(a) Immediately upon the Issuance of each Letter of Credit,
each Bank shall be deemed to, and hereby irrevocably and unconditionally agrees
to, purchase from the Issuing Bank a participation in such Letter of Credit and
each drawing thereunder in an amount equal to the product of (i) the Pro Rata
Share of such Bank, times (ii) the maximum amount available to be drawn under
such Letter of Credit and the amount of such drawing, respectively. For purposes
of Section 2.1, each Issuance of a Letter of Credit shall be deemed to utilize
the Commitment of each Bank by an amount equal to the amount of such
participation.
(b) In the event of any request for a drawing under a Letter
of Credit by the beneficiary or transferee thereof, the Issuing Bank will
promptly notify the Borrower. Any notice given by the Issuing Bank or the Agent
pursuant to this subsection 2.12(b) may be oral if immediately confirmed in
writing (including by facsimile); provided that the lack of such an immediate
confirmation shall not affect the conclusiveness or binding effect of such
notice. The Borrower shall reimburse the Issuing Bank prior to 11:00 a.m.
(Dallas time), on each date that any amount is paid by the Issuing Bank under
any Letter of Credit (each such date, an "Honor Date"), in an amount equal to
the amount so paid by the Issuing Bank. In the event the Borrower fails to
reimburse the Issuing Bank for the full amount of any drawing under any Letter
of Credit by 11:00 a.m. (Dallas time) on the Honor Date, the Issuing Bank will
promptly notify the Agent and the Agent will promptly notify each Bank thereof,
and the Borrower shall be deemed to have requested that Base Rate Advances be
made by the Banks to be disbursed on the Honor Date under such Letter of Credit,
subject to the amount of the unutilized portion of the Commitment and subject to
the conditions set forth in Section 6.2.
(c) Each Bank shall upon any notice pursuant to subsection
2.12(b) make available to the Agent for the account of the relevant Issuing Bank
an amount in dollars and in immediately available funds equal to its Pro Rata
Share of the amount of the drawing, whereupon the participating Banks shall
(subject to subsection 2.12(d)) each be deemed to have made an Advance
consisting of a Base Rate Advance to the Borrower in that amount. If any Bank so
notified fails to make available to the Agent for the account of the Issuing
Bank the amount of such Bank's Pro Rata Share of the amount of the drawing by no
later than 1:00 p.m. (Dallas time) on the Honor Date, then interest shall accrue
on such Bank's obligation to make such payment, from the Honor Date to the date
such Bank makes such payment, at a rate per annum equal to the Federal Funds
Rate in effect from time to time during such period. The Agent will promptly
give notice of the occurrence of the Honor Date, but failure of the Agent to
give any such notice on the Honor Date
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or in sufficient time to enable any Bank to effect such payment on such date
shall not relieve such Bank from its obligations under this Section 2.12.
(d) With respect to any unreimbursed drawing that is not
converted into Advances consisting of Base Rate Advances to the Borrower in
whole or in part, because of the Borrower's failure to satisfy the conditions
set forth in Section 6.2 or for any other reason, the Borrower shall be deemed
to have incurred from the Issuing Bank a Letter of Credit Advance (herein so
called) in the amount of such drawing, which Letter of Credit Advance shall be
due and payable on demand (together with interest) and shall bear interest at a
rate per annum equal to the Default Rate for the period from and including the
date of such drawing to but excluding the date of the Letter of Credit Advance,
together with all accrued, unpaid interest thereon, is paid in full, and each
Bank's payment to the Issuing Bank pursuant to subsection 12.12(c) shall be
deemed payment in respect of its participation in such Letter of Credit Advance
and shall constitute a participation in such Letter of Credit Advance in
accordance with such Bank's Pro Rate Share in satisfaction of its participation
obligation under this Section 12.12.
(e) Each Bank's obligation in accordance with this Agreement
to make the Advances of Letter of Credit Advances, as contemplated by this
Section 12.12, as a result of a drawing under a Letter of Credit, shall be
absolute and unconditional and without recourse to the Issuing Bank and shall
not be affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Bank may have against the Issuing
Bank, the Borrower or any other Person for any reason whatsoever; (ii) the
occurrence or continuance of a Default, an Event of Default; or (iii) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing; provided, however, that each Bank's obligation to make Advances
under this Section 12.12 is subject to the conditions set forth in Section 6.2.
Section 2.13 INDEMNIFICATION.
(a) Upon (and only upon) receipt by the Agent for the account
of the Issuing Bank of immediately available funds from the Borrower (i)
in reimbursement of any payment made by the Issuing Bank under the
Letter of Credit with respect to which any Bank has paid the Agent for
the account of the Issuing Bank for such Bank's participation in the
Letter of Credit pursuant to Section 2.12 or (ii) in payment of interest
thereon, the Agent will pay to each Bank, in the same funds as those
received by the Agent for the account of the Issuing Bank, the amount of
such Bank's Pro Rata Share of such funds, and the Issuing Bank shall
receive the amount of the Pro Rata Share of such funds of any Bank that
did not so pay the Agent for the account of the Issuing Bank.
(b) If the Agent or the Issuing Bank is required at any time
to return to the Borrower, or to a trustee, receiver, liquidator,
custodian, or any official in any insolvency proceeding of the types
described in Sections 11.1(d) or (e) (each an "Insolvency Proceeding"),
any portion of the payments made by the Borrower to the Agent for the
account of the Issuing Bank pursuant to subsection 2.13(a) in
reimbursement of a payment made under the Letter of Credit or interest
or fee thereon, each Bank shall, on demand of the Agent, forthwith
return to the Agent or the Issuing Bank the amount of its Pro Rata Share
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of any amounts so returned by the Agent or the Issuing Bank plus
interest thereon from the date such demand is made to the date such
amounts are returned by such Bank to the Agent or the Issuing Bank, at a
rate per annum equal to the Federal Funds Rate in effect from time to
time.
Section 2.14 ROLE OF THE ISSUING BANK.
(a) Each Bank and the Borrower agree that, in paying any
drawing under a Letter of Credit, the Issuing Bank shall not have any
responsibility to obtain any document (other than any sight draft and
certificates expressly required by the Letter of Credit) or to ascertain
or inquire as to the validity or accuracy of any such document or the
authority of the Person executing or delivering any such document.
(b) No Agent-related Person nor any of the respective
correspondents, participants or assignees of the Issuing Bank shall be
liable to any Bank for: (i) any action taken or omitted in connection
herewith at the request or with the approval of the Banks (including the
Required Banks, as applicable); (ii) any action taken or omitted in the
absence of gross negligence or willful misconduct; or (iii) the due
execution, effectiveness, validity or enforceability of any Letter of
Credit related document.
(c) The Borrower hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of
any Letter of Credit; provided, however, that this assumption is not
intended to, and shall not, preclude the Borrower's pursuing such rights
and remedies as it may have against the beneficiary or transferee at law
or under any other agreement. No Agent-related Person, nor any of the
respective correspondents, participants or assignees of the Issuing
Bank, shall be liable or responsible for any of the matters described in
clauses (i) through (vii) of Section 2.15; provided, however, anything
in such clauses to the contrary notwithstanding, that the Borrower may
have a claim against the Issuing Bank, and the Issuing Bank may be
liable to the Borrower, to the extent, but only to the extent, of any
direct, as opposed to consequential or exemplary, damages suffered by
the Borrower which the Borrower proves were caused by the Issuing Bank's
willful misconduct or gross negligence or the Issuing Bank's willful
failure to pay under any Letter of Credit after the presentation to it
by the beneficiary of a sight draft and certificate(s) strictly
complying with the terms and conditions of a Letter of Credit. In
furtherance and not in limitation of the foregoing: (i) the Issuing Bank
may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) the Issuing Bank shall not be
responsible for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Letter
of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any
reason.
Section 2.15 OBLIGATIONS ABSOLUTE. The Obligations of the Borrower under
this Agreement and any Letter of Credit related document to reimburse the
Issuing Bank for a drawing under a Letter of Credit, and to repay any Letter of
Credit Advance and any drawing under a Letter of Credit converted into an
Advance, shall be unconditional and irrevocable, and shall be paid
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strictly in accordance with the terms of this Agreement and each such other
Letter of Credit related document under all circumstances, including the
following:
(i) any lack of validity or enforceability of this
Agreement or any Letter of Credit related document;
(ii) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations of
the Borrower in respect of any Letter of Credit or any other
amendment or waiver of or any consent to departure from all or
any of the Letter of Credit related document;
(iii) the existence of any claim, set-off, defense or
other right that the Borrower may have at any time against any
beneficiary or any transferee of any Letter of Credit (or any
Person for whom any such beneficiary or any such transferee
may be acting), the Issuing Bank or any other Person, whether
in connection with this Agreement, the transactions
contemplated hereby or by the Letter of Credit Related
Documents or any unrelated transaction;
(iv) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
or any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any Letter
of Credit;
(v) any payment by the Issuing Bank under any Letter of
Credit against presentation of a draft or certificate that
does not strictly comply with the terms of any Letter of
Credit; or any payment made by the Issuing Bank under any
Letter of Credit to any Person purporting to be a trustee in
bankruptcy, debtor-in-possession, assignee for the benefit of
creditors, liquidator, receiver or other representative of or
successor to any beneficiary or any transferee of any Letter
of Credit, including any arising in connection with any
Insolvency Proceeding;
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or
consent to departure from any other guarantee, for all or any
of the obligations of the Borrower in respect of any Letter of
Credit; or
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, including any
other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Borrower or a Guarantor,
except for errors and omissions caused by an Issuing Bank's
gross negligence or willful misconduct.
Section 2.16 CASH COLLATERAL PLEDGE. Upon (i) the request of the Agent,
(A) if the Issuing Bank has honored any full or partial drawing request on any
Letter of Credit and such drawing has
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resulted in a Letter of Credit Advance hereunder, or (B) if, as of the
Termination Date, any Letters of Credit may for any reason remain outstanding
and partially or wholly undrawn, or (ii) the occurrence of the circumstances
described in Section 3.2 requiring the Borrower to Cash Collateralize Letters of
Credit, then, the Borrower shall immediately Cash Collateralize the Letter of
Credit Liabilities in an amount equal to such Letter of Credit Liabilities. The
Borrower hereby grants the Agent, for the benefit of the Agent, the Issuing Bank
and the Banks, a security interest in all such Cash Collateral. Cash Collateral
shall be maintained in blocked, non-interest bearing deposit accounts at
Comerica. The Borrower agrees to enter into documentation evidencing such
security interest in the Cash Collateral, in form and substance satisfactory to
Agent and the Required Banks in their reasonable discretion.
Section 2.17 LETTER OF CREDIT FEES.
(a) The Borrower shall pay to the Agent for the account of
each of the Banks a floating letter of credit fee with respect to the
Letters of Credit equal to the greater of (i) Five Hundred and No/100
Dollars ($500) or (ii) one percent per annum (1%) upon the face amount
of outstanding Letters of Credit, computed on a quarterly basis in
arrears on the last Business Day of each calendar quarter based upon
Letters of Credit outstanding for that quarter as calculated by the
Agent. Such letter of credit fees shall be due and payable monthly in
arrears on the last Business Day of each calendar month during which
Letters of Credit are outstanding, commencing on the first such monthly
date to occur after the date hereof, through the Termination Date (or
such later date upon which the outstanding Letters of Credit shall
expire), with the final payment to be made on the Termination Date (or
such later expiration date).
(b) The Company shall pay to the Issuing Bank from time to
time on demand the normal and customary issuance, presentation,
amendment and other customary processing fees, and other standard costs
and charges, of the Issuing Bank relating to letters of credit as from
time to time in effect.
Section 2.18 UNIFORM CUSTOMS AND PRACTICE. The Uniform Customs and
Practice for Documentary Credits as published by the International Chamber of
Commerce most recently at the time of issuance of any Letter of Credit shall
(unless otherwise expressly provided in the Letters of Credit) apply to the
Letters of Credit.
Section 2.19 EXISTING LETTERS OF CREDIT. The letters of credit described
on Schedule 2.19 hereto issued by Comerica shall be deemed to be Letters of
Credit issued by the Issuing Bank hereunder pursuant to the Letter of Credit
Commitment and shall be subject to and governed by, in all respects, this
Agreement to the same effect as if such Letters of Credit were issued pursuant
to this Agreement except as to Letter of Credit fees already collected by
Comerica.
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ARTICLE III
PAYMENTS
Section 3.1 METHOD OF PAYMENT. All payments of principal, interest, and
other amounts to be made by the Borrower under this Agreement and the other Loan
Documents shall be made to the Agent at the Principal Office for the account of
each Bank's Applicable Lending Office in Dollars and in immediately available
funds, without setoff, deduction, or counterclaim, not later than 11:00 a.m.,
Houston, Texas time on the date on which such payment shall become due (each
such payment made after such time on such due date to be deemed to have been
made on the next succeeding Business Day). The Borrower shall, at the time of
making each such payment, specify to the Agent the sums payable by the Borrower
under this Agreement and the other Loan Documents to which such payment is to be
applied (and in the event that the Borrower fails to so specify, or if an Event
of Default has occurred and is continuing, the Agent may apply such payment to
the Obligations in such order and manner as it may elect in its sole discretion,
subject to Section 3.3 hereof). Each payment received by the Agent under this
Agreement or any other Loan Document for the account of a Bank shall be paid
promptly to such Bank, in immediately available funds, for the account of such
Bank's Applicable Lending Office. Whenever any payment under this Agreement or
any other Loan Document shall be stated to be due on a day that is not a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of the
payment of interest and commitment fee, as the case may be.
Section 3.2 PREPAYMENT.
(a) The Borrower may, upon prior notice to the Agent in the
case of Base Rate Advances on the day of prepayment unless such
prepayments are being made on Base Rate Advances pursuant to the
Borrower's sweep authorizations then in effect, and at least three (3)
Business Days' prior notice to the Agent in the case of Eurodollar
Advances, prepay the Advances in whole at any time or from time to time
in part without premium or penalty but with accrued interest to the date
of prepayment on the amount so prepaid, provided that (a) Eurodollar
Advances may be prepaid only on the last day of the Interest Period for
such Advances, and (b) each partial prepayment of Eurodollar Advances
shall be in the principal amount of $100,000 or an integral multiple
thereof. All notices under this Section shall be irrevocable and shall
be given not later than 11:00 a.m. Dallas, Texas time on the day which
is not less than the number of Business Days specified above for such
notice.
(b) If on any date the Letter of Credit Liabilities exceed the
Letter of Credit Commitment, the Borrower shall Cash Collateralize on
such date the outstanding Letters of Credit in an amount equal to the
excess of the maximum amount then available to be drawn under the
Letters of Credit over the aggregate Letter of Credit Commitment. If on
any date after giving effect to any Cash Collateralization made on such
date pursuant to the preceding sentence, (i) the aggregate amount of
Advances then outstanding plus the amount of Letter of Credit
Liabilities exceeds (ii) the lesser of the Commitment or the Borrowing
Base, the
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Borrower shall immediately, and without notice or demand, prepay the
outstanding principal amount of the Advances by an amount equal to the
applicable excess.
Section 3.3 PRO RATA TREATMENT. Except to the extent otherwise provided
herein: (a) each Advance shall be by the Banks under Section 2.1, each payment
of commitment fee under Section 2.8 shall be made for the account of the Banks,
and each termination or reduction of the Commitments under Section 2.9 shall be
applied to the Commitments of the Banks, pro rata according to the respective
unused Commitments; (b) the making, Conversion, and Continuation of Advances of
a particular Type (other than Conversions provided for by Section 4.4) shall be
made pro rata among the Banks holding Advances of such Type according to the
amounts of their respective Commitments; (c) each payment and prepayment of
principal of or interest on Advances by the Borrower of a particular Type shall
be made to the Agent for the account of the Banks holding Advances of such Type
pro rata in accordance with the respective unpaid principal amounts of such
Advances held by such Banks; and (d) Interest Periods for Advances of a
particular Type shall be allocated among the Banks holding Advances of such Type
pro rata according to the respective principal amounts held by such Banks.
Section 3.4 NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Agent shall
have been notified by a Bank or the Borrower (the "Payor") prior to the date on
which such Bank is to make payment to the Agent of the proceeds of a Loan to be
made by it hereunder or the Borrower is to make a payment to the Agent for the
account of one or more of the Banks, 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 the
Agent, the 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 the Agent, the recipient of such
payment shall, on demand, pay to the Agent the amount made available to it
together with interest thereon in respect of the period commencing on the date
such amount was so made available by the Agent until the date the Agent recovers
such amount at a rate per annum equal to the Federal Funds Rate for such period.
Section 3.5 WITHHOLDING TAXES. All payments by the Borrower of principal
of and interest on the Advances and of all fees and other amounts payable under
any Loan Document are payable without deduction for or on account of any present
or future taxes, duties or other charges levied or imposed by the United States
of America or by the government of any jurisdiction outside the United States of
America or by any political subdivision or taxing authority of or in any of the
foregoing through withholding or deduction with respect to any such payments. If
any such taxes, duties or other charges are so levied or imposed, the Borrower
will pay additional interest or will make additional payments in such amounts so
that every net payment of principal of and interest on the Advances and of all
other amounts payable by it under any Loan Document, after withholding or
deduction for or on account of any such present or future taxes, duties or other
charges, will not be less than the amount provided for herein or therein,
provided that the Borrower shall have no obligation to pay such additional
amounts to any Bank to the extent that such taxes, duties, or other charges are
levied or imposed by reason of the failure of such Bank to comply with the
provisions
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of Section 3.6. The Borrower shall furnish promptly to the Agent for
distribution to each affected Bank, as the case may be, official receipts
evidencing any such withholding or reduction.
Section 3.6 WITHHOLDING TAX EXEMPTION. Each Bank that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to the Borrower and the Agent two duly completed
copies of United States Internal Revenue Service Form 1001 or 4224, certifying
in either case that such Bank is entitled to receive payments from the Borrower
under any Loan Document without deduction or withholding of any United States
federal income taxes. Each Bank which so delivers a Form 1001 or 4224 further
undertakes to deliver to Borrower and the Agent two additional copies of such
form (or a successor form) on or before the date such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent form so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by the Borrower or the Agent, in
each case certifying that such Bank is entitled to receive payments from the
Borrower under any Loan Document without deduction or withholding of any United
States federal income taxes, unless an event (including without limitation any
change in treaty, law or regulation) has occurred prior to the date on which any
such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Bank from duly completing and
delivering any such form with respect to it and such Bank advises the Borrower
and the Agent that it is not capable of receiving such payments without any
deduction or withholding of United States federal income tax.
Section 3.7 COMPUTATION OF INTEREST. Interest on the Advances and all
other amounts payable by the Borrower hereunder shall be computed on the basis
of a year of 360 days and the actual number of days elapsed (including the first
day but excluding the last day) unless such calculation would result in a
usurious rate, in which case interest shall be calculated on the basis of a year
of 365 or 366 days, as the case may be.
ARTICLE IV
YIELD PROTECTION AND ILLEGALITY
Section 4.1 ADDITIONAL COSTS.
(a) The Borrower shall pay within five (5) Business Days of
the request therefor to Agent for the account of such Bank from time to
time such amounts as such Bank may determine to be necessary to
compensate it for any costs incurred by such Bank which such Bank
determines are attributable to its making or maintaining of any
Eurodollar Advances hereunder or its obligation to make any of such
Advances hereunder, or any reduction in any amount receivable by such
Bank hereunder in respect of any such Advances or such obligation (such
increases in costs and reductions in amounts receivable being herein
called "Additional Costs"), resulting from any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable
to such Bank under this Agreement or its Note in respect of
any of such Advances (other than taxes imposed on the overall
net income of such Bank or its Applicable Lending
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Office for any of such Advances by the jurisdiction in which
such Bank has its principal office or such Applicable Lending
Office);
(ii) imposes or modifies any reserve, special deposit,
minimum capital, capital ratio, or similar requirement
relating to any extensions of credit or other assets of, or
any deposits with or other liabilities or commitments of, such
Bank (including any of such Advances or any deposits referred
to in the definition of "Eurodollar Rate" in Section 1.1
hereof); or
(iii) imposes any other condition affecting this
Agreement or the Notes or any of such extensions of credit or
liabilities or commitments.
Each Bank will notify the Borrower of any event occurring after the date
of this Agreement which will entitle such Bank to compensation pursuant
to this Section 4.1(a) as promptly as practicable after it obtains
knowledge thereof and determines to request such compensation, and will
designate a different Applicable Lending Office for the Advances
affected by such event if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the sole
opinion of such Bank, violate any law, rule, or regulation or be in any
way disadvantageous to such Bank, provided that such Bank shall have no
obligation to so designate an Applicable Lending Office located in the
United States of America. Each Bank will furnish the Borrower with a
certificate setting forth the basis and the amount of each request of
such Bank for compensation under this Section 4.1(a). If any Bank
requests compensation from the Borrower under this Section 4.1(a), the
Borrower may, by notice to such Bank (with a copy to the Agent) suspend
the obligation of such Bank to make or Continue making, or Convert
Advances into, Advances of the Type with respect to which such
compensation is requested until the Regulatory Change giving rise to
such request ceases to be in effect (in which case the provisions of
Section 4.4 hereof shall be applicable).
(b) Without limiting the effect of the foregoing provisions of
this Section 4.1, in the event that, by reason of any Regulatory Change,
any Bank either (i) incurs Additional Costs based on or measured by the
excess above a specified level of the amount of a category of deposits
or other liabilities of such Bank which includes deposits by reference
to which the interest rate on Eurodollar Advances is determined as
provided in this Agreement or a category of extensions of credit or
other assets of such Bank which includes Eurodollar Advances or (ii)
becomes subject to restrictions on the amount of such a category of
liabilities or assets which it may hold, then, if such Bank so elects by
notice to the Borrower (with a copy to the Agent), the obligation of
such Bank to make or Continue making, or Convert Advances into, Advances
of such Type hereunder shall be suspended until such Regulatory Change
ceases to be in effect (in which case the provisions of Section 4.4
hereof shall be applicable).
(c) Determinations and allocations by any Bank for purposes of
this Section 4.1 of the effect of any Regulatory Change on its costs of
maintaining its obligations to make Advances or of making or maintaining
Advances or on amounts receivable by it in respect
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of Advances, and of the additional amounts required to compensate such
Bank in respect of any Additional Costs, shall be conclusive, provided
that such determinations and allocations are made on a reasonable basis.
Section 4.2 LIMITATION ON TYPES OF ADVANCES. Anything herein to the
contrary notwithstanding, if with respect to any Fixed Rate Advances for any
Interest Period therefor:
(a) The Agent determines (which determination shall be
conclusive) that quotations of interest rates for the relevant deposits
referred to in the definition of "Eurodollar Rate" in Section 1.1 hereof
are not being provided in the relative amounts or for the relative
maturities for purposes of determining the rate of interest for such
Advances as provided in this Agreement; or
(b) Required Banks determine (which determination shall be
conclusive) and notify the Agent that the relevant rates of interest
referred to in the definition of "Eurodollar Rate" in Section 1.1 hereof
on the basis of which the rate of interest for such Advances for such
Interest Period is to be determined do not accurately reflect the cost
to the Banks of making or maintaining such Advances for such Interest
Period;
then the Agent shall give the Borrower prompt notice thereof specifying the
relevant Type of Advances and the relevant amounts or periods, and so long as
such condition remains in effect, the Banks shall be under no obligation to make
additional Advances of such Type or to Convert Advances of any other Type into
Advances of such Type and the Borrower shall, on the last day(s) of the then
current Interest Period(s) for the outstanding Advances of the affected Type,
either prepay such Advances or Convert such Advances into another Type of
Advance in accordance with the terms of this Agreement.
Section 4.3 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to (a) honor its obligation to make Eurodollar Advances hereunder
or (b) maintain Eurodollar Advances hereunder, then such Bank shall promptly
notify the Borrower (with a copy to the Agent) thereof and such Bank's
obligation to make or maintain Eurodollar Advances and to Convert other Types of
Advances into Eurodollar Advances hereunder shall be suspended until such time
as such Bank may again make and maintain Eurodollar Advances (in which case the
provisions of Section 4.4 hereof shall be applicable).
Section 4.4 TREATMENT OF AFFECTED ADVANCES. If the Eurodollar Advances
of any Bank (Advances of such Type being hereinafter called "Affected Advances"
and such Type being herein called the "Affected Type") are to be Converted
pursuant to Section 4.1 or 4.3 hereof, such Bank's Affected Advances shall be
automatically Converted into Base Rate Advances on the last day(s) of the then
current Interest Period(s) for the Affected Advances (or, in the case of a
Conversion required by Section 4.1(b) or 4.3 hereof, on such earlier date as
such Bank may specify to the Borrower with a copy to the Agent) and, unless and
until such Bank gives notice as provided below that the circumstances specified
in Section 4.1 or 4.3 hereof which gave rise to such Conversion no longer exist:
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(a) To the extent that such Bank's Affected Advances have been
so Converted, all payments and prepayments of principal which would
otherwise be applied to such Bank's Affected Advances shall be applied
instead to its Base Rate Advances;
(b) All Advances which would otherwise be made or Continued by
such Bank as Advances of the Affected Type shall be made as or Converted
into Base Rate Advances and all Advances of such Bank which would
otherwise be Converted into Advances of the Affected Type shall be
Converted instead into (or shall remain as) Base Rate Advances; and
(c) If Advances of other Banks of the Affected Type are
subsequently Converted into Advances of another Type (other than Base
Rate Advances) such Bank's Base Rate Advances shall be automatically
Converted on the Conversion date into Advances of such other Type to the
extent necessary so that, after giving effect thereto, all Advances held
by such Bank and the Banks whose Advances are so Converted are held pro
rata (as to principal amounts, Types, and Interest Periods) in
accordance with their respective Commitments.
If such Bank gives notice to the Borrower (with a copy to the Agent) that the
circumstances specified in Section 4.1 or 4.3 hereof which gave rise to the
Conversion of such Bank's Affected Advances pursuant to this Section 4.4 no
longer exist (which such Bank agrees to do promptly upon such circumstances
ceasing to exist) at a time when Advances of the Affected Type are outstanding,
such Bank's Base Rate Advances shall be automatically Converted, on the first
day(s) of the next succeeding Interest Period(s) for such outstanding Advances
of the Affected Type to the extent necessary so that, after giving effect
thereto, all Advances held by the Banks holding Advances of the Affected Type
and by such Bank are held pro rata (as to principal amounts, Types, and Interest
Periods) in accordance with their respective Commitments.
Section 4.5 COMPENSATION. The Borrower shall pay to the Agent for the
account of each Bank, upon the request of such Bank through the Agent, such
amount or amounts as shall be sufficient (in the reasonable opinion of such
Bank) to compensate it for any loss, cost, or expense incurred by it as a result
of:
(a) Any payment, prepayment or Conversion of a Eurodollar
Advance for any reason (including, without limitation, the acceleration
of the outstanding Advances pursuant to Section 11.2) on a date other
than the last day of an Interest Period for such Advance; or
(b) Any failure by the Borrower for any reason (including,
without limitation, the failure of any conditions precedent specified in
Article VI to be satisfied) to borrow, Convert, or prepay a Fixed Rate
Advance on the date for such borrowing, Conversion, or prepayment,
specified in the relevant notice of borrowing, prepayment, or Conversion
under this Agreement.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which otherwise would have accrued on the
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principal amount so paid or Converted or not borrowed for the period from the
date of such payment, Conversion, or failure to borrow to the last day of the
Interest Period for such Advance (or, in the case of a failure to borrow, the
Interest Period for such Advance which would have commenced on the date
specified for such borrowing) at the applicable rate of interest for such
Advance provided for herein over (ii) the interest component of the amount such
Bank would have bid in the London interbank market (if such Advance is a
Eurodollar Advance) for Dollar deposits of leading banks and amounts comparable
to such principal amount and with maturities comparable to such period.
Section 4.6 CAPITAL ADEQUACY. If after the date hereof, any Bank shall
have determined that the adoption or implementation of any applicable law, rule,
or regulation regarding capital adequacy (including, without limitation, any
law, rule, or regulation implementing the Basle Accord), or any change therein,
or any change in the interpretation or administration thereof by any central
bank or other Governmental Authority charged with the interpretation or
administration thereof, or compliance by such Bank (or its parent) with any
guideline, request, or directive regarding capital adequacy (whether or not
having the force of law) of any central bank or other Governmental Authority
(including, without limitation, any guideline or other requirement implementing
the Basle Accord), has or would have the effect of reducing the rate of return
on such Bank's (or its parent's) capital as a consequence of its obligations
hereunder or the transactions contemplated hereby to a level below that which
such Bank (or its parent) could have achieved but for such adoption,
implementation, change or compliance (taking into consideration such Bank's
policies with respect to capital adequacy) by an amount deemed by such Bank to
be material, then from time to time, within five (5) Business Days after demand
by such Bank (with a copy to the Agent), the Borrower shall pay to the Agent for
the account of such Bank such additional amount or amounts as will compensate
such Bank (or its parent) for such reduction. A certificate of such Bank
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive, provided that the
determination thereof is made on a reasonable basis. In determining such amount
or amounts, such Bank may use any reasonable averaging and attribution methods.
ARTICLE V
SECURITY
Section 5.1 COLLATERAL. To secure full and complete payment and
performance of the Obligations, the Borrower shall execute and deliver or cause
to be executed and delivered the documents described below covering the property
and collateral described in this Section 5.1 (which, together with any other
property and collateral which may now or hereafter secure the Obligations or any
part thereof, is sometimes herein called the "Collateral"):
(a) Beaird shall grant to the Agent for the benefit of the
Banks a first priority lien on the Real Property and shall assign to the
Agent for the benefit of the Banks all present and future rents, leases,
and profits relating to the Real Property, pursuant to the Mortgage.
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(b) The Borrower and the Guarantors (including all
Subsidiaries created or acquired after the date hereof) shall grant to
the Agent for the benefit of the Banks a first priority security
interest (except for Permitted Liens) in all of their respective
accounts, accounts receivable, equipment, machinery, fixtures,
inventory, chattel paper, documents, instruments, and general
intangibles, whether now owned or hereafter acquired, and all products
and proceeds thereof, pursuant to the Security Agreement.
(c) LSS and GHX, respectively, will grant liens on the LSS
Real Property and GHX Real Property secure the Obligations pursuant to
the Deeds of Trust.
(d) The Borrower shall, and shall cause its Subsidiaries
(other than Inactive Subsidiaries) to, open a lock box account
satisfactory to Agent at Agent's offices and direct that all account
debtors pay all monies directly into such lock box account, which shall
be in the sole name and under the sole dominion and control of Agent.
(e) The Borrower, the Rex Group and GHX shall pledge to and
grant to the Agent for the benefit of Banks, a first priority lien and
security interest in 100% of the share capital of each of Subsidiaries
of such Person pursuant to the Pledge Agreement.
(f) The Borrower shall execute, and cause its Subsidiaries to
execute, from time to time, such further documents and instruments,
including without limitation, Uniform Commercial Code financing
statements, as the Agent, in its sole discretion, deems necessary or
desirable to evidence and perfect its liens and security interests in
the Collateral.
Section 5.2 SETOFF. If an Event of Default shall have occurred and is
continuing, each Bank is hereby authorized at any time and from time to time,
without notice to the Borrower (any such notice being hereby expressly waived by
the Borrower), to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Bank to or for the credit or the account of the Borrower
against any and all of the obligations of the Borrower now or hereafter existing
under this Agreement, such Bank's Note, or any other Loan Document, irrespective
of whether or not the Agent or such Bank shall have made any demand under this
Agreement or such Bank's Note or such other Loan Document and although such
obligations may be unmatured. Each Bank agrees promptly to notify the Borrower
(with a copy to the Agent) after any such set off and application, provided that
the failure to give such notice shall not affect the validity of such set off
and application. The rights and remedies of each Bank hereunder are in addition
to other rights and remedies (including, without limitation, other rights of set
off) which such Bank may have.
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ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1 INITIAL ADVANCE AND LETTERS OF CREDIT. The obligation of
each Bank to make its initial Advance and the Issuing Bank to issue any initial
Letter of Credit is subject to the condition precedent that the Agent shall have
received on or before the day of such Advance or issuance all of the following,
each dated (unless otherwise indicated) the date hereof, in form and substance
satisfactory to the Agent:
(a) RESOLUTIONS. Resolutions of the Board of Directors of the
Borrower and the Guarantors certified by its Secretary or an Assistant
Secretary which authorize the execution, delivery, and performance by
such Person of this Agreement and the other Loan Documents to which such
Person is or is to be a party;
(b) INCUMBENCY CERTIFICATE. A certificate of incumbency for
each of the Borrower and the Guarantors certified by the Secretary or an
Assistant Secretary of such Person certifying the names of the officers
of such Person authorized to sign this Agreement and each of the other
Loan Documents to which such Person is or is to be a party (including
the certificates contemplated herein) together with specimen signatures
of such officers;
(c) ARTICLES OF INCORPORATION. The articles of incorporation
of the Borrower and the Guarantors certified by the Secretary of State
of the state of incorporation of such Person and dated within thirty
(30) days prior to the date of the initial Advance;
(d) BYLAWS. The bylaws of the Borrower and the Guarantors
certified by the Secretary or an Assistant Secretary of such Person;
(e) GOVERNMENTAL CERTIFICATES. Certificates of the appropriate
government officials of the state of incorporation of the Borrower and
the Guarantors as to the existence and good standing of such Person,
each dated within thirty (30) days prior to the date of the initial
Advance;
(f) NOTE. The Note executed by the Borrower;
(g) SECURITY AGREEMENT. The Security Agreement executed by
the Borrower and the Guarantors;
(h) MORTGAGE. The Mortgage executed by Beaird;
(i) FINANCING STATEMENTS. Uniform Commercial Code UCC-1
financing statements and UCC-1 financing statement amendments executed
by the Borrower and the Guarantors and covering the Collateral;
(j) GUARANTY. The Guaranty executed by the Guarantors;
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(k) LANDLORD AND MORTGAGEE WAIVERS. Landlord and Mortgagee
waivers executed by the landlords and mortgagees specified on Schedule
6.1(l) attached hereto;
(l) CONTRIBUTION AGREEMENT. The Contribution Agreement
executed by the Borrower and the Guarantors;
(m) DEEDS OF TRUST. A Deed of Trust executed by LSS with
respect to the LSS Real Property and two (2) Deeds of Trust executed by
GHX with respect to the GHX Real Property;
(n) UCC SEARCHES. The results of a Uniform Commercial Code
searches showing all financing statements and other documents or
instruments on file against the Borrower and the Guarantors in the
jurisdictions reflected on Schedule 6.1(l) attached hereto;
(o) PAYOFF OF GHX REVOLVING LINE OF CREDIT AND THE
REARRANGEMENT OF THE $18,000,000 LINE OF CREDIT. Evidence satisfactory
to Agent that GHX's existing $5,000,000 revolving credit loan with
Comerica and the Borrower's and certain of the Guarantors' $18,000,000
revolving credit loan with Comerica have been paid in full and the
commitments thereunder terminated, which, loans have been renewed and
extended as a part of the Commitment and have been funded to the
Borrower under the Note;
(p) REVIEW OF RELATED DOCUMENTS. Agents shall have reviewed
and approved the EnSerCo L.L.C. loan documents with Borrower;
(q) OPINION OF COUNSEL. A favorable opinion of Gardere Wynne
Sewell & Riggs, L.L.P., legal counsel to the Borrower and the Guarantor,
as to the matters set forth in Exhibit "F" hereto, and such other
matters as the Agent may reasonably request;
(r) PLEDGE AGREEMENT. The Pledge Agreement executed by the
Borrower, the Rex Group and GHX;
(s) EVIDENCE OF CLOSING AND FUNDING OF THE BEAIRD ACQUISITION.
(i) Agent shall have received true copies of the executed Purchase
Agreement certified by the Secretary or Assistant Secretary of the
Borrower (A) as being true and correct copies of such documents, (B) as
having been duly authorized by the Board of Directors of the Borrower,
and (c) as having been duly executed and delivered by the Borrower; and
(ii) the Agent shall have received evidence satisfactory to the Agent of
the consummation of the transactions contemplated by the Acquisition
Documents, substantially as described therein and in conformity with
applicable law and on terms and conditions satisfactory to the Agent.
The Purchase Agreement and all other Acquisition Documents shall be
valid, binding and enforceable against the parties thereto in accordance
with their terms, shall be in form and substance reasonably satisfactory
to the Agent and none of the principal terms or conditions to closing of
any party set forth in the Purchase Agreement or any other Acquisition
Document shall have been, without the prior written consent of the
Agent, amended or
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supplemented, and all principal conditions stated therein shall have
been satisfied without waiver.
(t) ATTORNEYS' FEES AND EXPENSES. Evidence that the costs and
expenses (including attorneys' fees) referred to in Section 13. 1, to
the extent incurred, shall have been paid in full by the Borrower.
Section 6.2 ALL ADVANCES AND LETTERS OF CREDIT. The obligation of each
Bank to make any Advance (including the initial Advance) and the Issuing Bank to
issue any Letter of Credit (including any initial Letter of Credit) is subject
to the following additional conditions precedent:
(a) ADVANCE REQUEST FORM/LETTER OF CREDIT REQUEST FORM. The
Agent shall have received, in connection with any requested Advance in
accordance with Section 2.5, an Advance Request Form, dated the date of
such Advance, and, in connection with any requested Letter of Credit,
the Issuing Bank and the Agent shall have received a Letter of Credit
Request Form, as required under Section 2.11 hereof, in each case
executed by an authorized officer of the Borrower;
(b) NO DEFAULT. No Default or Event of Default shall have
occurred and be continuing, or would result from such Advance;
(c) REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties contained in Article VII hereof and in the other Loan
Documents shall be true and correct on and as of the date of such
Advance with the same force and effect as if such representations and
warranties had been made on and as of such date; and
(d) ADDITIONAL DOCUMENTATION. The Agent shall have received
such additional approvals, opinions, or documents as the Agent or its
legal counsel, Winstead Sechrest & Minick P.C., may reasonably request.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Banks to enter into this Agreement, the
Borrower represents and warrants to the Agent and the Banks that:
Section 7.1 CORPORATE EXISTENCE. The Borrower and each Subsidiary (a) is
a corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation; (b) has all requisite corporate
power and authority to own its assets and carry on its business as now being or
as proposed to be conducted; and (c) is qualified to do business in all
jurisdictions in which the nature of its business makes such qualification
necessary and where failure to so qualify would have a material adverse effect
on its business, condition (financial or otherwise), operations, prospects, or
properties. The Borrower has the corporate power and authority to
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execute, deliver, and perform its obligations under this Agreement and the other
Loan Documents to which it is or may become a party.
Section 7.2 FINANCIAL STATEMENTS. The Borrower has delivered to the
Agent audited consolidated financial statements of the Borrower and its
Subsidiaries as at and for the fiscal year ended December 31, 1997, and
unaudited consolidated financial statements of the Borrower and its Subsidiaries
for the three (3)-month period ended March 31, 1998. Such financial statements
are true and correct, have been prepared in accordance with GAAP, and fairly and
accurately present, on a consolidated basis, the financial condition of the
Borrower and its Subsidiaries as of the respective dates indicated therein and
the results of operations for the respective periods indicated therein. Neither
the Borrower nor any of its Subsidiaries has any material contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments, or
unrealized or anticipated losses from any unfavorable commitments except as
referred to or reflected in such financial statements. There has been no
material adverse change in the business, condition (financial or otherwise),
operations, prospects, or properties of the Borrower or any of its Subsidiaries
since the effective date of the most recent financial statements referred to in
this Section.
Section 7.3 CORPORATE ACTION; NO BREACH. The execution, delivery, and
performance by the Borrower of this Agreement and the other Loan Documents to
which the Borrower or any Guarantor is or may become a party and compliance with
the terms and provisions hereof and thereof have been duly authorized by all
requisite action on the part of such Person and do not and will not (a) violate
or conflict with, or result in a breach of, or require any consent under (i) the
articles or bylaws of the Borrower or any of the Subsidiaries, (ii) any
applicable law, rule, or regulation or any order, writ, injunction, or decree of
any Governmental Authority or arbitrator, or (iii) any agreement or instrument
to which the Borrower or any of the Subsidiaries is a party or by which any of
them or any of their property is bound or subject, or (b) constitute a default
under any such agreement or instrument, or result in the creation or imposition
of any Lien (except as provided in Article V) upon any of the revenues or assets
of the Borrower or any Subsidiary.
Section 7.4 OPERATION OF BUSINESS. The Borrower and each of its
Subsidiaries possess all licenses, permits, franchises, patents, copyrights,
trademarks, and trade names, or rights thereto, necessary to conduct their
respective businesses substantially as now conducted and as presently proposed
to be conducted, and the Borrower and each of its Subsidiaries are not in
violation of any valid rights of others with respect to any of the foregoing.
Section 7.5 LITIGATION AND JUDGMENTS. Except as disclosed on Schedule
7.5 hereto, there is no action, suit, investigation, or proceeding before or by
any Governmental Authority or arbitrator pending, or to the knowledge of the
Borrower, threatened against or affecting the Borrower or any Subsidiary, that
would, if adversely determined, have a material adverse effect on the business,
condition (financial or otherwise), operations, prospects, or properties of the
Borrower or any Subsidiary or the ability of the Borrower to pay and perform the
Obligations. There are no outstanding judgments against the Borrower or any
Subsidiary.
Section 7.6 RIGHTS IN PROPERTIES, LIENS. The Borrower and each
Subsidiary have good and indefeasible title to or valid leasehold interests in
their respective properties and assets, real and
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personal, including the properties, assets, and leasehold interests reflected in
the financial statements described in Section 7.2, and none of the properties,
assets, or leasehold interests of the Borrower or any Subsidiary is subject to
any Lien, except as permitted by Section 9.2.
Section 7.7 ENFORCEABILITY. This Agreement constitutes, and the other
Loan Documents to which the Borrower is party, when delivered, shall constitute
the legal, valid, and binding obligations of the Borrower, enforceable against
the Borrower in accordance with their respective terms, except as limited by
bankruptcy, insolvency, or other laws of general application relating to the
enforcement of creditors' rights.
Section 7.8 APPROVALS. No authorization, approval, or consent of, and no
filing or registration with, any Governmental Authority or third party is or
will be necessary for the execution, delivery, or performance by the Borrower of
this Agreement and the other Loan Documents to which the Borrower is or may
become a party or for the validity or enforceability thereof.
Section 7.9 DEBT. The Borrower and its Subsidiaries have no Debt or
Contingent Obligations, except as disclosed on Schedule 7.9 hereto.
Section 7.10 TAXES. The Borrower and each Subsidiary have filed all tax
returns (federal, state, and local) required to be filed, including all income,
franchise, employment, property, and sales tax returns, and have paid all of
their respective liabilities for taxes, assessments, governmental charges, and
other levies that are due and payable. The Borrower knows of no pending
investigation of the Borrower or any Subsidiary by any taxing authority or of
any pending but unassessed tax liability of the Borrower or any Subsidiary.
Section 7.11 USE OF PROCEEDS: MARGIN SECURITIES. Neither the Borrower
nor any Subsidiary is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulations G, T, U, or X of the
Board of Governors of the Federal Reserve System), and no part of the proceeds
of any Advance will be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying margin stock.
Section 7.12 ERISA. The Borrower and each Subsidiary are in compliance
in all material respects with all applicable provisions of ERISA. Neither a
Reportable Event nor a Prohibited Transaction has occurred and is continuing
with respect to any Plan. No notice of intent to terminate a Plan has been
filed, nor has any Plan been terminated. No circumstances exist which constitute
grounds entitling the PBGC to institute proceedings to terminate, or appoint a
trustee to administer, a Plan, nor has the PBGC instituted any such proceedings.
Neither the Borrower nor any ERISA Affiliate has completely or partially
withdrawn from a Multiemployer Plan. The Borrower and each ERISA Affiliate have
met their minimum funding requirements under ERISA with respect to all of their
Plans, and the present value of all vested benefits under each Plan do not
exceed the fair market value of all Plan assets allocable to such benefits, as
determined on the most recent valuation date of the Plan and in accordance with
ERISA. Neither the Borrower nor any ERISA Affiliate has incurred any liability
to the PBGC under ERISA.
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Section 7.13 DISCLOSURE. No statement, information, report,
representation, or warranty made by the Borrower in this Agreement or in any
other Loan Document or furnished to the Agent or any Bank in connection with
this Agreement or any transaction contemplated hereby contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements herein or therein not misleading. All projections,
estimates, and pro forma financial information furnished by the Borrower
including the report listed on the attached SCHEDULE 7.13 were prepared on the
basis of assumptions, data, information, tests or conditions believed to be
reasonable at the time such projections, estimates and pro forma financial
information were furnished. There is no fact known to the Borrower which has a
material adverse effect, or which might in the future have a material adverse
effect, on the business, condition (financial or otherwise), operations,
prospects, or properties of the Borrower or any Subsidiary that has not been
disclosed in writing to the Agent and the Banks.
Section 7.14 SUBSIDIARIES. The Borrower has no Subsidiaries other than
those listed on Schedule 6.1(1) hereto, and Schedule 6.1(1) sets forth the
jurisdiction of incorporation of each Subsidiary, the percentage of the
Borrower's ownership of the outstanding voting stock of each Subsidiary, and all
locations which are leased or mortgaged to a Person other than Agent where
inventory of the Borrower or any Subsidiary is located complete with the names
and addresses of such landlords and mortgagees. All of the outstanding capital
stock of each Subsidiary has been validly issued, is fully paid, and is
nonassessable. None of the Inactive Subsidiaries has any assets or is conducting
any business.
Section 7.15 AGREEMENTS. Neither the Borrower nor any Subsidiary is a
party to any indenture, loan, or credit agreement, or to any lease or other
agreement or instrument, or subject to any charter or corporate restriction
which could have a material adverse effect on the business, condition (financial
or otherwise), operations, prospects, or properties of the Borrower or any
Subsidiary, or the ability of the Borrower to pay and perform its obligations
under the Loan Documents to which it is a party or the ability of any Subsidiary
to pay dividends directly or through another Subsidiary to the Borrower. Neither
the Borrower nor any Subsidiary is in default in any respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which it is
a party.
Section 7.16 COMPLIANCE WITH LAWS. Neither the Borrower nor any
Subsidiary is in violation in any material respect of any law, rule, regulation,
order, or decree of any Governmental Authority or arbitrator.
Section 7.17 INVENTORY. All inventory of the Borrower and the
Subsidiaries has been and will hereafter be produced in compliance with all
applicable laws, rules, regulations, and governmental standards, including,
without limitation, the minimum wage and overtime provisions of the Fair Labor
Standards Act, as amended (29 U.S.C. ss.ss. 201-219), and the regulations
promulgated thereunder.
Section 7.18 INVESTMENT COMPANY ACT. Neither the Borrower nor any
Subsidiary is an investment company" within the meaning of the Investment
Company Act of 1940, as amended.
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Section 7.19 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower
nor any Subsidiary is a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" or a "public utility"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
Section 7.20 YEAR 2000 COMPLIANCE. Any reprogramming required to permit
the proper functioning, in and following the year 2000, of (i) the Borrower's
and the Subsidiaries' computer systems and (ii) equipment containing embedded
microchips (including systems and equipment supplied by others or with which
Borrower's or the Subsidiaries' systems interface) and the testing of all such
systems and equipment, as so reprogrammed, will be completed by January 1, 1999.
The cost to the Borrower and the Subsidiaries of such reprogramming and testing
and of the reasonably foreseeable consequences of year 2000 to the Borrower and
the Subsidiaries (including, reprogramming errors and the failure of others'
systems or equipment) will not result in a Default or Event of Default or
materially adversely affect the business, financial position or results of
operations of the Borrower or the Subsidiaries. Except for such of the
reprogramming referred to in the preceding sentences as may be necessary, the
computer and management information systems of the Borrower and the Subsidiaries
are and, with ordinary course upgrading and maintenance, will continue to be,
sufficient to permit the Borrower and the Subsidiaries to conduct their
respective businesses without any material adverse effect on the business,
financial position or results of operations of the Borrower or the Subsidiaries.
Section 7.21 ENVIRONMENTAL MATTERS. Except as disclosed on Schedule
7.21 hereto:
(a) The Borrower, each Subsidiary, and all of their respective
properties, assets, and operations are in full compliance with all
Environmental Laws except as to non-compliance which could not
reasonably be expected to result in a material adverse effect on the
business, financial position or results of operations of the Borrower or
any of the Subsidiaries. The Borrower is not aware of, nor has the
Borrower received notice of, any past, present, or future conditions,
events, activities, practices, or incidents which may interfere with or
prevent the compliance or continued compliance of the Borrower and the
Subsidiaries with all Environmental Laws except as to non-compliance
which could not reasonably be expected to result in a material adverse
affect on the business, financial position or results of operations of
the Borrower or any of the Subsidiaries.
(b) The Borrower and each Subsidiary have obtained all
permits, licenses, and authorizations that are required under applicable
Environmental Laws, and all such permits are in good standing and the
Borrower and its Subsidiaries are in compliance with all of the terms
and conditions of such permits;
(c) No Hazardous Materials exist on, about, or within or have
been used, generated, stored, transported, disposed of on, or Released
from any of the properties or assets of the Borrower or any Subsidiary
in violation of applicable Environmental Laws. The use which the
Borrower and the Subsidiaries make and intend to make of their
respective properties and assets will not result in the use, generation,
storage, transportation,
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accumulation, disposal, or Release of any Hazardous Material on, in, or
from any of their properties or assets in violation of applicable
Environmental Laws;
(d) Neither the Borrower nor any of the Subsidiaries nor any
of their respective currently or previously owned or leased properties
or operations is subject to any outstanding or, to the best of its
knowledge, threatened order from or agreement with any Governmental
Authority or other Person or subject to any judicial or docketed
administrative proceeding with respect to (i) failure to comply with
Environmental Laws, (ii) Remedial Action, or (iii) any Environmental
Liabilities arising from a Release or threatened Release;
(e) There are no conditions or circumstances associated with
the currently or previously owned or leased properties or operations of
the Borrower or any of the Subsidiaries that could reasonably be
expected to give rise to any material Environmental Liabilities;
(f) Neither the Borrower nor any of its Subsidiaries is a
treatment, storage, or disposal facility requiring a permit under the
Resource Conservation and Recovery Act, 42 U. S.C. ss. 6901 et seq.,
regulations thereunder or any comparable provision of state law. The
Borrower and its Subsidiaries are in compliance with all applicable
financial responsibility requirements of all Environmental Laws;
(g) Neither the Borrower nor any of its Subsidiaries has filed
or failed to file any notice required under applicable Environmental Law
reporting a Release; and
(h) No Lien arising under any Environmental Law has attached
to any property or revenues of the Borrower or its Subsidiaries.
Section 7.22 ENSERCO LOAN AGREEMENT. The Borrower has delivered to the
Agent true, correct and complete copies of the EnSerCo Loan Agreement. There has
been no amendment, modification, waiver, or termination of, or supplement to,
the EnSerCo Loan Agreement.
Section 7.23 BOARD OF DIRECTORS. Attached hereto as SCHEDULE 7.23 is a
list of the current members of the Board of Directors of Borrower.
ARTICLE VIII
POSITIVE COVENANTS
The Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Bank has any Commitment hereunder, the
Borrower will perform and observe the following positive covenants:
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Section 8.1 REPORTING REQUIREMENTS. The Borrower will furnish to the
Agent and each Bank:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in
any event within ninety (90) days after the end of each fiscal year of
the Borrower, beginning with the fiscal year ending December 31, 1998,
(i) a copy of the annual audit report of the Borrower and the
Subsidiaries for such fiscal year containing, on a consolidated basis,
balance sheets and statements of income, retained earnings, and cash
flow as at the end of such fiscal year and for the 12-month period then
ended, in each case setting forth in comparative form the figures for
the preceding fiscal year, all in reasonable detail and audited and
certified by Deloitte & Touche, or other independent certified public
accountants of recognized standing acceptable to the Agent, to the
effect that such report has been prepared in accordance with GAAP; (ii)
the details of consolidation for the balance sheets and statements of
income, and (iii) a certificate of such independent certified public
accountants to the Agent (A) stating that to their knowledge no Default
has occurred and is continuing, or if in their opinion a Default has
occurred and is continuing, a statement as to the nature thereof, and
(B) confirming the calculations set forth in the officer's certificate
delivered simultaneously therewith;
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and
in any event within forty-five (45) days after the end of each of the
quarters of each fiscal year of the Borrower, a copy of an unaudited
financial report of the Borrower and the Subsidiaries as of the end of
such fiscal quarter and for the portion of the fiscal year then ended,
containing, on a consolidated and consolidating basis, balance sheets
and statements of income, retained earnings (consolidated only), and
cash flow (consolidated only), in each case setting forth in comparative
form the figures for the corresponding period of the preceding fiscal
year, all in reasonable detail certified by the chief financial officer
of the Borrower to have been prepared in accordance with GAAP and to
fairly and accurately present (subject to year-end audit adjustments)
the financial condition and results of operations of the Borrower and
the Subsidiaries, on a consolidated and consolidating basis, at the date
and for the periods indicated therein;
(c) CERTIFICATE OF NO DEFAULT. Concurrently with the delivery
of each of the financial statements referred to in subsections 8.1(a)
and 8.1(b), a certificate of the chief executive or chief financial
officer of the Borrower (i) stating that to the best of such officer's
knowledge, no Default has occurred and is continuing, or if a Default
has occurred and is continuing, a statement as to the nature thereof and
the action that is proposed to be taken with respect thereto, and (ii)
showing in reasonable detail the calculations demonstrating compliance
with Article X;
(d) MANAGEMENT LETTERS. Promptly upon receipt thereof, a copy
of any management letter or written report submitted to the Borrower or
any Subsidiary by independent certified public accountants with respect
to the business, condition (financial or otherwise), operations,
prospects, or properties of the Borrower or any Subsidiary;
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(e) NOTICE OF LITIGATION. Promptly after the commencement
thereof, notice of all actions, suits, and proceedings before any
Governmental Authority or arbitrator affecting the Borrower or any
Subsidiary which, if determined adversely to the Borrower or such
Subsidiary, could have a material adverse effect on the business,
condition (financial or otherwise), operations, prospects, or properties
of the Borrower or such Subsidiary;
(f) NOTICE OF DEFAULT. As soon as possible and in any event
within five (5) days after the occurrence of each Default or Event of
Default, a written notice setting forth the details of such Default and
the action that the Borrower has taken and proposes to take with respect
thereto;
(g) ERISA REPORTS. Promptly after the filing or receipt
thereof, copies of all reports, including annual reports, and notices
which the Borrower or any Subsidiary files with or receives from the
PBGC or the U.S. Department of Labor under ERISA; and as soon as
possible and in any event within five (5) days after the Borrower or any
Subsidiary knows or has reason to know that any Reportable Event or
Prohibited Transaction has occurred with respect to any Plan or that the
PBGC or the Borrower or any Subsidiary has instituted or will institute
proceedings under Title IV of ERISA to terminate any Plan, a certificate
of the chief financial officer of the Borrower setting forth the details
as to such Reportable Event or Prohibited Transaction or Plan
termination and the action that the Borrower proposes to take with
respect thereto;
(h) REPORTS TO OTHER CREDITORS. Promptly after the furnishing
thereof, copies of any statement or report furnished to any other party
pursuant to the terms of any indenture, loan, or credit or similar
agreement and not otherwise required to be furnished to the Agent and
the Banks pursuant to any other clause of this Section;
(i) NOTICE OF MATERIAL ADVERSE CHANGE. As soon as possible and
in any event within five (5) days after the occurrence thereof, written
notice of any matter that could have a material adverse effect on the
business, condition (financial or otherwise), operations, prospects, or
properties of the Borrower or any Subsidiary;
(j) PROXY STATEMENTS, ETC. As soon as available and in any
event within five (5) days of being sent to its shareholders or filed
with the Securities and Exchange Commission or any successor agency, one
copy of each financial statement, report, notice or proxy statement sent
by the Borrower or any Subsidiary to its stockholders generally, one
copy of all press releases and one copy of each regular, periodic or
special report (including Forms 10-K, 10-Q and 8-K), registration
statement, or prospectus filed by the Borrower or any Subsidiary with
any securities exchange or the Securities and Exchange Commission or any
successor agency;
(k) BORROWING BASE REPORT. As soon as available, and in any
event within fifteen (15) days after the end of each calendar month, a
Borrowing Base Report (herein so called) for Borrower and the
Subsidiaries in substantially the form of Exhibit "G" hereto, certified
by the chief executive or chief financial officer of Borrower together
with (i) a
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monthly aging of accounts receivable in form and detail satisfactory to
Agent, (ii) a monthly aging of accounts payable in form and detail
satisfactory to Agent and (iii) a summary report listing inventory in
form and detail satisfactory to Agent;
(l) GENERAL INFORMATION. Promptly, such other information
concerning the Borrower, any Subsidiary or any Affiliate as the Agent or
any Bank may from time to time reasonably request.
Section 8.2 MAINTENANCE OF EXISTENCE, CONDUCT OF BUSINESS. The Borrower
will preserve and maintain, and will cause each Subsidiary to preserve and
maintain, its corporate or partnership, as applicable, existence and all of its
leases, privileges, licenses, permits, franchises, qualifications,
and rights that are necessary or desirable in the ordinary conduct of its
business. The Borrower will conduct, and will cause each Subsidiary to conduct,
its business in an orderly and efficient manner in accordance with good business
practices.
Section 8.3 MAINTENANCE OF PROPERTIES. The Borrower will maintain, keep,
and preserve, and cause each Subsidiary to maintain, keep, and preserve, all of
its properties (tangible and intangible) necessary or useful in the proper
conduct of its business in good working order and condition.
Section 8.4 TAXES AND CLAIMS. The Borrower will pay or discharge, and
will cause each Subsidiary to pay or discharge, at or before maturity or before
becoming delinquent (a) all taxes, levies, assessments, and governmental charges
imposed on it or its income or profits or any of its property, and (b) all
lawful claims for labor, material, and supplies, which, if unpaid, might become
a Lien upon any of its property; provided, however, that neither the Borrower
nor any Subsidiary shall be required to pay or discharge any tax, levy,
assessment, Or governmental charge which is being contested in good faith by
appropriate proceedings diligently pursued, and for which adequate reserves have
been established.
Section 8.5 INSURANCE. The Borrower will maintain, and will cause each
of the Subsidiaries to maintain, insurance with financially sound and reputable
insurance companies in such amounts and covering such risks as is usually
carried by corporations engaged in similar businesses and owning similar
properties in the same general areas in which the Borrower and the Subsidiaries
operate, provided that in any event the Borrower will maintain and cause each
Subsidiary to maintain workmen's compensation insurance, property insurance,
comprehensive general liability insurance and products liability insurance. Each
insurance policy covering Collateral shall name the Agent as loss payee for the
benefit of the Banks and shall provide that such policy will not be canceled or
reduced without thirty (30) days' prior written notice to the Agent.
Section 8.6 INSPECTION RIGHTS. At any reasonable time and from time to
time, the Borrower will permit, and will cause each Subsidiary to permit,
representatives of the Agent and each Bank to examine, copy, and make extracts
from its books and records, to visit and inspect its properties, and to discuss
its business, operations, and financial condition with its officers, employees,
and independent certified public accountants.
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Section 8.7 KEEPING BOOKS AND RECORDS. The Borrower will maintain, and
will cause each Subsidiary to maintain, proper books of record and account in
which full, true, and correct entries in conformity with GAAP shall be made of
all dealings and transactions in relation to its business and activities.
Section 8.8 SUBSIDIARY GUARANTIES/SECURITY AGREEMENT/PLEDGE AGREEMENT.
The Borrower shall cause each Subsidiary (other than any Inactive Subsidiary) in
existence as of the date hereof to execute and deliver the Guaranty, the
Contribution Agreement and the Security Agreement and deliver same to Agent on
behalf of the Banks on the date hereof. In addition, the Borrower shall cause
each Subsidiary formed or acquired after the date hereof (which shall include,
without limitation, United Wellhead Services, Inc., a Delaware corporation
("United Wellhead")), within fifteen (15) days after being organized or
acquired, as the case may be, to join in the execution of the Guaranty, the
Contribution Agreement and the Security Agreement and deliver same to Agent on
behalf of the Banks. In addition, the Borrower shall pledge, or cause, as
applicable, a Subsidiary to pledge the stock or other equity or ownership
interest of such Person in each Subsidiary formed or acquired after the date
hereof (which shall include, without limitation, United Wellhead).
Section 8.9 COMPLIANCE WITH LAWS. The Borrower will comply, and will
cause each Subsidiary to comply, in all material respects with all applicable
laws, rules, regulations, orders, and decrees of any Governmental Authority or
arbitrator.
Section 8.10 COMPLIANCE WITH AGREEMENTS. The Borrower will comply, and
will cause each Subsidiary to comply, in all material respects with all
agreements, contracts, and instruments binding on it or affecting its properties
or business.
Section 8.11 FURTHER ASSURANCES. The Borrower will, and will cause each
Subsidiary to, execute and deliver such further agreements and instruments and
take such further action as may be requested by the Agent to carry out the
provisions and purposes of this Agreement and the other Loan Documents and to
create, preserve, and perfect the Liens of Agent for the benefit of the Banks in
the Collateral.
Section 8.12 ERISA. The Borrower will comply, and will cause each
Subsidiary to comply, with all minimum funding requirements, and all other
material requirements, of ERISA, if applicable, so as not to give rise to any
liability thereunder.
Section 8.13 YEAR 2000 COMPLIANT. The Borrower shall perform all acts
reasonably necessary to ensure that (i) the Borrower and the Subsidiaries and
any business in which the Borrower or the Subsidiaries hold a substantial
interest, and (ii) all customers, suppliers and vendors that are material to the
Borrower's or the Subsidiaries' businesses, become Year 2000 Compliant in a
timely manner. Such acts shall include, without limitation, performing a
comprehensive review and assessment of all of the Borrower's and the
Subsidiaries' systems and adopting a detailed plan, with itemized budget, for
the remediation, monitoring and testing of such systems. As used in this
paragraph, "Year 2000 Compliant" shall mean, in regard to any entity, that all
software, hardware,
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firmware, equipment, fixtures, goods or systems utilized by or material to the
business operations or financial condition of such entity, will properly perform
date-sensitive functions before, during and after the year 2000. The Borrower
shall, and shall cause the Subsidiaries to, immediately upon request, provide to
the Agent and the Banks such certifications or other evidence of Borrower's
compliance with the terms of this paragraph as Required Banks may from time to
time require.
Section 8.14 CERTAIN POST CLOSING COVENANTS.
(a) The Borrower and the Subsidiaries shall perfect Agent's
security interest in all items of (i) Collateral listed in Schedule II
of the Security Agreement (e.g., title vehicles) on or prior to ninety
(90) days after the date hereof, and (ii) Collateral listed in SCHEDULE
III of the Security Agreement (e.g., intellectual property) on or prior
to thirty (30) days after the date hereof.
(b) The Borrower shall provide to the Agent final execution
copies for the Agent's approval, prior to the execution thereof by the
Borrower or any Subsidiary party thereto, of the loan documents in
connection the proposed financing by Heller Financial, Inc. of the
Kirsch H.C. acquisition, and shall not close such transaction without
receiving Required Banks' approval.
(c) The Borrower shall provide to the Agent executed landlord
and mortgagee, as applicable, waivers, acceptable to Agent, with respect
to all leased or mortgaged locations of the Borrower and/or any
Subsidiary where any Collateral is located on or prior to thirty (30)
days after the date hereof (except for the City of Shreveport, which
shall be provided not later than sixty (60) days from the date hereof ).
(e) The Borrower shall cause all financing statements of
record in any jurisdiction in favor of St. James Capital and/or Bank
One, Texas, N.A. in inventory and/or accounts filed with respect to any
of the Borrower and/or the Guarantors and all financing statements of
record in any jurisdiction covering the inventory of Beaird existing on
the date hereof to be released and terminated on or prior to thirty (30)
days after the date hereof.
ARTICLE IX
NEGATIVE COVENANTS
The Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Bank has any Commitment hereunder,
the Borrower will perform and observe the following negative covenants:
Section 9.1 DEBT. The Borrower will not incur, create, assume, or permit
to exist, and will not permit any Subsidiary to incur, create, assume, or permit
to exist, any Debt or Contingent Obligation, except;
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(a) Debt to the Banks pursuant to the Loan Documents;
(b) Existing Debt described on Schedule 7.9 hereto;
(c) Debt not to exceed Seven Million Five Hundred Thousand and
No/100 Dollars ($7,500,000) to Heller Financial, Inc. to the extent such
loan documents have been preapproved by Required Banks;
(d) Contingent Obligations consisting of endorsements for
collection or deposit in the ordinary course of business;
(e) Contingent Obligations of the Company and the Subsidiaries
existing as of the date hereof and listed on Schedule 7.9 hereto; and
(f) Other Debt not covered in Sections 9. 1 (a) through (e)
above not to exceed Two Million and No/100 Dollars ($2,000,000) during
the term hereof.
Section 9.2 LIMITATION ON LIENS. The Borrower will not incur, create,
assume, or permit to exist, and will not permit any Subsidiary to incur, create,
assume, or permit to exist, any Lien upon its property, assets, or revenues,
whether now owned or hereafter acquired, except the following Liens ("Permitted
Liens").
(a) Liens disclosed on Schedule 9.2 hereto;
(b) Liens in favor of the Agent for the benefit of the Banks;
(c) Encumbrances consisting of minor easements, zoning
restrictions, or other restrictions on the use of real property that do
not (individually or in the aggregate) materially affect the value of
the assets encumbered thereby or materially impair the ability of the
Borrower or the Subsidiaries to use such assets in their respective
businesses, and none of which is violated in any material respect by
existing or proposed structures or land use;
(d) Liens for taxes, assessments, or other governmental
charges which are not delinquent or which are being contested in good
faith and for which adequate reserves have been established;
(e) Liens of mechanics, materialmen, warehousemen, carriers,
or other similar statutory Liens securing obligations that are not yet
due and are incurred in the ordinary course of business; and
(f) Liens resulting from good faith deposits to secure
payments of workmen's compensation or other social security programs or
to secure the performance of tenders, statutory obligations, surety and
appeal bonds, bids, contracts (other than for Payment of Debt), or
leases made in the ordinary course of business.
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Section 9.3 MERGERS, ETC.. The Borrower will not, and will not permit
any Subsidiary to, become a party to a merger or consolidation, or purchase or
otherwise acquire all or any part of the business or assets of any Person or any
shares or other evidence of beneficial ownership of any Person, or wind-up,
dissolve, or liquidate itself except that (i) acquisitions (but not mergers or
consolidations) aggregating during the term hereof of not more than Seven
Million Five Hundred and No/100 Dollars ($7,500,000.00) shall be permitted;
provided, (A) the Borrower gives the Agent ten (10) Business Days' prior notice
of any proposed acquisition and (B) no acquisition shall be permitted if any
Default is continuing or would reasonably be expected to result from such
acquisition, and (ii) Industrial Holdings Acquisition Three, Inc., a Texas
corporation may merge into United Wellhead resulting in United Wellhead becoming
a wholly-owned subsidiary of the Borrower. The Borrower shall not, and will not
permit any Subsidiary to, create or acquire any Subsidiary unless such new
Subsidiary is wholly owned directly or indirectly, by the Borrower.
Section 9.4 RESTRICTED PAYMENTS. The Borrower will not declare or pay
any dividends or make any other payment or distribution (whether in cash,
property, or obligations) on account of its capital stock, or redeem, purchase,
retire, or otherwise acquire any of its capital stock, or permit any of its
Subsidiaries to purchase or otherwise acquire any capital stock of the Borrower
or another Subsidiary, or set apart any money for a sinking or other analogous
fund for any dividend or other distribution on its capital stock or for any
redemption, purchase, retirement, or other acquisition of any of its capital
stock.
Section 9.5 INVESTMENTS. The Borrower will not make, and will not permit
any Subsidiary to make, any advance, loan, extension of credit, or capital
contribution to or investment in, or purchase or own, or permit any Subsidiary
to purchase or own, any stock, bonds, notes, debentures, or other securities of,
any Person, except:
(a) readily marketable direct obligations of the United States
of America or any agency thereof with maturities of one year or less
from the date of acquisition;
(b) fully insured certificates of deposit with maturities of
one year or less from the date of acquisition issued by any commercial
bank operating in the United States of America having capital and
surplus in excess of $50,000,000;
(c) commercial paper of a domestic issuer if at the time of
purchase such paper is rated in one of the two highest rating categories
of Standard and Poor's Corporation or Moody's Investors Service, Inc.;
and
(d) the investment in, and/or capital contribution to, in an
aggregate amount not to exceed Three Million and No/100 Dollars
($3,000,000), a to-be-formed Person owned at least nineteen percent
(19%) by the Borrower which will in turn rent the operations and
services of an Italian company named "Belleli Energy" ; provided that
the structure of such investment and transaction is acceptable to
Required Banks in their sole discretion; and
(e) the existing investment of the Borrower in OF Acquisition,
L.P., a Michigan limited partnership, d/b/a Orbit Form, Inc.
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Section 9.6 TRANSACTIONS WITH AFFILIATES. The Borrower will not enter
into, and will not permit any Subsidiary to enter into, any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate of the Borrower or such
Subsidiary, except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary than would
be obtained in a comparable arm's-length transaction with a Person not an
Affiliate of the Borrower or such Subsidiary.
Section 9.7 DISPOSITION OF ASSETS. The Borrower will not sell, lease,
assign, transfer, or otherwise dispose of any of its assets, or permit any
Subsidiary to do so with any of its assets, except dispositions of inventory in
the ordinary course of business and except for sales of excess or obsolete
equipment in the ordinary course of business not to exceed Two Hundred Fifty
Thousand and No/100 Dollars ($250,000.00) in the aggregate, in a calendar year.
Section 9.8 SALE AND LEASEBACK. The Borrower will not enter into, and
will not permit any Subsidiary to enter into, any arrangement with any Person
pursuant to which it leases from such Person real or personal property that has
been or is to be sold or transferred, directly or indirectly, by it to such
Person.
Section 9.9 PREPAYMENT OF DEBT. The Borrower will not prepay, and will
not permit any Subsidiary to prepay, any Debt, except (i) the Loan Obligations,
(ii) Debt arising pursuant to the EnSerCo Loan Documents, (iii) the Debt of
Philform listed on SCHEDULE 7.9 hereto, (iv) the Debt of the Borrower and
Landreth to GE Capital Corporation listed on SCHEDULE 7.9, and (v) Debt
described in Section 9.1(f) in an aggregate amount not to exceed Two Million and
No/100 Dollars ($2,000,000.00).
Section 9.10 NATURE OF BUSINESS. The Borrower will not, and will not
permit any Subsidiary to, engage in any business other than the businesses in
which they are engaged on the date hereof.
Section 9.11 ENVIRONMENTAL PROTECTION. The Borrower will not, and will
not permit any of its Subsidiaries to, (a) use (or permit any tenant to use) any
of their respective properties or assets for the handling, processing, storage,
transportation, or disposal of any Hazardous Material except in ordinary and
reasonable quantities in connection with prudent existing business practices and
in compliance with all applicable Environmental Law, (b) generate any Hazardous
Material, (c) conduct any activity that is likely to cause a Release or
threatened Release of any Hazardous Material, or (d) otherwise conduct any
activity or use any of their respective properties or assets in any manner that
is likely to violate any Environmental Law or create any Environmental
Liabilities for which the Borrower or any of its Subsidiaries would be
responsible which could reasonably be expected to have a material adverse effect
on the business, financial position or results of operation of the Borrower or
any Subsidiary.
Section 9.12 ACCOUNTING. The Borrower will not, and will not permit any
of its Subsidiaries to, change its fiscal year or make any change (a) in
accounting treatment or reporting
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practices, except as required by GAAP and disclosed to the Agent, or (b) in tax
reporting treatment, except as required by law and disclosed to the Agent.
Section 9.13 RESTRICTIONS ON DIVIDENDS OR PREPAYMENT. Neither the
Borrower nor any Subsidiary shall enter into any agreement or arrangement which
(i) would restrict the ability of any Subsidiary to pay dividends (directly or
through another Subsidiary) to the Borrower, or (ii) would expressly prohibit,
or would reasonably be expected to prohibit, prepayment of the entire principal
amount of the Advances hereunder.
Section 9.14 INACTIVE SUBSIDIARIES. Neither the Borrower nor any
Subsidiary shall convey any property or asset to, or make any investment in, or
loan and/or capital contribution to, any Inactive Subsidiary.
ARTICLE X
FINANCIAL COVENANTS
The Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Bank has any Commitment hereunder, the
Borrower will perform and observe the following financial covenants:
Section 10.1 CURRENT RATIO. The Borrower will at all times maintain a
Current Ratio of not less than 1.25 to 1.0 tested quarterly at the end of each
fixed quarter of the Borrower (calculated classifying Advances under this
Agreement as short term debt for the purposes of the Current Ratio).
Section 10.2 CONSOLIDATED NET WORTH. The Borrower will at all times
maintain Consolidated Net Worth in an amount not less than Forty-Five Million
and No/100 Dollars ($45,000,000) plus (a) 75% of the cumulative consolidated net
income of the Borrower since March 31, 1998, for each fiscal quarter of the
Borrower in which the Borrower's consolidated net income is positive plus (b)
100% of the net proceeds received by the Borrower from any sale or issuance of
any equity securities, or any other additions to capital by (including any
increases in equity of the Borrower or any Subsidiary resulting from mergers,
poolings, and acquisitions), the Borrower or the Subsidiaries during each fiscal
quarter ending on or after March 31, 1998.
Section 10.3 FUNDED DEBT/EBITDA RATIO. The Borrower will at all times
maintain a Funded Debt/EBITDA Ratio of not more than 3.5 to 1.0 tested at the
end of each fiscal quarter of the Borrower for the rolling four (4) quarter
period then ended.
Section 10.4 CASH FLOW COVERAGE RATIO. The Borrower will at all times
maintain a Cash Flow Coverage Ratio of not less than 1.25 to 1.0 tested
quarterly at the end of each fiscal quarter of the Borrower for the rolling four
(4) quarter period then ended.
Section 10.5 LEVERAGE RATIO. The Borrower will at all times maintain a
Leverage Ratio of not greater than 3.0 to 1.0.
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Section 10.6 OPERATING LEASES. The Borrower will not incur, create,
assume, or permit to exist, and will not permit any Subsidiary to incur, create,
assume, or permit to exist, any liability for payments under any Operating
Leases, which would cause the aggregate amount of payment to be made by the
Borrower and the Subsidiaries on a consolidated basis (including taxes,
insurance, maintenance, and similar expenses which the Borrower or any
Subsidiary is obligated to pay under any such Operating Lease) in any fiscal
year of the Borrower to exceed Three Million and No/100 Dollars ($3,000,000).
Section 10.7 CAPITAL EXPENDITURES. The Borrower shall not make or incur,
and will not permit any Subsidiary to make or incur, Capital Expenditures in any
calendar year, in excess of Four Million and No/100 Dollars ($4,000,000) in the
aggregate for the Borrower and the Subsidiaries.
ARTICLE XI
DEFAULT
Section 11.1 EVENTS OF DEFAULT. Each of the following shall be deemed an
"Event of Default":
(a) The Borrower shall fail to pay when due the Obligations or
any part thereof (other than the payment of principal) and such failure
shall remain unremedied for three (3) days or any Obligated Party shall
fail to pay when due any principal amount owed under the Loan Documents.
(b) Any representation or warranty made or deemed made by the
Borrower or any Obligated Party (or any of their respective officers) in
any Loan Document or in any certificate, report, notice, or financial
statement furnished at any time in connection with this Agreement shall
be false, misleading, or erroneous in any material respect when made or
deemed to have been made.
(c) The Borrower shall fail to perform, observe, or comply
with any covenant, agreement, or term contained in Section 8. 1, Article
IX, or Article X of this Agreement; or the Borrower or any Obligated
Party shall fail to perform, observe, or comply with any other covenant,
agreement, or term contained in this Agreement or any other Loan
Document (other than covenants to pay the Obligations) and such failure
shall continue for a period of five (5) days after notice thereof to the
Borrower by the Agent or any Bank (through the Agent).
(d) The Borrower, any Subsidiary, or any Obligated Party shall
commence a voluntary proceeding seeking liquidation, reorganization, or
other relief with respect to itself or its debts 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 a substantial part of its property or shall
consent 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 shall make a general assignment for the benefit
of
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creditors or shall generally fail to pay its debts as they become due or
shall take any corporate action to authorize any of the foregoing.
(e) An involuntary proceeding shall be commenced against the
Borrower, any Subsidiary, or any Obligated Party seeking liquidation,
reorganization, or other relief with respect to it or its debts 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 for it or a substantial part of its
property, and such involuntary proceeding shall remain undismissed and
unstayed for a period of sixty (60) days.
(f) The Borrower, any Subsidiary, or any Obligated Party shall
fail to discharge within a period of thirty (30) days after the
commencement thereof any attachment, sequestration, or similar
proceeding or proceedings involving an aggregate amount in excess of One
Hundred Thousand and No/100 Dollars ($100,000) against any of its assets
or properties.
(g) A final judgment or judgments for the payment of money in
excess of One Hundred Thousand and No/100 Dollars ($100,000) in the
aggregate shall be rendered by a court or courts against the Borrower,
any of its Subsidiaries, or any Obligated Party and the same shall not
be discharged (or provision shall not be made for such discharge), or a
stay of execution thereof shall not be procured, within thirty (30) days
from the date of entry thereof and the Borrower or the relevant
Subsidiary or Obligated Party shall not, within said period of thirty
(30) days, or such longer period during which execution of the same
shall have been stayed, appeal therefrom and cause the execution thereof
to be stayed during such appeal.
(h) The Borrower, any Subsidiary, or any Obligated Party shall
fail to pay when due any principal of or interest on any Debt (other
than the Obligations), or the maturity of any such Debt shall have been
accelerated, or any such Debt shall have been required to be prepaid
prior to the stated maturity thereof, or any event shall have occurred
that permits (or, with the giving of notice or lapse of time or both,
would permit) any holder or holders of such Debt or any Person acting on
behalf of such holder or holders to accelerate the maturity thereof or
require any such prepayment.
(i) This Agreement or any other Loan Document shall cease to
be in full force and effect or shall be declared null and void or the
validity or enforceability thereof shall be contested or challenged by
the Borrower, any Subsidiary, any Obligated Party or any of their
respective shareholders, or the Borrower or any Obligated Party shall
deny that it has any further liability or obligation under any of the
Loan Documents, or any lien or security interest created by the Loan
Documents shall for any reason cease to be a valid, first priority
perfected security interest in and lien upon any of the Collateral
purported to be covered thereby.
(j) Any of the following events shall occur or exist with
respect to the Borrower or any ERISA Affiliate: (i) any Prohibited
Transaction involving any Plan; (ii) any
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Reportable Event with respect to any Plan; (iii) the filing under
Section 4041 of ERISA of a notice of intent to terminate any Plan or the
termination of any Plan; (iv) any event or circumstance that might
constitute grounds entitling the PBGC to institute proceedings under
Section 4042 of ERISA for the termination of, or for the appointment of
a trustee to administer, any Plan, or the institution by the PBGC of any
such proceedings; or (v) complete or partial withdrawal under Section
4201 or 4204 of ERISA from a Multiemployer Plan or the reorganization,
insolvency, or termination of any Multiemployer Plan; and in each case
above, such event or condition, together with all other events or
conditions, if any, have subjected or could in the reasonable opinion of
Required Banks subject the Borrower to any tax, penalty, or other
liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise (or
any combination thereof) which in the aggregate exceed or could
reasonably be expected to exceed One Hundred Thousand and No/100 Dollars
($100,000).
(k) The Borrower or any of its Subsidiaries, or any of their
properties, revenues, or assets, shall become the subject of an order of
forfeiture, seizure, or divestiture (whether under RICO or otherwise)
and the same shall not have been discharged (or provisions shall not be
made for such discharge) within thirty (30) days from the date of entry
thereof.
(l) After the Closing Date, any Person or two or more Person
acting as a group (as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934) shall have acquired beneficial ownership (within
the meaning of Rule 13d-3 of the Securities and Exchange Commission
under the Securities Exchange Act of 1934) of thirty percent (30%) or
more of the outstanding shares of voting stock of the Borrower; or
individuals who, as of the date hereof, constitute the Board of
Directors of the Borrower (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board of Directors of the
Borrower; provided, however, that any individual becoming a director of
the Borrower subsequent to the Closing Date whose election, or
nomination for election by the Borrower's shareholders, was approved by
a vote of at least a majority of the directors then comprising the
Incumbent Board, shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are used
in Rule 14a-11 of Regulation 14A promulgated under the Securities
Exchange Act of 1934) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board of
Directors of the Borrower; or they shall cease to directly or indirectly
own one hundred percent (100%) of each class of stock or other equity
interests of Subsidiary.
(m) The Borrower, any Subsidiary, Guarantor or any Obligated
Party, or any combination of one or more of such Persons, shall fail to
pay when due any principal or interest on any Debt (other than the
Obligations) payable to Comerica including without limitation under the
promissory notes listed on Schedule 11.1(m) hereto, (collectively, the
Comerica Other Debt") or the maturity of any Comerica Other Debt shall
have been accelerated, or any such Comerica Other Debt shall have been
required to be prepaid prior to the stated maturity thereof, or any
event shall have occurred that permits (or, with the giving of notice or
the passage of time, or both, would permit) any holder or holders of
such
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Comerica Other Debt or any Person acting on behalf of such holder or
holders to accelerate the maturity thereof or require any prepayment.
(n) Any "Event of Default" or similar express occurrence shall
exist under any of the EnSerCo Loan Documents.
Section 11.2 REMEDIES. If any Event of Default shall occur and be
continuing, the Agent may (and if directed by Required Banks, shall) do any one
or more of the following:
(a) ACCELERATION. Declare an amount equal to the maximum
aggregate amount that is or at any time thereafter may become available
for drawing by the beneficiary under any outstanding Letters of Credit
(whether or not any beneficiary shall have presented, or shall be
entitled at such time to present, the drafts or other documents required
to draw under such Letters of Credit) to be immediately due and payable,
and declare all outstanding principal of and accrued and unpaid interest
on the Notes and all other obligations of the Borrower under the Loan
Documents immediately due and payable, and the same shall thereupon
become immediately due and payable, without notice, demand, presentment,
notice of dishonor, notice of acceleration, notice of intent to
accelerate, protest, or other formalities of any kind, all of which are
hereby expressly waived by the Borrower.
(b) TERMINATION OF COMMITMENTS. Terminate the Commitments and
the Letter of Credit Commitment without notice to the Borrower.
(c) JUDGMENT. Reduce any claim to judgment.
(d) FORECLOSURE. Foreclose or otherwise enforce any Lien
granted to the Agent for the benefit of itself and the Banks to secure
payment and performance of the Obligations in accordance with the terms
of the Loan Documents.
(e) RIGHTS. Exercise any and all rights and remedies afforded
by the laws of the State of Texas or any other jurisdiction, by any of
the Loan Documents, by equity, or otherwise.
Provided, however, that upon the occurrence of an Event of Default under
Subsection (d) or (e) of Section 11.1, the Commitments of all of the Banks shall
automatically terminate, and the outstanding principal of and accrued and unpaid
interest on the Notes and all other obligations of the Borrower under the Loan
Documents shall thereupon become immediately due and payable without notice,
demand, presentment, notice of dishonor, notice of acceleration, notice of
intent to accelerate, protest, or other formalities of any kind, all of which
are hereby expressly waived by the Borrower.
Section 11.3 PERFORMANCE BY THE AGENT. If the Borrower shall fail to
perform any covenant or agreement in accordance with the terms of the Loan
Documents, the Agent may, at the direction of Required Banks, perform or attempt
to perform such covenant or agreement on behalf of the Borrower. In such event,
the Borrower shall, at the request of the Agent, promptly pay any
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amount expended by the Agent or the Banks in connection with such performance or
attempted performance to the Agent at the Principal Office, together with
interest thereon at the Default Rate from and including the date of such
expenditure to but excluding the date such expenditure is paid in full.
Notwithstanding the foregoing, it is expressly agreed that neither the Agent nor
any Bank shall have any liability or responsibility for the performance of any
obligation of the Borrower under this Agreement or any of the other Loan
Documents.
ARTICLE XII
THE AGENT
Section 12.1 APPOINTMENT, POWERS AND IMMUNITIES. In order to expedite
the various transactions contemplated by this agreement, the Banks hereby
irrevocably appoint and authorize Comerica Bank-Texas to act as their Agent
hereunder and under each of the other Loan Documents. Comerica Bank-Texas
consents to such appointment and agrees to perform the duties of the Agent as
specified herein. The Banks authorize and direct the Agent to take such action
in their name and on their behalf under the terms and provisions of the Loan
Documents and to exercise such rights and powers thereunder as are specifically
delegated to or required of the Agent for the Banks, together with such rights
and powers as are reasonably incidental thereto. The Agent is hereby expressly
authorized to act as the Agent on behalf of itself and the other Banks:
(a) To receive on behalf of each of the Banks any payment of
principal, interest, fees or other amounts paid pursuant to this
Agreement and the Notes and to distribute to each Bank its pro rata
share of all payments so received as provided in this Agreement;
(b) To receive all documents and items to be furnished under
the Loan Documents;
(c) To act as nominee for and on behalf of the Banks in and
under the Loan Documents;
(d) To arrange for the means whereby the funds of the Banks
are to be made available to the Borrower;
(e) To distribute to the Banks information, requests, notices,
payments, prepayments, documents and other items received from the
Borrower, the other Obligated Parties, and other Persons;
(f) To execute and deliver to the Borrower, the other
Obligated Parties, and other Persons, all requests, demands, approvals,
notices, and consents received from the Banks;
(g) To the extent permitted by the Loan Documents, to exercise
on behalf of each Bank all rights and remedies of Banks upon the
occurrence of any Event of Default;
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(h) To accept, execute, and deliver the Security Agreement and
any other security documents as the secured party; and
(i) To take such other actions as may be requested by Required
Banks.
Neither the Agent nor any of its Affiliates, officers, directors,
employees, attorneys, or agents shall be liable for any action taken or omitted
to be taken by any of them hereunder or otherwise in connection with this
Agreement or any of the other Loan Documents except for its or their own gross
negligence or willful misconduct. Without limiting the generality of the
preceding sentence, the Agent (i) may treat the payee of any Note as the holder
thereof until the Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form satisfactory to the Agent; (ii) shall
have no duties or responsibilities except those expressly set forth in this
Agreement 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 Bank;
(iii) shall not be required to initiate any litigation or collection proceedings
hereunder or under any other Loan Document except to the extent requested by
Required Banks; (iv) shall not be responsible to the Banks for any recitals,
statements, representations or warranties contained in this Agreement or any
other Loan Document, or any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any other
Loan Document, or for the value, validity, effectiveness, enforceability, or
sufficiency of this Agreement or any other Loan Document or any other document
referred to or provided for herein or therein or for any failure by any Person
to perform any of its obligations hereunder or thereunder; (v) may consult with
legal counsel (including counsel for the Borrower), independent public
accountants, and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants, or experts; and (vi) shall incur no
liability under or in respect of any Loan Document by acting upon any notice,
consent, certificate, or other instrument or writing believed by it to be
genuine and signed or sent by the proper party or parties. As to any matters not
expressly provided for by this Agreement, the Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder in accordance with
instructions signed by Required Banks, and such instructions of Required Banks
and any action taken or failure to act pursuant thereto shall be binding on all
of the Banks; provided, however, that the Agent shall not be required to take
any action which exposes the Agent to personal liability or which is contrary to
this Agreement or any other Loan Document or applicable law.
Section 12.2 RIGHTS OF AGENT AS A BANK. With respect to its Commitment,
the Advances made by it and the Note issued to it, Comerica Bank-Texas in its
capacity as a Bank hereunder shall have the same rights and powers hereunder as
any other Bank and may exercise the same as though it were not acting as the
Agent, and the term "Bank" or "Banks" shall, unless the context otherwise
indicates, include the Agent in its individual capacity. The Agent and its
Affiliates may (without having to account therefor to any Bank) accept deposits
from, lend money to, act as trustee under indentures of, provide merchant
banking services to, and generally engage in any kind of business with the
Borrower, any of its Subsidiaries, any other Obligated Party, and any other
Person who may do business with or own securities of the Borrower, any
Subsidiary, or any other Obligated Party, all as if it were not acting as the
Agent and without any duty to account therefor to the Banks.
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Section 12.3 SHARING OF PAYMENTS, ETC. If any Bank shall obtain any
payment of any principal of or interest on any Advance made by it under this
Agreement or payment of any other obligation under the Loan Documents then owed
by the Borrower or any other Obligated Party to such Bank, whether voluntary,
involuntary, through the exercise of any right of setoff, banker's lien,
counterclaim or similar right, or otherwise, in excess of its pro rata share,
such Bank shall promptly purchase from the other Banks participation in the
Advances held by them hereunder in such amounts, and make such other adjustments
from time to time as shall be necessary to cause such purchasing Bank to share
the excess payment ratably with each of the other Banks in accordance with its
pro rata portion thereof. To such end, all of the Banks shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if all or any portion of such excess payment is thereafter rescinded or must
otherwise be restored. The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any Bank so purchasing a
participation in the Advances made by the other Banks may exercise all rights of
setoff, banker's lien, counterclaim, or similar rights with respect to such
participation as fully as if such Bank were a direct holder of Advances to the
Borrower in the amount of such participation. Nothing contained herein shall
require any Bank to exercise any such right or shall affect the right of any
Bank to exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of the Borrower.
Section 12.4 INDEMNIFICATION. The Banks hereby agree to indemnify the
Agent from and hold the Agent harmless against (to the extent not reimbursed
under Sections 13.1 and 13.2, but without limiting the obligations of the
Borrower under Sections 13.1 and 13.2), ratably in accordance with their
respective Commitments, any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, deficiencies, suits, costs, expenses (including
attorneys' fees), and disbursements of any kind or nature whatsoever which may
be imposed on, incurred by, or asserted against the Agent in any way relating to
or arising out of any of the Loan Documents or any action taken or omitted to be
taken by the Agent under or in respect of any of the Loan Documents; provided,
further, that no Bank shall be liable for any portion of the foregoing to the
extent caused by the Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, it is the express intention of the Banks that the
Agent shall be indemnified hereunder from and held harmless against all of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
deficiencies, suits, costs, expenses (including attorneys' fees), and
disbursements of any kind or nature directly or indirectly arising out of or
resulting from the sole or contributory negligence of the Agent. Without
limiting any other provision of this Section, each Bank agrees to reimburse the
Agent promptly upon demand for its pro rata share (calculated on the basis of
the Commitments) of any and all out-of-pocket expenses (including attorneys'
fees) incurred by the Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings, or otherwise) of, or legal advice in
respect of rights or responsibilities under, the Loan Documents, to the extent
that the Agent is not reimbursed for such expenses by the Borrower.
Section 12.5 INDEPENDENT CREDIT DECISIONS. Each Bank agrees that it has
independently and without reliance on the Agent or any other Bank, and based on
such documents and information as it has deemed appropriate, made its own credit
analysis of the Borrower and decision to enter into this Agreement and that it
will, independently and without reliance upon the Agent or any other
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Bank, and based upon 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. The Agent
shall not be required to keep itself informed as to the performance or
observance by the Borrower or any Obligated Party of this Agreement or any other
Loan Document or to inspect the properties or books of the Borrower or any
Obligated Party, Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Agent hereunder or under
the other Loan Documents, the Agent shall not have any duty or responsibility to
provide any Bank with any credit or other financial information concerning the
affairs, financial condition or business of the Borrower or any Obligated Party
(or any of their Affiliates) which may come into the possession of the Agent or
any of its Affiliates.
Section 12.6 SEVERAL COMMITMENTS. The Commitments and other obligations
of the Banks under this Agreement are several. The default by any Bank in making
an Advance in accordance with its Commitment shall not relieve the other Banks
of their obligations under this Agreement. In the event of any default by any
Bank in making any Advance, each nondefaulting Bank shall be obligated to make
its Advance but shall not be obligated to advance the amount which the
defaulting Bank was required to advance hereunder. In no event shall any Bank be
required to advance an amount or amounts which shall in the aggregate exceed
such Bank's Commitment. No Bank shall be responsible for any act or omission of
any other Bank.
Section 12.7 SUCCESSOR AGENT. Subject to the appointment and acceptance
of a successor Agent as provided below may resign at any time by giving notice
thereof to the Banks and the Borrower and the Agent may be removed at any time
with or without cause by Required Banks. Upon any such resignation or removal,
Required Banks will have the right to appoint a successor Agent. If no successor
Agent shall have been so appointed by Required Banks and shall have accepted
such appointment within thirty (30) days after the retiring Agent's giving of
notice of resignation or the Required Banks' removal of the retiring Agent, then
the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which
shall be a commercial bank organized under the laws of the United States of
America or any State thereof and having combined capital and surplus of at least
One Hundred Million Dollars ($100,000,000). Upon the acceptance of its
appointment as successor Agent, such successor Agent shall thereupon succeed to
and become vested with all rights, powers, privileges, immunities, and duties of
the resigning or removed Agent, and the resigning or removed Agent shall be
discharged from its duties and obligations under this Agreement and the other
Loan Documents. After any Agent's resignation or removal as Agent, the
provisions of this Article XII shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was the
Agent. Notwithstanding the foregoing, Comerica may not be removed as the Agent
at the request of the Required Banks unless Comerica shall also simultaneously
be replaced as "Issuing Bank" hereunder pursuant to documentation in form and
substance satisfactory to Comerica.
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ARTICLE XIII
MISCELLANEOUS
Section 13.1 EXPENSES. The Borrower hereby agrees to pay on demand: (a)
all costs and expenses of the Agent and the Banks in connection with the
preparation, negotiation, execution, and delivery of this Agreement and the
other Loan Documents and any and all amendments, modifications, renewals,
extensions, and supplements thereof and thereto, including, without limitation,
the fees and expenses of legal counsel for the Agent and the Banks, (b) all
costs and expenses of the Agent and the Banks in connection with any Default and
the enforcement of this Agreement or any other Loan Document, including, without
limitation, the fees and expenses of legal counsel for the Agent and the Banks,
(c) all transfer, stamp, documentary, or other similar taxes, assessments, or
charges levied by any Governmental Authority in respect of this Agreement or any
of the other Loan Documents, (d) all costs, expenses, assessments, and other
charges incurred in connection with any filing, registration, recording, or
perfection of any security interest or Lien contemplated by this Agreement or
any other Loan Document, and (e) all other costs and expenses incurred by the
Agent and the Banks in connection with this Agreement or any other Loan
Document, including, without limitation, all costs, expenses, and other charges
incurred in connection with obtaining any mortgagee title insurance policy,
survey, audit, or appraisal in respect of the Collateral.
Section 13.2 INDEMNIFICATION. The Borrower shall indemnify the Agent and
each Bank and each Affiliate thereof and their respective officers, directors,
employees, attorneys, and agents from, and hold each of them harmless against,
any and all losses, liabilities, claims, damages, penalties, judgments,
disbursements, costs, and expenses (including attorneys' fees) to which any of
them may become subject which directly or indirectly arise from or relate to (a)
the negotiation, execution, delivery, performance, administration, or
enforcement of any of the Loan Documents, (b) any of the transactions
contemplated by the Loan Documents, (c) any breach by the Borrower of any
representation, warranty, covenant, or other agreement contained in any of the
Loan Documents, (d) the presence, Release, threatened Release, disposal,
removal, or cleanup of any Hazardous Material located on, about, within, or
affecting any of the properties or assets of the Borrower or any Subsidiary, or
(e) any investigation, litigation, or other proceeding, including, without
limitation, any threatened investigation, litigation, or other proceeding
relating to any of the foregoing. Without limiting any provision of this
Agreement or of any other Loan Document, it is the express intention of the
parties hereto that each Person to be indemnified under this Section shall be
indemnified from and held harmless against any and all losses, liabilities,
claims, damages, penalties, judgments, disbursements, costs, and expenses
(including attorneys' fees) arising out of or resulting from the sole or
contributory negligence of such Person.
Section 13.3 LIMITATION OF LIABILITY. None of the Agent, any Bank, or
any Affiliate, officer, director, employee, attorney, or agent thereof shall
have any liability with respect to, and the Borrower hereby waives, releases,
and agrees not to sue any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by the Borrower in
connection with, arising out of, or in any way related to, this Agreement or any
of the other Loan Documents, or any of the transactions contemplated by this
Agreement or any of the other Loan
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Documents. The Borrower hereby waives, releases, and agrees not to sue the Agent
or any Bank or any of their respective Affiliates, officers, directors,
employees, attorneys, or agents for punitive damages in respect of any claim in
connection with, arising out of, or in any way related to, this Agreement or any
of the other Loan Documents, or any of the transactions contemplated by this
Agreement or any of the other Loan Documents.
Section 13.4 NO DUTY. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by the Agent and the Banks shall
have the right to act exclusively in the interest of the Agent and the Banks and
shall have no duty of disclosure, duty of loyalty, duty of care, or other duty
or obligation of any type or nature whatsoever to the Borrower or any of the
Borrower's shareholders or any other Person.
Section 13.5 NO FIDUCIARY RELATIONSHIP. The relationship between the
Borrower and each Bank is solely that of debtor and creditor, and neither the
Agent nor any Bank has any fiduciary or other special relationship with the
Borrower, and no term or condition of any of the Loan Documents shall be
construed so as to deem the relationship between the Borrower and any Bank to be
other than that of debtor and creditor.
Section 13.6 EQUITABLE RELIEF. The Borrower recognizes that in the event
the Borrower fails to pay, perform, observe, or discharge any or all of the
Obligations, any remedy at law may prove to be inadequate relief to the Agent
and the Banks. The Borrower therefore agrees that the Agent and the Banks, if
the Agent or the Banks so request, shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages.
Section 13.7 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of
the Agent or any Bank to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power, or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power, or privilege under this Agreement preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege. The rights and remedies provided for in this Agreement and the other
Loan Documents are cumulative and not exclusive of any rights and remedies
provided by law.
Section 13.8 SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns. The Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of the Agent and
all of the Banks. Any Bank may sell participation to one or more banks
or other institutions in or to all or a portion of its rights and
obligations under this Agreement and the other Loan Documents
(including, without limitation, all or a portion of its Commitments and
the Advances owing to it); provided, however, that (i) such Bank's
obligations under this Agreement and the other Loan Documents
(including, without limitation, its Commitment) shall remain unchanged,
(ii) such Bank shall remain solely responsible to the Borrower for the
performance of such obligations, (iii) such Bank shall remain the holder
of its Note for all purposes of this Agreement, (iv) the Borrower shall
continue to deal solely and directly
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with such Bank in connection with such Bank's rights and obligations
under this Agreement and the other Loan Documents, and (v) such Bank
shall not sell a participation that conveys to the participant the right
to vote or give or withhold consents under this Agreement or any other
Loan Document, other than the right to vote upon or consent to (A) any
increase of such Bank's Commitment, (B) any reduction of the principal
amount of, or interest to be paid on, the Advances of such Bank, (C) any
reduction of any commitment fee or other amount payable to such Bank
under any Loan Document, or (D) any postponement of any date for the
payment of any amount payable in respect of the Advances of such Bank.
(b) The Borrower and each of the Banks agree that any Bank
(the "Assigning Bank") may at any time assign to one or more Eligible
Assignees all, or a proportionate part of all, of its rights and
obligations under this Agreement and the other Loan Documents
(including, without limitation, its Commitment and Advances) (each an
"Assignee"); provided, however, that (i) each such assignment shall be
of a consistent, and not a varying, percentage of all of the assigning
Bank's rights and obligations under this Agreement and the other Loan
Documents, (ii) except in the case of an assignment of all of a Bank's
rights and obligations under this Agreement and the other Loan
Documents, the amount of the Commitment of the assigning Bank being
assigned pursuant to each assignment (determined as of the date of the
Assignment Acceptance with respect to such assignment) shall in no event
be less than $10,000,000, and (iii) the parties to each such assignment
shall execute and deliver to the Agent for its acceptance and recording
in the Register (as defined below), an Assignment and Acceptance,
together with the Note subject to such assignment, and a processing and
recordation fee of $3,000. Upon such execution, delivery, acceptance,
and recording, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at least five
(5) Business Days after the execution thereof, or, if so specified in
such Assignment and Acceptance, the date of acceptance thereof by the
Agent, (x) the assignee thereunder shall be a party hereto as a "Bank"
and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the
rights and obligations of a Bank hereunder and under the Loan Documents
and (y) the Bank that is an assignor thereunder shall, to the extent
that rights and obligations hereunder have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be released
from its obligations under this Agreement and the other Loan Documents
(and, in the case of an Assignment and Acceptance covering all or the
remaining portion of a Bank's rights and obligations under the Loan
Documents, such Bank shall cease to be a party thereto).
(c) By executing and delivering an Assignment and Acceptance,
the Bank that is an assignor thereunder and the assignee thereunder
confirm to and agree with each other and the other parties hereto as
follows: (i) other than as provided in such Assignment and Acceptance,
such assigning Bank makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties, or
representations made in or in connection with the Loan Documents or the
execution, legality, validity, and enforceability, genuineness,
sufficiency, or value of the Loan Documents or any other instrument or
document furnished pursuant thereto; (ii) such assigning Bank makes no
representation or warranty and assumes no responsibility with respect to
the financial condition of the
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Borrower or any Obligated Party or the performance or observance by the
Borrower or any Obligated Party of its obligations under the Loan
Documents; (iii) such assignee confirms that it has received a copy of
the other Loan Documents, together with copies of the financial
statements referred to in Section 7.2 and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Agent or such
assignor and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan
Documents; (v) such assignee confirms that it is an Eligible Assignee;
(vi) such assignee appoints and authorizes the Agent to take such action
as agent on its behalf and exercise such powers under the Loan Documents
as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; and (vii) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Bank.
(d) The Agent shall maintain at its Principal Office a copy of
each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Banks and
the Commitment of, and principal amount of the Advances owing to, each
Bank from time to time (the "REGISTER"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error,
and the Borrower, the Agent, and the Banks may treat each Person whose
name is recorded in the Register as a Bank hereunder for all purposes
under the Loan Documents. The Register shall be available for inspection
by the Borrower or any Bank at any reasonable time and from time to time
upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Bank and assignee representing that it is an Eligible
Assignee, together with any Note subject to such assignment, the Agent
shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit "G" hereto, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the
Register, and (iii) give prompt written notice thereof to the Borrower.
Within five (5) Business Days after its receipt of such notice, the
Borrower, at its expense, shall execute and deliver to the Agent in
exchange for the surrendered Note a new Note to the order of such
Eligible Assignee in an amount equal to the Commitment assumed by it
pursuant to such Assignment and Acceptance and, if the assigning Bank
has retained a Commitment, a new Note to the order of the assigning Bank
in an amount equal to the Commitment retained by it hereunder (each such
promissory note shall constitute a "Note" for purposes of the Loan
Documents). Such new Notes shall be in an aggregate principal amount of
the surrendered Note, shall be dated the effective date of such
Assignment and Acceptance, and shall otherwise be in substantially the
form of Exhibit "A" hereto.
(f) Any Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section, disclose to the assignee or
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participant or proposed assignee or participant, any information
relating to the Borrower or its Subsidiaries furnished to such Bank by
or on behalf of the Borrower or its Subsidiaries.
Section 13.9 SURVIVAL. All representations and warranties made in this
Agreement or any other Loan Document or in any document, statement, or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by the Agent or any Bank or any closing shall affect the
representations and warranties or the right of the Agent or any Bank to rely
upon them. Without prejudice to the survival of any other obligation of the
Borrower hereunder, the obligations of the Borrower under Article IV and
Sections 13.1 and 13.2 shall survive repayment of the Notes and termination of
the Commitments.
Section 13.10 ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES, AND THE OTHER
LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS THE PARTIES
HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
Section 13.11 AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement, the Notes, or any other Loan Document to which the Borrower
is a party, nor any consent to any departure by the Borrower therefrom, shall in
any event be effective unless the same shall be agreed or consented to by
Required Banks and the Borrower, 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, waiver, or consent shall, unless in writing
and signed by all of the Banks and the Borrower, do any of the following: (a)
increase Commitments of the Banks or subject the Banks to any additional
obligations; (b) reduce the principal of, or interest on, the Notes or any fees
or other amounts payable hereunder; (c) postpone any date fixed for any payment
of principal of, or interest on, the Notes or any fees or other amounts payable
hereunder; (d) waive any of the conditions specified in Article VI; (e) change
the percentage of the Commitments or of the aggregate unpaid principal amount of
the Notes or the number of Banks which shall be required for the Banks or any of
them to take any action under this Agreement; (f) change any provision contained
in this Section 13.1 1; or (g) release any Collateral. Notwithstanding anything
to the contrary contained in this Section, no amendment, waiver, or consent
shall be made with respect to Article XII hereof without the prior written
consent of the Agent.
Section 13.12 MAXIMUM INTEREST RATE. No provision of this Agreement or
of any other Loan Document shall require the payment or the collection of
interest in excess of the maximum amount permitted by applicable law. If any
excess of interest in such respect is hereby provided for, or shall be
adjudicated to be so provided, in any Loan Document or otherwise in connection
with this loan transaction, the provisions of this Section shall govern and
prevail and neither the Borrower nor the sureties, guarantors, successors, or
assigns of the Borrower shall be obligated to pay the
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excess amount of such interest or any other excess sum paid for the use,
forbearance, or detention of sums loaned pursuant hereto. In the event any Bank
ever receives, collects, or applies as interest any such sum, such amount which
would be in excess of the maximum amount permitted by applicable law shall be
applied as a payment and reduction of the principal of the indebtedness
evidenced by the Notes; and, if the principal of the Notes has been paid in
full, any remaining excess shall forthwith be paid to the Borrower. In
determining whether or not the interest paid or payable exceeds the Maximum
Rate, the Borrower and each Bank shall, to the extent permitted by applicable
law, (a) characterize any non-principal payment as an expense, fee, or premium
rather than as interest, (b) exclude voluntary prepayments and the effects
thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal
parts the total amount of interest throughout the entire contemplated term of
the indebtedness evidenced by the Notes so that interest for the entire term
does not exceed the Maximum Rate.
Section 13.13 NOTICES. All notices and other communications provided for
in this Agreement and the other Loan Documents to which the Borrower is a party
shall be given or made by telex, telegraph, telecopy, cable, or in writing and
telexed, telecopied, telegraphed, cabled, mailed by certified mail return
receipt requested, or delivered to the intended recipient at the "Address for
Notices" specified below its name on the signature pages hereof; or, as to any
party at such other address as shall be designated by such party in a notice to
each other party given in accordance with this Section. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telex or telecopy, subject to telephone
confirmation of receipt, or delivered to the telegraph or cable office, subject
to telephone confirmation of receipt, or when personally delivered or, in the
case of a mailed notice, when duly deposited in the mails, in each case given or
addressed as aforesaid; provided, however, notices to the Agent pursuant to
Article II shall not be effective until received by the Agent.
Section 13.14 GOVERNING LAW; VENUE; SERVICE OF PROCESS. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Texas and the applicable laws of the United States of America (without reference
to principles of conflicts of laws). This Agreement has been entered into in
Dallas County, Texas, and it shall be performable for all purposes in Dallas
County, Texas. Any action or proceeding against the Borrower under or in
connection with any of the Loan Documents may be brought in any state or federal
court in Dallas County, Texas. The Borrower hereby irrevocably (a) submits to
the nonexclusive jurisdiction of such courts, and (b) waives any objection it
may now or hereafter have as to the venue of any such action or proceeding
brought in any such court or that any such court is an inconvenient forum. The
Borrower agrees that service of process upon it may be made by certified or
registered mail, return receipt requested, at its address specified or
determined in accordance with the provisions of Section 13.13. Nothing herein or
in any of the other Loan Documents shall affect the right of the Agent or any
Bank to serve process in any other manner permitted by law or shall limit the
right of the Agent or any Bank to bring any action or proceeding against the
Borrower or with respect to any of its property in courts in other
jurisdictions. Any action or proceeding by the Borrower against the Agent or any
Bank shall be brought only in a court located in Dallas County, Texas.
- 63 -
<PAGE>
Section 13.15 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 13.16 SEVERABILITY. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
Section 13.17 HEADINGS. The headings, captions, and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section 13.18 NON-APPLICATION OF CHAPTER 346 OF TEXAS FINANCE CODE. The
provisions of Chapter 346 of the Texas Finance Code are specifically declared by
the parties hereto not to be applicable to this Agreement or any of the other
Loan Documents or to the transactions contemplated hereby.
Section 13.19 CONSTRUCTION. The Borrower, the Agent, and each Bank
acknowledges that each of them has had the benefit of legal counsel of its own
choice and has been afforded an opportunity to review this Agreement and the
other Loan Documents with its legal counsel and that this Agreement and the
other Loan Documents shall be construed as if jointly drafted by the parties
hereto.
Section 13.20 INDEPENDENCE OF COVENANTS. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default if such action is taken or such condition
exists.
Section 13.21 WAIVER JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH THE PARTIES HERETO HEREBY IRREVOCABLY AND EXPRESSLY WAIVES
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OR RELATING TO ANY THE LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS THE AGENT OR
ANY BANK IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
- 64 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
BORROWER:
INDUSTRIAL HOLDINGS, INC.
By:_________________________________
Name:Christine Smith
Title:Executive Vice President
ADDRESS FOR NOTICES:
Industrial Holdings, Inc.
7135 Ardmore
Houston, Texas 77054
Fax No.:713-749-9642
Telephone No.:713-747-1025
Attention: Mr. Robert E. Cone
AGENT:
COMERICA BANK-TEXAS
By:_________________________________
Name: Lizabeth Lary
Title:Corporate Banking Officer
ADDRESS FOR NOTICES:
Comerica Bank - Texas
P.O. Box 650-282
Dallas, Texas 75265-0282
Fax No.: (214) 969-6416
Telephone No.: (214) 969-6472
Attention: Mr. Gary Orr
- 65 -
<PAGE>
With a copy to:
Comerica Bank - Texas
910 Louisiana, Suite 410
Houston, Texas 77002
Fax No.: (713) 220-5651
Telephone No.: (713) 220-5601
Attention: Ms. Lizabeth Lary
BANKS:
COMERICA BANK-TEXAS
Commitment: By:_________________________________
Name: Lizabeth Lary
$35,000,000 Title: Corporate Banking Officer
ADDRESS FOR NOTICES:
Comerica Bank - Texas
P.O. Box 650-282
Dallas, Texas 75265-0282
Fax No.: (214) 969-6416
Telephone No.: (214) 969-6472
Attention: Mr. Gary Orr
WITH A COPY TO:
Comerica Bank - Texas
910 Louisiana, Suite 410
Houston, Texas 77002
Fax No.: (713) 220-5651
Telephone No.: (713) 220-5601
Attention: Ms. Lizabeth Lary
LENDING OFFICE FOR BASE RATE ADVANCES
Comerica Bank
1508 West Mockingbird
Dallas, Texas 75235
LENDING OFFICE FOR EURODOLLAR ADVANCES
Comerica Bank
39200 Six Mile Road
Livonia, Michigan 48152-7576
- 66 -
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION OF EXHIBIT SECTION
"A" Form of Note 2.2
"B" Advance Request Form 2.5
"C" Mortgage 5.1(a)
"D" Security Agreement 5.1(b)
"E" Guaranty 6.1(j)
"F" Opinion of Counsel for the
Borrower and the Guarantor 6.1(q)
"G" Form of Borrowing Base
Certificate 8.1(k)
"H" Assignment and Acceptance 13.8
"I" Contribution Agreement 6.1(l)
"J-1" Deed of Trust (GHX) 5.1(c)
"J-2" Deed of Trust (GHX) 5.1(c)
"J-3" Deed of Trust (LSS) 5.1(c)
"K" Pledge Agreement 5.1(e)
"L" Letter of Credit Request Form 2.11
INDEX TO SCHEDULES
SCHEDULE DESCRIPTION OF SCHEDULE SECTION
2.19 Existing Letters of Credit 2.19
5.1(a) Legal Description of Real Property 5.1(a)
7.5 Existing Litigation 7.5
7.9 Existing Debt 7.9
7.13 Projections 7.13
6.1(1) List of Subsidiaries 7.14
7.21 Environmental Matters 7.21
7.23 Board of Directors 7.23
9.2 Existing Liens 9.2
11.1(m) Comerica Other Debt 11.1(m)
<PAGE>
EXHIBIT "A"
FORM OF NOTE
<PAGE>
EXHIBIT "B"
ADVANCE REQUEST FORM
<PAGE>
EXHIBIT "C"
MORTGAGE
<PAGE>
EXHIBIT "D"
SECURITY AGREEMENT
<PAGE>
EXHIBIT "E"
GUARANTY
<PAGE>
EXHIBIT "F"
OPINION OF COUNSEL FOR THE BORROWER AND THE GUARANTOR
<PAGE>
EXHIBIT "G"
FORM OF BORROWING BASE CERTIFICATE
<PAGE>
EXHIBIT "H"
ASSIGNMENT AND ACCEPTANCE
<PAGE>
EXHIBIT "I"
CONTRIBUTION AGREEMENT
<PAGE>
EXHIBIT "J-1"
DEED OF TRUST (GHX)
<PAGE>
EXHIBIT "J-2"
DEED OF TRUST (GHX)
<PAGE>
EXHIBIT "J-3"
DEED OF TRUST (LSS)
<PAGE>
EXHIBIT "K"
PLEDGE AGREEMENT
<PAGE>
EXHIBIT "L"
LETTER OF CREDIT REQUEST FORM
<PAGE>
SCHEDULE 2.19
EXISTING LETTERS OF CREDIT
1. Documentary Credit Number 2621, issued May 22, 1998, expiry April 30,
1999, beneficiary Korea Bolt Ind. Co. Ltd., amount USD 75,000.00.
<PAGE>
SCHEDULE 5.1(A)
LEGAL DESCRIPTION OF REAL PROPERTY
<PAGE>
SCHEDULE 7.5
EXISTING LITIGATION
<PAGE>
SCHEDULE 7.9
EXISTING DEBT
<PAGE>
SCHEDULE 7.13
PROJECTIONS
<PAGE>
SCHEDULE 6.1(1)
LIST OF SUBSIDIARIES
<PAGE>
SCHEDULE 7.21
ENVIRONMENTAL MATTERS
<PAGE>
SCHEDULE 7.23
BOARD OF DIRECTORS
<PAGE>
SCHEDULE 9.2
EXISTING LIENS
<PAGE>
SCHEDULE 11.1(M)
COMERICA OTHER DEBT
EXHIBIT 10.2
Lease Agreement No. 9835
Dated: June 30, 1998 Schedule No. 001
COMERICA LEASING CORPORATION
LEASE SCHEDULE
1. DESCRIPTION OF LEASE: Lease Agreement dated JUNE 30, 1998 , by and between
COMERICA LEASING CORPORATION (herein "CLC") as Lessor, and INDUSTRIAL HOLDINGS,
INC. AND BEAIRD INDUSTRIES, INC. CO-LESSEES as Lessee (herein called "Lease
Agreement").
2. DESCRIPTION OF EQUIPMENT:
"As further described on attached Exhibit 'A'"
3. LOCATION: The equipment described above shall be located at 601 BENTON KELLY
STREET, SHREVEPORT, LA 71106-7198 .
4. TERM; RENTAL: The Term of the Lease Agreement for the Equipment described in
this Schedule shall be in accordance with the provisions of the Lease Agreement
and shall continue until all rental payments are fully paid. Lessee hereby
agrees to pay CLC as monthly rent for the Equipment, an amount equal to
$142,857.14 per month (to be applied towards principal), plus interest in
arrears as may be adjusted and re-calculated pursuant to an Adjustment Event,
plus any applicable sales and/or use taxes, commencing on JULY 30, 1998 and on
the 30th calendar day for 59 months, followed by a final principal installment
of $3,571,428.74 plus interest until fully paid. The rental payments shall be
remitted to CLC at Drawer 67-042, Detroit, Michigan 48267, unless CLC specifies
otherwise in writing.
Lessee and CLC expressly acknowledge and agree that the amount of Lessees
monthly rental payment obligation under the Lease Agreement is dependent upon
the Eurodollar-based Rate then in effect for the applicable monthly rental
period ("Billing Period") and that the 30 -day Eurodollar-based Rate as of for
JUNE 30, 1998 the first monthly Billing Period is 5.625%. The spread over the
Euro-Dollar based rate shall be 2.75%.
The amount from time-to-time outstanding under the Lease Agreement, and the
amount of any required monthly rental payment shall be noted on CLC's books and
records, which shall be conclusive evidence thereof, absent manifest error;
provided, however, any failure by CLC to make any such notation, or any error in
any such notation, shall not relieve Lessee of its obligations to repay CLC all
amounts payable by Lessee to CLC under or pursuant to the Lease Agreement in
accordance with the terms hereof.
Lessee may elect from time-to-time as specifically provided herein to designate
the "30"; "60"; "90"; "180" or "360" day Eurodollar-based Rate ("Fixed Period")
as the applicable rate to be used in the calculation of Lessees monthly payment
for all amounts outstanding under this Lease Schedule by delivering to CLC, by
11:00 a.m. (Detroit, Michigan time), two (2) Business Days prior to the
expiration of the current Fixed Period, a Notice of Change in Fixed Period
Election executed by a duly authorized officer of Lessee. Until written
notification by Lessee to CLC to the contrary, the Eurodollar-based Rate Fixed
Period last chosen by Lessee shall be used by CLC for all future calculations.
For the purposes of this Lease Agreement, the following terms will have the
following meanings:
"Adjustment Event" shall mean a change up or down in the Eurodollar-based
Rate as of the date which is two (2) Business Days prior to the expiration
of the current Fixed Period, from the Eurodollar-based Rate then in effect
pursuant to the terms hereof.
"Business Day" shall mean any day other than a Saturday, Sunday or holiday
on which CLC is open for all or substantially all of its domestic and
international commercial business in Detroit, Michigan.
"Eurodollar-based Rate" shall mean the quotient of:
(a) the per annum interest rate at which Comerica Bank's Eurodollar Lending
Office located in the Grand Cayman Islands, British West Indies, or such
other branch of Comerica Bank as it may hereinafter designate, offers
deposits to prime banks in the eurodollar market in an amount comparable to
all amounts outstanding under this Lease Schedule and for a period equal to
the respective Fixed Period chosen by Lessee at approximately 11:00 a.m.,
Detroit, Michigan time, two (2) Business Days prior to the expiration of the
current Fixed Period;
divided by
(b) a percentage equal to 100% minus the maximum rate on such date at which
Comerica Bank is required to maintain reserves on "Euro- currency
Liabilities" as defined in and pursuant to Regulation D of the Board of
Governors of the Federal Reserve System or, if such regulation or definition
is modified, and as long as Comerica Bank is required to maintain reserves
against a category of liabilities which includes eurodollar deposits or
includes a category of assets which includes eurodollar loans, the rate at
which such reserves are required to be maintained on such category.
<PAGE>
LEASE SCHEDULE - CONT. LEASE NO. 9835 - SCHEDULE NO. 001
5. INSURANCE: Lessee agrees to maintain adequate property damage insurance in
accordance with the terms of the Lease Agreement, but in any event not less than
the sum of the payments due, protecting CLCB as a loss payee. The minimum amount
indicated above shall NOT be construed to imply such amount will be or is
adequate, but rather as a minimum amount.
6. UCC 2A: In accordance with Section 2A of the Michigan Uniform Commercial Code
(MCLA Section 440.3101 et seq.) ("UCC") Lessee acknowledges either (a) that
Lessee has reviewed and approved any written Supply Contract (as defined by UCC
Section 2A-103(I)(y)) covering the Equipment purchased from the "Supplier" (as
defined by UCC Section 2A-103(I)(x)) thereof for lease to Lessee or (b) that
Lessor has informed or advised Lessee, in writing, either previously or by this
Lease Schedule of the following: (I) the identity of the supplier; (ii) that the
Lessee may have rights under the Supply Contract; and (iii) that the Lessee may
contact the Supplier for a description of any such rights lessee may have under
the Supply Contract.
Lessee's Initials:
7. PREPAYMENT: No Prepayment is allowed until after the twelfth month
anniversary. Prepayment in full is allowed on any regular lease installment date
after the twelfth month anniversary. After the twelfth month anniversary and
before the eighteenth month anniversary, Lessee will pay as liquidated damages,
and not as penalty, a .5% prepayment premium on the remaining principal balance.
No prepayment premiums will be assessed for full prepayment after the eighteenth
month anniversary.
The foregoing is hereby approved and agreed to by the undersigned as a Schedule
to and a part of the Lease Agreement, the provisions of which are hereby
incorporated herein by reference and which shall govern, notwithstanding
anything contrary or inconsistent herein.
<TABLE>
<CAPTION>
<S> <C>
COMERICA LEASING CORPORATION INDUSTRIAL HOLDINGS, INC.
(Lessor) (Co-Lessee)
By:_______________________________________ By:_______________________________________
William B. Dridge Christine A. Smith
Its: Vice President Its: Executive Vice President
BEAIRD INDUSTRIES, INC.
(Co-Lessee)
By:______________________________________________________
Christine A. Smith
Its: Vice President
</TABLE>
EXHIBIT 10.3
[Execution Version]
LOAN AGREEMENT
dated as of June 30, 1998
between
INDUSTRIAL HOLDINGS, INC.
as Borrower,
and
ENSERCO, L.L.C.
as Lender
$15,000,000
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS; TERMS...................................................1
Section 1.1 Definitions.............................................1
Section 1.2 Accounting Terms.......................................10
Section 1.3 Type...................................................10
Section 1.4 Interpretation.........................................10
ARTICLE II
THE LOAN............................................................11
Section 2.1 The Loan...............................................11
Section 2.2 Prepayment.............................................11
Section 2.3 Repayment..............................................12
Section 2.4 Fees...................................................12
Section 2.5 Interest...............................................12
Section 2.6 Breakage Costs.........................................14
Section 2.7 Increased Costs........................................15
Section 2.8 Illegality.............................................15
Section 2.9 Market Failure.........................................16
Section 2.10 Payments; Computations.................................16
Section 2.11 Taxes..................................................17
ARTICLE III
CONDITIONS PRECEDENT................................................18
Section 3.1 Conditions Precedent to the Loan.......................18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES......................................20
Section 4.1 Corporate Existence....................................20
Section 4.2 Financial Statements...................................20
Section 4.3 Corporate Action; No Breach............................20
Section 4.4 Operation of Business..................................20
Section 4.5 Litigation and Judgments...............................21
Section 4.6 Rights in Properties; Liens............................21
Section 4.7 Enforceability.........................................21
Section 4.8 Approvals..............................................21
Section 4.9 Debt...................................................21
Section 4.10 Taxes..................................................21
i
<PAGE>
PAGE
Section 4.11 Use of Proceeds; Margin Securities.....................21
Section 4.12 ERISA..................................................22
Section 4.13 Disclosure.............................................22
Section 4.14 Subsidiaries...........................................22
Section 4.15 Agreements.............................................22
Section 4.16 Compliance with Laws...................................23
Section 4.17 Investment Company Act.................................23
Section 4.18 Public Utility Holding Company Act.....................23
Section 4.19 Environmental Matters..................................23
Section 4.20 Year 2000 Compliance...................................24
Section 4.21 Acquisition............................................24
Section 4.22 Comerica Loan Agreement................................24
ARTICLE V
AFFIRMATIVE COVENANTS...............................................25
Section 5.1 Use of Proceeds........................................25
Section 5.2 Reporting Requirements.................................25
Section 5.3 Maintenance of Existence; Conduct of Business..........27
Section 5.4 Maintenance of Properties..............................27
Section 5.5 Taxes and Claims.......................................27
Section 5.6 Insurance..............................................27
Section 5.7 Inspection Rights......................................27
Section 5.8 Keeping Books and Records..............................28
Section 5.9 Subsidiary Guaranties..................................28
Section 5.10 Compliance with Laws...................................28
Section 5.11 Compliance with Agreements.............................28
Section 5.12 Further Assurances.....................................28
Section 5.13 ERISA..................................................28
Section 5.14 Year 2000 Compliant....................................28
Section 5.15 New Heller Financing...................................29
ARTICLE VI
NEGATIVE COVENANTS..................................................30
Section 6.1 Debt...................................................30
Section 6.2 Limitation on Liens....................................30
Section 6.3 Mergers, Etc...........................................31
Section 6.4 Restricted Payments....................................31
ii
<PAGE>
PAGE
Section 6.5 Investments............................................31
Section 6.6 Transactions With Affiliates...........................32
Section 6.7 Disposition of Assets..................................32
Section 6.8 Sale and Leaseback.....................................32
Section 6.9 Prepayment of Debt.....................................32
Section 6.10 Nature of Business.....................................32
Section 6.11 Environmental Protection...............................33
Section 6.12 Accounting.............................................33
Section 6.13 Restrictions on Dividends or Prepayment................33
ARTICLE VII
FINANCIAL COVENANTS.................................................34
Section 7.1 Current Ratio..........................................34
Section 7.2 Consolidated Net Worth.................................34
Section 7.3 Funded Debt/EBITDA Ratio...............................34
Section 7.4 Cash Flow Coverage Ratio...............................34
Section 7.5 Leverage Ratio.........................................34
Section 7.6 Operating Leases.......................................34
Section 7.7 Capital Expenditures...................................35
ARTICLE VIII
EVENTS OF DEFAULT...................................................36
Section 8.1 Events of Default......................................36
Section 8.2 Remedies...............................................38
Section 8.3 Remedies Cumulative....................................39
Section 8.4 No Additional Waiver Implied by One Waiver.............39
Section 8.5 Effect on Discontinuance of Proceedings................39
Section 8.6 Application of Payments................................39
ARTICLE IX
MISCELLANEOUS.......................................................40
Section 9.1 Obligations Absolute...................................40
Section 9.2 Amendments, Etc........................................40
Section 9.3 Notices................................................40
Section 9.4 Costs, Expenses, and Indemnification...................41
Section 9.5 Binding Effect; Assignments............................42
iii
<PAGE>
PAGE
Section 9.6 Termination............................................42
Section 9.7 Execution in Counterparts..............................42
Section 9.8 CHOICE OF LAW..........................................42
Section 9.9 LIMITATION ON DAMAGES..................................42
Section 9.10 ARBITRATION............................................42
Schedules and Exhibits:
Schedule 4.5 Litigation and Judgments
Schedule 4.9 Debt
Schedule 4.13Proformas
Schedule 4.14Subsidiaries
Schedule 4.19Environmental Matters
Schedule 6.2 Liens
Exhibit A- Form of Borrowing Request Exhibit B- Form of Contribution Agreement
Exhibit C- Form of Continuation/Conversion Request Exhibit D - Form of Guaranty
Exhibit E - Form of Compliance Certificate Exhibit F - Form of Opinion of
Counsel
iv
<PAGE>
LOAN AGREEMENT
This Loan Agreement (this "Agreement"), dated as of June 30, 1998, is
between INDUSTRIAL HOLDINGS, INC., a Texas corporation (the "Borrower"), and
ENSERCO, L.L.C., a Delaware limited liability company (the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower has requested and the Lender has agreed,
subject to the terms and conditions of this Agreement, to make the Loan (as
defined below) to the Borrower for the purposes set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; TERMS
Section 1.1 DEFINITIONS. As used herein, the following capitalized terms
shall have the following meanings:
"ACQUISITION" means the Borrower's acquisition of the common stock of
Beaird pursuant to the terms of the Acquisition Documents.
"ACQUISITION DOCUMENTS" means the Purchase Agreement and all other
material agreements, instruments, certificates and documents delivered in
connection with the arrangement, negotiation, or consummation of the
Acquisition.
"AFFILIATE" means, as to any Person, any other Person (a) that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, such Person; (b) that directly or indirectly
beneficially owns or holds five percent (5%) or more of any class of voting
stock of such Person; or (c) five percent (5%) or more of the voting stock of
which is directly or indirectly beneficially owned or held by the Person in
question. The term "control" means the possession, directly or indirectly, of
the power to direct or cause direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise; PROVIDED, however, in no event shall the Lender be deemed an
Affiliate of the Borrower or any of the Subsidiaries.
"AGREEMENT" has the meaning specified in the introduction.
"APPLICABLE MARGIN" means 5.00%.
1
<PAGE>
"BASE RATE" means, for any day, the fluctuating rate per annum of interest
equal to the greater of (a) the Prime Rate in effect on such day and (b) the
Federal Funds Rate in effect on such day plus 0.50%.
"BASE RATE TRANCHE" means any Tranche which bears interest based upon the
Base Rate, as determined in accordance with Section 2.5.
"BEAIRD" means Beaird Industries, Inc., a Delaware corporation.
"BORROWER" has the meaning specified in the introduction.
"BORROWER ACCOUNT" means any account of the Borrower which is designated
as the "Borrower Account" in writing by the Borrower.
"BORROWING REQUEST" means a Borrowing Request executed by a Responsible
Officer of the Borrower and delivered to the Lender in substantially the form of
EXHIBIT A.
"BUSINESS DAY" means any Monday through Friday during which commercial
banks are open for business in Houston, Texas, and, if the applicable Business
Day relates to any LIBOR Tranche, on which dealings are carried on in the London
interbank market.
"CAPITAL EXPENDITURE" shall mean all expenditures and liabilities incurred
for the acquisition of any fixed assets or improvements, replacements,
substitutions, or additions thereto which have a useful life of more than one
(1) year, including the direct or indirect acquisition of such assets by way of
increased product or service charges, offset items or otherwise the principal
portion of payments with respect to Capital Lease Obligations.
"CAPITAL LEASE OBLIGATIONS" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property, which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP. For purposes of this Agreement, the amount of
such Capital Lease Obligations shall be the capitalized amount thereof,
determined in accordance with GAAP.
"CASH FLOW COVERAGE RATIO" means , as calculated on a consolidated basis,
the ratio of (a) EBITDA for the 12 month period immediately preceding the date
of calculation, divided by (b) the sum of (i) the aggregate Debt Service of the
Borrower and the Subsidiaries for the 12 month period immediately preceding the
date of calculation plus (ii) the aggregate amount of cash dividends paid by
Borrower during the 12 month period immediately preceding the date of
calculation plus (iii) the aggregate amount of cash taxes paid by the Borrower
and the Subsidiaries during the 12 month period immediately preceding the date
of calculation. The Cash Flow Coverage Ratio shall be tested quarterly at the
end of each fiscal quarter of the Borrower for the 12 month period then ended.
The foregoing ratio may be expressed in the following fraction:
2
<PAGE>
EBITDA
Debt Service + Cash Dividends + Cash Taxes
"CLOSING DATE" shall mean June 30, 1998.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"COMERICA LOAN AGREEMENT" means the Credit Agreement dated June 30, 1998,
between the Borrower and Comerica Bank-Texas, as Agent, as the same may be
modified from time to time.
"COMERICA LOAN DOCUMENTS" means the Comerica Loan Agreement and each other
agreement, instrument, or document executed at any time in connection therewith.
"CONSOLIDATED CURRENT ASSETS" means, at any particular time, all amounts
which, in conformity with GAAP, would be included as current assets on a
consolidated balance sheet of the Borrower and the Subsidiaries.
"CONSOLIDATED CURRENT LIABILITIES" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as current liabilities
on a consolidated balance sheet of the Borrower and the Subsidiaries.
"CONSOLIDATED NET WORTH" means, at any particular time, all amounts which,
in conformity with GAAP, would be included as stockholders' equity on a
consolidated balance sheet of the Borrower and the Subsidiaries.
"CONSOLIDATED TANGIBLE NET WORTH" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as stockholders'
equity on a consolidated balance sheet of the Borrower and the Subsidiaries;
provided, however, there shall be excluded therefrom: (a) any amount at which
shares of capital stock of the Borrower appear as an asset on the Borrower's
balance sheet, (b) goodwill, including any amounts, however designated, that
represent the excess of the purchase price paid for assets or stock over the
value assigned thereto, (c) patents, trademarks, trade names, and copyrights,
(d) deferred expenses, (e) loans and advances to any stockholder, director,
officer, or employee of the Borrower or any Affiliate of the Borrower, and (f)
all other assets which are properly classified as intangible assets.
"CONSOLIDATED WORKING CAPITAL" means, at any particular time, the amount
by which Consolidated Current Assets exceed Consolidated Current Liabilities.
"CONTINGENT OBLIGATION" means, as to any Person, without duplication, any
direct or indirect liability of that Person, with or without recourse, (a) with
respect to any Debt, lease, dividend, letter of credit or other obligation (the
"PRIMARY OBLIGATIONS") of another Person (the "PRIMARY OBLIGOR"), including any
obligation of that Person (i) to purchase, repurchase or otherwise acquire such
primary obligations or any security therefor, (ii) to advance or provide funds
for the payment or discharge of any such primary obligation, or to maintain
working capital or equity capital of the primary obligor
3
<PAGE>
or otherwise to maintain the net worth or solvency or any balance sheet item,
level of income or financial condition of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (iv) otherwise to assure or hold harmless
the holder of any such primary obligation against loss in respect thereof (each,
a "Guaranty Obligation"); (b) with respect to any Surety Instrument issued for
the account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings or payments; (c) to purchase any materials, supplies,
or other property from, or to obtain the services of, another Person if the
relevant contract another related document or obligation requires that payment
for such materials, supplies or other property, or for such services, shall be
made regardless of whether delivery of such materials, supplies or other
property is ever made or tendered, or such services are ever performed or
tendered, or (d) in respect of any Swap Contract.
"CONTRIBUTION AGREEMENT" means the contribution and indemnification
agreement of the Borrower and the Guarantors in favor of the Lender, in
substantially the form of EXHIBIT B, as the same may be amended, supplemented,
or modified from time to time.
"CONTINUATION/CONVERSION REQUEST" means a Continuation/Conversion Request
executed by a Responsible Officer of the Borrower and delivered to the Lender in
substantially the form of EXHIBIT C.
"CURRENT RATIO" means, at any particular time, the ratio of Consolidated
Current Assets to Consolidated Current Liabilities.
"DEBT" means as to any Person at any time (without duplication): (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, notes, debentures, or other similar instruments, (c)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable of such Person arising in the ordinary
course of business that are not past due by more than ninety (90) days, (d) all
Capital Lease Obligations of such Person, (e) all obligations secured by a Lien
existing on property owned by such Person, whether or not the obligations
secured thereby have been assumed by such Person or are non-recourse to the
credit of such Person, (f) all reimbursement obligations of such Person (whether
contingent or otherwise) in respect of letters of credit, bankers' acceptances,
surety or other bonds and similar instruments, (g) all liabilities of such
Person in respect of unfunded vested benefits under any Plan, and (h) all
obligations with respect to Swap Contracts; and all Contingent Obligations in
respect of indebtedness of others of the kinds referred to in clauses (a)
through (h) above.
"DEBT SERVICE" means the sum of (a) all aggregate scheduled principal
payments owed by the Borrower and the Subsidiaries which became due during the
12-month period immediately preceding the date of calculation plus (b) cash
Interest Expense for the 12-month period immediately preceding the date of
calculation, plus (c) all regularly scheduled payments on account of Capital
Leases that became due and owing during the 12 month period immediately
preceding the date of calculation.
"DEFAULT" means (a) an Event of Default or (b) any event or occurrence
which with notice or lapse of time or both would, unless cured or waived, become
an Event of Default.
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"DEFAULT RATE" means a per annum rate equal to the Base Rate plus 7.00%.
"DOLLARS" and "$" means lawful money of the United States of America.
"EBITDA" means, for any period, the consolidated pre-tax income of the
Borrower and the Subsidiaries for such period, plus the aggregate amount which
was deducted for such period determining such consolidated, pre-tax income for
(a) interest expense (including amortization of debt discount, imputed interest
and capitalized interest), (b) depreciation, and (c) amortization, PROVIDED,
HOWEVER, that there shall be excluded therefrom (without duplication) (i) net
income (of loss) of any Person (other than a consolidated Subsidiary of such
Person) in which any other Person (other than such Person or any of its
consolidated Subsidiaries) has a joint interest, except to the extent of the
amount of dividends or other distributions actually paid to such Person or
(subject to subclause (iii) below) any of its consolidated Subsidiaries by such
other Person during such period, (ii) the income (or loss) of any Person during
such period accrued prior to the date it becomes a consolidated Subsidiary of
such Person or is merged into or consolidated with such Person or any of its
consolidated Subsidiaries, (iii) the income of any consolidated Subsidiary of
the Borrower to the extent attributable to minority interests held therein by
Persons other than the Borrower and its wholly-owned Subsidiaries, and (iv) the
income of any consolidated Subsidiary of the Borrower during such period to the
extent that the declaration or payment of dividends or similar distributions by
such consolidated Subsidiary of such income is not at the time permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order statute, rule or governmental regulation applicable to such
Subsidiary or any of its other Subsidiaries; PROVIDED FURTHER that, for purposes
of the Funded Debt/EBITDA Ratio only, EBITDA of any consolidated Subsidiary
acquired by the Borrower or any other Subsidiary, to the extent twelve (12)
months have not elapsed since its acquisition, shall be projected on a proforma
basis acceptable to the Lender based on historical performance for the periods
in question.
"EVENT OF DEFAULT" has the meaning specified in Section 7.1.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate
per annum equal for each day during such period 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 Lender of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for any such day on
such transactions received by the Lender from three Federal funds brokers of
recognized standing selected by it.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System or any of its successors.
"FUNDED DEBT" means all indebtedness for borrowed money (including,
without limitation, the unpaid amount of the purchase price of any property)
evidenced by a written document and subject to required payments of interest
and/or principal including, without limitation, Capital Lease Obligations, and
all Contingent Obligations related to any of the foregoing.
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"FUNDED DEBT/EBITDA RATIO" means, on any date of determination, the ratio
of (a) the consolidated Funded Debt of the Borrower and the Subsidiaries as of
the date of determination to (b) EBITDA of the Borrower and its consolidated
Subsidiaries for the period in question.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent basis" when the accounting principles
applied in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government.
"GUARANTORS" collectively means The Rex Group, Inc., a Texas corporation
(the "Rex Group"), Rex Machinery Sales, Inc., a Texas corporation ("Rex Sales"),
Rex Machinery Movers, Inc., a Texas corporation ("Rex Movers"), U.S. Crating,
Inc., a Texas corporation ("U.S. Crating"), First Texas Credit Corporation, a
Texas corporation ("First Texas"), Landreth Engineering Company, a Texas
corporation ("Landreth"), Pipeline Valve Specialty, Inc., a Texas corporation,
("Pipeline"), Bolt Manufacturing Co., Inc., a Texas corporation ("Bolt"),
LSS-Lone Star-Houston, Inc., a Texas corporation ("LSS"), American Rivet
Company, Inc., an Illinois corporation ("Rivet"), Manifold Valve Services, Inc.,
a Delaware corporation ("Manifold"), Philform, Inc., a Michigan corporation
("Philform"), GHX, Incorporated, a Texas corporation ("GHX"), Regal Machine
Tool, Inc., a Texas corporation, ("Regal"), WHIR Acquisition, Inc., a Texas
corporation ("WHIR"), Moores Pump and Supply, Inc., a Louisiana corporation
("Moores"), GHX, Incorporated of Louisiana, a Louisiana corporation ("GHX
Louisiana"), Beaird and each other Person who executes a guaranty of the Loan
Obligations, and individually, each a "Guarantor."
"GUARANTY" means (a) the Guaranty made by the Guarantors in favor of the
Lender, in substantially the form of EXHIBIT D attached hereto and (b) each
future guaranty of the Loan Obligations, as any the foregoing documents may be
amended, supplemented, and otherwise modified from time to time.
"HAZARDOUS MATERIAL" means any substance, product, waste, pollutant,
material, chemical, contaminant, constituent, or other material which is or
becomes listed, regulated, or addressed under any Environmental Law, including,
without limitation, asbestos, petroleum, and polychlorinated biphenyls.
"INTEREST EXPENSE" means, for any period, the total consolidated interest
expense (including, without limitation, interest expense attributable to Capital
Lease Obligations) of the Borrower and its consolidated subsidiaries for such
period, determined in accordance with GAAP.
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"HIGHEST LAWFUL RATE" means the maximum lawful interest rate, if any, that
at any time or from time to time may be contracted for, charged, or received
under the laws applicable to the Loan which are presently in effect or, to the
extent allowed by law, under such applicable laws, or an exemption therefrom,
which may hereafter be in effect and which allow a higher maximum nonusurious
interest rate than applicable laws now allow.
"INACTIVE SUBSIDIARIES" means XSUP Corporation, a Texas corporation,
("XSUP"), Rex International Corporation, a Texas corporation, ("Rex
International"), XTEL Corporation, a Texas corporation ("XTEL"), and Losco,
Inc., a Texas corporation ("Losco").
"INTEREST PERIOD" means, with respect to each LIBOR Tranche, the period
commencing on the date of such LIBOR Tranche and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The duration
of each such Interest Period shall be one, two, or three months, in each case as
the Borrower may select pursuant to a Continuation/Conversion Request (unless
there shall exist any Default or Event of Default, in which case the Borrower
may only select one month Interest Periods); provided, however, that:
(a) whenever the last day of any Interest Period would otherwise occur on
a day other than a Business Day, the last day of such Interest Period shall be
extended to occur on the next succeeding Business Day; provided that if such
extension would cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day;
(b) any Interest Period which begins on the last Business Day of the
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
Business Day of the calendar month in which it would have ended if there were a
numerically corresponding day in such calendar month; and
(c) the Borrower may not select an Interest Period for any LIBOR Tranche
which ends after the Maturity Date.
"LENDER" has the meaning specified in the introduction.
"LEVERAGE RATIO" means, at any time, the ratio of Consolidated Liabilities
to Consolidated Tangible Net Worth.
"LIBOR" means, for any LIBOR Tranche and for any Interest Period, an
interest rate per annum (rounded upwards, if necessary, to the nearest 1/100 of
1%) equal to the rate per annum reported two Business Days prior to the start of
the Interest Period, on Telerate Access Service Page 3750 (British Bankers
Association Interest Settlement Rates) provided by Telerate Systems Incorporated
(or, if such Telerate Page shall cease to be publicly available, as reported by
Reuters or any publicly available source of similar market data reasonably
selected by the Lender), as the London Interbank Offered Rate for U.S. dollar
deposits having a term equal to such Interest Period and in an amount
substantially equal to the amount of such LIBOR Tranche.
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"LIBOR TRANCHE" shall mean any Tranche which bears interest based upon the
LIBOR, as determined in accordance with Section 2.5.
"LIEN" means any lien, mortgage, security interest, tax lien, financing
statement, pledge, charge, hypothecation, assignment, preference, priority, or
other encumbrance of any kind or nature whatsoever (including, without
limitation, any conditional sale or title retention agreement), whether arising
by contract, operation of law, or otherwise.
"LOAN" means the loan made by the Lender to the Borrower under Section
2.1.
"LOAN COMMITMENT" means $15,000,000.
"LOAN DOCUMENTS" means this Agreement, the Note, the Guaranty, the
Contribution Agreement, the Borrowing Request, each Continuation/Conversion
Request, each Compliance Certificate, and each other agreement, instrument, or
document executed at any time in connection with this Agreement.
"LOAN OBLIGATIONS" means all principal, interest, fees, reimbursements,
indemnifications, and other amounts now or hereafter owed by the Borrower to the
Lender under the Loan Documents and any increases, extensions, and
rearrangements of those obligations under any amendments, supplements, and other
modifications of the documents and agreements creating those obligations.
"LOAN PARTIES" means the Borrower and the Guarantors.
"MATERIAL ADVERSE EFFECT" means any material adverse effect on (i) the
financial condition, business or properties of the Borrower or any of the
Subsidiaries or (ii) the ability of the Borrower or any of the Subsidiaries to
perform its respective obligations under the Loan Documents.
"MATURITY DATE" means November 30, 1999.
"MINIMUM LIBOR TRANCHE AMOUNT" means $1,000,000.
"MINIMUM LIBOR TRANCHE MULTIPLE" means $100,000.
"NOTE" means the $15,000,000 Promissory Note dated as of even date
herewith, made by the Borrower payable to the order of the Lender evidencing the
indebtedness of the Borrower to the Lender resulting from the Loan, as the same
may be amended, supplemented, and otherwise modified from time to time.
"OPERATING LEASE" means any lease (other than a lease constituting a
Capital Lease Obligation) of real or personal property.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
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"PERSON" means any individual, corporation, business trust, association,
company, partnership, joint venture, Governmental Authority, or other entity.
"PLAN" means any employee benefit or other plan established or maintained
by the Borrower or any ERISA Affiliate and which is covered by Title IV of
ERISA.
"PRIME RATE" means a fluctuating per annum interest rate in effect from
time to time equal to the rate of interest publicly announced by Barclays Bank
PLC as its prime commercial lending rate ( or comparable rate, if such bank does
not so designate a "prime commercial lending rate"), whether or not the Borrower
has notice thereof.
"PROHIBITED TRANSACTION" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Code.
"PURCHASE AGREEMENT" means the Stock Purchase Agreement dated May 20,
1998, between the Borrower and Trinity Industries, Inc.
"QUARTERLY DATE" means the last Business Day of each March, June,
September, and December.
"RELEASE" means, as to any Person, any release, spill, emission, leaking,
pumping, injection, deposit, disposal, disbursement, leaching, or migration of
Hazardous Materials into the indoor or outdoor environment or into or out of
property owned by such Person, including, without limitation, the movement of
Hazardous Materials through or in the air, soil, surface water, ground water, or
property.
"REMEDIAL ACTION" means all actions required to (a) clean up, remove,
treat, or otherwise address Hazardous Materials in the indoor or outdoor
environment, (b) prevent the Release or threat of Release or minimize the
further Release of Hazardous Materials so that they do not migrate or endanger
or threaten to endanger public health or welfare or the indoor or outdoor
environment, or (c) perform pre-remedial studies and investigations and
post-remedial monitoring and care.
"REPORTABLE EVENT" means any of the events set forth in Section 4043 of
ERISA.
"RESPONSIBLE OFFICER" means, with respect to any Person, such Person's
Chief Executive Officer, President, Chief Financial Officer, Vice Presidents,
Secretary, or Treasurer.
"RICO" means the Racketeer Influenced and Corrupt Organization Act of
1970, as amended from time to time.
"SUBSIDIARY" means any corporation, association, partnership, limited
liability company, joint venture or other business entity of which at least more
than fifty percent (50%) of the voting stock or other equity interests (in the
case of Persons other than corporations) is at the time directly or indirectly
owned or controlled by the Borrower or one or more of the Subsidiaries or by the
Borrower and one or more of the Subsidiaries.
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"SURETY INSTRUMENTS" means all letters of credit (including standby and
commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds
and similar instruments.
"SWAP CONTRACT" means any agreement, whether or not in writing, relating
to any transaction that is a rate swap, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap or option, bond,
note or bill option, interest rate option, forward foreign exchange transaction,
cap, collar or floor transaction, currency swap, cross-currency swap, swap
option, currency option or any other similar transaction (including any option
to enter into any of the foregoing) or any combination of the foregoing, and,
unless the context otherwise clearly requires, a master agreement relating to or
governing any or all of the foregoing.
"TRANCHE" means any tranche of principal outstanding accruing interest on
the same basis whether created in connection with the advance of the Loan or by
the continuation or conversion of existing Tranches of principal pursuant to
Section 2.5(a)(i) and shall include any Prime Rate Tranche or LIBOR Tranche.
"TYPE" has the meaning set forth in Section 1.3.
"UNITED WELLHEAD" means United Wellhead Services, Inc., a Delaware
corporation.
"UCC" means the Uniform Commercial Code as in effect in the State of
Texas.
Section 1.2 ACCOUNTING TERMS. Unless otherwise specified in this
Agreement, all accounting terms used in this Agreement shall be interpreted, all
accounting determinations under this Agreement shall be made, and all financial
statements required to be delivered under this Agreement shall be prepared, in
accordance with generally accepted accounting principles commonly applied in the
United States of America, or, in lieu thereof, a method approved by the Lender,
and on a basis consistent with the most recent pro forma or financial statements
approved or delivered to the Lender.
Section 1.3 TYPE. The "Type" of a Tranche refers to the determination
whether such tranche is a LIBOR Tranche or a Base Rate Tranche.
Section 1.4 INTERPRETATION. In this Agreement, the singular includes the
plural and the plural the singular; words importing any gender include the other
genders; references to statutes are to be construed as including all statutory
provisions consolidating, amending, or replacing the statute referred to;
references to "writing" include printing, typing, lithography, and other means
of reproducing words in a tangible, visible form; the words "including,"
"includes" and "include" shall be deemed to be followed by the words "without
limitation"; references to articles, sections (or subdivisions of sections),
recitals, exhibits, annexes, appendices, or schedules are to those of this
Agreement unless otherwise indicated and references to Persons include their
respective permitted successors and assigns and, in the case of Governmental
Authorities, Persons succeeding to their respective functions and capacities.
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ARTICLE II
THE LOAN
Section 2.1 THE LOAN. The Lender agrees, on the terms and conditions set
forth in this Agreement and for the purposes set forth in Section 5.1, to make a
single loan ("Loan") to the Borrower in the principal amount of the Loan
Commitment. The Loan is not revolving, therefore, the Borrower may not reborrow
amounts prepaid under the Loan. The indebtedness of the Borrower to the Lender
resulting from the Loan shall be evidenced by the Note.
Section 2.2 PREPAYMENT.
(a) The Borrower may from time to time voluntarily prepay all or a
part of the outstanding principal amount of the Loan pursuant to written notice
given by the Borrower to the Lender not less than five Business Days prior to
the date of prepayment. Each such notice shall specify the principal amount
which shall be prepaid and the date of the prepayment, and shall be irrevocable
and binding on the Borrower. Partial prepayments of the Loan must be made in a
minimum amount of $1,000,000 and in integral multiples of $100,000; provided
that unless such proposed prepayment prepays the entire outstanding principal
amount of the Loan, no proposed prepayment shall be permitted if the aggregate
outstanding principal amount of the Loan after giving effect to such proposed
prepayment would be less than $1,000,000 and further provided that the Borrower
must comply with Section 2.5(b). For each such notice given by the Borrower, the
Borrower shall prepay the Loan in the specified amount on the specified date as
set forth in such notice. The Borrower shall have no right to prepay any
principal amount of the Loan except as provided in this Section 2.2. Each
prepayment of principal pursuant to this Section 2.2 shall be accompanied by
payment of all accrued but unpaid interest on the principal amount prepaid and
any payments required under Section 2.2(b) and Section 2.6.
(b) With each prepayment of the Loan under Section 2.2(b) or upon any
acceleration of the Loan under Section 7.2, the Borrower shall pay to the Lender
the applicable premium for the applicable period specified in the table below:
PERIOD PREMIUM
Closing Date - December 31, 1998 Make-Whole Amount
January 1, 1999 - June 30, 1999 1.00% of principal amount of prepayment
July 1, 1999 and thereafter no prepayment premium is owed
If a Make-Whole Amount will be due, the Lender shall provide the Borrower with a
certificate stating the amount and basis of calculation of the Make-Whole
Amount, and such certificate shall be conclusive and binding, absent manifest
error. For the purposes of this Agreement, the following terms shall have the
following meanings:
"Make-Whole Amount" means the discounted present value of the Prepaid
Scheduled Interest Payments determined by discounting the Prepaid
Scheduled Interest Payments from their
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respective scheduled due dates to the Prepayment Date in accordance with
accepted financial practice at a discount rate equal to the Discount Rate.
"Prepaid Principal" means, with respect to any prepayment, the principal
amount of the principal being prepaid.
"Prepaid Scheduled Interest Payments" means each scheduled payment of
interest on the Prepaid Principal after the Prepayment Date that would
have been due on or before June 30, 1999, in accordance with this
Agreement assuming that the Prepaid Principal bears interest at a rate be
annum equal to the Applicable Margin and no prepayment of the Prepaid
Principal had occurred.
"Prepayment Date" means, with respect to any prepayment, the date on which
the prepayment is made or deemed made.
"Discount Rate" means, (i) the yields reported, as of 11:00 A.M. (Houston,
Texas time) on the first Business Day preceding the Prepayment Date, on
the display designated as "Page USD" on the Dow Jones Market Service (or
such other display as may replace Page USD on the Dow Jones Market
Service) for actively traded U.S. Treasury securities having a maturity
equal to one year or (ii) if such yields are not reported as of such time
or the yields reported as of such time are not ascertainable, the Treasury
Constant Maturity Series Yields reported, for the latest day for which
such yields have been so reported as of the first Business Day preceding
the Prepayment Date, in Federal Reserve Statistical Release H.15 (519) (or
any comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to one year.
Section 2.3 REPAYMENT. The Borrower shall repay to the Lender the
outstanding principal amount of the Loan on the Maturity Date.
Section 2.4 FEES. The Borrower shall pay to the Lender a structuring fee
equal to $225,000, payable upon the Borrower's and the Lender's execution of
this Agreement. The Lender acknowledges that the $50,000 working fee previously
paid by the Borrower to the Lender shall be applied to the structuring fee.
Section 2.5 INTEREST.
(a) ELECTION OF INTEREST RATE BASIS. The Borrower may select the
interest rate basis for the outstanding principal amount of the Loan in
accordance with the terms of this Section 2.5(a), except that the Loan initially
shall consist of only a Base Rate Tranche:
(i) With respect to any Tranche, the Borrower may continue or
convert any portion of any LIBOR Tranche or Base Rate Tranche to form new LIBOR
Tranches or Base Rate Tranches in accordance with this paragraph. Each such
continuation or conversion shall be made pursuant to a Continuation/Conversion
Request given by the Borrower to the Lender in writing or by telecopy not later
than 11:00 a.m. (Houston, Texas, time) on the fourth Business Day before the
date
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of the proposed continuation or conversion. Each Continuation/Conversion Request
shall be fully completed and shall specify the information required therein, and
shall be irrevocable and binding on the Borrower. In the case of any
continuation or conversion into LIBOR Tranches, upon the Borrower's request, the
Lender shall notify the Borrower of the applicable interest rate. Continuations
and conversions involving LIBOR Tranches shall be made in integral multiples of
the Minimum LIBOR Tranche Multiple. No continuation or conversion shall be
permitted if such continuation or conversion would cause the outstanding
principal amount of any LIBOR Tranche which would remain outstanding under the
Loan to be less than the Minimum LIBOR Tranche Amount. At no time shall there be
more than five separate LIBOR Tranches outstanding. Any conversion of an
existing LIBOR Tranche is subject to Section 2.6. Subject to the satisfaction of
all applicable conditions precedent, the Lender shall before close of business
on the date requested by the Borrower for the continuation or conversion, make
such continuation or conversion.
(ii) At the end of the Interest Period for any LIBOR Tranche
if the Borrower has not continued or converted such LIBOR Tranche into new
Tranches as provided for in paragraph (i) above, the Borrower shall be deemed to
have continued such LIBOR Tranche as a Base Rate Tranche. Each Base Rate Tranche
shall continue as a Base Rate Tranche unless the Borrower converts such Base
Rate Tranche as provided for in paragraph (i) above.
(b) PAYMENTS ON LIBOR TRANCHES. With respect to payments made on the
outstanding principal of the Loan, subject to the other requirements in this
Agreement, the Borrower may allocate the payments among the Tranches comprising
the Loan. Unless required by mandatory payments, partial prepayments involving
LIBOR Tranches must be made in multiples of the Minimum LIBOR Tranche Multiple
and no partial prepayment may be made if the prepayment would cause the
outstanding principal amount of any LIBOR Tranche to be less than the Minimum
LIBOR Tranche Amount. No voluntary prepayment of any LIBOR Tranche may be made
unless the required notice is provided by 11:00 a.m. (Houston, Texas, time) on
the fifth Business Day before the date of the proposed prepayment.
(c) INTEREST ON LIBOR TRANCHES. Each LIBOR Tranche shall bear
interest during its Interest Period at a per annum interest rate equal to the
sum of the LIBOR for such LIBOR Tranche plus the Applicable Margin. The Borrower
shall pay to the Lender all accrued but unpaid interest on each outstanding
LIBOR Tranche (i) on the last day of such LIBOR Tranche's Interest Period and
(ii) on the Maturity Date.
(d) INTEREST ON BASE RATE TRANCHES. Each Base Rate Tranche shall
bear interest at a per annum interest rate equal to the Base Rate in effect from
time to time plus the Applicable Margin. The Borrower shall pay to the Lender
all accrued but unpaid interest on each outstanding Base Rate Tranche (i)
beginning September 30, 1998, and on each Quarterly Date thereafter and (ii) on
the Maturity Date.
(e) PREVENTION OF USURY.
(i) If the effective rate of interest contracted for by the
Lender with the Borrower under the Loan Documents, including the stated rates of
interest contracted for hereunder
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and any other amounts contracted for under the Loan Documents which are deemed
to be interest, at any time exceeds the Highest Lawful Rate, then the
outstanding principal amount of the loans made by the Lender to the Borrower
hereunder shall bear interest at a rate which would make the effective rate of
interest on the loans made by the Lender to the Borrower under the Loan
Documents equal the Highest Lawful Rate until the difference between the amounts
which would have been due by the Borrower to the Lender at the stated rates and
the amounts which were due by the Borrower to the Lender at the Highest Lawful
Rate (such difference being the "Lost Interest") has been recaptured by the
Lender. If, when the loans made hereunder are repaid in full, the Lost Interest
has not been fully recaptured by the Lender pursuant to the preceding sentence,
then, to the extent permitted by law, the interest rates charged by the Lender
to the Borrower under Section 2.5 shall be retroactively increased such that the
effective rate of interest on the loans made by the Lender to the Borrower under
the Loan Documents was at the Highest Lawful Rate since the effectiveness of
this Agreement to the extent necessary to recapture the Lost Interest not
recaptured pursuant to the preceding sentence and, to the extent allowed by law,
the Borrower shall pay to the Lender the amount of the Lost Interest remaining
to be recaptured by the Lender.
(ii) In calculating all sums paid or agreed to be paid to the
Lender by the Borrower for the use, forbearance, or detention of money under the
Loan Documents, such amounts shall, to the extent permitted by applicable law,
be amortized, prorated, allocated, and spread in equal parts throughout the term
of the Loan Documents.
(iii) NOTWITHSTANDING THE FOREGOING OR ANY OTHER TERM
IN THIS AGREEMENT AND THE LOAN DOCUMENTS TO THE CONTRARY, it is the intention
of the Lender and the Borrower to conform strictly to any applicable usury laws.
Accordingly, if the Lender contracts for, charges, or receives any consideration
from the Borrower which constitutes interest in excess of the Highest Lawful
Rate, then any such excess shall be canceled automatically and, if previously
paid, shall at the Lender's option be applied to the outstanding amount of the
loans made hereunder by the Lender to the Borrower or be refunded to the
Borrower.
Section 2.6 BREAKAGE COSTS. If (i) any payment of principal on or any
conversion of any LIBOR Tranche is made on any date other than the last day of
the Interest Period for such LIBOR Tranche, whether as a result of any voluntary
or mandatory prepayment, any acceleration of maturity, or any other cause, (ii)
any payment of principal on any LIBOR Tranche is not made when due, or (iii) any
LIBOR Tranche is not borrowed, converted, or prepaid in accordance with the
respective notice thereof provided by the Borrower to the Lender, whether as a
result of any failure to meet any applicable conditions precedent for borrowing,
conversion, or prepayment, the cancellation of any request for borrowing,
conversion, or prepayment, the failure of the Borrower to provide the respective
notice of borrowing, conversion, or prepayment, or any other cause not specified
above which is created by the Borrower, then the Borrower shall pay to the
Lender upon demand any amounts required to compensate the Lender for any losses,
costs, or expenses, including administrative expenses, but excluding lost
profits, which are allocable to such action, including losses, costs, and
expenses related to the liquidation or reinvestment of funds acquired or
designated by the Lender to fund or maintain such LIBOR Tranche or related to
the reacquisition or redesignation of funds by the Lender to fund or maintain
such LIBOR Tranche following any liquidation or reinvestment of such funds
caused by such action. A certificate as to the amount of such loss, cost, or
expense detailing the
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calculation thereof submitted by the Lender to the Borrower shall be conclusive
and binding for all purposes, absent manifest error.
Section 2.7 INCREASED COSTS.
(a) COST OF FUNDS. If, due to either (i) any introduction of, change
in, or change in the interpretation of any law or regulation after the date of
this Agreement or (ii) compliance with any guideline or request from any central
bank or other governmental authority having appropriate jurisdiction (whether or
not having the force of law) given after the date of this Agreement, there shall
be any increase in the costs of the Lender allocable to committing to make the
Loan or obtaining funds for the making, funding, or maintaining of the Loan or
any Tranche in the relevant interbank market, including in each case any
increase in any applicable reserve requirement specified by the Federal Reserve
Board whether for emergency, marginal, supplemental, or other reserves, then the
Borrower shall pay to the Lender upon demand any amounts required to compensate
the Lender for such increased costs, such amounts being due and payable upon
demand by the Lender. A certificate as to the cause and amount of such increased
cost detailing the calculation of such cost and certifying that the Lender
customarily charges such amounts to its other customers in similar circumstances
submitted by the Lender to the Borrower shall be conclusive and binding for all
purposes, absent manifest error.
(b) CAPITAL ADEQUACY. If, due to either (i) any introduction of,
change in, or change in the interpretation of any law or regulation after the
date of this Agreement or (ii) compliance with any guideline or request from any
central bank or other governmental authority having appropriate jurisdiction
(whether or not having the force of law) given after the date of this Agreement,
there shall be any increase in the capital requirements of the Lender or its
parent or holding company allocable to (x) committing to make the loan or
making, funding, or maintaining of the Loan or any Tranche, as such capital
requirements are allocated by the Lender, then the Borrower shall pay to the
Lender upon demand any amounts required to compensate the Lender or its parent
or holding company for such increase in costs (including an amount equal to any
reduction in the rate of return on assets or equity of the Lender or its parent
or holding company), such amounts being due and payable upon demand by the
Lender. A certificate as to the cause and amount of such increased cost
detailing the calculation of such cost and certifying that the Lender
customarily charges such amounts to its other customers in similar circumstances
submitted by the Lender to the Borrower shall be conclusive and binding for all
purposes, absent manifest error. The Lender may not make any claim for
compensation under this Section 2.7(b) for increased costs incurred before six
months prior to the delivery of any such certificate.
Section 2.8 ILLEGALITY. Notwithstanding any other provision in this
Agreement, if it becomes unlawful for the Lender to obtain deposits or other
funds for making or funding any LIBOR Tranche in the relevant interbank market,
the Lender shall so notify the Borrower and the Lender's commitment to create
LIBOR Tranches shall be suspended until such condition has passed, all LIBOR
Tranches applicable to the Lender shall be converted to Base Rate Tranches as of
the end of each applicable Interest Period or earlier if necessary, and all
subsequent requests for LIBOR Tranches shall be deemed to be requests for Base
Rate Tranches.
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Section 2.9 MARKET FAILURE. Notwithstanding any other provision in this
Agreement, if the Lender determines that: (a) quotations of interest rates for
the relevant deposits referred to in the definition of "LIBOR" are not being
provided in the relevant amounts, or maturities for purposes of determining the
rate of interest referred to in the definition of "LIBOR" or (b) the relevant
rates of interest referred to in the definition of "LIBOR" which are used as the
basis to determine the rate of interest for LIBOR Tranches are not likely to
adequately cover the cost to the Lender of making or maintaining any LIBOR
Tranche, then if the Lender so notifies the Borrower, the commitment of the
Lender to create LIBOR Tranches shall be suspended until such condition has
passed, all LIBOR Tranches shall be converted to Base Rate Tranches as of the
end of each applicable Interest Period, and all subsequent requests for LIBOR
Tranches shall be deemed to be requests for Base Rate Tranches.
Section 2.10PAYMENTS; COMPUTATIONS.
(a) The Lender shall retain records of the advancing of the Loan and
all payments of principal and interest thereon, but the failure of the Lender to
do so shall not relieve the Borrower of its liability for the payment thereof.
Such records shall be conclusive and binding regarding the outstanding principal
amount of the Loan and the accrued but unpaid interest thereon, absent manifest
error.
(b) All payments made by or on behalf of the Borrower under this
Agreement and the Note shall be made by wire transfer in immediately available
funds before 11:00 a.m. (Houston, Texas Time) on the date such payment is
required to be made to an account located in New York directed by the Lender
from time to time in writing. Any payment received by the Lender after such time
shall be considered for all purposes, including the calculation of interest, as
having been made on the next following Business Day. All payments required to be
made by the Borrower shall be made without any counterclaim, offset, abatement,
withholding, or reduction whatsoever.
(c) Whenever any payment under this Agreement or the Note shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day. Such extension of time shall be included in
the computation of the payment of interest, fees, or such other amount due on
the outstanding amount. If the time for payment for an amount payable is not
specified under this Agreement or the Note, the payment shall be due and payable
on the date which is five (5) Business Days after the date the Lender demands
payment therefor.
(d) If the method of computing any interest or fees is not otherwise
set forth in this Agreement or the Note, such interest shall be computed based
upon the applicable per annum rate set forth in this Agreement or the Note
computed on the basis of a 365/366 day year, as applicable, for the actual
number of days elapsed, except for interest rates bases on LIBOR which shall be
computed on the basis of a 360 day year for the actual number of days elapsed.
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(e) If the Borrower fails to pay when due any amount payable under
this Agreement or any other Loan Document, including principal, interest, fees,
reimbursements, and indemnifications, such amount not paid when due shall bear
interest beginning on the date due until paid in full at the Default Rate.
Section 2.11TAXES.
(a) Any and all payments by the Borrower to the Lender shall be made
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges, or withholdings, and all liabilities with
respect thereto, excluding taxes imposed on the Lender's income, franchise and
other taxes imposed on the Lender by any jurisdiction of which the Lender is or
is deemed to be a citizen or resident or any political subdivision of such
jurisdiction (all such nonexcluded taxes, levies, imposts, deductions, charges,
withholdings, and liabilities being hereinafter referred to as "Taxes"). If the
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable to the Lender, (i) the sum payable shall be increased as may be
necessary so that, after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.11), the Lender
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions, and (iii)
the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) The Borrower agrees to pay and hold the Lender harmless from and
against any and all present and future stamp and other similar taxes with
respect to this Agreement and the Loan Documents and save the Lender harmless
from and against any and all liabilities with respect to or resulting from any
delay or omission to pay such taxes, and indemnify the Lender for the full
amount of such taxes paid by the Lender, whether or not such taxes were
correctly or legally asserted.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS PRECEDENT TO THE LOAN. The Lender's obligation to
make the Loan is subject to the satisfaction by the Borrower or waiver in
writing by the Lender of the following conditions precedent:
(a) DOCUMENTS. The Borrower shall have delivered or shall have
caused to be delivered the following documents and other items in each case
fully executed and delivered by the parties thereto where applicable and in each
case in form and substance satisfactory to the Lender:
(i) this Agreement, the Note, the Guaranty, and the
Contribution Agreement;
(ii) copies, each certified by the Secretary or an Assistant
Secretary of each Loan Party (A) of the resolutions of the Board of Directors of
each Loan Party approving the Loan Documents to which it is a party and (B) of
the articles or certificate of incorporation and bylaws of
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each Person and all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to the Loan Documents to which it
is a party;
(iii) a certificate certified by the Secretary or an Assistant
Secretary of each Loan Party dated as of the date of this Agreement certifying
as of the date of this Agreement the names and true signatures of officers of
each Loan Party authorized to sign the Loan Documents to which it is a party;
(iv) an opinion of Gardere Wynne Sewell & Riggs LLP as counsel
for the Borrower, substantially in the form of the attached EXHIBIT E and
covering other matters as the Lender, may request;
(v) copies of the executed Comerica Loan Agreement with all
amendments and supplements thereto (which shall be in form and substance
reasonably satisfactory to the Lender), certified by the Secretary or an
Assistant Secretary of the Borrower as being true and correct copies of such
documents;
(vi) a duly completed Borrowing Request executed by a
Responsible Officer of the Borrower; and
(vii) such other documents, governmental certificates, agreements,
and lien searches as the Lender may request.
(b) ACQUISITION.
(i) The Lender shall have received true copies of the executed
Purchase Agreement certified by the Secretary or an Assistant Secretary of the
Borrower (A) as being true and correct copies of such documents, (B) as having
been duly authorized by the Board of Directors of the Borrower, and (C) as
having been duly executed and delivered by the Borrower.
(ii) The Lender shall have received evidence satisfactory to
the Lender of the consummation of the transactions contemplated by the
Acquisition Documents, substantially as described therein and in conformity with
applicable law and on terms and conditions satisfactory to the Lender. The
Purchase Agreement and all other Acquisition Documents shall be valid, binding
and enforceable against the parties thereto in accordance with their terms,
shall be in form and substance reasonably satisfactory to the Lender and none of
the principal terms or conditions to closing of any party set forth in the
Purchase Agreement or any other Acquisition Document shall have been, without
the prior written consent of the Lender, amended or supplemented, and all
principal conditions stated therein shall have been satisfied without waiver.
(c) PAYMENT OF FEES. Contemporaneously with the initial Advance, the
Borrower shall pay to the Lender the structuring fee required to be paid by
Section 2.4.
(d) REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in the Loan Documents shall be true and correct in all
material respects as of the date of the Loan (after
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giving effect to the Loan), and no Default or Event of Default shall have
occurred and be continuing. The Borrower agrees that upon the making of the Loan
hereunder, the representations and warranties contained in each Loan Document
shall have been to be made as of the date the Loan is made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
Section 4.1 CORPORATE EXISTENCE. The Borrower and each Subsidiary (a) is
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of organization; (b) has all requisite corporate or partnership, as
applicable, power and authority to own its assets and carry on its business as
now being or as proposed to be conducted; and (c) is qualified to do business in
all jurisdictions in which the nature of its business makes such qualification
necessary and where failure to so qualify would have a material adverse effect
on its business, condition (financial or otherwise), operations, prospects, or
properties. The Borrower has the corporate power and authority to execute,
deliver, and perform its obligations under this Agreement and the other Loan
Documents to which it is or may become a party.
Section 4.2 FINANCIAL STATEMENTS. The Borrower has delivered to the Lender
audited consolidated financial statements of the Borrower and the Subsidiaries
as at and for the fiscal year ended December 31, 1997, and unaudited
consolidated financial statements of the Borrower and the Subsidiaries for the
three (3)-month period ended March 31, 1998. Such financial statements are true
and correct, have been prepared in accordance with GAAP, and fairly and
accurately present, on a consolidated basis, the financial condition of the
Borrower and the Subsidiaries as of the respective dates indicated therein and
the results of operations for the respective periods indicated therein. Neither
the Borrower nor any of the Subsidiaries has any material contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments, or
unrealized or anticipated losses from any unfavorable commitments except as
referred to or reflected in such financial statements. There has been no
material adverse change in the business, condition (financial or otherwise),
operations, prospects, or properties of the Borrower or any of the Subsidiaries
since the effective date of the most recent financial statements referred to in
this section.
Section 4.3 CORPORATE ACTION; NO BREACH. The execution, delivery, and
performance by the Borrower of this Agreement and the other Loan Documents to
which the Borrower or any Guarantor is or may become a party and compliance with
the terms and provisions hereof and thereof have been duly authorized by all
requisite action on the part of such Person and do not and will not (a) violate
or conflict with, or result in a breach of, or require any consent under (i) the
organizational or governing documents of the Borrower or any of the
Subsidiaries, (ii) any applicable law, rule, or regulation or any order, writ,
injunction, or decree of any Governmental Authority or arbitrator, or (iii) any
agreement or instrument to which the Borrower or any of the Subsidiaries is a
party or by which any of them or any of their property is bound or subject, or
(b) constitute a default under any such agreement or instrument, or result in
the creation or imposition of any Lien (except as provided in Article V) upon
any of the revenues or assets of the Borrower or any Subsidiary.
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Section 4.4 OPERATION OF BUSINESS. The Borrower and each of the
Subsidiaries possess all licenses, permits, franchises, patents, copyrights,
trademarks, and tradenames, or rights thereto, necessary to conduct their
respective businesses substantially as now conducted and as presently proposed
to be conducted, and the Borrower and each of the Subsidiaries are not in
violation of any valid rights of others with respect to any of the foregoing.
Section 4.5 LITIGATION AND JUDGMENTS. Except as disclosed on SCHEDULE 4.5
hereto, there is no action, suit, investigation, or proceeding before or by any
Governmental Authority or arbitrator pending, or to the knowledge of the
Borrower, threatened against or affecting the Borrower or any Subsidiary, that
would, if adversely determined, have a material adverse effect on the business,
condition (financial or otherwise), operations, prospects, or properties of the
Borrower or any Subsidiary or the ability of the Borrower to pay and perform the
Obligations. There are no outstanding judgments against the Borrower or any
Subsidiary.
Section 4.6 RIGHTS IN PROPERTIES; LIENS. The Borrower and each Subsidiary
have good and indefeasible title to or valid leasehold interests in their
respective properties and assets, real and personal, including the properties,
assets, and leasehold interests reflected in the financial statements described
in Section 4.2, and none of the properties, assets, or leasehold interests of
the Borrower or any Subsidiary is subject to any Lien, except as permitted by
Section 6.2.
Section 4.7 ENFORCEABILITY. This Agreement constitutes, and the other Loan
Documents to which the Borrower is party, when delivered, shall constitute the
legal, valid, and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms, except as limited by
bankruptcy, insolvency, or other laws of general application relating to the
enforcement of creditors' rights.
Section 4.8 APPROVALS. No authorization, approval, or consent of, and no
filing or registration with, any Governmental Authority or third party is or
will be necessary for the execution, delivery, or performance by the Borrower of
this Agreement and the other Loan Documents to which the Borrower is or may
become a party or for the validity or enforceability thereof.
Section 4.9 DEBT. The Borrower and the Subsidiaries have no Debt or
Contingent Obligations, except as disclosed on SCHEDULE 4.9 hereto.
Section 4.10 TAXES. The Borrower and each Subsidiary have filed all tax
returns (federal, state, and local) required to be filed, including all income,
franchise, employment, property, and sales tax returns, and have paid all of
their respective liabilities for taxes, assessments, governmental charges, and
other levies that are due and payable. The Borrower knows of no pending
investigation of the Borrower or any Subsidiary by any taxing authority or of
any pending but unassessed tax liability of the Borrower or any Subsidiary.
Section 4.11 USE OF PROCEEDS; MARGIN SECURITIES. Neither the Borrower nor
any Subsidiary is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations G, T, U, or X of
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the Board of Governors of the Federal Reserve System), and no part of the
proceeds of any Advance will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying margin stock.
Section 4.12 ERISA. The Borrower and each Subsidiary are in compliance in
all material respects with all applicable provisions of ERISA. Neither a
Reportable Event nor a Prohibited Transaction has occurred and is continuing
with respect to any Plan. No notice of intent to terminate a Plan has been
filed, nor has any Plan been terminated. No circumstances exist which constitute
grounds entitling the PBGC to institute proceedings to terminate, or appoint a
trustee to administer, a Plan, nor has the PBGC instituted any such proceedings.
Neither the Borrower nor any ERISA Affiliate has completely or partially
withdrawn from a Multiemployer Plan. The Borrower and each ERISA Affiliate have
met their minimum funding requirements under ERISA with respect to all of their
Plans, and the present value of all vested benefits under each Plan do not
exceed the fair market value of all Plan assets allocable to such benefits, as
determined on the most recent valuation date of the Plan and in accordance with
ERISA. Neither the Borrower nor any ERISA Affiliate has incurred any liability
to the PBGC under ERISA.
Section 4.13 DISCLOSURE. No statement, information, report,
representation, or warranty made by the Borrower in this Agreement or in any
other Loan Document or furnished to the Lender or any Lender in connection with
this Agreement or any transaction contemplated hereby contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements herein or therein not misleading. All projections,
estimates, and pro forma financial information furnished by the Borrower
including the report listed on the attached SCHEDULE 4.13 were prepared on the
basis of assumptions, data, information, tests, or conditions believed to be
reasonable at the time such projections, estimates, and pro forma financial
information were furnished. There is no fact known to the Borrower which has a
material adverse effect, or which might in the future have a material adverse
effect, on the business, condition (financial or otherwise), operations,
prospects, or properties of the Borrower or any Subsidiary that has not been
disclosed in writing to the Lender.
Section 4.14 SUBSIDIARIES. The Borrower has no Subsidiaries other than
those listed on SCHEDULE 4.14 hereto, and SCHEDULE 4.14 sets forth the
jurisdiction of organization of each Subsidiary, the percentage of the
Borrower's ownership of the outstanding voting stock of each Subsidiary, and all
locations which are leased or mortgaged to a Person other than Lender where
inventory of the Borrower or any Subsidiary is located complete with the names
and addresses of such landlords and mortgagees. All of the outstanding capital
stock of each Subsidiary has been validly issued, is fully paid, and is
nonassessable. None of the Inactive Subsidiaries has any assets or is conducting
any business.
Section 4.15 AGREEMENTS. Neither the Borrower nor any Subsidiary is a
party to any indenture, loan, or credit agreement, or to any lease or other
agreement or instrument, or subject to any charter or corporate restriction
which could have a material adverse effect on the business, condition (financial
or otherwise), operations, prospects, or properties of the Borrower or any
Subsidiary, or the ability of the Borrower to pay and perform its obligations
under the Loan Documents to which it is a party or the ability of any Subsidiary
to pay dividends (directly or through another Subsidiary) to the Borrower.
Neither the Borrower nor any Subsidiary is in default in any
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respect in the performance, observance, or fulfillment of any of the
obligations, covenants, or conditions contained in any agreement or instrument
material to its business to which it is a party.
Section 4.16 COMPLIANCE WITH LAWS. Neither the Borrower nor any Subsidiary
is in violation in any material respect of any law, rule, regulation, order, or
decree of any Governmental Authority or arbitrator.
Section 4.17 INVESTMENT COMPANY ACT. Neither the Borrower nor any
Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
Section 4.18 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower nor
any Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" or a "public utility" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 4.19 ENVIRONMENTAL MATTERS. Except as disclosed on SCHEDULE 4.19
hereto:
(a) The Borrower, each Subsidiary, and all of their respective
properties, assets, and operations are in full compliance with all
Environmental Laws except for non-compliances which could not be
reasonably expected to result in a Material Adverse Effect. The Borrower
is not aware of, nor has the Borrower received notice of, any past,
present, or future conditions, events, activities, practices, or incidents
which may interfere with or prevent the compliance or continued compliance
of the Borrower and the Subsidiaries with all Environmental Laws except
for non-compliances which could not be reasonably expected to result in a
Material Adverse Effect;
(b) The Borrower and each Subsidiary have obtained all permits,
licenses, and authorizations that are required under applicable
Environmental Laws, and all such permits are in good standing and the
Borrower and the Subsidiaries are in compliance with all of the terms and
conditions of such permits;
(c) No Hazardous Materials exist on, about, or within or have been
used, generated, stored, transported, disposed of on, or Released from any
of the properties or assets of the Borrower or any Subsidiary in violation
of applicable Environmental Laws. The use which the Borrower and the
Subsidiaries make and intend to make of their respective properties and
assets will not result in the use, generation, storage, transportation,
accumulation, disposal, or Release of any Hazardous Material on, in, or
from any of their properties or assets in violation of applicable
Environmental Laws;
(d) Neither the Borrower nor any of the Subsidiaries nor any of
their respective currently or previously owned or leased properties or
operations is subject to any outstanding or, to the best of its knowledge,
threatened order from or agreement with any Governmental Authority or
other Person or subject to any judicial or docketed administrative
proceeding with respect to (i) failure to comply with Environmental Laws,
(ii) Remedial Action, or (iii) any Environmental Liabilities arising from
a Release or threatened Release;
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(e) There are no conditions or circumstances associated with the
currently or previously owned or leased properties or operations of the
Borrower or any of the Subsidiaries that could reasonably be expected to
give rise to any material Environmental Liabilities;
(f) Neither the Borrower nor any of the Subsidiaries is a treatment,
storage, or disposal facility requiring a permit under the Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6901 ET SEQ., regulations
thereunder or any comparable provision of state law. The Borrower and the
Subsidiaries are in compliance with all applicable financial
responsibility requirements of all Environmental Laws;
(g) Neither the Borrower nor any of the Subsidiaries has filed or
failed to file any notice required under applicable Environmental Law
reporting a Release; and
(h) No Lien arising under any Environmental Law has attached to any
property or revenues of the Borrower or the Subsidiaries.
Section 4.20 YEAR 2000 COMPLIANCE. Any reprogramming required to permit
the proper functioning, in and following the year 2000, of (i) the Borrower's
and the Subsidiaries' computer systems and (ii) equipment containing embedded
microchips (including systems and equipment supplied by others or with which
Borrower's or the Subsidiaries' systems interface) and the testing of all such
systems and equipment, as so reprogrammed, will be completed by January 1, 1999.
The cost to the Borrower and the Subsidiaries of such reprogramming and testing
and of the reasonably foreseeable consequences of year 2000 to the Borrower and
the Subsidiaries (including reprogramming errors and the failure of others'
systems or equipment) will not result in a Default or Event of Default or
materially adversely affect the business, financial position or results of
operations of the Borrower or the Subsidiaries. Except for such of the
reprogramming referred to in the preceding sentence as may be necessary, the
computer and management information systems of the Borrower and the Subsidiaries
are and, with ordinary course upgrading and maintenance, will continue to be,
sufficient to permit the Borrower and the Subsidiaries to conduct their
respective businesses without any material adverse effect on the business,
financial position or results of operations of the Borrower or the Subsidiaries.
Section 4.21 ACQUISITION. Contemporaneously with the funding of the
initial Advance to the Borrower (i) the Acquisition shall have been consummated
in accordance with (i) the terms and conditions of the Acquisition Documents and
(ii) all applicable laws. The Borrower has delivered to the Lender true, correct
and complete copies of the Purchase Agreement. There has been no amendment,
modification, waiver, or termination of, or supplement to, the conditions or
terms of the Purchase Agreement (including any conditions to closing), except
for immaterial amendments, modifications, and supplements or as disclosed to and
approved by the Lender.
Section 4.22 COMERICA LOAN AGREEMENT. The Borrower has delivered to the
Lender true, correct and complete copies of the Comerica Loan Agreement. There
has been no amendment, modification, waiver, or termination of, or supplement
to, the Comerica Loan Agreement.
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ARTICLE V
AFFIRMATIVE COVENANTS
From and after the Closing Date and until all of the Loan Obligations
shall have been paid in full and the commitments of the Lender under this
Agreement and each other Loan Document have been terminated, the Borrower shall,
and shall cause each of the Subsidiaries to comply with each of the following
covenants and conditions as applicable:
Section 5.1 USE OF PROCEEDS.
(a) The proceeds of the Loan shall be used by the Borrower to
consummate the Acquisition.
(b) The Borrower shall not, directly or indirectly, use any part of
the proceeds of the Loan for the purpose of purchasing or carrying any margin
stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or to extend credit to any Person for the purpose of
purchasing or carrying any such margin stock, or for any purpose which violates,
or is inconsistent with, Regulation X of such Board of Governors.
Section 5.2 REPORTING REQUIREMENTS. The Borrower will furnish to the
Lender:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any
event within ninety (90) days after the end of each fiscal year of the
Borrower, beginning with the fiscal year ending December 31, 1998, (i) a
copy of the annual audit report of the Borrower and the Subsidiaries for
such fiscal year containing, on a consolidated and consolidating basis,
balance sheets and statements of income, retained earnings, and cash flow
as at the end of such fiscal year and for the 12-month period then ended,
in each case setting forth in comparative form the figures for the
preceding fiscal year, all in reasonable detail and audited and certified
by Deloitte & Touche, or other independent certified public accountants of
recognized standing acceptable to the Lender, to the effect that such
report has been prepared in accordance with GAAP; (ii) the details of
consolidation for the balance sheets and statements of income; and (iii) a
certificate of such independent certified public accountants to the Lender
(A) stating that to their knowledge no Default has occurred and is
continuing, or if in their opinion a Default has occurred and is
continuing, a statement as to the nature thereof, and (B) confirming the
calculations set forth in the officer's certificate delivered
simultaneously therewith;
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and in any
event within forty-five (45) days after the end of each of the quarters of
each fiscal year of the Borrower, a copy of an unaudited financial report
of the Borrower and the Subsidiaries as of the end of such fiscal quarter
and for the portion of the fiscal year then ended, containing, on a
consolidated and consolidating basis, balance sheets and statements of
income, retained earnings (consolidated only), and cash flow (consolidated
only), in each case setting forth in comparative form the figures for the
corresponding period of the preceding fiscal year, all in reasonable
detail certified by the chief financial officer of the Borrower to have
been prepared
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in accordance with GAAP and to fairly and accurately present (subject to
year-end audit adjustments) the financial condition and results of
operations of the Borrower and the Subsidiaries, on a consolidated and
consolidating basis, at the date and for the periods indicated therein;
(c) CERTIFICATE OF NO DEFAULT. Concurrently with the delivery of
each of the financial statements referred to in subsections 8.1(a) and
8.1(b), a Compliance Certificate executed by a Responsible Officer of the
Borrower;
(d) MANAGEMENT LETTERS. Promptly upon receipt thereof, a copy of any
management letter or written report submitted to the Borrower or any
Subsidiary by independent certified public accountants with respect to the
business, condition (financial or otherwise), operations, prospects, or
properties of the Borrower or any Subsidiary;
(e) NOTICE OF LITIGATION. Promptly after the commencement thereof,
notice of all actions, suits, and proceedings before any Governmental
Authority or arbitrator affecting the Borrower or any Subsidiary which, if
determined adversely to the Borrower or such Subsidiary, could have a
material adverse effect on the business, condition (financial or
otherwise), operations, prospects, or properties of the Borrower or such
Subsidiary;
(f) NOTICE OF DEFAULT. As soon as possible and in any event within
five (5) days after the occurrence of each Default or Event of Default, a
written notice setting forth the details of such Default and the action
that the Borrower has taken and proposes to take with respect thereto;
(g) ERISA REPORTS. Promptly after the filing or receipt thereof,
copies of all reports, including annual reports, and notices which the
Borrower or any Subsidiary files with or receives from the PBGC or the
U.S. Department of Labor under ERISA; and as soon as possible and in any
event within five (5) days after the Borrower or any Subsidiary knows or
has reason to know that any Reportable Event or Prohibited Transaction has
occurred with respect to any Plan or that the PBGC or the Borrower or any
Subsidiary has instituted or will institute proceedings under Title IV of
ERISA to terminate any Plan, a certificate of the chief financial officer
of the Borrower setting forth the details as to such Reportable Event or
Prohibited Transaction or Plan termination and the action that the
Borrower proposes to take with respect thereto;
(h) REPORTS TO OTHER CREDITORS. Promptly after the furnishing
thereof, copies of any statement or report furnished to any other party
pursuant to the terms of any indenture, loan, or credit or similar
agreement and not otherwise required to be furnished to the Lender
pursuant to any other clause of this section;
(i) NOTICE OF MATERIAL ADVERSE EFFECT. As soon as possible and in
any event within five (5) days after the occurrence thereof, written
notice of any matter that could have a Material Adverse Effect.
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(j) PROXY STATEMENTS, ETC. As soon as available and in any event
within five (5) days of being sent to its shareholders or filed with the
Securities and Exchange Commission or any successor agency, one copy of
each financial statement, report, notice or proxy statement sent by the
Borrower or any Subsidiary to its stockholders generally, one copy of all
press releases and one copy of each regular, periodic or special report
(including Forms 10- K, 10-Q and 8K), registration statement, or
prospectus filed by the Borrower or any Subsidiary with any securities
exchange or the Securities and Exchange Commission or any successor
agency;
(k) GENERAL INFORMATION. Promptly, such other information concerning
the Borrower, or any Subsidiary, or any Affiliate as the Lender may from
time to time reasonably request.
Section 5.3 MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS. The Borrower
will preserve and maintain, and will cause each Subsidiary to preserve and
maintain, its corporate or partnership, as applicable, existence and all of its
leases, privileges, licenses, permits, franchises, qualifications, and rights
that are necessary or desirable in the ordinary conduct of its business. The
Borrower will conduct, and will cause each Subsidiary to conduct, its business
in an orderly and efficient manner in accordance with good business practices.
Section 5.4 MAINTENANCE OF PROPERTIES. The Borrower will maintain, keep,
and preserve, and cause each Subsidiary to maintain, keep, and preserve, all of
its properties (tangible and intangible) necessary or useful in the proper
conduct of its business in good working order and condition.
Section 5.5 TAXES AND CLAIMS. The Borrower will pay or discharge, and will
cause each Subsidiary to pay or discharge, at or before maturity or before
becoming delinquent (a) all taxes, levies, assessments, and governmental charges
imposed on it or its income or profits or any of its property, and (b) all
lawful claims for labor, material, and supplies, which, if unpaid, might become
a Lien upon any of its property; PROVIDED, however, that neither the Borrower
nor any Subsidiary shall be required to pay or discharge any tax, levy,
assessment, or governmental charge which is being contested in good faith by
appropriate proceedings diligently pursued, and for which adequate reserves have
been established.
Section 5.6 INSURANCE. The Borrower will maintain, and will cause each of
the Subsidiaries to maintain, insurance with financially sound and reputable
insurance companies in such amounts and covering such risks as is usually
carried by corporations engaged in similar businesses and owning similar
properties in the same general areas in which the Borrower and the Subsidiaries
operate, provided that in any event the Borrower will maintain and cause each
Subsidiary to maintain workmen's compensation insurance, property insurance,
comprehensive general liability insurance, and products liability insurance
reasonably satisfactory to the Lender.
Section 5.7 INSPECTION RIGHTS. At any reasonable time and from time to
time, the Borrower will permit, and will cause each Subsidiary to permit,
representatives of the Lender to examine, copy, and make extracts from its books
and records, to visit and inspect its properties, and to discuss its
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business, operations, and financial condition with its officers, employees, and
independent certified public accountants.
Section 5.8 KEEPING BOOKS AND RECORDS. The Borrower will maintain, and
will cause each Subsidiary to maintain, proper books of record and account in
which full, true, and correct entries in conformity with GAAP shall be made of
all dealings and transactions in relation to its business and activities.
Section 5.9 SUBSIDIARY GUARANTIES. The Borrower shall cause each
Subsidiary (other than any Inactive Subsidiary) in existence as of the date
hereof to execute and deliver the Guaranty and the Contribution Agreement on the
date hereof. In addition, the Borrower shall cause each Subsidiary formed or
acquired after the date hereof (including United Wellhead), within fifteen (15)
days after being organized or acquired, as the case may be, to join in the
execution of the Guaranty and the Contribution Agreement and deliver same to the
Lender. In connection with the foregoing, the Borrower shall provide corporate
documentation and opinion letters reasonably satisfactory to the Lender
reflecting the corporate status of such new Subsidiary and the enforceability of
the Guaranty and the Contribution Agreement.
Section 5.10 COMPLIANCE WITH LAWS. The Borrower will comply, and will
cause each Subsidiary to comply, in all material respects with all applicable
laws, rules, regulations, orders, and decrees of any Governmental Authority or
arbitrator.
Section 5.11 COMPLIANCE WITH AGREEMENTS. The Borrower will comply, and
will cause each Subsidiary to comply, in all material respects with all
agreements, contracts, and instruments binding on it or affecting its properties
or business.
Section 5.12 FURTHER ASSURANCES. The Borrower will, and will cause each
Subsidiary to, execute and deliver such further agreements and instruments and
take such further action as may be requested by the Lender to carry out the
provisions and purposes of this Agreement and the Loan Documents.
Section 5.13 ERISA. The Borrower will comply, and will cause each
Subsidiary to comply, with all minimum funding requirements, and all other
material requirements, of ERISA, if applicable, so as not to give rise to any
liability thereunder.
Section 5.14 YEAR 2000 COMPLIANT. The Borrower shall perform all acts
reasonably necessary to ensure that (i) the Borrower and the Subsidiaries and
any business in which the Borrower or the Subsidiaries hold a substantial
interest, and (ii) all customers, suppliers and vendors that are material to the
Borrower's or the Subsidiaries' businesses, become Year 2000 Compliant in a
timely manner. Such acts shall include, without limitation, performing a
comprehensive review and assessment of all of the Borrower's and the
Subsidiaries' systems and adopting a detailed plan, with itemized budget, for
the remediation, monitoring and testing of such systems. As used in this
paragraph, "Year 2000 Compliant" shall mean, in regard to any entity, that all
software, hardware, firmware, equipment, fixtures, goods or systems utilized by
or material to the business operations or financial condition of such entity,
will properly perform date-sensitive functions before, during and
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after the year 2000. The Borrower shall, and shall cause the Subsidiaries to,
immediately upon request, provide to the Lender such certifications or other
evidence of Borrower's compliance with the terms of this paragraph as the Lender
may from time to time require.
Section 5.15 NEW HELLER FINANCING. The Borrower shall provide to the
Lender final execution copies for the Lender's approval, prior to the execution
thereof by the Borrower or any Subsidiary party thereto, of the loan documents
in connection the proposed financing by Heller Financial, Inc. of the Kirsch
H.C. acquisition and shall not close such transaction without receiving the
Lender's approval.
ARTICLE VI
NEGATIVE COVENANTS
From and after the Closing Date and until all of the Loan Obligations
shall have been paid in full and the commitments of the Lender under this
Agreement and each other Loan Document have been terminated, the Borrower shall,
and shall cause each of the Subsidiaries to comply with each of the following
comments and conditions as applicable:
Section 6.1 DEBT. The Borrower will not incur, create, assume, or permit
to exist, and will not permit any Subsidiary to incur, create, assume, or permit
to exist, any Debt or Contingent Obligation, except;
(a) Debt to the Lender pursuant to the Loan Documents;
(b) Debt owed pursuant to the Comerica Loan Documents;
(c) Existing Debt described on SCHEDULE 4.9 hereto;
(d) Debt not to exceed Seven Million Five Hundred Thousand and
No/100 Dollars ($7,500,000) to Heller Financial, Inc. to the extent the
terms and conditions of such loan documents have been preapproved by the
Lender;
(e) Contingent Obligations consisting of endorsements for collection
or deposit in the ordinary course of business;
(f) Contingent Obligations of the Company and the Subsidiaries
existing as of the date hereof and listed on SCHEDULE 4.14 hereto; and
(g) Other Debt not covered in Sections 6.1(a) through (f) above not
to exceed an aggregate amount of Two Million and No/100 Dollars
($2,000,000.00) during the term hereof.
Section 6.2 LIMITATION ON LIENS. The Borrower will not incur, create,
assume, or permit to exist, and will not permit any Subsidiary to incur, create,
assume, or permit to exist, any Lien upon
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any of its property, assets, or revenues, whether now owned or hereafter
acquired, except the following Permitted Liens (as hereinafter called):
(a) Liens disclosed on SCHEDULE 6.2 hereto;
(b) Liens securing obligations arising under the Comerica Loan
Documents;
(c) Encumbrances consisting of minor easements, zoning restrictions,
or other restrictions on the use of real property that do not
(individually or in the aggregate) materially affect the value of the
assets encumbered thereby or materially impair the ability of the Borrower
or the Subsidiaries to use such assets in their respective businesses, and
none of which is violated in any material respect by existing or proposed
structures or land use;
(d) Liens for taxes, assessments, or other governmental charges
which are not delinquent or which are being contested in good faith and
for which adequate reserves have been established;
(e) Liens of mechanics, materialmen, warehousemen, carriers, or
other similar statutory Liens securing obligations that are not yet due
and are incurred in the ordinary course of business; and
(f) Liens resulting from good faith deposits to secure payments of
workmen's compensation or other social security programs or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, contracts (other than for payment of Debt), or leases made in the
ordinary course of business.
Section 6.3 MERGERS, ETC. The Borrower will not, and will not permit any
Subsidiary to, become a party to a merger or consolidation, or purchase or
otherwise acquire all or any part of the business or assets of any Person or any
shares or other evidence of beneficial ownership of any Person, or wind-up,
dissolve, or liquidate itself except that (i) acquisitions (but not mergers or
consolidations) aggregating during the term hereof of not more than Seven
Million Five Hundred and No/100 Dollars ($7,500,000.00) shall be permitted,
provided (A) the Borrower gives the Lender ten (10) Business Days' prior notice
of any proposed acquisition and (B) no acquisition shall be permitted if any
Default is continuing or would reasonably be expected to result from such
acquisition and (ii) Industrial Holdings Three, Inc. may merge into United
Wellhead with United Wellhead becoming a wholly-owned subsidiary of the
Borrower. The Borrower shall not, and will not permit any Subsidiary to, create
any Subsidiary except for Subsidiary unless the such new Subsidiary is wholly
owned directly or indirectly wholly owned by the Borrower.
Section 6.4 RESTRICTED PAYMENTS. The Borrower will not declare or pay any
dividends or make any other payment or distribution (whether in cash, property,
or obligations) on account of its capital stock, or redeem, purchase, retire, or
otherwise acquire any of its capital stock, or permit any of the Subsidiaries to
purchase or otherwise acquire any capital stock of the Borrower or another
Subsidiary, or set apart any money for a sinking or other analogous fund for any
dividend or other
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distribution on its capital stock or for any redemption, purchase, retirement,
or other acquisition of any of its capital stock.
Section 6.5 INVESTMENTS. The Borrower will not make, and will not permit
any Subsidiary to make, any advance, loan, extension of credit, or capital
contribution to or investment in, or purchase or own, or permit any Subsidiary
to purchase or own, any stock, bonds, notes, debentures, or other securities of,
any Person, except:
(a) readily marketable direct obligations of the United States of
America or any agency thereof with maturities of one year or less from the
date of acquisition;
(b) fully insured certificates of deposit with maturities of one
year or less from the date of acquisition issued by any commercial bank
operating in the United States of America having capital and surplus in
excess of $50,000,000;
(c) commercial paper of a domestic issuer if at the time of purchase
such paper is rated in one of the two highest rating categories of
Standard and Poor's Corporation or Moody's Investors Service, Inc.;
(d) the investment in, and/or capital contribution to, in an
aggregate amount not to exceed Three Million and NO/100 Dollars
($3,000,000), a to be formed Person owned at least nineteen percent (19%)
by the Borrower which will in turn rent the operations and services of an
Italian company named Belleli Energy; provided that the terms, conditions,
and structure of such investment and transaction is acceptable to the
Lender in its sole discretion;
(e) the Borrower's existing investment in OF Acquisition, L.P.
Section 6.6 TRANSACTIONS WITH AFFILIATES. The Borrower will not enter
into, and will not permit any Subsidiary to enter into, any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate of the Borrower or such
Subsidiary, except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary than would
be obtained in a comparable arm's-length transaction with a Person not an
Affiliate of the Borrower or such Subsidiary.
Section 6.7 DISPOSITION OF ASSETS. The Borrower will not sell, lease,
assign, transfer, or otherwise dispose of any of its assets, or permit any
Subsidiary to do so with any of its assets, except dispositions of inventory in
the ordinary course of business and except for sales of excess or obsolete
equipment in the ordinary course of business not to exceed Two Hundred Fifty
Thousand and No/100 Dollars ($250,000.00) in the aggregate, in any calendar
year.
Section 6.8 SALE AND LEASEBACK. The Borrower will not enter into, and will
not permit any Subsidiary to enter into, any arrangement with any Person
pursuant to which it leases from such Person real or personal property that has
been or is to be sold or transferred, directly or indirectly, by it to such
Person.
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Section 6.9 PREPAYMENT OF DEBT. The Borrower will not prepay, and will not
permit any Subsidiary to prepay, any Debt, except (i) the Loan Obligations, (ii)
Debt arising pursuant to the Comerica Loan Documents, (iii) the Debt of Philform
owed to City Bank and Trust Company that is listed on SCHEDULE 4.9 hereto, (iv)
and Debt described in Section 6.1(d) in an aggregate amount to be prepaid
pursuant to this clause (iv) not to exceed Two Million and No/100 Dollars
($2,000,000), and (v) the Debt of Landreth owed to General Electric Capital
Corporation that is listed on SCHEDULE 4.9 hereto.
Section 6.10 NATURE OF BUSINESS. The Borrower will not, and will not
permit any Subsidiary to, engage in any business other than the businesses in
which they are engaged on the date hereof.
Section 6.11 ENVIRONMENTAL PROTECTION. The Borrower will not, and will not
permit any of the Subsidiaries to, (a) use (or permit any tenant to use) any of
their respective properties or assets for the handling, processing, storage,
transportation, or disposal of any Hazardous Material except in ordinary and
reasonable quantities in connection with prudent business practices and in
compliance with all applicable Environmental Law, (b) generate any Hazardous
Material, (c) conduct any activity that is likely to cause a Release or
threatened Release of any Hazardous Material, or (d) otherwise conduct any
activity or use any of their respective properties or assets in any manner that
is likely to violate any Environmental Law or create any Environmental
Liabilities for which the Borrower or any of the Subsidiaries would be
responsible which could reasonably be expected to result in a Material Adverse
Effect.
Section 6.12 ACCOUNTING. The Borrower will not, and will not permit any of
the Subsidiaries to, change its fiscal year or make any change (a) in accounting
treatment or reporting practices, except as required by GAAP and disclosed to
the Lender, or (b) in tax reporting treatment, except as required by law and
disclosed to the Lender.
Section 6.13 RESTRICTIONS ON DIVIDENDS OR PREPAYMENT. Neither the Borrower
nor any Subsidiary shall enter into any agreement or arrangement which (i) would
restrict the ability of any Subsidiary to pay dividends (directly or through
another Subsidiary) to the Borrower or (ii) expressly prohibits, or would
reasonably be expected to prohibit, prepayment of the entire principal amount of
the Loan.
ARTICLE VII
FINANCIAL COVENANTS
From and after the Closing Date and until all of the Loan Obligations
shall have been paid in full and the commitments of the Lender under this
Agreement and each other Loan Document have been terminated, the Borrower shall,
and shall cause each of the Subsidiaries to comply with each of the following
covenants and conditions as applicable:
Section 7.1 CURRENT RATIO. The Borrower will at all times maintain a
Current Ratio of not less than 1.25 to 1.0 tested quarterly at the end of each
fiscal quarter of the Borrower (calculated
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classifying principal amounts owed under the Comerica Loan Documents as short
term debt for the purposes of the Current Ratio).
Section 7.2 CONSOLIDATED NET WORTH. The Borrower will at all times
maintain Consolidated Net Worth in an amount not less than the sum of (a)
Forty-Five Million and No/100 Dollars ($45,000,000.00) plus (b) 75% of the
cumulative consolidated net income of the Borrower since March 31, 1998, for
each fiscal quarter of the Borrower in which the Borrower's consolidated net
income is positive plus (c) 100% of the net proceeds received by Borrower from
any sale or issuance of any equity securities of, or any other additions to
capital by (including any increases in equity of the Borrower or any Subsidiary
resulting from mergers, poolings, and acquisitions), the Borrower or the
Subsidiaries during each fiscal quarter ending on or after March 31, 1998.
Section 7.3 FUNDED DEBT/EBITDA RATIO. The Borrower will at all times
maintain a Funded Debt/EBITDA Ratio of not more than the ratios indicated below
tested at the end of each fiscal quarter of the Borrower for the rolling four
(4) quarter period then ended.
RATIO
Fiscal quarters ending on or before June 30, 1999 3.5 to 1.0
Fiscal quarters ending thereafter 3.0 to 1.0
Section 7.4 CASH FLOW COVERAGE RATIO. The Borrower will at all times
maintain a Cash Flow Coverage Ratio of not less than 1.25 to 1.0 tested
quarterly at the end of each fiscal quarter of the Borrower for the rolling four
(4) quarter period then ended.
Section 7.5 LEVERAGE RATIO. The Borrower will at all times maintain a
Leverage Ratio of not greater than 3.0 to 1.0.
Section 7.6 OPERATING LEASES. The Borrower will not incur, create, assume,
or permit to exist, and will not permit any Subsidiary to incur, create, assume,
or permit to exist, any liability for payments under any Operating Leases, which
would cause or be expected to cause the aggregate amount of payments to be made
by the Borrower and the Subsidiaries on a consolidated basis on account of
Operating Leases (including taxes, insurance, maintenance, and similar expenses
which the Borrower or any Subsidiary is obligated to pay under any such
Operating Lease) in any fiscal year of the Borrower to exceed Three Million and
No/100 Dollars ($3,000,000.00).
Section 7.7 CAPITAL EXPENDITURES. The Borrower will not make or incur, and
will not permit any Subsidiary to make or incur any Capital Expenditure that
would cause the aggregate amount of of Capital Expenditures of the Borrower and
the Subsidiaries to exceed Four Million and No/100 Dollars ($4,000,000) in any
calendar year.
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ARTICLE VIII
EVENTS OF DEFAULT
Section 8.1 EVENTS OF DEFAULT. If any of the following events ("EVENTS OF
DEFAULT") shall occur and be continuing:
(a) Any Loan Party shall fail to pay when due the Loan Obligations
or any part thereof (other than the payment of principal) and such failure
shall remain unremedied for three (3) days or any Loan Party shall fail to
pay when due any principal amount owed under the Loan Documents.
(b) Any representation or warranty made or deemed made by any Loan
Party (or any of their respective officers) in any Loan Document or in any
certificate, report, notice, or financial statement furnished at any time
in connection with this Agreement shall be false, misleading, or erroneous
in any material respect when made or deemed to have been made.
(c) (i) The Borrower shall fail to perform, observe, or comply with
any covenant, agreement, or term contained in Section 5.1, Article VI, or
Article VII of this Agreement, or (ii) any Loan Party shall fail to
perform, observe, or comply with any other covenant, agreement, or term
contained in this Agreement or any other Loan Document (other than
covenants to pay the Loan Obligations) and such failure shall continue for
a period of five (5) days after notice thereof to the Borrower by the
Lender.
(d) Any Loan Party or any Subsidiary shall commence a voluntary
proceeding seeking liquidation, reorganization, or other relief with
respect to itself or its debts 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 a substantial part of its property or shall consent 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 shall make a
general assignment for the benefit of creditors or shall generally fail to
pay its debts as they become due or shall take any corporate action to
authorize any of the foregoing.
(e) An involuntary proceeding shall be commenced against the any
Loan Party or Subsidiary seeking liquidation, reorganization, or other
relief with respect to it or its debts 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
for it or a substantial part of its property, and such involuntary
proceeding shall remain undismissed and unstayed for a period of sixty
(60) days.
(f) Any Loan Party or any Subsidiary shall fail to discharge within
a period of thirty (30) days after the commencement thereof any
attachment, sequestration, or similar proceeding or proceedings involving
an aggregate amount in excess of One Hundred Thousand and No/100 Dollars
($100,000.00) against any of its assets or properties.
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(g) A final judgment or judgments for the payment of money in excess
of One Hundred Thousand and No/100 Dollars ($100,000.00) in the aggregate
shall be rendered by a court or courts against any Loan Party or any
Subsidiaries and the same shall not be discharged (or provision shall not
be made for such discharge), or a stay of execution thereof shall not be
procured, within thirty (30) days from the date of entry thereof and the
relevant Loan Party or Subsidiary Party shall not, within said period of
thirty (30) days, or such longer period during which execution of the same
shall have been stayed, appeal therefrom and cause the execution thereof
to be stayed during such appeal.
(h) Any Loan Party or any Subsidiary shall fail to pay when due any
principal of or interest on any Debt (other than the Loan Obligations), or
the maturity of any such Debt shall have been accelerated, or any such
Debt shall have been required to be prepaid prior to the stated maturity
thereof, or any event or condition shall have occurred or exist that
permits (or, with the giving of notice or lapse of time or both, would
permit) any holder or holders of such Debt or any Person acting on behalf
of such holder or holders to accelerate the maturity thereof or require
any such prepayment.
(i) This Agreement or any other Loan Document shall cease to be in
full force and effect or shall be declared null and void or the validity
or enforceability thereof shall be contested or challenged by any Loan
Party or any Subsidiary or any of their respective shareholders, or any
Loan Party or any Subsidiary shall deny that it has any further liability
or obligation under any of the Loan Documents.
(j) Any of the following events shall occur or exist with respect to
the Borrower or any ERISA Affiliate: (i) any Prohibited Transaction
involving any Plan; (ii) any Reportable Event with respect to any Plan;
(iii) the filing under Section 4041 of ERISA of a notice of intent to
terminate any Plan or the termination of any Plan; (iv) any event or
circumstance that might constitute grounds entitling the PBGC to institute
proceedings under Section 4042 of ERISA for the termination of, or for the
appointment of a trustee to administer, any Plan, or the institution by
the PBGC of any such proceedings; or (v) complete or partial withdrawal
under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
reorganization, insolvency, or termination of any Multiemployer Plan; and
in each case above, such event or condition, together with all other
events or conditions, if any, have subjected or could in the reasonable
opinion of the Lender subject the Borrower to any tax, penalty, or other
liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise (or any
combination thereof) which in the aggregate exceed or could reasonably be
expected to exceed One Hundred Thousand and No/100 Dollars ($100,000.00).
(k) After the Closing Date, any Person or two or more Persons acting
as a group (as defined in Section 13(d)(3) of the Securities Exchange Act
of 1934) shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 30% or more of the outstanding shares of voting
stock of the Borrower; or individuals who, as of the date hereof,
constitute the Board of Directors of the Borrower (the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board of
Directors of the Borrower; provided, however, that any
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individual becoming a director of the Borrower subsequent to the Closing
Date whose election, or nomination for election by the Borrower's's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board, shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption
of office occurs as a result of either an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Securities Exchange Act of 1934) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board of Directors of the Borrower; or the shall cease to
directly or indirectly own 100% of each class of stock or other equity
interests of Subsidiary.
(l) The Borrower or any of the Subsidiaries, or any of their
properties, revenues, or assets, shall become the subject of an order of
forfeiture, seizure, or divestiture (whether under RICO or otherwise) and
the same shall not have been discharged (or provisions shall not be made
for such discharge) within thirty (30) days from the date of entry
thereof.
(m) Any "Event of Default" or similar express occurrence shall exist
under any Comerica Loan Document.
Section 8.2 REMEDIES. Upon the occurrence of an Event of Default, and at
any time thereafter during the continuance of such Event of Default the Lender
may exercise one or more of the following remedies:
(a) If any Event of Default shall have occurred and be continuing,
the Lender, by notice to the Borrower, may terminate its obligation to make the
Loan and declare the aggregate outstanding principal amount of the Loan, all
accrued but unpaid interest thereon, and all other Loan Obligations to be
immediately due and payable, whereupon the same shall immediately become due and
payable;
(b) If any Event of Default pursuant to Section 8.1(d) or (e) shall
occur, the Lender's obligation to make the Loan shall immediately and
automatically terminate and the aggregate outstanding principal amount of the
Loan, all accrued but unpaid interest thereon, and all other Loan Obligations
shall immediately and automatically become due and payable, all without notice
thereof to the Borrower;
(c) The Lender may declare by written notice to the Borrower that
the Loan Obligations specified in such notice (including the outstanding
principal amount of the Loan and any past due interest thereon) shall bear
interest beginning on the date specified in such notice, which shall not be
earlier than the date of occurrence of such Event of Default, until paid in full
at the Default Rate, whereupon such Loan Obligations shall accrue interest at
such rate payable to the Lender upon demand;
(d) The Lender may, to the fullest extent permitted by law, set off
and apply any indebtedness owed by the Lender to the Borrower against any and
all of the obligations of the
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Borrower under the Loan Documents, irrespective of whether or not the Lender
shall have made any demand under the Loan Documents and although such
obligations may be unmatured;
(e) The Lender may take any and all actions permitted under the
other Loan Documents; or
(f) The Lender may take any and all actions permitted at law or in
equity to enforce the rights of the Lender under the Loan Documents.
In connection with the foregoing, and except for the notices provided for above,
the Borrower waives notice of any Default or Event of Default, notice of
nonpayment, presentment for payment, demand, protest, notice of intent to
accelerate, notice of acceleration, and all other notices.
Section 8.3 REMEDIES CUMULATIVE. The rights and remedies of the Lender
under the Loan Documents shall be cumulative and shall not exclude any other
rights and remedies of the Lender allowed by law with respect to any default
under the Loan Documents. Failure by the Lender to insist upon the strict
performance of any of the covenants and agreements of the Borrower therein set
forth or to exercise any rights or remedies upon default by the Borrower
thereunder shall not be considered or taken as a waiver or relinquishment for
the future of the right to insist upon and to enforce by appropriate remedy a
strict compliance by the Borrower with all of the covenants and conditions
thereof, or of the rights to exercise any such rights or remedies, if such
default by the Borrower be continued or repeated.
Section 8.4 NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In the event any
covenant or agreement contained in the Loan Documents should be breached by
either party and thereafter waived by the other party, such waiver shall be
limited to the particular breach so waived and shall not be deemed to waive any
other breach thereunder. No waiver shall be binding unless it is in writing and
signed by the party making such waiver. No course of dealing between the Lender
and the Borrower or any delay or omission on the part of the Lender in
exercising any rights hereunder or under the Loan Documents shall operate as a
waiver.
Section 8.5 EFFECT ON DISCONTINUANCE OF PROCEEDINGS. In case any
proceeding taken by the Lender under the Loan Documents on account of any Event
of Default shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Lender, then, and in every such case, to
the fullest extent permitted by law the Borrower and the Lender shall be
restored, respectively, to their former positions and rights thereunder, and all
rights, remedies, powers, and duties of the Lender shall continue as in effect
prior to the commencement of such proceedings.
Section 8.6 APPLICATION OF PAYMENTS. Prior to an Event of Default, all
payments made on the Loan Obligations shall be applied to the Loan Obligations
as directed by the Borrower, subject to the rules regarding the application of
payments to certain Loan Obligations provided for under this Agreement and the
other Loan Documents. Following the occurrence and during the continuation of an
Event of Default, all payments and collections shall be applied to the Loan
Obligations in the order determined by the Lender.
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ARTICLE IX
MISCELLANEOUS
Section 9.1 OBLIGATIONS ABSOLUTE. To the fullest extent permitted by law,
the obligations of the Borrower to the Lender hereunder shall be absolute,
unconditional and irrevocable and shall be performed strictly in accordance with
the terms of this Agreement under all circumstances whatsoever, including the
following circumstances: (i) any lack of validity or enforceability of any
portion of this Agreement or any other Loan Document; (ii) any amendment or
waiver of or any consent to departure from this Agreement or any other Loan
Document; (iii) the existence of any claim, setoff, or defense (other than the
defense that payment has been made to the Lender, or the obligations of the
Borrower to the Lender have otherwise been satisfied or discharged in full);
provided that nothing in this Section 9.1 shall prevent the assertion of any
such claim by separate suit or counterclaim; or (iv) any other circumstance or
happening whatsoever, whether or not similar to any of the foregoing.
Section 9.2 AMENDMENTS, ETC.
(a) No amendment, waiver, or other modification of any provision of
any Loan Document, nor consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Lender and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
(b) In the event that the Lender assigns, syndicates, or otherwise
transfers any portion of this Agreement and the Loan Documents to any other
Person, the Borrower agrees to amend the Loan Documents or execute successor
documents as reasonably requested by the Lender to reflect the transfer and any
division of rights created thereby and the Lender shall pay the respective costs
and expenses incurred in connection with such assignment or transfer.
Section 9.3 NOTICES. Unless otherwise specified, all notices and other
communications provided for between the Borrower and the Lender in the Loan
Documents shall be in writing, including telecopy, and delivered or transmitted
to the addresses set forth below, or to such other address as shall be
designated by the Borrower or the Lender in written notice to the other party.
Notice sent by telecopy shall be deemed to be given and received when receipt of
such transmission is acknowledged, and delivered notice shall be deemed to be
given and received when receipted for by, or actually received by, an authorized
officer of the Borrower or the Lender, as the case may be.
Borrower:
Industrial Holdings, Inc.
7135 Ardmore
Houston, Texas 77054
Attn: Mr. Robert E. Cone
Telephone: (713) 747-1025
Telecopier: (713) 749-9642
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Lender:
EnSerCo, L.L.C.
1400 Smith Street
Houston, Texas 77002
Attn: Donna Lowry
Telephone: (713) 853-1939
Telecopier: (713) 646-4039
with a copy to:
EnSerCo, L.L.C.
1400 Smith Street
Houston, Texas 77002
Attn: Tom Byargeon
Telephone: (713) 853-0650
Telecopier: (713) 646-3640
Section 9.4 COSTS, EXPENSES, AND INDEMNIFICATION.
(a) Except as provided in Section 9.2(b), the Borrower shall pay
directly or reimburse the Lender for all reasonable out-of-pocket third party
expenses of the Lender, including reasonable charges and disbursements of legal
counsel for the Lender, in connection with the amendment, modification, waiver,
or interpretation of the Loan Documents, and the preservation or enforcement of
any rights of the Lender under the Loan Documents. The amount and nature of any
expense of the Lender hereunder shall be fully established by a certificate of
any officer of the Lender absent manifest error. The provisions of this
paragraph shall survive any purported termination of this Agreement that does
not expressly reference this paragraph.
(b) The Borrower agrees to protect, defend, indemnify, and hold
harmless the Lender and its stockholders, directors, officers, employees,
agents, affiliates, successors, and assigns, and their respective stockholders,
directors, officers, employees, and agents (for the purposes of this Section
9.4, collectively, the "Indemnified Parties"), from and against all demands,
claims, actions, suits, damages, judgments, fines, penalties, liabilities, and
out-of-pocket costs and expenses, including reasonable costs of attorneys and
related costs of experts such as accountants (collectively, the "Indemnified
Liabilities"), actually incurred by any Indemnified Party which are related to
any litigation or proceeding relating to the Loan Documents or the transactions
contemplated thereunder, INCLUDING ANY INDEMNIFIED LIABILITIES CAUSED BY ANY
INDEMNIFIED PARTY'S OWN NEGLIGENCE, but not Indemnified Liabilities which are a
result of any Indemnified Party's gross negligence or willful misconduct. The
amount and nature of any indemnification claim under this Section shall be
presumptively established by a certificate from the applicable Indemnified
Party. The provisions of this paragraph shall survive any purported termination
of this Agreement that does not expressly reference this paragraph.
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Section 9.5 BINDING EFFECT; ASSIGNMENTS. This Agreement shall become
effective when it shall have been executed by the parties hereto and thereafter
shall be binding upon and inure to the benefit of the Borrower and the Lender
and their respective successors and assigns. The Borrower may not assign its
rights or delegate its duties under the Loan Documents. The Lender may assign
and participate its rights and delegate its duties under the Loan Documents
without the consent of the Borrower.
Section 9.6 TERMINATION. This Agreement shall continue in full force and
effect until the Lender's obligation to make Advances has terminated and the
Loan Obligations shall have been fully paid or otherwise discharged; provided
however that all obligations of the Borrower to indemnify the Lender and any
provision of this Agreement stated to survive the repayment in full of the Loan
Obligations shall survive such repayment, and shall survive the exercise by the
Lender of any remedy under the Loan Documents.
Section 9.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Section 9.8 CHOICE OF LAW. THE PARTIES AGREE THAT THIS AGREEMENT AND THE
NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES IN CONNECTION THEREWITH,
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
TEXAS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES.
Section 9.9 LIMITATION ON DAMAGES. IN NO EVENT SHALL ANY PARTY HERETO BE
LIABLE TO ANY OTHER PARTY HERETO FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL,
INCIDENTAL, PUNITIVE, OR EXEMPLARY DAMAGES, INCLUDING WITHOUT LIMITATION, LOST
PROFITS OR SAVINGS, REGARDLESS OF THE FORM OF ACTION GIVING RISE TO SUCH A CLAIM
FOR SUCH DAMAGES, WHETHER IN CONTRACT OR TORT, INCLUDING NEGLIGENCE, EVEN IF A
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN THE EVENT A PARTY
HERETO IS FOUND, IN SPITE OF THIS SECTION 9.9, TO BE LIABLE TO ANOTHER PARTY FOR
SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR EXEMPLARY DAMAGES,
THEN TO THE FULLEST EXTENT PERMITTED BY LAW; THE MAXIMUM LIMIT OF SUCH DAMAGES
IS AGREED TO BE $5,000.
Section 9.10 ARBITRATION. ALL CLAIMS AND MATTERS IN QUESTION ARISING OUT
OF THIS AGREEMENT OR THE RELATIONSHIP BETWEEN THE PARTIES CREATED BY THIS
AGREEMENT, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, SHALL BE RESOLVED BY
BINDING ARBITRATION PURSUANT TO THE FEDERAL ARBITRATION ACT. THE ARBITRATION
SHALL BE ADMINISTERED THE AMERICAN ARBITRATION ASSOCIATION ("AAA"). THERE SHALL
BE THREE ARBITRATORS. EACH PARTY SHALL DESIGNATE AN ARBITRATOR, WHO NEED NOT BE
NEUTRAL, WITHIN 30 DAYS OF RECEIVING NOTIFICATION OF THE FILING WITH THE AAA OF
A DEMAND
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FOR ARBITRATION. IF EITHER PARTY FAILS TO DESIGNATE AN ARBITRATOR WITHIN THE
TIME SPECIFIED OR THE TWO PARTIES' ARBITRATORS FAIL TO DESIGNATE A THIRD
ARBITRATOR WITHIN 30 DAYS OF THEIR APPOINTMENTS, SUCH ARBITRATOR SHALL BE
APPOINTED BY THE AAA. THE TWO ARBITRATORS SO DESIGNATED SHALL ELECT A THIRD
ARBITRATOR. ANY AWARD OF THE ARBITRATORS SHALL BE ACCOMPANIED BY A WRITTEN
OPINION GIVING THE REASONS FOR THE AWARD. THE EXPENSE OF THE ARBITRATION SHALL
BE BORNE BY THE PARTIES IN THE MANNER DETERMINED IN WRITING BY THE ARBITRATORS.
THIS ARBITRATION PROVISION SHALL BE SPECIFICALLY ENFORCEABLE BY THE PARTIES. THE
DETERMINATION OF THE ARBITRATORS PURSUANT TO THIS SECTION SHALL BE FINAL AND
BINDING ON THE PARTIES AND MAY BE ENTERED FOR ENFORCEMENT BEFORE ANY COURT OF
COMPETENT JURISDICTION.
[The remainder of this page is intentionally blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
INDUSTRIAL HOLDINGS, INC.
By:______________________________
Name:____________________________
Title:___________________________
LENDER:
ENSERCO, L.L.C.
By: KENOBE, INC., its Managing Member
By:______________________________
Name:____________________________
Title:___________________________
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[Execution Version]
PROMISSORY NOTE
$15,000,000.00 Houston, Texas June 30, 1998
For value received, the undersigned INDUSTRIAL HOLDINGS, INC., a Texas
corporation (the "Borrower"), hereby promises to pay to the order of ENSERCO,
L.L.C. (the "Lender"), the principal amount of FIFTEEN MILLION AND NO/100 UNITED
STATES DOLLARS ($15,000,000.00) or, if less, the aggregate outstanding principal
amount of the Loan (as defined in the Loan Agreement referred to below) made by
the Lender to the Borrower, together with accrued but unpaid interest on the
outstanding principal amount of the Loan, at such interest rates, and at such
times, as are specified in the Loan Agreement.
This Promissory Note (this "Note") is entitled to the benefits of, and is
subject to the terms of, the Loan Agreement dated as of June 30, 1998 (as the
same may be modified from time to time, the "Loan Agreement"), between the
Borrower and the Lender. Capitalized terms used herein but not defined herein
shall have the meanings specified by the Loan Agreement. The Loan Agreement,
among other things, (a) provides for the making of the Loan by the Lender to the
Borrower, the indebtedness of the Borrower resulting from each such advance
being evidenced by this Note and (b) contains provisions for acceleration of the
maturity of this Note upon the happening of certain events stated in the Loan
Agreement and for prepayments of principal prior to the maturity of this Note
upon the terms and conditions specified in the Loan Agreement. Both principal
and interest are payable to the Lender in the currency, at the times, in the
locations, and in the manner specified in the Loan Agreement.
It is the intention of the Lender and the Borrower to conform strictly to
any applicable usury laws or relevant exemptions therefrom. Accordingly, the
terms of the Loan Agreement relating to the prevention of usury will be strictly
followed.
This Note shall be governed by, and construed in accordance with, the
internal laws of the State of Texas (without reference to principles of
conflicts of law).
THIS NOTE AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the date first above written.
INDUSTRIAL HOLDINGS, INC.
By:__________________________
Christine Smith
Vice President
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