<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1999
OR
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-11160
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2617871
- ------------------------------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2121 San Jacinto Street
Suite 2500
Dallas, Texas 75201
- ------------------------------- -----
(Address of principal executive (Zip Code)
offices)
(Registrant's telephone number, including area code) (214) 953-4500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X . No. ____.
---
At August 13, 1999, 22,416,294 shares of Common Stock, par value $.25, of the
Registrant were outstanding.
Page 1 of 27
Exhibit Index Appears on Page 26
<PAGE>
INDEX
Page
Number
------
Part I. Financial Information
Item 1 Management's Representation 3
Consolidated Condensed Statements of Operations for
the three and the six months ended June 30, 1999
and April 30, 1998 4
Consolidated Condensed Balance Sheets as of
June 30, 1999 and December 31, 1998 5
Consolidated Condensed Statements of Cash Flows for
the six months ended June 30, 1999 and April 30, 1998 7
Notes to Consolidated Condensed Financial Statements 8
Item 2 Management's Discussion and Analysis 14
Item 3 Quantitative and Qualitative Disclosures about Market Risk 23
Part II. Other Information
Item 4 Submission of matters to a vote of security holders 24
Item 6 Exhibit and Reports on Form 8-K. 26
Signature 27
2
<PAGE>
PART I
FINANCIAL INFORMATION
MANAGEMENT'S REPRESENTATION
The consolidated condensed financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed. The Company believes that the
disclosures are adequate to make the information presented not misleading.
These consolidated condensed financial statements should be read in conjunction
with the financial statements and the notes to consolidated financial statements
included in the Annual Report, Form 10-K for the fiscal year ended December 31,
1998.
In the opinion of the Company, all adjustments have been included that were
necessary to present fairly the financial position of Global Industrial
Technologies, Inc. and subsidiaries as of June 30, 1999; the results of
operations for the three and the six months ended June 30, 1999 and April 30,
1998; and cash flows for the six months ended June 30, 1999 and April 30, 1998,
respectively.
3
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In millions except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, April 30, June 30, April 30,
1999 1998 1999 1998
------------ ------------ ---------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues
Net sales and operating revenues $ 131.2 $ 106.6 $ 273.0 $ 203.5
Other 0.4 0.3 0.7 0.7
------------ ------------ ---------- -----------
Total Revenues 131.6 106.9 273.7 204.2
------------ ------------ ---------- -----------
Costs and Expenses
Cost of sales 97.3 81.3 204.3 156.3
Selling, engineering, administrative and
general expenses 26.8 19.5 53.0 42.5
Restructuring expenses (1.4) (1.4)
Interest expense 3.6 1.6 7.9 3.3
Other - net (0.8) 3.2 (0.4) 3.9
------------ ------------ ---------- -----------
Total Costs and Expenses 125.5 105.6 263.4 206.0
------------ ------------ ---------- -----------
Earnings (loss) from continuing operations
before income taxes 6.1 1.3 10.3 (1.8)
Income tax benefit (expense) (1.3) (0.8) (2.1) 0.5
------------ ------------ ---------- -----------
Earnings (loss) from continuing operations 4.8 0.5 8.2 (1.3)
Discontinued operations:
Gain (loss) on sale of discontinued operations less applicable
income taxes of $23.9, $40.2, $8.5 and $40.2 12.9 86.1 (11.9) 86.1
Earnings (loss) from discontinued operations less applicable
income taxes of $.2, $.1, $.2 and $1.7 0.2 2.4 0.3 5.0
------------ ------------ ---------- -----------
Net earnings (loss) $ 17.9 89.0 (3.4) 89.8
============ ============ ========== ===========
Basic earnings (loss) per common share:
Continuing operations $ 0.22 0.02 0.37 (0.06)
============ ============ ========== ===========
Discontinued operations $ 0.59 4.03 (0.52) 4.15
============ ============ ========== ===========
Net earnings (loss) $ 0.81 $ 4.05 (0.15) $ 4.09
============ ============ ========== ===========
Diluted earnings (loss) per common share:
Continuing operations $ 0.21 $ 0.02 0.36 $ (0.06)
============ ============ ========== ===========
Discontinued operations $ 0.58 $ 4.00 (0.51) $ 4.15
============ ============ ========== ===========
Net earnings (loss) $ 0.79 $ 4.02 (0.15) $ 4.09
============ ============ ========== ===========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
4
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
ASSETS (Unaudited)
- ------ ------------------------ ------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 8.8 $ 8.4
Notes and accounts receivable
Public 114.4 115.4
Unconsolidated affiliates - 6.7
------------------------ ------------------------
114.4 122.1
Less allowance for doubtful accounts 5.0 6.5
------------------------ ------------------------
109.4 115.6
Inventories
Finished products and work in process 70.7 71.5
Raw materials and supplies 61.8 63.6
------------------------ ------------------------
132.5 135.1
Assets held for sale, net - 174.0
Deferred income taxes 68.1 92.7
Asbestos insurance recoveries receivable 168.7 155.5
Prepaid expenses 3.2 9.9
------------------------ ------------------------
Total Current Assets 490.7 691.2
Investments in Unconsolidated Affiliates 2.4 3.1
Noncurrent Deferred Income Taxes 56.1 56.2
Goodwill - net 23.3 24.0
Noncurrent asbestos insurance receivable 151.8 145.2
Other Assets 97.9 84.5
Property, Plant and Equipment - at cost
Land, land improvements and mineral deposits 31.2 42.5
Buildings 92.9 93.2
Machinery and equipment 309.2 300.9
------------------------ ------------------------
433.3 436.6
Less accumulated depreciation, depletion and amortization 177.5 174.8
------------------------ ------------------------
Total properties - net 255.8 261.8
------------------------ ------------------------
Total Assets $ 1,078.0 $ 1,266.0
======================== ========================
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
5
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)
- ------------------------------------ ------------------------ ------------------------
<S> <C> <C>
Current Liabilities
Accounts payable $ 48.1 $ 62.8
Notes payable and current portion of long-term debt 104.6 176.7
Advances from customers on contracts 3.0 1.1
Accrued compensation and benefits 20.5 31.6
Accrued taxes other than income taxes 3.5 3.4
Insurance reserves 12.9 7.9
Income taxes currently payable 8.3 17.2
Current deferred income taxes 12.8 21.7
Asbestos related liabilites 133.5 137.6
Other accrued liabilities 35.4 74.1
------------------------ ------------------------
Total Current Liabilities 382.6 534.1
Long-term Debt 166.2 202.6
Postretirement benefits 73.0 81.0
Noncurrent Deferred Income Taxes 55.5 55.5
Asbestos related liabilities 160.8 145.7
Other Liabilities 7.4 12.6
Shareholders' Equity
Preferred stock
Common stock 6.8 6.8
Capital in excess of par value 381.0 381.4
Retained earnings (accumulated deficit) (22.9) (19.6)
Accumulated other nonowner changes in equity
Cumulative translation adjustment (58.6) (56.0)
Minimum pension liability adjustment (5.4) (5.4)
Treasury stock, at cost (68.4) (72.7)
------------------------ ------------------------
Total Shareholders' Equity 232.5 234.5
------------------------ ------------------------
Total Liabilites and Shareholders' Equity $ 1,078.0 $ 1,266.0
======================== ========================
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
6
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
Six months ended
June 30, April 30,
1999 1998
---------- ----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net earnings (loss) $ (3.4) $ 89.8
Adjustments to reconcile net earnings to cash flow
Continuing operations depreciation,
depletion and amortization 13.3 7.4
Discontinued operations depreciation,
depletion and amortization 1.1 4.2
Equity in loss of unconsolidated affiliate - 0.5
Loss (gain) on sale of discontinued operations 1.7 (86.1)
Gain on sale of assets (1.7) -
Decrease in receivables 3.6 3.7
Increase in inventories 0.4 (13.2)
Increase in asbestos insurance recoveries receivable (6.2) (5.3)
Increase in discontinued operations working capital (0.9) -
Decrease in accrued compensation (8.8) (12.3)
Decrease in accounts payable and accrued liabilities (36.5) (13.4)
Increase (decrease) in advances from customers 1.8 (3.5)
Increase (decrease) in income taxes payable (8.8) 0.2
Deferred income tax provision (benefit) 9.2 (0.8)
Other - net (1.3) (7.6)
---------- ----------
Net cash used by operating activities (36.5) (36.4)
---------- ----------
Cash flows from investing activities
Proceeds from sale of discontinued operations 163.8 217.5
Business acquisitions - (8.4)
Proceeds from asset sales 4.6 -
Settlement payment on asset sales - (5.3)
Continuing operations capital expenditures (12.6) (8.3)
Discontinued operations capital expenditures (12.0) (20.3)
---------- ----------
Net cash used by investing activities 143.8 175.2
---------- ----------
Cash flows from financing activities
Proceeds from borrowings 75.2
Principal payments on debt (108.4) (181.3)
Proceeds from exercise of stock options 1.5 1.9
Purchase of treasury shares - (2.6)
---------- ----------
Net cash provided by financing activities (106.9) (106.8)
---------- ----------
Effect of translation adjustments on cash - (0.1)
---------- ----------
Net increase in cash and cash equivalents 0.4 31.9
Cash and cash equivalents, beginning of period 8.4 14.9
---------- ----------
Cash and cash equivalents, end of period $ 8.8 $ 46.8
========== ==========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
7
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE A - Introduction and Basis of Presentation
The accompanying consolidated condensed interim financial statements include the
accounts of Global Industrial Technologies, Inc. together with its subsidiaries
and unconsolidated joint ventures (collectively referred to herein as the
"Company"). The Company conducts its business in two segments: Refractory
Products and Minerals and All Other.
On July 30, 1998, the Company's Board of Directors voted to change the Company's
annual fiscal accounting period from October 31, 1997 to December 31, 1997.
Accordingly, the accompanying consolidated condensed financial statements
present the three and the six-month periods ended June 30, 1999. The
comparative period under the old fiscal year presented herein is the three and
the six-month periods ended April 30, 1998.
NOTE B - Discontinued Operations
Ameri-Forge
- -----------
On June 22, 1999, the Company sold the assets and business of Ameri-Forge
Corporation ("Ameri-Forge") for $37.5 million, subject to certain post-closing
adjustments. Ameri-Forge manufactured and sold forged steel flanges and
undercarriage components for tracked equipment. The Company had revised its
original estimate of the proceeds of the sale used in recording the loss on
disposal of Ameri-Forge reflected in the December 31, 1998 consolidated
financial statements. As a result, an additional $40 million pre-tax charge for
loss on disposal of discontinued operations was recorded in the first quarter of
1999 as a reduction in the carrying value of fixed assets. Proceeds of the sale
were used to pay down debt.
The operating results for Ameri-Forge for the prior year have been presented as
discontinued operations in the Consolidated Condensed Statement of Operations.
For the current year, operating results have been charged against the reserve
for loss on disposal. The assets and liabilities of Ameri-Forge at December 31,
1998 have been reflected as "Net Assets Held For Sale," in the accompanying
balance sheets.
APG Lime
- --------
On April 13, 1999, the Company sold the assets and business of APG Lime
Corporation ("APG Lime") for cash consideration of $126.3 million and the
assumption of $3.7 million in debt, subject to certain post-closing adjustments.
APG Lime manufactured and sold lime for industrial and construction uses. The
sale resulted in a pre-tax gain from discontinued operations of approximately
$38.2 million, which is recognized in the second quarter of 1999. Proceeds of
the sale were used to pay down debt.
The operating results of APG Lime for the period January 1, 1999 through April
13, 1999 are presented as discontinued operations. The assets and liabilities
of APG Lime at December 31, 1998 have been reflected as "Net Assets Held For
Sale," in the accompanying balance sheet.
8
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
INTOOL
- ------
On March 12, 1998, the Company sold the assets and business of INTOOL
Incorporated ("INTOOL") for cash consideration of $229.5 million, including
certain postclosing adjustments. A gain of $81.7 million, net of tax, was
recognized. The INTOOL business manufactured and sold a product line of high-
quality pneumatic and electric tools for industrial applications, including
assembly and material removal. The operating results of INTOOL for the period
November 1, 1997 to March 12, 1998 are presented as discontinued operations in
the prior year.
In connection with the sale of INTOOL, the Company retained liabilities for
certain legal claims (net of insurance) and employee benefits. During the three
months ended June 30, 1999, the Company adjusted its estimate for these
liabilities and recorded an additional $1.4 million pre-tax, $0.9 million net-
of-tax, loss on sale of discontinued operations for INTOOL.
NOTE C - Inventories
The determination of inventory values and cost of sales under the LIFO method
for interim financial results are based on management's estimates of expected
year-end inventory levels and prices.
NOTE D - Restructuring Charges
During the year ended December 31, 1998, the Company recognized a charge to
reorganize and restructure its current organization. The restructuring
consisted primarily of four parts:
Concurrent with the acquisition of AP Green Industries, Inc. effective July 1,
1998, management initiated plans to consolidate and integrate the operations of
both companies through workforce reductions and the closure of duplicative
facilities.
Management finalized plans to consolidate the manufacturing and administrative
functions of Corrosion Technologies International, Inc. ("CTI") with those of
Harbison-Walker Refractories Company ("Harbison-Walker"). The move is being
made in an effort to reduce costs and improve productivity and asset utilization
by eliminating duplicative functions and taking advantage of existing
facilities' excess capacity.
In addition, during the third quarter of 1998, the Company decided to terminate
a 50% joint venture and close Harbison-Walkers' Eufala, Alabama facility, which
housed a portion of its operations. During the three months ended June 30,
1999, the Company recognized a $1.4 million gain on the sale of various assets
which were previously written-off in the restructuring charge taken in the three
months ended September 30, 1998. At that time the estimated costs to hold the
assets were expected to exceed the eventual sales proceeds. The charge taken in
1998 related to these assets was $1.9 million.
The remaining charges represent severance benefits related to the approximate
18% staff level reduction at the Company's corporate headquarters, located in
Dallas, Texas.
9
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The following table summarizes the activity occurring within the related current
liability accounts during the six months ended June 30, 1999; amounts are in
millions:
<TABLE>
<CAPTION>
Balance at Balance at
----------
Segment Type December 31, Provisions Payments June 30,
---- ------------ ---------- -------- --------
1998 1999
---- ----
<S> <C> <C> <C> <C> <C>
Refractory Employee severance $ 2.7 $ (.6) $ (1.2) $ .9
Products Other employee fringes
(excluding pension
curtailment) 1.4 (1.0) (0.1) .3
Contract terminations 0.8 (.6) (.1) .1
Other facility shut-down
Costs 2.1 --- --- 2.1
Site restoration costs 2.4 2.2 (3.5) 1.1
------- -------- -------- -------
Total Refractory Products 9.4 0 (4.9) 4.5
All Other Employee severance 1.1 --- (.4) .7
Contract terminations
and other 0.6 --- (.6) ---
------- -------- -------- -------
Total All Other 1.7 --- (1.0) .7
Corporate Employee severance 1.1 --- (1.1) ---
------- -------- -------- -------
Total Company $ 12.2 $ 0 $ (7.0) $ 5.2
======= ======== ======== =======
</TABLE>
Management has substantially completed the restructuring plan with the majority
of the remaining cash expenditures to occur during the third quarter of 1999.
A provision was made in the second quarter to increase site restoration costs by
$2.2 million based on management's latest estimate of remaining costs. The
provision was offset in total by decreases to employee severance, other employee
fringes, and contract termination reserves as shown above. The decreases are
due to lower than expected actual costs associated with those liabilities.
Given the nature of the costs reflected herein, increases or decreases may still
be necessary throughout the remaining tenure of the Company's restructuring
plans. Any such changes will be reflected in the statement of operations as
incurred.
10
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE E - Notes Payable and Long Term Debt
At December 31, 1998 the Company amended certain provisions of the senior
revolving credit facility entered into on August 31, 1998 (Credit Facility) and
various senior notes from separate private placement offerings (Private
Placements) to allow for the planned disposition of the Ameri-Forge division.
The primary effect of the amendment on the Credit Facility was to (i) lower the
required minimum consolidated net worth limit from $280 million to approximately
$215 million through July 31, 1999, to be increased to $325 million on August 1,
1999, and continue at such level thereafter and (ii) reduced the facility from
$215 million to $140 million effective upon consummation of the APG Lime sale.
The Private Placement agreements were amended to provide for (i) a reduction in
the required minimum consolidated tangible net worth limit, as defined, from
$280 million to approximately $209 million which increases to $325 million on
July 31, 2000 and (ii) an increase in the maximum amount of debt to
capitalization, from 55% to 64% excluding ATA from Refmex, decreasing to 45%
over the next 12 months. In addition, the Private Placement agreements required
the Company to replace its existing Credit Facility as described in the
paragraphs below.
On May 3, 1999, the Company elected to exercise the optional prepayment of its
obligations under Solid Waste Disposal Revenue Bonds issued by the Industrial
Development Board of the City of Eufaula, Alabama. The called bonds were issued
in November 1996, carried a principal amount of $5.7 million at an interest rate
of 5.85%, and were scheduled to mature in November 2006. A penalty of $171,000
was paid for early termination of the bonds.
On July 30, 1999, the Company entered into a $120 million revolving debt
facility with Chase Bank of Texas, N.A. as agent (the New Facility), that will
expire on June 30, 2000. The facility is secured by certain assets of the
Company, and carries a floating interest rate of LIBOR+250 basis points. Fees
associated with the execution of the New Facility totaled $1.79 million. The
initial drawdown on the facility was used to retire the existing revolving
Credit Facility. The New Facility also allows for the issuance of a maximum of
$20 million in letters of credit. As of August 10, 1999, the Company had drawn
$97.7 million under the New Facility, with an additional $9.9 million allocated
to issued letters of credit, leaving an amount of $12.4 million available for
further borrowing.
In addition, on July 30, 1999, the Company amended certain portions of the
Private Placement agreements to allow for the securitization of the New
Facility, and to recognize more restrictive covenants provided for in the New
Facility. In consideration of these amendments, the interest rates on the
private placement notes will increase by up to 75 basis points between August
1, 1999 and October 31, 1999, an additional increase of 75 basis points between
November 1, 1999, and January 31, 2000, an additional increase of 50 basis
points between February 1, 2000, and April 30, 2000, and a final increase of 50
basis points after May 1, 2000 for a total of 250 basis points.
11
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE F - Interest Rate Swaps
In the second quarter of 1999, the Company terminated the two existing interest
rate swaps at a gain of $.3 million. See Note M to the Consolidated Financial
Statements contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
NOTE G - Contingencies
The Company and its subsidiaries are involved in certain legal actions and
claims arising in the ordinary course of business. See NOTE N to Consolidated
Financial Statements contained in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
NOTE H - Comprehensive Income
The components of comprehensive income (loss) for the Company include net income
(loss), and changes in the cumulative translation and minimum pension liability
adjustments. Total comprehensive income (loss) for the three and six month
periods ended June 30, 1999, was $16.7 million and ($5.9) million,
respectively; and for the three and six months ended April 30, 1998, $87.4
million and $87.0 million, respectively.
NOTE I - Earnings Per Share
Outstanding options to purchase 1.0 million shares, 1.0 million shares, .6
million shares and .6 million shares, respectively, were excluded from the three
and six months ended June 30, 1999, and the three and the six months ended April
30, 1998, diluted earnings per share calculations as the exercise prices
associated with the options exceeded the average market value of the Company's
common shares. For the six months ended April 30, 1998, options to purchase .2
million shares were excluded from the diluted earnings per share calculation as
their inclusion would be anti-dilutive due to the net loss from continuing
operations as restated. Deferred compensation units representing .2 million
potential common shares were excluded from the three and six months ended April
30, 1998, diluted earnings per share calculations, as the effect of inclusion in
the calculation would be anti-dilutive.
12
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
No differences in the numerator exist to calculate basic and diluted earnings
per share. A reconciliation of the common shares outstanding utilized in the
denominator of the basic and diluted earnings per share calculation is as
follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, April 30, June 30, April 30,
1999 1998 1999 1998
-------------------------------------------------------
<S> <C> <C> <C> <C>
Denominator for basic earnings (loss)
per share 22.3 21.9 22.3 21.9
----- ----- ----- -----
Potential common shares:
Stock options .4 .2 .4 ---
Deferred compensation units .1 --- .1 ---
----- ----- ----- -----
Total potential common shares .5 .2 .5 ---
----- ----- ----- -----
Denominator for diluted earnings
(loss) per share 22.8 22.1 22.8 21.9
===== ===== ===== =====
</TABLE>
NOTE J- Information by Industry Segment
Sales and operating profit results are presented below for the three and the six
months ended June 30, 1999, and April 30, 1998.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, April 30, June 30, April 30,
INDUSTRY SEGMENT 1999 1998 1999 1998
-------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Refractory Products and Minerals.................. $121.4 $ 94.7 $247.8 $179.2
All other......................................... 9.8 11.1 25.2 22.8
------ ------ ------ ------
Reportable segment revenues.................... 131.2 105.8 273.0 202.0
Divested operations............................... 0 .8 0 1.5
------ ------ ------ ------
Total.......................................... $131.2 $106.6 $273.0 $203.5
====== ====== ====== ======
Operating profit (loss).............................
Refractory Products and Minerals.................. $ 12.4 $ 8.7 $ 23.6 $ 12.5
All other......................................... 1.9 (1.3) 4.4 (1.4)
------ ------ ------ ------
Reportable segment profit...................... 14.3 7.4 28.0 11.1
Corporate expenses................................ (6.0) (3.7) (11.2) (8.7)
Divested operations............................... 0 (.3) 0 (.4)
Partnership Operations......................... 0 (.5) 0 (.5)
Interest expense............................... (3.6) (1.6) (7.9) (3.3)
Restructuring Charges.......................... 1.4 0 1.4 0
------ ------ ------ ------
Earnings (loss) from continuing operations
before income taxes.......................... $ 6.1 $ 1.3 $ 10.3 $ (1.8)
====== ====== ====== ======
</TABLE>
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Recent Developments
- -------------------
Following the election of Mr. Ronald LaBow, Chairman of WHX Corporation ("WHX")
to the Board of Directors of the Company (the "Board") at the 1999 annual
meeting of the Company's shareholders, a special committee (the "Special
Committee") was established to, among other things, evaluate the offer by RHI
AG, an Austrian stock corporation ("RHI"), to purchase all outstanding shares of
common stock of the Company (the "Shares") in light of the fact that WHX, at the
time, had outstanding a competing unsolicited tender offer for the Shares (the
"WHX Offer"). The Special Committee consists of four Board members, David H.
Blake, Richard W. Vieser, Rawles Fulgham and Graham L. Adelman. The WHX Offer,
which was first publicly announced on December 15, 1998, had been extended by
WHX on June 25, 1999 until July 13, 1999 but was not extended after such date.
On July 14, 1999, WHX issued a press release announcing the termination of the
WHX Offer. Though the WHX Offer has terminated, Ronald LaBow will remain on the
Board.
On July 12, 1999, the Company announced that it had signed a definitive
agreement under which an indirect wholly-owned subsidiary of RHI, would make a
cash tender offer to purchase all Shares for $13 per Share (the "RHI
Agreement"). The tender offer commenced on Friday, July 16, 1999. The
completion of the tender offer is conditioned on at least a majority of the
Shares having been tendered and not withdrawn, RHI's obtaining definitive
financing arrangements and regulatory and other customary conditions. The
definitive agreement also provides that, following completion of the tender
offer, the indirect wholly-owned subsidiary of RHI will merge with and into the
Company. When such merger becomes effective, each Share will be converted into
the right to receive $13 in cash and the Company will become a wholly-owned
subsidiary of RHI. The foregoing description is qualified in its entirety by
reference to the RHI Agreement which is attached as Exhibit 1 to the Company's
Tender Offer Solicitation/Recommendation Statement on Schedule 14D-9, filed with
the Securities and Exchange Commission (the "Commission") on July 16, 1999 (the
"RHI Schedule 14D-9"), and is incorporated herein by reference. In the RHI
Schedule 14D-9, the Board of Directors of the Company recommended that Company
shareholders accept RHI's tender offer and tender their Shares to the indirect
wholly-owned subsidiary of RHI and approve and adopt the RHI Agreement. The
Board's recommendation to the shareholders of the Company and the reasons
therefor are set forth in the RHI Schedule 14D-9 which is incorporated herein by
reference.
In connection with the RHI Agreement, on July 9, 1999, the Company amended its
Rights Agreement, dated as of October 31, 1995, as amended (the "Rights
Agreement"), between the Company and The Bank of New York, a New York banking
corporation (the "Rights Agent"), by adoption of the Sixth Amendment to Rights
Agreement, dated as of July 9, 1999 (the "Sixth Amendment"). The Rights
Agreement was filed by the Company as an exhibit to Form 8-B on October 31,
1995. The capitalized terms used but not defined herein shall have the meaning
ascribed to such terms in the Rights Agreement. The Sixth Amendment amends
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
various provisions of the Rights Agreement to provide, among other things, that
(i) neither RHI nor its indirect wholly-owned subsidiary, nor any of their
respective affiliates or associates, shall be deemed to be an Acquiring Person
as a result of the transactions contemplated by the RHI Agreement being approved
or becoming effective, (ii) a Distribution Date shall not occur by reason of the
approval or execution of the RHI Agreement or the consummation of the
transactions contemplated by the RHI Agreement and (iii) if the RHI Agreement is
terminated for any reason in accordance with its terms or otherwise, (a) the
exclusion of RHI and its wholly-owned indirect subsidiary from the designation
as an Acquiring Person and (b) the preclusion of the transactions contemplated
by the RHI Agreement from causing the occurrence of a Distribution Date shall
cease to be effective as of the date of such termination. The foregoing
description is qualified in its entirety by reference to the Sixth Amendment
which is attached as Exhibit 37 to Amendment No. 23 to the Company's Tender
Offer Solicitation/Recommendation Statement on Schedule 14D-9, filed in
connection with the WHX Offer and is incorporated herein by reference.
On July 30, 1999, in accordance with the terms of the RHI Agreement, RHI paid
the Company $5.0 million and notified the Company in writing of RHI's
determination to extend the Financing Termination Time (as such term is defined
in the RHI Agreement) to 5:00 p.m. (New York City time) on October 31, 1999.
On August 4, 1999, RHI and Global received a request for additional information
(a "Second Request") from the Federal Trade Commission under the Hart-Scott-
Rodino Antitrust Improvement Act of 1976 (the "HSR Act"). Unless earlier
terminated, the Second Request extends the waiting period under the HSR Act
until ten calendar days after substantial compliance by RHI and Global with such
request. The expiration of such waiting period is a condition to the tender
offer by RHI for the Company's Shares, and accordingly, the tender offer may not
be consummated until such time. In addition, on August 6, 1999, RHI announced
the extension of the expiration date of the tender offer commenced on July 16,
1999. The tender offer is currently set to expire at 12:00 Midnight, New York
City time, on September 30, 1999.
Ameri-Forge
On June 22, 1999, the Company sold the assets and business of Ameri-Forge
Corporation ("Ameri-Forge") for $37.5 million, subject to certain post-closing
adjustments. The Company had revised its original estimate of the proceeds of
the sale used in recording the loss on disposal of Ameri-Forge reflected in the
December 31, 1998 consolidated financial statements. As a result, an additional
$40 million pre-tax charge for loss on disposal of discontinued operations was
recorded in the first quarter of 1999 as a reduction in the carrying value of
fixed assets. Proceeds of the sale were used to pay down debt.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
APG Lime
On April 13, 1999, the Company sold the assets and business of APG Lime for cash
consideration of $126.3 million and the assumption of $3.7 million in debt,
subject to certain post-closing adjustments. The sale resulted in a pre-tax
gain from discontinued operations of $38.2 million which was recognized in the
second quarter of 1999. Proceeds of the sale were used to pay down debt.
Results of Operations
- ---------------------
Overall Summary
The Company reported a net loss of $3.4 million, or $.15 per share compared to
net earnings of $89.8 million, or $4.09 per share for the six months ended June
30, 1999 and April 30, 1998, respectively, and reported net earnings of $17.9
million, or $.81 per share compared to $89.0 million, or $4.05 per share for the
three months ended June 30, 1999 and April 30, 1998, respectively.
Continuing Operations
From continuing operations, the Company reported net earnings of $8.2 million,
or $.37 per share compared to a net loss of $1.3 million, or $.06 per share for
the six months ended June 30, 1999 and April 30, 1998, respectively, and
reported net earnings of $4.8 million, or $.22 per share compared to net
earnings of $.5 million, or $.02 per share for the three months ended June 30,
1999 and April 30, 1998, respectively. The 1999 results include contributions
for the entire six month period from Green and Harbison-Walker Refractories
GmbH, formerly Magnesitwerk Aken GmbH (Aken). The 1998 results include no
contribution from Green and four months of profit contribution from Aken.
Including Green and Aken, revenues for the six months of $273.7 million
increased $69.5 million, or 34%, from $204.2 million in 1998. Second quarter
revenues of $131.6 million increased $24.7 million, or 23%, from $106.9 million
in 1998. Segment results from continuing operations for the six months of $28.0
million increased $16.9 million, or 152% from $11.1 million in 1998. Second
quarter operating results for the three months of $14.3 million increased $6.9
million, or 93%, from $7.4 million in 1998. Segment revenues and operating
profits are discussed individually below under the heading "Industry Segment
Analysis".
General corporate expenses for the six months of $11.2 million increased $2.5
million, or 29%, from $8.7 million in 1998. Corporate expense includes
approximately $.8 million of defense costs associated with the WHX tender offer
and an increase in net expense relating to asbestos claims (See Note G to the
consolidated condensed financial statements for more information on asbestos
claims). Interest expense of $7.9 million increased $4.6 million, or 139%,
from $3.3 million in 1998. The increase is due to higher debt levels in 1999
from the acquisition of Green including cash expenditures for the integration of
Green and Harbison-Walker.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
In the second quarter of 1999, the Company recorded a $1.4 million gain on the
sale of Refractory Product and Mineral assets which had been written off
previously as part of the restructuring charges taken in the third quarter of
1998. The gain is reported as a credit to restructuring charges.
Backlog
The Company's consolidated backlog of unshipped orders from continuing
operations was $161.9 million at June 30, 1999, compared to $121.2 million at
April 30, 1998. The net increase of $40.7 million reflects a higher backlog
from Refractory Products due to the Green acquisition offset by a lower backlog
from the CTI and Processing Equipment businesses.
Restructuring charges
During the year ended December 31, 1998, the Company recognized a charge to
reorganize and restructure its current organization. The restructuring
consisted primarily of four parts:
Concurrent with the acquisition of Green effective July 1, 1998, management
initiated plans to consolidate and integrate the operations of both companies
through workforce reductions and the closure of duplicative facilities.
Management finalized plans to consolidate the manufacturing and administrative
functions of Corrosion Technologies International, Inc. ("CTI") with those of
Harbison-Walker Refractories Companies ("Harbison-Walker"). The move is being
made in an effort to reduce costs and improve productivity and asset utilization
by eliminating duplicative functions and taking advantage of existing
facilities' excess capacity.
In addition, during the third quarter of 1998, the Company decided to terminate
a 50% joint venture and close Harbison-Walkers' Eufala, Alabama facility, which
housed a portion of its operations. During the three months ended June 30, 1999,
the Company recognized a $1.4 million gain on the sale of various assets which
were previously written-off in the restructuring charge taken in the three
months ended September 30, 1998. At that time, the estimated costs to hold the
assets were expected to exceed the eventual sales proceeds. The charge taken in
1998 related to these assets was $1.9 million.
The remaining charges represent severance benefits related to the approximate
18% staff level reduction at the Company's corporate headquarters, located in
Dallas, Texas.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following table summarizes the activity occurring within the related
current liability accounts during the six months ended June 30, 1999; amounts
are in millions:
<TABLE>
<CAPTION>
Balance at Balance at
-----------
Segment Type December 31, Provisions Payments June 30,
1998 1999
---- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Refractory Employee severance $ 2.7 $ (.6) $ (1.2) $ .9
Products Other employee fringes
(excluding pension
curtailment) 1.4 (1.0) (.1) .3
Contract terminations .8 (.6) (.1) .1
Other facility shut-down
costs 2.1 --- --- 2.1
Site restoration costs 2.4 2.2 (3.5) 1.1
---- ---- ----- ----
Total Refractory Products 9.4 0 (4.9) 4.5
All Other Employee severance 1.1 --- (.4) .7
Contract terminations
and other .6 --- (.6) ---
---- ---- ----- ----
Total All Other 1.7 --- (1.0) .7
Corporate Employee severance 1.1 --- (1.1) ---
---- ---- ----- ----
Total Company $12.2 $ 0 $ (7.0) $ 5.2
==== ==== ===== ====
</TABLE>
Management has substantially completed the restructuring plan with the majority
of the remaining cash expenditures to occur during the third quarter of 1999. A
provision was made in the second quarter to increase site restoration costs $2.2
million based on management's latest estimate of remaining costs. The provision
was offset in total by decreases to employee severance, other employee fringes,
and contract termination reserves as shown above. The decreases are due to
lower than expected actual costs associated with those liabilities. Given the
nature of the costs reflected herein, increases or decreases may still be
necessary throughout the remaining tenure of the Company's restructuring plans.
Any such changes will be reflected in the statement of operations as incurred.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Industry Segment Analysis
- -------------------------
Refractory Products and Minerals
Revenues for the six months of $247.8 million increased $68.6 million, or 38%,
from $179.2 million in 1998. The increase is primarily due to contribution from
Green and Aken ($98.8 million) offset by lower worldwide sales ($30.2 million).
Revenues from the foreign operations (Aken, Refmex and Recsa) decreased $10.4
million from 1998 to 1999 due to decreased demand from the cement and steel
industries in Mexico and Latin America, an economic slowdown in Chile from the
depressed copper industry, and lower sales to Russia. Refractory sales in the
United States decreased $11.1 million from the prior year primarily due to lower
iron and steel production, delayed industrial projects and Green sales which
were not maintained by the Company. Sales of mineral products declined $8.7
million in 1999 primarily from the continued effect of prevailing exchange rates
between the U.S. Dollar and European currencies on the Company's ability to
competitively price exports. Revenues for the three months of $121.4 million
increased $26.7 million, or 28%, from $94.7 million in 1998. The increase for
the second quarter is due to the contribution from Green ($46.1 million) also
offset by lower worldwide sales ($19.4 million) explained above.
Operating profit for the six months of $23.6 million increased $11.1 million, or
89%, from $12.5 million in 1998. The improvement for the six months is primarily
due to the contribution from the Green acquisition ($20.6 million excluding
depreciation), cost reductions and margin improvements in the Harbison-Walker
business ( $5.6 million), offset by increased depreciation ($5.8 million) and
the effect of the lower worldwide sales ($9.3 million) mentioned above. Second
quarter operating profit of $12.4 million increased $3.7 million, or 43%, from
$8.7 million in 1998.
All Other
Revenues for the six months of $25.2 million increased $2.4 million, or 11%,
from $22.8 million in 1998. The increase is due to the shipment of an
electronic scrap recovery system in the first quarter from the Shred Tech
business, offset by lower sales volume in the CTI business. A recent dispute
between the Company and the purchaser of this electronic scrap recovery system
over certain contractual obligations and expenses with respect to the
installation of the system has resulted in delayed payments to the Company.
Based upon discussions with the purchaser, management expects to resolve the
dispute without a material effect to the Company. Revenues for the second
quarter of $9.8 million decreased $1.3 million, or 12%, from $11.1 million in
1998. The decrease in the second quarter is due to lower sales volume in the
CTI business due to the depressed copper industry.
Operating profit for the six months of $4.4 million increased $5.8 million from
a net loss of $1.4 million in 1998. The increase is due to the profit
contribution from the aforementioned sale of an electronic scrap recovery
system, margin improvements due to lower material costs and lower fixed costs
from headcount reductions. In addition, the Company recorded a pre-tax charge
to earnings in 1998 of $2.4 million to close the British Jeffrey Diamond ("BJD")
processing business in Wakefield, England. Operating profit for the second
quarter of $1.9
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
million increased $3.2 million from a net loss of $1.3 million in 1998 primarily
due to the BJD charge in the second quarter of 1998.
Discontinued Operations
The Company reported a net loss of $11.6 million from discontinued operations
for the six months ended June 30, 1999. The reported amount includes operating
profits from APG Lime ($.3 million net of allocated interest and taxes), a net
loss on the sale of Ameri-Forge ($24.8 million), a net gain on the sale of APG
Lime ($13.8 million) and a net charge ($.9 million) for retained liabilities
associated with the INTOOL divestiture.
For the six months ended April 30, 1998, the Company reported a net gain on the
sale of INTOOL of $86.1 million and operating profits from INTOOL and Ameri-
Forge of $5.0 million.
Liquidity, Capital Resources and Financial Condition
- ----------------------------------------------------
Cash and cash equivalents were $8.8 million at June 30, 1999, an increase of $.4
million from $8.4 million at December 31, 1998. Net cash used by operating
activities was $36.5 million during the six month period ended June 30, 1999,
reflecting the contribution from operating earnings (excluding the net loss on
the sales of Ameri-Forge and APG Lime) less working capital increases. The
increase in working capital during the period of $55.5 million is due primarily
to decreases in accounts payable and accrued liabilities of $36.5 million.
Accounts payable decreased $14.7 million in the six month period resulting from
the payment of increased spending levels in the fourth quarter of 1998 primarily
from the integration of Green and Harbison-Walker. Other accrued liabilities
decreased $25.2 million primarily due to payments relating to Ameri-Forge which
is reported as a discontinued operation, and restructuring costs associated with
the integration of Green and Harbison-Walker. Payments for Ameri-Forge during
the six months included working capital increases and allocated interest
expense. The asbestos insurance recoveries receivable increased $6.2 million
over the six month period due to delayed payments from insurance carriers.
The Company's current ratio at June 30, 1999 of 1.28 to 1 was higher than .97 to
1 at December 31, 1998 (excluding assets held for sale) reflecting the increased
investment in working capital from the aforementioned items.
Net cash from investing activities was $143.8 million and $175.2 million for the
six months ended June 30, 1999 and April 30, 1998, respectively. Proceeds from
the sale of discontinued operations reflects the sales of Ameri-Forge and APG
Lime in 1999 and the sale of INTOOL in 1998. Proceeds from asset sales of $4.6
million in 1999 includes the sale of the Eufala property mentioned earlier and
the sale of a joint venture interest acquired in the Green acquisition. Capital
expenditures from continuing operations of $12.6 million increased $4.3 million,
or 52% from $8.3 million in 1998. Refractory products and minerals accounted
for 87% of the capital expenditures in the six month period for plant
reconfiguration spending relative to the Green/Harbison-Walker integration
program.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Net cash used by financing activities was $106.9 million and $106.8 million for
the six months ended June 30, 1999 and April 30, 1998, respectively. In both
periods, debt was reduced from proceeds generated from the sale of discontinued
operations discussed above. At June 30, 1999, the Company had total debt of
$270.8 million, resulting in a total debt to total capitalization ratio of .54
to 1, and a total debt to shareholder's equity of 1.17 to 1. The comparable
amounts at December 31, 1998, were total debt of $379.3 million, total debt to
total capitalization of .62 to 1, and total debt to stockholder's equity of 1.62
to 1.
At December 31, 1998 the Company amended certain provisions of the senior
revolving credit facility entered into on August 31, 1998 (Credit Facility) and
existing senior notes from various private placement offerings (Private
Placements) to allow for the planned disposition of the Ameri-Forge division.
The primary effect of the amendment on the Credit Facility was to (i) lower the
required minimum consolidated net worth limit from $280 million to approximately
$215 million, through July 31, 1999, to be increased to $325 million on August
1, 1999, and continue at such level thereafter and (ii) reduced the facility
from $215 million to $140 million effective upon consummation of the APG Lime
sale. The Private Placement agreements were amended to provide for (i) a
reduction in the required minimum consolidated tangible net worth limit, as
defined, from $280 million to approximately $209 million which increases to $325
million on July 31, 2000 and (ii) an increase in the maximum amount of debt to
capitalization, from 55% to 64% excluding ATA from Refmex, decreasing to 45%
over the next 12 months. In addition, the Private Placement agreements required
the Company to replace its existing Credit Facility as described in the
paragraphs below.
On April 13, 1999, the Company sold the assets and business of APG Lime for cash
consideration of $126.3 million and the assumption of $3.7 million in debt,
subject to certain post-closing adjustments. Cash proceeds from the sale were
used to reduce the debt of the Company. Subsequent to this sale, as discussed
above, the total principal amount available to the Company under the Credit
Facility was reduced from $215 million to $140 million.
On May 3, 1999, the Company elected to exercise the optional prepayment of its
obligations under Solid Waste Disposal Revenue Bonds issued by the Industrial
Development Board of the City of Eufaula, Alabama. The called bonds were issued
in November 1996, carried a principal amount of $5.7 million at an interest rate
of 5.85%, and were scheduled to mature in November 2006. A penalty of $171,000
was paid for early termination of the bonds.
On June 22, 1999, the Company sold the assets and business of Ameri-Forge for
cash consideration of $37.5 million, subject to certain post-closing
adjustments. Cash proceeds from the sale were also used to reduce the debt of
the Company.
On July 30, 1999, the Company entered into a $120 million revolving debt
facility with Chase Bank of Texas, N.A. as agent (the New Facility), that will
expire on June 30, 2000. The facility is secured by certain assets of the
Company, and carries a floating interest rate of LIBOR+250 basis points. Fees
associated with the execution of the New Facility totaled $1.79 million. The
initial draw down on the facility was used to retire the previous revolving
Credit Facility. The New Facility also allows for the issuance of a maximum of
$20 million in letters of credit. As of
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
August 10, 1999, the Company had drawn $97.7 million under the New Facility,
with an additional $9.9 million allocated to issued letters of credit, leaving
an amount of $12.4 million available for further borrowing.
In addition, on July 30, 1999, the Company amended certain portions of the
Private Placement agreements to allow for the securitization of the New
Facility, and to recognize more restrictive covenants provided for in the New
Facility. In consideration of these amendments, the interest rates on the
private placement notes will increase by up to 75 basis points between August 1,
1999 and October 31, 1999, an additional increase of 75 basis points between
November 1, 1999, and January 31, 2000, an additional increase of 50 basis
points between February 1, 2000, and April 30, 2000, and a final increase of 50
basis points after May 1, 2000 for a total of 250 basis points.
The Company had $8.8 million in cash and cash equivalents on hand at June 30,
1999, and committed and discretionary unused lines of credit aggregating an
additional $27.2 million (including foreign lines of credit). Management
believes that internally-generated funds, and borrowings under existing credit
facilities will be adequate to meet working capital and capital expenditure
requirements, while maintaining an appropriate debt to total capitalization
ratio.
Year 2000 Issue
- ---------------
The Company has completed its Y2K information systems implementation and
modification for all wholly owned operations. A significant portion of the
Company's direct risk in the information system area is mitigated by the
implementation of the new accounting, finance and operating (Enterprise Resource
Planning) systems. Although not purchased specifically for the purpose of
avoiding such risks, these systems are, nevertheless, fully "Year 2000"
compliant. Global has performed its own Y2K tests on this ERP software and found
no significant issues.
Testing of telecommunications hardware and software has identified some voice
mail software that requires upgrading. Upgrades are complete at most sites.
Global has upgraded its human resource applications, database management
software, desktop and network operating systems to achieve Y2K compliance levels
as described by the respective vendors. It has requested and received Y2K
compliance reports from all major outside providers of information systems and
support.
With respect to embedded technology other than information systems, the Company
has assessed its risk of major malfunctions to be relatively low at its
continuing operations. Harbison Walker and AP Green plants have conducted tests
of their production equipment. Only one machine exhibited a problem and
corrective measures have been made.
Management believes that potential malfunctions occurring within its information
systems environment can be mitigated with manual processing of transactions.
Global has surveyed key vendors and customers for their Y2K readiness. However,
the risk of disruptions to operations caused by non-Year 2000 compliant systems
of customers, suppliers and unrelated third parties remains. Likewise, the
Company does not have contingency plans in place to evoke, should such
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
an event, or series of events occur. The possibility does therefore exist that
any such disruptions could have an adverse effect on the Company.
The Company expenses all Year 2000 costs as incurred. Through June 30, 1999,
less than $100,000 of costs had been incurred in the Company's efforts to
achieve Year 2000 compliant systems (exclusive of costs associated with the
purchase and installation of new hardware and software, more fully discussed
above). The ultimate total cost to the Company of achieving Year 2000 compliant
systems is currently estimated to be less than $500,000, to be expended
primarily in the 1999 timeframe. The Company has increased its overall
information systems budget to accommodate the aforementioned Year 2000
compliance projects, but has not delayed other critical information systems work
due to these efforts. Incremental costs incurred strictly due to Year 2000
compliance issues are not expected to have a material impact on the Company's
results of operations, financial condition or liquidity.
Item 3 - Quantitative and Qualitative Disclosures about Market Risk.
The Company has terminated the two interest rate swap contracts which were in
place at December 31, 1998. However, the Company may enter into future
contracts to offset the impact of floating interest rates. Other than the
interest rate swaps, information about market risks for the six months ended
June 30, 1999, does not differ materially from that discussed under Item 7A of
the Company's Annual Report on Form 10-K for the year ended December 31, 1998.
Forward-Looking Statements
- --------------------------
STATEMENTS THE COMPANY MAY PUBLISH THAT ARE NOT STRICTLY HISTORICAL ARE
"FORWARD-LOOKING" STATEMENTS UNDER THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. ALTHOUGH THE COMPANY BELIEVES THE
EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON
REASONABLE ASSUMPTIONS, IT CAN GIVE NO ASSURANCE THAT ITS EXPECTATIONS WILL BE
REALIZED. FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS WHICH MAY
CAUSE THE COMPANY'S ACTUAL RESULTS AND CORPORATE DEVELOPMENTS TO DIFFER
MATERIALLY FROM THOSE EXPECTED. FACTORS THAT COULD CAUSE RESULTS AND
DEVELOPMENTS TO DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS INCLUDE,
WITHOUT LIMITATION, CHANGES IN MANUFACTURING AND SHIPMENT SCHEDULES, DELAYS IN
COMPLETING PLANT CONSTRUCTION AND ACQUISITIONS, CURRENCY EXCHANGE RATES, NEW
PRODUCT AND TECHNOLOGY DEVELOPMENTS, COMPETITION WITHIN EACH BUSINESS SEGMENT,
CYCLICALITY OF THE MARKETS FOR THE PRODUCTS OF A MAJOR SEGMENT, LITIGATION,
SIGNIFICANT COST VARIANCES, THE EFFECTS OF ACQUISITIONS AND DIVESTITURES,
DISRUPTIONS TO OPERATIONS CAUSED BY NON-YEAR 2000 COMPLIANT SYSTEMS OF UNRELATED
THIRD PARTIES, AND OTHER RISKS DESCRIBED FROM TIME TO TIME IN THE COMPANY'S SEC
REPORTS INCLUDING QUARTERLY REPORTS ON FORM 10-Q, ANNUAL REPORTS ON FORM 10-K
AND
23
<PAGE>
PART II
OTHER INFORMATION
Item 4: Submission of matters to a vote of security holders
(a) The annual meeting of shareholders of the Company was held on
June 7, 1999, and reconvened on July 1, 1999.
(b) At the meeting, Ronald LaBow was elected Director to serve for a
term expiring at the annual meeting of shareholders to be held in
2002. Graham L. Adelman, David H. Blake, Rawles Fulgham and
Richard W. Viser continued in office as Directors after the
meeting.
Nominees For Withheld
-------- --- --------
Sheldon R. Erikson 8,440,308 560,229
Ronald LaBow 10,304,575 117,032
(c) The shareholders voted at the meeting upon a shareholder proposal
calling for the prompt sale of the Company. The results of the
voting on such proposal were as follows.
For Against Abstentions
--- ------- -----------
6,329,178 9,799,813 3,157,322
The shareholders voted at the meeting upon a shareholder proposal
calling for the declassification of the Company's Board of
Directors. The results of the voting on such proposal were as
follows:
For Against Abstentions
--- ------- -----------
9,084,931 6,209,036 3,125,091
The shareholders voted at the meeting upon a shareholder proposal
submitted by WHX Corporation calling for the declassification of
the Company's Board of Directors. The results of the voting on
such proposal were as follows:
For Against Abstentions
--- ------- -----------
12,052,539 7,252,048 117,557
<PAGE>
The shareholders also voted at the meeting upon a shareholder
proposal submitted by WHX Corporation calling for the redemption of
the Company's Stockholder Rights Plan. The results of the voting on
such proposal were as follows:
For Against Abstentions
--- ------- -----------
14,390,983 4,965,209 65,952
<PAGE>
REPORTS ON FORM 8-K.
PART II
OTHER INFORMATION
Item 6: Exhibits and reports on Form 8-K.
(a) Exhibits
10.38 Agreement and Plan of Merger, dated as of July 12,
1999, by and among Global Industrial Technologies,
Inc., RHI AG and Heat Acquisition Corp. (incorporated
herein by reference to Exhibit 1 to the Tender Offer
Solicitation/Recommendation Statement on Schedule 14D-
9) filed on July 16, 1999.
10.39 Sixth Amendment to Rights Agreement, dated July 9,
1999, (incorporated herein by reference to Exhibit 37
to Amendment No. 23 to the Tender Offer
Solicitation/Recommendation Statement on Schedule 14D-
9) filed on July 12, 1999.
10.40 Amendment No. 2 dated as of July 30, 1999, to Note
Agreement dated as of October 2, 1998, by and between
the Registrant and GPX Corp. and The Prudential
Insurance Company of America.
10.41 Amendment No. 3 dated as of July 30, 1999, to Note
Agreement dated as of June 30, 1998, among the
Registrant, GPX Corp., The Prudential Insurance Company
of America and U.S. Private Placement Fund.
10.42 Amendment No. 4, dated as of July 30, 1999, to Note
Agreement dated as of January 31, 1996, among the
Registrant, GPX Corp., The Prudential Insurance Company
of America and Principal Life Insurance Company.
10.43 Credit Agreement, dated as of July 30, 1999, among the
Registrant, Chase Bank of Texas, National Association,
as Administrative Agent; PNC Bank, National
Association, as Syndication Agent; and ABN AMRO Bank NV
as Issuing Bank and as Documentation Agent.
(b) Reports on Form 8-K
Agreement for the asset sale of Ameri-Forge Corporation filed as
of May 21, 1999.
By-Law Amendment to the by-laws of Global Industrial
Technologies, Inc., filed as of May 26, 1999
By-Law Amendment to the by-laws of Global Industrial
Technologies, Inc., filed as of June 8, 1999.
26
<PAGE>
By: /s/ Donna A. Reeves
-------------------------------------
Donna A. Reeves
Vice President - Controller
(Authorized Officer and Chief
Accounting Officer)
Dated: August 16, 1999
27
<PAGE>
EXHIBIT 10.40
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
GPX CORP.
________________________________
AMENDMENT NO. 2
dated as of July 30, 1999
to
Note Agreement dated as of October 2, 1998
$25,000,000 7.05% Senior Notes, Due October 2, 2010
________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AMENDMENT NO. 2 TO NOTE AGREEMENT
THIS AMENDMENT NO.2 TO NOTE AGREEMENT dated as of July 30, 1999, (this
"Amendment"), is entered into by and between GLOBAL INDUSTRIAL TECHNOLOGIES,
INC., a Delaware corporation (the "Company"), and GPX CORP., a Nevada
corporation ("GPX," and together with the Company, the "Co-Makers") and THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential")(the "Purchaser").
Recitals
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A. The Co-Makers and the Purchaser entered into a Note Agreement dated as
of October 2, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Note Agreement"), pursuant to which the Co-Makers issued and sold to
the Purchaser and the Purchaser purchased, on the terms and conditions therein
set forth, the Co-Makers' 7.05% Senior Notes, Due October 2, 2010, in the
aggregate principal amount of $25,000,000 (the "Notes"). The Purchaser remain
the holder of 100% of the outstanding principal amount of the Notes.
Capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed to them in the Note Agreement.
B. The Co-Makers and Chase Bank of Texas, N.A., ABN Amro Bank N.V., PNC
Bank, National Association and the other financial institutions party thereto
(collectively, the "Banks") have entered into a Credit Agreement dated as of
July 30, 1999 (as the same may be amended, modified, or supplemented from time
to time, the "Credit Agreement"), pursuant to which the Banks have agreed to
extend credit to the Co-Makers in the form of revolving credit advances not to
exceed an aggregate principal amount of $120,000,000.
C. The Company and the Restricted Subsidiaries (including GPX) that have
executed guaranties in connection with the Credit Agreement (collectively, the
"Guarantors") have executed Guaranties in respect of the Co-Makers' obligations
under the Notes.
D. The Guarantors, the Banks, and the Purchaser have executed a Sharing
Agreement dated as of August 31, 1998 as supplemented by agreement dated as of
October 2, 1998 and additional agreements dated as of July 30, 1999.
E. The Company and the Guarantors have entered into security agreements,
guaranties and pledges (the "Security Documents") in favor of Chase Bank of
Texas, National Association, as Collateral Agent for the Purchaser and the
Banks, all as identified in the Credit Agreement and in the Intercreditor
Agreement referred to below.
F. The Guarantors, the Banks, the Company and the Purchaser have executed
or will execute an Intercreditor Agreement of even date herewith (the
"Intercreditor Agreement").
<PAGE>
G. The Co-Makers and the Purchaser desire to amend the Note Agreement in
the respects, but only in the respects, hereinafter set forth.
NOW, THEREFORE, the Co-Makers and the Purchaser, in consideration of the
foregoing and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, do hereby agree as follows:
Section 1. Amendment of the Note Agreement. The Note Agreement is hereby
amended as follows:
(a) Paragraph 1 of the Note Agreement is amended to read in its entirety as
follows:
1. Authorization of Issue of Notes. The Co-Makers will authorize
the issue of their joint and several senior promissory notes in the
aggregate principal amount of $25,000,000: (i) to be dated the date of
issue thereof; (ii) to mature October 2, 2010 (iii) to bear interest on the
unpaid balance thereof (A) from the date thereof through July 31, 1999, at
the rate of 7.05% per annum; from August 1, 1999 through October 31, 1999,
at the rate of 7.80%; from November 1, 1999 through January 31, 2000, at
the rate of 8.55%; from February 1, 2000 through April 30, 2000, at the
rate of 9.05%; and from May 1, 2000 until the principal thereof shall have
become due and payable, at the rate of 9.55% and (B) on overdue payments at
the rate specified therein, and to be substantially in the form of Exhibit
-------
A attached hereto. The term "Notes" as used herein shall include each such
-
senior promissory note delivered pursuant to any provision of this
Agreement and each such senior promissory note delivered in substitution or
exchange for any other Note pursuant to any such provision.
(b) Paragraph 4 of the Note Agreement is amended by deleting the
words "optional prepayments permitted" and inserting in their place the word
"prepayments".
(c) Paragraph 5A of the Note Agreement is amended by deleting the
word "and" found between the references to paragraphs "6G" and "6I" in the
fourth line of the text immediately following paragraph 5A(vi), and by inserting
the words "6K, 6L and (for periods ending on or after September 30, 1999) 6M"
immediately following the reference to "6I" in that line.
(d) Paragraph 6A of the Note Agreement is amended in its entirety to
read as follows:
6A. Minimum Consolidated Net Worth. The Company will at all times
maintain or cause to be maintained Consolidated Net Worth in an amount not
less than the sum of (a) $209,250,000 plus (b) 50% of net income, after
provision for income taxes, of the Company and the Restricted Subsidiaries
on a consolidated basis (without any deduction for losses) for each fiscal
quarter of the Company ended through the date of determination, beginning
with the fiscal quarter ending September 30, 1999, plus (c) 100% of the Net
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<PAGE>
Proceeds received by the Company from any issuance, sale or other
disposition of any shares of capital stock or other equity securities of
the Company of any class (or any securities convertible or exchangeable for
any such shares, or any rights, warrants, or options to subscribe for or
purchase any such shares).
(e) Paragraph 6E is amended by deleting subparagraph (viii) and
inserting in lieu of the following subparagraph (viii), (ix) and (x):
(viii) Liens securing the Notes and the Obligations arising under
and as defined in the Credit Agreement, and the Notes of the Co-Makers issued
under the Note Agreement dated January 31, 1996, between the Co-Maker and The
Prudential Insurance Company of America and Principal Life Insurance Company,
and the Note Agreement dated June 30, 1998, between the Co-Maker and The
Prudential Insurance Company of America and U.S. Private Placement Fund.
(ix) Liens on assets owned by the Company within the United States,
other than assets included in the Collateral, to secure Debt of the Company or a
Subsidiary not in excess of $3,000,000 in the aggregate at any time outstanding
provided that such Liens do not secure any other Debt.
(x) Liens on assets located in Canada and owned by any Restricted
Subsidiary of the Company organized under the laws of Canada, to secure Debt of
the Company or a Subsidiary not in excess of C$15,000,000 in the aggregate at
any time outstanding, provided that such Liens do not secure any other Debt.
(f) Paragraph 6F is amended to read in its entirety as follows:
6F. Disposition of Assets. The Company will not and will not permit any
Restricted Subsidiary to sell, lease, assign, transfer, or otherwise dispose of
any of their respective assets (including without limitation stock or other
equity interests in any of the Subsidiaries or any of the voting rights of any
such stock or other equity interests); provided, however, that the following
dispositions shall be permitted so long as the Company and the Restricted
Subsidiaries, as applicable, receive full, fair and reasonable consideration at
the time of such disposition at least equal to the fair market value of such
asset being disposed:
(i) dispositions of inventory in the ordinary course of
business of the Company and its Restricted Subsidiaries;
(ii) the Jeffrey Disposition, provided that all of the
proceeds (less reasonable expenses) from the Jeffrey Disposition shall
be applied to repay Borrowings (as defined in the Credit Agreement)
under the Credit Agreement;
(iii) the Shred-Tech Disposition, provided that all of the
proceeds (less reasonable expenses) from the Shred-Tech Disposition
shall be applied to prepay
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<PAGE>
the Notes in accordance with paragraph 4A, ratably with repayment of
Borrowings (as defined in the Credit Agreement) under the Credit
Agreement;
(iv) any other disposition of assets having a Net Book Value
not to exceed $25,000,000 in the aggregate for as long as any Note
remains outstanding, provided, that with regard to any such
--------
disposition of assets having a Net Book Value in excess of $5,000,000
individually or when aggregated with all other such dispositions on or
after July 30, 1999 all of the proceeds (less reasonable expenses)
from such disposition or dispositions in excess of $5,000,000 shall be
applied to prepay the Notes in accordance with paragraph 4, ratably
with repayment of Borrowings (as defined in the Credit Agreement)
under the Credit Agreement;
(v) disposition of assets that are worn out, obsolete or no
longer used or useful in the conduct of the business of the Company
and its Restricted Subsidiaries, so long as such assets are replaced
with assets of equal or greater value; and
(vi) disposition of assets to the Company or any wholly-owned
Restricted Subsidiary that is a Guarantor.
(g) New paragraphs 6K, 6L & 6M are added to the Note Agreement
reading in their entireties as follows:
6K. Consolidated Leverage Ratio. The Company will at all times
maintain or cause to be maintained a Consolidated Leverage Ratio of not
greater than: (i) 4.50 to 1.00 during the period from and including July
31, 1999 through September 29, 1999, (ii) 4.25 to 1.00 during the period
from and including September 30 through December 30, 1999, (iii) 3.75 to
1.00 during the period from and including December 31, 1999 through March
30, 2000, and (iv) 3.50 to 1.00 from and including March 31, 2000 and
thereafter.
6L. Consolidated Interest Coverage Ratio. The Company will at all
times maintain or cause to be maintained a Consolidated Interest Coverage
Ratio of not less than 3.50 to 1.00.
6M. Capital Expenditures. The Company will not permit the aggregate
Capital Expenditures of the Company and its Subsidiaries to exceed
$20,000,000 during any four quarter period ending on the last day of any
fiscal quarter of the Company.
(h) Paragraph 10B of the Note Agreement is amended by inserting the
following new defined terms in the appropriate alphabetical order within such
paragraph:
"Agreed Expense Reduction Amount" shall mean, with respect to the
calculation of Adjusted EBITDA for any period, expenses, not to exceed the
amounts specified on Schedule 6K for such period, that were incurred by the
-----------
Company and its Restricted
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<PAGE>
Subsidiaries prior to June 30, 1999 and were actually deducted in arriving
at EBITDA for such period but will not occur in subsequent periods due to
cost reductions related to the acquisition of A.P. Green Industries, Inc.
and its Subsidiaries.
"Adjusted EBITDA" shall mean, for each period of determination, the
sum of the following for the Company and its Restricted Subsidiaries on a
consolidated basis:
(A) EBITDA for such period, plus
(B) the Agreed Expense Reduction Amount.
"Capital Expenditures" shall mean, and for any period, all capital
expenditures as determined in accordance with GAAP and in any event shall
include, but not be limited to, all expenditures (whether paid in cash or
accrued as a liability, including the portion of Capitalized Lease
Obligations originally incurred during such period that are capitalized for
the consolidated balance sheet of the Company and its Subsidiaries) by the
Company and its Restricted Subsidiaries during such period for the
acquisition, construction, improvement or replacement of land, buildings,
equipment or other fixed or capital assets or leaseholds (excluding
expenditures properly chargeable to repairs or maintenance) or otherwise
included in "capital expenditures," "additions to property, plant or
equipment" or comparable items in the consolidated financial statements of
the Company and its Restricted Subsidiaries.
"Collateral" shall have the meaning specified in Section 4.01 of the
Credit Agreement, as in effect on the date hereof.
"Consolidated Interest Coverage Ratio" shall mean, as of the last day
of any fiscal quarter of the Company, the ratio of (a) Adjusted EBITDA for
the 12-month period ending on such day to (b) cash interest expense of the
Company and its Restricted Subsidiaries for the 12-month period ending on
such day.
"Consolidated Leverage Ratio" shall mean, as of the last day of any
fiscal quarter of the Company, the ratio of (a) Consolidated Funded Debt as
of such last day to (b) Adjusted EBITDA for the 12-month period ending on
such day; provided, however, that for purposes of this definition
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Consolidated Funded Debt shall not include the non-recourse Indebtedness of
Aken existing as of July 30, 1999, and Adjusted EBITDA shall not include
EBITDA of Aken or any portion of the Agreed Expense Reduction Amount
attributable to Aken.
"Credit Agreement" shall mean that certain Credit Agreement dated as
of July 30, 1999, among the Company, Chase Bank of Texas, National
Association, as administrative agent for the lenders party thereto from
time to time (the "Lenders") and the Lenders.
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<PAGE>
"EBITDA" shall mean, for each period of determination, the sum of (a)
consolidated net income of the Company and its Restricted Subsidiaries for
such period (whether positive or negative), plus, (b) each of the following
to the extent actually deducted in arriving at consolidated net income for
such period and without duplication: depreciation, amortization, taxes, and
interest expense of the Company and its Restricted Subsidiaries for such
period, minus (c) gains from the sale of fixed assets not in the ordinary
course of business, plus (d) to the extent actually deducted in arriving at
consolidated net income for such period and without duplication, losses
from the sale of fixed assets not in the ordinary course of business, minus
(e) extraordinary gains determined in accordance with GAAP, plus (f) to the
extent actually deducted in arriving at consolidated net income for such
period and without duplication, extraordinary losses determined in
accordance with GAAP, plus (g) to the extent actually deducted in arriving
at consolidated net income for such period and without duplication, noncash
charges incurred by the Borrower and its Restricted Subsidiaries in the
fiscal quarters ending September 30, 1998, December 31, 1998 and March 31,
1999 only.
"Income Taxes" shall mean federal, state, local and foreign income
taxes.
"Jeffrey" shall mean the Jeffrey Woodruff Division of Global
Processing Systems, Inc., a Subsidiary of the Company.
"Jeffrey Disposition" shall mean the disposition of all or
substantially all of the assets of Jeffrey.
"Net Book Value" of any asset shall mean the book value of such asset,
minus depreciation of such asset.
"Net Proceeds" from any issuance, sale or other disposition of any
shares of equity securities (or any securities convertible or exchangeable
for such shares, or any rights, warrants, or options to subscribe for or
purchase any such shares) shall mean the amount equal to (a) the aggregate
gross proceeds of such issuance, sale or other disposition, less (b) the
following reasonable fees and expenses: (i) placement agent fees, (ii)
underwriting discounts and commissions, (iii) bank and other lender fees,
and (iv) legal fees and legal expenses payable by the issuer in connection
with such issuance, sale or other disposition.
"Shred-Tech" shall mean the Shred-Tech Division of Global-GIX Canada
Inc., a Subsidiary of Company.
"Shred-Tech Disposition" shall mean the disposition of all or
substantially all of the assets of Shred-Tech.
(i) Exhibit A, in the form attached hereto, hereby replace existing
Exhibit A to the Note Agreement.
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<PAGE>
(j) A new Schedule 6K is added to the Note Agreement, in the form
attached hereto as Schedule 6K.
Section 2. Effective Date. This Amendment shall become effective on
the date hereof (the "Effective Date"), subject in all cases to the following
having been received by and being satisfactory to the Purchasers:
(a) duly executed counterparts of this Amendment;
(b) duly executed Notes in the forms attached to this Amendment,
executed by the Co-Makers;
(c) duly executed Guaranties on behalf of Global Processing Systems,
Inc., Corrosion Technology International, A. P. Green Industries, Inc., Detrick
Refractory Fibers, Inc., Polymer Pipe Technology, Inc., and Corrosion IP Corp.;
(d) duly executed Security Documents, executed by the Company and the
Guarantors satisfactory to the Purchaser, creating a first priority security
interest in the collateral described therein;
(e) duly executed counterparts of the Intercreditor Agreement executed
by the Company, the Guarantors, the Banks and Chase National Bank of Texas,
National Association, as Collateral Agent for the Purchaser and the Banks.
(f) a copy of the Credit Agreement as in effect on the Effective Date,
certified by the Co-Makers;
(g) certificates of the Secretary or Assistant Secretary of each of
the Guarantors and the Co-Makers attaching and certifying copies of (i) the
resolutions of the board of directors of such Guarantor authorizing the
execution and delivery of this Amendment; (ii) the resolutions of the board of
directors of each Co-Maker authorizing the execution, delivery, and performance
of this Amendment; and (iii) the name, title and true signature of each officer
of such Guarantor or Co-Maker, as the case may be, executing the Amendment; and
for each Guarantor identified in subsection (c) of this section, (iv) the
certificate of incorporation of such Guarantor, as the case may be, and (v) the
bylaws of such Guarantor, as the case may be.
(h) a favorable opinion of Jeanette H. Quay, general counsel of the
Company, counsel for the Co-Makers and the Guarantors, satisfactory to the
Purchasers and the Purchasers' special counsel and addressing such matters as
the Purchasers may request;
(i) evidence satisfactory to the Purchasers that the Purchasers'
special counsel has received its fees, charges and disbursements charged or
incurred in connection with the preparation, negotiation, execution and delivery
of this Amendment, and any other documents executed and
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<PAGE>
delivered contemporaneously herewith or therewith, to the extent such fees,
charges and disbursements are reflected in a statement of such special counsel
tendered to the Co-Makers at least one Business Day prior to the execution of
this Amendment.
Section 3. Representations and Warranties. In order to induce the
Purchasers to enter into this Amendment, each of the Co-Makers represents and
warrants as follows:
(a) Organization. The Company is a corporation duly organized and
------------
validly existing in good standing under the laws of the State of Delaware. GPX
is a corporation duly organized and validly existing in good standing under the
laws of the State of Nevada. Each other Guarantor is a corporation duly
organized and validly existing in good standing under the laws of the state of
its incorporation.
(b) Power and Authority. Each of the Co-Makers and each Guarantor has
-------------------
all requisite corporate power to execute, deliver and perform its obligations
under this Amendment and the Notes executed by it. The execution, delivery and
performance by the Co-Makers of this Amendment and the Notes and the execution
and delivery by the Guarantors of this Amendment have been duly authorized by
all requisite corporate action on the part of each of the Co-Makers or such
Guarantors, as the case may be. Each of the Co-Makers has duly executed and
delivered this Amendment and the Notes, and this Amendment and the Notes
constitute legal, valid and binding obligations of each of the Co-Makers,
enforceable against the Co-Makers in accordance with their respective terms.
Each of the Guarantors has duly executed and delivered this Amendment, and this
Amendment constitutes the legal, valid and binding obligation of such
Guarantor, enforceable against it in accordance with its terms.
(c) No Conflicts. Neither the execution and delivery of this
------------
Amendment or the Notes by the Co-Makers or the execution and delivery of this
Amendment by the Guarantors, nor the consummation of the transactions
contemplated hereby, nor fulfillment of nor compliance with the terms and
provisions thereof will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any security interest, lien or other
encumbrance upon any of the properties or assets of the Co-Makers or the
Guarantors pursuant to the certificate of incorporation or bylaws of the
Co-Makers or the Guarantors, any award of any arbitrator or any agreement
(including any agreement with stockholders), instrument, order, judgment,
decree, statute, law, rule or regulation to which the Co-Makers or the
Guarantors are subject.
(d) Consents. Neither the nature of the business conducted by the
--------
Co-Makers, nor any of its properties, nor any relationship between the Co-Makers
and any other Person, nor any circumstance in connection with the transactions
contemplated by this Amendment is such as to require any authorization, consent,
approval, exemption or other action by or notice to or filing with any court or
administrative or governmental body or any other Person in connection with the
execution and delivery of this Amendment or fulfillment of or compliance with
the terms and provisions hereof.
-8-
<PAGE>
(e) No Event of Default or Default. Immediately following the
------------------------------
effectiveness of this Amendment, no Event of Default or Default exists.
(f) Other. All representations and warranties of the Co-Makers in the
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Credit Agreement and in the Security Documents are true and correct on the date
hereof, as though made on and as of such date.
Section 4. Miscellaneous.
(a) References to Note Agreement. Upon and after the Effective Date,
----------------------------
each reference to the Note Agreement in each document relating thereto shall
mean and be a reference to such Note Agreement as amended by this Amendment.
(b) Ratification and Confirmation. Except as specifically amended
-----------------------------
herein, the Note Agreement shall remain in full force and effect, and is hereby
ratified and confirmed.
(c) No Waiver. The execution, delivery and effectiveness of this
---------
Amendment shall not operate as a waiver of any right, power or remedy of any
Purchaser or any other holder of Notes, nor constitute a waiver of any provision
of the Note Agreement (as amended by this Amendment), the Notes or any other
document relating thereto.
(d) Expenses. The Company confirms its agreement, pursuant to
--------
paragraph 11B of the Note Agreement, to pay promptly all expenses of Purchaser
related to this Amendment and all matters contemplated hereby, including,
without limitation, all fees and expenses of the Purchasers' special counsel.
(e) GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN
-------------
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK, AND EACH OF THE PARTIES HERETO CHOOSES NEW YORK LAW TO
GOVERN THIS AMENDMENT PURSUANT TO N.Y. GEN. OBLIG. LAW SECTION 5-1401 (CONSOL.
1995).
(f) Counterparts. This Amendment may be executed in counterparts
------------
(including those transmitted by facsimile), each of which shall be deemed an
original and all of which taken together shall constitute one and the same
document. Delivery of this Amendment may be made by facsimile transmission of a
duly executed counterpart copy hereof.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute this Amendment as of the date first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ R. CHRIS BUSBEE
_______________________________________________
Name: R. Chris Busbee
__________________________________________
Title: Vice President
_________________________________________
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By: /s/ PAUL W. FEHLMAN
_______________________________________________
Name: Paul W. Fehlman
__________________________________________
Title: Treasurer
_________________________________________
GPX CORP.
By: /s/ PAUL W. FEHLMAN
_______________________________________________
Name: Paul W. Fehlman
__________________________________________
Title: Treasurer
_________________________________________
S-1
<PAGE>
Each of the undersigned Guarantors, having guaranteed the obligations of
the Co-Makers under the Note Agreement and the Notes issued thereunder, pursuant
to a Guaranty dated as of October 2, 1998 (the "Guaranty") hereby consents, as
of the date first above written, to the execution by the Co-Makers of the
foregoing Amendment; and reaffirms that the obligations of the Co-Makers under
the Note Agreement (defined above) as amended by the Amendment, and under the
replacement Notes issued pursuant to the Amendment constitute "Guaranteed
----------
Indebtedness" within the meaning of that Guaranty; and affirms that the Guaranty
- ------------
remains in full force and effect in favor of the Purchaser; and confirms that
the representations made in Section 4 hereof, insofar as such representations
relate to such Guarantor, are true and correct as of the date of the Amendment.
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By:_______________________________________________
Name:__________________________________________
Title:_________________________________________
GPX CORP.
By:_______________________________________________
Name:__________________________________________
Title:_________________________________________
HARBISON-WALKER REFRACTORIES
COMPANY
By:_______________________________________________
Name:__________________________________________
Title:_________________________________________
S-2
<PAGE>
HARBISON-WALKER INTERNATIONAL
REFRACTORIES, INC.
By:_______________________________________________
Name:__________________________________________
Title:_________________________________________
A.P. GREEN REFRACTORIES, INC.
By:_______________________________________________
Name:__________________________________________
Title:_________________________________________
S-3
<PAGE>
EXHIBIT A
[FORM OF NOTE]
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
GPX CORP.
7.05% SENIOR NOTE DUE ____________, 2010
No. R-01
ORIGINAL PRINCIPAL AMOUNT: $25,000,000
ORIGINAL ISSUE DATE: October 2, 1998
INTEREST RATE: THROUGH JULY 31, 1999, 7.05% PER ANNUM; FROM
AUGUST 1, 1999 THROUGH OCTOBER 31, 1999, AT THE RATE OF 7.80%; FROM
NOVEMBER 1, 1999 THROUGH JANUARY 31, 2000, AT THE RATE OF 8.55%; FROM
FEBRUARY 1, 2000 THROUGH APRIL 30, 2000, AT THE RATE OF 9.05%; FROM
MAY 1, 2000 UNTIL THE PRINCIPAL THEREOF SHALL HAVE BECOME DUE AND PAYABLE
AT THE RATE OF 9.55%.
INTEREST PAYMENT DATES: January 2nd, April 2nd, July 2nd and October 2nd
of each year
FINAL MATURITY DATE: October 2, 2010
PRINCIPAL PREPAYMENT DATES AND AMOUNTS:
October 2, 2006 - $5,000,000
October 2, 2007 - $5,000,000
October 2, 2008 - $5,000,000
October 2, 2009 - $5,000,000
FOR VALUE RECEIVED, the undersigned, GLOBAL INDUSTRIAL TECHNOLOGIES,
INC. (the "Company"), a corporation organized and existing under the laws of the
State of Delaware, and GPX CORP., a corporation organized and existing under the
laws of the State of Nevada (collectively, "Co-Makers"), hereby jointly and
severally promise to pay to ___________________________, or registered assigns,
the principal sum of _______________ DOLLARS payable in required prepayments on
the Principal Prepayment Dates and in the amounts specified above, and on the
Final Maturity Date specified above in an amount equal to the unpaid balance of
the principal hereof, with interest (computed on the basis of a 360-day
year--30-day month) (a) on the unpaid balance thereof at the Interest Rate per
annum specified above from the Original Issue Date specified above, payable on
each Interest Payment Date specified above and on the Final Maturity Date
specified above, commencing January 2, 1999, until the principal hereof shall
have become due and payable, and (b) on any overdue payment (including any
overdue prepayment) of principal, any overdue payment of interest and any
overdue payment of any Yield-Maintenance Amount (as defined in the Agreement
referred to below), payable quarterly as
N-1
<PAGE>
aforesaid (or, at the option of the registered holder hereof, on demand), at a
rate per annum from time to time equal to the lesser of (a) the maximum rate
permitted by applicable law or (b) the greater of (i) 2% in excess of the
interest rate that otherwise would apply under this Note at such time or (ii) 2%
over the rate of interest publicly announced by the Bank of New York from time
to time in New York City as its Prime Rate.
Payments of principal of, interest on and any Yield-Maintenance Amount
payable with respect to this Note are to be made at the main office of Bank of
New York in New York City or at such other place as the holder hereof shall
designate to the Company in writing, in lawful money of the United States of
America.
This Note is one of the 7.05% Senior Notes (the "Notes") issued pursuant
to a Note Agreement, dated as of October 2, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Agreement"), among the Co-Makers and
the original purchasers of the Notes named in the Information Schedule attached
thereto and is entitled to the benefits thereof. As provided in the Agreement,
this Note is subject to prepayment, in whole or from time to time in part on the
terms specified in the Agreement.
This Note is a registered Note and, as provided in and subject to the
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Co-Makers may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Co-Makers shall not be affected by any notice to
the contrary.
In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreement.
The Co-Makers and any and all endorsers, guarantors and sureties severally
waive grace, demand, presentment for payment, notice of dishonor or default,
notice of intent to accelerate, notice of acceleration (to the extent set forth
in the Agreement), protest and diligence in collecting.
Should any indebtedness represented by this Note be collected at law or in
equity, or in bankruptcy or other proceedings, or should this Note be placed in
the hands of attorneys for collection, the Company agrees to pay, in addition to
the principal, Yield-Maintenance Amount, if any, and interest due and payable
hereon, all costs of collecting or attempting to collect this Note, including
reasonable attorneys' fees and expenses (including those incurred in connection
with any appeal).
N-2
<PAGE>
The Co-Makers, and the purchaser and the registered holder of this Note
specifically intend and agree to limit contractually the amount of interest
payable under this Note to the maximum amount of interest lawfully permitted to
be charged under applicable law. Therefore, none of the terms of this Note
shall ever be construed to create a contract to pay interest at a rate in excess
of the maximum rate permitted to be charged under applicable law, and neither
the Co-Makers nor any other party liable or to become liable hereunder shall
ever be liable for interest in excess of the amount determined at such maximum
rate, and the provisions of paragraph 11R of the Agreement shall control over
any contrary provision of this Note.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
N-3
<PAGE>
This note is intended to be performed in the State of New York and shall
be construed and enforced in accordance with the law of such State.
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By: ______________________________________________
Vice President
By: ______________________________________________
Treasurer
GPX CORP.
By: ______________________________________________
Vice President
By: ______________________________________________
Treasurer
N-4
<PAGE>
SCHEDULE 6K
N-5
<PAGE>
EXHIBIT 10.41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
GPX CORP.
________________________________
AMENDMENT NO. 3
dated as of July 30, 1999
to
Note Agreement dated as of June 30, 1998
$75,000,000 6.83% Senior Notes, Due June 30, 2008
________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AMENDMENT NO. 3 TO NOTE AGREEMENT
THIS AMENDMENT NO. 3 TO NOTE AGREEMENT dated as of July 30, 1999,
(this "Amendment"), is entered into by and between GLOBAL INDUSTRIAL
TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and GPX CORP., a
Nevada corporation ("GPX," and together with the Company, the "Co-Makers"), THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential") and U.S. PRIVATE
PLACEMENT FUND ("U.S. Fund")(collectively, the "Purchasers").
Recitals
--------
A. The Co-Makers and the Purchasers entered into a Note Agreement dated
as of June 30, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Note Agreement"), pursuant to which the Co-Makers issued and sold to
the Purchasers and the Purchasers purchased, on the terms and conditions therein
set forth, the Co-Makers' 6.83% Senior Notes, Due June 30, 2008 in the
aggregate principal amount of $75,000,000 (the "Notes"). The Purchasers remain,
collectively, the holders of 100% of the outstanding principal amount of the
Notes.
Capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed to them in the Note Agreement.
B. The Co-Makers and Chase Bank of Texas, N.A., ABN Amro Bank N.V., PNC
Bank, National Association Bank and the other financial institutions party
thereto (collectively, the "Banks") have entered into a Credit Agreement dated
as of July 30, 1999 (as the same may be amended, modified, or supplemented from
time to time, the "Credit Agreement"), pursuant to which the Banks have agreed
to extend credit to the Co-Makers in the form of revolving credit advances not
to exceed an aggregate principal amount of $120,000,000.
C. The Company and the Restricted Subsidiaries (including GPX) that have
executed guaranties in connection with the Credit Agreement (collectively, the
"Guarantors") have executed Guaranties in respect of the Co-Makers' obligations
under the Notes.
D. The Guarantors, the Banks, and the Purchasers have executed a Sharing
Agreement dated as of August 31, 1998 as supplemented by agreement dated as of
October 2, 1998 and additional agreements dated as of July 30, 1999.
<PAGE>
E. The Company and the Guarantors have entered into security agreements,
guaranties and pledges (the "Security Documents") in favor of Chase Bank of
Texas, National Association, as Collateral Agent for the Purchasers and the
Banks, all as identified in the Credit Agreement and in the Intercreditor
Agreement referred to below.
F. The Guarantors, the Banks, the Company and the Purchasers have
executed or will execute an Intercreditor Agreement of even date herewith (the
"Intercreditor Agreement").
G. The Co-Makers and the Purchasers desire to amend the Note Agreement in
the respects, but only in the respects, hereinafter set forth.
NOW, THEREFORE, the Co-Makers and the Purchasers, in consideration of the
foregoing and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, do hereby agree as follows:
Section 1. Amendment of the Note Agreement. The Note Agreement is
hereby amended as follows:
(a) Paragraph 1 of the Note Agreement is amended to read in its
entirety as follows:
1. Authorization of Issue of Notes. The Co-Makers will authorize
the issue of their joint and several senior promissory notes in the
aggregate principal amount of $75,000,000: (i) to be dated the date of
issue thereof; (ii) to mature June 30, 2008 (iii) to bear interest on the
unpaid balance thereof (A) from the date thereof through July 31, 1999, at
the rate of 6.83% per annum; from August 1, 1999 through October 31, 1999,
at the rate of 7.58%; from November 1, 1999 through January 31, 2000, at
the rate of 8.33%; from February 1, 2000 through April 30, 2000, at the
rate of 8.83%; and from May 1, 2000 until the principal thereof shall have
become due and payable at the rate of 9.33% and (B) on overdue payments at
the rate specified therein, and to be substantially in the form of Exhibit
-------
A attached hereto. The term "Notes" as used herein shall include each such
-
senior promissory note delivered pursuant to any provision of this
Agreement and each such senior promissory note delivered in substitution or
exchange for any other Note pursuant to any such provision.
(b) Paragraph 4 to the Note Agreement if amended by deleting the
words "optional prepayments permitted" and inserting in their place the word
"prepayment".
(c) Paragraph 5A of the Note Agreement is amended by deleting the
word "and" found between the references to paragraphs "6G" and "6I" in the
fourth line of the text immediately following paragraph 5A(vi), and by inserting
the words "6K, 6L and (for periods ending on or after September 30, 1999) 6M"
immediately following the reference to "6I" in that line.
-2-
<PAGE>
(d) Paragraph 6A of the Note Agreement is amended in its entirety
to read as follows:
6A. Minimum Consolidated Net Worth. The Company will at all times
maintain or cause to be maintained Consolidated Net Worth in an amount not
less than the sum of (a) $209,250,000 plus (b) 50% of net income, after
provision for income taxes, of the Company and the Restricted Subsidiaries
on a consolidated basis (without any deduction for losses) for each fiscal
quarter of the Company ended through the date of determination, beginning
with the fiscal quarter ending September 30, 1999, plus (c) 100% of the Net
Proceeds received by the Company from any issuance, sale or other
disposition of any shares of capital stock or other equity securities of
the Company of any class (or any securities convertible or exchangeable for
any such shares, or any rights, warrants, or options to subscribe for or
purchase any such shares).
(e) Paragraph 6E is amended by deleting subparagraph (viii) and
inserting in lieu of the following subparagraphs (viii), (ix) and (x):
(viii) Liens securing the Notes and the Obligations arising under
and as defined in the Credit Agreement, and the notes of the Co-Makers issued
under the Note Agreement dated October 2, 1998, between the Co-Maker and The
Prudential Insurance Company of America, and the Note Agreement dated January
31, 1996, between the Co-Maker and The Prudential Insurance Company of America
and Principal Life Insurance Company.
(ix) Liens on assets owned by the Company within the United States,
other than assets included in the Collateral, to secure Debt of the Company or a
Subsidiary not in excess of $3,000,000 in the aggregate at any time outstanding
provided that such Liens do not secure any other Debt.
(x) Liens on assets located in Canada and owned by any Restricted
Subsidiary of the Company organized under the laws of Canada, to secure Debt of
the Company or a Subsidiary not in excess of C$15,000,000 in the aggregate at
any time outstanding, provided that such Liens do not secure any other Debt.
(f) Paragraph 6F is amended to read in its entirety as follows:
6F. Disposition of Assets. The Company will not and will not permit
any Restricted Subsidiary to sell, lease, assign, transfer, or otherwise
dispose of any of their respective assets (including without limitation
stock or other equity interests in any of the Subsidiaries or any of the
voting rights of any such stock or other equity interests); provided,
however, that the following dispositions shall be permitted so long as the
Company and the Restricted Subsidiaries, as applicable, receive full, fair
and reasonable consideration at the time of such disposition at least equal
to the fair market value of such asset being disposed:
-3-
<PAGE>
(i) dispositions of inventory in the ordinary course of
business of the Company and its Restricted Subsidiaries;
(ii) the Jeffrey Disposition, provided that all of the proceeds
(less reasonable expenses) from the Jeffrey Disposition shall be
applied to repay Borrowings (as defined in the Credit Agreement) under
the Credit Agreement;
(iii) the Shred-Tech Disposition, provided that all of the
proceeds (less reasonable expenses) from the Shred-Tech Disposition
shall be applied to prepay the Notes in accordance with paragraph 4A,
ratably with repayment of Borrowings (as defined in the Credit
Agreement) under the Credit Agreement;
(iv) any other disposition of assets having a Net Book Value not
to exceed $25,000,000 in the aggregate for as long as any Note remains
outstanding, provided, that with regard to any such disposition of
---------
assets having a Net Book Value in excess of $5,000,000 individually or
when aggregated with all other such dispositions on or after July 30,
1999 all of the proceeds (less reasonable expenses) from such
disposition or dispositions in excess of $5,000,000 shall be applied
to prepay the Notes in accordance with paragraph 4A, ratably with
repayment of Borrowings (as defined in the Credit Agreement) under the
Credit Agreement;
(v) disposition of assets that are worn out, obsolete or no
longer used or useful in the conduct of the business of the Company
and its Restricted Subsidiaries, so long as such assets are replaced
with assets of equal or greater value; and
(vi) disposition of assets to the Company or any wholly-owned
Restricted Subsidiary that is a Guarantor.
(g) New paragraphs 6K, 6L & 6M are added to the Note Agreement
reading in their entireties as follows:
6K. Consolidated Leverage Ratio. The Company will at all times
maintain or cause to be maintained a Consolidated Leverage Ratio of not
greater than: (i) 4.50 to 1.00 during the period from and including July
31, 1999 through September 29, 1999, (ii) 4.25 to 1.00 during the period
from and including September 30 through December 30, 1999, (iii) 3.75 to
1.00 during the period from and including December 31, 1999 through March
30, 2000, and (iv) 3.50 to 1.00 from and including March 31, 2000 and
thereafter.
6L. Consolidated Interest Coverage Ratio. The Company will at all
times maintain or cause to be maintained a Consolidated Interest Coverage
Ratio of not less than 3.50 to 1.00.
-4-
<PAGE>
6M. Capital Expenditures. The Company will not permit the aggregate
Capital Expenditures of the Company and its Subsidiaries to exceed
$20,000,000 during any four quarter period ending on the last day of any
fiscal quarter of the Company.
(h) Paragraph 10B of the Note Agreement is amended by inserting the
following new defined terms in the appropriate alphabetical order within such
paragraph:
"Agreed Expense Reduction Amount" shall mean, with respect to the
calculation of Adjusted EBITDA for any period, expenses, not to exceed the
amounts specified on Schedule 6K for such period, that were incurred by the
-----------
Company and its Restricted Subsidiaries prior to June 30, 1999 and were
actually deducted in arriving at EBITDA for such period but will not occur
in subsequent periods due to cost reductions related to the acquisition of
A.P. Green Industries, Inc. and its Subsidiaries.
"Adjusted EBITDA" shall mean, for each period of determination, the
sum of the following for the Company and its Restricted Subsidiaries on a
consolidated basis:
(A) EBITDA for such period, plus
(B) the Agreed Expense Reduction Amount.
"Capital Expenditures" shall mean, and for any period, all capital
expenditures as determined in accordance with GAAP and in any event shall
include, but not be limited to, all expenditures (whether paid in cash or
accrued as a liability, including the portion of Capitalized Lease
Obligations originally incurred during such period that are capitalized for
the consolidated balance sheet of the Company and its Subsidiaries) by the
Company and its Restricted Subsidiaries during such period for the
acquisition, construction, improvement or replacement of land, buildings,
equipment or other fixed or capital assets or leaseholds (excluding
expenditures properly chargeable to repairs or maintenance) or otherwise
included in "capital expenditures," "additions to property, plant or
equipment" or comparable items in the consolidated financial statements of
the Company and its Restricted Subsidiaries.
"Collateral" shall have the meaning specified in Section 4.01 of the
Credit Agreement, as in effect on the date hereof.
"Consolidated Interest Coverage Ratio" shall mean, as of the last day
of any fiscal quarter of the Company, the ratio of (a) Adjusted EBITDA for
the 12-month period ending on such day to (b) cash interest expense of the
Company and its Restricted Subsidiaries for the 12-month period ending on
such day.
-5-
<PAGE>
"Consolidated Leverage Ratio" shall mean, as of the last day of any
fiscal quarter of the Company, the ratio of (a) Consolidated Funded Debt as
of such last day to (b) Adjusted EBITDA for the 12-month period ending on
such day; provided, however, that for purposes of this definition
-------- -------
Consolidated Funded Debt shall not include the non-recourse Indebtedness of
Aken existing as of July 30, 1999, and Adjusted EBITDA shall not include
EBITDA of Aken or any portion of the Agreed Expense Reduction Amount
attributable to Aken.
"Credit Agreement" shall mean that certain Credit Agreement dated as
of July 30, 1999, among the Company, Chase Bank of Texas, National
Association, as administrative agent for the lenders party thereto from
time to time (the "Lenders") and the Lenders.
"EBITDA"shall mean, for each period of determination, the sum of (a)
consolidated net income of the Company and its Restricted Subsidiaries for
such period (whether positive or negative), plus, (b) each of the following
to the extent actually deducted in arriving at consolidated net income for
such period and without duplication: depreciation, amortization, taxes, and
interest expense of the Company and its Restricted Subsidiaries for such
period, minus (c) gains from the sale of fixed assets not in the ordinary
course of business, plus (d) to the extent actually deducted in arriving at
consolidated net income for such period and without duplication, losses
from the sale of fixed assets not in the ordinary course of business, minus
(e) extraordinary gains determined in accordance with GAAP, plus (f) to the
extent actually deducted in arriving at consolidated net income for such
period and without duplication, extraordinary losses determined in
accordance with GAAP, plus (g) to the extent actually deducted in arriving
at consolidated net income for such period and without duplication, noncash
charges incurred by the Borrower and its Restricted Subsidiaries in the
fiscal quarters ending September 30, 1998, December 31, 1998 and March 31,
1999 only.
"Income Taxes" shall mean federal, state, local and foreign income
taxes.
"Jeffrey" shall mean the Jeffrey Woodruff Division of Global
Processing Systems, Inc., a Subsidiary of the Company.
"Jeffrey Disposition" shall mean the disposition of all or
substantially all of the assets of Jeffrey.
"Net Book Value" of any asset shall mean the book value of such asset,
minus depreciation of such asset.
"Net Proceeds" from any issuance, sale or other disposition of any
shares of equity securities (or any securities convertible or exchangeable
for such shares, or any rights, warrants, or options to subscribe for or
purchase any such shares) shall mean the amount equal to (a) the aggregate
gross proceeds of such issuance, sale or other disposition, less (b) the
following reasonable fees and expenses: (i) placement agent fees, (ii)
underwriting
-6-
<PAGE>
discounts and commissions, (iii) bank and other lender fees, and (iv) legal
fees and legal expenses payable by the issuer in connection with such
issuance, sale or other disposition.
"Shred-Tech" shall mean the Shred-Tech Division of Global-GIX Canada
Inc., a Subsidiary of Company.
"Shred-Tech Disposition" shall mean the disposition of all or
substantially all of the assets of Shred-Tech.
(i) Exhibit A, in the forms attached hereto, hereby replace existing
Exhibit A to the Note Agreement.
(j) A new Schedule 6K is added to the Note Agreement, in the form
attached hereto as Schedule 6K.
Section 2. Effective Date. This Amendment shall become effective on
the date hereof (the "Effective Date"), subject in all cases to the following
having been received by and being satisfactory to the Purchasers:
(a) duly executed counterparts of this Amendment;
(b) duly executed Notes in the forms attached to this Amendment,
executed by the Co-Makers;
(c) duly executed Guaranties on behalf of Global Processing Systems,
Inc., Corrosion Technology International, A. P. Green Industries, Inc., Detrick
Refractory Fibers, Inc., Polymer Pipe Technology, Inc., and Corrosion IP Corp.;
(d) duly executed Security Documents, executed by the Company and the
Guarantors satisfactory to the Purchasers, creating a first priority security
interest in the collateral described therein;
(e) duly executed counterparts of the Intercreditor Agreement
executed by the Company, the Guarantors, the Banks and Chase National Bank of
Texas, National Association, as Collateral Agent for the Purchasers and the
Banks.
(f) a copy of the Credit Agreement as in effect on the Effective
Date, certified by the Co-Makers;
(g) certificates of the Secretary or Assistant Secretary of each of
the Guarantors and the Co-Makers attaching and certifying copies of (i) the
resolutions of the board of directors of such Guarantor authorizing the
execution and delivery of this Amendment; (ii) the resolutions of the board of
directors of each Co-Maker authorizing the execution, delivery, and performance
-7-
<PAGE>
of this Amendment; and (iii) the name, title and true signature of each officer
of such Guarantor or Co-Maker, as the case may be, executing the Amendment; and
for each Guarantor identified in subsection (c) of this section, (iv) the
certificate of incorporation of such Guarantor, as the case may be, and (v) the
bylaws of such Guarantor, as the case may be.
(h) a favorable opinion of Jeanette H. Quay, general counsel of the
Company, counsel for the Co-Makers and the Guarantors, satisfactory to the
Purchasers and the Purchasers' special counsel and addressing such matters as
the Purchasers may request;
(i) evidence satisfactory to the Purchasers that the Purchasers'
special counsel has received its fees, charges and disbursements charged or
incurred in connection with the preparation, negotiation, execution and delivery
of this Amendment, and any other documents executed and delivered
contemporaneously herewith or therewith, to the extent such fees, charges and
disbursements are reflected in a statement of such special counsel tendered to
the Co-Makers at least one Business Day prior to the execution of this
Amendment.
Section 3. Representations and Warranties. In order to induce the
Purchasers to enter into this Amendment, each of the Co-Makers represents and
warrants as follows:
(a) Organization. The Company is a corporation duly organized and
------------
validly existing in good standing under the laws of the State of Delaware. GPX
is a corporation duly organized and validly existing in good standing under the
laws of the State of Nevada. Each other Guarantor is a corporation duly
organized and validly existing in good standing under the laws of the state of
its incorporation.
(b) Power and Authority. Each of the Co-Makers and each Guarantor has
-------------------
all requisite corporate power to execute, deliver and perform its obligations
under this Amendment and the Notes executed by it. The execution, delivery and
performance by the Co-Makers of this Amendment and the Notes and the execution
and delivery by the Guarantors of this Amendment have been duly authorized by
all requisite corporate action on the part of each of the Co-Makers or such
Guarantors, as the case may be. Each of the Co-Makers has duly executed and
delivered this Amendment and the Notes, and this Amendment and the Notes
constitute legal, valid and binding obligations of each of the Co-Makers,
enforceable against the Co-Makers in accordance with their respective terms.
Each of the Guarantors has duly executed and delivered this Amendment, and this
Amendment constitutes the legal, valid and binding obligation of such Guarantor,
enforceable against it in accordance with its terms.
(c) No Conflicts. Neither the execution and delivery of this
------------
Amendment or the Notes by the Co-Makers or the execution and delivery of this
Amendment by the Guarantors, nor the consummation of the transactions
contemplated hereby, nor fulfillment of nor compliance with the terms and
provisions thereof will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any security interest, lien or other
encumbrance upon any of the properties or assets of the Co-
-8-
<PAGE>
Makers or the Guarantors pursuant to the certificate of incorporation or bylaws
of the Co-Makers or the Guarantors, any award of any arbitrator or any agreement
(including any agreement with stockholders), instrument, order, judgment,
decree, statute, law, rule or regulation to which the Co-Makers or the
Guarantors are subject.
(d) Consents. Neither the nature of the business conducted by the Co-
--------
Makers, nor any of its properties, nor any relationship between the Co-Makers
and any other Person, nor any circumstance in connection with the transactions
contemplated by this Amendment is such as to require any authorization, consent,
approval, exemption or other action by or notice to or filing with any court or
administrative or governmental body or any other Person in connection with the
execution and delivery of this Amendment or fulfillment of or compliance with
the terms and provisions hereof.
(e) No Event of Default or Default. Immediately following the
------------------------------
effectiveness of this Amendment, no Event of Default or Default exists.
(f) Other. All representations and warranties of the Co-Makers in the
-----
Credit Agreement and in the Security Documents are true and correct on the date
hereof, as though made on and as of such date.
Section 4. Miscellaneous.
(a) References to Note Agreement. Upon and after the Effective Date,
----------------------------
each reference to the Note Agreement in each document relating thereto shall
mean and be a reference to such Note Agreement as amended by this Amendment.
(b) Ratification and Confirmation. Except as specifically amended
-----------------------------
herein, the Note Agreement shall remain in full force and effect, and is hereby
ratified and confirmed.
(c) No Waiver. The execution, delivery and effectiveness of this
---------
Amendment shall not operate as a waiver of any right, power or remedy of any
Purchaser or any other holder of Notes, nor constitute a waiver of any provision
of the Note Agreement (as amended by this Amendment), the Notes or any other
document relating thereto.
(d) Expenses. The Company confirms its agreement, pursuant to
--------
paragraph 11B of the Note Agreement, to pay promptly all expenses of Purchaser
related to this Amendment and all matters contemplated hereby, including,
without limitation, all fees and expenses of the Purchasers' special counsel.
(e) GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN
-------------
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK, AND EACH OF THE PARTIES HERETO CHOOSES NEW YORK LAW TO
GOVERN THIS
-9-
<PAGE>
AMENDMENT PURSUANT TO N.Y. GEN. OBLIG. LAW SECTION 5-1401 (CONSOL. 1995).
(f) Counterparts. This Amendment may be executed in counterparts
------------
(including those transmitted by facsimile), each of which shall be deemed an
original and all of which taken together shall constitute one and the same
document. Delivery of this Amendment may be made by facsimile transmission of a
duly executed counterpart copy hereof.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute this Amendment as of the date first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ R. CHRIS BUSBEE
_________________________________________
Name: R. Chris Busbee
___________________________________
Title: Vice President
__________________________________
U.S. PRIVATE PLACEMENT FUND
By: Prudential Private Placement Investors, L.P.,
Investment Advisor
By: Prudential Private Placement Investors, Inc., its
General Partner
By: /s/ R. CHRIS BUSBEE
____________________________________
Title: Vice President
____________________________
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By: /s/ PAUL W. FEHLMAN
_________________________________________
Name: Paul W. Fehlman
___________________________________
Title: Treasurer
__________________________________
GPX CORP.
By: /s/ PAUL W. FEHLMAN
_________________________________________
Name: Paul W. Fehlman
___________________________________
Title: Treasurer
__________________________________
S-1
<PAGE>
Each of the undersigned Guarantors, having guaranteed the obligations of
the Co-Makers under the Note Agreement and the Notes issued thereunder, pursuant
to a Guaranty dated as of August 31, 1998 (the "Guaranty") hereby consents, as
of the date first above written, to the execution by the Co-Makers of the
foregoing Amendment; and reaffirms that the obligations of the Co-Makers under
the Note Agreement (defined above) as amended by the Amendment, and under the
replacement Notes issued pursuant to the Amendment constitute "Guaranteed
----------
Indebtedness" within the meaning of that Guaranty; and affirms that the Guaranty
- ------------
remains in full force and effect in favor of the Purchasers; and confirms that
the representations made in Section 4 hereof, insofar as such representations
relate to such Guarantor, are true and correct as of the date of the Amendment.
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By: /s/ PAUL W. FEHLMAN
____________________________________
Name: Paul W. Fehlman
_______________________________
Title: Treasurer
______________________________
GPX CORP.
By: /s/ PAUL W. FEHLMAN
____________________________________
Name: Paul W. Fehlman
_______________________________
Title: Treasurer
______________________________
HARBISON-WALKER REFRACTORIES
COMPANY
By: /s/ PAUL W. FEHLMAN
_________________________________________
Name: Paul W. Fehlman
___________________________________
Title: Treasurer
__________________________________
S-2
<PAGE>
HARBISON-WALKER INTERNATIONAL
REFRACTORIES, INC.
By: /s/ DONNA A. REEVES
______________________________________
Name: Donna A. Reeves
_________________________________
Title: Vice President
________________________________
A.P. GREEN REFRACTORIES, INC.
By: /s/ PAUL W. FEHLMAN
______________________________________
Name: Paul W. Fehlman
_________________________________
Title: Treasurer
________________________________
S-3
<PAGE>
EXHIBIT A
---------
[FORM OF NOTE]
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
GPX CORP.
6.83% SENIOR NOTE DUE ______________, 2008
No. R-_____ [Date]
$________
FOR VALUE RECEIVED, the undersigned, GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
(the "Company"), a corporation organized and existing under the laws of the
State of Delaware, and GPX CORP., a corporation organized and existing under the
laws of the State of Nevada (collectively, "Co-Makers"), hereby jointly and
severally promise to pay to ____________________________________________________
or registered assigns, the principal sum of _________________________ DOLLARS on
______________, 20___ with interest (computed on the basis of a 360-day
year--30-day month) (a) on the unpaid balance thereof through July 31, 1999, at
the rate of 6.83% per annum; from August 1, 1999 through October 31, 1999, at
the rate of 7.58%; from November 1, 1999 through January 31, 2000, at the rate
of 8.33%; from February 1, 2000 through April 30, 2000, at the rate of 8.83%;
from May 1, 2000 until the principal thereof shall have become due and payable
at the rate of 9.33%, such interest being payable quarterly on the last day of
March, June, September, and December (each an "Interest Payment Date") in each
year, commencing with the March, June, September, or December next succeeding
the date hereof, until the principal hereof shall have become due and payable,
and (b) on any overdue payment (including any overdue prepayment) of principal,
any overdue payment of interest and any overdue payment of any Yield-Maintenance
Amount (as defined in the Agreement referred to below), payable quarterly as
aforesaid (or, at the option of the registered holder hereof, on demand), at a
rate per annum from time to time equal to the lesser of (a) the maximum rate
permitted by applicable law or (b) the greater of (i) 2% in excess of the
interest rate that otherwise would apply under this Note at such time or (ii) 2%
over the rate of interest publicly announced by the Bank of New York from time
to time in New York City as its Prime Rate.
Payments of principal of, interest on and any Yield-Maintenance Amount
payable with respect to this Note are to be made at the main office of Bank of
New York in New York City or at such other place as the holder hereof shall
designate to the Company in writing, in lawful money of the United States of
America.
This Note is one of the 6.83% Senior Notes (the "Notes") issued pursuant to
a Note Agreement, dated as of June 30, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Agreement"), among the Co-Makers and
the original purchasers of the Notes named in the Information Schedule attached
thereto and is entitled to the benefits thereof. As provided in
N-1
<PAGE>
the Agreement, this Note is subject to prepayment, in whole or from time to time
in part on the terms specified in the Agreement.
This Note is a registered Note and, as provided in and subject to the
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Co-Makers may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Co-Makers shall not be affected by any notice to
the contrary.
This Note is subject to optional prepayment, in whole or from time to time
in part, on the terms specified in the Agreement.
In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreement.
The Co-Makers and any and all endorsers, guarantors and sureties severally
waive grace, demand, presentment for payment, notice of dishonor or default,
notice of intent to accelerate, notice of acceleration (to the extent set forth
in the Agreement), protest and diligence in collecting.
Should any indebtedness represented by this Note be collected at law or in
equity, or in bankruptcy or other proceedings, or should this Note be placed in
the hands of attorneys for collection, the Company agrees to pay, in addition to
the principal, Yield Maintenance Amount, if any, and interest due and payable
hereon, all costs of collecting or attempting to collect this Note, including
reasonable attorneys' fees and expenses (including those incurred in connection
with any appeal).
The Co-Makers, and the purchaser and the registered holder of this Note
specifically intend and agree to limit contractually the amount of interest
payable under this Note to the maximum amount of interest lawfully permitted to
be charged under applicable law. Therefore, none of the terms of this Note shall
ever be construed to create a contract to pay interest at a rate in excess of
the maximum rate permitted to be charged under applicable law, and neither the
Co-Makers nor any other party liable or to become liable hereunder shall ever be
liable for interest in excess of the amount determined at such maximum rate, and
the provisions of paragraph 11R of the Agreement shall control over any contrary
provision of this Note.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
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<PAGE>
This note is intended to be performed in the State of New York and shall be
construed and enforced in accordance with the law of such State.
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By: _____________________________________
Vice President
By: _____________________________________
Treasurer
GPX CORP.
By: _____________________________________
Vice President
By: _____________________________________
Treasurer
N-3
<PAGE>
SCHEDULE 6K
<PAGE>
EXHIBIT 10.42
=========================================================
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
GPX CORP.
________________________________
AMENDMENT NO. 4
dated as of July 30, 1999
to
Note Agreement dated as of January 31, 1996
$25,000,000 6.45% Senior Notes, Series A, Due January 31, 2002
$50,000,000 6.76% Senior Notes, Series B, Due January 31, 2006
________________________________
=========================================================
<PAGE>
AMENDMENT NO. 4 TO NOTE AGREEMENT
THIS AMENDMENT NO. 4 TO NOTE AGREEMENT dated as of July 30, 1999,
(this "Amendment"), is entered into by and between GLOBAL INDUSTRIAL
TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and GPX CORP., a
Nevada corporation ("GPX," and together with the Company, the "Co-Makers"), THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential") and PRINCIPAL LIFE
INSURANCE COMPANY ("Principal")(collectively, the "Purchasers").
Recitals
--------
A. The Co-Makers and the Purchasers entered into a Note Agreement dated
as of January 31, 1996 (as amended, supplemented or otherwise modified from
time to time, the "Note Agreement"), pursuant to which the Co-Makers issued and
sold to the Purchasers and the Purchasers purchased, on the terms and conditions
therein set forth, the Co-Makers' 6.45% Senior Notes, Series A, Due January 31,
2002, in the aggregate principal amount of $25,000,000, and 6.76% Senior Notes,
Series B, Due January 31, 2006 in the aggregate principal amount of $50,000,000
(the "Notes"). The Purchasers remain, collectively, the holders of 100% of the
outstanding principal amount of the Notes.
Capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed to them in the Note Agreement.
B. The Co-Makers and Chase Bank of Texas, N.A., ABN Amro Bank N.V., PNC
Bank, National Association and the other financial institutions party thereto
(collectively, the "Banks") have entered into a Credit Agreement dated as of
July 30, 1999 (as the same may be amended, modified, or supplemented from time
to time, the "Credit Agreement"), pursuant to which the Banks have agreed to
extend credit to the Co-Makers in the form of revolving credit advances not to
exceed an aggregate principal amount of $120,000,000.
C. The Company and the Restricted Subsidiaries (including GPX) that have
executed guaranties in connection with the Credit Agreement (collectively, the
"Guarantors") have executed Guaranties in respect of the Co-Makers' obligations
under the Notes.
D. The Guarantors, the Banks, and the Purchasers have executed a Sharing
Agreement dated as of August 31, 1998 as supplemented by agreement dated as of
October 2, 1998 and additional agreements dated as of July 30, 1999.
<PAGE>
E. The Company and the Guarantors have entered into security agreements,
guaranties and pledges (the "Security Documents") in favor of Chase Bank of
Texas, National Association, as Collateral Agent for the Purchasers and the
Banks, all as identified in the Credit Agreement and in the Intercreditor
Agreement referred to below.
F. The Guarantors, the Banks, the Company and the Purchasers have
executed or will execute an Intercreditor Agreement of even date herewith (the
"Intercreditor Agreement").
G. The Co-Makers and the Purchasers desire to amend the Note Agreement in
the respects, but only in the respects, hereinafter set forth.
NOW, THEREFORE, the Co-Makers and the Purchasers, in consideration of the
foregoing and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, do hereby agree as follows:
Section 1. Amendment of the Note Agreement. The Note Agreement is hereby
amended as follows:
(a) Paragraphs 1A and 1B of the Note Agreement are amended to read in
their entirety as follows:
1A. Authorization of Issue of Series A Notes. The Co-Makers will
authorize the issue of their joint and several senior promissory notes,
Series A, in the aggregate principal amount of $25,000,000: (i) to be dated
the date of issue thereof; (ii) to mature January 31, 2002; (iii) to bear
interest on the unpaid balance thereof (A) from the date thereof through
July 31, 1999 at the rate of 6.45% per annum; from August 1, 1999 through
October 31, 1999, at the rate of 7.20%; from November 1, 1999 through
January 31, 2000, at the rate of 7.95%; from February 1, 2000 through April
30, 2000, at the rate of 8.45%; and from May 1, 2000 until the principal
thereof shall have become due and payable at the rate of 8.95% and (B) on
overdue payments at the rate specified therein, and to be substantially in
the form of Exhibit A attached hereto. The term "Series A Notes" as used
---------
herein shall include each such senior promissory note, Series A, delivered
pursuant to any provision of this Agreement and each such senior promissory
note delivered in substitution or exchange for any other Series A Note
pursuant to any such provision.
1B. Authorization of Issue of Series B Notes. The Co-Makers will
authorize the issue of their joint and several senior promissory notes,
Series B, in the aggregate principal amount of $50,000,000: (i) to be
dated the date of issue thereof ; (ii) to mature January 31, 2006; (iii)
to bear interest (A) on the unpaid balance thereof through July 31, 1999,
at the rate of 6.76% per annum; from August 1, 1999 through October 31,
1999, at the rate of 7.51%; from November 1, 1999 through January 31, 2000,
at the rate of 8.26%; from February 1, 2000 through April 30, 2000, at the
rate of 8.76%; and from May 1, 2000 until the principal thereof shall have
become due and payable at the rate of 9.26% and (B) on
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<PAGE>
overdue payments at the rate specified therein, and to be substantially in
the form of Exhibit B attached hereto. The term "Series B Notes" as used
---------
herein shall include-each such senior promissory note, Series B, delivered
pursuant to any provision of this Agreement and each such senior promissory
note delivered in substitution or exchange for any other Series B Note
pursuant to any such provision.
Capitalized terms used herein have the meanings specified in paragraph
10. The term "Notes" as used herein shall include each Series A Note and each
Series B Note.
(b) Paragraph 4 of the Note Agreement is amended by deleting the
works "optional prepayments permitted" and inserting in their place the word
"prepayments".
(c) Paragraph 5A of the Note Agreement is amended by deleting the
word "and" found between the references to paragraphs "6G" and "6I" in the
fourth line of the text immediately following paragraph 5A(vi), and by inserting
the words "6K, 6L and (for periods ending on or after September 30, 1999) 6M"
immediately following the reference to "6I" in that line.
(d) Paragraph 6A of the Note Agreement is amended in its entirety
to read as follows:
6A. Minimum Consolidated Net Worth. The Company will at all times
maintain or cause to be maintained Consolidated Net Worth in an amount not
less than the sum of (a) $209,250,000 plus (b) 50% of net income, after
provision for income taxes, of the Company and the Restricted Subsidiaries
on a consolidated basis (without any deduction for losses) for each fiscal
quarter of the Company ended through the date of determination, beginning
with the fiscal quarter ending September 30, 1999, plus (c) 100% of the Net
Proceeds received by the Company from any issuance, sale or other
disposition of any shares of capital stock or other equity securities of
the Company of any class (or any securities convertible or exchangeable for
any such shares, or any rights, warrants, or options to subscribe for or
purchase any such shares).
(e) Paragraph 6E is amended by deleting subparagraph (viii) and
inserting in lieu of the following subparagraphs (viii), (ix) and (x):
(viii) Liens securing the Notes and the Obligations arising under
and as defined in the Credit Agreement, and the notes of the Co-Makers issued
under the Note Agreement dated October 2, 1998, between the Co-Maker and The
Prudential Insurance Company of America, and the Note Agreement dated June 30,
1998, between the Co-Maker and The Prudential Insurance Company of America and
U.S. Private Placement Fund.
(ix) Liens on assets owned by the Company within the United States,
other than assets included in the Collateral, to secure Debt of the Company or a
Subsidiary not in excess of
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<PAGE>
$3,000,000 in the aggregate at any time outstanding provided that such Liens do
not secure any other Debt.
(x) Liens on assets located in Canada and owned by any Restricted
Subsidiary of the Company organized under the laws of Canada, to secure Debt of
the Company or a Subsidiary not in excess of C$15,000,000 in the aggregate at
any time outstanding, provided that such Liens do not secure any other Debt.
(f) Paragraph 6F is amended to read in its entirety as follows:
6F. Disposition of Assets. The Company will not and will not permit
any Restricted Subsidiary to sell, lease, assign, transfer, or otherwise
dispose of any of their respective assets (including without limitation
stock or other equity interests in any of the Subsidiaries or any of the
voting rights of any such stock or other equity interests); provided,
however, that the following dispositions shall be permitted so long as the
Company and the Restricted Subsidiaries, as applicable, receive full, fair
and reasonable consideration at the time of such disposition at least equal
to the fair market value of such asset being disposed:
(i) dispositions of inventory in the ordinary course of
business of the Company and its Restricted Subsidiaries;
(ii) the Jeffrey Disposition, provided that all of the
proceeds (less reasonable expenses) from the Jeffrey Disposition shall be
applied to repay Borrowings (as defined in the Credit Agreement) under the
Credit Agreement;
(iii) the Shred-Tech Disposition, provided that all of the
proceeds (less reasonable expenses) from the Shred-Tech Disposition shall
be applied to prepay the Notes in accordance with paragraph 4B, ratably
with repayment of Borrowings (as defined in the Credit Agreement) under the
Credit Agreement;
(iv) any other disposition of assets having a Net Book Value
not to exceed $25,000,000 in the aggregate for as long as any Note remains
outstanding, provided, that with regard to any such disposition of assets
--------
having a Net Book Value in excess of $5,000,000 individually or when
aggregated with all other such dispositions on or after July 30, 1999 all
of the proceeds (less reasonable expenses) from such disposition or
dispositions in excess of $5,000,000 shall be applied to prepay the Notes
in accordance with paragraph 4B, ratably with repayment of Borrowings (as
defined in the Credit Agreement) under the Credit Agreement;
(v) disposition of assets that are worn out, obsolete or no
longer used or useful in the conduct of the business of the Company and its
Restricted Subsidiaries, so long as such assets are replaced with assets of
equal or greater value; and
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<PAGE>
(vi) disposition of assets to the Company or any wholly-owned
Restricted Subsidiary that is a Guarantor.
(g) New paragraphs 6K, 6L & 6M are added to the Note Agreement
reading in their entireties as follows:
6K. Consolidated Leverage Ratio. The Company will at all times
maintain or cause to be maintained a Consolidated Leverage Ratio of not
greater than: (i) 4.50 to 1.00 during the period from and including July
31, 1999 through September 29, 1999, (ii) 4.25 to 1.00 during the period
from and including September 30 through December 30, 1999, (iii) 3.75 to
1.00 during the period from and including December 31, 1999 through March
30, 2000, and (iv) 3.50 to 1.00 from and including March 31, 2000 and
thereafter.
6L. Consolidated Interest Coverage Ratio. The Company will at all
times maintain or cause to be maintained a Consolidated Interest Coverage
Ratio of not less than 3.50 to 1.00.
6M. Capital Expenditures. The Company will not permit the aggregate
Capital Expenditures of the Company and its Subsidiaries to exceed
$20,000,000 during any four quarter period ending on the last day of any
fiscal quarter of the Company.
(h) Paragraph 10B of the Note Agreement is amended by inserting the
following new defined terms in the appropriate alphabetical order within such
paragraph:
"Agreed Expense Reduction Amount" shall mean, with respect to the
calculation of Adjusted EBITDA for any period, expenses, not to exceed the
amounts specified on Schedule 6K for such period, that were incurred by the
-----------
Company and its Restricted Subsidiaries prior to June 30, 1999 and were
actually deducted in arriving at EBITDA for such period but will not occur
in subsequent periods due to cost reductions related to the acquisition of
A.P. Green Industries, Inc. and its Subsidiaries.
"Adjusted EBITDA" shall mean, for each period of determination, the
sum of the following for the Company and its Restricted Subsidiaries on a
consolidated basis :
(A) EBITDA for such period, plus
(B) the Agreed Expense Reduction Amount.
"Capital Expenditures" shall mean, and for any period, all capital
expenditures as determined in accordance with GAAP and in any event shall
include, but not be limited to, all expenditures (whether paid in cash or
accrued as a liability, including the portion of Capitalized Lease
Obligations originally incurred during such period that are capitalized for
the consolidated balance sheet of the Company and its Subsidiaries) by the
Company and its
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<PAGE>
Restricted Subsidiaries during such period for the acquisition,
construction, improvement or replacement of land, buildings, equipment or
other fixed or capital assets or leaseholds (excluding expenditures
properly chargeable to repairs or maintenance) or otherwise included in
"capital expenditures," "additions to property, plant or equipment" or
comparable items in the consolidated financial statements of the Company
and its Restricted Subsidiaries.
"Collateral" shall have the meaning specified in Section 4.01 of the
Credit Agreement, as in effect on the date hereof.
"Consolidated Interest Coverage Ratio" shall mean, as of the last day
of any fiscal quarter of the Company, the ratio of (a) Adjusted EBITDA for
the 12-month period ending on such day to (b) cash interest expense of the
Company and its Restricted Subsidiaries for the 12-month period ending on
such day.
"Consolidated Leverage Ratio" shall mean, as of the last day of any
fiscal quarter of the Company, the ratio of (a) Consolidated Funded Debt as
of such last day to (b) Adjusted EBITDA for the 12-month period ending on
such day; provided, however, that for purposes of this definition
-------- -------
Consolidated Funded Debt shall not include the non-recourse Indebtedness of
Aken existing as of July 30, 1999, and Adjusted EBITDA shall not include
EBITDA of Aken or any portion of the Agreed Expense Reduction Amount
attributable to Aken.
"Credit Agreement" shall mean that certain Credit Agreement dated as
of July 30, 1999, among the Company, Chase Bank of Texas, National
Association, as administrative agent for the lenders party thereto from
time to time (the "Lenders") and the Lenders.
"EBITDA" shall mean, for each period of determination, the sum of (a)
consolidated net income of the Company and its Restricted Subsidiaries for
such period (whether positive or negative), plus, (b) each of the following
to the extent actually deducted in arriving at consolidated net income for
such period and without duplication: depreciation, amortization, taxes, and
interest expense of the Company and its Restricted Subsidiaries for such
period, minus (c) gains from the sale of fixed assets not in the ordinary
course of business, plus (d) to the extent actually deducted in arriving at
consolidated net income for such period and without duplication, losses
from the sale of fixed assets not in the ordinary course of business, minus
(e) extraordinary gains determined in accordance with GAAP, plus (f) to the
extent actually deducted in arriving at consolidated net income for such
period and without duplication, extraordinary losses determined in
accordance with GAAP, plus (g) to the extent actually deducted in arriving
at consolidated net income for such period and without duplication, noncash
charges incurred by the Borrower and its Restricted Subsidiaries in the
fiscal quarters ending September 30, 1998, December 31, 1998 and March 31,
1999 only.
"Income Taxes" shall mean federal, state, local and foreign income
taxes.
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<PAGE>
"Jeffrey" shall mean the Jeffrey Woodruff Division of Global
Processing Systems, Inc., a Subsidiary of the Company.
"Jeffrey Disposition" shall mean the disposition of all or
substantially all of the assets of Jeffrey.
"Net Book Value" of any asset shall mean the book value of such asset,
minus depreciation of such asset.
"Net Proceeds" from any issuance, sale or other disposition of any
shares of equity securities (or any securities convertible or exchangeable
for such shares, or any rights, warrants, or options to subscribe for or
purchase any such shares) shall mean the amount equal to (a) the aggregate
gross proceeds of such issuance, sale or other disposition, less (b) the
following reasonable fees and expenses: (i) placement agent fees, (ii)
underwriting discounts and commissions, (iii) bank and other lender fees,
and (iv) legal fees and legal expenses payable by the issuer in connection
with such issuance, sale or other disposition.
"Shred-Tech" shall mean the Shred-Tech Division of Global-GIX Canada
Inc., a Subsidiary of Company.
"Shred-Tech Disposition" shall mean the disposition of all or
substantially all of the assets of Shred-Tech.
(i) Exhibits A and B, in the forms attached hereto, hereby replace
Exhibits A and B to the Note Agreement.
(j) A new Schedule 6K is added to the Note Agreement, in the form
attached hereto as Schedule 6K.
Section 2. Effective Date. This Amendment shall become effective on
the date hereof (the "Effective Date"), subject in all cases to the following
having been received by and being satisfactory to the Purchasers:
(a) duly executed counterparts of this Amendment;
(b) duly executed Notes in the forms attached to this Amendment,
executed by the Co-Makers;
(c) duly executed Guaranties on behalf of Global Processing Systems,
Inc., Corrosion Technology International, A. P. Green Industries, Inc., Detrick
Refractory Fibers, Inc., Polymer Pipe Technology, Inc., and Corrosion IP Corp.;
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<PAGE>
(d) duly executed Security Documents, executed by the Company and the
Guarantors satisfactory to the Purchasers, creating a first priority security
interest in the collateral described therein;
(e) duly executed counterparts of the Intercreditor Agreement
executed by the Company, the Guarantors, the Banks and Chase National Bank of
Texas, National Association, as Collateral Agent for the Purchasers and the
Banks.
(f) a copy of the Credit Agreement as in effect on the Effective
Date, certified by the Co-Makers;
(g) certificate of the Secretary or Assistant Secretary of each of
the Guarantors and the Co-Makers attaching and certifying copies of(i) the
resolutions of the board of directors of such Guarantor authorizing the
execution and delivery of this Amendment; (ii) the resolutions of the board of
directors of each Co-Maker authorizing the execution, delivery, and performance
of this Amendment; and (iii) the name, title and true signature of each officer
of such Guarantor or Co-Maker, as the case may be, executing the Amendment; and
for each Guarantor identified in subsection (c) of this section, (iv) the
certificate of incorporation of such Guarantor, as the case may be, and (v) the
bylaws of such Guarantor, as the case may be.
(h) a favorable opinion of Jeanette H. Quay, general counsel of the
Company, counsel for the Co-Makers and the Guarantors, satisfactory to the
Purchasers and the Purchasers' special counsel and addressing such matters as
the Purchasers may request;
(i) evidence satisfactory to the Purchasers that the Purchasers'
special counsel has received its fees, charges and disbursements charged or
incurred in connection with the preparation, negotiation, execution and delivery
of this Amendment, and any other documents executed and delivered
contemporaneously herewith or therewith, to the extent such fees, charges and
disbursements are reflected in a statement of such special counsel tendered to
the Co-Makers at least one Business Day prior to the execution of this
Amendment.
Section 3. Representations and Warranties. In order to induce the
Purchasers to enter into this Amendment, each of the Co-Makers represents and
warrants as follows:
(a) Organization. The Company is a corporation duly organized and
------------
validly existing in good standing under the laws of the State of Delaware. GPX
is a corporation duly organized and validly existing in good standing under the
laws of the State of Nevada. Each other Guarantor is a corporation duly
organized and validly existing in good standing under the laws of the state of
its incorporation.
(b) Power and Authority. Each of the Co-Makers and each Guarantor
-------------------
has all requisite corporate power to execute, deliver and perform its
obligations under this Amendment and the Notes executed by it. The execution,
delivery and performance by the Co-Makers of this
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<PAGE>
Amendment and the Notes and the execution and delivery by the Guarantors of this
Amendment have been duly authorized by all requisite corporate action on the
part of each of the Co-Makers or such Guarantors, as the case may be. Each of
the Co-Makers has duly executed and delivered this Amendment and the Notes, and
this Amendment and the Notes constitute legal, valid and binding obligations of
each of the Co-Makers, enforceable against the Co-Makers in accordance with
their respective terms. Each of the Guarantors has duly executed and delivered
this Amendment, and this Amendment constitutes the legal, valid and binding
obligation of such Guarantor, enforceable against it in accordance with its
terms.
(c) No Conflicts. Neither the execution and delivery of this
------------
Amendment or the Notes by the Co-Makers or the execution and delivery of this
Amendment by the Guarantors, nor the consummation of the transactions
contemplated hereby, nor fulfillment of nor compliance with the terms and
provisions thereof will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any security interest, lien or other
encumbrance upon any of the properties or assets of the Co-Makers or the
Guarantors pursuant to the certificate of incorporation or bylaws of the Co-
Makers or the Guarantors, any award of any arbitrator or any agreement
(including any agreement with stockholders), instrument, order, judgment,
decree, statute, law, rule or regulation to which the Co-Makers or the
Guarantors are subject.
(d) Consents. Neither the nature of the business conducted by the
--------
Co-Makers, nor any of its properties, nor any relationship between the Co-Makers
and any other Person, nor any circumstance in connection with the transactions
contemplated by this Amendment is such as to require any authorization, consent,
approval, exemption or other action by or notice to or filing with any court or
administrative or governmental body or any other Person in connection with the
execution and delivery of this Amendment or fulfillment of or compliance with
the terms and provisions hereo f.
(e) No Event of Default or Default. Immediately following the
------------------------------
effectiveness of this Amendment, no Event of Default or Default exists.
(f) Other. All representations and warranties of the Co-Makers in
-----
the Credit Agreement and in the Security Documents are true and correct on the
date hereof, as though made on and as of such date.
Section 4. Miscellaneous.
(a) References to Note Agreement. Upon and after the Effective Date,
----------------------------
each reference to the Note Agreement in each document relating thereto shall
mean and be a reference to such Note Agreement as amended by this Amendment.
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<PAGE>
(b) Ratification and Confirmation. Except as specifically amended
-----------------------------
herein, the Note Agreement shall remain in full force and effect, and is hereby
ratified and confirmed.
(c) No Waiver. The execution, delivery and effectiveness of this
---------
Amendment shall not operate as a waiver of any right, power or remedy of any
Purchaser or any other holder of Notes, nor constitute a waiver of any provision
of the Note Agreement (as amended by this Amendment), the Notes or any other
document relating thereto.
(d) Expenses. The Company confirms its agreement, pursuant to
--------
paragraph 11B of the Note Agreement, to pay promptly all expenses of Purchaser
related to this Amendment and all matters contemplated hereby, including,
without limitation, all fees and expenses of the Purchasers' special counsel.
(e) GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN
-------------
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK, AND EACH OF THE PARTIES HERETO CHOOSES NEW YORK LAW TO
GOVERN THIS AMENDMENT PURSUANT TO N.Y. GEN. OBLIG. LAW SECTION 5-1401 (CONSOL.
1995).
(f) Counterparts. This Amendment may be executed in counterparts
------------
(including those transmitted by facsimile), each of which shall be deemed an
original and all of which taken together shall constitute one and the same
document. Delivery of this Amendment may be made by facsimile transmission of a
duly executed counterpart copy hereof.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute this Amendment as of the date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: __________________________________________________
Name: ___________________________________________
Title: __________________________________________
PRINCIPAL LIFE INSURANCE COMPANY
By: PRINCIPAL CAPITAL MANAGEMENT, LLC, a Delaware
limited liability company, its authorized
signatory
By: ______________________________________________
Title: ______________________________________
By: ______________________________________________
Title: ______________________________________
PRINCIPAL LIFE INSURANCE COMPANY, ON BEHALF OF ONE OR
MORE SEPARATE ACCOUNTS
By: PRINCIPAL CAPITAL MANAGEMENT, LLC, a Delaware
limited liability company, its authorized
signatory
By: ___________________________________________________
Title: ____________________________________________
By: ___________________________________________________
Title: ____________________________________________
S-1
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By: /s/ PAUL W. FEHLMAN
___________________________________________________
Name: Paul W. Fehlman
_____________________________________________
Title: Treasurer
____________________________________________
GPX CORP.
By: /s/ PAUL W. FEHLMAN
___________________________________________________
Name: Paul W. Fehlman
_____________________________________________
Title: Treasurer
____________________________________________
S-2
<PAGE>
Each of the undersigned Guarantors, having guaranteed the obligations of
the Co-Makers under the Note Agreement and the Notes issued thereunder, pursuant
to a Guaranty dated as of August 31, 1998 (the "Guaranty") hereby consents, as
of the date first above written, to the execution by the Co-Makers of the
foregoing Amendment; and reaffirms that the obligations of the Co-Makers under
the Note Agreement (defined above) as amended by the Amendment, and under the
replacement Notes issued pursuant to the Amendment constitute "Guaranteed
----------
Indebtedness" within the meaning of that Guaranty; and affirms that the Guaranty
- ------------
remains in full force and effect in favor of the Purchasers; and confirms that
the representations made in Section 4 hereof, insofar as such representations
relate to such Guarantor, are true and correct as of the date of the Amendment.
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By: /s/ PAUL W. FEHLMAN
___________________________________________________
Name: Paul W. Fehlman
_____________________________________________
Title: Treasurer
____________________________________________
GPX CORP.
By: /s/ PAUL W. FEHLMAN
___________________________________________________
Name: Paul W. Fehlman
_____________________________________________
Title: Treasurer
____________________________________________
HARBISON-WALKER REFRACTORIES COMPANY
By: /s/ PAUL W. FEHLMAN
___________________________________________________
Name: Paul W. Fehlman
_____________________________________________
Title: Treasurer
____________________________________________
S-3
<PAGE>
HARBISON-WALKER INTERNATIONAL REFRACTORIES, INC.
By: /s/ DONNA A. REEVES
___________________________________________________
Name: Donna A. Reeves
_____________________________________________
Title: Vice President
____________________________________________
A.P. GREEN REFRACTORIES, INC.
By: /s/ PAUL W. FEHLMAN
___________________________________________________
Name: Paul W. Fehlman
_____________________________________________
Title: Treasurer
____________________________________________
S-4
<PAGE>
EXHIBIT A
---------
[FORM OF SERIES A NOTE]
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
GPX CORP.
6.45% SENIOR NOTE, SERIES A, DUE January 31, 2002
No. A-_____ [Date]
$_________
FOR VALUE RECEIVED, the undersigned, GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
(the "Company"), a corporation organized and existing under the laws of the
State of Delaware, and GPX CORP., a corporation organized and existing under the
laws of the State of Nevada (collectively, "Co-Makers"), hereby jointly and
severally promise to pay to ___________________, or registered assigns, the
principal sum of _______________________ DOLLARS on January 31, 2002, with
interest (computed on the basis of a 360-day year--30-day month) (a) on the
unpaid balance thereof through July 31, 1999, at the rate of 6.45% per annum;
from August 1, 1999 through October 31, 1999, at the rate of 7.20%; from
November 1, 1999 through January 31, 2000, at the rate of 7.95%; from February
1, 2000 through April 30, 2000, at the rate of 8.45%; from May 1, 2000 until the
principal thereof shall have become due and payable at the rate of 8.95%, such
interest being payable semiannually on the 31st day of July and January in each
year, commencing with the July or January next succeeding the date hereof, until
the principal hereof shall have become due and payable, and (b) on any overdue
payment (including any overdue prepayment) of principal, any overdue payment of
interest and any overdue payment of any Yield-Maintenance Amount (as defined in
the Agreement referred to below), payable semiannually as aforesaid (or, at the
option of the registered holder hereof, on demand), at a rate per annum from
time to time equal to the lesser of (a) the maximum rate permitted by applicable
law or (b) the greater of (i) 2% in excess of the interest rate that otherwise
would apply under this Note at such time or (ii) 2% over the rate of interest
publicly announced by the Bank of New York from time to time in New York City as
its Prime Rate.
Payments of principal of, interest on and any Yield-Maintenance Amount
payable with respect to this Note are to be made at the main office of the Bank
of New York in New York City or at such other place as the holder hereof shall
designate to the Company in writing, in lawful money of the United States of
America.
This Note is one of the 6.45% Senior Notes, Series A (the "Notes") issued
pursuant to a Note Agreement, dated as of January 31, 1996 (as amended,
supplemented or otherwise modified from time to time, the "Agreement"), among
the Co-Makers and the original purchasers of the Series A Notes named in the
Information Schedule attached thereto and is entitled to the
N-1
<PAGE>
benefits thereof. As provided in the Agreement, this Note is subject to
prepayment, in whole or from time to time in part on the terms specified in the
Agreement.
This Note is a registered Note and, as provided in and subject to the
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Co-Makers may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Co-Makers shall not be affected by any notice to
the contrary.
This Note is subject to optional prepayment, in whole or from time to time
in part, on the terms specified in the Agreement.
In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreement.
The Co-Makers and any and all endorsers, guarantors and sureties severally
waive grace, demand, presentment for payment, notice of dishonor or default,
notice of intent to accelerate, notice of acceleration (to the extent set forth
in the Agreement), protest and diligence in collecting.
Should any indebtedness represented by this Note be collected at law or in
equity, or in bankruptcy or other proceedings, or should this Note be placed in
the hands of attorneys for collection, the Company agrees to pay, in addition to
the principal, Yield-Maintenance Amount, if any, and interest due and payable
hereon, all costs of collecting or attempting to collect this Note, including
reasonable attorneys' fees and expenses (including those incurred in connection
with any appeal).
The Co-Makers, and the purchaser and the registered holder of this Note
specifically intend and agree to limit contractually the amount of interest
payable under this Note to the maximum amount of interest lawfully permitted to
be charged under applicable law. Therefore, none of the terms of this Note
shall ever be construed to create a contract to pay interest at a rate in excess
of the maximum rate permitted to be charged under applicable law, and neither
the Co-Makers nor any other party liable or to become liable hereunder shall
ever by liable for interest in excess of the amount determined at such maximum
rate, and the provisions of paragraph 11R of the Agreement shall control over
any contrary provision of this Note.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
N-2
<PAGE>
This note is intended to be performed in the State of New York and shall
be construed and enforced in accordance with the law of such State.
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By: ________________________________________________________
Vice President
By: ________________________________________________________
Treasurer
GPX CORP.
By: ________________________________________________________
Vice President
By: ________________________________________________________
Treasurer
N-3
<PAGE>
EXHIBIT B
---------
[FORM OF SERIES B NOTE]
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
GPX CORP.
6.76% SENIOR NOTE, SERIES B, DUE January 31, 2006
No. B-_____ [Date]
$_________
FOR VALUE RECEIVED, the undersigned, GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
(the "Company"), a corporation organized and existing under the laws of the
State of Delaware, and GPX CORP., a corporation organized and existing under the
laws of the State of Nevada (collectively, "Co-Makers"), hereby jointly and
severally promise to pay to ___________________, or registered assigns, the
principal sum of _______________________ DOLLARS on January 31, 2006, with
interest (computed on the basis of a 360-day year--30-day month) (a) on the
unpaid balance thereof through July 31, 1999, at the rate of 6.76% per annum;
from August 1, 1999 through October 31, 1999, at the rate of 7.51%; from
November 1, 1999 through January 31, 2000, at the rate of 8.26%; from February
1, 2000 through April 30, 2000, at the rate of 8.76%; from May 1, 2000 until the
principal thereof shall have become due and payable at the rate of 9.26%, such
interest being payable semiannually on the 31st day of July and January in each
year, commencing with the July or January next succeeding the date hereof, until
the principal hereof shall have become due and payable, and (b) on any overdue
payment (including any overdue prepayment) of principal, any overdue payment of
interest and any overdue payment of any Yield-Maintenance Amount (as defined in
the Agreement referred to below), payable semiannually as aforesaid (or, at the
option of the registered holder hereof, on demand), at a rate per annum from
time to time equal to the lesser of (a) the maximum rate permitted by applicable
law or (b) the greater of (i) 2% in excess of the interest rate that otherwise
would apply under this Note at such time or (ii) 2% over the rate of interest
publicly announced by the Bank of New York from time to time in New York City as
its Prime Rate.
Payments of principal of, interest on and any Yield-Maintenance Amount
payable with respect to this Note are to be made at the main office of the Bank
of New York in New York City or at such other place as the holder hereof shall
designate to the Company in writing, in lawful money of the United States of
America.
This Note is one of the 6.76% Senior Notes, Series B (the "Notes") issued
pursuant to a Note Agreement, dated as of January 31, 1996 (as amended,
supplemented or otherwise modified from time to time, the "Agreement"), among
the Co-Makers and the original purchasers of the Series B Notes named in the
Information Schedule attached thereto and is entitled to the
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<PAGE>
benefits thereof. As provided in the Agreement, this Note is subject to
prepayment, in whole or from time to time in part on the terms specified in the
Agreement.
This Note is a registered Note and, as provided in and subject to the
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Co-Makers may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Co-Makers shall not be affected by any notice to
the contrary.
The Co-Makers agree to make required prepayments of principal on the dates
and in the amounts specified in the Agreement. This Note is also subject to
optional prepayment, in whole or from time to time in part, on the terms
specified in the Agreement.
In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreement.
The Co-Makers and any and all endorsers, guarantors and sureties severally
waive grace, demand, presentment for payment, notice of dishonor or default,
notice of intent to accelerate, notice of acceleration (to the extent set forth
in the Agreement), protest and diligence in collecting.
Should any indebtedness represented by this Note be collected at law or in
equity, or in bankruptcy or other proceedings, or should this Note be placed in
the hands of attorneys for collection, the Co-Makers agree to pay, in addition
to the principal, Yield-Maintenance Amount, if any, and interest due and payable
hereon, all costs of collecting or attempting to collect this Note, including
reasonable attorneys' fees and expenses (including those incurred in connection
with any appeal).
The Co-Makers, and the purchaser and the registered holder of this Note
specifically intend and agree to limit contractually the amount of interest
payable under this Note to the maximum amount of interest lawfully permitted to
be charged under applicable law. Therefore, none of the terms of this Note
shall ever be construed to create a contract to pay interest at a rate in excess
of the maximum rate permitted to be charged under applicable law, and neither
the Co-Makers nor any other party liable or to become liable hereunder shall
ever by liable for interest in excess of the amount determined at such maximum
rate, and the provisions of paragraph 11R of the Agreement shall control over
any contrary provision of this Note.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
N-2
<PAGE>
This note is intended to be performed in the State of New York and shall
be construed and enforced in accordance with the law of such State.
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By: ________________________________________________________
Vice President
By: ________________________________________________________
Treasurer
GPX CORP.
By: ________________________________________________________
Vice President
By: ________________________________________________________
Treasurer
N-3
<PAGE>
SCHEDULE 6K
<PAGE>
EXHIBIT 10.43
CREDIT AGREEMENT
Dated as of
July 30, 1999
among
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.,
as Borrower
The Lenders Party Hereto,
PNC BANK, NATIONAL ASSOCIATION,
as Syndication Agent,
ABN AMRO BANK N.V.,
as Issuing Bank and as Documentation Agent
And
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Administrative Agent
________________________
CHASE SECURITIES INC.,
as Sole Lead Arranger and Book Manager
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - Definitions.............................................................. 1
SECTION 1.01. Defined Terms..................................................... 1
SECTION 1.02 Terms Generally................................................... 18
SECTION 1.03 Accounting Terms; GAAP............................................ 19
ARTICLE II - The Credits............................................................. 19
SECTION 2.01 Commitments....................................................... 19
SECTION 2.02 Loans and Borrowings.............................................. 19
SECTION 2.03 Requests for Borrowings........................................... 20
SECTION 2.04 Letters of Credit................................................. 21
SECTION 2.05 Funding of Borrowings............................................. 25
SECTION 2.06 Interest Elections................................................ 26
SECTION 2.07 Termination and Reduction of Commitments.......................... 27
SECTION 2.08 Repayment of Loans; Evidence of Debt.............................. 29
SECTION 2.09 Prepayment of Loans............................................... 30
SECTION 2.10 Fees.............................................................. 31
SECTION 2.11 Interest.......................................................... 32
SECTION 2.12 Taxes............................................................. 32
SECTION 2.13 Payments Generally; Pro Rata Treatment; Sharing of Set-offs....... 33
SECTION 2.14 Mitigation Obligations; Replacement of Lenders.................... 35
ARTICLE III - Yield Protection and Illegality........................................ 36
SECTION 3.01 Increased Costs................................................... 36
SECTION 3.02 Alternate Rate of Interest........................................ 37
SECTION 3.03 Illegality........................................................ 38
SECTION 3.04 Treatment of Affected Borrowings.................................. 38
SECTION 3.05 Break Funding Payments............................................ 38
ARTICLE IV - Security................................................................ 39
SECTION 4.01 Collateral........................................................ 39
ARTICLE V - Representations and Warranties........................................... 41
SECTION 5.01 Organization; Powers.............................................. 41
SECTION 5.02 Authorization; Enforceability..................................... 41
SECTION 5.03 Governmental Approvals; No Conflicts.............................. 41
SECTION 5.04 Financial Condition; No Material Adverse Change................... 41
SECTION 5.05 Properties........................................................ 42
SECTION 5.06 Litigation and Environmental Matters.............................. 42
SECTION 5.07 Compliance with Laws and Agreements............................... 42
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 5.08 Investment and Holding Company Status............................. 43
SECTION 5.09 Taxes............................................................. 43
SECTION 5.10 ERISA............................................................. 43
SECTION 5.11 Disclosure........................................................ 43
SECTION 5.12 Year 2000......................................................... 44
SECTION 5.13 Indebtedness...................................................... 44
SECTION 5.14 Subsidiaries...................................................... 44
SECTION 5.15 Inventory......................................................... 44
SECTION 5.16 Patents, Trademarks and Copyrights................................ 44
SECTION 5.17 Margin Securities................................................. 45
SECTION 5.18 Labor Matters..................................................... 45
SECTION 5.19 Solvency.......................................................... 45
SECTION 5.20 Burdensome Agreements............................................. 45
SECTION 5.21 Collateral Value.................................................. 46
ARTICLE VI - Conditions.............................................................. 46
SECTION 6.01 Effective Date.................................................... 46
SECTION 6.02 Each Credit Event................................................. 49
ARTICLE VII - Affirmative Covenants.................................................. 50
SECTION 7.01 Financial Statements and Other Information........................ 50
SECTION 7.02 Notices of Material Events........................................ 51
SECTION 7.03 Existence; Conduct of Business.................................... 52
SECTION 7.04 Payment of Obligations............................................ 52
SECTION 7.05 Maintenance of Properties......................................... 52
SECTION 7.06 Books and Records; Inspection Rights.............................. 52
SECTION 7.07 Insurance......................................................... 52
SECTION 7.08 Compliance with Laws.............................................. 53
SECTION 7.09 Use of Proceeds and Letters of Credit............................. 53
SECTION 7.10 Compliance with Agreements........................................ 53
SECTION 7.11 Further Assurances................................................ 53
ARTICLE VIII - Negative Covenants.................................................... 53
SECTION 8.01 Indebtedness...................................................... 54
SECTION 8.02 Liens............................................................. 55
SECTION 8.03 Fundamental Changes............................................... 55
SECTION 8.04 Investments, Loans, Advances, Guarantees and Acquisitions......... 56
SECTION 8.05 Hedging Agreements................................................ 57
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 8.06 Restricted Payments..................................................... 57
SECTION 8.07 Transactions with Affiliates............................................ 57
SECTION 8.08 Restrictive Agreements.................................................. 57
SECTION 8.09 Disposition of Assets................................................... 57
SECTION 8.10 Sale and Leaseback...................................................... 59
SECTION 8.11 Accounting.............................................................. 59
SECTION 8.12 Subordinated Indebtedness............................................... 59
SECTION 8.13 Most Favored Lender Status.............................................. 59
ARTICLE IX - Financial Covenants........................................................... 59
SECTION 9.01 Consolidated Leverage Ratio............................................. 59
SECTION 9.02 Consolidated Interest Coverage Ratio.................................... 60
SECTION 9.03 Consolidated Net Worth.................................................. 60
SECTION 9.04 Capital Expenditures.................................................... 60
ARTICLE X - Events of Default.............................................................. 60
SECTION 10.01 Default................................................................ 60
ARTICLE XI - The Administrative Agent...................................................... 63
ARTICLE XII - Miscellaneous................................................................ 65
SECTION 12.01 Notices................................................................ 65
SECTION 12.02 Waivers; Amendments.................................................... 66
SECTION 12.03 Expenses; Indemnity; Damage Waiver..................................... 67
SECTION 12.04 Successors and Assigns................................................. 69
SECTION 12.05 Survival............................................................... 71
SECTION 12.06 Counterparts; Effectiveness............................................ 71
SECTION 12.07 Severability........................................................... 72
SECTION 12.08 Right of Setoff........................................................ 72
SECTION 12.09 GOVERNING LAW; VENUE; SERVICE OF PROCESS............................... 72
SECTION 12.10 WAIVER OF JURY TRIAL................................................... 73
SECTION 12.11 Headings............................................................... 73
SECTION 12.12 Confidentiality........................................................ 73
SECTION 12.13 Maximum Interest Rate.................................................. 74
SECTION 12.14 Non-Application of Chapter 346 of Texas Finance Code................... 74
SECTION 12.15 NO ORAL AGREEMENTS..................................................... 74
SECTION 12.16 No Fiduciary Relationship.............................................. 74
SECTION 12.17 Construction........................................................... 75
</TABLE>
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<PAGE>
CREDIT AGREEMENT
----------------
THIS CREDIT AGREEMENT (this "Agreement") dated as of July 30, 1999,
---------
among GLOBAL INDUSTRIAL TECHNOLOGIES, INC., as Borrower, the LENDERS party
hereto, CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as Administrative Agent, PNC
BANK, NATIONAL ASSOCIATION, as Syndication Agent, and ABN AMRO BANK N.V., as
Issuing Bank and as Documentation Agent.
The parties hereto agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.1. Defined Terms. As used in this Agreement, the following
-------------
terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to
---
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
"Additional Covenant" shall mean any affirmative or negative covenant
-------------------
or similar restriction applicable to the Borrower or any Subsidiary (regardless
of whether such provision is labeled or otherwise characterized as a covenant)
the subject matter of which either (i) is similar to that of the covenants in
Articles VII, VIII and IX of this Agreement, or related definitions in Article I
of this Agreement, but contains one or more percentages, amounts or formulas
that is more restrictive than those set forth herein or more beneficial to the
holder or holders of the Indebtedness created or evidenced by the document in
which such covenant or restriction is contained (and such covenant or similar
restriction shall be deemed an Additional Covenant only to the extent that it is
more restrictive or more beneficial) or (ii) is different from the subject
matter of the covenants in Articles VII, VIII and IX of this Agreement, or
related definitions in Article I of this Agreement.
"Additional Default" means any provision contained in any document or
------------------
instrument creating or evidencing Indebtedness of the Borrower or any Subsidiary
which permits the holder or holders of such Indebtedness to accelerate (with the
passage of time or giving of notice or both) the maturity thereof or otherwise
requires the Borrower or any Subsidiary to purchase such Indebtedness prior to
the stated maturity thereof and which either (i) is similar to the Defaults and
Events of Default contained in Article X of this Agreement, or related
definitions in Article I in this Agreement, but contains one or more
percentages, amounts or formulas that is more restrictive or has a shorter grace
period than those set forth herein or is more beneficial to the holders of such
other Indebtedness (and such provisions shall be deemed an Additional Default
only to the extent that it
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<PAGE>
is more restrictive, has a shorter grace period or is more beneficial) or (ii)
is different from the subject matter of the Defaults and Events of Default
contained in Article X of this Agreement, or related definitions in Article I of
this Agreement.
"Adjusted EBITDA" means, for each period of determination, the sum of
---------------
the following for the Borrower and its Subsidiaries on a consolidated basis:
(A) EBITDA for such period, plus
(B) the Agreed Expense Reduction Amount.
"Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing
------------------
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means Chase Bank of Texas, National
--------------------
Association, in its capacity as administrative agent for the Lenders hereunder.
"Administrative Questionnaire" means an Administrative Questionnaire
----------------------------
in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another Person
---------
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Agents" means, collectively, the Administrative Agent, the
------
Syndication Agent and the Documentation Agent.
"Agreed Expense Reduction Amount" means, with respect to the
-------------------------------
calculation of Adjusted EBITDA for any period, expenses, not to exceed the
amounts specified on Schedule 1.01 for such period, that were incurred by the
Borrower and its Subsidiaries prior to June 30, 1999 and were actually deducted
in arriving at EBITDA for such period but will not occur in subsequent periods
due to cost reductions related to the acquisition of A.P. Green Industries, Inc.
and its Subsidiaries.
"Aken" means Harbison-Walker Refractories GmbH, formerly Magnesitwerk
----
Aken GmbH.
"Alternate Base Rate" means, for any day, a rate per annum equal to
-------------------
the greatest of (a) the Prime Rate in effect on such day, (b) the CD Rate plus
1% and (c) the Federal Funds Effective Rate in effect on such day plus 0.5%.
Any change in the Alternate Base Rate due to a change in the Prime Rate, the CD
Rate or the Federal Funds Effective Rate shall be effective from
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<PAGE>
and including the effective date of such change in the Prime Rate, the CD Rate
or the Federal Funds Effective Rate, respectively.
"Alternate Currency" means any currency other than dollars that is
------------------
deemed by the Issuing Bank, in its sole discretion, to be tradable.
"Applicable Margin" means (a) a per annum percentage rate equal to
-----------------
1.0% with respect to any ABR Loan and (b) a per annum percentage rate equal to
2.5% with respect to any Eurodollar Loan.
"Applicable Percentage" means, with respect to any Lender, the
---------------------
percentage of the total Commitments represented by such Lender's Commitment. If
the Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.
"Assignment and Acceptance" means an assignment and acceptance entered
-------------------------
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 12.04), and accepted by the Administrative Agent, in the
form of Exhibit "K" or any other form approved by the Administrative Agent.
"Available Amount" means the amount equal to the total Commitments
----------------
minus Revolving Credit Exposure.
"Availability Period" means the period from and including the
-------------------
Effective Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitments.
"Board" means the Board of Governors of the Federal Reserve System of
-----
the United States of America.
"Borrower" means Global Industrial Technologies, Inc., a Delaware
--------
corporation.
"Borrower Security Agreement" means the Security Agreement of the
---------------------------
Borrower in favor of the Collateral Agent for the benefit of the Administrative
Agent, the Issuing Bank, the Lenders and the holders of the Senior Note Debt, in
substantially the form of Exhibit "D" hereto, as the same may be amended,
supplemented or modified from time to time.
"Borrowing" means Revolving Loans of the same Type, made, converted or
---------
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect.
"Borrowing Request" means a request by the Borrower for a Borrowing in
-----------------
accordance with Section 2.03.
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<PAGE>
"Borrowing Request Form" means a certificate in substantially the
----------------------
form of Exhibit "B", properly completed and signed by the Borrower requesting a
Borrowing or a conversion or continuation of a Borrowing.
"Business Day" means any day that is not a Saturday, Sunday or other
------------
day on which commercial banks in Dallas, Texas are authorized or required by law
to remain closed; provided that, when used in connection with a Eurodollar Loan,
--------
the term "Business Day" shall also exclude any day on which banks are not open
------------
for dealings in dollar deposits in the London interbank market.
"Capital Expenditures" means, and for any period, all capital
--------------------
expenditures as determined in accordance with GAAP and in any event shall
include, but not be limited to, all expenditures (whether paid in cash or
accrued as a liability, including the portion of Capital Lease Obligations
originally incurred during such period that are capitalized for the consolidated
balance sheet of the Borrower and its Subsidiaries) by the Borrower and its
Subsidiaries during such period for the acquisition, construction, improvement
or replacement of land, buildings, equipment or other fixed or capital assets or
leaseholds (excluding expenditures properly chargeable to repairs or
maintenance) or otherwise included in "capital expenditures," "additions to
property, plant or equipment" or comparable items in the consolidated financial
statements of the Borrower and its Subsidiaries.
"Capital Lease Obligations" of any Person means the obligations of
-------------------------
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"CD Rate" means the secondary market rate for three-month certificates
-------
of deposit (adjusted for statutory reserve requirements).
"Change in Control" means (a) the acquisition of ownership, directly
-----------------
or indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof), of shares
representing more than 30% of the aggregate ordinary voting power represented by
the issued and outstanding capital stock of the Borrower, provided however that
with respect to the cash tender offer made by HAC pursuant to the RHI Merger
Agreement no Change in Control shall be deemed to have occurred unless and until
such tender offer has been consummated by HAC accepting and making payment for
tendered shares, which consummation is contemplated to occur concurrently with
the closing of the merger of HAC into Borrower pursuant to the RHI Merger
Agreement; (b) occupation of a majority of the seats (other than vacant seats)
on the board of directors of the Borrower by Persons who were neither (i)
nominated by the board of directors of the Borrower nor (ii) appointed by
directors so nominated; or (c) the acquisition of direct or indirect Control of
the Borrower by any Person or group.
-4-
<PAGE>
"Change in Law" means (a) the adoption of any law, rule or regulation
-------------
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender or the Issuing
Bank (or, for purposes of Section 3.01(b), by any lending office of such Lender
or by such Lender's or the Issuing Bank's holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time.
"Collateral" has the meaning specified in Section 4.01.
----------
"Collateral Agent" means Chase Bank of Texas, National Association,
-----------------
as Collateral Agent for the Administrative Agent, the Issuing Bank, the Lenders
and the holders of the Senior Note Debt.
"Commitment" means, with respect to each Lender, the commitment of
----------
such Lender to make Revolving Loans and to acquire participations in Letters of
Credit hereunder, expressed as an amount representing the maximum aggregate
amount of such Lender's Revolving Credit Exposure hereunder, as such commitment
may be (a) reduced from time to time pursuant to Section 2.07 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 12.04. The initial amount of each Lender's Commitment is
set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to
which such Lender shall have assumed its Commitment, as applicable. The initial
aggregate amount of the Lenders' Commitments is $120,000,000.
"Compliance Certificate" means a certificate of a Financial Officer of
----------------------
the Borrower, in the form of Exhibit "J" hereto.
"Consolidated Interest Coverage Ratio" means, as of the last day of
------------------------------------
any fiscal quarter of the Borrower, the ratio of (a) Adjusted EBITDA for the 12-
month period ending on such day to (b) cash interest expense of the Borrower and
its Subsidiaries for the 12-month period ending on such day.
"Consolidated Leverage Ratio" means, as of the last day of any fiscal
---------------------------
quarter of the Borrower, the ratio of (a) Funded Debt as of such last day to
(b) Adjusted EBITDA for the 12-month period ending on such day; provided,
however, that for purposes of this definition Funded Debt shall not include the
non-recourse Indebtedness of Aken existing as of the Effective Date, and
Adjusted EBITDA shall not include EBITDA of Aken or any portion of the Agreed
Expense Reduction Amount attributable to Aken.
-5-
<PAGE>
"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 its Subsidiaries.
"Control" means the possession, directly or indirectly, of the power
-------
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
----------- ----------
"Contribution and Indemnification Agreement" means a contribution and
------------------------------------------
indemnification agreement of the Borrower and each Guarantor, in substantially
the form of Exhibit "H", as the same may be amended, supplemented, or modified
from time to time.
"Default" means any event or condition which constitutes an Event of
-------
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings and the
-----------------
environmental matters disclosed in Schedule 5.06.
"dollars" or "$" refers to lawful money of the United States of
------- -
America.
"Documentation Agent" means ABN AMRO Bank N.V., in its capacity as
-------------------
documentation agent for the Lenders hereunder.
"EBITDA" means, for each period of determination, the sum of (a)
------
consolidated net income of the Borrower and its Subsidiaries for such period
(whether positive or negative), plus, (b) each of the following to the extent
actually deducted in arriving at consolidated net income for such period and
without duplication: depreciation, amortization, taxes, and interest expense of
the Borrower and its Subsidiaries for such period, minus (c) gains from the sale
of fixed assets not in the ordinary course of business, plus (d) to the extent
actually deducted in arriving at consolidated net income for such period and
without duplication, losses from the sale of fixed assets not in the ordinary
course of business, minus (e) extraordinary gains determined in accordance with
GAAP, plus (f) to the extent actually deducted in arriving at consolidated net
income for such period and without duplication, extraordinary losses determined
in accordance with GAAP, plus (g) to the extent actually deducted in arriving at
consolidated net income for such period and without duplication, noncash charges
incurred by the Borrower and its Subsidiaries in the fiscal quarters ending
September 30, 1998, December 31, 1998 and March 31, 1999 only.
"Effective Date" means the date on which the conditions specified in
--------------
Section 6.01 are satisfied (or waived in accordance with Section 12.02).
"Environmental Laws" means all laws, rules, regulations, codes,
------------------
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into
-6-
<PAGE>
by any Governmental Authority, relating in any way to the environment,
preservation or reclamation of natural resources, the management, release or
threatened release of any Hazardous Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or otherwise
-----------------------
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"Equivalent Amount" means the equivalent in dollars of any Alternate
-----------------
Currency. For purposes of this Agreement, each Equivalent Amount shall be
determined by using the quoted spot rate at which the Issuing Bank, the
Administrative Agent or any of their respective affiliates offers to exchange
dollars for such Alternate Currency at 11:00 a.m. Dallas, Texas time on the date
on which such equivalent is to be determined pursuant to the provisions of this
Agreement. The Equivalent Amount of each outstanding Letter of Credit issued in
Alternate Currency shall be recalculated hereunder by the Issuing Bank on each
date it is necessary to determine the LC Exposure, including the date of each
requested Borrowing and the date of issuance, amendment, renewal or extension of
any Letter of Credit. The Equivalent amount of each outstanding Letter of
Credit issued in Alternate Currency shall be recalculated by the Issuing Bank on
each day that the Available Amount is $4,000,000 or less. The Equivalent Amount
of each LC Disbursement (and of any portion thereof reimbursed by the Borrower
but required to be refunded for any reason) shall be determined by the Issuing
Bank as of the date such LC Disbursement is made.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"Eurodollar", when used in reference to any Loan or Borrowing, refers
----------
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in Article X.
----------------
"Excluded Taxes" means, with respect to the Administrative Agent, any
--------------
Lender, the Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation
-7-
<PAGE>
of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured
by) its net income by the United States of America, or by the jurisdiction under
the laws of which such recipient is organized or in which its principal office
is located or, in the case of any Lender, in which its applicable lending office
is located, (b) any branch profits taxes imposed by the United States of America
or any similar tax imposed by any other jurisdiction in which the Borrower is
located and (c) in the case of a Foreign Lender (other than an assignee pursuant
to a request by the Borrower under Section 2.14(b)), any withholding tax that is
imposed on amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party to this Agreement (or designates a new lending office) or
is attributable to such Foreign Lender's failure to comply with Section 2.12(e),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment), to
receive additional amounts from the Borrower with respect to such withholding
tax pursuant to Section 2.12(a).
"Existing Credit Agreement" means that certain Credit Agreement dated
-------------------------
as of August 31, 1998, among the Borrower, GPX Corp., Chase Bank of Texas,
National Association, as administrative agent, and the other parties thereto, as
amended by that certain First Amendment to Credit Agreement dated as of March 5,
1999.
"Existing Letters of Credit" means the letters of credit described on
--------------------------
Schedule 2.04.
"Existing ABN Letters of Credit" means the Existing Letters of Credit
------------------------------
issued by ABN AMRO Bank N.V.
"Existing PNC Letters of Credit" means the Existing Letters of Credit
------------------------------
issued by PNC.
"Federal Funds Effective Rate" means, for any day, the weighted
----------------------------
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Financial Officer" means the chief financial officer, principal
-----------------
accounting officer, treasurer or controller of the Borrower.
"Foreign Lender" means any Lender that is organized under the laws of
--------------
a jurisdiction other than that in which the Borrower is located. For purposes
of this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"Funded Debt" means, at any particular time, the sum of the following,
-----------
calculated on a consolidated basis for the Borrower and its Subsidiaries without
duplication: (a) all obligations
-8-
<PAGE>
for borrowed money (as a direct obligor on a promissory note, bond, debenture or
other similar instrument), plus (b) all Capital Lease Obligations (other than
the interest component of such obligations), plus (c) all obligations for the
deferred purchase price of the property excluding (i) trade accounts payable of
such Person arising in the ordinary course of business and (ii) obligations for
earnout payments which are contingent on performance in connection with the
acquisition of a business.
"GAAP" means generally accepted accounting principles in the United
----
States of America.
"Governmental Authority" means the government of the United States of
----------------------
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person (the "guarantor") means any
--------- ---------
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
---------------
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee shall not include
--------
endorsements for collection or deposit in the ordinary course of business.
"Guarantors" means all of the Material Subsidiaries of the Borrower as
----------
of the Effective Date and each other Subsidiary that at any time executes a
Guaranty in favor of the Agents and the Lenders.
"Guaranty" means the guaranty agreement of each Guarantor in favor of
--------
the Agents, the Issuing Bank and the Lenders, in substantially the form of
Exhibit "G" hereto, as the same may be amended, supplemented, or modified from
time to time.
"HAC" means Heat Acquisition Corp., a Delaware corporation and a
---
wholly-owned indirect subsidiary of RHI.
"Hazardous Materials" means all explosive or radioactive substances
-------------------
or wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum
-9-
<PAGE>
distillates, asbestos or asbestos containing materials, polychlorinated
biphenyls, radon gas, infectious or medical wastes and all other substances or
wastes of any nature regulated pursuant to any Environmental Law.
"Hedging Agreement" means any interest rate protection agreement,
-----------------
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Indebtedness" of any Person means, without duplication, (a) all
------------
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty, (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances and
(k) payment obligations with respect to Hedging Agreements, provided that for
purposes of this definition, the amount of the obligation of any Person under
any Hedging Agreement shall be the amount determined, in respect thereof as of
the end of the most recently ended fiscal quarter of such Person, based on the
assumption that such Hedging Agreement has terminated at the end of such fiscal
quarter, and in making such determination, if such Hedging Agreement provides
for the netting of amounts payable by and to each party thereto or if any
Hedging Agreement provides for the simultaneous payment of amounts by and to
each party, then in each such case, the amount of such obligation shall be the
net amount so determined. The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such Person
is a general partner) to the extent such Person is liable therefor as a result
of such Person's ownership interest in or other relationship with such entity,
except to the extent the terms of such Indebtedness provide that such Person is
not liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
-----------------
"Intercreditor Agreement" means the Intercreditor Agreement among the
-----------------------
Administrative Agent, Collateral Agent, Lenders, the Issuing Bank, The
Prudential Insurance Company of America, U.S. Private Placement Fund, Principal
Life Insurance Company, the other holders of the Senior Note Debt, the Borrower
and the Material Subsidiaries, in form and substance satisfactory to the
Administrative Agent, as the same may be amended, restated, supplemented or
modified from time to time.
-10-
<PAGE>
"Interest Election Request" means a request by the Borrower to convert
-------------------------
or continue a Borrowing in accordance with Section 2.06.
"Interest Payment Date" means (a) with respect to any ABR Loan, the
---------------------
last day of each March, June, September and December and (b) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part and, in the case of a Eurodollar Borrowing with an
Interest Period of more than three months' duration, each day prior to the last
day of such Interest Period that occurs at intervals of three months' duration
after the first day of such Interest Period.
"Interest Period" means, with respect to any Eurodollar Borrowing, the
---------------
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect, and provided, that (i) if any Interest
--------
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (ii) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and thereafter shall
be the effective date of the most recent conversion or continuation of such
Borrowing.
"Issuing Bank" means ABN AMRO Bank N.V. in its capacity as the issuer
------------
of Letters of Credit hereunder, and its successors in such capacity as provided
in Section 2.04(i). The Issuing Bank may, in its discretion, arrange for one or
more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which
case the term "Issuing Bank" shall include any such Affiliate with respect to
Letters of Credit issued by such Affiliate.
"Jeffrey" means the Jeffrey Woodruff Division of Global Processing
-------
Systems, Inc., a Subsidiary of the Borrower.
"Jeffrey Disposition" means the disposition of all or substantially
-------------------
all of the assets of Jeffrey.
"LC Disbursement" means a payment made by the Issuing Bank pursuant to
---------------
a Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate undrawn
-----------
amount of all outstanding Letters of Credit at such time, including the
Equivalent Amount of the undrawn amount of each outstanding Letter of Credit
issued in Alternate Currency, plus (b) the aggregate amount of all LC
Disbursements that have not yet been reimbursed by or on behalf of the Borrower
at such time, including the Equivalent Amount of each unreimbursed LC
Disbursement made in
-11-
<PAGE>
Alternate Currency. The LC Exposure of any Lender at any time shall be its
Applicable Percentage of the total LC Exposure at such time.
"Lenders" means the Persons listed on Schedule 2.01 and any other
-------
Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Acceptance.
"Letter of Credit" means any letter of credit issued pursuant to this
----------------
Agreement.
"Letter of Credit Request Form" means a certificate, in substantially
-----------------------------
the form of Exhibit "C" hereto, properly completed and signed by the Borrower
requesting the issuance of a Letter of Credit (or the amendment, renewal, or
extension of an outstanding Letter of Credit).
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
---------
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO Rate" with respect to such
---------
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
----
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Documents" means this Agreement and all promissory notes,
--------------
security agreements, pledge agreements, deeds of trust, assignments, letters of
credit, letter of credit applications, guaranties, intercreditor agreements,
collateral sharing agreements, and other instruments, documents, 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.
-12-
<PAGE>
"Loans" means the loans made by the Lenders to the Borrower pursuant
-----
to this Agreement.
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
business, assets, operations, prospects or condition, financial or otherwise, of
the Borrower and the Subsidiaries taken as a whole, (b) the ability of the
Borrower or any Guarantor to pay and perform any of the Obligations, (c) any of
the rights of or benefits available to any of the Agents and Lenders under this
Agreement or any of the other Loan Documents, or (d) the validity or
enforceability of this Agreement or any of the other Loan Documents.
"Material Indebtedness" means Indebtedness (other than the Loans and
---------------------
Letters of Credit), or obligations in respect of one or more Hedging Agreements,
of any one or more of the Borrower and its Subsidiaries in an aggregate
principal amount exceeding $5,000,000. For purposes of determining Material
Indebtedness, the "principal amount" of the obligations of the Borrower or any
Subsidiary in respect of any Hedging Agreement at any time shall be the amount
of its payment obligations thereunder determined as provided in clause (k) of
the definition of "Indebtedness" set forth in this Section 1.1.
"Material Subsidiaries" means, collectively, the Subsidiaries listed
---------------------
on Schedule 5.14 which are designated as Material Subsidiaries on the Effective
Date, together with any other Subsidiary that is a borrower of or Guarantees the
Senior Note Debt.
"Maturity Date" means June 30, 2000.
-------------
"Maximum Rate" means, at any time and with respect to any Lender, the
------------
maximum rate of interest under applicable law that such Lender 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 Maximum Rate. For purposes of determining the
Maximum Rate under Texas law, the applicable rate ceiling shall be the weekly
ceiling described in, and computed in accordance with, Article 5069-1D.001 et
seq., Vernon's Texas Civil Statutes.
"Moody's" means Moody's Investors Service, Inc.
-------
"Multiemployer Plan" means a multiemployer plan as defined in Section
------------------
4001(a)(3) of ERISA.
"Net Book Value" of any asset means the book value of such asset,
--------------
minus depreciation of such asset.
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<PAGE>
"Net Proceeds" from any issuance, sale or other disposition of any
------------
shares of equity securities (or any securities convertible or exchangeable for
such shares, or any rights, warrants, or options to subscribe for or purchase
any such shares) means the amount equal to (a) the aggregate gross proceeds of
such issuance, sale or other disposition, less (b) the following reasonable fees
and expenses: (i) placement agent fees, (ii) underwriting discounts and
commissions, (iii) bank and other lender fees, and (iv) legal fees and legal
expenses payable by the issuer in connection with such issuance, sale or other
disposition.
"Note" means a promissory note of the Borrower payable to the order of
----
a Lender, in substantially the form of Exhibit "A" hereto, and all extensions,
renewals, and modifications thereof and all substitutions therefor.
"Note Agreements" means, collectively, (i) the Note Agreement dated as
---------------
of January 31, 1996, by and among the Borrower, The Prudential Insurance Company
of America and Principal Life Insurance Company (formerly known as Principal
Mutual Life Insurance Company), (ii) the Note Agreement dated as of June 30,
1998, by and among the Borrower, The Prudential Insurance Company of America and
U.S. Private Placement Fund, and (iii) the Note Agreement dated as of October 2,
1998, by and between the Borrower and The Prudential Insurance Company of
America, as such Note Agreements have been and may be amended, supplemented or
modified from time to time.
"Obligations" means all obligations, indebtedness, and liabilities of
-----------
the Borrower to the Agents and the Lenders, 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, all of the
Borrower's contingent reimbursement obligations in respect of Letters of
Credit), and all interest accruing thereon and all attorneys' fees and other
expenses incurred in the enforcement or collection thereof.
"Other Taxes" means any and all present or future stamp or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
----
defined in ERISA and any successor entity performing similar functions.
"Permitted Encumbrances" means:
----------------------
(a) Liens imposed by law for taxes that are not yet due or are
being contested in compliance with Section 7.04;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the ordinary course
of business and securing obligations that are not overdue by more than 60 days
or are being contested in compliance with Section 7.04;
-14-
<PAGE>
(c) pledges and deposits made in the ordinary course of business
in compliance with workers' compensation, unemployment insurance and other
social security laws or regulations or insurance requirements;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the ordinary course of
business;
(e) judgment liens in respect of judgments that do not constitute
an Event of Default under clause (k) of Article X; and
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary course
of business that do not secure any monetary obligations and do not materially
detract from the value of the affected property or interfere with the ordinary
conduct of business of the Borrower or any Subsidiary;
provided that the term "Permitted Encumbrances" shall not include any Lien
- --------
securing Indebtedness.
"Permitted Investments" means:
---------------------
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed by
the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from
the date of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances
and time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts issued
or offered by, any domestic office of any commercial bank organized under the
laws of the United States of America or any State thereof which has a combined
capital and surplus and undivided profits of not less than $500,000,000; and
(d) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (a) above and entered into
with a financial institution satisfying the criteria described in clause (c)
above.
"Person" means any natural person, corporation, limited liability
------
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
-15-
<PAGE>
"Plan" means any employee pension benefit plan subject to the
----
provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of
ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if
such plan were terminated, would under Section 4069 of ERISA be deemed to be) an
"employer" as defined in Section 3(5) of ERISA.
"Pledge Agreement" means the Pledge Agreement of the Borrower in favor
----------------
of the Collateral Agent for the benefit of the Administrative Agent, the Issuing
Bank, the Lenders and the holders of the Senior Note Debt, in substantially the
form of Exhibit "F" hereto, as the same may be amended, supplemented or modified
from time to time.
"PNC" means PNC Bank, National Association.
---
"Pledged Stock" means all shares of capital stock of A.P. Green
-------------
Industries, Inc. and of Harbison-Walker Refractories Company, now owned or
hereafter acquired by the Borrower, which Pledged Stock shall constitute 100% of
the issued and outstanding capital stock of such entities.
"Prime Rate" means the rate of interest per annum announced from time
----------
to time by the Administrative Agent as its prime rate in effect at its principal
office in Houston, Texas; each change in the Prime Rate shall be effective from
and including the date such change is announced as being effective.
"Register" has the meaning set forth in Section 12.04.
--------
"Related Parties" means, with respect to any specified Person, such
---------------
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Reportable Event" means any of the events set forth in Section 4043
----------------
of ERISA.
"Required Lenders" means, at any time, Lenders having Revolving Credit
----------------
Exposures and unused Commitments representing more than 66-2/3% of the sum of
the total Revolving Credit Exposures and unused Commitments at such time.
"Restricted Payment" means any dividend or other distribution (whether
------------------
in cash, securities or other property) with respect to any shares of any class
of capital stock of the Borrower or any Subsidiary, or any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such shares of capital stock of the Borrower
or any option, warrant or other right to acquire any such shares of capital
stock of the Borrower.
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<PAGE>
"Revolving Credit Exposure" means, with respect to any Lender at any
-------------------------
time, the sum of the outstanding principal amount of such Lender's Revolving
Loans and its LC Exposure at such time.
"Revolving Loan" means a Loan made pursuant to Section 2.03.
--------------
"RHI" means RHI AG, a corporation organized under the laws of Austria.
---
"RHI Merger Agreement" means that certain Agreement and Plan of Merger
--------------------
dated as of July 12, 1999, among RHI, HAC and Borrower, as the same may be
amended, supplemented or modified from time to time.
"S&P" means Standard & Poor's.
---
"Senior Note Debt" means the indebtedness evidenced by the Senior
----------------
Notes issued pursuant to the Note Agreements described on Schedule 8.01(b) in
the aggregate principal amount not to exceed $155,904,149.58.
"Senior Notes" means, collectively, the promissory notes executed by
------------
the Borrower in connection with the Note Agreements.
"Shred-Tech" means the Shred-Tech Division of Global-GIX Canada Inc.,
----------
a Subsidiary of Borrower.
"Shred-Tech Disposition" means the disposition of all or substantially
----------------------
all of the assets of Shred-Tech.
"Solvent" means, as to any Person, that (a) the aggregate fair market
-------
value of its assets exceeds its liabilities, (b) it has sufficient cash flow to
enable it to pay its Indebtedness as such Indebtedness matures, and (c) it does
not have unreasonably small capital to conduct its business.
"Statutory Reserve Rate" means a fraction (expressed as a decimal),
----------------------
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board). Such reserve percentages shall include those
imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to
constitute eurocurrency funding and to be subject to such reserve requirements
without benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such Regulation D or any
comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
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<PAGE>
"subsidiary" means, with respect to any Person (the "parent") at any
---------- ------
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Subsidiary" means any subsidiary of the Borrower.
----------
"Subsidiary Security Agreement" means the Security Agreement of the
-----------------------------
Material Subsidiaries in favor of the Collateral Agent for the benefit of the
Administrative Agent, the Issuing Bank, the Lenders and the holders of the
Senior Note Debt, in substantially the form of Exhibit "E" hereto, as the same
may be amended, supplemented or modified from time to time.
"Syndication Agent" means PNC Bank, National Association, in its
-----------------
capacity as syndication agent for the Lenders hereunder.
"Taxes" means any and all present or future taxes, levies, imposts,
-----
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Transactions" means the execution, delivery and performance by the
------------
Borrower of this Agreement, the borrowing of Loans, the use of the proceeds
thereof and the issuance of Letters of Credit hereunder.
"Type", when used in reference to any Loan or Borrowing, refers to
----
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate
Base Rate.
"UCC" means the Uniform Commercial Code as in effect in the State of
---
Texas.
SECTION 1.2 Terms Generally. The definitions of terms herein shall
----------------
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any
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<PAGE>
reference herein to any Person shall be construed to include such Person's
successors and assigns, (c) the words "herein", "hereof" and "hereunder", and
words of similar import, shall be construed to refer to this Agreement in its
entirety and not to any particular provision hereof, (d) all references herein
to Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e)
the words "asset" and "property" shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights.
SECTION 1.3 Accounting Terms; GAAP. Except as otherwise expressly
----------------------
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
--------
that, if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
ARTICLE II
The Credits
-----------
SECTION 2.1 Commitments. Subject to the terms and conditions set
-----------
forth herein, each Lender agrees to make Revolving Loans to the Borrower in
dollars from time to time during the Availability Period in an aggregate
principal amount that will not result in (a) such Lender's Revolving Credit
Exposure exceeding such Lender's Commitment, or (b) the sum of the total
Revolving Credit Exposures exceeding the total Commitments. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, prepay and reborrow Revolving Loans.
SECTION 2.2 Loans and Borrowings.
--------------------
(a) Each Revolving Loan shall be made as part of a Borrowing
consisting of Revolving Loans made by the Lenders ratably in accordance
with their respective Commitments. The failure of any Lender to make any
Loan required to be made by it shall not relieve any other Lender of its
obligations hereunder; provided that the Commitments of the Lenders are
--------
several and no Lender shall be responsible for any other Lender's failure
to make Loans as required.
(b) Subject to Sections 3.02, 3.03 and 3.04, each Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may
request in accordance
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<PAGE>
herewith. Each Lender at its option may make any Eurodollar Loan by causing
any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that any exercise of such option shall not affect the
--------
obligation of the Borrower to repay such Loan in accordance with the terms
of this Agreement.
(c) At the commencement of each Interest Period for any Eurodollar
Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $500,000 and not less than $2,000,000. At the time
that each ABR Borrowing is made, such Borrowing shall be in an aggregate
amount that is an integral multiple of $500,000 and not less than
$1,000,000 provided that an ABR Borrowing may be in an aggregate amount
--------
that is equal to the entire unused balance of the total Commitments or that
is required to finance the reimbursement of an LC Disbursement as
contemplated by Section 2.04(e). Borrowings of more than one Type may be
outstanding at the same time; provided that there shall not at any time be
--------
more than a total of 15 Eurodollar Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or
continue, any Borrowing if the Interest Period requested with respect
thereto would end after the Maturity Date.
SECTION 2.3 Requests for Borrowings. To request a Borrowing, the
-----------------------
Borrower shall notify the Administrative Agent of such request by telephone (a)
in the case of a Eurodollar Borrowing, not later than 11:00 a.m., Dallas, Texas
time, three Business Days before the date of the proposed Borrowing or (b) in
the case of an ABR Borrowing, not later than 11:00 a.m., Dallas, Texas time, on
the same Business Day as the date of the proposed Borrowing. Each such
telephonic Borrowing Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Borrowing Request by means of a Borrowing Request Form signed by the Borrower.
Each such telephonic and written Borrowing Request shall specify the following
information in compliance with Section 2.02:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated
by the definition of the term "Interest Period"; and
(v) the location and number of the Borrower's account to which
funds are to be disbursed, which shall comply with the requirements of
Section 2.05.
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<PAGE>
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month's duration. Promptly following
receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender's Loan to be made as part of the requested Borrowing.
SECTION 2.4 Letters of Credit.
-----------------
(a) General. Subject to the terms and conditions set forth herein,
-------
the Borrower may request the issuance of Letters of Credit denominated and
payable in dollars or any Alternate Currency for its own account, in a form
reasonably acceptable to the Administrative Agent and the Issuing Bank, at any
time and from time to time during the Availability Period. In the event of any
inconsistency between the terms and conditions of this Agreement and the terms
and conditions of any form of letter of credit application or other agreement
submitted by the Borrower to, or entered into by the Borrower with, the Issuing
Bank relating to any Letter of Credit, the terms and conditions of this
Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
----------------------------------------------------------
Conditions. To request the issuance of a Letter of Credit (or the amendment,
- ----------
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the Administrative Agent (reasonably in advance of the requested date
of issuance, amendment, renewal or extension) a notice by means of a Letter of
Credit Request Form requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended, renewed or extended, and
specifying the date of issuance, amendment, renewal or extension (which shall be
a Business Day), the date on which such Letter of Credit is to expire (which
shall comply with paragraph (c) of this Section), the amount and currency
(either dollars or a specified Alternate Currency) of such Letter of Credit, the
name and address of the beneficiary thereof and such other information as shall
be necessary to prepare, amend, renew or extend such Letter of Credit. If
requested by the Issuing Bank, the Borrower also shall submit a letter of credit
application on the Issuing Bank's standard form in connection with any request
for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or
extended only if (and upon issuance, amendment, renewal or extension of each
Letter of Credit the Borrower shall be deemed to represent and warrant that),
after giving effect to such issuance, amendment, renewal or extension (i) the LC
Exposure shall not exceed $20,000,000, (ii) the Equivalent Amount of LC Exposure
in Alternate Currency shall not exceed $4,000,000, and (iii) the sum of the
total Revolving Credit Exposures shall not exceed the total Commitments. As of
the Effective Date, the Existing Letters of Credit shall each be deemed to be
issued and outstanding Letters of Credit under this Agreement.
(c) Expiration Date. Each Letter of Credit shall expire at or prior
---------------
to the close of business on the date one year after the date of issuance of such
Letter of Credit (or, in the case of any renewal or extension thereof, one year
after such renewal or extension). Letters of Credit shall not
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<PAGE>
expire after the close of business on the date that is five Business Days prior
to the Maturity Date, except for Existing Letters of Credit having expirations
beyond such date, which shall not exceed $6,500,000. With respect to each
Existing Letter of Credit expiring after the close of business on the date that
is five Business Days prior to the Maturity Date, Borrower shall deposit in an
account with the Administrative Agent, in the name of the Administrative Agent
and for the benefit of the Issuing Bank and the Lenders, on or before the date
which is five Business Days prior to the Maturity Date, an amount in cash in
dollars equal to the face amount of such Existing Letters of Credit, including
the Equivalent Amount of the face amount of each such Existing Letter of Credit
issued in Alternate Currency, to be held by the Administrative Agent as
Collateral for the payment and performance of the Obligations. From time to time
thereafter, the Borrower shall deposit in such account such additional amounts
in dollars as shall be required by the Administrative Agent due to increases in
the Equivalent Amount of such Existing Letters of Credit issued in Alternate
Currency.
(d) Participations. By the issuance of a Letter of Credit (or an
--------------
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Lender, and each Lender hereby acquires from the Issuing
Bank, a participation in such Letter of Credit equal to such Lender's Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit. As of the Effective Date, the Existing ABN Letters of Credit shall be
deemed to be Letters of Credit issued hereunder. Immediately on and as of the
Effective Date and without any further action on the part of the Issuing Bank or
the Lenders, the Issuing Bank hereby grants to each Lender, and each Lender
hereby acquires from the Issuing Bank, a participation in each Existing ABN
Letter of Credit equal to such Lender's Applicable Percentage of the aggregate
amount available to be drawn under such Existing ABN Letter of Credit. Subject
to the terms and provisions set forth herein, on the Effective Date, or as soon
as practicable thereafter, the Issuing Bank shall issue replacement Letters of
Credit in exchange for the Existing PNC Letters of Credit. Upon such issuance
and without any further action on the part of the Issuing Bank or the Lenders,
the Issuing Bank hereby grants to each Lender, and each Lender hereby acquires
from the Issuing Bank, a participation in each such replacement Letter of Credit
equal to such Lender's Applicable Percentage of the aggregate amount available
to be drawn under such replacement Letter of Credit. In the event the Existing
PNC Letters of Credit are not replaced with Letters of Credit issued hereunder
on the Effective Date, (i) as of the Effective Date, the Existing PNC Letters of
Credit shall be deemed to be Letters of Credit issued hereunder, and (ii)
immediately on and as of the Effective Date and without any further action on
the part of PNC or any of the other Lenders, PNC hereby grants to each Lender,
and each Lender hereby acquires from PNC, a participation in each Existing PNC
Letter of Credit equal to such Lender's Applicable Percentage of the aggregate
amount available to be drawn under such Existing PNC Letter of Credit. Until
such time as the Existing PNC Letters of Credit are replaced with Letters of
Credit issued by the Issuing Bank hereunder, PNC shall have the same rights
hereunder with regard to the Existing PNC Letters of Credit as the Issuing Bank
has with regard to Letters of Credit, and each reference herein to the "Issuing
Bank" shall be deemed to include PNC as issuer of the Existing PNC Letters of
Credit. In consideration and in furtherance of the foregoing, each Lender
hereby absolutely and unconditionally agrees to pay to the Administrative Agent,
for the account of the Issuing Bank, in dollars (a) such Lender's Applicable
Percentage of each LC Disbursement made
-22-
<PAGE>
in dollars by the Issuing Bank and not reimbursed by the Borrower on the date
due as provided in paragraph (e) of this Section, or of any reimbursement
payment made by the Borrower in dollars and required to be refunded to the
Borrower for any reason, and (b) such Lender's Applicable Percentage of the
Equivalent Amount of each LC Disbursement made in any Alternate Currency by the
Issuing Bank and not reimbursed by the Borrower on the date due as provided in
paragraph (e) of this Section, or of the Equivalent Amount of any reimbursement
payment made by the Borrower in any Alternate Currency and required to be
refunded to the Borrower for any reason. Each Lender acknowledges and agrees
that its obligation to acquire participations pursuant to this paragraph in
respect of Letters of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including any amendment, renewal or
extension of any Letter of Credit or the occurrence and continuance of a Default
or reduction or termination of the Commitments, and that each such payment shall
be made without any offset, abatement, withholding or reduction whatsoever. Each
Lender acknowledges and agrees that its obligation to acquire participations
pursuant to this paragraph will continue after the Maturity Date with respect to
Letters of Credit outstanding on and after the Maturity Date regardless of
whether cash collateral is provided pursuant to Section 2.04(c).
(e) Reimbursement. If the Issuing Bank shall make any LC Disbursement
-------------
in respect of a Letter of Credit, the Borrower shall reimburse such LC
Disbursement by paying to the Issuing Bank an amount equal to such LC
Disbursement in dollars, not later than 12:00 noon, Dallas, Texas time, on the
date that such LC Disbursement is made, if the Borrower shall have received
notice of such LC Disbursement prior to 10:00 a.m., Dallas, Texas time, on such
date, or, if such notice has not been received by the Borrower prior to such
time on such date, then not later than 12:00 noon, Dallas, Texas time, on (i)
the Business Day that the Borrower receives such notice, if such notice is
received prior to 10:00 a.m., Dallas, Texas time, on the day of receipt, or (ii)
the Business Day immediately following the day that the Borrower receives such
notice, if such notice is not received prior to such time on the day of receipt;
provided that, (A) the Borrower may pay the amount of such LC Disbursement in
- --------
the Alternate Currency of such LC Disbursement if such amount is paid to the
Issuing Bank not later than 12:00 noon, Dallas, Texas time, on the Business Day
before the date such LC Disbursement is due to the Letter of Credit beneficiary,
and (B) if such LC Disbursement (or the Equivalent Amount of any LC Disbursement
made in any Alternate Currency) is not less than $1,000,000, the Borrower may,
subject to the conditions to borrowing set forth herein, request in accordance
with Section 2.03 that such payment be financed with an ABR Borrowing in dollars
in an amount equal to such LC Disbursement or the Equivalent Amount thereof, as
the case may be, and, to the extent so financed, the Borrower's obligation to
make such payment shall be discharged and replaced by the resulting ABR
Borrowing. If the Borrower fails to make such payment when due, the Issuing
Bank shall notify the Administrative Agent and each Lender of the applicable LC
Disbursement, the payment then due from the Borrower in respect thereof in
dollars and such Lender's Applicable Percentage thereof. Promptly following
receipt of such notice, each Lender shall pay to the Administrative Agent in
dollars its Applicable Percentage of the payment then due from the Borrower, in
the same manner as provided in Section 2.05 with respect to Loans made by such
Lender (and Section 2.05 shall apply, mutatis mutandis, to the payment
------- --------
obligations of the Lenders), and the Administrative Agent shall promptly pay to
the Issuing
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<PAGE>
Bank in dollars the amounts so received by it from the Lenders. Promptly
following receipt by the Administrative Agent of any payment from the Borrower
pursuant to this paragraph, the Administrative Agent shall distribute such
payment to the Issuing Bank or, to the extent that Lenders have made payments
pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders
and the Issuing Bank as their interests may appear. Any payment made by a Lender
pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement
(other than the funding of ABR Loans as contemplated above) shall not constitute
a Loan and shall not relieve the Borrower of its obligation to reimburse such LC
Disbursement.
(f) Obligations Absolute. The Borrower's obligation to reimburse LC
--------------------
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower's obligations hereunder.
Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of
their Related Parties, shall have any liability or responsibility by reason of
or in connection with the issuance or transfer of any Letter of Credit or any
payment or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank; provided that the foregoing shall not be construed to excuse the
--------
Issuing Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by
the Borrower that are caused by the Issuing Bank's failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. The parties hereto expressly agree that,
in the absence of gross negligence or wilful misconduct on the part of the
Issuing Bank (as finally determined by a court of competent jurisdiction), the
Issuing Bank shall be deemed to have exercised care in each such determination.
In furtherance of the foregoing and without limiting the generality thereof, the
parties agree that, with respect to documents presented which appear on their
face to be in substantial compliance with the terms of a Letter of Credit, the
Issuing Bank may, in its sole discretion, either accept and make payment upon
such documents without responsibility for further investigation, regardless of
any notice or information to the contrary, or refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the
terms of such Letter of Credit.
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<PAGE>
(g) Disbursement Procedures. The Issuing Bank shall, promptly
-----------------------
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder; provided that any failure to give or
--------
delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Lenders with respect to any such LC
Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any LC
----------------
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof (or
unpaid Equivalent Amount thereof in the case of any LC Disbursement made in any
Alternate Currency) shall bear interest, for each day from and including the
date such LC Disbursement is made to but excluding the date that the Borrower
reimburses such LC Disbursement, at the rate per annum then applicable to ABR
Loans; provided that, if the Borrower fails to reimburse such LC Disbursement
--------
when due pursuant to paragraph (e) of this Section, then Section 2.11(c) shall
apply. Interest accrued pursuant to this paragraph shall be for the account of
the Issuing Bank, except that interest accrued on and after the date of payment
by any Lender pursuant to paragraph (e) of this Section to reimburse the Issuing
Bank shall be for the account of such Lender to the extent of such payment.
(i) Replacement of the Issuing Bank. The Issuing Bank may be replaced
--------------------------------
at any time by written agreement among the Borrower, the Administrative Agent,
the replaced Issuing Bank and the successor Issuing Bank. The Administrative
Agent shall notify the Lenders of any such replacement of the Issuing Bank. At
the time any such replacement shall become effective, the Borrower shall pay all
unpaid fees accrued for the account of the replaced Issuing Bank pursuant to
Section 2.10(b). From and after the effective date of any such replacement, (i)
the successor Issuing Bank shall have all the rights and obligations of the
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require. After the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain
a party hereto and shall continue to have all the rights and obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit issued by it
prior to such replacement, but shall not be required to issue additional Letters
of Credit.
(j) Cash Collateralization. If any Event of Default shall occur and
-----------------------
be continuing, (i) on the Business Day that the Borrower receives notice from
the Administrative Agent or the Required Lenders demanding the deposit of cash
collateral pursuant to this paragraph, the Borrower shall deposit in an account
with the Administrative Agent, in the name of the Administrative Agent and for
the benefit of the Lenders, an amount in cash in dollars equal to the LC
Exposure as of such date plus any accrued and unpaid interest thereon, and (ii)
thereafter, the Borrower shall deposit in such account such additional amounts
in dollars as Administrative Agent may require due to subsequent increases in
the Equivalent Amount of LC Exposure in Alternate Currency; provided that the
--------
obligation to deposit such cash collateral shall become effective immediately,
and such deposit
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shall become immediately due and payable, without demand or other notice of any
kind, upon the occurrence of any Event of Default with respect to the Borrower
described in clause (h) or (i) of Article X. Such deposit shall be held by the
Administrative Agent as collateral for the payment and performance of the
Obligations. The Administrative Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal, over such account. Other than any
interest earned on the investment of such deposits, which investments shall be
made at the option and sole discretion of the Administrative Agent and at the
Borrower's risk and expense, such deposits shall not bear interest. Interest or
profits, if any, on such investments shall accumulate in such account. Moneys in
such account shall be applied by the Administrative Agent to reimburse the
Issuing Bank for LC Disbursements for which it has not been reimbursed and, to
the extent not so applied, shall be held for the satisfaction of the
reimbursement obligations of the Borrower for the LC Exposure at such time or,
if the maturity of the Loans has been accelerated (but subject to the consent of
Required Lenders), be applied to satisfy other Obligations. If the Borrower is
required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower within three Business Days after
all Events of Default have been cured or waived.
SECTION 2.5 Funding of Borrowings.
---------------------
(a) Each Lender shall make each Loan to be made by it hereunder on the
proposed date thereof by wire transfer of immediately available funds by 12:00
noon, Dallas, Texas time, to the account of the Administrative Agent most
recently designated by it for such purpose by notice to the Lenders. The
Administrative Agent will make such Loans available to the Borrower by promptly
crediting the amounts so received, in like funds, to an account of the Borrower
maintained with the Administrative Agent in Dallas, Texas and designated by the
Borrower in the applicable Borrowing Request; provided that ABR Loans made to
--------
finance the reimbursement of an LC Disbursement as provided in Section 2.04(e)
shall be remitted by the Administrative Agent to the Issuing Bank.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation or (ii) in the case of the Borrower,
the interest rate applicable to ABR Loans. If such Lender pays such amount to
the
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Administrative Agent, then such amount shall constitute such Lender's Loan
included in such Borrowing.
SECTION 2.6 Interest Elections.
------------------
(a) Each Borrowing initially shall be of the Type specified in the
applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall
have an initial Interest Period as specified in such Borrowing Request.
Thereafter, the Borrower may elect to convert such Borrowing to a different Type
or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may
elect Interest Periods therefor, all as provided in this Section. The Borrower
may elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among the
Lenders holding the Loans comprising such Borrowing, and the Loans comprising
each such portion shall be considered a separate Borrowing.
(b) To make an election pursuant to this Section, the Borrower shall
notify the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.03 if the Borrower were
requesting a Borrowing of the Type resulting from such election to be made on
the effective date of such election. Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Interest Election Request by
means of a Borrowing Request Form signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall
specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request
applies and, if different options are being elected with respect to
different portions thereof, the portions thereof to be allocated to
each resulting Borrowing (in which case the information to be
specified pursuant to clauses (iii) and (iv) below shall be specified
for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing
or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of
the term "Interest Period".
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If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election
Request with respect to a Eurodollar Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period such Borrowing shall be converted to
an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing and the Administrative Agent, at the
request of the Required Lenders, so notifies the Borrower, then, so long as an
Event of Default is continuing (i) no outstanding Borrowing may be converted to
or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.
SECTION 2.7 Termination and Reduction of Commitments.
----------------------------------------
(a) Unless previously terminated, the Commitments shall terminate on
the Maturity Date.
(b) The Borrower may at any time terminate, or from time to time
reduce, the Commitments; provided that (i) each reduction of the Commitments
--------
shall be in an amount that is an integral multiple of $5,000,000 and not less
than $5,000,000 and (ii) the Borrower shall not terminate or reduce the
Commitments if, after giving effect to any concurrent prepayment of the Loans in
accordance with Section 2.09, the Revolving Credit Exposures would exceed the
total Commitments.
(c) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) of this
Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section shall be irrevocable; provided that a notice
--------
of termination of the Commitments delivered by the Borrower may state that such
notice is conditioned upon the effectiveness of other credit facilities, in
which case such notice may be revoked by the Borrower (by notice to the
Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied. Any termination or reduction of the Commitments
shall be permanent. Each reduction of the Commitments shall be made ratably
among the Lenders in accordance with their respective Commitments.
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<PAGE>
(d) In the event of the Jeffrey Disposition, the Commitments shall be
automatically reduced by an amount equal to all of the proceeds (less reasonable
expenses) from the Jeffrey Disposition. Such reduction of the Commitments due
to the Jeffrey Disposition shall occur automatically on the first Business Day
following the date of closing of such disposition and without further action or
documentation, provided that the Borrower shall execute and deliver and cause to
be executed and delivered such documents, instruments and agreements as the
Administrative Agent shall request to further reflect such reduction.
Simultaneously with such reduction of the Commitments, the Borrower shall prepay
Borrowings in an amount equal to all of such proceeds of the Jeffrey
Disposition. Such reduction of the Commitments shall be permanent and may not
be reinstated. Such reduction of the Commitments shall be made ratably among
the Lenders in accordance with their respective Commitments. Such prepayments
shall be made in accordance with Section 2.09, except the requirements regarding
partial prepayment amounts.
(e) In the event of the Shred-Tech Disposition, the Commitments shall
be automatically reduced by an amount equal to all of the proceeds (less
reasonable expenses) from the Shred-Tech Disposition, except for any pro rata
portion of such proceeds which is required to be applied to reduce the Senior
Note Debt. Such reduction of the Commitments due to the Shred-Tech Disposition
shall occur automatically on the first Business Day following the date of
closing of such sale and without further action or documentation, provided that
the Borrower shall execute and deliver and cause to be executed and delivered
such documents, instruments and agreements as the Administrative Agent shall
request to further reflect such reduction. Simultaneously with such reduction
of the Commitments, the Borrower shall prepay the Borrowings in an amount equal
to all of the proceeds (less reasonable expenses) from the Shred-Tech
Disposition, except for any pro rata portion of such proceeds which is required
to be applied to reduce the Senior Note Debt. Such reduction of the
Commitments shall be permanent and may not be reinstated. Such reduction of the
Commitments shall be made ratably among the Lenders in accordance with their
respective Commitments. Such prepayments shall be made in accordance with
Section 2.09, except the requirements regarding partial prepayment amounts.
(f) In the event of any disposition of assets (other than dispositions
specified in clauses (a), (b) and (c) of Section 8.09) having a Net Book Value
in excess of $5,000,000 individually or when aggregated with all other such
dispositions on or after the Effective Date, as provided in Section 8.09(d), the
Commitments shall automatically be reduced by an amount equal to all of the
proceeds (less reasonable expenses) from such disposition or dispositions in
excess of $5,000,000, except for any pro rata portion of such proceeds which is
required to be applied to reduce the Senior Note Debt. Such reduction of the
Commitments due to such disposition shall occur automatically on the first
Business Day following the date of closing of such disposition and without
further action or documentation, provided that the Borrower shall execute and
deliver and cause to be executed and delivered such documents, instruments and
agreements as the Administrative Agent shall request to further reflect such
reduction. Simultaneously with such reduction of the Commitments, the Borrower
shall prepay Borrowings in an amount equal to all of the proceeds (less
reasonable expenses) from such disposition, except for any pro rata portion of
such proceeds which is required to be applied to reduce the Senior Note Debt.
Such reduction of the
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<PAGE>
Commitments shall be permanent and may not be reinstated. Such reduction of the
Commitments shall be made ratably among the Lenders in accordance with their
respective Commitments. Such prepayments shall be made in accordance with
Section 2.09, except the requirements regarding partial prepayment amounts.
SECTION 2.8 Repayment of Loans; Evidence of Debt.
-------------------------------------
(a) The Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of each Lender the then unpaid principal
amount of each Revolving Loan on the Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Loan made hereunder, the Type thereof and
the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder for the account of the Lenders and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph
(b) or (c) of this Section shall be prima facie evidence of the existence and
----- -----
amounts of the obligations recorded therein; provided that the failure of any
--------
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.
(e) The obligation of the Borrower to repay each Lender for Loans
made by such Lender and interest thereon shall be evidenced by a Note executed
by the Borrower, payable to the order of such Lender, in the principal amount of
such Lender's Commitment as in effect on the date hereof, and initially dated
the date hereof.
SECTION 2.9 Prepayment of Loans.
-------------------
(a) The Borrower shall have the right at any time and from time to
time to prepay any Borrowing in whole or in part, subject to prior notice in
accordance with paragraph (b) of this Section.
(b) The Borrower shall notify the Administrative Agent (confirmed by
telecopy) of any prepayment of a Eurodollar Borrowing that will be made before
the last day of the applicable Interest Period and shall pay all amounts
required to be paid by Section 3.05 concurrently with such prepayment. Such
notice shall be given not later than 11:00 a.m., Dallas, Texas time, on the date
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of prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Borrowing or portion thereof to
be prepaid; provided that, if a notice of prepayment is given in connection with
--------
a conditional notice of termination of the Commitments as contemplated by
Section 2.07, then such notice of prepayment may be revoked if such notice of
termination is revoked in accordance with Section 2.07. Promptly following
receipt of any such notice, the Administrative Agent shall advise the Lenders of
the contents thereof. Each partial prepayment of any Borrowing shall be in an
amount that would be permitted in the case of an advance of a Borrowing of the
same Type as provided in Section 2.02. Each prepayment of a Borrowing shall be
applied ratably to the Loans included in the prepaid Borrowing. Prepayments
shall be accompanied by accrued interest to the extent required by Section 2.11.
(c) If at any time the total Revolving Credit Exposures (including
the Equivalent Amount of Letters of Credit issued in Alternate Currency and the
Equivalent Amount of LC Disbursements made in Alternate Currency) exceeds the
total Commitments, the Borrower shall promptly prepay the outstanding Borrowings
by the amount of the excess plus accrued and unpaid interest on the amount so
prepaid. For purposes of the foregoing, the Equivalent Amount of each Letter of
Credit issued in Alternate Currency shall be recalculated on each day that the
Available Amount is $4,000,000 or less.
SECTION 2.10 Fees.
----
(a) The Borrower agrees to pay to the Administrative Agent for the
account of each Lender (pro rata in accordance with the Commitment of each
Lender) a commitment fee on the daily average unused amount of the Commitments
for the Availability Period, at the rate of one-half of one percent per annum.
For purposes of calculating the commitment fee hereunder, the Commitments shall
be deemed utilized by the amount of all Borrowings plus the outstanding Letter
of Credit Liabilities. Accrued commitment fees payable under this Section shall
be payable in arrears on the last day of March, June, September and December of
each year and on the date on which the Commitments terminate, commencing on the
first such date to occur after the date hereof. All commitment fees shall be
computed on the basis of a year of 360 days and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).
(b) The Borrower agrees to pay (i) to the Administrative Agent for
the account of the Lenders (pro rata according to the amount of their respective
Commitments) a commission with respect to their participations in Letters of
Credit, which shall accrue at a per annum rate equal to the Applicable Margin
for Eurodollar Loans on the face amount of all outstanding Letters of Credit
during the period from and including the Effective Date to but excluding the
later of the date on which such Lender's Commitment terminates and the date on
which such Lender ceases to have any LC Exposure, and (ii) to the Administrative
Agent for the account of the Issuing Bank a fronting fee for each Letter of
Credit in an amount equal to 1/8% per annum on the face amount of such Letter of
Credit, as well as the Issuing Bank's standard fees with respect to the
issuance, amendment, renewal or extension of any Letter of Credit or processing
of drawings thereunder. Participation fees for each Letter of Credit shall
accrue and shall be payable quarterly in advance, commencing on the
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<PAGE>
date of issuance of such Letter of Credit and continuing on the first day of
each January, April, July and October thereafter; provided that all such fees
--------
shall be payable on the date on which the Commitments terminate and any such
fees accruing after the date on which the Commitments terminate shall be payable
on demand. The fronting fees for Existing Letters of Credit shall be payable
upon the Effective Date, and all other fronting fees for each Letter of Credit
shall be payable upon issuance of such Letter of Credit. Any other fees payable
to the Issuing Bank pursuant to this paragraph shall be payable within 10 days
after demand. All participation fees and fronting fees shall be computed on the
basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day). The fronting fee
for each Letter of Credit issued in Alternate Currency shall be calculated by
the Administrative Agent on the Equivalent Amount (as determined by the
Administrative Agent) of the face amount of such Letter of Credit as of the date
of issuance thereof. The participation fees for each Letter of Credit issued in
Alternate Currency shall be calculated by the Administrative Agent on the
Equivalent Amount (as determined by the Administrative Agent) of the face amount
of such Letter of Credit as of the first day of each January, April, July and
October.
(c) The Borrower agrees to pay to the Administrative Agent, for its
own account, fees payable in the amounts and at the times separately agreed upon
between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
commitment fees and participation fees, to the Lenders. Fees paid shall not be
refundable under any circumstances.
SECTION 2.11 Interest.
--------
(a) The Loans comprising each ABR Borrowing shall bear interest at
the Alternate Base Rate plus the Applicable Margin.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Margin.
(c) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided in the preceding paragraphs
of this Section or (ii) in the case of any other amount, including interest and
fees, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of
this Section.
(d) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan and upon termination of the Commitments;
provided that (i) interest
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accrued pursuant to paragraph (c) of this Section shall be payable on demand,
(ii) in the event of any repayment or prepayment of any Loan (other than a
prepayment of an ABR Loan prior to the end of the Availability Period), accrued
interest on the principal amount repaid or prepaid shall be payable on the date
of such repayment or prepayment and (iii) in the event of any conversion of any
Eurodollar Loan prior to the end of the current Interest Period therefor,
accrued interest on such Loan shall be payable on the effective date of such
conversion.
(e) All interest hereunder shall be computed on the basis of a year
of 360 days, except that interest computed by reference to the Alternate Base
Rate at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The applicable Alternate Base Rate,
Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent,
and such determination shall be conclusive absent manifest error.
SECTION 2.12 Taxes.
-----
(a) Any and all payments by or on account of any obligation of the
Borrower hereunder shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; provided that if the Borrower shall be
--------
required to deduct any Indemnified Taxes or Other Taxes from such payments, then
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section) the Administrative Agent, Lender or Issuing Bank (as the
case may be) 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
Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent, each
Lender and the Issuing Bank, within 10 days after written demand therefor, for
the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or
with respect to any payment by or on account of any obligation of the Borrower
hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to the Borrower by a Lender or the
Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a
Lender or the Issuing Bank, shall be conclusive absent manifest error.
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<PAGE>
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by applicable
law, such properly completed and executed documentation prescribed by applicable
law or reasonably requested by the Borrower as will permit such payments to be
made without withholding or at a reduced rate.
SECTION 2.13 Payments Generally; Pro Rata Treatment; Sharing of Set-
-------------------------------------------------------
offs.
- ----
(a) The Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or of amounts payable under Section 2.12, 3.01 or 3.05, or
otherwise) prior to 12:00 noon, Dallas, Texas time, on the date when due, in
immediately available funds, without set-off or counterclaim. Any amounts
received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at 1111 Fannin Street,
9th Floor, MS46, Houston, Texas 77002, except payments to be made directly to
the Issuing Bank as expressly provided herein and except that payments pursuant
to Sections 2.12, 3.01, 3.05 and 12.03 shall be made directly to the Persons
entitled thereto. The Administrative Agent shall distribute any such payments
received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof. If any payment hereunder shall be due on a
day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All
payments hereunder shall be made in dollars.
(b) If at any time insufficient funds are received by and available
to the Administrative Agent to pay fully all amounts of principal, unreimbursed
LC Disbursements, interest and fees then due hereunder, such funds shall be
applied (i) first, towards payment of interest and fees then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
interest and fees then due to such parties, and (ii) second, towards payment of
principal and unreimbursed LC Disbursements then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of principal and
unreimbursed LC Disbursements then due to such parties.
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans or
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<PAGE>
participations in LC Disbursements resulting in such Lender receiving payment of
a greater proportion of the aggregate amount of its Loans and participations in
LC Disbursements and accrued interest thereon than the proportion received by
any other Lender, then the Lender receiving such greater proportion shall
purchase (for cash at face value) participations in the Loans and participations
in LC Disbursements of other Lenders to the extent necessary so that the benefit
of all such payments shall be shared by the Lenders ratably in accordance with
the aggregate amount of principal of and accrued interest on their respective
Loans and participations in LC Disbursements; provided that (i) if any such
--------
participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made
by the Borrower pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations
in LC Disbursements to any assignee or participant, other than to the Borrower
or any Subsidiary or Affiliate thereof (as to which the provisions of this
paragraph shall apply). The Borrower consents to the foregoing and agrees, to
the extent it may effectively do so under applicable law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise
against the Borrower rights of set-off and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the Borrower
in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuing Bank hereunder that the
Borrower will not make such payment, the Administrative Agent may assume that
the Borrower has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to the Lenders or the Issuing Bank,
as the case may be, the amount due. In such event, if the Borrower has not in
fact made such payment, then each of the Lenders or the Issuing Bank, as the
case may be, severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender or Issuing Bank with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.
(e) If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.04(d) or (e), 2.05(b) or 2.13(d), then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender's obligations under
such Sections until all such unsatisfied obligations are fully paid.
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SECTION 2.14 Mitigation Obligations; Replacement of Lenders.
----------------------------------------------
(a) If any Lender requests compensation under Section 3.01, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.12,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to Section 2.12 or 3.01, as the case may be,
in the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 3.01, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.12,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 12.04), all its interests, rights and obligations under this Agreement
to an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) the Borrower
--------
shall have received the prior written consent of the Administrative Agent (and,
if a Commitment is being assigned, the Issuing Bank), which consent shall not
unreasonably be withheld, (ii) such Lender shall have received payment of an
amount equal to the outstanding principal of its Loans and participations in LC
Disbursements, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrower (in the case of all
other amounts) and (iii) in the case of any such assignment resulting from a
claim for compensation under Section 3.01 or payments required to be made
pursuant to Section 2.12, such assignment will result in a reduction in such
compensation or payments. A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Borrower to require such
assignment and delegation cease to apply.
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ARTICLE III
Yield Protection and Illegality
-------------------------------
SECTION 3.1 Increased Costs.
---------------
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender (except any such
reserve requirement reflected in the Adjusted LIBO Rate) or the
Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the London
interbank market any other condition affecting this Agreement or
Eurodollar Loans made by such Lender or any Letter of Credit or
participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any Change in
Law regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender's or the Issuing Bank's capital or on the capital
of such Lender's or the Issuing Bank's holding company, if any, as a consequence
of this Agreement or the Loans made by, or participations in Letters of Credit
held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a
level below that which such Lender or the Issuing Bank or such Lender's or the
Issuing Bank's holding company could have achieved but for such Change in Law
(taking into consideration such Lender's or the Issuing Bank's policies and the
policies of such Lender's or the Issuing Bank's holding company with respect to
capital adequacy), then from time to time the Borrower will pay to such Lender
or the Issuing Bank, as the case may be, such additional amount or amounts as
will compensate such Lender or the Issuing Bank or such Lender's or the Issuing
Bank's holding company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or the Issuing Bank or its
holding company, as the case may be, as specified in paragraph (a) or (b) of
this Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender or the Issuing
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Bank, as the case may be, the amount shown as due on any such certificate within
10 days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation; provided
--------
that the Borrower shall not be required to compensate a Lender or the Issuing
Bank pursuant to this Section for any increased costs or reductions incurred
more than 270 days prior to the date that such Lender or the Issuing Bank, as
the case may be, notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation therefor; provided further that, if the Change
-------- -------
in Law giving rise to such increased costs or reductions is retroactive, then
the 270-day period referred to above shall be extended to include the period of
retroactive effect thereof.
SECTION 3.2 Alternate Rate of Interest. If prior to the
--------------------------
commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable,
for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that
the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (or Lender) of
making or maintaining their Loans (or its Loan) included in such Borrowing for
such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.
SECTION 3.3 Illegality. Notwithstanding any other provision of this
----------
Agreement, in the event that it becomes unlawful for any Lender or its
applicable lending office to (a) honor its obligation to make Eurodollar
Borrowings hereunder or (b) maintain Eurodollar Borrowings hereunder, then such
Lender shall promptly notify the Borrower (with a copy to the Administrative
Agent) thereof and such Lender's obligation to make or maintain Eurodollar
Borrowings and to convert other Types of Borrowings into Eurodollar Borrowings
hereunder shall be suspended until such time as such Lender may again make and
maintain Eurodollar Borrowings, in which case (i) all Borrowings which would be
otherwise made by such Lender as Eurodollar Borrowings shall be made instead as
ABR Borrowings and all Borrowings which would otherwise be converted into (or
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continued as) Eurodollar Borrowings shall be converted instead into (or shall
remain as) ABR Borrowings and (ii) if such Lender so requests by notice to the
Borrower (with a copy to the Administrative Agent), all Eurodollar Borrowings of
such Lender shall be automatically converted into ABR Borrowings on the date
specified by such Lender in such notice.
SECTION 3.4 Treatment of Affected Borrowings. If the Eurodollar
--------------------------------
Borrowings of any Lender are to be converted pursuant to Section 3.03 hereof,
such Lender's Eurodollar Borrowings shall be automatically converted into ABR
Borrowings on the last day(s) of the then current Interest Period(s) for such
Eurodollar Borrowings (or on such earlier date as such Lender may specify to the
Borrower with a copy to the Administrative Agent) and, unless and until such
Lender gives notice as provided below that the circumstances specified in
Section 3.03 hereof which gave rise to such conversion no longer exist:
(a) To the extent that such Lender's Eurodollar Borrowings have been
so converted, all payments and prepayments of principal which would otherwise be
applied to such Lender's Eurodollar Borrowings shall be applied instead to its
ABR Borrowings;
(b) All Borrowings which would otherwise be made or continued by such
Lender as Eurodollar Borrowings shall be made as or converted into ABR
Borrowings and all Borrowings of such Lender which would otherwise be converted
into Eurodollar Borrowings shall be converted instead into (or shall remain as)
ABR Borrowings; and
If such Lender gives notice to the Borrower (with a copy to the Administrative
Agent) that the circumstances specified in Section 3.03 hereof which gave rise
to the conversion of such Lender's Eurodollar Borrowings pursuant to this
Section 3.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Borrowings are
outstanding, such Lender's ABR Borrowings shall be automatically converted, on
the first day(s) of the next succeeding Interest Period(s) for such outstanding
Eurodollar Borrowings to the extent necessary so that, after giving effect
thereto, all Borrowings held by the Lenders holding Eurodollar Borrowings and by
such Lender are held pro rata (as to principal amounts, Types, and Interest
Periods) in accordance with their respective Commitments.
SECTION 3.5 Break Funding Payments. In the event of (a) the payment
----------------------
of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice may be revoked under Section
2.09(b) and is revoked in accordance therewith), or (d) the assignment of any
Eurodollar Loan other than on the last day of the Interest Period applicable
thereto as a result of a request by the Borrower pursuant to Section 2.14, then,
in any such event, the Borrower shall compensate each Lender for the loss, cost
and expense attributable to such event. In the case of a Eurodollar Loan, such
loss, cost or expense to any Lender shall be deemed to include an amount
determined by such Lender to be the excess, if any, of (i) the amount of
interest
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<PAGE>
which would have accrued on the principal amount of such Loan had such event not
occurred, at the Adjusted LIBO Rate that would have been applicable to such
Loan, for the period from the date of such event to the last day of the then
current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
such Loan), over (ii) the amount of interest which would accrue on such
principal amount for such period at the interest rate which such Lender would
bid were it to bid, at the commencement of such period, for dollar deposits of a
comparable amount and period from other banks in the eurodollar market. A
certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.
ARTICLE IV
Security
--------
SECTION 4.1 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 4.01 (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) The Borrower shall grant to the Collateral Agent, for the benefit
of the Administrative Agent, the Issuing Bank, the Lenders and the holders of
the Senior Note Debt, a first priority security interest in all of its accounts,
accounts receivable, equipment, machinery, furniture, fixtures, inventory,
chattel paper, documents, instruments, and general intangibles, whether now
owned or hereafter acquired, and all products and proceeds thereof, pursuant to
the Borrower Security Agreement.
(b) The Borrower shall cause each of the Material Subsidiaries to
grant to the Collateral Agent, for the benefit of the Administrative Agent, the
Issuing Bank, the Lenders and the holders of the Senior Note Debt, a first
priority security interest in all of each Subsidiary's accounts, accounts
receivable, equipment, machinery, furniture, fixtures, inventory, chattel paper,
documents, instruments, and general intangibles, whether now owned or hereafter
acquired, and all products and proceeds thereof, pursuant to the Subsidiary
Security Agreement.
(c) The Borrower shall execute the Pledge Agreement, granting to the
Collateral Agent, for the benefit of the Administrative Agent, the Issuing Bank,
the Lenders and the holders of the Senior Note Debt, a first priority security
interest in the Pledged Stock and shall provide the executed Pledge Agreement to
the Collateral Agent, together with the original stock certificates representing
the Pledged Stock and stock transfer powers duly executed in blank, to be held
by the Collateral Agent in escrow until the earliest of (i) the occurrence of an
Event of Default under Section 10.01(b), (ii) the occurrence of a Default as a
result of Borrower's failure to observe or
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<PAGE>
perform any covenant, condition or agreement contained in Article VII, which
failure continues unremedied for a period of five Business Days, or (iii) the
occurrence of any other Default (other than under Section 10.01(b) or as
described in clause (ii) above), whereupon the Pledge Agreement, stock
certificates, stock transfer powers, and other documents and instruments
evidencing or perfecting the Collateral Agent's Lien in the Pledged Stock shall
be released from escrow to the Collateral Agent, and the security interest of
the Collateral Agent in the Pledged Stock shall become effective and perfected
for all purposes.
(d) The Borrower shall execute and cause to be executed such further
documents and instruments, including without limitation, Uniform Commercial Code
financing statements, as the Administrative Agent, in its sole discretion, deems
necessary or desirable to evidence and perfect its Liens in the Collateral.
(e) The Borrower shall cause Global-GIX Canada, Inc., an Ontario
corporation ("GIX"), within 30 days after the date hereof, to (i) grant to the
---
Collateral Agent for the benefit of the Administrative Agent, the Issuing Bank,
the Lenders and the holders of the Senior Note Debt, a first priority security
interest in all of GIX's accounts, accounts receivable, equipment, machinery,
furniture, fixtures, inventory, chattel paper, documents, instruments, and
general intangibles, whether now owned or hereafter acquired, and all products
and proceeds thereof, pursuant to a security agreement and any other documents,
agreements or instruments as are necessary, in the Collateral Agent's sole
discretion, to perfect the Collateral Agent's security interest in such property
of GIX, in form and substance satisfactory to the Collateral Agent, (ii) execute
a guaranty in favor of the Agents, the Issuing Bank and the Lenders, in form and
substance satisfactory to the Administrative Agent, (iii) deliver a legal
opinion of Canadian counsel to Borrower and GIX, addressed to the Administrative
Agent and the Collateral Agent and permitting reliance thereon by the Issuing
Bank, the Lenders and the holders of the Senior Note Debt, in form and substance
satisfactory to the Administrative Agent as to such matters as the Required
Lenders shall reasonably request, (iv) deliver landlord and mortgagee waivers in
form and substance satisfactory to the Administrative Agent, executed by each
landlord and mortgagee of any real property where any Collateral of GIX is
located, as well as any other agreements of third parties in possession of any
of the Collateral of GIX as the Administrative Agent may require, and (v)
execute and deliver such additional documents and certificates as the
Administrative Agent or its counsel may reasonably request, all in form and
substance satisfactory to the Administrative Agent and its counsel.
ARTICLE V
Representations and Warranties
------------------------------
The Borrower represents and warrants to the Lenders that:
SECTION 5.1 Organization; Powers. Each of the Borrower and its
--------------------
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority to carry on its business as now conducted and,
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<PAGE>
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, is qualified to
do business in, and is in good standing in, every jurisdiction where such
qualification is required.
SECTION 5.2 Authorization; Enforceability. The Transactions are
-----------------------------
within the Borrower's corporate powers and have been duly authorized by all
necessary corporate and, if required, stockholder action. This Agreement has
been duly executed and delivered by the Borrower and constitutes a legal, valid
and binding obligation of the Borrower, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.
SECTION 5.3 Governmental Approvals; No Conflicts. The Transactions
------------------------------------
(a) do not require any consent or approval of, registration or filing with, or
any other action by, any Governmental Authority, except such as have been
obtained or made and are in full force and effect, (b) will not violate any
applicable law or regulation or the charter, by-laws or other organizational
documents of the Borrower or any of its Subsidiaries or any order of any
Governmental Authority, (c) will not violate or result in a default under any
indenture, agreement or other instrument binding upon the Borrower or any of its
Subsidiaries or its assets, or give rise to a right thereunder to require any
payment to be made by the Borrower or any of its Subsidiaries, and (d) will not
result in the creation or imposition of any Lien on any asset of the Borrower or
any of its Subsidiaries.
SECTION 5.4 Financial Condition; No Material Adverse Change.
-----------------------------------------------
(a) The Borrower has heretofore furnished to the Lenders its
consolidated balance sheet and statements of income, stockholders' equity and
cash flows (i) as of and for the fiscal years ended October 31, 1997 and
December 31, 1998, reported on by Price Waterhouse Coopers, independent public
accountants, (ii) as of and for the fiscal quarter and the portion of the
fiscal year ended March 31, 1999, certified by its chief financial officer, and
(iii) as of and for each of the months of April, May and June 1999 and the
portion of the fiscal year then ended, certified by its chief financial officer.
Such financial statements present fairly, in all material respects, the
financial position and results of operations and cash flows of the Borrower and
its consolidated Subsidiaries as of such dates and for such periods in
accordance with GAAP, subject to year-end audit adjustments and the absence of
footnotes in the case of the statements referred to in clauses (ii) and (iii)
above.
(b) Since March 31, 1999, there has been no material adverse change
in the business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and its Subsidiaries, taken as a whole.
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SECTION 5.5 Properties.
----------
(a) Each of the Borrower and its Subsidiaries has good title to, or
valid leasehold interests in, all its real and personal property material to its
business, except for minor defects in title that do not interfere with its
ability to conduct its business as currently conducted or to utilize such
properties for their intended purposes.
(b) Each of the Borrower and its Subsidiaries owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other intellectual
property material to its business, and the use thereof by the Borrower and its
Subsidiaries does not infringe upon the rights of any other Person, except for
any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 5.6 Litigation and Environmental Matters.
------------------------------------
(a) There are no actions, suits or proceedings by or before any
arbitrator or Governmental Authority pending against or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any of its
Subsidiaries (i) as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect (other
than the Disclosed Matters) or (ii) that involve this Agreement or the
Transactions.
(b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, neither the Borrower nor any of
its Subsidiaries (i) has failed to comply with any Environmental Law or to
obtain, maintain or comply with any permit, license or other approval required
under any Environmental Law, (ii) has become subject to any Environmental
Liability, (iii) has received notice of any claim with respect to any
Environmental Liability or (iv) knows of any basis for any Environmental
Liability.
(c) Since the date of this Agreement, there has been no change in the
status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
SECTION 5.7 Compliance with Laws and Agreements. Each of the
-----------------------------------
Borrower and its Subsidiaries is in compliance with all laws, regulations and
orders of any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding upon it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. No Default has
occurred and is continuing.
SECTION 5.8 Investment and Holding Company Status. Neither the
-------------------------------------
Borrower nor any of its Subsidiaries is (a) an "investment company" as defined
in, or subject to regulation under,
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the Investment Company Act of 1940 or (b) a "holding company" as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.
SECTION 5.9 Taxes. Each of the Borrower and its Subsidiaries has
-----
timely filed or caused to be filed all Tax returns (including applicable
extensions) and reports required to have been filed and has paid or caused to be
paid all Taxes required to have been paid by it, except (a) Taxes that are being
contested in good faith by appropriate proceedings and for which the Borrower or
such Subsidiary, as applicable, has set aside on its books adequate reserves or
(b) to the extent that the failure to do so could not reasonably be expected to
result in a Material Adverse Effect.
SECTION 5.10 ERISA. Each Borrower, each Guarantor and each ERISA
-----
Affiliate (i) have fulfilled all obligations under the minimum funding standards
of ERISA and the Code with respect to each Plan, (ii) are in compliance in all
material respects with all other applicable provisions of ERISA and the Code
with respect to each Plan, and (iii) have not incurred any liability under Title
IV of ERISA to the PBGC with respect to any Plan or any trust established
thereunder. No Plan or trust created thereunder has been terminated, and there
have been no Reportable Events, with respect to any Plan or trust created
thereunder which Reportable Event or Reportable Events will or could result in
the termination of such Plan or give rise to a material liability of the Company
or any ERISA Affiliate in respect thereof. Neither Borrower, any Guarantor, any
ERISA Affiliate nor any predecessor of any of them, is or has ever been an
employer required to contribute to any Multiemployer Plan, the termination of
which would be reasonably likely to have a Material Adverse Effect. Neither
Borrower, any Guarantor, nor any ERISA Affiliate is or has ever been a
"contributing sponsor" (as such term is defined in Section 4001 of ERISA) of any
Mutiemployer Plan with respect to which Borrower, any Guarantor or any ERISA
Affiliate has or could reasonably be expected to incur any withdrawal liability
(and no event has occurred which, with the giving of notice under Section 4219
of ERISA, would result in such liability) under section 4201 of ERISA as a
result of a complete or partial withdrawal which withdrawal liability could give
rise to a material liability of Borrower, any Guarantor or any ERISA Affiliate.
Neither any Borrower, any Guarantor, nor any ERISA Affiliate is currently
subject to any "outstanding claim for withdrawal liability" within the meaning
of Section 4001(a)(12) of ERISA.
The execution and delivery of this Agreement, the Notes, the Guaranty and
the making of Loans and Borrowings hereunder will be exempt from or will not
involve any transaction which is subject to the prohibitions of Section 406 of
ERISA and will not involve any transaction in connection with which a penalty
could be imposed under section 502(i) of ERISA or a tax could be imposed
pursuant to section 4975 of the Code.
SECTION 5.11 Disclosure. The Borrower has disclosed to the Lenders
----------
all agreements, instruments and corporate or other restrictions to which it or
any of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates
or other information furnished by or on behalf of the Borrower to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or delivered hereunder (as modified or
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supplemented by other information so furnished) contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to projected financial
--------
information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time.
SECTION 5.12 Year 2000. Any reprogramming required to permit the
---------
proper functioning, in and following the year 2000, of (i) the Borrower's
computer systems and (ii) equipment containing embedded microchips (including
systems and equipment supplied by others or with which Borrower's systems
interface) and the testing of all such systems and equipment, as so
reprogrammed, will be completed by September 30, 1999. The cost to the Borrower
of such reprogramming and testing and of the reasonably foreseeable consequences
of year 2000 to the Borrower (including, without limitation, reprogramming
errors and the failure of others' systems or equipment) will not result in a
Default or a Material Adverse Effect. 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 its Subsidiaries are and,
with ordinary course upgrading and maintenance, will continue for the term of
this Agreement to be, sufficient to permit the Borrower to conduct its business
without Material Adverse Effect.
SECTION 5.13 Indebtedness. The Borrower and its Subsidiaries have no
------------
Indebtedness, except as disclosed on Schedule 8.01(c) or otherwise permitted by
Section 8.01(c).
SECTION 5.14 Subsidiaries. The Borrower has no Subsidiaries other
------------
than those listed on Schedule 5.14 hereto, and Schedule 5.14 sets forth the
jurisdiction of incorporation of each Subsidiary and the percentage of the
Borrower's or any Subsidiary's ownership of the outstanding voting stock or
other ownership or equity interests of each Subsidiary and designates the
Material Subsidiaries as of the Effective Date. All of the outstanding capital
stock of each Subsidiary has been validly issued, is fully paid, and is
nonassessable. The Borrower shall, from time to time as necessary, deliver to
the Administrative Agent an updated Schedule 5.14 to this Agreement, together
with a certificate of an authorized officer of the Borrower certifying that the
information set forth in such schedule is true, correct and complete as of such
date.
SECTION 5.15 Inventory. All inventory of the Borrower 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. (S)(S) 201-219), and the regulations promulgated thereunder.
SECTION 5.16 Patents, Trademarks and Copyrights. Schedule 5.16 sets
----------------------------------
forth a true, accurate and complete listing, as of the date hereof, of all
patents, trademarks and copyrights, and applications therefor, of the Borrower
and its Subsidiaries. Except as created or permitted under the Loan Documents,
no Lien exists with respect to the interests of the Borrower or any Subsidiary
in any such patents, trademarks, copyrights or applications, and neither the
Borrower nor any Subsidiary has transferred or subordinated any interest it may
have in such patents, trademarks,
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copyrights and applications. The Borrower shall, from time to time as necessary,
deliver to the Administrative Agent an updated Schedule 5.16 to this Agreement,
together with a certificate of an authorized officer of the Borrower certifying
that the information set forth on such schedule is true, correct and complete as
of such date. Upon the request of the Administrative Agent at any time, the
Borrower shall execute and deliver and cause to be executed and delivered
assignments of all patents, trademarks, copyrights and applications therefor
included in the Collateral, in favor of the Collateral Agent for the benefit of
the Administrative Agent, the Issuing Bank, the Lenders and the holders of the
Senior Note Debt, which assignments shall be in form and substance satisfactory
to the Administrative Agent and in proper form (i) for recording in the U.S.
Patent and Trademark Office to properly reflect the Collateral Agent's security
interest in all U.S. patents, trademarks and applications therefor included in
the Collateral and (ii) for recording with the U.S. Library of Congress to
properly reflect the Collateral Agent's security interest in all U.S. copyrights
and applications therefor included in the Collateral.
SECTION 5.17 Margin Securities. Neither the Borrower nor any of its
-----------------
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying any
"margin stock" within the meaning of Regulation T, U or X of the Board, as
amended. No part of the proceeds of any Letter of Credit or Borrowing will be
used, directly or indirectly, to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying margin stock.
SECTION 5.18 Labor Matters. Except for any of the following that
-------------
would not have a Material Adverse Effect, (a) there are no actual or threatened
strikes, labor disputes, slow downs, walkouts, work stoppages, or other
concerted interruptions of operations that involve any employees employed at any
time in connection with the business activities or operations at any of the
Borrower's or its Subsidiaries' locations, (b) hours worked by and payment made
to the employees of the Borrower or its Subsidiaries have not been in violation
of the Fair Labor Standards Act or any other applicable laws, rules and
regulations pertaining to labor matters, (c) all payments due from the Borrower
or its Subsidiaries for employee health and welfare insurance, including,
without limitation, workers' compensation insurance, have been paid or accrued
as a liability on its books, (d) the business activities and operations of the
Borrower and its Subsidiaries are in compliance with the Occupational Safety and
Health Act of 1970, 29 U.S.C. (S) 651 et seq. and other applicable health and
safety laws, rules and regulations.
SECTION 5.19 Solvency. On the date of each Borrowing and the date
--------
that any Letter of Credit is issued, the Borrower and each of its Subsidiaries
are, and after giving effect to the requested Borrowing or LC Disbursement, will
be, Solvent.
SECTION 5.20 Burdensome Agreements. Neither the Borrower nor any of
---------------------
its Subsidiaries are a party to any agreements which contain any unusual or
burdensome provisions which could result in a Material Adverse Effect.
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<PAGE>
SECTION 5.21 Collateral Value. As of the Effective Date, the Net
----------------
Book Value of the Collateral is not less than the amount equal to 67.8% of the
Net Book Value of all accounts receivable, inventory, general intangibles,
equipment, furniture, fixtures, property, plant and equipment of the Borrower
and its Subsidiaries.
ARTICLE VI
Conditions
----------
SECTION 6.1 Effective Date. The obligations of the Lenders to make
--------------
Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not
become effective until the date on which the Administrative Agent (or its
counsel) has received (or waived in accordance with Section 12.02) each of the
following, in form and substance satisfactory to the Administrative Agent:
(a) Credit Agreement. Either (i) a counterpart of this Agreement
----------------
signed on behalf of each party hereto or (ii) written evidence satisfactory to
the Administrative Agent (which may include telecopy transmission of a signed
signature page of this Agreement) that such party has signed a counterpart of
this Agreement.
(b) Resolutions. Resolutions of the Board of Directors of each of the
-----------
Borrower and the Material Subsidiaries certified by the Secretary or an
Assistant Secretary of such Person 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.
(c) Incumbency Certificate. A certificate of incumbency certified by
----------------------
the Secretary or an Assistant Secretary of each of the Borrower and the Material
Subsidiaries certifying the names of the officers of each 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.
(d) Articles of Incorporation. The articles of incorporation or
-------------------------
certificate of incorporation of each of the Borrower and the Material
Subsidiaries certified by the Secretary of State of the state of incorporation
of such Person and dated within ten (10) days prior to the Effective Date.
(e) Bylaws. The bylaws of each of the Borrower and the Material
------
Subsidiaries certified by the Secretary or an Assistant Secretary of such
Person.
(f) Governmental Certificates. Certificates of the appropriate
--------------------------
government officials of the state of incorporation of each of the Borrower and
the Material Subsidiaries as to the existence and good standing of such Persons
and certificates of the appropriate government officials of each state where
each such Person is qualified to do business as to the qualification and good
standing of such Person, each dated within ten (10) days prior to the Effective
Date.
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<PAGE>
(g) Corporate Structure. Evidence of the Borrower's corporate and
-------------------
subsidiary structure, which evidence and structure shall be satisfactory to the
Administrative Agent in its sole discretion.
(h) Governmental and Third Party Approvals. All governmental and
--------------------------------------
third-party approvals necessary or advisable, in the sole discretion of the
Administrative Agent, in connection with the Loans and in connection with the
continuing operations of each of the Borrower and its Subsidiaries.
(i) Financial Statements. The financial statements specified in
--------------------
Section 5.04, which shall be satisfactory to the Administrative Agent in its
sole discretion.
(j) Reports and Opinions. An independent auditor's most recent
--------------------
management letter and unqualified report and opinion on the Borrower's financial
statements.
(k) Notes. The Notes executed by the Borrower.
-----
(l) Borrower Security Agreement. The Borrower Security Agreement
---------------------------
executed by the Borrower.
(m) Subsidiary Security Agreement. The Subsidiary Security Agreement
-----------------------------
executed by the Material Subsidiaries.
(n) Pledge Agreement. The Pledge Agreement executed by the Borrower.
----------------
(o) Financing Statements. Uniform Commercial Code financing
--------------------
statements executed by the Borrower and the Material Subsidiaries and covering
the Collateral.
(p) Pledged Stock. The original stock certificates representing the
-------------
Pledged Stock, together with stock transfer powers duly executed in blank by the
Borrower.
(q) Guaranty. The Guaranty executed by each Guarantor.
--------
(r) Contribution and Indemnification Agreement. The Contribution and
------------------------------------------
Indemnification Agreement executed by the Borrower and each Guarantor.
(s) Landlord and Mortgagee Waivers. Landlord and mortgagee waivers in
------------------------------
form and substance satisfactory to the Administrative Agent executed by each
landlord and mortgagee of any real property where any of the Collateral is
located, as well as any other agreements of third parties in possession of any
of the Collateral as the Administrative Agent may require.
(t) Insurance Policies. Certificate(s) of insurance evidencing all
------------------
insurance policies required by Section 7.07, together with loss payable
endorsements (where applicable) in
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<PAGE>
favor of the Collateral Agent, for the benefit of the Administrative Agent, the
Issuing Bank, the Lenders and the holders of the Senior Note Debt, with respect
to all insurance policies covering Collateral.
(u) Lien Searches. The results of UCC, tax and judgment lien
-------------
searches showing all financing statements, other documents or instruments and
tax and judgment liens on file against each of the Borrower and the Material
Subsidiaries in such jurisdictions as the Administrative Agent may require, such
searches to be as of a date no more than ten (10) days prior to the Effective
Date.
(v) Opinion of Counsel. A favorable written opinion (addressed to the
------------------
Administrative Agent and the Lenders and dated the Effective Date) of Jackson
Walker L.L.P., counsel for the Borrower and the Subsidiaries, in form and
substance satisfactory to the Administrative Agent, as to the matters specified
on Exhibit "I" hereto and such other matters relating to the Borrower, this
Agreement or the Transactions as the Required Lenders shall reasonably request.
The Borrower hereby requests such counsel to deliver such opinion.
(w) Opinion of Local Counsel. A favorable written opinion (addressed
------------------------
to the Administrative Agent and the Lenders and dated the Effective Date) of
Pennsylvania counsel, in form and substance satisfactory to the Administrative
Agent, as to such matters of law of the State of Pennsylvania as the Required
Lenders shall reasonably request. The Borrower hereby requests such counsel to
deliver such opinion.
(x) Indebtedness. All terms of the Material Indebtedness of the
------------
Borrower and its Subsidiaries (including the Senior Note Debt), which shall be
satisfactory to the Lenders, and all requisite consents, approvals and
amendments relating to such Material Indebtedness which shall be in form and
substance satisfactory to the Administrative Agent.
(y) Compliance Certificate. An initial Compliance Certificate, dated
----------------------
the Effective Date and signed by a Financial Officer of the Borrower, confirming
compliance with the conditions set forth in paragraphs (a), (b) and (c) of
Section 6.02 and showing compliance as of June 30, 1999 with the ratios
applicable on the Effective Date for the financial covenants set forth in
Sections 9.01 and 9.02 only.
(z) Solvency Certificates. Certificates, dated the Effective Date and
---------------------
signed by a Financial Officer of the Borrower and of each of the Material
Subsidiaries, certifying as to the Solvency of the Borrower and each of the
Material Subsidiaries as of the Effective Date and after giving effect to the
transactions contemplated by this Agreement.
(aa) Intercreditor Agreement. The Intercreditor Agreement executed by
-----------------------
the Borrower, the Material Subsidiaries and the holders of the Senior Note Debt.
(bb) Termination Agreement. A termination agreement, executed by the
---------------------
parties to the Existing Credit Agreement, terminating the Existing Credit
Agreement and the commitments
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<PAGE>
of the lenders thereunder, together with evidence that the initial Borrowing
hereunder will pay in full all amounts outstanding under the Existing Credit
Agreement.
(cc) Fees and Expenses. All fees and other amounts due and payable on
-----------------
or prior to the Effective Date, including to the extent invoiced, reimbursement
or payment of all attorneys' fees and out-of-pocket expenses required to be
reimbursed or paid by the Borrower hereunder.
(dd) Additional Documentation. Such additional documents and
------------------------
certificates as the Administrative Agent or its counsel may reasonably request
relating to the organization, existence and good standing of each of the
Borrower and the Subsidiaries, the authorization of the Transactions and any
other legal matters relating to the Borrower and the Subsidiaries, this
Agreement or the Transactions, all in form and substance satisfactory to the
Administrative Agent and its counsel.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.
SECTION 6.2 Each Credit Event. The obligation of each Lender to
-----------------
make a Loan on the occasion of any Borrowing, and of the Issuing Bank to issue,
amend, renew or extend any Letter of Credit, is subject to the satisfaction of
the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Borrower set forth in this Agreement and the other Loan
Documents shall be true and correct on and as of the date of such Borrowing or
the date of issuance, amendment, renewal or extension of such Letter of Credit,
as applicable.
(b) No Default. At the time of and immediately after giving effect to
----------
such Borrowing or the issuance, amendment, renewal or extension of such Letter
of Credit, as applicable, no Default shall have occurred and be continuing.
(c) Material Adverse Effect. No event, development or circumstance
-----------------------
has occurred or exists that has had or could reasonably be expected to have a
Material Adverse Effect.
(d) Borrowing Request Form. With respect to any Borrowing, the
----------------------
Administrative Agent shall have received, in accordance with Section 2.03, a
Borrowing Request Form, dated the date of such Borrowing, executed by an
authorized officer of the Borrower;
(e) Letter of Credit Request Form. With respect to any Letter of
-----------------------------
Credit, the Administrative Agent shall have received, in accordance with Section
2.04, a Letter of Credit Request Form, dated the date of such Letter of Credit
and executed by an authorized officer of the Borrower.
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<PAGE>
(f) Additional Documentation. The Administrative Agent shall have
------------------------
received such additional approvals, opinions, or documents as the Administrative
Agent or its legal counsel may reasonably request.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a), (b)
and (c) of this Section.
ARTICLE VII
Affirmative Covenants
---------------------
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all LC Disbursements shall have been reimbursed, the Borrower covenants and
agrees with the Lenders that:
SECTION 7.1 Financial Statements and Other Information. The
------------------------------------------
Borrower will furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year of the Borrower,
its audited consolidated balance sheet and related statements of
operations, stockholders' equity and cash flows as of the end of and for
such year, setting forth in each case in comparative form the figures for
the previous fiscal year, all reported on by Price Waterhouse Coopers or
other independent public accountants of recognized national standing
(without a "going concern" or like qualification or exception and without
any qualification or exception as to the scope of such audit) to the effect
that such consolidated financial statements present fairly in all material
respects the financial condition and results of operations of the Borrower
and its consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Borrower, its consolidated balance
sheet and related statements of operations, stockholders' equity and cash
flows as of the end of and for such fiscal quarter and the then elapsed
portion of the fiscal year, setting forth in each case in comparative form
the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year, all
certified by one of its Financial Officers as presenting fairly in all
material respects the financial condition and results of operations of the
Borrower and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes;
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<PAGE>
(c) concurrently with any delivery of financial statements under
clause (a) or (b) above, a Compliance Certificate of a Financial Officer of
the Borrower (i) certifying as to whether a Default has occurred and, if a
Default has occurred, specifying the details thereof and any action taken
or proposed to be taken with respect thereto, (ii) setting forth reasonably
detailed calculations demonstrating compliance with the financial covenants
and (iii) stating whether any change in GAAP or in the application thereof
has occurred since the date of the audited financial statements referred to
in Section 5.04 and, if any such change has occurred, specifying the effect
of such change on the financial statements accompanying such certificate;
(d) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported on
such financial statements stating whether they obtained knowledge during
the course of their examination of such financial statements of any Default
(which certificate may be limited to the extent required by accounting
rules or guidelines);
(e) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
the Borrower or any Subsidiary with the Securities and Exchange Commission,
or any Governmental Authority succeeding to any or all of the functions of
said Commission, or with any national securities exchange, or distributed
by the Borrower to its shareholders generally, as the case may be;
(f) promptly following any request therefor, such projections,
budgets and other information regarding the operations, business affairs
and financial condition of the Borrower or any Subsidiary, or compliance
with the terms of this Agreement and the other Loan Documents, as the
Administrative Agent may reasonably request.
SECTION 7.2 Notices of Material Events. The Borrower will furnish
--------------------------
to the Administrative Agent and each Lender prompt written notice of the
following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by
or before any arbitrator or Governmental Authority against or affecting the
Borrower or any Affiliate thereof that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any Reportable Event that, alone or together
with any other Reportable Events that have occurred, could reasonably be
expected to result in liability of the Borrower and its Subsidiaries in an
aggregate amount exceeding $5,000,000; and
(d) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
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<PAGE>
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
SECTION 7.3 Existence; Conduct of Business. The Borrower will, and
------------------------------
will cause each of its Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of its business; provided that the foregoing shall not prohibit
--------
any merger, consolidation, liquidation or dissolution permitted under Section
8.03.
SECTION 7.4 Payment of Obligations. The Borrower will, and will
----------------------
cause each of its Subsidiaries to, pay its obligations, including Tax
liabilities, that, if not paid, could result in a Material Adverse Effect or
become a Lien on any of its property, before the same shall become delinquent or
in default, except where (a) the validity or amount thereof is being contested
in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary
has set aside on its books adequate reserves with respect thereto in accordance
with GAAP and (c) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 7.5 Maintenance of Properties. The Borrower will, and will
-------------------------
cause each of its Subsidiaries to keep and maintain all property material to the
conduct of its business in good working order and condition, ordinary wear and
tear excepted.
SECTION 7.6 Books and Records; Inspection Rights. The Borrower
------------------------------------
will, and will cause each of its Subsidiaries to, keep proper books of record
and account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. The Borrower will, and
will cause each of its Subsidiaries to, permit any representatives designated by
the Administrative Agent or any Lender, upon reasonable prior notice, to visit
and inspect its properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants, all at such reasonable times and as often as
reasonably requested.
SECTION 7.7 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 workers' compensation insurance, property insurance,
comprehensive general liability insurance, products liability insurance, and
business interruption insurance reasonably satisfactory to the Lenders. Each
property insurance policy covering Collateral shall name the Collateral Agent as
loss payee for the benefit of the Lenders and the holders of the Senior Note
Debt and shall provide that such policy will not be canceled or reduced without
thirty (30) days' prior written notice to the Collateral Agent.
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<PAGE>
SECTION 7.8 Compliance with Laws. The Borrower will, and will cause
--------------------
each of its Subsidiaries to, and with respect to ERISA will cause each of its
ERISA Affiliates to, comply with all laws, rules, regulations and orders of any
Governmental Authority applicable to it or its property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 7.9 Use of Proceeds and Letters of Credit. The proceeds of
-------------------------------------
the Loans will be used only to pay all amounts outstanding under the Existing
Credit Agreement and for general corporate purposes of the Borrower and its
Subsidiaries. No part of the proceeds of any Loan will be used, whether directly
or indirectly, for any purpose that entails a violation of any of the
Regulations of the Board, including Regulations T, U and X. Each Letter of
Credit will be issued only to support a transaction that is entered into the
ordinary course of the Borrower's or any of its Subsidiaries' business.
SECTION 7.10 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 7.11 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 Administrative 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 the Collateral
Agent, for the benefit of the Administrative Agent, the Issuing Bank, the
Lenders and the holders of the Senior Note Debt, in the Collateral.
ARTICLE VIII
Negative Covenants
------------------
Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in full
and all Letters of Credit have expired or terminated and all LC Disbursements
shall have been reimbursed, the Borrower covenants and agrees with the Lenders
that:
SECTION 8.1 Indebtedness. The Borrower will not, and will not
------------
permit any Subsidiary to, create, incur, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness created hereunder;
(b) the Senior Note Debt and Guarantees thereof;
(c) Indebtedness (excluding intercompany Indebtedness set forth on
Schedule 8.01(e)) existing on the date hereof and set forth in Schedule
8.01(c), and
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<PAGE>
extensions, renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof and provided that the
terms of such Indebtedness are not more onerous or burdensome to the
Borrower, any Subsidiary or the Lenders than existing for such Indebtedness
on the Effective Date;
(d) Indebtedness of the Borrower to any wholly-owned Subsidiary that
is a Guarantor and Indebtedness of any Subsidiary to the Borrower or any
other wholly-owned Subsidiary that is a Guarantor;
(e) Indebtedness of the Borrower or any Guarantor to any Subsidiary
that is not a Guarantor, existing on the date hereof and set forth in
Schedule 8.01(e) or hereafter created or incurred, provided that (i) all
such Indebtedness shall be evidenced by promissory notes containing
subordination provisions in form and substance satisfactory to the Required
Lenders, and (ii) the aggregate amount of such Indebtedness (excluding such
Indebtedness existing on the date hereof as set forth in Schedule 8.01(e))
outstanding at any time shall not exceed $20,000,000.
(f) Indebtedness of any Subsidiary that is not a Guarantor to the
Borrower or any Guarantor, existing on the date hereof and set forth in
Schedule 8.01(e) or hereafter created or incurred, provided that (i) all
such Indebtedness shall be included in the Collateral, and (ii) the
aggregate amount of such Indebtedness (excluding such Indebtedness existing
on the date hereof as set forth in Schedule 8.01(e)) outstanding at any
time shall not exceed $5,000,000.
(g) purchase money Indebtedness of the Borrower or any Subsidiary
representing the purchase price of equipment, that is secured by the asset
purchased, provided that the principal amount of such Indebtedness does not
exceed the purchase price of the equipment acquired and the Lien does not
attach to any other assets of the Borrower or any Subsidiary;
(h) Indebtedness of the Borrower or any Subsidiary funded in U.S.
dollars, provided that such Indebtedness shall not exceed $3,000,000 in the
aggregate at any time outstanding; and
(i) Indebtedness of the Borrower or any Subsidiary funded in Canadian
dollars, provided that such Indebtedness shall not exceed C$15,000,000 in
the aggregate at any time outstanding.
SECTION 8.2 Liens. The Borrower will not, and will not permit any
-----
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:
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<PAGE>
(a) Permitted Encumbrances;
(b) any Lien on any property or asset of the Borrower or any
Subsidiary existing on the date hereof and set forth in Schedule 8.02;
provided that (i) such Lien shall not apply to any other property or asset
--------
of the Borrower or any Subsidiary and (ii) such Lien shall secure only
those obligations which it secures on the date hereof and extensions,
renewals and replacements thereof that do not increase the outstanding
principal amount thereof;
(c) Liens permitted by clause (g) of Section 8.01;
(d) Liens on assets owned by the Borrower within the United States,
other than assets included in the Collateral, to secure Indebtedness
permitted by clause (h) of Section 8.01, provided that such Liens shall not
secure any other Indebtedness; and
(e) Liens on assets located in Canada and owned by any Subsidiary of
the Borrower organized under the laws of Canada, to secure Indebtedness
permitted by clause (i) of Section 8.01, provided that such Liens shall not
secure any other Indebtedness.
SECTION 8.3 Fundamental Changes.
-------------------
(a) The Borrower will not, and will not permit any Subsidiary to,
merge into or consolidate with any other Person, or permit any other Person
to merge into or consolidate with it, or liquidate or dissolve, except
that, if at the time thereof and immediately after giving effect thereto no
Default shall have occurred and be continuing (i) any Subsidiary may merge
into the Borrower in a transaction in which the Borrower is the surviving
corporation, (ii) any Subsidiary that is not a Guarantor may merge into
any Subsidiary in a transaction in which the surviving entity is a
Subsidiary, (iii) any Guarantor may be dissolved, liquidated or merged into
another Subsidiary, so long as such dissolution, liquidation or merger
results in all assets of such Guarantor being owned by the Borrower or
another Guarantor, (iv) any Subsidiary that is not a Guarantor may
liquidate or dissolve if the Borrower determines in good faith that such
liquidation or dissolution is in the best interests of the Borrower and is
not materially disadvantageous to the Lenders and so long as such
liquidation or dissolution results in all assets of such Subsidiary being
owned by the Borrower or another Subsidiary, and (v) any Person that is not
a Subsidiary may merge into the Borrower in a transaction in which the
Borrower is the surviving corporation or into any Subsidiary in a
transaction in which the surviving entity is a Subsidiary; provided that
--------
any such merger involving a Person that is not a wholly-owned Subsidiary
immediately prior to such merger shall not be permitted unless (x) such
merger is also permitted by Section 8.04 and (y) such merger does not
result in and is not part of a transaction or series of transactions that
result in a Change in Control.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the
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<PAGE>
Borrower and its Subsidiaries on the date of execution of this Agreement
and businesses reasonably related thereto.
SECTION 8.4 Investments, Loans, Advances, Guarantees and
--------------------------------------------
Acquisitions. The Borrower will not, and will not permit any of its Subsidiaries
- ------------
to, purchase, hold or acquire (including pursuant to any merger with any Person
that was not a wholly owned Subsidiary prior to such merger) any capital stock,
evidences of indebtedness or other securities (including any option, warrant or
other right to acquire any of the foregoing) of, make or permit to exist any
loans or advances to, Guarantee any obligations of, or make or permit to exist
any investment or any other interest in, any other Person, or purchase or
otherwise acquire (in one transaction or a series of transactions) any assets of
any other Person constituting a business unit, except:
(a) Permitted Investments;
(b) investments by the Borrower existing on the date hereof in the
capital stock of its Subsidiaries and other investments existing on the
date hereof and set forth on Schedule 8.04;
(c) loans or advances made by the Borrower to any wholly-owned
Subsidiary that is a Guarantor and made by any Subsidiary to the Borrower
or any other wholly-owned Subsidiary that is a Guarantor;
(d) loans or advances made by the Borrower or any Subsidiary to any
Subsidiary that is not a Guarantor to the extent permitted by Section
8.01(e);
(e) Guarantees constituting Indebtedness permitted by Section 8.01;
(f) acquisitions of entities in the refractory business, provided
that (i) the total cash and non-cash consideration paid and Indebtedness
assumed or incurred by the Borrower or any Subsidiary for all such
acquisitions shall not exceed $10,000,000 in the aggregate, (ii) at the
time of any such acquisition, no Default exists or would result or is
projected to result from any such acquisition, and (iii) at the time of any
such acquisition and after consummation of such acquisition, an amount not
less than $15,000,000 shall be unused and available under the Commitments.
SECTION 8.5 Hedging Agreements. The Borrower will not, and will not
------------------
permit any of its Subsidiaries to, enter into any Hedging Agreement, other than
Hedging Agreements entered into in the ordinary course of business to hedge or
mitigate risks to which the Borrower or any Subsidiary is exposed in the conduct
of its business or the management of its liabilities.
SECTION 8.6 Restricted Payments. The Borrower will not, and will
-------------------
not permit any of its Subsidiaries to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, except (a) the Borrower may
declare and pay dividends with respect to its capital stock
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payable solely in additional shares of its common stock, and (b) Subsidiaries
may declare and pay dividends to the Borrower or any Guarantor.
SECTION 8.7 Transactions with Affiliates. The Borrower will not,
----------------------------
and will not permit any of its Subsidiaries to, sell, lease or otherwise
transfer any property or assets to, or purchase, lease or otherwise acquire any
property or assets from, or otherwise engage in any other transactions with, any
of its Affiliates, except (a) in the ordinary course of business at prices and
on terms and conditions not less favorable to the Borrower or such Subsidiary
than could be obtained on an arm's-length basis from unrelated third parties,
(b) transactions between or among the Borrower and its wholly-owned Subsidiaries
that are Guarantors not involving any other Affiliate and (c) any Restricted
Payment permitted by Section 8.06.
SECTION 8.8 Restrictive Agreements. The Borrower will not, and will
----------------------
not permit any of its Subsidiaries to, directly or indirectly, enter into, incur
or permit to exist any agreement or other arrangement that prohibits, restricts
or imposes any condition upon (a) the ability of the Borrower or any Subsidiary
to create, incur or permit to exist any Lien upon any of its property or assets,
or (b) the ability of any Subsidiary to pay dividends or other distributions
with respect to any shares of its capital stock or to make or repay loans or
advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of
the Borrower or any other Subsidiary; provided that (i) the foregoing shall not
--------
apply to restrictions and conditions imposed by law or by this Agreement, (ii)
the foregoing shall not apply to restrictions and conditions existing on the
date hereof identified on Schedule 8.08 (but shall apply to any extension or
renewal of, or any amendment or modification expanding the scope of, any such
restriction or condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided such restrictions and conditions apply
only to the Subsidiary that is to be sold and such sale is permitted hereunder,
(iv) clause (a) of the foregoing shall not apply to restrictions or conditions
imposed by any agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Indebtedness and (v) clause (a) of the foregoing shall not
apply to customary provisions in leases restricting the assignment thereof.
SECTION 8.9 Disposition of Assets. The Borrower will not and will
---------------------
not permit any Subsidiary to sell, lease, assign, transfer, or otherwise dispose
of any of their respective assets (including without limitation stock or other
equity interests in any of the Subsidiaries or any of the voting rights of any
such stock or other equity interests); provided, however, that the following
dispositions shall be permitted so long as the Borrower and the Subsidiaries, as
applicable, receive full, fair and reasonable consideration at the time of such
disposition at least equal to the fair market value of such asset being
disposed:
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(a) dispositions of inventory in the ordinary course of business of
the Borrower and its Subsidiaries;
(b) the Jeffrey Disposition, provided that (i) the Borrower shall
give the Administrative Agent five Business Days prior notice of such
disposition and shall furnish to the Administrative Agent such information
as the Administrative Agent shall reasonably request regarding such
disposition and the proceeds thereof, and (ii) all of the proceeds (less
reasonable expenses) from the Jeffrey Disposition shall be applied to
permanently reduce the Commitments and prepay Borrowings in accordance with
Section 2.07(d), and no part of such proceeds shall be applied to the
Senior Note Debt;
(c) the Shred-Tech Disposition, provided that (i) the Borrower shall
give the Administrative Agent five Business Days prior notice of such
disposition and shall furnish to the Administrative Agent such information
as the Administrative Agent shall reasonably request regarding such
disposition and the proceeds thereof, and (ii) all of the proceeds (less
reasonable expenses) from the Shred-Tech Disposition shall be applied to
permanently reduce the Commitments and prepay Borrowings in accordance with
Section 2.07(e), except for any pro rata portion of such proceeds which is
required to be applied to reduce the Senior Note Debt, in which case such
pro rata portion of such proceeds shall be so applied to reduce the Senior
Note Debt;
(d) dispositions (other than those specified in clauses (a), (b) and
(c) above) of assets having a Net Book Value not to exceed $25,000,000 in
the aggregate during the term of this Agreement, provided that with regard
to any such disposition of assets having a Net Book Value in excess of
$5,000,000 individually or when aggregated with all other such dispositions
on or after the Effective Date, all of the proceeds (less reasonable
expenses) from such disposition or dispositions in excess of $5,000,000
shall be applied to permanently reduce the Commitments and prepay
Borrowings in accordance with Section 2.07(f), except for any pro rata
portion of such proceeds which is required to be applied to reduce the
Senior Note Debt, in which case such pro rata portion of such proceeds
shall be so applied to reduce the Senior Note Debt;
(e) disposition of assets that are worn out, obsolete or no longer
used or useful in the conduct of the business of the Borrower and the
Subsidiaries, so long as such assets are replaced with assets of equal or
greater value; and
(f) disposition of assets to the Borrower or any wholly-owned
Subsidiary that is a Guarantor.
SECTION 8.10 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 8.11 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 practices, except as required by GAAP and
disclosed to the Administrative Agent, or (b) in tax reporting treatment, except
as required by law and disclosed to the Administrative Agent.
SECTION 8.12 Subordinated Indebtedness. The Borrower shall not, and
-------------------------
shall not permit any Subsidiary to, (a) prepay any Indebtedness that is
subordinated to the Obligations, or (b) modify the terms of any documents,
instruments or agreements evidencing any Indebtedness that is subordinated to
the Obligations.
SECTION 8.13 Most Favored Lender Status. The Borrower will not and
--------------------------
will not permit any Subsidiary to enter into, assume or otherwise be bound or
obligated under any agreement creating or evidencing Material Indebtedness
containing one or more Additional Covenants or Additional Defaults, unless prior
written consent to such agreement shall have been obtained pursuant to Section
12.02; provided, however, in the event the Borrower or any Subsidiary shall
enter into, assume or otherwise become bound by or obligated under any such
agreement without the prior written consent of Required Lenders, the terms of
this Agreement shall, without any further action on the part of the Borrower or
any other party hereto, be deemed to be amended automatically to include each
Additional Covenant and each Additional Default contained in such agreement. The
Borrower further covenants to promptly execute and deliver at its expense
(including, without limitation, the fees and expenses of counsel for the
Lenders) an amendment to this Agreement in form and substance satisfactory to
the Required Lenders evidencing the amendment of this Agreement to include such
Additional Covenants and Additional Defaults, provided that the execution and
delivery of such amendment shall not be a precondition to the effectiveness of
such amendment as provided for in this Section 8.13, but shall merely be for the
convenience of the parties hereto.
ARTICLE IX
Financial Covenants
-------------------
Until the Commitments have expired or been terminated and the principal of
and interest on each Loan and all fees payable hereunder shall have been paid in
full and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, the Borrower covenants and agrees with
the Lenders that:
SECTION 9.1 Consolidated Leverage Ratio. The Borrower will at all
---------------------------
times maintain or cause to be maintained a Consolidated Leverage Ratio of not
greater than: (i) 4.50 to 1.00 during the period from and including the
Effective Date through September 29, 1999, (ii) 4.25 to 1.00 during the period
from and including September 30 through December 30, 1999, (iii) 3.75 to 1.00
during the period from and including December 31, 1999 through March 30, 2000,
and (iv) 3.50 to 1.00 from and including March 31, 2000 and thereafter.
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SECTION 9.2 Consolidated Interest Coverage Ratio. The Borrower will
------------------------------------
at all times maintain or cause to be maintained a Consolidated Interest Coverage
Ratio of not less than 3.50 to 1.00.
SECTION 9.3 Consolidated Net Worth. The Borrower will at all times
----------------------
maintain or cause to be maintained Consolidated Net Worth in an amount not less
than the sum of (a) $209,250,000, plus (b) 50% of net income, after provision
for income taxes, of the Borrower and the Subsidiaries on a consolidated basis
(without any deduction for losses) for each fiscal quarter of the Borrower ended
through the date of determination, beginning with the fiscal quarter ending
September 30, 1999, plus (c) 100% of the Net Proceeds received by the Borrower
from any issuance, sale or other disposition of any shares of capital stock or
other equity securities of the Borrower of any class (or any securities
convertible or exchangeable for any such shares, or any rights, warrants, or
options to subscribe for or purchase any such shares).
SECTION 9.4 Capital Expenditures. The Borrower will not permit the
--------------------
aggregate Capital Expenditures of the Borrower and its Subsidiaries to exceed
$20,000,000 during any four quarter period ending on the last day of any fiscal
quarter of the Borrower.
ARTICLE X
Events of Default
-----------------
SECTION 10.1 Default. If any of the following Events of Default
-------
shall occur:
(a) the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or any
fee or any other amount (other than an amount referred to in clause (a) of
this Section) payable under this Agreement, when and as the same shall
become due and payable, and such failure shall continue unremedied for a
period of five Business Days;
(c) any representation or warranty made or deemed made by or on
behalf of the Borrower or any Subsidiary in or in connection with this
Agreement or any other Loan Document or any amendment or modification
hereof or thereof or waiver hereunder or thereunder, or in any report,
certificate, financial statement or other document furnished pursuant to or
in connection with this Agreement or any other Loan Document or any
amendment or modification hereof or thereof or waiver hereunder or
thereunder, shall prove to have been incorrect in any material respect when
made or deemed made;
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(d) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Section 4.01(e), 7.02 or 7.03 (with
respect to the Borrower's existence) or 7.09 or in Article VIII or in
Article IX;
(e) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those
specified in clause (a), (b) or (d) of this Section), and such failure
shall continue unremedied for a period of 30 days after the earlier of
notice thereof from the Administrative Agent to the Borrower (which notice
will be given at the request of any Lender) or the Borrower's actual
knowledge of such failure;
(f) the Borrower or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of
any Material Indebtedness, when and as the same shall become due and
payable after any applicable grace periods;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables
or permits (with or without the giving of notice, the lapse of time or
both) the holder or holders of any Material Indebtedness or any trustee or
agent on its or their behalf to cause any Material Indebtedness to become
due, or to require the prepayment, repurchase, redemption or defeasance
thereof, prior to its scheduled maturity; provided that this clause (g)
--------
shall not apply to secured Indebtedness that becomes due as a result of the
voluntary sale or transfer of the property or assets securing such
Indebtedness;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of the Borrower or any Subsidiary or its debts, or of a
substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any
Subsidiary or for a substantial part of its assets, and, in any such case,
such proceeding or petition shall continue undismissed for 60 days or an
order or decree approving or ordering any of the foregoing shall be
entered;
(i) the Borrower or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or
other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in clause (h) of this Section, (iii) apply
for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any
Subsidiary or for a substantial part of its assets, (iv) file an answer
admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of creditors
or (vi) take any action for the purpose of effecting any of the foregoing;
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(j) the Borrower or any Subsidiary shall become unable, admit in
writing its inability or fail generally to pay its debts as they become
due;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $5,000,000 shall be rendered against the Borrower, any
Subsidiary or any combination thereof (exclusive of judgment amounts to the
extent covered by insurance, subject to applicable deductibles or
retentions, except where the insurer is contesting coverage in respect of
such judgment) and the same shall remain undischarged for a period of 30
consecutive days during which execution shall not be effectively stayed, or
any action shall be legally taken by a judgment creditor to attach or levy
upon any assets of the Borrower or any Subsidiary to enforce any such
judgment;
(l) a Reportable Event shall have occurred with respect to any Plan,
excluding events currently described in clauses (2), (3), (4), (7), (8),
(9), (11), (12) and (13) of Section 4043(c) of ERISA;
(m) a complete or partial withdrawal under Section 4201 or 4204 of
ERISA from a Multiemployer Plan or a reorganization, insolvency, or
termination of any Multiemployer Plan or an assertion by a Multiemployer
Plan of withdrawal liability against Borrower, any Subsidiary or any ERISA
Affiliate occurs and such event or condition, together with all other such
events or conditions, if any, have subjected or could in the reasonable
opinion of the Required Lenders subject Borrower or any Subsidiary to any
tax, penalty, or other liability to a Plan, a Multiemployer Plan, the PBGC,
or otherwise (or any combination thereof) which individually or in the
aggregate exceed or could reasonably be expected to exceed $5,000,000;
(n) a Change in Control shall occur; provided, however, that a Change
in Control due to the purchase by HAC of shares of stock of the Borrower in
connection with HAC's merger into the Borrower pursuant to the RHI Merger
Agreement (a "RHI Change in Control") shall result in termination of the
---------------------
Commitments immediately upon the occurrence of such RHI Change in Control,
but such RHI Change in Control shall not constitute an Event of Default
until five days after the date such RHI Change in Control occurs if on or
before the date such RHI Change in Control occurs, the Borrower has
received (and provided a copy to the Administrative Agent) a written
commitment from one or more financial institutions to refinance the
Obligations in full;
(o) a Material Adverse Effect shall occur;
(p) 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 or
any Subsidiary or any of their respective shareholders, or the Borrower or
any Guarantor shall deny that it has any further liability or obligation
under any of the Loan Documents, or any Lien created by the Loan Documents
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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; or
(q) the Borrower or any Subsidiary, or any of their properties,
revenues or assets shall become subject to an order of forfeiture, seizure
or divestiture and the same shall not have been discharged within 30 days
from the date of entry thereof.
then, and in every such event (other than an event with respect to the Borrower
described in clause (h), (i) or (n) of this Section), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either or
both of the following actions, at the same or different times: (i) terminate
the Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder,
shall become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower; and
in case of any event with respect to the Borrower described in clause (h), (i)
or (n) of this Section, the Commitments shall automatically terminate and the
principal of the Loans then outstanding, together with accrued interest thereon
and all fees and other obligations of the Borrower accrued hereunder, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.
ARTICLE XI
The Administrative Agent
------------------------
Each of the Lenders and the Issuing Bank hereby irrevocably appoints
the Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms hereof, together with such actions and
powers as are reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall have the
same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Borrower or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations
except those expressly set forth herein. Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing, (b) the Administrative Agent shall not have any duty to take any
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discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby that the Administrative Agent is
required to exercise in writing by the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.02), and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrower or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Required Lenders (or such other number
or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.02) or in the absence of its own gross negligence or
wilful misconduct. The Administrative Agent shall be deemed not to have
knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into (i)
any statement, warranty or representation made in or in connection with this
Agreement, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article VI or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrower), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and
exercise its rights and powers by or through any one or more subagents appointed
by the Administrative Agent. The Administrative Agent and any such subagent may
perform any and all its duties and exercise its rights and powers through their
respective Related Parties. The exculpatory provisions of the preceding
paragraphs shall apply to any such subagent and to the Related Parties of the
Administrative Agent and any such subagent, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Lenders, the Issuing Bank and the Borrower.
Upon any such resignation, the Required Lenders shall have the right, in
consultation with the Borrower, to appoint a successor. If no successor shall
have
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been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice
of its resignation, then the retiring Administrative Agent may, on behalf of the
Lenders and the Issuing Bank, appoint a successor Administrative Agent which
shall be a bank with an office in Dallas, Texas, or an Affiliate of any such
bank. Upon the acceptance of its appointment as Administrative Agent hereunder
by a successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor. After the
Administrative Agent's resignation hereunder, the provisions of this Article and
Section 12.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its subagents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it was
acting as Administrative Agent.
Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any related agreement or any document furnished hereunder or thereunder.
Neither the Syndication Agent nor the Documentation Agent shall have
any duties or responsibilities under this Agreement or the other Loan Documents
or otherwise except in its role as a Lender.
ARTICLE XII
Miscellaneous
-------------
SECTION 12.1 Notices. Except in the case of notices and other
-------
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to it at 2121 San Jacinto, Suite 2500, Dallas,
Texas 75201, Attention of Paul W. Fehlman (Telecopy No. 214/953-4594) with
a copy to Jeanette H. Quay, General Counsel (Telecopy No. 214/953-4597);
(b) if to the Administrative Agent, to Chase Bank of Texas, National
Association, 2200 Ross Avenue, 3rd Floor, Dallas, Texas 75201, Attention of
Mae K. Reeves (Telecopy
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No. (214) 965-2044), and, for any Borrowing Requests, with a copy to The
Chase Manhattan Bank, Agency Services, One Chase Manhattan Plaza, 8th
Floor, New York, New York 10081, Attention of Muniram Appanna (Telecopy No.
(212) 552-7490;
(c) if to the Issuing Bank, to ABN AMRO Bank N.V., Three Riverway,
Suite 1700, Houston, Texas 77056, Attention of Diego Puiggari (Telecopy No.
(713) 961-1699), and, for any Letter of Credit issuance, amendment, renewal
or extension requests, with a copy to ABN AMRO Bank, N.V., 200 West Monroe,
Suite 1100, Chicago, Illinois 60606-5002, Attention of Bob Novak (Telecopy
No. (312) 904-6303); and
(d) if to any other Lender, to it at its address (or telecopy number)
set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 12.2 Waivers; Amendments. (a) No failure or delay by the
-------------------
Administrative Agent, the Issuing Bank or any Lender in exercising any right or
power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Administrative Agent, the Issuing Bank and the
Lenders hereunder are cumulative and are not exclusive of any rights or remedies
that they would otherwise have. No waiver of any provision of this Agreement or
consent to any departure by the Borrower therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) of this Section,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall not be
construed as a waiver of any Default, regardless of whether the Administrative
Agent, any Lender or the Issuing Bank may have had notice or knowledge of such
Default at the time.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders or by the Borrower and the
Administrative Agent with the consent of the Required Lenders; provided that no
--------
such agreement shall (i) increase the Commitment of any Lender without the
written consent of such Lender, (ii) reduce the principal amount of any Loan or
LC Disbursement or reduce the rate of interest thereon, or reduce any fees
payable hereunder, without the written consent of each Lender, (iii) postpone
the scheduled date of payment of the principal amount of any Loan or LC
Disbursement, or any interest thereon, or any fees payable hereunder, or reduce
the amount of, waive or excuse any such payment, or postpone the scheduled date
of expiration of any Commitment, without the written consent of each Lender,
(iv) change Section 2.13(b) or (c) in a manner that would alter the pro rata
sharing of payments required thereby,
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without the written consent of each Lender, (v) reduce the Commitment of any
Lender without the written consent of each Lender, (vi) modify or waive Section
10.01(m) or the definition of "Change in Control" without the written consent of
each Lender, (vii) release any Collateral or Guarantor without the written
consent of each Lender, except in connection with dispositions, mergers or
dissolutions expressly permitted by this Agreement, or (viii) change any of the
provisions of this Section or the definition of "Required Lenders" or any other
provision hereof specifying the number or percentage of Lenders required to
waive, amend or modify any rights hereunder or make any determination or grant
any consent hereunder, without the written consent of each Lender; provided
--------
further that no such agreement shall amend, modify or otherwise affect the
- -------
rights or duties of the Administrative Agent, the Issuing Bank hereunder without
the prior written consent of the Administrative Agent or the Issuing Bank, as
the case may be.
SECTION 12.3 Expenses; Indemnity; Damage Waiver. (a) The Borrower
----------------------------------
shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including the reasonable fees, charges
and disbursements of counsel for the Administrative Agent, in connection with
the syndication of the credit facilities provided for herein, the preparation
and administration of this Agreement, the other Loan Documents or any
amendments, modifications or waivers of the provisions hereof (whether or not
the transactions contemplated hereby or thereby shall be consummated), (ii) all
reasonable out-of-pocket expenses incurred by the Issuing Bank in connection
with the issuance, amendment, renewal or extension of any Letter of Credit or
any demand for payment thereunder, (iii) all out-of-pocket expenses incurred by
the Administrative Agent, the Issuing Bank or any Lender, including the fees,
charges and disbursements of any counsel for the Administrative Agent, the
Issuing Bank or any Lender, in connection with the enforcement or protection of
its rights in connection with this Agreement, including its rights under this
Section, or in connection with the Loans made or Letters of Credit issued
hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans or Letters of
Credit, (iv) 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, (v) all costs, out-of-pocket
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 (vi) all other
costs and out-of-pocket expenses incurred by the Administrative Agent in
connection with this Agreement, any other Loan Document or the Collateral,
including without limitation costs, fees, expenses and other charges incurred in
connection with performing or obtaining any audit or appraisal in respect of the
Collateral or for any surveys, environmental assessments, title insurance,
filing fees, recording costs and lien searches.
(b) THE BORROWER SHALL INDEMNIFY THE ADMINISTRATIVE AGENT, THE
ISSUING BANK AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING
PERSONS (EACH SUCH PERSON BEING CALLED AN "INDEMNITEE") AGAINST, AND HOLD EACH
----------
INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND
RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL
FOR ANY
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<PAGE>
INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN
CONNECTION WITH, OR AS A RESULT OF (I) THE EXECUTION OR DELIVERY OF THIS
AGREEMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY, THE PERFORMANCE BY
THE PARTIES HERETO OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THE CONSUMMATION
OF THE TRANSACTIONS OR ANY OTHER TRANSACTIONS CONTEMPLATED HEREBY, (II) ANY LOAN
OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM (INCLUDING ANY REFUSAL
BY THE ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF
THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY
WITH THE TERMS OF SUCH LETTER OF CREDIT), (III) ANY ACTUAL OR ALLEGED PRESENCE
OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY
THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR ANY ENVIRONMENTAL LIABILITY RELATED
IN ANY WAY TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR (IV) ANY ACTUAL OR
PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF
THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND
REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO; PROVIDED THAT SUCH
--------
INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH
LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A
COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE
RESULTED FROM THE GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF SUCH INDEMNITEE.
(c) To the extent that the Borrower fails to pay any amount required
to be paid by it to the Administrative Agent or to the Issuing Bank under
paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the
Administrative Agent or to the Issuing Bank, as the case may be, such Lender's
Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage,
- --------
liability or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent or the Issuing Bank in its capacity as such.
(d) To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement or any agreement or instrument contemplated hereby, the
Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.
(e) All amounts due under this Section shall be payable upon written
demand therefor.
SECTION 12.4 Successors and Assigns. (a) The provisions of this
----------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and
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assigns permitted hereby (including any Affiliate of the Issuing Bank that
issues any Letter of Credit), except that the Borrower may not assign or
otherwise transfer any of its rights or obligations hereunder without the prior
written consent of each Lender (and any attempted assignment or transfer by the
Borrower without such consent shall be null and void). Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit) and, to the extent expressly contemplated hereby, the Related
Parties of each of the Administrative Agent, the Issuing Bank and the Lenders)
any legal or equitable right, remedy or claim under or by reason of this
Agreement.
(b) Any Lender may assign to one or more assignees all or a portion of
its rights and obligations under this Agreement (including all or a portion of
its Commitment and the Loans at the time owing to it); provided that (i) except
--------
in the case of an assignment to a Lender or an Affiliate of a Lender, each of
the Borrower and the Administrative Agent (and, in the case of an assignment of
all or a portion of a Commitment or any Lender's obligations in respect of its
LC Exposure, the Issuing Bank) must give their prior written consent to such
assignment (which consent shall not be unreasonably withheld), (ii) except in
the case of an assignment to a Lender or an Affiliate of a Lender or an
assignment of the entire remaining amount of the assigning Lender's Commitment,
the amount of the Commitment of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and Acceptance with respect
to such assignment is delivered to the Administrative Agent) shall not be less
than $5,000,000 unless each of the Borrower and the Administrative Agent
otherwise consent, (iii) each partial assignment shall be made as an assignment
of a proportionate part of all the assigning Lender's rights and obligations
under this Agreement, (iv) the parties to each assignment shall execute and
deliver to the Administrative Agent an Assignment and Acceptance, together with
a processing and recordation fee of $3,500, and (v) the assignee, if it shall
not be a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire; and provided further that any consent of the Borrower otherwise
----------------
required under this paragraph shall not be required if an Event of Default under
Article X has occurred and is continuing. Subject to acceptance and recording
thereof pursuant to paragraph (d) of this Section, from and after the effective
date specified in each Assignment and Acceptance the assignee thereunder shall
be a party hereto and, to the extent of the interest assigned by such Assignment
and Acceptance, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 2.12, 3.01, 3.05 and 12.03). Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this paragraph shall be treated for purposes of this
Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices in Dallas, Texas a copy of
each Assignment and Acceptance
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delivered to it and a register for the recordation of the names and addresses of
the Lenders, and the Commitment of, and principal amount of the Loans and LC
Disbursements owing to, each Lender pursuant to the terms hereof from time to
time (the "Register"). The entries in the Register shall be conclusive, and the
--------
Borrower, the Administrative Agent, the Issuing Bank and the Lenders may treat
each Person whose name is recorded in the Register pursuant to the terms hereof
as a Lender hereunder for all purposes of this Agreement, notwithstanding notice
to the contrary. The Register shall be available for inspection by the Borrower,
the Issuing Bank and any Lender, at any reasonable time and from time to time
upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph. Each assigning Lender
shall surrender any Note subject to such assignment, and the Borrower shall
execute and deliver to the Administrative Agent in exchange for the surrendered
Note a new Note payable to the order of the assignee in an amount equal to the
Commitment assumed by such assignee pursuant to such Assignment and Acceptance
and, if the assigning Lender has retained a Commitment, a new Note payable to
the order of the assigning Lender in an amount equal to the Commitment retained
by it hereunder. Such new Notes shall be in an aggregate face 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 and shall each constitute a "Note" for purposes of the Loan Documents.
(e) Any Lender may, without the consent of the Borrower, the
Administrative Agent, the Issuing Bank, sell participations to one or more banks
or other entities (a "Participant") in all or a portion of such Lender's rights
-----------
and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (i) such Lender's
--------
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrower, the Administrative Agent, the Issuing
Bank and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
--------
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver described in the first proviso to
Section 12.02(b) that affects such Participant. Subject to paragraph (f) of
this Section, the Borrower agrees that each Participant shall be entitled to the
benefits of Sections 2.12, 3.01 and 3.05 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section. To the extent permitted by law, each Participant also shall be
entitled
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to the benefits of Section 12.08 as though it were a Lender, provided such
Participant agrees to be subject to Section 2.13(c) as though it were a Lender.
(f) A Participant shall not be entitled to receive any greater payment
under Section 2.12 or 3.01 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower's
prior written consent. A Participant that would be a Foreign Lender if it were
a Lender shall not be entitled to the benefits of Section 2.12 unless the
Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrower, to comply with Section
2.12(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of
--------
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.
SECTION 12.5 Survival. All covenants, agreements, representations
--------
and warranties made by the Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, the Issuing Bank or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not expired
or terminated. The provisions of Sections 2.12, 3.01, 3.05 and 12.03 and
Article XI shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.
SECTION 12.6 Counterparts; Effectiveness. This Agreement may be
---------------------------
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. Except as provided in Section
6.01, this Agreement shall become effective when it shall have been executed by
the Administrative Agent and when the Administrative Agent shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Delivery of an executed counterpart of a signature page of this Agreement by
telecopy shall be effective as delivery of a manually executed counterpart of
this Agreement.
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<PAGE>
SECTION 12.7 Severability. Any provision of this Agreement held to
------------
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 12.8 Right of Setoff. If an Event of Default shall have
---------------
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Borrower against any of and all the obligations of the Borrower now or hereafter
existing under this Agreement held by such Lender, irrespective of whether or
not such Lender shall have made any demand under this Agreement and although
such obligations may be unmatured. The rights of each Lender under this Section
are in addition to other rights and remedies (including other rights of setoff)
which such Lender may have.
SECTION 12.9 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. 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 12.01.
NOTHING HEREIN OR IN ANY OF THE OTHER LOAN DOCUMENTS SHALL AFFECT THE RIGHT OF
THE AGENTS, THE ISSUING BANK OR ANY LENDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENT, THE
ISSUING BANK OR ANY LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE
BORROWER OR WITH RESPECT TO ANY OF ITS RESPECTIVE PROPERTY IN COURTS IN OTHER
JURISDICTIONS. ANY ACTION OR PROCEEDING BY THE BORROWER AGAINST THE
ADMINISTRATIVE AGENT, THE ISSUING BANK OR ANY LENDER SHALL BE BROUGHT ONLY IN A
COURT LOCATED IN DALLAS COUNTY, TEXAS.
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SECTION 12.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
--------------------
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVER S AND CERTIFICATIONS IN THIS SECTION.
SECTION 12.11 Headings. Article and Section headings and the Table of
--------
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 12.12 Confidentiality. Each of the Administrative Agent, the
---------------
Issuing Bank and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates' directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in
connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or the enforcement of rights hereunder,
(f) subject to an agreement containing provisions substantially the same as
those of this Section, to any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this
Agreement, (g) with the consent of the Borrower or (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section or (ii) becomes available to the Administrative Agent, the Issuing
Bank or any Lender on a nonconfidential basis from a source other than the
Borrower. For the purposes of this Section, "Information" means all information
-----------
received from the Borrower relating to the Borrower or its business, other than
any such information that is available to the Administrative Agent, the Issuing
Bank or any Lender on a nonconfidential basis prior to disclosure by the
Borrower; provided that, in the case of information received from the Borrower
--------
after the date hereof, such information is clearly identified at the time of
delivery as confidential. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.
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SECTION 12.13 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 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 Lender 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 Lender 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 12,14 Non-Application of Chapter 346 of Texas Finance Code.
----------------------------------------------------
The provisions of Chapter 346 of the Texas Finance Code (Vernon's Texas Code
Annotated) 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 12.15 NO ORAL AGREEMENTS. THIS AGREEMENT, THE NOTES, ANY
------------------
SEPARATE LETTER AGREEMENTS WITH RESPECT TO FEES PAYABLE TO THE AGENTS, AND THE
OTHER LOAN DOCUMENTS REFERRED TO HEREIN REPRESENT THE FINAL AGREEMENT AMONG THE
PARTIES HERETO AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.
SECTION 12.16 No Fiduciary Relationship. The relationship between the
-------------------------
Borrower and each Lender with respect to the Loan Documents and the Transactions
is solely that of debtor and creditor, and neither the Administrative Agent, the
Issuing Bank nor any Lender has any fiduciary or other special relationship with
the Borrower with respect to the Loan Documents and the Transactions, 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 Lender with respect to the Loan
Documents and the Transactions to be other than that of debtor and creditor.
SECTION 12.17 Construction. The Borrower, the Administrative Agent,
------------
the Issuing Bank and each Lender acknowledge 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
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<PAGE>
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.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By: /s/ PAUL W. FEHLMAN
__________________________________________
Name: Paul W. Fehlman
Title: Treasurer
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
individually and as Administrative Agent
By: /s/ MAE REEVES
__________________________________________
Name: Mae Reeves
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION,
individually and as Syndication Agent
By: /s/ DARLENE B. KRUTH
__________________________________________
Name: Darlene B. Kruth
Title: Assistant Vice President
ABN AMRO BANK N.V., individually, as
Issuing Bank and as Documentation Agent
By: /s/ DIEGO PUIGGARI
__________________________________________
Name: Diego Puiggari
Title: Group Vice President
By: /s/ ERIC R. HOLLINGSWORTH
__________________________________________
Name: Eric R. Hollingsworth
Title: Vice President
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<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit Description of Exhibits
- ------- -----------------------
"A" Form of Note
"B" Borrowing Request Form
"C" Letter of Credit Request Form
"D" Borrower Security Agreement
"E" Subsidiary Security Agreement
"F" Pledge Agreement
"G" Guaranty
"H" Contribution and Indemnification Agreement
"I" Matters to be Addressed in Opinion of Counsel
"J" Compliance Certificate
"K" Assignment and Acceptance
INDEX TO SCHEDULES
------------------
Schedule Description of Schedules
- -------- ------------------------
1.01 Agreed Expense Reduction Amount
2.01 Lenders and Commitments
2.04 Existing Letters of Credit
5.06 Disclosed Matters
5.14 Subsidiaries
5.16 Patents, Trademarks and Copyrights
8.01(b) Senior Note Debt
8.01(c) Other Existing Indebtedness
8.01(e) Existing Intercompany Indebtedness
8.02 Existing Liens
8.04 Existing Investments
8.08 Existing Restrictive Agreements
<PAGE>
EXHIBIT A
TO
CREDIT AGREEMENT
Form of Note
------------
<PAGE>
NOTE
----
$______________ Dallas, Texas July ___, 1999
FOR VALUE RECEIVED, the undersigned, GLOBAL INDUSTRIAL TECHNOLOGIES, INC.,
a Delaware corporation ("Maker"), hereby promises to pay to the order of
-----
_________________ ("Payee"), at the offices of Chase Bank of Texas, National
-----
Association, as the administrative agent (together with any successor as
provided in the Agreement, hereinbelow defined, the "Administrative Agent"), at
--------------------
1111 Fannin Street, 9th Floor, MS46, Houston, Texas 77002, on the dates
hereinafter specified, in lawful money of the United States of America, the
principal sum of _________________________ ($_____________) or such lesser
amount as shall equal the aggregate unpaid principal amount of the Revolving
Loans made by the Payee to the Maker under the Agreement, on the dates and in
the principal amounts provided in the Agreement, and to pay interest on the
unpaid principal amount of each such Revolving Loan, at such office, in like
money and funds, for the period commencing on the date of such Revolving Loans
until such Revolving Loans shall be paid in full, at the rates per annum and on
the dates provided in the Agreement.
This Note is a Note referred to in that certain Credit Agreement dated as
of July __, 1999, among Maker, Payee, Administrative Agent, PNC Bank, National
Association, as the Syndication Agent, ABN AMRO Bank N.V., as the Documentation
Agent and the Issuing Bank, and each of the Lenders from time to time party
thereto (such Credit Agreement, as the same may be amended, restated, modified,
or supplemented from time to time, being referred to herein as the "Agreement").
---------
Capitalized terms used and not otherwise defined in this Note have the
respective meanings specified in the Agreement. The Agreement, among other
things, contains provisions for acceleration of the maturity of this Note upon
the happening of certain stated events and also for prepayments of Borrowings
prior to the maturity of this Note upon the terms and conditions specified in
the Agreement.
This Note evidences Loans made by the Lenders to Maker under the Agreement.
Maker may borrow, repay and reborrow hereunder upon the terms and conditions
specified in the Agreement.
Notwithstanding anything to the contrary contained herein, no provisions of
this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of
NOTE - Page 1
<PAGE>
indebtedness evidenced by this Note; and, if the principal amount hereof has
been paid in full, any remaining excess shall forthwith be paid to Maker. In
determining whether or not the interest paid or payable exceeds the Maximum
Rate, Maker and Payee shall, to the extent permitted by applicable law, (i)
characterize any non-principal payment as an expense, fee, or premium rather
than as interest, (ii) exclude voluntary prepayments and the effects thereof,
and (iii) 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 this Note so that the interest for the entire term
does not exceed the Maximum Rate.
THIS NOTE 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. THIS
NOTE IS PERFORMABLE IN DALLAS COUNTY, TEXAS.
Maker and each surety, guarantor, endorser, and other party ever liable for
payment of any sums of money payable on this Note jointly and severally waive
notice, presentment, demand for payment, protest, notice of protest and non-
payment or dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, diligence in collecting, grace, and all other
formalities of any kind, except any notice and grace periods provided in the
Agreement, and consent to all extensions without notice for any period or
periods of time and partial payments, before or after maturity, and any
impairment of any Collateral securing this Note, all without prejudice to the
holder. The holder shall similarly have the right to deal in any way, at any
time, with one or more of the foregoing parties without notice to any other
party, and to grant any such party any extensions of time for payment of any of
said indebtedness, or to release or substitute part or all of the Collateral
securing this Note, or to grant any other indulgences or forbearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By:_______________________________________________
Name:__________________________________________
Title:_________________________________________
NOTE - Page 2
<PAGE>
EXHIBIT B
TO
CREDIT AGREEMENT
Borrowing Request Form
----------------------
<PAGE>
BORROWING REQUEST FORM
----------------------
TO: Chase Bank of Texas, National Association, as Administrative Agent
2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201
Attention: Mae K. Reeves
Ladies and Gentlemen:
The undersigned is an officer of GLOBAL INDUSTRIAL TECHNOLOGIES, INC., a
Delaware corporation (the "Borrower"), and is authorized to make and deliver
--------
this certificate pursuant to that certain Credit Agreement dated as of July 30,
1999, among the Borrower, each of the banks or other lending institutions which
is or may from time to time become a signatory thereto and any successors or
permitted assignees thereof (collectively, the "Lenders"), PNC Bank, National
-------
Association, as the Syndication Agent, ABN AMRO Bank N.V., as the Documentation
Agent and as the Issuing Bank, and Chase Bank of Texas, National Association, a
national banking association, as the Administrative Agent (such Credit
Agreement, as the same may be amended, supplemented or modified from time to
time, being hereinafter referred to as the "Credit Agreement"). All terms
----------------
defined in the Credit Agreement shall have the same meaning herein.
In accordance with the Credit Agreement, the Borrower hereby (check
whichever is applicable):
____ 1. Requests that the Lenders make a Borrowing (the "Requested Borrowing"),
-------------------
in the amount set forth in item (d) below, of the following Type (check
whichever is applicable):
_____ Eurodollar Borrowing having an Interest Period of (check
whichever is applicable):
_____ one month
_____ two months
_____ three months
_____ six months
_____ ABR Borrowing
____ 2. Requests that the Lenders convert a Eurodollar Borrowing into an ABR
Borrowing in the amount of $__________.
____ 3. Request that the Lenders convert an ABR Borrowing into a Eurodollar
Borrowing in the amount of $_____________, having an Interest Period of
(check whichever is applicable):
_____ one month
_____ two months
_____ three months
_____ six months
____ 4. Requests that the Lenders continue a Eurodollar Borrowing in the amount
of $__________, having an Interest Period of (check whichever is
applicable):
_____ one month
_____ two months
_____ three months
_____ six months
BORROWING REQUEST FORM - Page 1
<PAGE>
The Borrower hereby requests and instructs the Administrative Agent to make
the Requested Borrowing available to Borrower by (check whichever is
applicable):
_____ depositing the same in the following account maintained with
Administrative Agent:
____________________________________________________________________
____________________________________________________________________
_____ wire transfer in accordance with the following wiring instructions:
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
In connection with the foregoing and pursuant to the terms and provisions
of the Credit Agreement, the undersigned hereby certifies that the following
statements are true and correct:
(i) The representations and warranties contained in Article V of
the Credit Agreement and in each of the other Loan Documents are true and
correct on and as of the date hereof with the same force and effect as if
made on and as of such date.
(ii) No Default has occurred and is continuing or would result from
the Requested Borrowing.
(iii) No event, development or circumstance has occurred or exists
that has or could reasonably be expected to have a Material Adverse Effect.
(iv) The amount of the Requested Borrowing, when added to all
outstanding Borrowings and LC Exposure, will not exceed the total amount of
the Commitments.
(v) All information supplied below is true, correct, and complete
as of the date hereof.
Information
-----------
(a) Outstanding principal amount of Borrowings........... $____________
(b) LC Exposure.......................................... $____________
(c) Net availability for Borrowings: [the difference
of (i) the amount of the Commitments, minus (ii)
the sum of line (a) plus line (b)]................... $____________
(d) Amount of Requested Borrowing/1/..................... $____________
BORROWER:
--------
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By:__________________________________________
Name:_____________________________________
Title:____________________________________
Dated as of:___________________
[insert date of
Requested Borrowing]
cc: The Chase Manhattan Bank
Agency Services
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Muniram Appanna
______________________
/1/ Each Eurodollar Borrowing shall be an integral multiple of $500,000 and not
less than $2,000,000. Each ABR Borrowing shall be an integral multiple of
$500,000 and not less than $1,000,000, except as otherwise provided in
Section 2.02(c) of the Credit Agreement. There shall not at any time be
more than a total of 15 Eurodollar Borrowings outstanding.
BORROWING REQUEST FORM - Page 2
<PAGE>
EXHIBIT C
TO
CREDIT AGREEMENT
Letter of Credit Request Form
-----------------------------
<PAGE>
LETTER OF CREDIT REQUEST FORM
-----------------------------
TO: Chase Bank of Texas, National Association, as Administration Agent
2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201
Attention: Mae K. Reeves
ABN AMRO Bank N.V., as Issuing Bank
Three Riverway, Suite 1700
Houston, Texas 77056
Attention: Diego Puiggari
Ladies and Gentlemen:
The undersigned is an officer of GLOBAL INDUSTRIAL TECHNOLOGIES, INC., a
Delaware corporation (the "Borrower"), and is authorized to make and deliver
--------
this certificate pursuant to that certain Credit Agreement dated as of July 30,
1999, among the Borrower, each of the banks or other lending institutions which
is or may from time to time become a signatory thereto and any successors or
permitted assigns thereof (the "Lenders"), PNC Bank, National Association, as
-------
the Syndication Agent, ABN AMRO Bank N.V., as the Documentation Agent and as the
Issuing Bank, and Chase Bank of Texas, National Association, as the
Administrative Agent (such Credit Agreement, as the same may be amended,
supplemented or modified from time to time, being hereinafter referred to as the
"Credit Agreement"). All terms defined in the Credit Agreement shall have the
----------------
same meaning herein.
In accordance with the Credit Agreement, the Borrower hereby requests that
the Issuing Bank issue a Letter of Credit. The Letter of Credit shall:
(a) be issued on ________________, 19___;/1/
(b) be in the amount of ____________;/2/
(c) permit [a single drawing/multiple drawings]/3/ on the terms and
conditions set forth in the letter of credit application attached
as Annex I hereto;
-------
(d) be payable upon presentation of a [sight draft/time draft. The
time draft shall be payable on __________________, 19___];/4/
(e) expire on __________________, 19___;/4/
(f) be issued for the account of the Borrower; and
(g) be used for the following purpose:_______________________________
_________________________________________________________________
_____________________________________________________________./5/
The Letter of Credit is to be delivered by the Issuing Bank to ________./6/
[Drawing/Each drawing]/3/ under the Letter of Credit shall be subject to
the conditions specified in the letter of credit application attached as Annex I
-------
hereto.
In connection with the foregoing and pursuant to the terms and provisions
of the Credit Agreement, the undersigned hereby certifies that the following
statements are true and correct:
____________________
/1/ Insert date not later than the last day of the Availability Period.
/2/ Insert face amount of Letter of Credit and currency (either dollars or an
Alternate Currency) in which the Letter of Credit is to be issued. Issuance
is subject to limitations on amount as specified in Section 2.04(b) of the
Credit Agreement.
/3/ Specify one.
/4/ Insert date not later than one year after issuance.
/5/ Describe purpose for which Letter of Credit will be used.
/6/ Insert name of Borrower or name and address of beneficiary.
LETTER OF CREDIT REQUEST FORM - Page 1
<PAGE>
(i) The representations and warranties contained in Article V of the
Credit Agreement and in each of the other Loan Documents are true and
correct on and as of the date hereof with the same force and effect as if
made on and as of such date.
(ii) No Default has occurred and is continuing or would result from
the issuance of the Letter of Credit requested hereunder.
(iii) No event, development or circumstance has occurred or exists
that has had or could reasonably be expected to have a Material Adverse
Effect.
(iv) When the face amount of the Letter of Credit requested hereunder
is added to all other LC Exposure, (A) the LC Exposure will not exceed
$20,000,000, (B) the Equivalent Amount of LC Exposure in Alternate Currency
will not exceed $4,000,000, and (C) the sum of the total Revolving Credit
Exposures will not exceed the amount equal to the total Commitment.
(v) The proposed terms of the Letter of Credit requested hereunder
and the transactions proposed to be supported thereby are accurately and
completely described on the letter of credit application attached as
Annex I hereto.
-------
(vi) All information supplied below is true, correct, and complete as
of the date hereof.
Information
-----------
(a) Outstanding principal amount of Borrowings........... $____________
(b) LC Exposure.......................................... $____________
(c) The difference of (i) the amount of the Commitments,
minus (ii) the sum of line (a) plus line (b)......... $____________
(d) Difference of $20,000,000 minus line (b)............. $____________
(e) Net availability for Letters of Credit: [lesser of
line (c) or line (d)]................................ $____________
(f) Face Amount of requested Letter of Credit............ $____________
(g) Date requested for issuance of Letter of Credit...... ______, 19__
BORROWER:
--------
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By:__________________________________________
Name:_____________________________________
Title:____________________________________
Dated as of:__________________
[insert date of
proposed issuance
of Letter of Credit]
cc: ABN AMRO Bank N.V.
200 West Monroe, Suite 1100
Chicago, Illinois 60606-5002
Attention: Bob Novak
LETTER OF CREDIT REQUEST FORM - Page 2
<PAGE>
ANNEX 1
TO LETTER OF CREDIT REQUEST FORM
Letter of Credit Application
----------------------------
<PAGE>
EXHIBIT D
EXHIBIT D
TO
CREDIT AGREEMENT
Borrower Security Agreement
---------------------------
<PAGE>
ARTICLE I
Definitions; Security Interest
------------------------------
Section 1.1 Definitions. All capitalized terms used and not otherwise
-----------
defined herein shall have their respective meanings as set forth in the Credit
Agreement. Terms defined in the UCC shall have the same meanings when used,
unless otherwise defined, in this agreement. If the definition given a term in
the Credit Agreement conflicts with the definition given that term in the UCC,
then the Credit Agreement definition controls to the extent allowed by law. If
the definition given a term in Chapter 9 of the UCC conflicts with the
definition given that term in any other chapter of the UCC, then the Chapter 9
definition controls. Furthermore, as used in this Agreement:
"Account" means any "account," as such term is defined in Section
-------
9.106 of the UCC, now owned or hereafter acquired by the Debtor, and, in
any event, shall include, without limitation, each of the following,
whether now owned or hereafter acquired by the Debtor: (a) all rights of
the Debtor to payment for goods sold or leased or services rendered,
whether or not earned by performance, (b) all accounts receivable of the
Debtor, (c) all rights of the Debtor to receive any payment of money or
other form of consideration, (d) all security pledged, assigned, or granted
to or held by the Debtor to secure any of the foregoing, (e) all guaranties
of, or indemnifications with respect to, any of the foregoing, (f) all
Chattel Paper, (g) all Instruments, and (h) all rights of the Debtor as an
unpaid seller of goods or services, including, but not limited to, all
rights of stoppage in transit, replevin, reclamation, and resale.
"Chattel Paper" means any "chattel paper", as such term is defined in
-------------
Section 9.105(a)(2) of the UCC, now owned or hereafter acquired by the
Debtor.
"Collateral" has the meaning specified in Section 1.2 of this
---------- -----------
Agreement.
"Default" means any Default under or as defined in the Credit
-------
Agreement or any Default under and as defined in any Note Agreement.
"Document" means any "document", as such term is defined in Section
--------
9.105(a)(6) of the UCC, now owned or hereafter acquired by the Debtor,
including, without limitation, all documents of title and warehouse
receipts of the Debtor.
"Equipment" means any "equipment", as such term is defined in Section
---------
9.109(2) of the UCC, now owned or hereafter acquired by the Debtor and, in
any event, shall include, without limitation, all machinery, equipment,
furnishings, fixtures and vehicles now owned or hereafter acquired by the
Debtor and any and all additions, substitutions, and replacements of any of
the foregoing, wherever located, together with all attachments, components,
parts, equipment, and accessories installed thereon or affixed thereto.
BORROWER SECURITY AGREEMENT - Page 2
<PAGE>
"Event of Default" means any Event of Default under and as defined in
----------------
the Credit Agreement or any Event of Default under and as defined in any
Note Agreement.
"General Intangibles" means any "general intangibles", as such term is
-------------------
defined in Section 9.106 of the UCC, now owned or hereafter acquired by the
Debtor and, in any event, shall include, without limitation, each of the
following, whether now owned or hereafter acquired by the Debtor: (a) all
of the Debtor's Patents, Marks, trade secrets, intellectual property,
registrations, renewal rights, goodwill, copyrights, franchises, licenses,
permits, proprietary information, customer lists, designs, and inventions,
(b) all of the Debtor's books, records, data, plans, manuals, computer
software, and computer programs, (c) all of the Debtor's contract rights,
partnership interests, joint venture interests, securities, deposit
accounts, investment accounts, certificates of deposit, and investment
property, (d) all rights of the Debtor to payment under letters of credit
and similar agreements, (e) all tax refunds and tax refund claims of the
Debtor, (f) all choses in action and causes of action of the Debtor
(whether arising in contract, tort, or otherwise and whether or not
currently in litigation) and all judgments in favor of the Debtor, (g) all
rights and claims of the Debtor under warranties and indemnities, and (h)
all rights of the Debtor under any insurance, surety, or similar contract
or arrangement.
"Instrument" means any "instrument", as such term is defined in
----------
Section 9.105(a)(9) of the UCC, now owned or hereafter acquired by the
Debtor, other than stock and other securities.
"Inventory" means any "inventory", as such term is defined in Section
---------
9.109(4) of the UCC, now owned or hereafter acquired by the Debtor, and, in
any event, shall include, without limitation, each of the following,
whether now owned or hereafter acquired by the Debtor: (a) all goods and
other personal property of the Debtor that are held for sale or lease or to
be furnished under any contract of service, (b) all raw materials, work-in-
process, finished goods, inventory, supplies, and materials of the Debtor,
(c) all wrapping, packaging, advertising, and shipping materials of the
Debtor, (d) all goods that have been returned to, repossessed by, or
stopped in transit by the Debtor, and (e) all Documents evidencing any of
the foregoing.
"Marks" means all trademarks and service marks, now owned or held or
-----
hereafter acquired by the Debtor, and whether registered or unregistered,
and all trade areas including logos, designs, trade names, company names,
business names, fictitious business names and other business identifiers in
connection with any such registered or unregistered names.
BORROWER SECURITY AGREEMENT - Page 3
<PAGE>
"Obligations" means:
-----------
(a) the indebtedness, liabilities and obligations of the Debtor
to the Lenders evidenced by the Notes executed by Debtor, and payable
to the order of the respective Lenders, pursuant to the Credit
Agreement;
(b) the "Obligations," as such term is defined in the Credit
Agreement;
(c) all future Loans by any Lender to the Debtor and all LC
Disbursements made by the Issuing Bank;
(d) the indebtedness, liabilities and obligations of Debtor to
the Note Holders evidenced by the Senior Notes, executed by Debtor and
payable to the order of the respective Note Holders, pursuant to the
Note Agreements;
(e) all other indebtedness, liabilities and obligations of Debtor
to the Note Holders under the Note Agreements, including any Yield-
Maintenance Amount (as defined in the Note Agreements) and reasonable
costs, fees and expenses in collection of the Senior Notes held by the
Note Holders;
(f) all costs and expenses, including without limitation all
reasonable attorneys' fees and legal expenses, incurred by any Secured
Party to preserve and maintain the Collateral, collect the obligations
herein described and enforce this Agreement; and
(g) all extensions, renewals and modifications of any of the
foregoing.
"Patents" means all patents, patent applications and patent rights,
-------
now owned or hereafter acquired by the Debtor.
"Permitted Liens" means the security interests granted hereby and
---------------
Liens expressly permitted by Section 8.02 of the Credit Agreement.
"Proceeds" means any "proceeds," as such term is defined in Section
--------
9.306 of the UCC and, in any event, shall include, but not be limited to,
(a) any and all proceeds of any insurance, indemnity, warranty, or guaranty
payable to the Debtor from time to time with respect to any of the
Collateral, (b) any and all payments (in any form whatsoever) made or due
and payable to the Debtor from time to time in connection with any
requisition, confiscation, condemnation, seizure, or forfeiture of all or
any part of the Collateral by any Governmental Authority (or any person
BORROWER SECURITY AGREEMENT - Page 4
<PAGE>
acting under color of Governmental Authority), and (c) any and all other
amounts from time to time paid or payable under or in connection with any
of the Collateral.
"Secured Party" means each of, and "Secured Parties" means all of, the
------------- ---------------
Collateral Agent, the Administrative Agent, the Issuing Bank, the Lenders
and the Note Holders.
"UCC" means the Uniform Commercial Code as in effect in the State of
---
Texas or, if so required with respect to any particular Collateral by
mandatory provisions of applicable law, as in effect in the jurisdiction in
which such Collateral is located.
Section 1.2 Security Interest. As collateral security for the prompt
-----------------
payment and performance in full when due of the Obligations (whether at stated
maturity, by acceleration, or otherwise), the Debtor hereby grants to the
Collateral Agent, for the pro rata benefit of the Secured Parties, a security
interest in the following property, whether now owned or existing or hereafter
acquired or arising and wherever arising or located (such property being
hereinafter sometimes called the "Collateral"):
----------
(a) all Accounts;
(b) all General Intangibles;
(c) all Inventory;
(d) all Equipment; and
(e) all Proceeds and products of any or all of the foregoing.
If the grant, pledge, or collateral transfer or assignment of any rights of the
Debtor under any contract included in the Collateral is expressly prohibited by
such contract, then the security interest hereby granted therein nonetheless
remains effective to the extent allowed by UCC Section 9.318 or other applicable
law but is otherwise limited by that prohibition.
Section 1.3 Debtor Remains Liable. Notwithstanding anything to the
---------------------
contrary contained herein, (a) the Debtor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Collateral Agent of any of its rights hereunder shall not release the Debtor
from any of its duties or obligations under the contracts and agreements
included in the Collateral, and (c) none of the Secured Parties shall have any
obligation or liability under any of the contracts and agreements included in
the Collateral by reason of this Agreement, nor shall any Secured Party be
obligated to perform any of the obligations or duties of the Debtor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
BORROWER SECURITY AGREEMENT - Page 5
<PAGE>
ARTICLE II
Representations and Warranties
------------------------------
The Debtor represents and warrants to the Collateral Agent that:
Section 2.1 Title. Except for the Permitted Liens, the Debtor owns, and
-----
with respect to Collateral acquired after the date hereof the Debtor will own,
the Collateral free and clear of any Lien.
Section 2.2 Accounts. Unless the Debtor has given the Collateral Agent
--------
written notice to the contrary, whenever the security interest granted hereunder
attaches to an Account, the Debtor shall be deemed to have represented and
warranted to the Collateral Agent as to each and all of its Accounts that (a)
each Account is genuine and in all respects what it purports to be, (b) each
Account represents the legal, valid, and binding obligation of the account
debtor evidencing indebtedness unpaid and owed by such account debtor arising
out of the performance of labor or services by the Debtor or the sale or lease
of goods by the Debtor, (c) the amount of each Account represented as owing is
the correct amount actually and unconditionally owing except for normal trade
discounts granted in the ordinary course of business, and (d) to the best of
Debtor's knowledge, no Account is subject to any offset, counterclaim, or other
defense.
Section 2.3 Financing Statements. No financing statement, security
--------------------
agreement, or other lien instrument covering all or any part of the Collateral
is on file in any public office, except as may have been filed in favor of the
Collateral Agent or to perfect any Permitted Liens. Except as set forth on
Schedule 3 hereto, the Debtor has not within the past five years done business
- ----------
under any name or trade name other than its legal name set forth at the
beginning of this Agreement. All information provided by the Debtor in its
Security Agreement Questionnaire delivered to the Collateral Agent or its
counsel is true, correct and complete in all material respects.
Section 2.4 Organization and Authority. The Debtor is a corporation duly
--------------------------
organized, validly existing, and in good standing under the laws of the state of
its incorporation. The Debtor has the corporate power and authority to execute,
deliver, and perform this Agreement, and the execution, delivery, and
performance of this Agreement by the Debtor (a) have been authorized by all
necessary corporate action on the part of the Debtor, (b) do not and will not
violate (i) any law, rule or regulation which violation would have a material
adverse effect on the business, condition (financial or otherwise), operations,
prospects, or properties of the Debtor, or (ii) the articles of incorporation or
bylaws of the Debtor, and (c) do not and will not conflict with, result in a
breach of, or constitute a default under the provisions of any material
indenture, mortgage, deed of trust, security agreement, instrument, or agreement
pursuant to which the Debtor or any of its property is bound.
Section 2.5 Principal Place of Business. The principal place of
---------------------------
business and chief executive office of the Debtor, and the office where the
Debtor keeps its books and records, is
BORROWER SECURITY AGREEMENT - Page 6
<PAGE>
located at the address of the Debtor shown below its name on the signature pages
of this Agreement, except for any records stored offsite at the addresses
specified on Schedule 1 hereto.
----------
Section 2.6 Location of Collateral. All Inventory and Equipment (except
----------------------
for Inventory and Equipment which is not, individually or in the aggregate,
material in value or to the business of the Debtor) of the Debtor are located at
the locations specified on Schedule 1 hereto, or at other locations within the
----------
continental United States of America in the ordinary course of the Debtor's
business so long as all actions have been taken to assure the continued
perfection and priority of the Collateral Agent's security interest therein.
The Debtor has exclusive possession and control of its Inventory and Equipment.
None of the Inventory or Equipment is evidenced by a Document (including,
without limitation, a negotiable document of title). All Instruments and
Chattel Paper have been endorsed and delivered to the Collateral Agent.
Section 2.7 Perfection. This Agreement creates a security interest in the
----------
Collateral in favor of the Collateral Agent. Upon the filing of UCC financing
statements in favor of the Collateral Agent in the jurisdictions listed on
Schedule 2 attached hereto, and upon the Collateral Agent's obtaining possession
- ----------
of all Documents, Instruments and Chattel Paper of the Debtor, the security
interest in favor of the Collateral Agent created herein is and will constitute
a valid and perfected Lien upon and security interest in all items of the
Collateral covered by Article 9 of the UCC, subject to no equal or prior Lien,
except the Permitted Liens.
ARTICLE III
Covenants
---------
The Debtor covenants and agrees with the Collateral Agent that until the
Obligations are paid and performed in full and all commitments and other
obligations of the Lenders and the Note Holders to the Debtor have been
terminated and no Letters of Credit are outstanding:
Section 3.1 Maintenance. The Debtor shall maintain the Collateral in good
-----------
operating condition and repair, and the Debtor shall not permit any waste or
destruction of the Collateral or any part thereof except for the ordinary wear
and tear of its intended primary use. The Debtor shall not use or permit the
Collateral to be used in violation of any law or inconsistently with the terms
of any policy of insurance. The Debtor shall not use or permit the Collateral
to be used in any manner or for any purpose that would impair the value of the
Collateral or expose the Collateral to unusual risk.
Section 3.2 Encumbrances. The Debtor shall not create, permit, or
------------
suffer to exist, and the Debtor shall defend the Collateral against, any Lien on
the Collateral except Permitted Liens, and the Debtor shall defend the Debtor's
rights in the Collateral and the Collateral Agent's security interest in the
Collateral against the claims of all Persons.
Section 3.3 Modification of Collateral. The Debtor shall not do
--------------------------
anything to impair the rights of the Collateral Agent in the Collateral. Without
the prior written consent of the Collateral
BORROWER SECURITY AGREEMENT - Page 7
<PAGE>
Agent, the Debtor shall not (a) grant any extension of time for any payment with
respect to the Collateral, other than trade extensions granted in the ordinary
course of business, (b) compromise, compound, or settle any of the Collateral,
(c) release in whole or in part any person or entity liable for payment with
respect to the Collateral, (d) allow any credit or discount for payment with
respect to the Collateral other than normal trade discounts granted in the
ordinary course of business and other adjustments, such as bad debt expense,
made in the ordinary course of business, (e) release any lien, security interest
or assignment securing the Collateral, or (f) otherwise amend or modify any of
the Collateral in any material manner.
Section 3.4 Disposition of Collateral. The Debtor shall not sell, lease,
-------------------------
assign, transfer or otherwise dispose of any of the Collateral, except as
expressly permitted by the Credit Agreement.
Section 3.5 Further Assurances. At any time and from time to time, upon
------------------
the reasonable request of the Collateral Agent, and at the sole expense of the
Debtor, the Debtor shall promptly execute and deliver all such further
instruments and documents and take such further action as the Collateral Agent
may deem necessary or desirable to preserve and perfect its security interest in
the Collateral and carry out the provisions and purposes of this Agreement,
including, without limitation, the execution and filing of such financing
statements as the Collateral Agent may require. A carbon, photographic, or other
reproduction of this Agreement or of any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement and
may be filed as a financing statement. The Debtor shall promptly endorse and
deliver to the Collateral Agent all Documents, Instruments, and Chattel Paper
that it now owns or may hereafter acquire.
Section 3.6 Risk of Loss; Insurance. The Debtor shall be responsible
-----------------------
for any loss of or damage to the Collateral. The Debtor shall maintain, with
financially sound and reputable companies, insurance policies (i) insuring the
Collateral against loss by fire, explosion, theft, and such other risks and
casualties as are customarily insured against by companies engaged in the same
or a similar business, and (ii) insuring the Debtor and the Collateral Agent
against liability for personal injury and property damage relating to the
Collateral, such policies to be in such amounts and covering such risks as are
customarily insured against by companies engaged in the same or a similar
business, but at least in the amounts specified in the Credit Agreement, with
losses payable to the Debtor and the Collateral Agent as their respective
interests may appear. All insurance with respect to the Collateral shall provide
that no cancellation, reduction in amount, or change in coverage thereof shall
be effective unless the Collateral Agent has received thirty (30) days prior
written notice thereof. The Debtor shall furnish the Collateral Agent with
certificates or other evidence satisfactory to the Collateral Agent of
compliance with the foregoing insurance provisions. The Debtor shall deliver to
the Collateral Agent upon demand copies of all insurance policies covering the
Collateral or any part thereof.
Section 3.7 Inspection Rights. The Debtor shall permit the Collateral
-----------------
Agent and each Secured Party and their representatives, upon one (1) Business
Day's prior notice, to examine or inspect the Collateral wherever located and to
examine, inspect, and copy the Debtor's books and records at any reasonable time
and as often as they may desire. The Collateral Agent may at any
BORROWER SECURITY AGREEMENT - Page 8
<PAGE>
time and from time to time contact account debtors and other obligors to verify
the existence, amounts, and terms of the Debtor's Accounts.
Section 3.8 Mortgagee's and Landlord's Waivers. With respect to all
----------------------------------
locations of Collateral, the Debtor shall cause each mortgagee of real property
owned by the Debtor and each landlord of real property leased by the Debtor to
execute and deliver instruments satisfactory in form and substance to the
Collateral Agent by which such mortgagee or landlord waives or subordinates its
rights, if any, in the Collateral.
Section 3.9 Notification. The Debtor shall promptly notify the
------------
Collateral Agent of (i) any Lien or material claim made or threatened against
the Collateral, (ii) any material change in the Collateral, including, without
limitation, any material damage to or loss of the Collateral, and (iii) the
occurrence or existence of any Default or Event of Default.
Section 3.10 Corporate Changes. The Debtor shall not change its name,
-----------------
identity, or corporate structure in any manner that might make any financing
statement filed in connection with this Agreement seriously misleading, unless
the Debtor shall have given the Collateral Agent thirty (30) days prior written
notice thereof and shall have taken all action deemed necessary or desirable by
the Collateral Agent to make each financing statement not seriously misleading.
The Debtor shall not change its principal place of business, chief executive
office, or the place where it keeps its books and records, unless it shall have
given the Collateral Agent thirty (30) days prior written notice thereof and
shall have taken all action deemed necessary or desirable by the Collateral
Agent to cause its security interest in the Collateral to be perfected with the
priority required by this Agreement.
Section 3.11 Books and Records; Information. The Debtor shall keep
------------------------------
books and records of the Collateral and the Debtor's business and financial
condition in accordance with GAAP (subject to year-end adjustments and
disclosures). The Debtor shall from time to time at the request of the
Collateral Agent deliver to the Collateral Agent such information regarding the
Collateral and the Debtor as the Collateral Agent may request, including,
without limitation, lists and descriptions of the Collateral and evidence of the
identity and existence of the Collateral. The Debtor shall mark its books and
records to reflect the security interest of the Collateral Agent under this
Agreement.
Section 3.12 Location of Collateral. The Debtor shall not move any of its
----------------------
Equipment or Inventory from the locations specified herein without the prior
written consent of the Collateral Agent, except to other locations within the
continental United States of America in the ordinary course of business so long
as all actions have been taken to assure the continued perfection and priority
of the Collateral Agent's security interest therein.
Section 3.13 Warehouse Receipts Non-Negotiable. The Debtor agrees that
---------------------------------
if any warehouse receipt or receipt in the nature of a warehouse receipt is
issued in respect of any of the Collateral, such warehouse receipt or receipt in
the nature thereof shall not be "negotiable" (as such term is used in Section
7.104 of the UCC as in effect in any relevant jurisdiction or under relevant
law).
BORROWER SECURITY AGREEMENT - Page 9
<PAGE>
Section 3.14 Collection of Accounts. Except as otherwise provided in
----------------------
this Section, the Debtor shall have the right to collect and receive payments on
the Accounts. In connection with such collections, the Debtor may take (and, at
the Collateral Agent's direction, shall take) such actions as the Debtor or the
Collateral Agent may deem necessary or advisable to enforce collection of the
Accounts. At any time, if an Event of Default shall have occurred and be
continuing, the Collateral Agent shall have the right to, or upon the request of
the Collateral Agent the Debtor shall, instruct all account debtors and other
Persons obligated in respect of the Accounts to make all payments on the
Accounts either directly to the Collateral Agent, for the pro rata benefit of
the Secured Parties (by instructing that such payments be remitted to a post
office box which shall be in the name and under the control of the Collateral
Agent), or to one or more other banks in the United States of America (by
instructing that such payments be remitted to a post office box which shall be
in the name or under the control of the Collateral Agent) under arrangements in
form and substance satisfactory to the Collateral Agent pursuant to which the
Debtor shall have irrevocably instructed such other bank (and such other bank
shall have agreed) to remit all such payments directly to the Collateral Agent.
In addition to the foregoing, the Debtor agrees that if any Proceeds of any
Collateral (including payments made in respect of Accounts) shall be received by
the Debtor while an Event of Default exists, the Debtor shall promptly deliver
such Proceeds to the Collateral Agent, for the pro rata benefit of the Secured
Parties, with any necessary endorsements. Until such Proceeds are delivered to
the Collateral Agent, such Proceeds shall be held in trust by the Debtor for the
benefit of the Collateral Agent and shall not be commingled with any other funds
or property of the Debtor. All Proceeds of Collateral received by the Collateral
Agent pursuant to this Section may at the option of the Determining Lenders, (i)
be applied to the Obligations in accordance with the Intercreditor Agreement, or
(ii) be deposited to the credit of Debtor and held as collateral for the
Obligations or permitted to be used by Debtor in the ordinary course of its
business.
ARTICLE IV
Special Provisions Concerning Marks
-----------------------------------
Section 4.1 Additional Representations and Warranties. The Debtor
-----------------------------------------
represents and warrants that it is the true and lawful exclusive owner of the
Marks listed as being owned by it in Schedule 4 hereto and that, as of the date
----------
hereof, the listed Marks include all the United States federal and foreign
registrations or applications registered in the United States Patent and
Trademark Office or the equivalent government agency or office in any applicable
foreign jurisdiction which are necessary for Debtor's business as currently
operated. The Debtor represents and warrants that it owns or is licensed to use
or is not prohibited from using all Marks that it uses. The Debtor further
warrants that it is aware of no third party claim (which could have a Material
Adverse Effect) that any aspect of the Debtor's present or contemplated business
operations infringes or will infringe any mark. The Debtor represents and
warrants that it is the owner of record of all registrations and applications
listed as being owned by it in Schedule 4 hereto and that such registrations are
----------
valid, subsisting, have not been cancelled and that the Debtor is not aware of
any third party claim (which could have a Material Adverse Effect) that any such
registration is invalid or unenforceable. The Debtor hereby grants to the
Collateral Agent an absolute power of attorney to sign, upon the occurrence and
during the continuance of an Event of Default, any document which may be
required
BORROWER SECURITY AGREEMENT - Page 10
<PAGE>
by the United States Patent and Trademark Office or any equivalent government
agency or office of any applicable foreign jurisdiction in order to effect an
absolute assignment of all right, title and interest in each such Mark and
associated goodwill, and record the same.
Section 4.2 Licenses and Assignments. Other than the license agreements
------------------------
listed on Schedule 4 hereto and any extensions or renewals thereof, the Debtor
----------
hereby agrees not to divest itself of any right under any Mark except those
Debtor reasonably determines are not necessary for the conduct of its or its
Subsidiaries' business.
Section 4.3 Infringements. The Debtor agrees, promptly upon learning
-------------
thereof, to notify the Collateral Agent in writing of the name and address of,
and to furnish such pertinent information that may be available with respect to,
any party who may be infringing or otherwise violating any of the Debtor's
rights in and to any Mark, or with respect to any party claiming that the
Debtor's use of any Mark violates any property right of that party, in each case
to the extent that the Debtor reasonably believes that such infringement or
violation is material to its business or could result in a Material Adverse
Effect. The Debtor further agrees, if consistent with good business practice,
diligently to prosecute any Person infringing any Mark to the extent that the
Debtor reasonably believes that such infringement is material to its business or
could result in a Material Adverse Effect.
Section 4.4 Preservation of Marks. To the extent the failure to do so
---------------------
would cause a Material Adverse Effect and the Debtor reasonably believes it to
be consistent with good business practice, the Debtor agrees to use its Marks in
interstate commerce during the time in which this Agreement is in effect,
sufficiently to preserve such Marks as trademarks or service marks registered
under the laws of the United States or applicable foreign jurisdictions.
Section 4.5 Maintenance of Registration. To the extent the failure to
---------------------------
do so would cause a Material Adverse Effect and the Debtor reasonably believes
it to be consistent with good business practice, the Debtor shall, at its own
expense, diligently process all documents required by the Trademark Act of 1946,
15 U.S.C. (S)(S) 1051 et seq. to maintain trademark registration, including but
-- ---
not limited to affidavits of use and applications for renewals of registration
in the United States Patent and Trademark Office for all of its Marks pursuant
to 15 U.S.C. (S)(S) 1058(a), 1059 and 1065, and shall pay all fees and
disbursements in connection therewith and shall not abandon any such filing of
affidavit of use or any such application of renewal prior to the exhaustion of
all reasonable administrative and judicial remedies without prior written
consent of the Determining Lenders.
Section 4.6 Future Registered Marks. If any Mark registration is issued
-----------------------
hereafter to the Debtor as a result of any application now or hereafter pending
before the United States Patent and Trademark Office or any equivalent
government agency or office in any applicable foreign jurisdiction, within 30
days of receipt of such registration the Debtor shall deliver a copy of such
registration, and a grant of security in such Mark to the Collateral Agent,
confirming the grant thereof hereunder, the form of such confirmatory grant to
be satisfactory to the Collateral Agent.
BORROWER SECURITY AGREEMENT - Page 11
<PAGE>
Section 4.7 Remedies. If an Event of Default shall occur and be
--------
continuing, the Collateral Agent may, after five days' written notice to the
Debtor, take any or all of the following actions: (i) declare the entire right,
title and interest of the Debtor in and to each of the Marks and the goodwill of
the business associated therewith, together with all trademark rights and rights
of protection to the same, vested, in which event such rights, title and
interest shall immediately vest, in the Collateral Agent for the benefit of the
Secured Parties, in which case the Collateral Agent shall be entitled to
exercise the power of attorney referred to in Section 4.1 to execute, cause to
-----------
be acknowledged and notarized and record said absolute assignment with the
applicable agency; (ii) take and use or sell the Marks and the goodwill of the
Debtor's businesses symbolized by the Marks and the right to carry on the
businesses and use the assets of the Debtor in connection with which the Marks
have been used; and (iii) direct the Debtor to refrain, in which event the
Debtor shall refrain, from using the Marks in any manner whatsoever, directly or
indirectly, and execute such other and further documents that the Collateral
Agent may request to further confirm this and to transfer ownership of the Marks
and registrations and any pending trademark application in the United States
Patent and Trademark Office or any equivalent government agency or office in any
foreign jurisdiction to the Collateral Agent.
ARTICLE V
Special Provisions
Concerning Patents
------------------
Section 5.1 Additional Representations and Warranties. The Debtor
-----------------------------------------
represents and warrants that it is the true and lawful exclusive owner of all
rights in the Patents listed as being owned by it in Schedule 5 hereto and that,
----------
as of the date hereof, said Patents include all the patents and applications for
patents that the Debtor now owns which are necessary for Debtor's business as
currently operated. The Debtor represents and warrants that it owns or is
licensed to practice under all Patents that it now uses or practices under. The
Debtor further warrants that it is aware of no third party claim (which could
have a Material Adverse Effect) that any aspect of the Debtor's present or
contemplated business operations infringes or will infringe any patent. The
Debtor hereby grants to the Collateral Agent an absolute power of attorney to
sign, upon the occurrence and during the continuance of any Event of Default,
any document which may be required by the United States Patent and Trademark
Office or the equivalent government agency or office of any applicable foreign
jurisdiction, in order to effect an absolute assignment of all right, title and
interest in each Patent and record the same.
Section 5.2 Licenses and Assignments. Other than the license agreements
------------------------
listed on Schedule 5 hereto and any extensions or renewals thereof, the Debtor
----------
hereby agrees not to divest itself of any right under any Patent except those
Patents the Debtor reasonably determines are not necessary for the conduct of
its or its Subsidiaries' business.
Section 5.3 Infringements. The Debtor agrees, promptly upon learning
-------------
thereof, to furnish the Collateral Agent in writing with all pertinent
information available to the Debtor with respect to any infringement or other
violation of the Debtor's rights in any Patent, or with respect to any
BORROWER SECURITY AGREEMENT - Page 12
<PAGE>
claim that practice of any Patent violates any property rights of that party, in
each case to the extent that the Debtor reasonably believes that such
infringement or violation is material to its business or could result in a
Material Adverse Effect. The Debtor further agrees, consistent with good
business practice and absent direction of the Collateral Agent to the contrary
(which direction shall only be given if an Event of Default shall have occurred
and be continuing), diligently to prosecute any Person infringing any Patent to
the extent that the Debtor reasonably believes that such infringement is
material to its business or could result in a Material Adverse Effect.
Section 5.4 Maintenance of Patents. At its own expense, the Debtor
----------------------
shall make timely payment of all post-issuance fees required pursuant to 35
U.S.C. (S) 41 to maintain in force rights under each Patent to the extent the
Debtor reasonably believes it to be consistent with good business practice and
failure to do so would cause a Material Adverse Effect.
Section 5.5 Prosecution of Patent Application. At its own expense, the
---------------------------------
Debtor shall diligently prosecute all applications for Patents listed as being
owned by it in Schedule 5 hereto and shall not abandon any such application
----------
prior to exhaustion of all reasonable administrative and judicial remedies, to
the extent Debtor reasonably believes it to be consistent with good business
practice and failure to do so would cause a Material Adverse Effect.
Section 5.6 Other Patents. Within thirty (30) days of acquisition of a
-------------
Patent, or of filing of an application for a Patent, the Debtor shall deliver to
the Collateral Agent a copy of said Patent or such application, as the case may
be, with a grant of security as to such Patent, as the case may be, confirming
the grant thereof hereunder, the form of such confirmatory grant to be
satisfactory to the Collateral Agent.
Section 5.7 Remedies. If an Event of Default shall occur and be
--------
continuing, the Collateral Agent may after five days' written notice to the
Debtor, take any or all of the following actions: (i) declare the entire right,
title, and interest of the Debtor in each of the Patents vested, in which event
such right, title, and interest shall immediately vest in the Collateral Agent
for the benefit of the Secured Parties, in which case the Collateral Agent shall
be entitled to exercise the power of attorney referred to in Section 5.1 to
-----------
execute, cause to be acknowledged and notarized and record said absolute
assignment with the applicable agency; (ii) take and practice or sell the
Patents; and (iii) direct the Debtor to refrain, in which event the Debtor shall
refrain, from practicing the Patents directly or indirectly, and the Debtor
shall execute such other and further documents as the Collateral Agent may
request further to confirm this and to transfer ownership of the Patents to the
Collateral Agent for the benefit of the Secured Parties.
BORROWER SECURITY AGREEMENT - Page 13
<PAGE>
ARTICLE VI
Rights of the Collateral Agent
------------------------------
Section 6.1 Power of Attorney. The Debtor hereby irrevocably
-----------------
constitutes and appoints the Collateral Agent and any officer or agent thereof,
with full power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the name of the Debtor or in its own
name, to take any and all action and to execute any and all documents and
instruments which the Collateral Agent at any time and from time to time deems
necessary or desirable to accomplish the purposes of this Agreement and, without
limiting the generality of the foregoing, the Debtor hereby gives the Collateral
Agent the power and right on behalf of the Debtor and in its own name to do any
of the following, without notice to or the consent of the Debtor, whether or not
an Event of Default has occurred and is continuing, except as otherwise
expressly provided below.
(i) after the occurrence and during the continuance of an Event of
Default, to demand, sue for, collect, or receive in the name of the Debtor
or in its own name, any money or property at any time payable or receivable
on account of or in exchange for any of the Collateral and, in connection
therewith, endorse checks, notes, drafts, acceptances, money orders,
documents of title, or any other instruments for the payment of money under
the Collateral or any policy of insurance;
(ii) to pay or discharge taxes or Liens levied or placed on or
threatened against the Collateral;
(iii) after the occurrence and during the continuance of an Event of
Default, to notify post office authorities to change the address for
delivery of mail of the Debtor to an address designated by the Collateral
Agent and to receive, open, and dispose of mail addressed to the Debtor;
(iv) (A) after the occurrence and during the continuance of an
Event of Default, to direct account debtors and any other parties liable
for any payment under any of the Collateral to make payment of any and all
monies due and to become due thereunder directly to the Collateral Agent or
as the Collateral Agent shall direct; (B) after the occurrence and during
the continuance of an Event of Default, to receive payment of and receipt
for any and all monies, claims, and other amounts due and to become due at
any time in respect of or arising out of any Collateral; (C) after the
occurrence and during the continuance of an Event of Default, to sign and
endorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments, proxies, stock
powers, verifications, and notices in connection with accounts and other
documents relating to the Collateral; (D) after the occurrence and during
the continuance of an Event of Default, to commence and prosecute any suit,
action, or proceeding at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to enforce
any other right in respect of any Collateral; (E) after the occurrence and
during the continuance of an Event of Default, to defend any suit, action,
or proceeding brought against the Debtor with
BORROWER SECURITY AGREEMENT - Page 14
<PAGE>
respect to any Collateral; (F) after the occurrence and during the
continuance of an Event of Default, to settle, compromise, or adjust any
suit, action, or proceeding described above and, in connection therewith,
to give such discharges or releases as the Collateral Agent may deem
appropriate; (G) to exchange any of the Collateral for other property upon
any merger, consolidation, reorganization, recapitalization, or other
readjustment of the issuer thereof and, in connection therewith, deposit
any of the Collateral with any committee, depositary, transfer agent,
registrar, or other designated agency upon such terms as the Collateral
Agent may determine; (H) to add or release any guarantor, endorser, surety,
or other party to any of the Collateral; (I) after the occurrence and
during the continuance of an Event of Default, to renew, extend, or
otherwise change the terms and conditions of any of the Collateral; (J) to
make, settle, compromise, or adjust claims under any insurance policy
covering any of the Collateral; and (K) after the occurrence and during the
continuance of an Event of Default, to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as
fully and completely as though the Collateral Agent were the absolute owner
thereof for all purposes, and to do, at the Collateral Agent's option and
the Debtor's expense, at any time, or from time to time, all acts and
things which the Collateral Agent deems necessary to protect, preserve, or
realize upon the Collateral and the Collateral Agent's security interest
therein.
This power of attorney is a power coupled with an interest and shall be
irrevocable. The Collateral Agent shall be under no duty to exercise or
withhold the exercise of any of the rights, powers, privileges, and options
expressly or implicitly granted to the Collateral Agent in this Agreement, and
shall not be liable for any failure to do so or any delay in doing so. The
Collateral Agent shall not be liable for any act or omission or for any error of
judgment or any mistake of fact or law in its individual capacity or in its
capacity as attorney-in-fact except acts or omissions resulting from its willful
misconduct. This power of attorney is conferred on the Collateral Agent solely
to protect, preserve, and realize upon its security interest in the Collateral.
The Collateral Agent shall not be responsible for any decline in the value of
the Collateral and shall not be required to take any steps to preserve rights
against prior parties or to protect, preserve, or maintain any security interest
or Lien given to secure the Collateral.
Section 6.2 Certain Covenants and Rights Regarding the Collateral.
-----------------------------------------------------
(a) The Debtor shall from time to time at the reasonable request of
the Collateral Agent furnish the Collateral Agent with a schedule of each
Account included in the Collateral and a list of all those liable on
checks, notes, drafts, and other Instruments representing the proceeds of
such Accounts. The Collateral Agent shall have the right to make test
verifications of the Collateral. If any part of the Collateral is or
becomes subject to the Federal Assignment of Claims Act, the Debtor will
execute all instruments and take all steps required by the Collateral Agent
to comply with that act. If part of the Collateral is evidenced by Chattel
Paper or by one or more promissory notes, trade acceptances or other
Instruments for the payment of money, the Debtor will, at the request of
the Collateral Agent, immediately deliver them to the Collateral Agent,
appropriately endorsed to the order of the
BORROWER SECURITY AGREEMENT - Page 15
<PAGE>
Collateral Agent, and regardless of the form of endorsement, the Debtor
waives presentment, demand, notice of dishonor, protest, and notice of
protest.
(b) If the validity or priority of this Agreement or of any rights,
titles, security interests or other interests created or evidenced hereby
shall be attacked, endangered, or questioned, or if any legal proceedings
are instituted with respect thereto, the Debtor will give prompt written
notice thereof to the Collateral Agent and, at the Debtor's own cost and
expense, will diligently endeavor to cure any defect which may be developed
or claimed, and will take all necessary and proper steps for the defense of
such legal proceedings, and the Collateral Agent (whether or not named as a
party to the legal proceedings with respect thereto) is hereby authorized
and empowered to take such additional steps as in its judgment and
discretion may be necessary or proper for the defense of any such legal
proceedings or the protection of the validity or priority of this Agreement
and the rights, titles, security interests, and other interests created or
evidenced hereby, and all expenses so incurred of every kind and character
shall be a demand obligation owing by the Debtor and the party incurring
such expenses shall be subrogated to all rights of the Person receiving
such payment.
(c) Upon the occurrence of an Event of Default and at any time
thereafter, the Collateral Agent is authorized to take possession peaceably
of the Collateral and of all books, records and accounts relating thereto,
and to exercise without interference from the Debtor any and all rights
which the Debtor has with respect to the management, possession,
protection, or preservation of the Collateral. If necessary to obtain the
possession provided for above, the Collateral Agent may invoke any and all
legal remedies to dispossess the Debtor, including specifically one or more
actions for forcible entry and detainer. In connection with any action
taken by the Collateral Agent pursuant to this Section, the Collateral
Agent shall not be liable for any loss sustained by the Debtor resulting
from any act or omission of the Collateral Agent unless such loss is caused
by the willful misconduct and bad faith of the Collateral Agent, nor shall
the Collateral Agent be obligated to perform or discharge any obligation,
duty, or liability under any sale or lease agreement covering the
Collateral or any part thereof, or under or by reason of this Agreement or
exercise of rights or remedies hereunder.
(d) At any time prior to the termination of this Agreement, after the
occurrence and during the continuance of an Event of Default, the
Collateral Agent may notify the account debtors or obligors of any
Accounts, Chattel Paper, Instruments, or other evidences of indebtedness
included in the Collateral to pay the Collateral Agent directly. Until the
Collateral Agent elects to exercise these rights, the Debtor is authorized
as agent of the Collateral Agent to collect and enforce such accounts. The
costs of collection and enforcement, including attorneys' fees and
expenses, shall be borne solely by the Debtor whether incurred by the
Collateral Agent or the Debtor.
Section 6.3 Performance by the Collateral Agent. If the Debtor fails to
-----------------------------------
perform or comply with any of its obligations or agreements contained herein,
the Collateral Agent itself may, at its sole
BORROWER SECURITY AGREEMENT - Page 16
<PAGE>
discretion, cause or attempt to cause performance or compliance with such
agreement and, the expenses of the Collateral Agent, together with interest
thereon at the Maximum Rate, shall be payable by the Debtor to the Collateral
Agent on demand and shall constitute Obligations secured by this Agreement. The
Collateral Agent, upon making such payment, shall be subrogated to all of the
rights of the Person receiving such payment. Notwithstanding the foregoing, it
is expressly agreed that the Collateral Agent shall not have any liability or
responsibility for the performance of any obligation of the Debtor under this
Agreement.
Section 6.4 Setoff; Property Held by the Collateral Agent. If an Event
---------------------------------------------
of Default shall have occurred and be continuing, the Collateral Agent shall
have the right to set off and apply against the Obligations, at any time and
without notice to the Debtor, any and all deposits (general or special, time or
demand, provisional or final) or other sums at any time credited by or owing
from the Collateral Agent to the Debtor whether or not the Obligations are then
due. As additional security for the Obligations, the Debtor hereby grants the
Collateral Agent a security interest in all money, instruments, and other
property of the Debtor now or hereafter held by the Collateral Agent. In
addition to the Collateral Agent's right of setoff and as further security for
the Obligations, the Debtor hereby grants the Collateral Agent a security
interest in all deposits (general or special, time or demand, provisional or
final) and other accounts of the Debtor now or hereafter deposited with or held
by the Collateral Agent and all other sums at any time credited by or owing from
the Collateral Agent to the Debtor. The rights and remedies of the Collateral
Agent hereunder are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which the Collateral Agent may have.
Section 6.5 Subrogation. If any of the Obligations are given in renewal
-----------
or extension or applied toward the payment of indebtedness secured by any Lien,
the Secured Parties shall be, and are hereby, subrogated to all of the rights,
titles, interests and Liens securing the indebtedness so renewed, extended, or
paid.
Section 6.6 Collateral Agent's Duty of Care. Other than the exercise of
-------------------------------
reasonable care in the physical custody of the Collateral while held by the
Collateral Agent hereunder, the Collateral Agent shall have no responsibility
for or obligation or duty with respect to all or any part of the Collateral or
any matter or proceeding arising out of or relating thereto, including without
limitation any obligation or duty to collect any sums due in respect thereof or
to protect or preserve any rights against prior parties or any other rights
pertaining thereto, it being understood and agreed that Debtor shall be
responsible for preservation of all rights in the Collateral. Without limiting
the generality of the foregoing, the Collateral Agent shall be conclusively
deemed to have exercised reasonable care in the custody of the Collateral if the
Collateral Agent takes such action, for purposes of preserving rights in the
Collateral, as Debtor may reasonably request in writing, but no failure or
omission or delay by the Collateral Agent in complying with any such request by
Debtor, and no refusal by the Collateral Agent to comply with any such request
by Debtor, shall be deemed to be a failure to exercise reasonable care.
Section 6.7 Assignment by the Collateral Agent. The Secured Parties may
----------------------------------
from time to time assign the Obligations and any portion thereof and/or the
Collateral and any portion thereof in
BORROWER SECURITY AGREEMENT - Page 17
<PAGE>
accordance with the applicable provisions of the Credit Agreement and the Note
Agreements, respectively, and the assignee shall be entitled to all of the
rights and remedies of such Person under this Agreement in relation thereto.
ARTICLE VII
Default
-------
Section 7.1 Rights and Remedies. Upon the occurrence of an Event of
-------------------
Default, the Collateral Agent shall have the following rights and remedies:
(i) In addition to all other rights and remedies granted to the
Collateral Agent in this Agreement and in any other instrument or agreement
securing, evidencing, or relating to the Obligations or any part thereof or
by applicable law, the Collateral Agent shall have all of the rights and
remedies of a secured party under the UCC (whether or not the UCC applies
to the affected Collateral). Without limiting the generality of the
foregoing, the Collateral Agent may (A) without demand or notice to the
Debtor, collect, receive, or take possession of the Collateral or any part
thereof and for that purpose the Collateral Agent may enter upon any
premises on which the Collateral is located and remove the Collateral
therefrom or render it inoperable, and/or (B) sell, lease, or otherwise
dispose of the Collateral, or any part thereof, in one or more parcels at
public or private sale or sales, at the Collateral Agent's offices or
elsewhere, for cash, on credit, or for future delivery, and upon such other
terms as the Collateral Agent may deem commercially reasonable. Each
Secured Party shall have the right at any public sale or sales, and, to the
extent permitted by applicable law, at any private sale or sales, to bid
and become a purchaser of the Collateral or any part thereof free of any
right or equity of redemption on the part of the Debtor, which right or
equity of redemption is hereby expressly waived and released by the Debtor.
Upon the request of the Collateral Agent, the Debtor shall assemble the
Collateral and make it available to the Collateral Agent at any place
designated by the Collateral Agent that is reasonably convenient to the
Debtor and the Collateral Agent. The Debtor agrees that the Collateral
Agent shall not be obligated to give more than five days prior written
notice of the time and place of any public sale or of the time after which
any private sale may take place and that such notice shall constitute
reasonable notice of such matters. The Collateral Agent shall not be
obligated to make any sale of Collateral if it shall determine not to do
so, regardless of the fact that notice of sale of Collateral may have been
given. The Collateral Agent may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned from time to
time by announcement at the time and place fixed for sale, and such sale
may, without further notice, be made at the time and place to which the
same was so adjourned. The Debtor shall be liable for all expenses of
retaking, holding, preparing for sale, or the like, and all attorneys'
fees, legal expenses, and all other costs and expenses incurred by any
Secured Party in connection with the collection of the Obligations and the
enforcement of the Collateral Agent's rights under this Agreement. The
Debtor shall remain liable for any deficiency if the proceeds of any sale
or disposition of the Collateral are
BORROWER SECURITY AGREEMENT - Page 18
<PAGE>
insufficient to pay the Obligations in full. The Debtor waives all rights
of marshalling in respect of the Collateral.
(ii) The Collateral Agent may cause any or all of the Collateral
held by it to be transferred into the name of the Collateral Agent or the
name or names of the Collateral Agent's nominee or nominees.
(iii) The Collateral Agent may collect or receive all money or
property at any time payable or receivable on account of or in exchange for
any of the Collateral, but shall be under no obligation to do so.
(iv) On any sale of the Collateral, the Collateral Agent is hereby
authorized to comply with any limitation or restriction with which
compliance is necessary, in the view of the Collateral Agent's counsel, in
order to avoid any violation of applicable law or in order to obtain any
required approval of the purchaser or purchasers by any applicable
Governmental Authority.
Section 7.2 Application of Proceeds of Sale. The proceeds of any sale of
-------------------------------
Collateral pursuant to Section 7.1 hereof, as well as any Collateral consisting
-----------
of cash, shall be applied by the Collateral Agent as provided in the
Intercreditor Agreement. Upon any sale of the Collateral by the Collateral
Agent (including, without limitation, a sale pursuant to the UCC or under a
judicial proceeding), the receipt of the Collateral Agent or of the officer
making the sale shall be a sufficient discharge to the purchaser or purchasers
of the Collateral so sold and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid over
to the Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
ARTICLE VIII
Miscellaneous
-------------
Section 8.1 No Waiver; Cumulative Remedies. No failure on the part of the
------------------------------
Collateral Agent 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 are cumulative
and not exclusive of any rights and remedies provided by law.
Section 8.2 Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the Debtor, the Collateral Agent and their
respective heirs, successors, and assigns, except that the Debtor may not assign
any of its rights or obligations under this Agreement without the prior written
consent of the Collateral Agent.
BORROWER SECURITY AGREEMENT - Page 19
<PAGE>
Section 8.3 AMENDMENT; ENTIRE AGREEMENT; CONTROLLING AGREEMENT. THIS
--------------------------------------------------
AGREEMENT AND THE OTHER LOAN DOCUMENTS 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 OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. The
provisions of this Agreement may be amended or waived only by an instrument in
writing signed by the parties hereto. In the event any term or provision of this
Agreement expressly conflicts with any term or provision of the Credit
Agreement, the terms and provisions of the Credit Agreement shall govern and
control.
Section 8.4 Notices. All notices and other communications provided for
-------
in this Agreement shall be given or made in writing and telecopied, 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 the 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 telecopy, 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.
Sec Applicable 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. 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 DEBTOR
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT OR AGREEMENT
SECURING, EVIDENCING, OR RELATING TO THE OBLIGATIONS OR ANY PART THEREOF MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT IN DALLAS COUNTY, TEXAS. THE DEBTOR
HEREBY IRREVOCABLY (I) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS,
AND (II) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. THE DEBTOR 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 8.4 OF THIS
-----------
AGREEMENT. NOTHING IN THIS AGREEMENT OR ANY OTHER INSTRUMENT OR AGREEMENT
SECURING, EVIDENCING, OR RELATING TO THE OBLIGATIONS OR ANY PART THEREOF SHALL
AFFECT THE RIGHT OF THE COLLATERAL AGENT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF
BORROWER SECURITY AGREEMENT - Page 20
<PAGE>
THE COLLATERAL AGENT TO BRING ANY ACTION OR PROCEEDING AGAINST THE DEBTOR OR
WITH RESPECT TO ANY OF THE COLLATERAL IN ANY STATE OR FEDERAL COURT IN ANY OTHER
JURISDICTION. ANY ACTION OR PROCEEDING BY THE DEBTOR AGAINST THE COLLATERAL
AGENT SHALL BE BROUGHT ONLY IN A COURT LOCATED IN DALLAS COUNTY, TEXAS.
Section 8.6 Headings. The headings, captions, and arrangements used in
--------
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section 8.7 Survival of Representations and Warranties. All
------------------------------------------
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, and no investigation by any Secured Party shall affect the
representations and warranties or the right of the Secured Parties to rely upon
them.
Section 8.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 8.9 Waiver of Bond. In the event the Collateral Agent seeks to
--------------
takepossession of any or all of the Collateral by judicial process, the Debtor
hereby irrevocably waives any bonds and any surety or security relating thereto
that may be required by applicable law as an incident to such possession, and
waives any demand for possession prior to the commencement of any such suit or
action.
Section 8.10 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 8.11 Construction. The Debtor and the Collateral Agent
------------
acknowledge 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 with its
legal counsel and that this Agreement shall be construed as if jointly drafted
by the Debtor and the Collateral Agent.
Section 8.12 Obligations Absolute. The obligations of the Debtor under
--------------------
this Agreement shall be absolute and unconditional and shall not be released,
discharged, reduced, or in any way impaired by any circumstance whatsoever,
including, without limitation, any amendment, modification, extension, or
renewal of this Agreement, the Obligations, or any document or instrument
evidencing, securing, or otherwise relating to the Obligations, or any release
or subordination of collateral, or any waiver, consent, extension, indulgence,
compromise, settlement, or other action or inaction in respect of this
Agreement, the Obligations, or any document or instrument evidencing, securing,
or otherwise relating to the Obligations, or any exercise or failure to exercise
any right, remedy, power, or privilege in respect of the Obligations.
BORROWER SECURITY AGREEMENT - Page 21
<PAGE>
Section 8.13 Release of Security Interest. At such time as all of the
----------------------------
Obligations have been paid and performed in full, all obligations and
commitments of the Secured Parties to make advances, issue letters of credit or
otherwise extend credit under the Credit Agreement and the Note Agreements,
respectively, have expired or terminated, and no Letters of Credit remain
outstanding, the Collateral Agent shall release the security interest granted
hereby.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
BORROWER SECURITY AGREEMENT - Page 22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first written above.
DEBTOR:
------
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By: /s/ PAUL W. FEHLMAN
------------------------------------
Name: Paul W. Fehlman
-------------------------------
Title: Treasurer
------------------------------
Address for Notices:
2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Telephone No.: (214) 953-4572
Attention: Paul W. Fehlman
COLLATERAL AGENT:
----------------
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION,
as Collateral Agent
By: /s/ MAE K. REEVES
------------------------------------
Name: Mae K. Reeves
-------------------------------
Title: Vice President
------------------------------
Address for Notices:
2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201
Fax No.: (214) 965-2044
Telephone No.: (214) 965-2159
Attention: Mae K. Reeves
BORROWER SECURITY AGREEMENT - Page 23
<PAGE>
EXHIBIT E
TO
CREDIT AGREEMENT
Subsidiary Security Agreement
-----------------------------
<PAGE>
POS=BOTTOM,QUAD=LEFT)
SUBSIDIARY SECURITY AGREEMENT
-----------------------------
This SUBSIDIARY SECURITY AGREEMENT (this "Agreement") dated as of July 30,
---------
1999 is by and among the undersigned debtors (each, a "Debtor" and collectively,
------
the "Debtors") and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as the collateral
-------
agent (in such capacity, together with its successors and assigns in such
capacity, the "Collateral Agent") for the Secured Parties (as hereinafter
----------------
defined).
R E C I T A L S:
- - - - - - - -
A. Concurrently herewith, Global Industrial Technologies, Inc., a
Delaware corporation (the "Borrower"), Chase Bank of Texas, National
--------
Association, as the Administrative Agent, ABN AMRO Bank N.V., as the
Documentation Agent and as the Issuing Bank, PNC Bank, National Association, as
the Syndication Agent, and the Lenders from time to time party thereto have
executed that certain Credit Agreement of even date herewith (such Credit
Agreement, as the same may be amended, supplemented or modified from time to
time, being hereinafter referred to as the "Credit Agreement").
----------------
B. The Borrower is presently indebted to the holders (the "Note Holders")
------------
of certain notes issued by the Borrower pursuant to (i) that certain Note
Agreement dated as of January 31, 1996, by and among the Borrower, The
Prudential Insurance Company of America and Principal Life Insurance Company
(formerly known as Principal Mutual Life Insurance Company), (ii) that certain
Note Agreement dated as of June 30, 1998, by and among the Borrower, The
Prudential Insurance Company of America and U.S. Private Placement Fund, and
(iii) that certain Note Agreement dated as of October 2, 1998, by and between
the Borrower and The Prudential Insurance Company of America (such Note
Agreements, as the same have been and may be amended, supplemented or modified
from time to time, being hereinafter referred to collectively as the "Note
----
Agreements").
- ----------
C. The Borrower, the Debtors, the Collateral Agent, the Administrative
Agent, the Issuing Bank, the Lenders and the Note Holders have executed that
certain Intercreditor Agreement of even date herewith (such Intercreditor
Agreement, as the same may be amended, supplemented or modified from time to
time, the "Intercreditor Agreement"), which Intercreditor Agreement, among other
-----------------------
things, appoints the Collateral Agent and sets forth certain agreements
regarding the parties' rights with regard to the Collateral.
D. The Administrative Agent, the Issuing Bank and the Lenders have
conditioned their obligations under the Credit Agreement on the execution and
delivery by the Debtors of this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SUBSIDIARY SECURITY AGREEMENT - PAGE 1
<PAGE>
ARTICLE I
Definitions; Security Interest
------------------------------
Section I.1 Definitions. All capitalized terms used and not otherwise
-----------
defined herein shall have their respective meanings as set forth in the Credit
Agreement. Terms defined in the UCC shall have the same meanings when used,
unless otherwise defined, in this agreement. If the definition given a term in
the Credit Agreement conflicts with the definition given that term in the UCC,
then the Credit Agreement definition controls to the extent allowed by law. If
the definition given a term in Chapter 9 of the UCC conflicts with the
definition given that term in any other chapter of the UCC, then the Chapter 9
definition controls. Furthermore, as used in this Agreement:
"Account" means any "account," as such term is defined in Section
-------
9.106 of the UCC, now owned or hereafter acquired by any Debtor, and, in
any event, shall include, without limitation, each of the following,
whether now owned or hereafter acquired by any Debtor: (a) all rights of
any Debtor to payment for goods sold or leased or services rendered,
whether or not earned by performance, (b) all accounts receivable of any
Debtor, (c) all rights of any Debtor to receive any payment of money or
other form of consideration, (d) all security pledged, assigned, or granted
to or held by any Debtor to secure any of the foregoing, (e) all guaranties
of, or indemnifications with respect to, any of the foregoing, (f) all
Chattel Paper, (g) all Instruments, and (h) all rights of any Debtor as an
unpaid seller of goods or services, including, but not limited to, all
rights of stoppage in transit, replevin, reclamation, and resale.
"Chattel Paper" means any "chattel paper", as such term is defined in
-------------
Section 9.105(a)(2) of the UCC, now owned or hereafter acquired by any
Debtor.
"Collateral" has the meaning specified in Section 1.2 of this
---------- -----------
Agreement.
"Default" means any Default under or as defined in the Credit
-------
Agreement or any Default under and as defined in any Note Agreement.
"Document" means any "document", as such term is defined in Section
--------
9.105(a)(6) of the UCC, now owned or hereafter acquired by any Debtor,
including, without limitation, all documents of title and warehouse
receipts of any Debtor.
"Equipment" means any "equipment", as such term is defined in Section
---------
9.109(2) of the UCC, now owned or hereafter acquired by any Debtor and, in
any event, shall include, without limitation, all machinery, equipment,
furnishings, fixtures, and vehicles now owned or hereafter acquired by any
Debtor and any and all additions, substitutions, and replacements of any of
the foregoing, wherever
SUBSIDIARY SECURITY AGREEMENT - PAGE 2
<PAGE>
located, together with all attachments, components, parts, equipment, and
accessories installed thereon or affixed thereto.
"Event of Default" means any Event of Default under and as defined in
----------------
the Credit Agreement or any Event of Default under and as defined in any
Note Agreement.
"General Intangibles" means any "general intangibles", as such term is
-------------------
defined in Section 9.106 of the UCC, now owned or hereafter acquired by any
Debtor and, in any event, shall include, without limitation, each of the
following, whether now owned or hereafter acquired by any Debtor: (a) all
Patents, Marks, trade secrets, intellectual property, registrations,
renewal rights, goodwill, copyrights, franchises, licenses, permits,
proprietary information, customer lists, designs, and inventions of any
Debtor, (b) all books, records, data, plans, manuals, computer software,
and computer programs of any Debtor, (c) all contract rights, partnership
interests, joint venture interests, securities, deposit accounts,
investment accounts, certificates of deposit and investment property of any
Debtor, (d) all rights of any Debtor to payment under letters of credit and
similar agreements, (e) all tax refunds and tax refund claims of any
Debtor, (f) all choses in action and causes of action of any Debtor
(whether arising in contract, tort, or otherwise and whether or not
currently in litigation) and all judgments in favor of any Debtor, (g) all
rights and claims of any Debtor under warranties and indemnities, and (h)
all rights of any Debtor under any insurance, surety, or similar contract
or arrangement.
"Instrument" means any "instrument", as such term is defined in
----------
Section 9.105(a)(9) of the UCC, now owned or hereafter acquired by any
Debtor.
"Inventory" means any "inventory", as such term is defined in Section
---------
9.109(4) of the UCC, now owned or hereafter acquired by any Debtor, and, in
any event, shall include, without limitation, each of the following,
whether now owned or hereafter acquired by any Debtor: (a) all goods and
other personal property of any Debtor that are held for sale or lease or to
be furnished under any contract of service, (b) all raw materials, work-in-
process, finished goods, inventory, supplies, and materials of any Debtor,
(c) all wrapping, packaging, advertising, and shipping materials of any
Debtor, (d) all goods that have been returned to, repossessed by, or
stopped in transit by any Debtor, and (e) all Documents evidencing any of
the foregoing.
"Marks" means all trademarks and service marks, now owned or held or
-----
hereafter acquired by any Debtor, and whether registered or unregistered,
and all trade areas including logos, designs, trade names, company names,
business names, fictitious business names and other business identifiers in
connection with any such registered or unregistered marks.
SUBSIDIARY SECURITY AGREEMENT - PAGE 3
<PAGE>
"Obligations" means:
-----------
(a) the indebtedness, liabilities and obligations of the Borrower to
the Lenders evidenced by the Notes, executed by the Borrower and payable to
the order of the respective Lenders, pursuant to the Credit Agreement;
(b) the indebtedness, liabilities and obligations of each Debtor to
the Administrative Agent, the Issuing Bank and the Lenders under the
Guaranty executed by each Debtor in favor of the Administrative Agent, the
Issuing Bank and the Lenders;
(c) the "Obligations" as such term is defined in the Credit
Agreement;
(d) all future Loans by any Lender to the Borrower and the Debtors,
or any of them, and all LC Disbursements made by the Issuing Bank;
(e) the indebtedness, liabilities and obligations of the Borrower to
the Note Holders evidenced by the Senior Notes, executed by the Borrower
and payable to the order of the Note Holders, pursuant to the Note
Agreements;
(f) the indebtedness, liabilities and obligations of each Debtor to
the Note Holders under the guaranty or guaranties executed by each Debtor
in favor of the Note Holders;
(g) all other indebtedness, liabilities and obligations of each
Debtor to the Note Holders under the Note Agreements, including any Yield-
Maintenance Amount (as defined in the Note Agreements) and reasonable
costs, fees and expenses in collection of the notes held by the Note
Holders;
(h) all costs and expenses, including without limitation all
reasonable attorneys' fees and legal expenses, incurred by any Secured
Party to preserve and maintain the Collateral, collect the obligations
herein described and enforce this Agreement; and
(i) all extensions, renewals and modifications of any of the
foregoing.
"Patents" means all patents, patent applications and patent rights,
-------
now owned or hereafter acquired by any Debtor.
"Permitted Liens" means the security interests granted hereby and
---------------
Liens expressly permitted by Section 8.02 of the Credit Agreement.
------------
"Proceeds" means any "proceeds", as such term is defined in Section
--------
9.306 of the UCC and, in any event, shall include, but not be limited to,
(a) any and all
SUBSIDIARY SECURITY AGREEMENT - PAGE 4
<PAGE>
proceeds of any insurance, indemnity, warranty, or guaranty payable to any
Debtor from time to time with respect to any of the Collateral, (b) any and
all payments (in any form whatsoever) made or due and payable to any Debtor
from time to time in connection with any requisition, confiscation,
condemnation, seizure, or forfeiture of all or any part of the Collateral
by any Governmental Authority (or any person acting under color of
Governmental Authority), and (c) any and all other amounts from time to
time paid or payable under or in connection with any of the Collateral.
"Secured Party" means each of, and "Secured Parties" means all of, the
------------- ---------------
Collateral Agent, the Administrative Agent, the Issuing Bank, the Lenders
and the Note Holders.
"UCC" means the Uniform Commercial Code as in effect in the State of
---
Texas or, if so required with respect to any particular Collateral by
mandatory provisions of applicable law, as in effect in the jurisdiction in
which such Collateral is located.
Section I.2 Security Interest. As collateral security for the prompt
-----------------
payment and performance in full when due of the Obligations (whether at stated
maturity, by acceleration, or otherwise), each Debtor hereby grants to the
Collateral Agent, for the pro rata benefit of the Secured Parties, a security
interest in the following property, whether now owned or existing or hereafter
acquired or arising and wherever arising or located (such property being
hereinafter sometimes called the "Collateral"):
----------
(a) all Accounts;
(b) all General Intangibles;
(c) all Inventory;
(d) all Equipment; and
(e) all Proceeds and products of any or all of the foregoing.
Without limiting the foregoing, this Agreement secures the payment of all
amounts that constitute part of the Obligations and would be owed by the
Borrower to any Secured Party but for the fact that they are unenforceable or
not allowable due to the existence of bankruptcy, reorganization, or similar
proceedings involving the Borrower. If the grant, pledge, or collateral
transfer or assignment of any rights of any Debtor under any contract included
in the Collateral is expressly prohibited by such contract, then the security
interest hereby granted nonetheless remains effective to the extent allowed by
Section 9.318 of the UCC or other applicable law but is otherwise limited by
that prohibition.
SUBSIDIARY SECURITY AGREEMENT - PAGE 5
<PAGE>
Section I.3 Debtors Remain Liable. Notwithstanding anything to the
---------------------
contrary contained herein, (a) each Debtor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Collateral Agent of any of its rights hereunder shall not release any Debtor
from any of its duties or obligations under the contracts and agreements
included in the Collateral, and (c) none of the Secured Parties shall have any
obligation or liability under any of the contracts and agreements included in
the Collateral by reason of this Agreement, nor shall any Secured Party be
obligated to perform any of the obligations or duties of any Debtor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
ARTICLE II
Representations and Warranties
------------------------------
Each Debtor represents and warrants to the Collateral Agent that:
Section II.1 Title. Except for the Permitted Liens, such Debtor owns,
-----
and with respect to Collateral acquired after the date hereof such Debtor will
own, the Collateral free and clear of any Lien.
Section II.2 Accounts. Unless a Debtor has given the Collateral Agent
--------
written notice to the contrary, whenever the security interest granted hereunder
attaches to an Account, each Debtor shall be deemed to have represented and
warranted to the Collateral Agent as to each and all of its Accounts that (a)
each Account is genuine and in all respects what it purports to be, (b) each
Account represents the legal, valid, and binding obligation of the account
debtor evidencing indebtedness unpaid and owed by such account debtor arising
out of the performance of labor or services by such Debtor or the sale or lease
of goods by such Debtor, (c) the amount of each Account represented as owing is
the correct amount actually and unconditionally owing except for normal trade
discounts granted in the ordinary course of business, and (d) to the best of
Debtor's knowledge, no Account is subject to any offset, counterclaim, or other
defense.
Section II.3 Financing Statements. No financing statement, security
--------------------
agreement, or other lien instrument covering all or any part of the Collateral
is on file in any public office, except as may have been filed in favor of the
Collateral Agent or to perfect any Permitted Liens. Except as set forth on
Schedule 3 hereto, no Debtor has within the past five years done business under
- ----------
any name or trade name other than its legal name set forth at the beginning of
this Agreement. All information provided by each Debtor in its Security
Agreement Questionnaire delivered to the Collateral Agent or its counsel is
true, correct and complete in all material respects.
Section II.4 Organization and Authority. Each Debtor is a corporation
--------------------------
duly organized, validly existing, and in good standing under the laws of the
state of its incorporation. Each Debtor has the corporate power and authority to
execute, deliver, and perform this Agreement, and the execution, delivery, and
performance of this Agreement by such Debtor (a) have been authorized
SUBSIDIARY SECURITY AGREEMENT - PAGE 6
<PAGE>
by all necessary corporate action on the part of such Debtor, (b) do not and
will not violate (i) any law, rule or regulation which violation would have a
material adverse effect on the business, condition (financial or otherwise),
operations, prospects, or properties of such Debtor, or (ii) the articles or
certificate of incorporation or bylaws of such Debtor, and (c) do not and will
not conflict with, result in a breach of, or constitute a default under the
provisions of any material indenture, mortgage, deed of trust, security
agreement, instrument or agreement pursuant to which such Debtor or any of its
property is bound.
Section II.5 Principal Place of Business. The principal place of
---------------------------
business and chief executive office of each Debtor, and the office where each
Debtor keeps its books and records, is located at the address of such Debtor
shown below its name on the signature pages of this Agreement except for any
records stored offsite at the addresses specified on Schedule 1 hereto.
----------
Section II.6 Location of Collateral. All Inventory and Equipment
----------------------
(except for Inventory and Equipment which is not, individually or in the
aggregate, material in value or to the business of any Debtor) of each Debtor
are located at the locations specified on Schedule 1 hereto or at other
----------
locations within the continental United States of America in the ordinary course
of each Debtor's business so long as all actions have been taken to assure the
continued perfection and priority of the Collateral Agent's security interest
therein. Each Debtor has exclusive possession and control of its Inventory and
Equipment. None of the Inventory or Equipment of any Debtor is evidenced by a
Document (including, without limitation, a negotiable document of title). All
Instruments and Chattel Paper of each Debtor have been endorsed and delivered to
the Collateral Agent.
Section II.7 Perfection. This Agreement creates a security interest in
----------
the Collateral in favor of the Collateral Agent. Upon the filing of UCC
financing statements in favor of the Collateral Agent in the jurisdictions
listed on Schedule 2 attached hereto, and upon the Collateral Agent's obtaining
----------
possession of all Documents, Instruments and Chattel Paper of each Debtor, the
security interest in favor of the Collateral Agent created herein will
constitute a valid and perfected Lien upon and security interest in all items of
the Collateral covered by Article 9 of the UCC, subject to no equal or prior
Lien, except the Permitted Liens.
ARTICLE III
Covenants
---------
The Debtors jointly and severally covenant and agree with the Collateral
Agent that until the Obligations are paid and performed in full and all
commitments and other obligations of the Lenders and the Note Holders to the
Borrower have been terminated and no Letters of Credit are outstanding:
Section III.1 Maintenance. Each Debtor shall maintain the Collateral
-----------
in good operating condition and repair, and no Debtor shall permit any waste or
destruction of the Collateral or any part thereof except for the ordinary wear
and tear of its intended primary use. No Debtor shall
SUBSIDIARY SECURITY AGREEMENT - PAGE 7
<PAGE>
use or permit the Collateral to be used in violation of any law or
inconsistently with the terms of any policy of insurance. No Debtor shall use or
permit the Collateral to be used in any manner or for any purpose that would
impair the value of the Collateral or expose the Collateral to unusual risk.
Section III.2 Encumbrances. No Debtor shall create, permit, or suffer
------------
to exist, and each Debtor shall defend the Collateral against, any Lien on the
Collateral except Permitted Liens, and shall defend such Debtor's rights in the
Collateral and the Collateral Agent's security interest in the Collateral
against the claims of all Persons.
Section III.3 Modification of Collateral. No Debtor shall do anything
--------------------------
to impair the rights of the Collateral Agent in the Collateral. Without the
prior written consent of the Collateral Agent, no Debtor shall (a) grant any
extension of time for any payment with respect to the Collateral, other than
trade extensions granted in the ordinary course of business, (b) compromise,
compound, or settle any of the Collateral, (c) release in whole or in part any
person or entity liable for payment with respect to the Collateral, (d) allow
any credit or discount for payment with respect to the Collateral other than
normal trade discounts granted in the ordinary course of business and other
adjustments, such as bad debt expense, made in the ordinary course of business,
(e) release any lien, security interest, or assignment securing the Collateral,
or (f) otherwise amend or modify any of the Collateral in any material manner.
Section III.4 Disposition of Collateral. No Debtor shall sell, lease,
-------------------------
assign, transfer or otherwise dispose of any Collateral, except as expressly
permitted by the Credit Agreement.
Section III.5 Further Assurances. At any time and from time to time,
------------------
upon the reasonable request of the Collateral Agent, and at the sole expense of
the Debtors, each Debtor shall promptly execute and deliver all such further
instruments and documents and take such further action as the Collateral Agent
may deem necessary or desirable to preserve and perfect its security interest in
the Collateral and carry out the provisions and purposes of this Agreement,
including, without limitation, the execution and filing of such financing
statements as the Collateral Agent may require. A carbon, photographic, or other
reproduction of this Agreement or of any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement and
may be filed as a financing statement. Each Debtor shall promptly endorse and
deliver to the Collateral Agent all Documents, Instruments, and Chattel Paper
that it now owns or may hereafter acquire.
Section III.6 Risk of Loss; Insurance. The Debtors shall be
-----------------------
responsible for any loss of or damage to the Collateral. Each Debtor shall
maintain, with financially sound and reputable companies, insurance policies (i)
insuring the Collateral against loss by fire, explosion, theft, and such other
risks and casualties as are customarily insured against by companies engaged in
the same or a similar business, and (ii) insuring such Debtor and the Collateral
Agent against liability for personal injury and property damage relating to the
Collateral, such policies to be in such amounts and covering such risks as are
customarily insured against by companies engaged in the same or a similar
business, but at least in the amounts specified in the Credit Agreement, with
SUBSIDIARY SECURITY AGREEMENT - PAGE 8
<PAGE>
losses payable to such Debtor and the Collateral Agent, as their respective
interests may appear. All insurance with respect to the Collateral shall provide
that no cancellation, reduction in amount, or change in coverage thereof shall
be effective unless the Collateral Agent has received 30 days prior written
notice thereof. Each Debtor shall furnish the Collateral Agent with certificates
or other evidence satisfactory to the Collateral Agent of compliance with the
foregoing insurance provisions. Each Debtor shall deliver to the Collateral
Agent upon demand copies of all insurance policies covering the Collateral or
any part thereof.
Section III.7 Inspection Rights. Each Debtor shall permit the
-----------------
Collateral Agent and each Secured Party and their representatives, upon one (1)
Business Day's prior notice, to examine or inspect the Collateral wherever
located and to examine, inspect, and copy such Debtor's books and records at any
reasonable time and as often as they may desire. The Collateral Agent may at any
time and from time to time contact account debtors and other obligors to verify
the existence, amounts, and terms of any Debtor's Accounts.
Section III.8 Mortgagee's and Landlord's Waivers. With respect to all
----------------------------------
locations of Collateral, each Debtor shall cause each mortgagee of real property
owned by such Debtor and each landlord of real property leased by such Debtor to
execute and deliver instruments satisfactory in form and substance to the
Collateral Agent by which such mortgagee or landlord waives or subordinates its
rights, if any, in the Collateral.
Section III.9 Notification. Each Debtor shall promptly notify the
------------
Collateral Agent of (i) any Lien or material claim made or threatened against
the Collateral, (ii) any material change in the Collateral, including, without
limitation, any material damage to or loss of the Collateral, and (iii) the
occurrence or existence of a Default or an Event of Default.
Section III.10 Corporate Changes. No Debtor shall change its name,
-----------------
identity, or corporate structure in any manner that might make any financing
statement filed in connection with this Agreement seriously misleading, unless
such Debtor shall have given the Collateral Agent thirty (30) days prior written
notice thereof and shall have taken all action deemed necessary or desirable by
the Collateral Agent to make each financing statement not seriously misleading.
No Debtor shall change its principal place of business, chief executive office,
or the place where it keeps its books and records, unless it shall have given
the Collateral Agent thirty (30) days prior written notice thereof and shall
have taken all action deemed necessary or desirable by the Collateral Agent to
cause its security interest in the Collateral to be perfected with the priority
required by this Agreement.
Section III.11 Books and Records; Information. Each Debtor shall keep
------------------------------
accurate and complete books and records of the Collateral and such Debtor's
business and financial condition in accordance with GAAP (subject to year-end
adjustments and disclosures). Each Debtor shall from time to time at the request
of the Collateral Agent deliver to the Collateral Agent such information
regarding the Collateral and such Debtor as the Collateral Agent may request,
including, without limitation, lists and descriptions of the Collateral and
evidence of the identity
SUBSIDIARY SECURITY AGREEMENT - PAGE 9
<PAGE>
and existence of the Collateral. Each Debtor shall mark its books and records to
reflect the security interest of the Collateral Agent under this Agreement.
Section III.12 Location of Collateral. No Debtor shall move any of its
----------------------
Equipment or Inventory from the locations specified herein without the prior
written consent of the Collateral Agent, except to other locations within the
continental United States of America in the ordinary course of business so long
as all actions have been taken to assure the continued perfection and priority
of the Collateral Agent's security interest therein.
Section III.13 Warehouse Receipts Non-Negotiable. Each Debtor agrees
---------------------------------
that if any warehouse receipt or receipt in the nature of a warehouse receipt is
issued in respect of any of the Collateral, such warehouse receipt or receipt in
the nature thereof shall not be "negotiable" (as such term is used in Section
7.104 of the UCC as in effect in any relevant jurisdiction or under relevant
law).
Section III.14 Collection of Accounts. Except as otherwise provided in
----------------------
this Section, the Debtors shall have the right to collect and receive payments
on the Accounts. In connection with such collections, the Debtors may take (and,
at the Collateral Agent's direction, shall take) such actions as the Debtors or
the Collateral Agent may deem necessary or advisable to enforce collection of
the Accounts. At any time, if an Event of Default shall have occurred and be
continuing, the Collateral Agent shall have the right to, or upon the request of
the Collateral Agent the Debtors shall, instruct all account debtors and other
Persons obligated in respect of the Accounts to make all payments on the
Accounts either (a) directly to the Collateral Agent (by instructing that such
payments be remitted to a post office box which shall be in the name and under
the control of the Collateral Agent), or (b) to one or more other banks in the
United States of America (by instructing that such payments be remitted to a
post office box which shall be in the name or under the control of the
Collateral Agent) under arrangements in form and substance satisfactory to the
Collateral Agent pursuant to which the Debtors shall have irrevocably instructed
such other bank (and such other bank shall have agreed) to remit all such
payments directly to the Collateral Agent. In addition to the foregoing, each
Debtor agrees that if any Proceeds of any Collateral (including payments made in
respect of Accounts) shall be received by such Debtor while an Event of Default
exists, such Debtor shall promptly deliver such Proceeds to the Collateral
Agent, for the pro rata benefit of the Secured Parties, with any necessary
endorsements. Until such Proceeds are delivered to the Collateral Agent, such
Proceeds shall be held in trust by such Debtor for the benefit of the Collateral
Agent and shall not be commingled with any other funds or property of any
Debtor. All Proceeds of Collateral received by the Collateral Agent pursuant to
this Section may at the option of the Determining Lenders in the exercise of
their absolute discretion, (i) be applied to the Obligations in accordance with
the Intercreditor Agreement, or (ii) be deposited to the credit of any Debtor
and held as collateral for the Obligations or permitted to be used by such
Debtor in the ordinary course of its business.
ARTICLE IV
Special Provisions Concerning Marks
-----------------------------------
SUBSIDIARY SECURITY AGREEMENT - PAGE 10
<PAGE>
Section IV.1 Additional Representations and Warranties. Each Debtor
-----------------------------------------
represents and warrants that it is the true and lawful exclusive owner of the
Marks listed as being owned by it in Schedule 4 hereto and that, as of the date
----------
hereof, the listed Marks include all the United States federal and foreign
registrations or applications registered in the United States Patent and
Trademark Office or the equivalent government agency or office in any applicable
foreign jurisdiction which are necessary for such Debtor's business as currently
operated. Each Debtor represents and warrants that it owns or is licensed to use
or is not prohibited from using all Marks that it uses. Each Debtor further
warrants that it is aware of no third party claim (which could have a Material
Adverse Effect) that any aspect of such Debtor's present or contemplated
business operations infringes or will infringe any mark. Each Debtor represents
and warrants that it is the owner of record of all registrations and
applications listed as being owned by it in Schedule 4 hereto and that such
----------
registrations are valid, subsisting, have not been cancelled and that such
Debtor is not aware of any third party claim (which could have a Material
Adverse Effect) that any such registration is invalid or unenforceable. Each
Debtor hereby grants to the Collateral Agent an absolute power of attorney to
sign, upon the occurrence and during the continuance of an Event of Default, any
document which may be required by the United States Patent and Trademark Office
or any equivalent government agency or office of any applicable foreign
jurisdiction in order to effect an absolute assignment of all right, title and
interest in each such Mark and associated goodwill, and record the same.
Section IV.2 Licenses and Assignments. Other than the license
------------------------
agreements listed on Schedule 4 hereto and any extensions or renewals thereof,
----------
each Debtor hereby agrees not to divest itself of any right under any Mark
except those such Debtor reasonably determines are not necessary for the conduct
of its or its Subsidiaries' business.
Section IV.3 Infringements. Each Debtor agrees, promptly upon learning
-------------
thereof, to notify the Collateral Agent in writing of the name and address of,
and to furnish such pertinent information that may be available with respect to,
any party who may be infringing or otherwise violating any of such Debtor's
rights in and to any Mark, or with respect to any party claiming that such
Debtor's use of any Mark violates any property right of that party, in each case
to the extent that such Debtor reasonably believes that such infringement or
violation is material to its business or could result in a Material Adverse
Effect. Each Debtor further agrees, if consistent with good business practice,
diligently to prosecute any Person infringing any Mark to the extent that such
Debtor reasonably believes that such infringement is material to its business or
could result in a Material Adverse Effect.
Section IV.4 Preservation of Marks. To the extent the failure to do so
---------------------
would cause a Material Adverse Effect and such Debtor reasonably believes it to
be consistent with good business practice, each Debtor agrees to use its Marks
in interstate commerce during the time in which this Agreement is in effect,
sufficiently to preserve such Marks as trademarks or service marks registered
under the laws of the United States or applicable foreign jurisdictions.
SUBSIDIARY SECURITY AGREEMENT - PAGE 11
<PAGE>
Section IV.5 Maintenance of Registration. To the extent the failure to
---------------------------
do so would cause a Material Adverse Effect and such Debtor reasonably believes
it to be consistent with good business practice, each Debtor shall, at its own
expense, diligently process all documents required by the Trademark Act of 1946,
15 U.S.C. (S)(S) 1051 et seq. to maintain trademark registration, including but
-- ---
not limited to affidavits of use and applications for renewals of registration
in the United States Patent and Trademark Office for all of its Marks pursuant
to 15 U.S.C. (S)(S) 1058(a), 1059 and 1065, and shall pay all fees and
disbursements in connection therewith and shall not abandon any such filing of
affidavit of use or any such application of renewal prior to the exhaustion of
all reasonable administrative and judicial remedies without prior written
consent of the Determining Lenders.
Section IV.6 Future Registered Marks. If any Mark registration is issued
-----------------------
hereafter to any Debtor as a result of any application now or hereafter pending
before the United States Patent and Trademark Office or any equivalent
government agency or office in any applicable foreign jurisdiction, within 30
days of receipt of such registration such Debtor shall deliver a copy of such
registration, and a grant of security in such Mark to the Collateral Agent,
confirming the grant thereof hereunder, the form of such confirmatory grant to
be satisfactory to the Collateral Agent.
Section IV.7 Remedies. If an Event of Default shall occur and be
--------
continuing, the Collateral Agent may, after five days' written notice to each
Debtor, take any or all of the following actions: (i) declare the entire right,
title and interest of each Debtor in and to each of the Marks and the goodwill
of the business associated therewith, together with all trademark rights and
rights of protection to the same, vested, in which event such rights, title and
interest shall immediately vest, in the Collateral Agent for the benefit of the
Secured Parties, in which case the Collateral Agent shall be entitled to
exercise the power of attorney referred to in Section 4.1 to execute, cause to
-----------
be acknowledged and notarized and record said absolute assignment with the
applicable agency; (ii) take and use or sell the Marks and the goodwill of each
Debtor's businesses symbolized by the Marks and the right to carry on the
businesses and use the assets of such Debtor in connection with which the Marks
have been used; and (iii) direct each Debtor to refrain, in which event such
Debtor shall refrain, from using the Marks in any manner whatsoever, directly or
indirectly, and execute such other and further documents that the Collateral
Agent may request to further confirm this and to transfer ownership of the Marks
and registrations and any pending trademark application in the United States
Patent and Trademark Office or any equivalent government agency or office in any
foreign jurisdiction to the Collateral Agent.
ARTICLE V
Special Provisions
Concerning Patents
------------------
Section V.1 Additional Representations and Warranties. Each Debtor
-----------------------------------------
represents and warrants that it is the true and lawful exclusive owner of all
rights in the Patents listed as being owned by it in Schedule 5 hereto and that,
----------
as of the date hereof, said Patents include all the patents and applications for
patents that such Debtor now owns which are necessary for such Debtor's
SUBSIDIARY SECURITY AGREEMENT - PAGE 12
<PAGE>
business as currently operated. Each Debtor represents and warrants that it owns
or is licensed to practice under all Patents that it now uses or practices
under. Each Debtor further warrants that it is aware of no third party claim
(which could have a Material Adverse Effect) that any aspect of such Debtor's
present or contemplated business operations infringes or will infringe any
patent. Each Debtor hereby grants to the Collateral Agent an absolute power of
attorney to sign, upon the occurrence and during the continuance of any Event of
Default, any document which may be required by the United States Patent and
Trademark Office or the equivalent government agency or office of any applicable
foreign jurisdiction, in order to effect an absolute assignment of all right,
title and interest in each Patent and record the same.
Section V.2 Licenses and Assignments. Other than the license agreements
------------------------
listed on Schedule 5 hereto and any extensions or renewals thereof, each Debtor
----------
hereby agrees not to divest itself of any right under any Patent except those
Patents such Debtor reasonably determines are not necessary for the conduct of
its or its Subsidiaries' business.
Section V.3 Infringements. Each Debtor agrees, promptly upon learning
-------------
thereof, to furnish the Collateral Agent in writing with all pertinent
information available to such Debtor with respect to any infringement or other
violation of such Debtor's rights in any Patent, or with respect to any claim
that practice of any Patent violates any property rights of that party, in each
case to the extent that such Debtor reasonably believes that such infringement
or violation is material to its business or could result in a Material Adverse
Effect. Each Debtor further agrees, consistent with good business practice and
absent direction of the Collateral Agent to the contrary (which direction shall
only be given if an Event of Default shall have occurred and be continuing),
diligently to prosecute any Person infringing any Patent to the extent that such
Debtor reasonably believes that such infringement is material to its business or
could result in a Material Adverse Effect.
Section V.4 Maintenance of Patents. At its own expense, each Debtor
----------------------
shall make timely payment of all post-issuance fees required pursuant to 35
U.S.C. (S) 41 to maintain in force rights under each Patent to the extent such
Debtor reasonably believes it to be consistent with good business practice and
failure to do so would cause a Material Adverse Effect.
Section V.5 Prosecution of Patent Application. At its own expense, each
---------------------------------
Debtor shall diligently prosecute all applications for Patents listed as being
owned by it in Schedule 5 hereto and shall not abandon any such application
----------
prior to exhaustion of all reasonable administrative and judicial remedies, to
the extent such Debtor reasonably believes it to be consistent with good
business practice and failure to do so would cause a Material Adverse Effect.
Section V.6 Other Patents. Within thirty (30) days of acquisition of a
-------------
Patent, or of filing of an application for a Patent, each Debtor shall deliver
to the Collateral Agent a copy of said Patent or such application, as the case
may be, with a grant of security as to such Patent, as the case may be,
confirming the grant thereof hereunder, the form of such confirmatory grant to
be satisfactory to the Collateral Agent.
SUBSIDIARY SECURITY AGREEMENT - PAGE 13
<PAGE>
Section V.7 Remedies. If an Event of Default shall occur and be
--------
continuing, the Collateral Agent may after five days' written notice to each
Debtor, take any or all of the following actions: (i) declare the entire right,
title, and interest of each Debtor in each of the Patents vested, in which event
such right, title, and interest shall immediately vest in the Collateral Agent
for the benefit of the Secured Parties, in which case the Collateral Agent shall
be entitled to exercise the power of attorney referred to in Section 5.1 to
--------
execute, cause to be acknowledged and notarized and record said absolute
assignment with the applicable agency; (ii) take and practice or sell the
Patents; and (iii) direct each Debtor to refrain, in which event such Debtor
shall refrain, from practicing the Patents directly or indirectly, and such
Debtor shall execute such other and further documents as the Collateral Agent
may request further to confirm this and to transfer ownership of the Patents to
the Collateral Agent for the benefit of the Secured Parties.
ARTICLE VI
Rights of the Collateral Agent
------------------------------
Section VI.7 Power of Attorney. Each Debtor hereby irrevocably
-----------------
constitutes and appoints the Collateral Agent and any officer or agent thereof,
with full power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the name of such Debtor or in its own
name, to take any and all action and to execute any and all documents and
instruments which the Collateral Agent at any time and from time to time deems
necessary or desirable to accomplish the purposes of this Agreement and, without
limiting the generality of the foregoing, each Debtor hereby gives the
Collateral Agent the power and right on behalf of such Debtor and in its own
name to do any of the following, without notice to or the consent of such
Debtor, whether or not an Event of Default has occurred and is continuing,
except as otherwise expressly provided below.
(i) after the occurrence and during the continuance of an Event of
Default, to demand, sue for, collect, or receive in the name of any Debtor
or in its own name, any money or property at any time payable or receivable
on account of or in exchange for any of the Collateral and, in connection
therewith, endorse checks, notes, drafts, acceptances, money orders,
documents of title, or any other instruments for the payment of money under
the Collateral or any policy of insurance;
(ii) to pay or discharge taxes or Liens levied or placed on or
threatened against the Collateral;
(iii) after the occurrence and during the continuance of an Event of
Default, to notify post office authorities to change the address for
delivery of mail of any Debtor to an address designated by the Collateral
Agent and to receive, open, and dispose of mail addressed to any Debtor;
(iv) (A) after the occurrence and during the continuance of an Event
of Default, to direct account debtors and any other parties liable for any
payment under any of the
SUBSIDIARY SECURITY AGREEMENT - PAGE 14
<PAGE>
Collateral to make payment of any and all monies due and to become due
thereunder directly to the Collateral Agent or as the Collateral Agent
shall direct; (B) after the occurrence and during the continuance of an
Event of Default, to receive payment of and receipt for any and all monies,
claims, and other amounts due and to become due at any time in respect of
or arising out of any Collateral; (C) after the occurrence and during the
continuance of an Event of Default, to sign and endorse any invoices,
freight or express bills, bills of lading, storage or warehouse receipts,
drafts against debtors, assignments, proxies, stock powers, verifications,
and notices in connection with accounts and other documents relating to the
Collateral; (D) after the occurrence and during the continuance of an Event
of Default, to commence and prosecute any suit, action, or proceeding at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right in respect of
any Collateral; (E) after the occurrence and during the continuance of an
Event of Default, to defend any suit, action, or proceeding brought against
any Debtor with respect to any Collateral; (F) after the occurrence and
during the continuance of an Event of Default, to settle, compromise, or
adjust any suit, action, or proceeding described above and, in connection
therewith, to give such discharges or releases as the Collateral Agent may
deem appropriate; (G) to exchange any of the Collateral for other property
upon any merger, consolidation, reorganization, recapitalization, or other
readjustment of the issuer thereof and, in connection therewith, deposit
any of the Collateral with any committee, depositary, transfer agent,
registrar, or other designated agency upon such terms as the Collateral
Agent may determine; (H) to add or release any guarantor, indorser, surety,
or other party to any of the Collateral; (I) after the occurrence and
during the continuance of an Event of Default, to renew, extend, or
otherwise change the terms and conditions of any of the Collateral; (J) to
make, settle, compromise, or adjust claims under any insurance policy
covering any of the Collateral; and (K) after the occurrence and during the
continuance of an Event of Default, to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as
fully and completely as though the Collateral Agent were the absolute owner
thereof for all purposes, and to do, at the Collateral Agent's option and
the Debtors' expense, at any time, or from time to time, all acts and
things which the Collateral Agent deems necessary to protect, preserve, or
realize upon the Collateral and the Collateral Agent's security interest
therein.
This power of attorney is a power coupled with an interest and shall be
irrevocable. The Collateral Agent shall be under no duty to exercise or
withhold the exercise of any of the rights, powers, privileges, and options
expressly or implicitly granted to the Collateral Agent in this Agreement, and
shall not be liable for any failure to do so or any delay in doing so. The
Collateral Agent shall not be liable for any act or omission or for any error of
judgment or any mistake of fact or law in its individual capacity or in its
capacity as attorney-in-fact except acts or omissions resulting from its willful
misconduct. This power of attorney is conferred on the Collateral Agent solely
to protect, preserve, and realize upon its security interest in the Collateral.
The Collateral Agent shall not be responsible for any decline in the value of
the Collateral and shall not be required to take any steps to preserve rights
against prior parties or to protect, preserve, or maintain any security interest
or Lien given to secure the Collateral.
SUBSIDIARY SECURITY AGREEMENT - PAGE 15
<PAGE>
Section VI.2 Certain Covenants and Rights Regarding the Collateral.
-----------------------------------------------------
(a) Each Debtor shall from time to time at the reasonable request of
the Collateral Agent furnish the Collateral Agent with a schedule of each
Account included in the Collateral and a list of all those liable on
checks, notes, drafts, and other Instruments representing the proceeds of
such Accounts. The Collateral Agent shall have the right to make test
verifications of the Collateral. If any part of the Collateral is or
becomes subject to the Federal Assignment of Claims Act, each Debtor whose
Collateral has been affected thereby will execute all instruments and take
all steps required by the Collateral Agent to comply with that act. If
part of the Collateral is evidenced by Chattel Paper, or by one or more
promissory notes, trade acceptances or other Instruments for the payment of
money, each Debtor will, at the request of the Collateral Agent,
immediately deliver them to the Collateral Agent, appropriately endorsed to
the order of the Collateral Agent, and regardless of the form of
endorsement, such Debtor waives presentment, demand, notice of dishonor,
protest, and notice of protest.
(b) If the validity or priority of this Agreement or of any rights,
titles, security interests or other interests created or evidenced hereby
shall be attacked, endangered, or questioned, or if any legal proceedings
are instituted with respect thereto, each Debtor will give prompt written
notice thereof to the Collateral Agent and, at such Debtors' own cost and
expense, will diligently endeavor to cure any defect which may be developed
or claimed, and will take all necessary and proper steps for the defense of
such legal proceedings, and the Collateral Agent (whether or not named as a
party to the legal proceedings with respect thereto) is hereby authorized
and empowered to take such additional steps as in its judgment and
discretion may be necessary or proper for the defense of any such legal
proceedings or the protection of the validity or priority of this Agreement
and the rights, titles, security interests, and other interests created or
evidenced hereby, and all expenses so incurred of every kind and character
shall be a demand obligation owing by the Debtors and the party incurring
such expenses shall be subrogated to all rights of the Person receiving
such payment.
(c) Upon the occurrence of an Event of Default and at any time
thereafter, the Collateral Agent is authorized to take possession peaceably
of the Collateral and of all books, records and accounts relating thereto,
and to exercise without interference from the Debtors any and all rights
which any such Debtor has with respect to the management, possession,
protection, or preservation of the Collateral. If necessary to obtain the
possession provided for above, the Collateral Agent may invoke any and all
legal remedies to dispossess any such Debtor, including specifically one or
more actions for forcible entry and detainer. In connection with any
action taken by the Collateral Agent pursuant to this Section, the
Collateral Agent shall not be liable for any loss sustained by any Debtor
resulting from any act or omission of the Collateral Agent unless such loss
is caused by the willful misconduct and bad faith of the Collateral Agent,
nor shall the Collateral Agent be obligated to perform or discharge any
obligation, duty, or liability under any sale or lease
SUBSIDIARY SECURITY AGREEMENT - PAGE 16
<PAGE>
agreement covering the Collateral or any part thereof, or under or by
reason of this Agreement or exercise of rights or remedies hereunder.
(d) At any time prior to the termination of this Agreement, after the
occurrence and during the continuance of an Event of Default, the
Collateral Agent may notify the account debtors or obligors of any
Accounts, Chattel Paper, Instruments, or other evidences of indebtedness
included in the Collateral to pay the Collateral Agent directly. Until the
Collateral Agent elects to exercise these rights, each Debtor is authorized
as agent of the Collateral Agent to collect and enforce such accounts. The
costs of collection and enforcement, including attorneys' fees and
expenses, shall be borne solely by the Debtors whether incurred by the
Collateral Agent or the Debtors.
Section VI.3 Performance by the Collateral Agent. If any of the Debtors
-----------------------------------
fails to perform or comply with any of its obligations or agreements contained
herein, the Collateral Agent itself may, at its sole discretion, cause or
attempt to cause performance or compliance with such agreement, and the expenses
of the Collateral Agent, together with interest thereon at the Maximum Rate,
shall be payable by the Debtors to the Collateral Agent on demand and shall
constitute Obligations secured by this Agreement. The Collateral Agent, upon
making such payment, shall be subrogated to all of the rights of the Person
receiving such payment. Notwithstanding the foregoing, it is expressly agreed
that the Collateral Agent shall not have any liability or responsibility for the
performance of any obligation of any Debtor under this Agreement.
Section VI.4 Setoff; Property Held by the Collateral Agent. If an
---------------------------------------------
Event of Default shall have occurred and be continuing, the Collateral Agent
shall have the right to set off and apply against the Obligations, at any time
and without notice to any Debtor, any and all deposits (general or special, time
or demand, provisional or final) or other sums at any time credited by or owing
from the Collateral Agent to any Debtor whether or not the Obligations are then
due. As additional security for the Obligations, each Debtor hereby grants the
Collateral Agent a security interest in all money, instruments, and other
property of such Debtor now or hereafter held by the Collateral Agent. In
addition to the Collateral Agent's right of setoff and as further security for
the Obligations, each Debtor hereby grants the Collateral Agent a security
interest in all deposits (general or special, time or demand, provisional or
final) and other accounts of such Debtor now or hereafter deposited with or held
by the Collateral Agent and all other sums at any time credited by or owing from
the Collateral Agent to such Debtor. The rights and remedies of the Collateral
Agent hereunder are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which the Collateral Agent may have.
Section VI.5 Subrogation. If any of the Obligations are given in
-----------
renewal or extension or applied toward the payment of indebtedness secured by
any Lien, the Secured Parties shall be, and are hereby, subrogated to all of the
rights, titles, interests and Liens securing the indebtedness so renewed,
extended, or paid.
SUBSIDIARY SECURITY AGREEMENT - PAGE 17
<PAGE>
Section VI.6 Collateral Agent's Duty of Care. Other than the exercise of
-------------------------------
reasonable care in the physical custody of the Collateral while held by the
Collateral Agent hereunder, the Collateral Agent shall have no responsibility
for or obligation or duty with respect to all or any part of the Collateral or
any matter or proceeding arising out of or relating thereto, including without
limitation any obligation or duty to collect any sums due in respect thereof or
to protect or preserve any rights against prior parties or any other rights
pertaining thereto, it being understood and agreed that each Debtor shall be
responsible for preservation of all rights in the Collateral. Without limiting
the generality of the foregoing, the Collateral Agent shall be conclusively
deemed to have exercised reasonable care in the custody of the Collateral if the
Collateral Agent takes such action, for purposes of preserving rights in the
Collateral, as any Debtor may reasonably request in writing, but no failure or
omission or delay by the Collateral Agent in complying with any such request by
any Debtor, and no refusal by the Collateral Agent to comply with any such
request by any Debtor, shall be deemed to be a failure to exercise reasonable
care.
Section VI.7 Assignment by the Collateral Agent. The Secured Parties
----------------------------------
may from time to time assign the Obligations and any portion thereof and/or the
Collateral and any portion thereof in accordance with the applicable provisions
of the Credit Agreement and the Note Agreements, respectively, and the assignee
shall be entitled to all of the rights and remedies of such Person under this
Agreement in relation thereto.
ARTICLE VII
Default
-------
Section VII.1 Rights and Remedies. Upon the occurrence of an Event of
-------------------
Default, the Collateral Agent shall have the following rights and remedies:
(i) In addition to all other rights and remedies granted to the
Collateral Agent in this Agreement and in any other instrument or agreement
securing, evidencing, or relating to the Obligations or any part thereof or
by applicable law, the Collateral Agent shall have all of the rights and
remedies of a secured party under the UCC (whether or not the UCC applies
to the affected Collateral). Without limiting the generality of the
foregoing, the Collateral Agent may (A) without demand or notice to any
Debtor, collect, receive, or take possession of the Collateral or any part
thereof and for that purpose the Collateral Agent may enter upon any
premises on which the Collateral is located and remove the Collateral
therefrom or render it inoperable, and/or (B) sell, lease, or otherwise
dispose of the Collateral, or any part thereof, in one or more parcels at
public or private sale or sales, at the Collateral Agent's offices or
elsewhere, for cash, on credit, or for future delivery, and upon such other
terms as the Collateral Agent may deem commercially reasonable. Each
Secured Party shall have the right at any public sale or sales, and, to the
extent permitted by applicable law, at any private sale or sales, to bid
and become a purchaser of the Collateral or any part thereof free of any
right or equity of redemption on the part of any Debtor, which right or
equity of redemption is hereby expressly waived and
SUBSIDIARY SECURITY AGREEMENT - PAGE 18
<PAGE>
released by each Debtor. Upon the request of the Collateral Agent, each
Debtor shall assemble the Collateral and make it available to the
Collateral Agent at any place designated by the Collateral Agent that is
reasonably convenient to such Debtor and the Collateral Agent. Each Debtor
agrees that the Collateral Agent shall not be obligated to give more than
five days prior written notice of the time and place of any public sale or
of the time after which any private sale may take place and that such
notice shall constitute reasonable notice of such matters. The Collateral
Agent shall not be obligated to make any sale of Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of
Collateral may have been given. The Collateral Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement of the time and place fixed for
sale, and such sale may, without further notice, be made at the time and
place to which the same was so adjourned. Each Debtor shall be jointly and
severally liable for all expenses of retaking, holding, preparing for sale,
or the like, and all attorneys' fees, legal expenses, and all other costs
and expenses incurred by any Secured Party in connection with the
collection of the Obligations and the enforcement of the Collateral Agent's
rights under this Agreement. The Debtors shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay the Obligations in full. Each Debtor waives all rights
of marshalling in respect of the Collateral.
(ii) The Collateral Agent may cause any or all of the Collateral held
by it to be transferred into the name of the Collateral Agent or the name
or names of the Collateral Agent's nominee or nominees.
(iii) The Collateral Agent may collect or receive all money or
property at any time payable or receivable on account of or in exchange for
any of the Collateral, but shall be under no obligation to do so.
(iv) On any sale of the Collateral, the Collateral Agent is hereby
authorized to comply with any limitation or restriction with which
compliance is necessary, in the view of the Collateral Agent's counsel, in
order to avoid any violation of applicable law or in order to obtain any
required approval of the purchaser or purchasers by any applicable
Governmental Authority.
Section VII.2 Application of Proceeds of Sale. The proceeds of any sale
-------------------------------
of Collateral pursuant to Section 7.1 hereof, as well as any Collateral
-----------
consisting of cash, shall be applied by the Collateral Agent as provided in the
Intercreditor Agreement. Upon any sale of the Collateral by the Collateral Agent
(including, without limitation, a sale pursuant to the UCC or under a judicial
proceeding), the receipt of the Collateral Agent or of the officer making the
sale shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold and such purchaser or purchasers shall not be obligated to
see to the application of any part of the purchase money paid over to the
Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
SUBSIDIARY SECURITY AGREEMENT - PAGE 19
<PAGE>
ARTICLE VIII
Miscellaneous
-------------
Section VIII.1 No Waiver; Cumulative Remedies. No failure on the part of
------------------------------
the Collateral Agent 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 are cumulative
and not exclusive of any rights and remedies provided by law.
Section VIII.2 Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the Debtors, the Collateral Agent, and their
respective heirs, successors, and assigns, except that no Debtor may assign any
of its rights or obligations under this Agreement without the prior written
consent of the Collateral Agent. The provisions of this Agreement shall apply to
each Debtor, individually and collectively.
Section VIII.3 AMENDMENT; ENTIRE AGREEMENT; CONTROLLING AGREEMENT. THIS
--------------------------------------------------
AGREEMENT AND THE OTHER LOAN DOCUMENTS 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 OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. The
provisions of this Agreement may be amended or waived only by an instrument in
writing signed by the parties hereto. In the event any term or provision of this
Agreement expressly conflicts with any term or provision of the Credit
Agreement; the terms and provisions of the Credit Agreement shall govern and
control.
Section VIII.4 Notices. All notices and other communications provided
-------
for in this Agreement shall be given or made in writing and telecopied, 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 the 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 telecopy, 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.
Section VIII.5 Applicable 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
SUBSIDIARY SECURITY AGREEMENT - PAGE 20
<PAGE>
OF AMERICA. 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 ANY DEBTOR UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER INSTRUMENT OR AGREEMENT SECURING, EVIDENCING, OR RELATING TO THE
OBLIGATIONS OR ANY PART THEREOF MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN
DALLAS COUNTY, TEXAS. EACH DEBTOR HEREBY IRREVOCABLY (I) SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (II) WAIVES ANY OBJECTION IT MAY
NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT
IN SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. EACH DEBTOR 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 8.4 OF THIS AGREEMENT. NOTHING IN THIS AGREEMENT
-----------
OR ANY OTHER INSTRUMENT OR AGREEMENT SECURING, EVIDENCING, OR RELATING TO THE
OBLIGATIONS OR ANY PART THEREOF SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
OF THE COLLATERAL AGENT TO BRING ANY ACTION OR PROCEEDING AGAINST ANY DEBTOR OR
WITH RESPECT TO ANY OF THE COLLATERAL IN ANY STATE OR FEDERAL COURT IN ANY OTHER
JURISDICTION. ANY ACTION OR PROCEEDING BY ANY DEBTOR AGAINST THE COLLATERAL
AGENT SHALL BE BROUGHT ONLY IN A COURT LOCATED IN DALLAS COUNTY, TEXAS.
Section VIII.6 Headings. The headings, captions, and arrangements used
--------
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section VIII.7 Survival of Representations and Warranties. All
------------------------------------------
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, and no investigation by any Secured Party shall affect the
representations and warranties of any Debtor herein or the right of the Secured
Parties to rely upon them.
Section VIII.8 Counterparts. This Agreement may be executed in any
------------
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section VIII.9 Waiver of Bond. In the event the Collateral Agent seeks
--------------
to take possession of any or all of the Collateral by judicial process, each
Debtor hereby irrevocably waives any bonds and any surety or security relating
thereto that may be required by applicable law as an incident to such
possession, and waives any demand for possession prior to the commencement of
any such suit or action.
SUBSIDIARY SECURITY AGREEMENT - PAGE 21
<PAGE>
Section VIII.10 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section VIII.11 Construction. Each Debtor and the Collateral Agent
------------
acknowledge 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 with its
legal counsel and that this Agreement shall be construed as if jointly drafted
by the Debtors and the Collateral Agent.
Section VIII.12 Obligations Absolute. The obligations of each Debtor
--------------------
under this Agreement shall be absolute and unconditional and shall not be
released, discharged, reduced, or in any way impaired by any circumstance
whatsoever, including, without limitation, any amendment, modification,
extension, or renewal of this Agreement, the Obligations, or any document or
instrument evidencing, securing, or otherwise relating to the Obligations, or
any release or subordination of collateral, or any waiver, consent, extension,
indulgence, compromise, settlement, or other action or inaction in respect of
this Agreement, the Obligations, or any document or instrument evidencing,
securing, or otherwise relating to the Obligations, or any exercise or failure
to exercise any right, remedy, power, or privilege in respect of the
Obligations.
Section VIII.13 Release of Security Interest. At such time as all of the
----------------------------
Obligations have been paid and performed in full, all obligations and
commitments of the Secured Parties to make advances, issue letters of credit or
otherwise extend credit under the Credit Agreement and the Note Agreements,
respectively, have expired or terminated, and no Letters of Credit remain
outstanding, the Collateral Agent shall release the security interest granted
hereby.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
SUBSIDIARY SECURITY AGREEMENT - PAGE 22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first written above.
DEBTORS:
-------
GPX CORP., a Nevada corporation
By: /s/ Paul W. Fehlman
______________________________
Name: Paul W. Fehlman
-------------------------
Title: Treasurer
------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
HARBISON-WALKER REFRACTORIES
COMPANY, a Delaware corporation
By: /s/ Paul W. Fehlman
------------------------------
Name: Paul W. Fehlman
-------------------------
Title: Treasurer
------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
SUBSIDIARY SECURITY AGREEMENT - PAGE 23
<PAGE>
GLOBAL PROCESSING SYSTEMS, INC.,
a Delaware corporation
By: /s/ Paul W. Fehlman
--------------------------------
Name: Paul W. Fehlman
----------------------------
Title: Treasurer
---------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
CORROSION TECHNOLOGY INTERNATIONAL,
INC., a Delaware corporation
By: /s/ Paul W. Fehlman
--------------------------------
Name: Paul W. Fehlman
----------------------------
Title: Treasurer
---------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
SUBSIDIARY SECURITY AGREEMENT - PAGE 24
<PAGE>
A.P. GREEN REFRACTORIES, INC.,
a Delaware corporation
By: /s/ Paul W. Fehlman
--------------------------------
Name: Paul W. Fehlman
----------------------------
Title: Treasurer
---------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
A.P. GREEN INDUSTRIES, INC.,
a Delaware corporation
By: /s/ Paul W. Fehlman
--------------------------------
Name: Paul W. Fehlman
----------------------------
Title: Treasurer
---------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
SUBSIDIARY SECURITY AGREEMENT - PAGE 25
<PAGE>
DETRICK REFRACTORY FIBERS INC.,
a Mississippi corporation
By: /s/ Paul W. Fehlman
---------------------------------
Name: Paul w. Fehlman
-----------------------------
Title: Treasurer
----------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
POLYMER PIPE TECHNOLOGY, INC.,
a Delaware corporation
By: /s/ Paul W. Fehlman
---------------------------------
Name: Paul w. Fehlman
-----------------------------
Title: Treasurer
----------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
SUBSIDIARY SECURITY AGREEMENT - PAGE 26
<PAGE>
CORROSION IP CORP.,
a Nevada corporation
By: /s/ Paul W. Fehlman
---------------------------------
Name: Paul W. Fehlman
-----------------------------
Title: Treasurer
----------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
GLOBAL INDUSTRIAL TECHNOLOGIES
SERVICES COMPANY, a Delaware corporation
By: /s/ Paul W. Fehlman
---------------------------------
Name: Paul W. Fehlman
-----------------------------
Title: Treasurer
----------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
SUBSIDIARY SECURITY AGREEMENT - PAGE 27
<PAGE>
COLLATERAL AGENT:
----------------
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION,
as Collateral Agent
By: /s/ Mae K. Reeves
---------------------------------
Name: Mae K. Reeves
---------------------------
Title: Vice President
---------------------------
Address: 2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201
Fax No. (214) 965-2044
Phone No.: (214) 965-2159
Attention: Mae K. Reeves
SUBSIDIARY SECURITY AGREEMENT - PAGE 28
<PAGE>
SCHEDULE 1
Locations of Collateral
-----------------------
SUBSIDIARY SECURITY AGREEMENT - PAGE 29
<PAGE>
SCHEDULE 2
Jurisdictions for Filing
UCC Financing Statements
------------------------
<PAGE>
SCHEDULE 3
Additional Names and Trade Names
--------------------------------
<PAGE>
SCHEDULE 4
Trademarks
----------
<PAGE>
SCHEDULE 5
Patents
-------
<PAGE>
EXHIBIT F
TO
CREDIT AGREEMENT
Pledge Agreement
----------------
<PAGE>
PLEDGE AGREEMENT
----------------
THIS PLEDGE AGREEMENT (this "Agreement") dated as of July 30, 1999, is by
---------
and between GLOBAL INDUSTRIAL TECHNOLOGIES, INC., a Delaware corporation (the
"Pledgor") and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as the collateral
- --------
agent (in such capacity, the "Collateral Agent") for the Secured Parties (as
----------------
defined herein).
R E C I T A L S:
---------------
A. The Pledgor, Chase Bank of Texas, National Association, as the
Administrative Agent, PNC Bank, National Association, as the Syndication Agent,
ABN AMRO Bank N.V., as the Documentation Agent and as the Issuing Bank, and the
Lenders from time to time party thereto have executed that certain Credit
Agreement of even date herewith (such Credit Agreement, as the same may be
amended, supplemented or modified from time to time, being hereinafter referred
to as the "Credit Agreement").
----------------
B. The Pledgor is indebted to the holders (the "Note Holders") of certain
------------
notes issued by the Pledgor pursuant to (i) that certain Note Agreement dated as
of January 31, 1996, by and among the Pledgor, The Prudential Insurance Company
of America and Principal Life Insurance Company (formerly known as Principal
Mutual Life Insurance Company), (ii) that certain Note Agreement dated as of
June 30, 1998, by and among the Pledgor, The Prudential Insurance Company of
America and U.S. Private Placement Fund, and (iii) that certain Note Agreement
dated as of October 2, 1998, by and between the Pledgor and The Prudential
Insurance Company of America (such Note Agreements, as the same have been or may
be amended, supplemented or modified from time to time, being hereinafter
referred to collectively as the "Note Agreements").
---------------
C. The Pledgor, the Material Subsidiaries, the Collateral Agent, the
Administrative Agent, the Lenders, the Issuing Bank and the Note Holders have
executed that certain Intercreditor Agreement of even date herewith (such
Intercreditor Agreement, as the same may be amended, supplemented or modified
from time to time, being hereinafter referred to as the "Intercreditor
-------------
Agreement"), which Intercreditor Agreement, among other things, appoints the
Collateral Agent and sets forth certain agreements regarding the parties' rights
with regard to the Collateral.
D. The Administrative Agent, the Issuing Bank and the Lenders have
conditioned their obligations under the Credit Agreement on the execution and
delivery by the Pledgor of this Agreement.
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
<PAGE>
ARTICLE I
Security Interest and Pledge
----------------------------
Section 1.1. Defined Terms. All capitalized terms used and not otherwise
-------------
defined herein shall have their respective meanings as specified in the Credit
Agreement.
Section 1.2. Security Interest and Pledge. Pledgor hereby pledges and
----------------------------
grants to Collateral Agent, for the pro rata benefit of the Secured Parties, a
first priority security interest in the following property (such property being
hereinafter sometimes called the "Collateral"):
----------
(a) all of Pledgor's shares of common capital stock of (i) Harbison-
Walker Refractories Company, a Delaware corporation, now owned or hereafter
acquired by the Pledgor, including without limitation 1,000 shares
presently evidenced by certificate number 01 and (ii) A.P. Green
Industries, Inc., a Delaware corporation, now owned or hereafter acquired
by the Pledgor, including without limitation 1,000 shares presently
evidenced by certificate number 001;
(b) all present and future increases, profits, combinations,
reclassifications of, and substitutes and replacements for, all or part of
the foregoing, and all present and future accounts, contract rights,
general intangibles, chattel paper, documents, instruments, cash and
noncash proceeds, and other rights arising from or by virtue of, or from
the voluntary or involuntary sale, lease, or other disposition of, or
collections with respect to, all or any part of the foregoing; and
(c) all products, proceeds, revenues, distributions, dividends, stock
dividends, securities, and other property, rights, and interests that
Pledgor receives or is at any time entitled to receive on account of any of
the foregoing.
Notwithstanding anything to the contrary contained herein or in any of the other
Loan Documents, the security interest granted hereby shall not become effective
until the earliest of (i) the occurrence of an Event of Default under Section
10.01(b) of the Credit Agreement, (ii) the occurrence of a Default as a result
of Pledgor's failure to observe or perform any covenant, condition or agreement
contained in Article VII of the Credit Agreement, which failure continues
unremedied for a period of five Business Days, or (iii) the occurrence of any
other Default (other than under Section 10.01(b) of the Credit Agreement or as
described in clause (ii) above), whereupon the security interest granted hereby
-----------
shall become effective for all purposes.
Section 1.3. Security for Obligations. This Agreement and the security
interests created hereby secure the payment and performance of the following
obligations, indebtedness and liabilities of the Pledgor (collectively, the
"Obligations"): (i) the obligations, indebtedness and liabilities of the Pledgor
-----------
to the Lenders evidenced by the Notes, executed by the Pledgor and payable to
the order of the respective Lenders, pursuant to the Credit Agreement, (ii) the
"Obligations," as such term is
-2-
<PAGE>
defined in the Credit Agreement, (iii) all future Loans by any Lender to the
Pledgor and all LC Disbursements made by the Issuing Bank, (iv) the obligations,
indebtedness and liabilities of the Pledgor to the Note Holders evidenced by the
Senior Notes, executed by the Pledgor and payable to the order of the respective
Note Holders, pursuant to the Note Agreements, (v) all other obligations,
liabilities and indebtedness of Pledgor to the Note Holders under the Note
Agreements, including any Yield-Maintenance Amount (as defined in the Note
Agreements) and reasonable costs, fees and expenses in collection of the Senior
Notes held by the Note Holders, (vi) all costs and expenses, including without
limitation all reasonable attorneys' fees and legal expenses, incurred by any
Secured Party to preserve and maintain the Collateral, collect the obligations
herein described and enforce this Agreement, and (vii) all extensions, renewals,
and modifications of any of the foregoing.
ARTICLE II
Representations and Warranties
------------------------------
Pledgor represents and warrants to Collateral Agent that:
Section 2.1. Title. Pledgor owns, and with respect to Collateral acquired
-----
after the date hereof, Pledgor will own, legally and beneficially, the
Collateral free and clear of any Lien or any right or option on the part of any
Person to purchase or otherwise acquire the Collateral or any part thereof,
except for the security interest granted hereunder and as provided in the RHI
Merger Agreement. The Collateral is not subject to any restriction on transfer
or assignment except for compliance with applicable federal and state securities
laws and regulations promulgated thereunder and as provided in the RHI Merger
Agreement. Pledgor has the unrestricted right to pledge the Collateral as
contemplated hereby. All of the Collateral has been duly and validly issued and
is fully paid and nonassessable.
Section 2.2. Organization and Authority. Pledgor is a corporation duly
--------------------------
organized, validly existing, and in good standing under the laws of its state of
incorporation. Pledgor has the corporate power and authority to execute,
deliver, and perform this Agreement, and the execution, delivery, and
performance of this Agreement by Pledgor have been duly authorized by all
necessary corporate action on the part of Pledgor and do not and will not
violate or conflict with the articles of incorporation or bylaws of Pledgor or
any law, rule, or regulation or any order, writ, injunction, or decree of any
Governmental Authority and do not and will not conflict with, result in a breach
of, or constitute a default under the provisions of any indenture, mortgage,
deed of trust, security agreement, or other instrument or agreement binding on
Pledgor or any of its property.
Section 2.3. Principal Place of Business. The principal place of business
---------------------------
and chief executive office of Pledgor, and the office where Pledgor keeps its
books and records, is located at the address of Pledgor shown below its name on
the signature pages of this Agreement.
-3-
<PAGE>
Section 2.4. Financing Statements. No financing statement covering any of
--------------------
the Collateral or its proceeds, except financing statements naming the
Collateral Agent as secured party, is on file in any public office. So long as
any amount remains unpaid on any Obligations or any Secured Party has any
commitment to extend credit to the Pledgor, the Pledgor will not execute or
file, or consent to or permit the filing of, any such financing statement or
statements in any public office, except the financing statement filed or to be
filed with respect to the security interest granted hereby.
Section 2.5. Percentage of Stock. The Collateral constitutes (i) 100% of
-------------------
the issued and outstanding shares of common capital stock of Harbison-Walker
Refractories Company and (ii) 100% of the issued and outstanding shares of
common capital stock of A.P. Green Industries, Inc.
Section 2.6. First Priority Perfected Security Interest. Upon the filing
------------------------------------------
of UCC financing statements and Collateral Agent's taking possession of the
certificates representing the stock included in the Collateral, this Agreement
creates in favor of Collateral Agent a first priority perfected security
interest in the Collateral, subject only to the earliest of (i) the occurrence
of an Event of Default under Section 10.01(b) of the Credit Agreement, (ii) the
occurrence of a Default as a result of Pledgor's failure to observe or perform
any covenant, condition or agreement contained in Article VII of the Credit
Agreement, which failure continues unremedied for a period of five Business
Days, or (iii) the occurrence of any other Default (other than under Section
10.01(b) of the Credit Agreement or as described in clause (ii) above), and
there are no other conditions precedent to the effectiveness of this Agreement
that have not been fully and permanently satisfied.
ARTICLE III
Affirmative and Negative Covenants
----------------------------------
Pledgor covenants and agrees with Collateral Agent that:
Section 3.1. Delivery. Prior to or concurrently with the execution and
--------
delivery of this Agreement, Pledgor shall deliver to Collateral Agent all
certificate(s) identified in Section 1.1(a) hereof, accompanied by undated stock
powers duly executed in blank, such certificates and stock powers to be
delivered to and held by Collateral Agent in escrow until such time as the
security interest granted herein becomes effective as provided in Section 1.2.
-----------
Section 3.2. Encumbrances. Pledgor shall not create, permit, or suffer to
------------
exist, and shall defend the Collateral against, any Lien on the Collateral
except the pledge and security interest of Collateral Agent hereunder, and shall
defend Pledgor's rights in the Collateral and Collateral Agent's security
interest in the Collateral against the claims of all Persons.
Section 3.3. Sale of Collateral. Pledgor shall not sell, assign, or
------------------
otherwise dispose of the Collateral or any part thereof without the prior
written consent of Collateral Agent.
-4-
<PAGE>
Section 3.4. Distributions. If Pledgor shall become entitled to receive
-------------
or shall receive any stock certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in connection with
any reclassification, increase, or reduction of capital or issued in connection
with any reorganization), warrant, option or rights, whether as an addition to,
in substitution of, or in exchange for any Collateral or otherwise, Pledgor
agrees to accept the same as Collateral Agent's agent and to hold the same in
trust for Collateral Agent, and to deliver the same forthwith to Collateral
Agent in the exact form received, with the appropriate endorsement of Pledgor
when necessary and/or appropriate undated stock powers duly executed in blank,
to be held by Collateral Agent as additional Collateral for the Obligations,
subject to the terms hereof. Any sums paid upon or in respect of the Collateral
upon the liquidation or dissolution of the issuer thereof shall be paid over to
Collateral Agent to be held by it as additional Collateral for the Obligations
subject to the terms hereof; and in case any distribution of capital shall be
made on or in respect of the Collateral or any property shall be distributed
upon or with respect to the Collateral pursuant to any recapitalization or
reclassification of the capital of the issuer thereof or pursuant to any
reorganization of the issuer thereof, the property so distributed shall be
delivered to the Collateral Agent to be held by it, as additional Collateral for
the Obligations, subject to the terms hereof. All sums of money and property so
paid or distributed in respect of the Collateral that are received by Pledgor
shall, until paid or delivered to Collateral Agent, be held by Pledgor in trust
as additional security for the Obligations.
Section 3.5. Further Assurances. At any time and from time to time, upon
------------------
the reasonable request of Collateral Agent, and at the sole expense of Pledgor,
Pledgor shall promptly execute and deliver all such further instruments and
documents and take such further action as Collateral Agent may deem necessary or
desirable to preserve and perfect its security interest in the Collateral (upon
the effectiveness thereof) and carry out the provisions and purposes of this
Agreement, including, without limitation, the execution and filing of such
financing statements as Collateral Agent may require. A carbon, photographic, or
other reproduction of this Agreement or of any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement and
may be filed as a financing statement. Subject to the right of Pledgor to
receive cash dividends under Section 4.3 hereof, in the event any Collateral is
-----------
ever received by Pledgor, Pledgor shall promptly transfer and deliver to
Collateral Agent such Collateral so received by Pledgor (together with any
necessary endorsements in blank or undated stock powers duly executed in blank),
which Collateral shall thereafter be held by Collateral Agent pursuant to the
terms of this Agreement. Collateral Agent shall at all times have the right to
exchange any certificates representing Collateral for certificates of smaller or
larger denominations for any purpose consistent with this Agreement.
Section 3.6. Notification. Pledgor shall promptly notify Collateral Agent
------------
of (i) any Lien or claim made or threatened against the Collateral, (ii) any
material change in the Collateral, including without limitation any material
decrease in the value of the Collateral, and (iii) the occurrence or existence
of any Default or Event of Default under the Credit Agreement or any Note
Agreement.
-5-
<PAGE>
Secton 3.7. Books and Records; Information. Pledgor shall keep accurate
------------------------------
and complete books and records of the Collateral and Pledgor's business and
financial condition in accordance with GAAP. Pledgor shall from time to time at
the request of Collateral Agent deliver to Collateral Agent such information
regarding the Collateral and Pledgor as Collateral Agent may request. Pledgor
shall mark its books and records to reflect the security interest of Collateral
Agent under this Agreement (upon the effectiveness thereof).
Section 3.8 Additional Securities. Pledgor shall not consent to or
---------------------
approve the issuance of any additional shares of any class of capital stock of
the issuer of the Collateral, or any securities convertible into, or
exchangeable for, any such shares or any warrants, options, rights, or other
commitments entitling any Person to purchase or otherwise acquire any such
shares.
ARTICLE IV
Rights of Collateral Agent and Pledgor
--------------------------------------
Section 4.1. Power of Attorney. Pledgor hereby irrevocably constitutes
-----------------
and appoints Collateral Agent and any officer or agent thereof, with full power
of substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead and in the name of Pledgor or in its
own name, from time to time in Collateral Agent's discretion, but only after the
security interest created herein has become effective as provided in Section
-------
1.2, to take any and all action and to execute any and all documents and
- ---
instruments which may be necessary or desirable to accomplish the purposes of
this Agreement and, without limiting the generality of the foregoing, hereby
gives Collateral Agent the power and right on behalf of Pledgor and in its own
name to do any of the following (subject to the rights of Pledgor under Sections
--------
4.2 and 4.3 hereof), without notice to or the consent of Pledgor:
- --- ---
(i) to demand, sue for, collect, or receive in the name of Pledgor
or in its own name, any money or property at any time payable or receivable
on account of or in exchange for any of the Collateral and, in connection
therewith, endorse checks, notes, drafts, acceptances, money orders, or any
other instruments for the payment of money under the Collateral; and
(ii) to pay or discharge taxes, Liens, security interests, or other
encumbrances levied or placed on or threatened against the Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable. Collateral Agent shall be under no duty to exercise or withhold the
exercise of any of the rights, powers, privileges, and options expressly or
implicitly granted to Collateral Agent in this Agreement, and shall not be
liable for any failure to do so or any delay in doing so. Collateral Agent
shall not be liable for any act or omission or for any error of judgment or any
mistake of fact or law in its individual capacity or in its capacity as
attorney-in-fact except acts or omissions resulting from its
-6-
<PAGE>
willful misconduct. This power of attorney is conferred on Collateral Agent
solely to protect, preserve, and realize upon its security interest in the
Collateral.
Section 4.2. Voting Rights. Unless and until an Event of Default under
-------------
the Credit Agreement or any Note Agreement shall have occurred and be
continuing, Pledgor shall be entitled to exercise any and all voting rights
pertaining to the Collateral or any part thereof for any purpose not
inconsistent with the terms of this Agreement, the Credit Agreement or the Note
Agreements. Collateral Agent shall execute and deliver to the Pledgor all such
proxies and other instruments as Pledgor may reasonably request for the purpose
of enabling Pledgor to exercise the voting rights which it is entitled to
exercise pursuant to this Section.
Sectiom 4.3. Dividends. Unless and until an Event of Default under the
---------
Credit Agreement or any Note Agreement shall have occurred and be continuing,
Pledgor shall be entitled to receive and retain any dividends on the Collateral
paid in cash out of earned surplus to the extent and only to the extent that
such dividends are permitted by the Credit Agreement and the Note Agreements.
Section 4.4. Performance by Collateral Agent. If Pledgor fails to perform
-------------------------------
or comply with any of its agreements contained herein, Collateral Agent itself
may, at its sole discretion, cause or attempt to cause performance or compliance
with such agreement and the expenses of Collateral Agent, together with interest
thereon at the Maximum Rate, shall be payable by Pledgor to Collateral Agent on
demand and shall constitute Obligations secured by this Agreement.
Notwithstanding the foregoing, it is expressly agreed that Collateral Agent
shall not have any liability or responsibility for the performance of any
obligation of Pledgor under this Agreement.
Section 4.5. Setoff; Property Held by Collateral Agent. Collateral Agent
-----------------------------------------
shall have the right to set off and apply against the Obligations, at any time
and without notice to Pledgor, any and all deposits (general or special, time or
demand, provisional or final) or other sums at any time credited by or owing
from Collateral Agent to Pledgor whether or not the Obligations are then due. As
additional security for the Obligations, Pledgor hereby grants Collateral Agent
a security interest in all money, instruments, and other property of Pledgor now
or hereafter held by Collateral Agent, including, without limitation, property
held in safekeeping. In addition to Collateral Agent's right of setoff and as
further security for the Obligations, Pledgor hereby grants Collateral Agent a
security interest in all deposits (general or special, time or demand,
provisional or final) and other accounts of Pledgor now or hereafter maintained
with Collateral Agent and all other sums at any time credited by or owing from
Collateral Agent to Pledgor. The rights and remedies of Collateral Agent
hereunder are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which Collateral Agent may have.
Section 4.6. Collateral Agent's Duty of Care. Other than the exercise of
-------------------------------
reasonable care in the physical custody of the Collateral while held by
Collateral Agent hereunder, Collateral Agent shall have no responsibility for or
obligation or duty with respect to all or any part of the Collateral or any
matter or proceeding arising out of or relating thereto, including, without
limitation, any obligation or duty to collect any sums due in respect thereof or
to protect or preserve any rights
-7-
<PAGE>
against prior parties or any other rights pertaining thereto, it being
understood and agreed that Pledgor shall be responsible for preservation of all
rights in the Collateral. Without limiting the generality of the foregoing,
Collateral Agent shall be conclusively deemed to have exercised reasonable care
in the custody of the Collateral if Collateral Agent takes such action, for
purposes of preserving rights in the Collateral, as Pledgor may reasonably
request in writing, but no failure or omission or delay by Collateral Agent in
complying with any such request by Pledgor, and no refusal by Collateral Agent
to comply with any such request by Pledgor, shall be deemed to be a failure to
exercise reasonable care.
Section 4.7. Assignment by Secured Parties. Secured Parties may at any
-----------------------------
time and from time to time assign the Obligations and any portion thereof and/or
the Collateral and any portion thereof in accordance with the Credit Agreement
and the Note Agreements, respectively, and the assignee shall be entitled to all
of the rights and remedies of Collateral Agent under this Agreement in relation
thereto.
ARTICLE V
Default
-------
Section 5.1. Rights and Remedies. If any Event of Default under the
-------------------
Credit Agreement or any Note Agreement shall occur, Collateral Agent shall have
the following rights and remedies:
(i) In addition to all other rights and remedies granted to
Collateral Agent in this Agreement and in any other instrument or agreement
securing, evidencing, or relating to the Obligations, Collateral Agent
shall have all of the rights and remedies of a secured party under the
Uniform Commercial Code as adopted by the State of Texas. Without limiting
the generality of the foregoing, Collateral Agent may (A) without demand or
notice to Pledgor, collect, receive, or take possession of the Collateral
or any part thereof, (B) sell or otherwise dispose of the Collateral, or
any part thereof, in one or more parcels at public or private sale or
sales, at Collateral Agent's offices or elsewhere, for cash, on credit, or
for future delivery, and/or (C) bid and become a purchaser at any sale free
of any right or equity of redemption in Pledgor, which right or equity is
hereby expressly waived and released by Pledgor. Upon the request of
Collateral Agent, Pledgor shall assemble the Collateral and make it
available to Collateral Agent at any place designated by Collateral Agent
that is reasonably convenient to Pledgor and Collateral Agent. Pledgor
agrees that Collateral Agent shall not be obligated to give more than five
days written notice of the time and place of any public sale or of the time
after which any private sale may take place and that such notice shall
constitute reasonable notice of such matters. Collateral Agent shall not
be obligated to make any sale of the Collateral regardless of notice of
sale having been given. Collateral Agent may adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned. Pledgor shall be liable for all
expenses of retaking, holding, preparing for sale, or the like, and all
attorneys' fees and other expenses incurred by any
-8-
<PAGE>
Secured Party in connection with the collection of the Obligations and the
enforcement of Collateral Agent's rights under this Agreement, all of which
expenses and fees shall constitute additional Obligations secured by this
Agreement. Collateral Agent may apply the Collateral against the
Obligations in such order and manner provided in the Intercreditor
Agreement. Pledgor shall remain liable for any deficiency if the proceeds
of any sale or disposition of the Collateral are insufficient to pay the
Obligations. Pledgor waives all rights of marshalling in respect of the
Collateral.
(ii) Collateral Agent may cause any or all of the Collateral held
by it to be transferred into the name of Collateral Agent or the name or
names of Collateral Agent's nominee or nominees.
(ii) Collateral Agent may collect or receive all money or property
at any time payable or receivable on account of or in exchange for any of
the Collateral, but shall be under no obligation to do so.
(iv) Collateral Agent shall have the right, but shall not be
obligated to, exercise or cause to be exercised all voting, consensual, and
other powers of ownership pertaining to the Collateral, and Pledgor shall
deliver to Collateral Agent, if requested by Collateral Agent, irrevocable
proxies with respect to the Collateral in form satisfactory to Collateral
Agent.
(v) Pledgor hereby acknowledges and confirms that Collateral
Agent may be unable to effect a public sale of any or all of the Collateral
by reason of certain prohibitions contained in the Securities Act of 1933,
as amended, and applicable state securities laws and may be compelled to
resort to one or more private sales thereof to a restricted group of
purchasers who will be obligated to agree, among other things, to acquire
any shares of the Collateral for their own respective accounts for
investment and not with a view to distribution or resale thereof. Pledgor
further acknowledges and confirms that any such private sale may result in
prices or other terms less favorable to the seller than if such sale were a
public sale and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner, and Collateral Agent shall be under no obligation to take any steps
in order to permit the Collateral to be sold at a public sale. Collateral
Agent shall be under no obligation to delay a sale of any of the Collateral
for any period of time necessary to permit any issuer thereof to register
such Collateral for public sale under the Securities Act of 1933, as
amended, or under applicable state securities laws.
(vi) On any sale of the Collateral, Collateral Agent is hereby
authorized to comply with any limitation or restriction with which
compliance is necessary, in the view of Collateral Agent's counsel, in
order to avoid any violation of applicable law or in order to obtain any
required approval of the purchaser or purchasers by any applicable
governmental authority.
<PAGE>
ARTICLE VI
Miscellaneous
-------------
Section 6.1. No Waiver; Cumulative Remedies. No failure on the part of
------------------------------
Collateral Agent 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 are cumulative
and not exclusive of any rights and remedies provided by law.
Section 6.2. Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of Pledgor and Collateral Agent and their respective
heirs, successors, and assigns, except that Pledgor may not assign any of its
rights or obligations under this Agreement without the prior written consent of
Collateral Agent.
Section 6.3. AMENDMENT; ENTIRE AGREEMENT. THIS AGREEMENT EMBODIES THE
---------------------------
FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES 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 OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS
AMONG THE PARTIES HERETO. The provisions of this Agreement may be amended or
waived only by an instrument in writing signed by the parties hereto.
Section 6.4. Notices. All notices and other communications provided for
-------
in this Agreement 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 the 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.
SECTION 6.5. APPLICABLE 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. 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 PLEDGOR
-10-
<PAGE>
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT OR AGREEMENT
SECURING, EVIDENCING, OR RELATING TO THE OBLIGATIONS OR ANY PART THEREOF MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT IN DALLAS COUNTY, TEXAS. PLEDGOR HEREBY
IRREVOCABLY (I) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND
(II) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY
SUCH ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. PLEDGOR 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 6.4 OF THIS
-----------
AGREEMENT. NOTHING IN THIS AGREEMENT OR ANY OTHER INSTRUMENT OR AGREEMENT
SECURING, EVIDENCING, OR RELATING TO THE OBLIGATIONS OR ANY PART THEREOF SHALL
AFFECT THE RIGHT OF COLLATERAL AGENT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF COLLATERAL AGENT TO BRING ANY
ACTION OR PROCEEDING AGAINST PLEDGOR OR WITH RESPECT TO ANY OF ITS PROPERTY IN
COURTS IN OTHER JURISDICTIONS. ANY ACTION OR PROCEEDING BY PLEDGOR AGAINST
COLLATERAL AGENT SHALL BE BROUGHT ONLY IN A COURT LOCATED IN DALLAS COUNTY,
TEXAS.
Sectiom 6.6. Headings. The headings, captions, and arrangements used in
--------
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section 6.7. Survival. All representations and warranties made in this
--------
Agreement shall survive the execution and delivery of this Agreement, and no
investigation by any Secured Party shall affect the representations and
warranties of Pledgor herein or the right of the Secured Parties to rely upon
them.
Section 6.8. Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 6.9. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 6.10. Construction. Pledgor and Collateral Agent acknowledge 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 with its legal counsel and that
this Agreement shall be construed as if jointly drafted by Pledgor and
Collateral Agent.
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<PAGE>
[Remainder of Page Intentionally Left Blank]
-12-
<PAGE>
Section 6.11. Obligations Absolute. The obligations of Pledgor under this
--------------------
Agreement shall be absolute and unconditional and shall not be released,
discharged, reduced, or in any way impaired by any circumstance whatsoever,
including, without limitation, any amendment, modification, extension, or
renewal of this Agreement, the Obligations, or any document or instrument
evidencing, securing, or otherwise relating to the Obligations, or any release,
subordination, or impairment of collateral, or any waiver, consent, extension,
indulgence, compromise, settlement, or other action or inaction in respect of
this Agreement, the Obligations, or any document or instrument evidencing,
securing, or otherwise relating to the Obligations, or any exercise or failure
to exercise any right, remedy, power, or privilege in respect of the
Obligations.
Section 6.12. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
--------------------
APPLICABLE LAW, PLEDGOR 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 OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF SECURED PARTY IN THE
NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first written above.
PLEDGOR:
-------
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By: /s/ Paul W. Fehlman
-------------------------------
Name: Paul W. Fehlman
------------------------
Title: Treasurer
------------------------
Address for Notices:
2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Telephone No.: (214) 953-4572
Attention: Paul W. Fehlman
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<PAGE>
COLLATERAL AGENT:
----------------
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Collateral Agent
By: /s/ Mae K. Reeves
---------------------------------
Name: Mae K. Reeves
----------------------------
Title: Vice President
----------------------------
Address for Notices:
2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201
Fax No.: (214) 965-2044
Telephone No.: (214) 965-2159
Attention: Mae K. Reeves
-14-
<PAGE>
EXHIBIT G
TO
CREDIT AGREEMENT
Guaranty
--------
<PAGE>
GUARANTY
--------
THIS GUARANTY (this "Guaranty"), dated as of July 30, 1999, is executed by
--------
the undersigned guarantors (each a "Guarantor" and, collectively, the
---------
"Guarantors"), for the benefit of each of the banks or lending institutions
- -----------
(each, a "Lender" and, collectively, the "Lenders") which is or may from time to
------ -------
time become a signatory to the Credit Agreement (hereinafter defined) or any
successor or permitted assignee thereof, ABN AMRO Bank N.V., as the Issuing Bank
under the Credit Agreement, and Chase Bank of Texas, National Association, as
the Administrative Agent under the Credit Agreement.
WHEREAS, Global Industrial Technologies, Inc., a Delaware corporation (the
"Borrower"), the Lenders, PNC Bank, National Association, as the Syndication
--------
Agent, ABN AMRO Bank N.V., as the Documentation Agent and as the Issuing Bank,
and Chase Bank of Texas, National Association, as the Administrative Agent, are
parties to that certain Credit Agreement dated as of the date hereof (as the
same may be amended, supplemented or modified from time to time, the "Credit
------
Agreement"); and
- ---------
WHEREAS, as a condition to the Credit Agreement, each Guarantor is required
to execute and deliver this Guaranty.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Guarantors hereby jointly and severally,
irrevocably and unconditionally guarantee to the Administrative Agent, the
Issuing Bank and the Lenders the full and prompt payment and performance of the
Guaranteed Indebtedness (hereinafter defined), this Guaranty being upon the
following terms:
1. The term "Guaranteed Indebtedness", as used herein, means all of the
-----------------------
"Obligations", as defined in the Credit Agreement. The term "Guaranteed
----------
Indebtedness" shall include any and all post-petition interest and expenses
- ------------
(including reasonable attorneys' fees) whether or not allowed under any
bankruptcy, insolvency, or other similar law. All other capitalized terms used
and not otherwise defined herein shall have their respective meanings as set
forth in the Credit Agreement.
2. This instrument shall be an absolute, continuing, irrevocable, and
unconditional guaranty of payment and performance, and not a guaranty of
collection, and each Guarantor shall remain liable on its obligations hereunder
until the payment and performance in full of the Guaranteed Indebtedness. No
set-off, counterclaim, recoupment, reduction, or diminution of any obligation,
or any defense of any kind or nature which the Borrower may have against the
Administrative Agent, the Issuing Bank, any Lender or any other party, or which
any Guarantor may have against the Borrower, the Administrative Agent, the
Issuing Bank, any Lender or any other party, shall be available to, or shall be
asserted by, any Guarantor against the Administrative Agent, the Issuing Bank,
any Lender or any subsequent holder of the Guaranteed Indebtedness or any part
thereof or against payment of the Guaranteed Indebtedness or any part thereof.
GUARANTY - Page 1
<PAGE>
3. The obligations of each Guarantor hereunder shall be limited to an
aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance under Section 548 of the United
States Bankruptcy Code or to being set aside, avoided, or annulled under any
applicable state law relating to fraudulent transfers or fraudulent obligations.
4. If any Guarantor becomes liable for any indebtedness owing by the
Borrower to the Administrative Agent, the Issuing Bank or any Lender by
endorsement or otherwise, other than under this Guaranty, such liability shall
not be in any manner impaired or affected hereby, and the rights of the
Administrative Agent, the Issuing Bank and the Lenders hereunder shall be
cumulative of any and all other rights that any of them may ever have against
any Guarantor. The exercise by the Administrative Agent, the Issuing Bank or
any Lender of any right or remedy hereunder or under any other instrument, or at
law or in equity, shall not preclude the concurrent or subsequent exercise of
any other right or remedy.
5. In the event of default by the Borrower in payment or performance of
the Guaranteed Indebtedness, or any part thereof, when such Guaranteed
Indebtedness becomes due, whether by its terms, by acceleration, or otherwise,
Guarantors jointly and severally agree to promptly pay the amount due thereon to
the Administrative Agent, for the pro rata benefit of the Administrative Agent,
the Issuing Bank and the Lenders, without notice or demand in lawful currency of
the United States of America and it shall not be necessary for the
Administrative Agent, the Issuing Bank or any Lender, in order to enforce such
payment by any Guarantor, first to institute suit or exhaust its remedies
against the Borrower, any Guarantor or others liable on such Guaranteed
Indebtedness, or to enforce any rights against any collateral which shall ever
have been given to secure such Guaranteed Indebtedness. Notwithstanding
anything to the contrary contained in this Guaranty, each Guarantor hereby
irrevocably subordinates to the prior indefeasible payment in full of the
Guaranteed Indebtedness, any and all rights such Guarantor may now or hereafter
have under any agreement or at law or in equity (including, without limitation,
any law subrogating such Guarantor to the rights of the Administrative Agent,
the Issuing Bank and the Lenders) to assert any claim against or seek
contribution, indemnification or any other form of reimbursement from the
Borrower or any other party liable for payment of any or all of the Guaranteed
Indebtedness for any payment made by such Guarantor under or in connection with
this Guaranty or otherwise.
6. If acceleration of the time for payment of any amount payable by the
Borrower under the Guaranteed Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of the Borrower, all such amounts otherwise
subject to acceleration under the terms of the Guaranteed Indebtedness shall
nonetheless be jointly and severally payable by the Guarantors hereunder
forthwith on demand by the Administrative Agent.
7. Each Guarantor hereby agrees that its obligations under this Guaranty
shall not be released, discharged, diminished, impaired, reduced, or affected
for any reason or by the occurrence of any event, including, without limitation,
one or more of the following events, whether or not with notice to or the
consent of any Guarantor: (a) the taking or accepting of collateral as security
for any or all of the Guaranteed Indebtedness or the release, surrender,
exchange, or subordination of any collateral now or hereafter securing any or
all of the Guaranteed Indebtedness; (b) any partial release
GUARANTY - Page 2
<PAGE>
of the liability of any Guarantor hereunder, or the full or partial release of
any other guarantor from liability for any or all of the Guaranteed
Indebtedness; (c) the dissolution, insolvency, or bankruptcy of the Borrower,
any Guarantor, or any other party at any time liable for the payment of any or
all of the Guaranteed Indebtedness; (d) any renewal, extension, modification,
waiver, amendment, or rearrangement of any or all of the Guaranteed Indebtedness
or any instrument, document, or agreement evidencing, securing, or otherwise
relating to any or all of the Guaranteed Indebtedness; (e) any adjustment,
indulgence, forbearance, waiver, or compromise that may be granted or given by
the Administrative Agent, the Issuing Bank or any Lender to the Borrower, any
Guarantor, or any other party ever liable for any or all of the Guaranteed
Indebtedness; (f) any neglect, delay, omission, failure, or refusal of the
Administrative Agent, the Issuing Bank or any Lender to take or prosecute any
action for the collection of any of the Guaranteed Indebtedness or to foreclose
or take or prosecute any action in connection with any instrument, document, or
agreement evidencing, securing, or otherwise relating to any or all of the
Guaranteed Indebtedness; (g) the unenforceability or invalidity of any or all of
the Guaranteed Indebtedness or of any instrument, document, or agreement
evidencing, securing, or otherwise relating to any or all of the Guaranteed
Indebtedness; (h) any payment by the Borrower or any other party to the
Administrative Agent, the Issuing Bank or any Lender is held to constitute a
preference under applicable bankruptcy or insolvency law or if for any other
reason the Administrative Agent, the Issuing Bank or any Lender is required to
refund any payment or pay the amount thereof to someone else; (i) the settlement
or compromise of any of the Guaranteed Indebtedness; (j) the non-perfection of
any security interest or lien securing any or all of the Guaranteed
Indebtedness; (k) any impairment of any collateral securing any or all of the
Guaranteed Indebtedness; (l) the failure of the Administrative Agent, the
Issuing Bank or any Lender to sell any collateral securing any or all of the
Guaranteed Indebtedness in a commercially reasonable manner or as otherwise
required by law; (m) any change in the corporate existence, structure, or
ownership of the Borrower; or (n) any other circumstance which might otherwise
constitute a defense available to, or discharge of, the Borrower or any
Guarantor.
8. Each Guarantor represents and warrants to the Administrative Agent,
the Issuing Bank and the Lenders that:
(a) Each and every representation and warranty contained in the Credit
Agreement pertaining to such Guarantor is true and correct in all respects.
(b) The value of the consideration received and to be received by such
Guarantor as a result of the Borrower, the Lenders, the Issuing Bank and
the Administrative Agent entering into the Credit Agreement, the extensions
of credit thereunder and such Guarantor executing and delivering this
Guaranty is reasonably equivalent to or greater than the liability and
obligation of such Guarantor hereunder, and such liability and obligation,
the Borrower's entering into the Credit Agreement and the extensions of
credit thereunder have benefitted and may reasonably be expected to benefit
such Guarantor directly or indirectly.
(c) Such Guarantor has, independently and without reliance upon the
Administrative Agent, the Issuing Bank or any Lender and based upon such
documents and
GUARANTY - Page 3
<PAGE>
information as such Guarantor has deemed appropriate, made its own analysis
and decision to enter into this Guaranty.
(d) The ability of the Borrower to borrow and obtain letters of credit
from time to time under the Credit Agreement will enable such Guarantor to
obtain credit, will benefit such Guarantor and the consolidated corporate
group of which such Guarantor is a part and are necessary and convenient to
the conduct, promotion and attainment of the business of such Guarantor.
(e) As additional consideration for entering into this Guaranty, such
Guarantor has obtained certain rights under that certain Contribution and
Indemnification Agreement of even date herewith, among the Borrower and the
Guarantors.
(f) Such Guarantor has adequate capital to conduct its business as a
going concern, as presently conducted and as proposed to be conducted; such
Guarantor will be able to meet its obligations hereunder and in respect of
its other existing and future indebtedness and liabilities as and when the
same shall be due and payable; such Guarantor is not insolvent (as that
term is defined in 11 U.S.C. (S) 101 or applicable law) and will not be
rendered insolvent by its obligations hereunder, and the foregoing
representations are supported by such Guarantor's internal projections and
forecasts.
(g) Such Guarantor has determined that the execution and delivery of
this Guaranty is to its advantage and benefit, taking into account all
relevant facts and circumstances.
9. If an Event of Default shall have occurred and be continuing, the
Administrative Agent, the Issuing Bank and each Lender shall have the right to
set off and apply against this Guaranty or the Guaranteed Indebtedness or both,
at any time and without notice to any Guarantor, any and all deposits (general
or special, time or demand, provisional or final) or other sums at any time
credited by or owing from the Administrative Agent, the Issuing Bank or any
Lender to any Guarantor whether or not the Guaranteed Indebtedness is then due
and irrespective of whether or not the Administrative Agent, the Issuing Bank or
any Lender shall have made any demand under this Guaranty. As security for this
Guaranty and the Guaranteed Indebtedness, each Guarantor hereby grants the
Administrative Agent, the Issuing Bank and each Lender a security interest in
all money, instruments, certificates of deposit, and other property of such
Guarantor now or hereafter held by the Administrative Agent, the Issuing Bank
and each Lender, including without limitation, property held in safekeeping. In
addition to the Administrative Agent's, the Issuing Bank's and each Lender's
right of setoff and as further security for this Guaranty and the Guaranteed
Indebtedness, each Guarantor hereby grants the Administrative Agent, the Issuing
Bank and each Lender a security interest in all deposits (general or special,
time or demand, provisional or final) and all other accounts of such Guarantor
now or hereafter on deposit with or held by the Administrative Agent, the
Issuing Bank or any Lender and all other sums at any time credited by or owing
from the Administrative Agent, the Issuing Bank or any Lender to such Guarantor.
The rights and remedies of the Administrative Agent, the Issuing Bank and each
Lender hereunder are in addition to other rights and remedies (including,
without limitation, other
GUARANTY - Page 4
<PAGE>
rights of setoff) which the Administrative Agent, the Issuing Bank and each
Lender may have.
10. (a) Each Guarantor hereby agrees that the Subordinated Indebtedness
(hereinafter defined) shall be subordinate and junior in right of payment to the
prior payment in full of all Guaranteed Indebtedness, and each Guarantor hereby
assigns the Subordinated Indebtedness to the Administrative Agent, for the pro
rata benefit of the Administrative Agent, the Issuing Bank and the Lenders, as
security for the Guaranteed Indebtedness. If any sums shall be paid to any
Guarantor by the Borrower or any other Person on account of the Subordinated
Indebtedness, such sums shall be held in trust by such Guarantor for the benefit
of the Administrative Agent and shall forthwith be paid to the Administrative
Agent, for the pro rata benefit of the Administrative Agent, the Issuing Bank
and the Lenders, without affecting the liability of any Guarantor under this
Guaranty and may be applied by the Administrative Agent, the Issuing Bank and
the Lenders against the Guaranteed Indebtedness in such order and manner as they
may determine in their absolute discretion; provided, however, that so long as
-------- -------
no Event of Default shall have occurred, the Borrower and the Subsidiaries shall
be permitted to pay to any Guarantor, and each Guarantor shall be permitted to
receive and retain, regularly scheduled payments on account of Subordinated
Indebtedness. Upon the request of the Administrative Agent, each Guarantor
shall execute, deliver, and endorse to the Administrative Agent, for the pro
rata benefit of the Administrative Agent, the Issuing Bank and the Lenders, such
documents and instruments as the Administrative Agent may request to perfect,
preserve, and enforce the rights of the Administrative Agent, the Lenders and
the Issuing Bank hereunder. For purposes of this Guaranty, the term
"Subordinated Indebtedness" means all indebtedness, liabilities, and obligations
- --------------------------
of the Borrower and the Subsidiaries, or any of them, to any Guarantor, whether
such indebtedness, liabilities, and obligations now exist or are hereafter
incurred or arise, or whether the obligations of the Borrower or such Subsidiary
thereon are direct, indirect, contingent, primary, secondary, several, joint,
joint and several, or otherwise, and irrespective of whether such indebtedness,
liabilities, or obligations are evidenced by a note, contract, open account, or
otherwise, and irrespective of the Person or Persons in whose favor such
indebtedness, obligations, or liabilities may, at their inception, have been, or
may hereafter be created, or the manner in which they have been or may hereafter
be acquired by any Guarantor.
(b) Each Guarantor agrees that any and all liens, security interests,
judgment liens, charges, or other encumbrances upon the assets of the Borrower
and the Subsidiaries, or any of them, securing payment of any Subordinated
Indebtedness shall be and remain inferior and subordinate to any and all liens,
security interests, judgment liens, charges, or other encumbrances upon such
assets securing payment of the Guaranteed Indebtedness or any part thereof,
regardless of whether such encumbrances securing the Subordinated Indebtedness
or the Guaranteed Indebtedness presently exist or are hereafter created or
attached. No Guarantor shall (i) file suit against the Borrower or any
Subsidiary or exercise or enforce any other creditor's right it may have against
the Borrower or any Subsidiary, or (ii) foreclose, repossess, sequester, or
otherwise take steps or institute any action or proceedings (judicial or
otherwise, including without limitation the commencement of, or joinder in, any
liquidation, bankruptcy, rearrangement, debtor's relief or insolvency
proceeding) to enforce any liens, security interests, collateral rights,
judgments or other encumbrances held by any Guarantor on assets of the Borrower
or any Subsidiary unless and until
GUARANTY - Page 5
<PAGE>
the Guaranteed Indebtedness shall have been paid in full, no Letters of Credit
are outstanding, and the Commitments have expired or terminated.
(c) In the event of any receivership, bankruptcy, reorganization,
rearrangement, debtor's relief, or other insolvency proceeding involving the
Borrower or any Subsidiary as debtor, the Administrative Agent shall have the
right to prove and vote any claim under the Subordinated Indebtedness and to
receive, for the benefit of the Administrative Agent, the Issuing Bank and the
Lenders, directly from the receiver, trustee or other court custodian all
dividends, distributions, and payments made in respect of the Subordinated
Indebtedness. The Administrative Agent, the Issuing Bank and the Lenders may
apply any such dividends, distributions, and payments against the Guaranteed
Indebtedness in such order and manner as they may determine in their absolute
discretion.
(d) Each Guarantor agrees that all promissory notes, accounts
receivable, ledgers, records, or any other evidence of Subordinated Indebtedness
shall contain a specific written notice thereon that the indebtedness evidenced
thereby is subordinated under the terms of this Guaranty.
11. No Guarantor shall prepay any Indebtedness, except the Guaranteed
Indebtedness and Subordinated Indebtedness as permitted by Section 10(a).
12. No amendment or waiver of any provision of this Guaranty or consent to
any departure by any Guarantor therefrom shall in any event be effective unless
the same shall be in writing and signed by the Administrative Agent and the
Required Lenders. No failure on the part of the Administrative Agent, the
Issuing Bank or any Lender to exercise, and no delay in exercising, any right,
power, or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power, or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right, power,
or privilege. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
13. Any acknowledgment or new promise, whether by payment of principal or
interest or otherwise and whether by the Borrower or others (including any
Guarantor), with respect to any of the Guaranteed Indebtedness shall, if the
statute of limitations in favor of any Guarantor against the Administrative
Agent, the Issuing Bank or any Lender shall have commenced to run, toll the
running of such statute of limitations and, if the period of such statute of
limitations shall have expired, prevent the operation of such statute of
limitations.
14. This Guaranty is for the benefit of the Administrative Agent, the
Issuing Bank and the Lenders and their respective successors and assigns, and in
the event of an assignment of the Guaranteed Indebtedness, or any part thereof,
the rights and benefits hereunder, to the extent applicable to the indebtedness
so assigned, may be transferred with such indebtedness. This Guaranty is binding
not only on each Guarantor, but on each Guarantor's successors and assigns. The
Guarantors' obligations and agreements hereunder are joint and several. The
provisions of this Guaranty shall apply to each Guarantor individually and
collectively.
GUARANTY - Page 6
<PAGE>
15. Each Guarantor recognizes that the Administrative Agent, the Issuing
Bank and the Lenders are relying upon this Guaranty and the undertakings of each
Guarantor hereunder in making extensions of credit to the Borrower under the
Credit Agreement and further recognizes that the execution and delivery of this
Guaranty is a material inducement to the Administrative Agent, the Issuing Bank
and the Lenders in entering into the Credit Agreement. Each Guarantor hereby
acknowledges that there are no conditions to the full effectiveness of this
Guaranty.
16. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A LENDING
TRANSACTION NEGOTIATED, CONSUMMATED, AND PERFORMABLE IN DALLAS COUNTY, TEXAS,
AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF TEXAS.
17. The Guarantors jointly and severally agree to pay on demand all
attorneys' fees and all other costs and expenses incurred by the Administrative
Agent and each Lender in connection with the enforcement or collection of this
Guaranty.
18. Each Guarantor hereby waives promptness, diligence, notice of any
default under the Guaranteed Indebtedness, demand of payment, notice of
acceptance of this Guaranty, presentment, notice of protest, notice of dishonor,
notice of intent to accelerate, notice of acceleration, notice of the incurring
by the Borrower of additional indebtedness, and all other notices and demands
with respect to the Guaranteed Indebtedness and this Guaranty.
19. Each Guarantor agrees that the Administrative Agent, the Issuing Bank
and each Lender may exercise any and all rights granted to them under the Credit
Agreement and the other Loan Documents without affecting the validity or
enforceability of this Guaranty.
20. Each Guarantor hereby represents and warrants to the Administrative
Agent, the Issuing Bank and the Lenders that such Guarantor has adequate means
to obtain from the Borrower and the Subsidiaries on a continuing basis
information concerning the financial condition and assets of the Borrower and
the Subsidiaries and that such Guarantor is not relying upon the Administrative
Agent, the Issuing Bank or any Lender to provide (and neither the
Administrative Agent, the Issuing Bank nor any Lender shall have any duty to
provide) any such information to such Guarantor either now or in the future.
21. THIS GUARANTY REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES.
22. Each Guarantor acknowledges that it has had the benefit of legal
counsel of its own choice and has been afforded an opportunity to review this
Guaranty with its legal counsel and that this Guaranty shall be construed as if
jointly drafted by the Guarantors, the Administrative Agent, the Issuing Bank
and the Lenders.
GUARANTY - Page 7
<PAGE>
23. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH GUARANTOR
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 OF OR RELATING TO THIS GUARANTY, THE CREDIT AGREEMENT,
ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY OR THE ACTIONS OF THE ADMINISTRATIVE AGENT, THE ISSUING BANK OR ANY
LENDER IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
GUARANTY - Page 8
<PAGE>
EXECUTED as of the day and year first written above.
GUARANTORS:
----------
GPX CORP., a Nevada corporation
By: /s/ Paul W. Fehlman
--------------------------------
Name: Paul W. Fehlman
--------------------------
Title: Treasurer
-------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
HARBISON-WALKER REFRACTORIES
COMPANY, a Delaware corporation
By: /s/ Paul W. Fehlman
--------------------------------
Name: Paul W. Fehlman
--------------------------
Title: Treasurer
-------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
<PAGE>
GLOBAL PROCESSING SYSTEMS, INC.
a Delaware corporation
By: /s/ Paul W. Fehlman
--------------------------------
Name: Paul W. Fehlman
--------------------------
Title: Treasurer
-------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
CORROSION TECHNOLOGY INTERNATIONAL
INC., a Delaware corporation
By: /s/ Paul W. Fehlman
--------------------------------
Name: Paul W. Fehlman
--------------------------
Title: Treasurer
-------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
<PAGE>
A.P. GREEN REFRACTORIES, INC.,
a Delaware corporation
By: /s/ Paul W. Fehlman
---------------------------------
Name: Paul W. Fehlman
---------------------------
Title: Treasurer
--------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
A.P. GREEN INDUSTRIES, INC.,
a Delaware corporation
By: /s/ Paul W. Fehlman
---------------------------------
Name: Paul W. Fehlman
---------------------------
Title: Treasurer
--------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
<PAGE>
DETRICK REFRACTORY FIBERS INC.
a Mississippi corporation
By: /s/ Paul W. Fehlman
--------------------------------
Name: Paul W. Fehlman
--------------------------
Title: Treasurer
-------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
POLYMER PIPE TECHNOLOGY, INC.
a Delaware corporation
By: /s/ Paul W. Fehlman
--------------------------------
Name: Paul W. Fehlman
--------------------------
Title: Treasurer
-------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
<PAGE>
CORROSION IP CORP.,
a Nevada corporation
By: /s/ Paul W. Fehlman
--------------------------------
Name: Paul W. Fehlman
--------------------------
Title: Treasurer
-------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
GLOBAL INDUSTRIAL TECHNOLOGIES
SERVICES COMPANY, a Delaware corporation
By: /s/ Paul W. Fehlman
--------------------------------
Name: Paul W. Fehlman
--------------------------
Title: Treasurer
-------------------------
Address: 2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Fax No.: (214) 953-4594
Phone No.: (214) 953-4574
Attention: Paul W. Fehlman
<PAGE>
WSM Draft
Dated July 29, 1999
EXHIBIT H
TO
CREDIT AGREEMENT
Contribution and Indemnification Agreement
------------------------------------------
<PAGE>
CONTRIBUTION AND INDEMNIFICATION AGREEMENT
------------------------------------------
THIS CONTRIBUTION AND INDEMNIFICATION AGREEMENT (this "Agreement"), dated
---------
as of July 30, 1999, is entered into by and among Global Industrial
Technologies, Inc., a Delaware corporation (the "Borrower"), and the other
--------
parties signatory hereto (each a "Guarantor" and collectively, the "Guarantors,"
--------- ----------
and together with Borrower, each a "Company" and, collectively, the
-------
"Companies").
---------
R E C I T A L S:
---------------
A. Borrower, certain banks or lending institutions from time to time
party thereto (each a "Lender" and, collectively, the "Lenders"), PNC Bank,
------ -------
National Association as Syndication Agent, ABN AMRO Bank N.V. as Documentation
Agent and Issuing Bank, and Chase Bank of Texas, National Association as
Administrative Agent, have entered into that certain Credit Agreement of even
date herewith (as the same may be amended, supplemented or modified from time to
time, the "Credit Agreement"), providing for loans and extensions of credit to
----------------
the Borrower.
B. The Guarantors have executed that certain Guaranty of even date
herewith, pursuant to which the Guarantors jointly and severally guarantee the
full and prompt payment and performance of the Guaranteed Indebtedness, as such
term is defined in the Guaranty.
C. The Companies wish to enter into this Agreement to effect equitable
sharing of their risk in respect of the Guaranteed Indebtedness among all of the
Companies, including the Guarantors.
A G R E E M E N T:
-----------------
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Capitalized terms used in this Agreement to the extent not otherwise
defined herein shall have the same meanings as in the Credit Agreement.
2. If any Guarantor makes a payment in respect of the Guaranteed
Indebtedness, it shall have the rights of contribution and reimbursement set
forth below against the other Companies and shall be indemnified as set forth
below; provided that no Guarantor shall enforce its rights to any payment by
--------
exercising its rights of contribution, reimbursement or indemnification unless
and until all the Guaranteed Indebtedness shall have been paid in full.
3. If any Guarantor makes a payment in respect of the Guaranteed
Indebtedness that is greater than its Pro Rata Percentage (hereinafter defined)
of the Guaranteed Indebtedness, calculated as of the date such payment is made,
the Guarantor making such payment shall have the right to
CONTRIBUTION AND INDEMNIFICATION AGREEMENT - Page 1
<PAGE>
receive from each of the other Guarantors, and the other Guarantors jointly and
severally agree to pay to such Guarantor, when permitted by paragraph 2 hereof,
an amount such that the net payments made by the Guarantors in respect of the
Guaranteed Indebtedness shall be shared among the Guarantors pro rata in
proportion to their respective Pro Rata Percentages of the Guaranteed
Indebtedness. The Guarantors hereby jointly and severally indemnify each of the
other Guarantors and jointly and severally agree to hold each of them harmless
from and against any and all amounts which any such Guarantor shall ever be
required to pay in respect of the Guaranteed Indebtedness in excess of such
Guarantor's respective Pro Rata Percentage of the Guaranteed Indebtedness.
Notwithstanding anything to the contrary contained in this paragraph or in this
Agreement, no liability or obligation of any Guarantor that shall accrue
pursuant to this Agreement shall be paid nor shall it be deemed owed pursuant to
this Agreement or any Loan Documents unless and until all of the Guaranteed
Indebtedness shall be paid in full. As used herein, the term "Pro Rata
--------
Percentage" shall mean, for each Guarantor, the percentage derived by dividing
- ----------
(a) the amount by which the fair saleable value of its assets on the Date of
Determination (hereinafter defined) exceeds its liabilities (without giving
effect to its Guaranty, any guaranty of Obligations under the Existing Credit
Agreement or any guaranty of the Senior Note Debt) (such excess for each
Guarantor, its "Net Worth"), by (b) the Net Worth of all of the Guarantors. As
---------
used herein, the term "Date of Determination" shall mean June 30, 1999.
---------------------
4. If any Guarantor makes any payment in respect of the Guaranteed
Indebtedness, the Guarantor making such payment shall have the right to receive
from the Borrower, and the Borrower agrees to pay to such Guarantor, when
permitted by paragraph 2 hereof, an amount equal to such payment. The Borrower
-----------
hereby indemnifies each of the Guarantors and agrees to hold each of them
harmless from and against any and all amounts which any such Guarantor shall
ever be required to pay in respect of the Guaranteed Indebtedness.
Notwithstanding anything to the contrary contained in this paragraph or in this
Agreement, no liability or obligation of the Borrower that shall accrue pursuant
to this Agreement shall be paid or shall be deemed owed pursuant to this
Agreement or any Loan Documents unless and until all of the Guaranteed
Indebtedness shall be paid in full.
5. Each Company represents and warrants to each other Company and to
their respective successors and assigns that:
(a) the execution, delivery and performance by each Company of this
Agreement are within such Company's corporate or partnership powers, have
been duly authorized by all necessary corporate or partnership action, as
the case may be, require no action by or in respect of, or filing with, any
governmental body, agency or official and do not contravene, or constitute
a default under, any provision of applicable law or regulation or of the
articles or certificate of incorporation or bylaws or other organizing
document of such party or of any agreement, judgment, injunction, order,
decree or other instrument binding upon such party or result in the
creation or imposition of any Lien on any asset of such Company;
(b) this Agreement constitutes a legal, valid and binding agreement of
each Company, enforceable against such Company in accordance with its
terms; and
CONTRIBUTION AND INDEMNIFICATION AGREEMENT - Page 2
<PAGE>
(c) such Company has adequate capital to conduct its business as a
going concern, as presently conducted and as proposed to be conducted, will
be able to meet its obligations hereunder and in respect of its other
existing and future indebtedness and liabilities as and when the same shall
be due and payable, and is not insolvent (as that term is defined in 11
U.S.C. (S) 101 or applicable law) and will not be rendered insolvent by its
obligations hereunder, and the foregoing representation is supported by
such Company's internal projections and forecasts.
6. No failure or delay by any Guarantor in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and non-exclusive of any rights or remedies
provided by law.
7. Any provision of this Agreement may be amended or waived if, but only
if, such amendment or waiver is in writing and is signed by the parties hereto
and consented to in writing by the Administrative Agent and the Required
Lenders.
8. The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
9. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF TEXAS.
10. This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement shall become effective
when a counterpart hereof shall have been signed by all the parties hereto.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
CONTRIBUTION AND INDEMNIFICATION AGREEMENT - Page 3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
BORROWER:
--------
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By: /s/ PAUL W. FEHLMAN
________________________________
Name: Paul W. Fehlman
_________________________
Title: Treasurer
________________________
GUARANTORS:
----------
GPX CORP., a Nevada corporation
By: /s/ PAUL W. FEHLMAN
________________________________
Name: Paul W. Fehlman
_________________________
Title: Treasurer
________________________
HARBISON-WALKER REFRACTORIES
COMPANY, a Delaware corporation
By: /s/ PAUL W. FEHLMAN
________________________________
Name: Paul W. Fehlman
_________________________
Title: Treasurer
________________________
GLOBAL PROCESSING SYSTEMS, INC.,
a Delaware corporation
By: /s/ PAUL W. FEHLMAN
________________________________
Name: Paul W. Fehlman
_________________________
Title: Treasurer
________________________
CONTRIBUTION AND INDEMNIFICATION AGREEMENT - Page 4
<PAGE>
CORROSION TECHNOLOGY INTERNATIONAL,
INC., a Delaware corporation
By: /s/ PAUL W. FEHLMAN
________________________________
Name: Paul W. Fehlman
_________________________
Title: Treasurer
________________________
A.P. GREEN REFRACTORIES, INC.,
a Delaware corporation
By: /s/ PAUL W. FEHLMAN
________________________________
Name: Paul W. Fehlman
_________________________
Title: Treasurer
________________________
A.P. GREEN INDUSTRIES, INC.,
a Delaware corporation
By: /s/ PAUL W. FEHLMAN
________________________________
Name: Paul W. Fehlman
_________________________
Title: Treasurer
________________________
DETRICK REFRACTORY FIBERS INC.,
a Mississippi corporation
By: /s/ PAUL W. FEHLMAN
________________________________
Name: Paul W. Fehlman
_________________________
Title: Treasurer
________________________
POLYMER PIPE TECHNOLOGY, INC.,
a Delaware corporation
By: /s/ PAUL W. FEHLMAN
________________________________
Name: Paul W. Fehlman
_________________________
Title: Treasurer
________________________
CONTRIBUTION AND INDEMNIFICATION AGREEMENT - Page 5
<PAGE>
CORROSION IP CORP.,
a Nevada corporation
By: /s/ PAUL W. FEHLMAN
________________________________
Name: Paul W. Fehlman
_________________________
Title: Treasurer
________________________
GLOBAL INDUSTRIAL TECHNOLOGIES
SERVICES COMPANY, a Delaware corporation
By: /s/ PAUL W. FEHLMAN
________________________________
Name: Paul W. Fehlman
_________________________
Title: Treasurer
________________________
<PAGE>
EXHIBIT I
TO
CREDIT AGREEMENT
Matters To Be Addressed
-----------------------
in Opinion of Counsel
---------------------
<PAGE>
Matters to be Addressed in Opinion of Counsel
---------------------------------------------
All capitalized terms used and not otherwise defined herein shall have
their respective meanings as set forth in the Credit Agreement to which this is
an Exhibit.
1. Each of the Borrower and Guarantors is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
organization. Each of the Borrower and Guarantors has all the requisite
power and authority to carry on its business as now conducted. Except
where failure could not reasonably be expected to result in a Material
Adverse Effect, each of the Borrower and Guarantors is qualified to do
business in, and is in good standing in, every jurisdiction where such
qualification is required.
2. The Borrower has the corporate power to execute, deliver, and perform
the Loan Documents to which the Borrower is a party. The execution,
delivery, and performance by the Borrower of the Loan Documents, and
compliance with the terms and provisions thereof, have been duly authorized
by all necessary corporate and, if required, stockholder action. The Loan
Documents (a) do not require any consent or approval of, registration or
filing with, or any other action taken by, any Governmental Authority,
except such as have been obtained or made and are in full force and effect,
(b) will not violate any applicable law or regulation or the charter, by-
laws or other organizational documents of the Borrower or any order of any
Governmental Authority, (c) will not violate or result in a default under
any indenture, agreement or other instrument binding upon the Borrower or
its assets, or give rise to a right thereunder to require any payment to be
made by the Borrower, and (d) will not result in the creation or imposition
of any Lien on any asset of the Borrower.
3. Each Guarantor has the corporate power to execute, deliver, and perform
the Loan Documents to which such Guarantor is a party. The execution,
delivery and performance by the Guarantors of the Loan Documents, and
compliance with the terms and provisions thereof, have been duly authorized
by all necessary corporate and, if required, stockholder action. The Loan
Documents (a) do not require any consent or approval of, registration or
filing with, or any other action taken by, any Governmental Authority,
except such as have been obtained or made and are in full force and effect,
(b) will not violate any applicable law or regulation or the charter, by-
laws or other organizational documents of such Guarantor or any order of
any Governmental Authority, (c) will not violate or result in a default
under any indenture, agreement or other instrument binding upon such
Guarantor or its assets, or give rise to a right thereunder to require any
payment to be made by such Guarantor, and (d) will not result in the
creation or imposition of any Lien on any asset of such Guarantor.
4. The Loan Documents to which the Borrower is a party have been duly
executed and delivered by the Borrower and constitute legal, valid and
binding obligations of the Borrower, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights
generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or law.
MATTERS TO BE ADDRESSED IN OPINION OF COUNSEL - Page 1
<PAGE>
5. The Loan Documents to which each Guarantor is a party have been duly
executed and delivered by such Guarantor and constitute legal, valid and
binding obligations of such Guarantor, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights
generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or law.
6. There are no actions, suits, or proceedings by or before any arbitrator
or Governmental Authority pending against or, to counsel's knowledge,
threatened against or affecting the Borrower or any Guarantor that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve the Loan Documents or the Transactions.
7. No authorization, consent, approval of, registration with (except as
have been obtained or made on or prior to the date hereof and which remain
in full force and effect on the date hereof), or exemption by any
Governmental Authority is required for the execution, delivery, and
performance by the Borrower of any Loan Document to which the Borrower is a
party, or the execution, delivery, and performance by any Guarantor of any
Loan Document to which such Guarantor is a party.
8. All of the shares of Pledged Stock have been duly authorized and
validly issued and are fully paid and non-assessable. None of the shares
of Pledged Stock are subject to any restriction on transfer or assignment,
except compliance with applicable securities laws and regulations.
9. Neither the Borrower nor any of the Guarantors is (a) an "investment
company" as defined in, or subject to regulation under the Investment
Company Act of 1940 or (b) a "holding company" as defined in, or subject to
regulation under, the Public Utility Holding Company Act of 1935.
10. The extension, arranging and obtaining of the credit represented by
the Loan Documents do not result in any violation of Regulation T, U or X
of the Board of Governors of the Federal Reserve System.
11. The provisions of the Borrower Security Agreement and the Pledge
Agreement are sufficient to create in favor of the Collateral Agent for the
benefit of the Administrative Agent, the Issuing Bank, the Lenders and the
holders of the Senior Note Debt a valid and enforceable security interest
in all right, title, and interest of the Borrower in the Collateral
described therein in which a security interest may be created under Article
9 of the UCC. The financing statements executed by the Borrower for filing
in the Office of the Secretary of State of Texas and Dallas County, Texas
(the "Borrower Texas Financing Statements") are sufficient in form to
perfect a security interest in favor of the Collateral Agent for the
benefit of the Administrative Agent, the Issuing Bank, the Lenders and the
holders of the Senior Note Debt in the Collateral described therein, to the
extent that a security interest in such Collateral may be perfected by the
filing of a financing statement under the UCC.
MATTERS TO BE ADDRESSED IN OPINION OF COUNSEL - Page 2
<PAGE>
Upon (a) the execution and delivery by the Borrower of the Loan Documents,
including the Borrower Security Agreement, the Pledge Agreement and the
Borrower Texas Financing Statements, (b) the filing of the Borrower Texas
Financing Statements in the Office of the Secretary of State of Texas and
the real property records of Dallas County, Texas, and (c) the Collateral
Agent's taking possession of the original stock certificates evidencing the
Pledged Stock and all instruments, documents and chattel paper included in
the Collateral, the Collateral Agent will have a first priority perfected
security interest in all Collateral described in the Borrower Security
Agreement in which a security interest is perfected by possession or filing
under the UCC, subject only to (i) security interests perfected by
financing statements filed in the office of the Secretary of State or in
the real property records of Dallas County, Texas prior to the filing date
of the financing statements in favor of the Collateral Agent, and (ii)
security interests that may be perfected other than by possession or filing
under the UCC.
12. The provisions of the Subsidiary Security Agreement are sufficient to
create in favor of the Collateral Agent for the benefit of the
Administrative Agent, the Issuing Bank, the Lenders and the holders of the
Senior Note Debt a valid and enforceable security interest in all right,
title, and interest of each Guarantor in the Collateral described therein
in which a security interest may be created under Article 9 of the UCC.
The financing statements executed by each Guarantor (the "Guarantor Texas
Financing Statements") for filing in the Office of the Secretary of State
of Texas and each county in Texas where such Guarantor owns any fixtures as
represented by the Borrower and such Guarantor (the "Texas Counties") are
sufficient in form to perfect a security interest in favor of the
Collateral Agent for the benefit of the Administrative Agent, the Issuing
Bank, the Lenders and the holders of the Senior Note Debt in the Collateral
described therein, to the extent that a security interest in such
Collateral may be perfected by the filing of a financing statement under
the UCC. Upon (a) the execution and delivery by each Guarantor of the Loan
Documents, including the Subsidiary Security Agreement and the Guarantor
Texas Financing Statements, (b) the filing of the Guarantor Texas Financing
Statements in the Office of the Secretary of State of Texas and the real
property records of the Texas Counties, and (c) the Collateral Agent's
taking possession of all instruments, documents and chattel paper included
in the Collateral, the Collateral Agent will have a first priority
perfected security interest in all Collateral described in the Subsidiary
Security Agreement in which a security interest is perfected by possession
or filing under the UCC, subject only to (i) security interests perfected
by financing statements filed in the Office of the Secretary of State of
Texas or in the real property records of the Texas Counties prior to the
filing date of the financing statements in favor of the Collateral Agent,
and (ii) security interests that may be perfected other than by possession
or filing under the UCC.
MATTERS TO BE ADDRESSED IN OPINION OF COUNSEL - Page 3
<PAGE>
EXHIBIT J
TO
CREDIT AGREEMENT
Compliance Certificate
----------------------
<PAGE>
COMPLIANCE CERTIFICATE
----------------------
TO: Chase Bank of Texas, National Association,
as Administrative Agent
2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201
Attention: Mae K. Reeves
Ladies and Gentlemen:
The undersigned is the president, chief executive officer, chief financial
officer or corporate controller of GLOBAL INDUSTRIAL TECHNOLOGIES, INC., a
Delaware corporation (the "Borrower"), and is authorized to make and deliver
--------
this certificate pursuant to that certain Credit Agreement dated as of July 30,
1999, among the Borrower, the Lenders from time to time party thereto, PNC Bank,
National Association as Syndication Agent, ABN AMRO Bank N.V. as Documentation
Agent and Issuing Bank, and Chase Bank of Texas, National Association as
Administrative Agent (as the same may be amended, supplemented or modified from
time to time, being hereinafter referred to as the "Credit Agreement"). All
----------------
terms defined in the Credit Agreement shall have the same meaning herein.
In connection with the foregoing and pursuant to the terms and provisions
of the Credit Agreement, the undersigned hereby certifies to the Administrative
Agent, the Issuing Bank and each Lender that the following statements are true
and correct:
A. Representations and Warranties. The representations and warranties
------------------------------
contained in Article V of the Credit Agreement and in each of the other Loan
Documents are true and correct on and as of the date hereof with the same force
and effect as if made on and as of such date.
B. Financial Reports. Borrower has delivered to the Administrative Agent
-----------------
all financial information and reports required by the Credit Agreement by the
dates provided therein, including financial statements required by 7.01(a) or
7.01(b), as applicable, as of and for the [three, six or nine months or fiscal
year] ended on _____________________. Such financial statements (including any
related schedules and/or notes) are true and correct in all material respects
(subject, as to interim statements, to changes resulting from audits and year
end adjustments) and have been prepared in accordance with GAAP consistently
followed throughout the periods involved. The balance sheets fairly present the
condition of Borrower and its Subsidiaries as of the dates thereof, and the
statements of income, stockholders' equity and cash flows fairly present the
results of operations of Borrower and its Subsidiaries and their cash flows for
the periods indicated.
C. No Default. No Default has occurred and is continuing, of if a
----------
Default has occurred or is continuing, a statement as to the nature thereof and
the action which is proposed to be taken with respect thereto is attached
hereto.
D. Financial Covenants. The information set forth below is true and
-------------------
correct based upon the financial statements delivered herewith as of the last
day of the fiscal quarter next preceding the date of this certificate:
1. Consolidated Leverage Ratio as of __________, 19___ (for the most recent 12-
---------------------------
month period then ended):
(a) On a consolidated basis for the Borrower and the Subsidiaries (without
duplication), except non-recourse Indebtedness of Aken existing as of
the Effective Date:
<TABLE>
<S> <C>
(i) all obligations for borrowed money (as a direct obligor on a
promissory note, bond, debenture or other similar instrument) $__________
(ii) all Capital Lease Obligations (other than the interest component
of such obligations) $__________
(iii) all obligations for the deferred purchase price of property
excluding (i) trade accounts payable arising in the ordinary
course of business, and (ii) obligations for earnout payments
contingent on performance in connection with the acquisition of a
business $__________
(iv) Consolidated Funded Debt (the sum of Line (a)(i), plus Line
(a)(ii), plus Line (a)(iii)) $__________
</TABLE>
(b) The sum of the following, calculated on a consolidated basis for the
Borrower and the Subsidiaries except Aken, without duplication: (i) the
amount of consolidated net income for the 12-month period most recently
ended (whether positive or negative), plus (ii) each of the following to
the extent actually deducted in arriving at consolidated net income for
such period and without duplication: depreciation, amortization, taxes,
and interest expense of the Borrower and the Subsidiaries for such
period, minus (iii) gains from the sale of fixed assets not in the
ordinary course of business, plus (iv) to the extent actually deducted in
arriving at consolidated
COMPLIANCE CERTIFICATE - Page 1
<PAGE>
<TABLE>
<S> <C>
net income for such period and without duplication, losses from the sale
of fixed assets not in the ordinary course of business, minus (v)
extraordinary gains determined in accordance with GAAP, plus (vi) to the
extent actually deducted in arriving at consolidated net income for such
period and without duplication, extraordinary losses determined in
accordance with GAAP, plus (vii) to the extent actually deducted in
arriving at consolidated net income for such period and without
duplication, noncash charges incurred by the Borrower and its
Subsidiaries in the fiscal quarters ending September 30, 1998, December
31, 1998 and March 31, 1999 only $___________
(c) Agreed Expense Reduction Amount (except any portion attributable to Aken) $___________
(d) Sum of Line (b) plus Line (c) $___________
(e) Ratio of Line (a)(iv) to Line (d) ____ to ____
(f) Maximum Consolidated Leverage Ratio permitted by Section 9.01 of Credit Agreement ____ to 1.00
</TABLE>
<TABLE>
<S> <C>
2. Consolidated Interest Coverage Ratio as of ___________, 19___ (for the most recent
12-month period then ended):
(a) The sum of the following, calculated on a consolidated basis for the
Borrower and the Subsidiaries, without duplication: (i) the amount of
consolidated net income for the 12-month period most recently ended
(whether positive or negative), plus (ii) each of the following to the
extent actually deducted in arriving at consolidated net income for
such period and without duplication: depreciation, amortization, taxes,
and interest expense of the Borrower and the Subsidiaries for such
period, minus (iii) gains from the sale of fixed assets not in the
ordinary course of business, plus (iv) to the extent actually deducted
in arriving at consolidated net income for such period and without
duplication, losses from the sale of fixed assets not in the ordinary
course of business, minus (v) extraordinary gains determined in
accordance with GAAP, plus (vi) to the extent actually deducted in
arriving at consolidated net income for such period and without
duplication, extraordinary losses determined in accordance with GAAP,
plus (vii) to the extent actually deducted in arriving at consolidated
net income for such period and without duplication, noncash charges
incurred by the Borrower and its Subsidiaries in the fiscal quarters
ending September 30, 1998, December 31, 1998 and March 31, 1999 only $___________
(b) Agreed Expense Reduction Amount $___________
(c) Sum of Line (a) plus Line (b) $___________
(d) Cash interest expense of the Borrower and its Subsidiaries for the 12-
month period ending on such day $___________
(e) Ratio of Line (c) to Line (d) ____ to ____
(f) Minimum Consolidated Interest Coverage Ratio required by Section 9.02 of Credit
Agreement 3.50 to 1.00
</TABLE>
<TABLE>
<S> <C>
3. Consolidated Net Worth as of ___________, 19___:
----------------------
(a) Stockholders' equity shown on consolidated balance sheet of the
Borrower and the Subsidiaries as of such date $___________
(b) For each fiscal quarter of Borrower ended through such date,
the sum of 50% of the positive consolidated net income of the Borrower
and the Subsidiaries for each such quarter, beginning with the fiscal
quarter ending September 30, 1999 $___________
(c) With respect to any issuance, sale or other disposition of any shares
of capital stock or other equity securities of Borrower of any class (or any
securities convertible or exchangeable for any such shares, or any rights,
warrants or options to subscribe for or purchase any such shares), the aggregate
gross proceeds of such issuance, sale or other disposition received by the
Borrower, less the following: (i) placement agent fees, (ii) underwriting discounts
and commissions, (iii) bank and other lender fees, and (iv) legal fees and legal
expenses payable by the issuer in connection with such issuance, sale or other
disposition $___________
(d) Minimum Consolidated Net Worth required by Section 9.03 of Credit Agreement
(Sum of $209,250,000, plus Line (b), plus Line (c)) $___________
</TABLE>
COMPLIANCE CERTIFICATE - Page 2
<PAGE>
4. Capital Expenditures as of ___________, 19___ (for the most recent four (4)
--------------------
fiscal quarters then ended):
<TABLE>
<S> <C>
(a) Capital Expenditures of the Borrower and the Subsidiaries $___________
(b) Maximum Capital Expenditures permitted by Section 9.04 of Credit Agreement $20,000,000
</TABLE>
The undersigned hereby certifies that the above information and calculations
are true and correct and not misleading as of the date hereof.
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By:
-----------------------------
Name:
------------------------
Title:
------------------------
Dated as of:___________________
COMPLIANCE CERTIFICATE - Page 3
<PAGE>
EXHIBIT K
TO
CREDIT AGREEMENT
Form of Assignment and Acceptance
---------------------------------
<PAGE>
ASSIGNMENT AND ACCEPTANCE
-------------------------
Dated _____________, 19__
Reference is made to the Credit Agreement dated as of July 30, 1999 (as the
same has been or may be amended, restated or supplemented and in effect from
time to time, the "Credit Agreement"), among GLOBAL INDUSTRIAL TECHNOLOGIES,
----------------
INC., a Delaware corporation (the "Borrower"), each of the Lenders from time to
--------
time party thereto, PNC BANK, NATIONAL ASSOCIATION, as Syndication Agent, ABN
AMRO BANK N.V., as Documentation Agent and as Issuing Bank, and CHASE BANK OF
TEXAS, NATIONAL ASSOCIATION as Administrative Agent. Capitalized terms used
herein and not otherwise defined shall have the meanings assigned to such terms
in the Credit Agreement.
__________________________________________________________ (the "Assignor")
--------
and __________________________________________ (the "Assignee") agree as
--------
follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, a _____%
interest in and to all the Assignor's rights and obligations under the
Credit Agreement and the other Loan Documents as of the Effective Date
(as defined below) (including, without limitation, such percentage
interest in the Commitment of the Assignor on the Effective Date, such
percentage interest in the Borrowings owing to the Assignor
outstanding on the Effective Date, and such percentage interest in
Assignor's participation share of the LC Exposure outstanding on the
Effective Date, together with such percentage interest in all unpaid
interest and fees accrued from the Effective Date). This Assignment
and Acceptance is made by Assignor without recourse.
2. The Assignor (i) represents that as of the date hereof, its Commitment
is $_______________, the outstanding principal balance of its
Borrowings is $_______________, and the amount of Assignor's
participation interest in the LC Exposure is $_______________ (all as
unreduced by any assignments which have not yet become effective);
(ii) makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made in
or in connection with the Credit Agreement or any other Loan Document
or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement or any other Loan
Document, other than that it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is free
and clear of any adverse claim; (iii) makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under the Credit Agreement or any
other Loan Document; and (iv) attaches the Note held by Assignor and
requests that the Administrative Agent
ASSIGNMENT AND ACCEPTANCE-Page 1
<PAGE>
exchange such Note for new Notes payable to the order of (A) Assignee
in the amount of $__________, which is an amount equal to the
Commitment assumed by the Assignee pursuant hereto and (B) the
Assignor in an amount equal to $__________, which is the amount of the
Commitment retained by the Assignor under the Credit Agreement,
respectively, as specified above.
3. The Assignee (i) represents and warrants that it is legally authorized
to enter in this Assignment and Acceptance; (ii) confirms that it has
received a copy of the Credit Agreement, together with copies of the
most recent financial statements delivered pursuant to Section 7.01
thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (iii) agrees that it will,
independently and without reliance upon the Administrative Agent, the
Assignor, the Issuing Bank or any other Lender and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking
action under the Credit Agreement and the other Loan Documents; (iv)
confirms that it is eligible to be an Assignee; (v) appoints and
authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under the Loan Documents as are
delegated to the Administrative Agent by the terms thereof, together
with such powers as are reasonably incidental thereto; [and] (vi)
agrees that it will perform in accordance with their terms all the
obligations which by the terms of the Credit Agreement and the other
Loan Documents are required to be performed by it as a Lender; [and
(vii) attaches the forms prescribed by the Internal Revenue Service of
the United States certifying as to the Assignee's exemption from
United States withholding taxes with respect to all payments to be
made to the Assignee under the Loan Documents or such other documents
as are necessary to indicate that all such payments are subject to
such tax at a rate reduced by an applicable tax treaty]./1/
4. The effective date for this Assignment and Acceptance shall be
______________, 19___ (the "Effective Date")./1/ Following the
--------------
5. Upon such acceptance and recording, from and after the Effective Date,
(i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Acceptance, shall have the rights
and obligations of a Lender thereunder and under the other Loan
Documents and (ii) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from
its obligations under the Credit Agreement and the other Loan Documents.
- -----------------------
/1/ If the Assignee is organized under the laws of a jurisdiction outside
the United States.
/2/ Such date shall be at least ten Business Days after the execution of
this Assignment and Acceptance and delivery thereof to the
Administrative Agent.
ASSIGNMENT AND ACCEPTANCE-Page 2
<PAGE>
6. Upon such acceptance and recording, from and after the Effective Date,
the Administrative Agent shall make all payments in respect of the
interest assigned hereby (including payments of principal, interest,
fees, and other amounts) to the Assignee. The Assignor and Assignee
shall make all appropriate adjustments in payments for periods prior
to the Effective Date by the Administrative Agent or with respect to
the making of this assignment directly between themselves.
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS AND APPLICABLE LAWS OF
THE UNITED STATES OF AMERICA.
[NAME OF ASSIGNOR],
By:---------------------------------
Name:-----------------------------
Title:----------------------------
[NAME OF ASSIGNEE],
By:----------------------------------
Name:------------------------------
Title:-----------------------------
ACCEPTED BY:
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, as
Administrative Agent
By:---------------------------
Name:-----------------------
Title:----------------------
Date:----------------------
CONSENTED TO BY:
ASSIGNMENT AND ACCEPTANCE-Page 3
<PAGE>
GLOBAL INDUSTRIAL
TECHNOLOGIES,
INC./3/
By:-------------------------------
Name:---------------------------
Title:--------------------------
[ISSUING BANK]
By:-------------------------------
Name:---------------------------
Title:--------------------------
- ------------------------
/3/ This Assignment and Acceptance shall be required to be signed by Borrower
only if its consent is required under the Credit Agreement. The consent of
Borrower shall not be unreasonably withheld and is not required in the case
of an assignment to a Lender or an Affiliate of a Lender or if an Event of
Default has occurred and is continuing.
ASSIGNMENT AND ACCEPTANCE-
Page 4
<PAGE>
EXHIBIT L
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT (as the same may from time to time be amended
or restated, this "Intercreditor Agreement") dated as of July 30, 1999, is made
by Global Industrial Technologies, Inc., a Delaware corporation ("Borrower"),
the Material Subsidiaries named on the signature pages hereof (collectively,
"Material Subsidiaries," and together with Borrower, collectively, "Debtors"),
Chase Bank of Texas, National Association, as Collateral Agent ("Collateral
Agent"), Chase Bank of Texas, National Association, as Administrative Agent
("Administrative Agent"), for itself and certain other lenders (collectively,
"Lenders") under the Bank Credit Agreement (as hereinafter defined), Lenders,
ABN AMRO Bank N.V., as Issuing Bank under the Bank Credit Agreement ("Issuing
Bank"), The Prudential Insurance Company of America ("Prudential"), U.S. Private
Placement Fund ("U.S. Fund"), Principal Life Insurance Company (formerly known
as Principal Mutual Life Insurance Company) ("Principal," and together with
Prudential, U.S. Fund and the other holders of the Notes [as hereinafter
defined] under the respective Note Agreements [as hereinafter defined],
collectively, "Holders" and individually, a "Holder").
BACKGROUND
Borrower is a party to that certain Credit Agreement of even date herewith
(as the same may from time to time be amended, modified, supplemented or
restated, the "Bank Credit Agreement") with Lenders, Administrative Agent, the
Issuing Bank and the other Agents named therein.
Borrower is a party to (a) the Note Agreement dated as of January 31, 1996
with Prudential and Principal, (b) the Note Agreement dated as of June 30, 1998
with Prudential and U.S. Fund, and (c) the Note Agreement dated as of October 2,
1998 with Prudential (such Note Agreements, as the same have been or may from
time to time be amended, modified, supplemented or restated, the "Note
Agreements").
The parties hereto are parties to that certain Sharing Agreement dated as
of August 31, 1998 relating to indebtedness of Borrower (as the same has been or
may from time to time be amended, modified, supplemented or restated, the
"Sharing Agreement").
In connection with the execution and delivery of the Bank Credit Agreement,
the Debtors will grant to the Collateral Agent security interests in the
Collateral (as hereinafter defined) pursuant to the Security Documents (as
hereinafter defined), and the Note Agreements will be amended by Amendments (the
"Amendments") dated of even date with the Bank Credit Agreement.
The security interests in favor of Administrative Agent, Issuing Bank and
Lenders in the Collateral are to be pari passu with the security interests in
favor of Holders in the Collateral.
It is a requirement of the Bank Credit Agreement and the Note Agreements
and to the effectiveness of the Amendments that Borrower and Material
Subsidiaries execute and deliver to
INTERCREDITOR AGREEMENT - Page 1
<PAGE>
Collateral Agent, for the benefit of Secured Parties, this Intercreditor
Agreement in order to set forth the rights and obligations of the parties
hereto.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
I. DEFINED TERMS
I.1 Definitions. All capitalized terms used and not otherwise defined in
this Intercreditor Agreement shall have the meanings set forth in the Bank
Credit Agreement as in effect on the date hereof. Nothing herein shall be
construed to prohibit or restrict the modification, amendment, renewal or
increase of the Bank Credit Agreement, the Bank Obligations, the Note Agreements
or the Note Obligations, and any such increase shall be included in the
definition of "Bank Obligations" or "Note Obligations," as the case may be, set
forth in this Section 1.1. In addition, the following terms shall have the
meanings set forth below,
"Acceleration" means the earlier of (a) the acceleration of the maturity of
any amount outstanding under a Credit Facility or (b) a Bankruptcy Event.
"Bank Notes" means the Notes as defined in the Bank Credit Agreement.
"Bank Obligations" means all Obligations (as defined in the Bank Credit
Agreement as in effect on the date hereof).
"Bankruptcy Event" means an event with respect to the Borrower or any of
its Subsidiaries specified in paragraph 7A(viii), (ix) or (x) of each of the
Note Agreements or in Section 10.01(h) or (i) of the Bank Credit Agreement.
"Bankruptcy Law" means any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction.
"Cash Management Obligations" means, for any Lender, any obligations owed
to such Lender by Borrower or any Subsidiary which arise as a direct result of
the deposit, collection and other cash management or deposit services provided
by such Lender to Borrower or any Subsidiary, including without limitation all
of the obligations of Borrower or any Subsidiary to such Lender for overdrafts,
for returned checks and other returned items and for credit extended under, or
as a result of, cash management and deposit agreements.
"Collateral" means, collectively, all of the property in which Collateral
Agent has a security interest pursuant to the Security Documents.
"Collateral Account" has the meaning specified in Section 4.1.
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INTERCREDITOR AGREEMENT - Page 2
<PAGE>
"Credit Facilities" means the Bank Credit Agreement and the Note
Agreements, and "Credit Facility" means any of them.
"Default Reference Date" means the earlier of: (a) if a Notice of Event of
Default is given by a Secured Party pursuant to Section 9.1 (or was required by
that Section to be given) and Acceleration occurs within 180 days thereafter as
a result of such Event of Default, the date that such Notice of Event of Default
was given or required to be given under that section; and (b) the date on which
Acceleration occurs.
"Determining Secured Parties" means (a) Holders holding, in the aggregate,
66.67% of the outstanding principal amount of Senior Notes (for so long as any
Senior Notes remain outstanding) plus (b) the Lenders having, in the aggregate,
----
66.67% of the Commitments, so long as the Commitments have not been terminated,
and, otherwise, the Lenders holding, in the aggregate, 66.67% of the principal
amount of outstanding Loans and LC Exposure under the Bank Credit Agreement (for
so long as any Obligations or LC Exposure remain outstanding under the Bank
Credit Agreement); provided, however, that for purposes of removal of the
Collateral Agent and appointment of a successor Collateral Agent pursuant to
Section 7.6(b), Determining Secured Parties shall be determined without regard
to the Collateral Agent in its capacity as a Secured Party.
"Distribution Date" means each date established by Collateral Agent or
specified by the Determining Secured Parties under Section 4.4 as a date for the
-----------
distribution of amounts on deposit in the Collateral Account.
"Event of Default" means an Event of Default under the Bank Credit
Agreement or the Note Agreements.
"Financing Documents" means the Credit Facilities, the Sharing Agreement
and the Security Documents.
"Law" means any statute, law, ordinance, regulation, rule, order, writ,
injunction or decree of any state, commonwealth, federal, foreign, territorial
or other court or government body, subdivision, agency, department, commission,
board, bureau or instrumentality of a governmental body.
"LC Amount" means an amount equal to (a) all LC Exposure under the Bank
Credit Agreement, minus (b) the amount of cash collateral held by the
Administrative Agent pursuant to Section 2.04 of the Bank Credit Agreement or
------------
Section 4.7 hereof.
- -----------
"Non-Reallocable Payment" means:
(a) a Scheduled Payment made to a Secured Party prior to the
applicable Default Reference Date;
(b) with respect to the Bank Credit Agreement, any repayments of
advances made by a Secured Party thereunder on a revolving basis which are
made and received
INTERCREDITOR AGREEMENT - Page 3
<PAGE>
during the period referred to in paragraph (a) of the definition of
"Reallocable Payment"; provided that if the aggregate repayments received
--------
during such period are in excess of the aggregate advances made during such
period, such excess shall constitute a Reallocable Payment; and provided
--------
further that any advances made after the date such Secured Party gives, or
-------
was required by Section 9.1(c) to give, a Notice of Event of Default cannot
--------------
be used to offset payments received during such period; and
(c) any payments to the Administrative Agent of amounts to be held as
cash collateral for LC Exposure that are not required to be shared as
provided in Section 4.7.
-----------
"Note Obligations" means all unpaid principal and interest on the Notes (as
defined in the Note Agreements as in effect on the date hereof), any Yield-
Maintenance Amount (as defined in the Note Agreements as in effect on the date
hereof) and reasonable costs, fees and expenses in collection of the Notes.
"Notice of Event of Default" has the meaning specified in Section 9.1.
-----------
"Obligations" means the Bank Obligations and the Note Obligations.
"Post-Acceleration Sharing Percentage" means, as to any Secured Party at
any time, with respect to any Reallocable Payment received by the Collateral
Agent or any Secured Party at any time after Acceleration, the percentage
equivalent of a fraction of which (a) the numerator is such Secured Party's
---------
Obligations payable to it (whether or not then due) under the Financing
Documents, and (b) the denominator is the sum of the Obligations payable to all
-----------
Secured Parties (whether or not then due) under the Financing Documents, in each
case as of the earliest date on which an Acceleration occurs. For purposes of
this definition, Obligations payable to the Issuing Bank and the Lenders shall
include the LC Amount.
"Pre-Acceleration Reallocable Payment" shall have the meaning specified in
clause (a) of the definition of "Reallocable Payment."
"Pre-Acceleration Sharing Percentage" means, as to any Secured Party at any
time, with respect to any Reallocable Payment received by any Secured Party
during the period described in clause (a) of the definition of "Reallocable
Period," the percentage equivalent of a fraction of which (a) the numerator is
---------
such Secured Party's Obligations payable to it (whether or not then due) under
the Financing Documents, and (b) the denominator is the sum of the Obligations
-----------
payable to all Secured Parties (whether or not then due) under the Financing
Documents, in each case as of the Sharing Commencement Date immediately prior to
any Reallocable Payment made on the Sharing Commencement Date. For purposes of
this definition, Obligations payable to the Issuing Bank and the Lenders shall
include the LC Amount.
"Proceeds" has the meaning assigned to it under the UCC (as defined in the
Bank Credit Agreement as in effect on the date hereof) and, in any event, shall
include, but not be limited to, (a) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to any Debtor from time to time with
respect to any of the Collateral, (b) any and all payments (in any form
INTERCREDITOR AGREEMENT - Page 4
<PAGE>
whatsoever) made or due and payable to any Debtor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(as defined in the Bank Credit Agreement as in effect on the date hereof) and
(c) any and all other amounts from time to time paid or payable under or in
connection with any of the Collateral.
"Reallocable Payment" means any amount received by a Secured Party in
respect of any Credit Facility by virtue of any voluntary or involuntary payment
or prepayment (other than a Non-Reallocable Payment) made by or for the account
of the Borrower by virtue of the application of any provision of any of the
Financing Documents, or by virtue of an exercise of any Set-Off Rights or
similar mechanism, including without limitation any payments to the
Administrative Agent of amounts to be held as cash collateral for LC Exposure
except as provided in Section 4.7:
(a) during the period commencing 30 days before the applicable Default
Reference Date (unless paragraph (b) of that definition applies) (the
"Sharing Commencement Date") and ending at the time of Acceleration (each
such amount, a "Pre-Acceleration Reallocable Payment"); and
(b) at any time after Acceleration (each such amount, a "Post-
Acceleration Reallocable Payment");
provided, however, that in no event shall the period referred to in clause (a)
commence earlier than 210 days prior to Acceleration:
"Reduced Secured Party" shall have the meaning specified in Section 4.10.
------------
"Repaying Secured Party" shall have the meaning specified in Section 4.10.
------------
"Scheduled Payment" means (a) with respect to the Note Agreements, (i) any
scheduled principal repayment required under paragraph 4A thereof or the express
terms of the Senior Notes or mandatory principal prepayment required under
paragraph 6F(iii) or 6F(iv) thereof, and (ii) any scheduled payment of accrued
interest under any Note Agreement or the Senior Notes; and (b) with respect to
the Bank Credit Agreement, (i) any similar scheduled principal repayment
required thereunder, (ii) any prepayment made in connection with any mandatory
or automatic reduction of the Commitments under Section 2.07(d), (e) or (f) of
the Bank Credit Agreement, (iii) any prepayment required under Section 2.09(c)
of the Bank Credit Agreement as a result of any change in the Equivalent Amount
of Letters of Credit issued in Alternate Currency, and (iv) any payment of
accrued interest under the Bank Credit Agreement or the Bank Notes.
"Secured Party" means each of, and "Secured Parties" means all of,
Administrative Agent, Issuing Bank, Lenders, and Holders.
"Security Documents" means, collectively, (a) the Borrower Security
Agreement of even date herewith, executed by the Borrower in favor of the
Collateral Agent, (b) the Subsidiary Security Agreement of even date herewith,
executed by the Material Subsidiaries in favor of the Collateral
INTERCREDITOR AGREEMENT - Page 5
<PAGE>
Agent, (c) the Pledge Agreement of even date herewith, executed by the Borrower
in favor of the Collateral Agent, and (d) the security agreement hereafter
executed by Global-GIX Canada, Inc. in favor of the Collateral Agent.
"Senior Notes" means the Notes as defined in the Note Agreements.
"Set-Off Rights" means any right of any Secured Party to set off,
appropriate and apply (a) any deposits and any other indebtedness at any time
held or owing by such Secured Party to or for the credit or account of the
Borrower against and on account of liabilities of the Borrower under a Credit
Facility pursuant to Law and, if applicable, the terms of that Credit Facility,
and (b) indebtedness owing by a Secured Party to or for the credit of the
Borrower, against and on account of liabilities of the Borrower under a Credit
Facility.
"Sharing Commencement Date" shall have the meaning specified in clause (a)
of the definition of "Reallocable Payment."
I.2 Principal Obligations. As used in the definition of "Proportionate
Share" set forth in Section 1 of the Sharing Agreement, "principal obligations"
---------
shall include the LC Amount.
II. AGREEMENT TO HOLD COLLATERAL
In reliance upon, and subject to, the provisions of this Intercreditor
Agreement, Collateral Agent will hold the security interest granted to
Collateral Agent in the Collateral under each Security Document on behalf of and
for the ratable benefit of the Secured Parties on the terms and conditions set
forth in this Intercreditor Agreement.
III. ACCELERATION AND SHARING
III.1 Exercise of Rights and Remedies. Upon the occurrence of an Event of
Default and so long as Collateral Agent is so entitled under any Security
Document, Collateral Agent may exercise the rights and remedies provided in this
Intercreditor Agreement and at the request of Determining Secured Parties
(subject to the terms and provisions hereof) shall exercise the rights and
remedies provided in the Security Documents.
III.2 General Authority of Collateral Agent over the Collateral. Each
Debtor hereby irrevocably constitutes and appoints Collateral Agent and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full power and authority in the name of such Debtor
or in Collateral Agent's own name, from time to time so long as an Event of
Default exists and so long as Collateral Agent is so entitled under any Security
Document, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to carry out the
terms of this Intercreditor Agreement and the Security Documents, and accomplish
the purposes hereof and thereof.
III.3 Remedies Not Exclusive.
INTERCREDITOR AGREEMENT - Page 6
<PAGE>
(a) No remedy conferred upon or reserved to Collateral Agent herein or
in any of the Security Documents is intended to be exclusive of any other
remedy or remedies, but every such remedy shall be cumulative and shall be
in addition to every other remedy conferred herein or in the Security
Documents, the Bank Credit Agreement or the Note Agreements or now or
hereafter existing at Law or in equity; provided, however, any exercise of
any rights or remedies by Collateral Agent or any Secured Party with regard
to any Collateral shall be subject to the terms of this Intercreditor
Agreement.
(b) No delay or omission by Collateral Agent or any Secured Party to
exercise any right, remedy or power hereunder or under any Security
Document shall impair any such right, remedy or power or shall be construed
to be a waiver thereof, and every right, power and remedy given by this
Intercreditor Agreement or any Security Document to Collateral Agent or
Secured Parties may be exercised from time to time and as often as may be
deemed expedient by Collateral Agent.
(c) If Collateral Agent shall have proceeded to enforce any right,
remedy or power under this Intercreditor Agreement or any Security Document
and the proceeding for the enforcement thereof shall have been discontinued
or abandoned for any reason or shall have been determined adversely to
Collateral Agent, then Debtors, Collateral Agent and Secured Parties shall,
subject to any determination in such proceeding, severally and respectively
be restored to their former positions and rights hereunder or thereunder
with respect to the Collateral and in all other respects, and thereafter
all rights, remedies and powers of Collateral Agent and Secured Parties
shall continue as though no such proceeding had been taken.
(d) All rights of action and of asserting claims upon or under this
Intercreditor Agreement and the Security Documents may be enforced by
Collateral Agent without the possession of any Security Document, the Bank
Credit Agreement, any Note Agreement or any instrument evidencing any Bank
Obligations or Note Obligations or the production thereof at any trial or
other proceeding relative thereto, and any suit or proceeding instituted by
Collateral Agent shall be brought in its name as Collateral Agent and any
recovery of judgment shall be held as part of the Collateral on behalf of
and for the ratable benefit of the Secured Parties.
III.4 Waiver and Estoppel.
(a) Each Debtor agrees, to the extent it may lawfully do so, that it
will not at any time in any manner whatsoever claim or take the benefit or
advantage of, any appraisement, valuation, stay, extension, moratorium,
turnover or redemption Law, or any Law permitting it to direct the order in
which the Collateral shall be sold, now or at any time hereafter in force,
which may delay, prevent or otherwise affect the performance or enforcement
of this Intercreditor Agreement or any Security Document and hereby waives
all benefit or advantage of all such Laws and covenants that it will not
hinder, delay or impede the execution of any power granted to Collateral
Agent in this Intercreditor Agreement or any
INTERCREDITOR AGREEMENT - Page 7
<PAGE>
Security Document but will suffer and permit the execution of every such
power as though no such Law were in force.
(b) Each Debtor, to the extent it may lawfully do so, on behalf of
itself and all who may claim through or under it, including without
limitation any and all subsequent creditors, vendees, assignees and
lienors, waives and releases all rights to demand or to have any
marshalling of the Collateral upon any sale, whether made under any power
of sale granted herein, in any Security Document or pursuant to judicial
proceedings or upon any foreclosure or any enforcement of this
Intercreditor Agreement or any Security Document and consents and agrees
that all the Collateral may at any such sale be offered and sold as an
entirety.
(c) Each Debtor waives, to the extent it may lawfully do so,
presentment, demand, protest and any notice of any kind (except notices
explicitly required hereunder, under any Security Document, the Bank Credit
Agreement or the Note Agreements) in connection with this Intercreditor
Agreement and the Security Documents and any action taken by Collateral
Agent with respect to the Collateral.
III.5 Limitation on Collateral Agent's Duty in Respect of Collateral.
Except as otherwise required by Law, beyond its duties as to the custody thereof
expressly provided herein or in any Security Document and to account to Secured
Parties and Debtors for moneys and other property received by it hereunder or
under any Security Document, Collateral Agent shall not have any duty to any
Debtor or to any Secured Party as to any Collateral in its possession or control
or in the possession or control of any of its agents or nominees, or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto.
III.6 Limitation by Law. All rights, remedies and powers provided herein
may be exercised only to the extent that the exercise thereof does not violate
any applicable provision of Law, and all the provisions hereof are intended to
be subject to all applicable mandatory provisions of Law which may be
controlling and to be limited to the extent necessary so that they will not
render this Intercreditor Agreement or any Security Document invalid,
unenforceable in whole or in part or not entitled to be recorded, registered or
filed under the provisions of any applicable Law.
III.7 Sharing Notice. Upon Acceleration with respect to any Credit
Facility, the accelerating Secured Party shall immediately notify the Collateral
Agent and the Collateral Agent shall immediately give notice (a "Sharing
Notice") to each of the Secured Parties informing them that the provisions of
this Section are to be implemented and requiring each Secured Party to provide
it with all necessary information to enable it to calculate (a) such Secured
Party's Obligations as of both the Sharing Commencement Date and the date of
such Acceleration with respect to the Credit Facility to which such Secured
Party is a party and (b) the Pre-Acceleration Sharing Percentage and Post-
Acceleration Sharing Percentage of each Secured Party. Any Sharing Notice shall
be effective as of the date it is sent by the Collateral Agent and shall remain
effective until all the Secured Parties agree that such Sharing Notice is no
longer in effect. If any necessary information is not received by the
Collateral Agent within three days after the Collateral Agent delivers the
Sharing Notice, the Collateral Agent may request such information from any other
Secured Party that is a party to the
INTERCREDITOR AGREEMENT - Page 8
<PAGE>
applicable Credit Facility. If any such necessary information has not been
provided to the Collateral Agent within two days after the Collateral Agent
makes such supplemental request, the Collateral Agent may proceed with its
calculations based upon the other information available to it and which it
reasonably and in good faith believes to be correct. Once the Collateral Agent
has either received such necessary information or has determined to proceed
based upon such other information available to it, the Collateral Agent shall
calculate and promptly notify the Secured Parties as to the Obligations payable
to each Secured Party (whether or not then due) as of both the Sharing
Commencement Date and the date of Acceleration with respect to the applicable
Credit Facility and the Pre-Acceleration Sharing Percentage and Post-
Acceleration Sharing Percentage of each Secured Party, which notice shall
demonstrate such calculations in reasonable detail. If the Collateral Agent
thereafter receives information which demonstrates that the Collateral Agent=s
prior calculations were erroneous, the Collateral Agent shall recalculate the
Obligations payable to each Secured Party (whether or not then due) with respect
to such Credit Facility and each Secured Party=s Pre-Acceleration Sharing
Percentage and Post-Acceleration Sharing Percentage, and shall promptly notify
all Secured Parties of such recalculations and, if any payments pursuant to
Section 4.8 have been made based upon such erroneous prior calculations, the
- -----------
amount to be repaid by or to such Secured Party as a result of such
recalculations. Each Secured Party that has received an excess payment as a
result of such erroneous prior calculations shall promptly (and in any event
within five Business Days after its receipt of the Collateral Agent=s
recalculations) repay to the Collateral Agent for the account of the other
appropriate Secured Parties the excess portion of any payments previously
received by it.
IV. COLLATERAL ACCOUNT; DISTRIBUTIONS
IV.1 The Collateral Account. After the occurrence of an Event of Default,
all moneys which are required by this Intercreditor Agreement or any Security
Document to be delivered to Collateral Agent or which are received by Collateral
Agent or any agent or nominee of Collateral Agent or any Secured Party in
respect of the Collateral as a result of any foreclosure or otherwise shall be
deposited in an account established at an office of Collateral Agent (the
"Collateral Account") and held by Collateral Agent for the benefit of the
Secured Parties and applied in accordance with the terms of this Intercreditor
Agreement.
IV.2 Control of Collateral Account. Subject to the terms of this
Intercreditor Agreement, all right, title and interest in and to the Collateral
Account shall vest in Collateral Agent and the Collateral Account shall be
subject to the exclusive dominion and control of Collateral Agent.
IV.3 Investment of Funds Deposited in Collateral Account. Collateral
Agent shall use reasonable efforts to invest and reinvest moneys on deposit in
the Collateral Account at any time in:
(a) marketable obligations of the United States having a maturity of
not more than six months from the date of acquisition;
(b) marketable obligations directly and fully guaranteed by the United
States having a maturity of not more than one year from the date of
acquisition;
INTERCREDITOR AGREEMENT - Page 9
<PAGE>
(c) bankers' acceptances and certificates of deposit and other
interest-bearing obligations issued by Collateral Agent or any bank
organized under the Laws of the United States or any state thereof with
capital, surplus and undivided profits aggregating at least $100,000,000,
in each case having a maturity of not more than six months from the date of
acquisition;
(d) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (a), (b) and (c)
----------- --- ---
entered into with Collateral Agent or any bank meeting the qualifications
specified in clause (c) above; and
----------
(e) commercial paper rated at least A-1 or the equivalent thereof by
S&P or P-1 or the equivalent thereof by Moody's and maturing within three
months after the date of acquisition.
All such investments and the interest and income received thereon and the net
proceeds realized on the sale or redemption thereof shall be held in the
Collateral Account as part of the Collateral. Collateral Agent shall not be
liable for any investment, for any failure to invest hereunder, or for any
performance of any such investment or any loss or penalty resulting therefrom.
IV.4 Application of Moneys.
(a) Collateral Agent shall have the right (pursuant to Section 5.4)
-----------
upon an Event of Default, at any time to apply moneys held by it in the
Collateral Account to the payment of due and unpaid fees and expenses owing
to it pursuant to Section 5.1. If Collateral Agent exercises its rights
-----------
pursuant to the preceding sentence, or if after an Acceleration the
Determining Secured Parties instruct the Collateral Agent to make a
distribution from the Collateral Account, and the date(s) for such
distribution, all remaining moneys (or in the case of an instruction from
the Determining Secured Parties, such amount as is specified in such
instruction) held by Collateral Agent in the Collateral Account or received
by Collateral Agent shall, to the extent available for distribution (it
being understood that Collateral Agent may liquidate investments prior to
maturity in order to make a distribution pursuant to this Section 4.4), be
-----------
distributed by Collateral Agent on each Distribution Date in the following
order of priority:
First: to Collateral Agent for any unpaid reasonable fees or
expenses owing to it pursuant to Section 5.1 and then to any Secured
-----------
Party which has theretofore advanced or paid any such fees and
expenses constituting administrative expenses allowable under Section
503(b) of the United States Bankruptcy Code of 1978, as amended, pro
rata an amount equal to the amount thereof so advanced or paid by such
Secured Party and for which such Secured Party has not been reimbursed
prior to such Distribution Date;
Second: to the payment of the unpaid Obligations payable to the
Secured Parties with respect to the Credit Facilities, which
Obligations payable to the Issuing Banks and the Lenders shall include
the LC Amount, and which payment under this
INTERCREDITOR AGREEMENT - Page 10
<PAGE>
clause shall be shared by the Secured Parties according to their
respective Post-Acceleration Sharing Percentages; and
Third: to the payment to the Borrower, or its successors or
assigns, or as a court of competent jurisdiction may direct, or
otherwise as required by Law, if any surplus is then remaining from
such proceeds.
(b) The term "unpaid" as used in clause Second of Section 4.4(a)
--------------
refers:
(i) in the absence of a bankruptcy proceeding with respect to any
Debtor, to all amounts of the Bank Obligations and the Note
Obligations outstanding as of a Distribution Date, which outstanding
Bank Obligations shall include the LC Amount, and
(ii) during the pendency of a bankruptcy proceeding with respect
to any Debtor, to all amounts allowed by the bankruptcy court in
respect of the Bank Obligations and the Note Obligations as a basis
for distribution (including estimated amounts, if any, allowed in
respect of contingent claims), and in any event including the LC
Amount with respect to the Bank Obligations, to the extent that prior
distributions have not been made in respect thereof.
(c) Collateral Agent shall make all payments and distributions under
this Section 4.4 on account of the Bank Obligations to the Administrative
-----------
Agent for redistribution to Lenders in accordance with the provisions of
the Bank Credit Agreement. Collateral Agent shall make all payments and
distributions under this Section 4.4 on account of the Note Obligations to
-----------
each Holder.
(d) If any Secured Party has advanced or paid any expenses of
Collateral Agent hereunder and is not paid or reimbursed in full for the
amount of such advances or payments, such Secured Party shall have a claim
against any Secured Party which has not paid its share of such expenses of
Collateral Agent, based on the Post-Acceleration Sharing Percentages.
(e) In the event of any inconsistency between the terms and conditions
of this Intercreditor Agreement and the terms and conditions of the Sharing
Agreement, this Intercreditor Agreement shall control with regard to
distribution and sharing of all moneys which are required to be deposited
in the Collateral Account pursuant to Section 4.1.
-----------
(f) The parties hereto acknowledge that all or a portion of the moneys
distributed on account of the Bank Obligations pursuant to the Second
clause of Section 4.4(a) may be held by the Administrative Agent as cash
--------------
collateral for the LC Exposure pursuant to Section 2.04(j) of the Bank
---------------
Credit Agreement. The parties hereto agree that notwithstanding anything
to the contrary contained in this Intercreditor Agreement, in the Sharing
Agreement or in the Note Agreements, none of the Holders shall be entitled
to share in such cash collateral.
INTERCREDITOR AGREEMENT - Page 11
<PAGE>
IV.5 Collateral Agent's Calculations. In making the determinations and
allocations required by Section 4.4, Collateral Agent may rely upon information
-----------
supplied by the Administrative Agent as to the amounts payable with respect to
the Bank Obligations and by each Holder as to amounts payable with respect to
the Note Obligations owed to such Holder, and Collateral Agent shall have no
liability to any of the Secured Parties for actions taken in reliance on such
information. All distributions made by Collateral Agent pursuant to Section 4.4
-----------
shall be (subject to any decree of any court of competent jurisdiction) final,
and Collateral Agent shall have no duty to inquire as to the application by
Administrative Agent or any Holder of any amounts distributed to them.
IV.6 Proceeds of Jeffrey Disposition. Notwithstanding anything to the
contrary contained in this Intercreditor Agreement, in the Sharing Agreement or
in the Note Agreements, any and all proceeds (less reasonable expenses) of the
Jeffrey Disposition shall be applied to permanently reduce the Commitments and
prepay Borrowings under the Bank Credit Agreement in an amount equal to such
proceeds, and no part of such proceeds shall be applied to the Note Obligations.
IV.7 Letters of Credit. The parties hereto acknowledge that certain
Existing Letters of Credit (for which the LC Exposure is not greater than
$6,500,000) expire after the Maturity Date and that the Borrower is required to
deposit cash collateral to be held by the Administrative Agent on or before the
date which is five Business Days prior to the Maturity Date, as provided in
Section 2.04(c) of the Bank Credit Agreement. The parties hereto agree that
- ---------------
notwithstanding anything to the contrary contained in this Intercreditor
Agreement, in the Sharing Agreement or in the Note Agreements, in the event that
after the Maturity Date there are no Bank Obligations other than the LC
Exposure, none of the Holders shall be entitled to share in such cash collateral
for such Existing Letters of Credit not to exceed $6,500,000; provided, however,
-------- -------
that promptly upon the expiry of any such Letter of Credit, the amount of cash
collateral therefor that was not applied to discharge obligations of the
Borrower to the Issuing Bank or the Lenders in respect of that Letter of Credit
shall be delivered to the Collateral Agent to be held in the Collateral Account
and distributed in accordance with the provisions of this Intercreditor
Agreement, and all of the Secured Parties shall be entitled to share in such
amount in accordance with the provisions of this Intercreditor Agreement.
IV.8 Payments.
(a) If, at any time that any Obligations owed to any of the Secured
Parties under any of the Credit Facilities remain outstanding, any Secured
Party obtains any Reallocable Payment (whether by way of voluntary or
involuntary payment or prepayment, by virtue of the exercise of any Set-Off
Rights or otherwise by virtue of the application of any provision of any of
the Financing Documents comprising or relating to the Credit Facilities, or
in any other manner except pursuant to this Intercreditor Agreement) in
respect of any Credit Facility, such Secured Party shall forthwith notify
the Collateral Agent thereof of its obtaining the same and after receipt of
a Sharing Notice, pay to the Collateral Agent for the account of the
Secured Parties (other than the paying Secured Party) pro rata in
--- ----
accordance with their respective Pre-Acceleration Sharing Percentages (with
respect to Pre-Acceleration Reallocable Payments) or Post-Acceleration
Sharing Percentages (with respect to Post-Acceleration Reallocable
Payments) an amount equal to such Reallocable Payment less
INTERCREDITOR AGREEMENT - Page 12
<PAGE>
such Secured Party's Pre-Acceleration Sharing Percentage or Post-
Acceleration Sharing Percentage, as applicable, of such amount. Upon
receipt of any such payment the Collateral Agent shall distribute the same
to the Secured Parties other than the Secured Party so paying the same pro
---
rata in accordance with their respective Pre-Acceleration Sharing
----
Percentages or Post-Acceleration Sharing Percentages, as applicable.
(b) Upon any distribution made pursuant to clause (a), the Secured
Party making such payment shall be deemed to have purchased from each other
Secured Party a participation in the Obligations of such other Secured
Party. The Borrower agrees that any Secured Party so purchasing a
participation from another Secured Party pursuant to this Section 4.8 may,
-----------
to the fullest extent permitted by applicable Law, exercise all its rights
of payment (including, without limitation, any Set-Off Rights) with respect
to such participation as fully as if such Secured Party were the direct
creditor of the Borrower in the amount of such participation.
(c) Notwithstanding Section 4.8(a), (i) a Lender may apply a payment
--------------
first to Cash Management Obligations owed to it by Borrower or any
Subsidiary before applying such payment to the Bank Obligations and, if so
applied to its Cash Management Obligations, such Lender shall have no
obligation to share the amount of such payment so applied with any other
Secured Party; and (ii) as among the Lenders only, this Section 4.8 shall
-----------
supersede and control in the event of any conflict between this Section 4.8
-----------
and Section 2.13(c) of the Bank Credit Agreement.
---------------
IV.9 Preferences, etc. If
(a) any Secured Party (a "Paying Secured Party") makes any payment
pursuant to Section 4.8; and
-----------
(b) the amount obtained by the Paying Secured Party which gave rise to
such payment or any part thereof (the "relevant amount") is required to be
repaid, and is repaid, by the Paying Secured Party to the Borrower or any
other Person;
then the Collateral Agent (if it shall then hold the same) and each of the other
Secured Parties which has received any part thereof (each, a "Sharing Secured
Party") shall promptly (and in any event within five Business Days after its
receipt of notification from the Collateral Agent requiring such repayment,
which notification the Collateral Agent shall dispatch promptly upon its
determining the amount of the repayment required from the relevant Sharing
Secured Party) repay the portion of the relevant amount received by the
Collateral Agent or such Sharing Secured Party, as the case may be, to the
Paying Secured Party, together with such amount as is equal to the appropriate
portion of the interest, if any (in respect of the period during which the
Collateral Agent or such Sharing Secured Party (as the case may be) held such
portion of the relevant amount), the Paying Secured Party shall have repaid when
repaying such relevant amount.
IV.10 Adjustments to Sharing Percentages. If, at any time after the date
of a Sharing Notice,
INTERCREDITOR AGREEMENT - Page 13
<PAGE>
(a) a Secured Party (a "Repaying Secured Party") is required to repay
to the Borrower or any other Person all or any portion of an amount
received on or prior to the date of such Sharing Notice, with the result
that the Repaying Secured Party's Obligations are increased, then, after
such repayment has been made and the Repaying Secured Party has notified
the Collateral Agent thereof, the Pre-Acceleration Sharing Percentages and
Post-Acceleration Sharing Percentages of the Secured Parties shall be
adjusted on the first Business Day following the Collateral Agent=s receipt
of such notification to reflect such increase (and the resultant decrease
in the Pre-Acceleration Sharing Percentages and Post-Acceleration Sharing
Percentages of the Secured Parties other than the Repaying Secured Party),
and each other Secured Party shall promptly (and in any event within five
Business Days after its receipt of notification from the Collateral Agent
requiring such repayment, which notification the Collateral Agent shall
dispatch promptly upon its determining the amount of the repayment required
from each such other Secured Party) repay to the Collateral Agent for the
account of the Repaying Secured Party the portion of any payments
previously received by it under Section 4.8 in excess of its Pre-
-----------
Acceleration Sharing Percentage or Post-Acceleration Sharing Percentage, as
applicable, thereof as so redetermined, together with such amount (if any)
as is equal to the appropriate portion of any interest (in respect of the
period during which such other Secured Party held such amount) the Repaying
Secured Party shall have repaid when repaying such amount as aforesaid, or
(b) an amount originally included in the Obligations payable to a
Secured Party (a "Reduced Secured Party") under its Credit Facility as a
contingent obligation (such as a Letter of Credit) ceases to be an
obligation because of its expiry, reduction, cancellation or otherwise,
with the result that such Obligations are reduced, then the Reduced Secured
Party shall promptly notify the Collateral Agent thereof, and the Pre-
Acceleration Sharing Percentages and/or Post-Acceleration Sharing
Percentages, as applicable, of the Secured Parties shall be adjusted on the
first Business Day following the Collateral Agent's receipt of such
notification to reflect such decrease (and the resultant increase in the
Pre-Acceleration Sharing Percentages or Post-Acceleration Sharing
Percentages, as applicable, of the Secured Parties other than the Reduced
Secured Party) and the Reduced Secured Party shall promptly repay to the
Collateral Agent for the account of the respective other Secured Parties
the portion of any payments previously received by it under Section 4.8 in
-----------
excess of its Pre-Acceleration Sharing Percentage and/or Post-Acceleration
Sharing Percentage, as applicable, thereof as so redetermined.
V. AGREEMENTS WITH COLLATERAL AGENT
V.1 Expenses. Debtors jointly and severally agree to pay to Collateral
Agent, from time to time upon demand, all of the reasonable costs and expenses
of Collateral Agent (including, without limitation, the reasonable fees and
disbursements of its counsel and such special counsel as Collateral Agent elects
to retain) which arise in addition to the fees, costs and expenses of
Administrative Agent, Issuing Bank or any Lender under the Bank Credit Agreement
or of any Holder under the Note Agreements, (A) arising in connection with the
preparation, execution, delivery, modification, and termination of this
Intercreditor Agreement and each Security Document or the enforcement of any of
the provisions hereof or thereof, (B) incurred or required to be advanced
INTERCREDITOR AGREEMENT - Page 14
<PAGE>
in connection with the administration of the Collateral, the sale or other
disposition of Collateral pursuant to any Security Document and the
preservation, protection or defense of Collateral Agent's rights under this
Intercreditor Agreement, the Security Documents and in and to the Collateral or
(C) incurred by Collateral Agent in connection with the resignation of
Collateral Agent pursuant to Section 7.6. The Obligations of Debtors under this
-----------
Section 5.1 shall survive the termination of the other provisions of this
- -----------
Intercreditor Agreement.
V.2 Filing Fees, Excise Taxes, Etc. Debtors jointly and severally agree
to pay or to reimburse Collateral Agent for any and all payments made by
Collateral Agent in respect of all search, filing, recording and registration
fees, taxes, excise taxes and other similar imposts which may be payable or
determined to be payable in respect to the execution and delivery of this
Intercreditor Agreement and each Security Document. The obligations of Debtors
under this Section 5.2 shall survive the termination of the other provisions of
-----------
this Intercreditor Agreement.
V.3 INDEMNIFICATION. DEBTORS JOINTLY AND SEVERALLY AGREE TO INDEMNIFY,
AND HOLD COLLATERAL AGENT AND EACH SECURED PARTY HARMLESS FROM AND AGAINST ANY
AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES (INCLUDING, WITHOUT LIMITATION, THE REASONABLE
FEES AND EXPENSES OF COUNSEL) AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER
WHICH MAY AT ANY TIME BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THEM OR ANY
OF THEIR REPRESENTATIVES, DIRECTORS, OFFICERS, EMPLOYEES, OR AGENTS IN ANY WAY
RELATING TO OR ARISING OUT OF ANY OF THIS INTERCREDITOR AGREEMENT, THE BANK
CREDIT AGREEMENT, NOTE AGREEMENTS, THE SECURITY DOCUMENTS OR ANY DOCUMENTS
CONTEMPLATED BY OR REFERRED TO HEREIN OR THEREIN (INCLUDING IN CONNECTION WITH
OR AS A RESULT OF, IN WHOLE OR IN PART, THE MERE NEGLIGENCE OF ANY OF COLLATERAL
AGENT OR ANY SECURED PARTY), ANY TRANSACTION RELATED HERETO OR THERETO, OR ANY
ACT, OMISSION OR TRANSACTION OF ANY OF THE DEBTORS OR ANY OF THEIR
REPRESENTATIVES, DIRECTORS, OFFICERS, EMPLOYEES, OR OTHER AGENTS, TO THE EXTENT
THAT ANY OF THE SAME RESULTS, DIRECTLY OR INDIRECTLY, FROM ANY CLAIMS MADE OR
ACTIONS, SUITS OR PROCEEDINGS COMMENCED BY OR ON BEHALF OF ANY PERSON. IN ANY
SUIT, PROCEEDING OR ACTION BROUGHT BY COLLATERAL AGENT UNDER OR WITH RESPECT TO
ANY CONTRACT, AGREEMENT, INTEREST OR OBLIGATION CONSTITUTING PART OF THE
COLLATERAL FOR ANY SUM OWING THEREUNDER, OR TO ENFORCE ANY PROVISIONS THEREOF,
DEBTORS, JOINTLY AND SEVERALLY, WILL SAVE, INDEMNIFY AND KEEP COLLATERAL AGENT,
EACH SECURED PARTY OR ANY OF THEIR RESPECTIVE REPRESENTATIVES, DIRECTORS,
OFFICERS, EMPLOYEES OR AGENTS HARMLESS FROM AND AGAINST ALL EXPENSE, LOSS OR
DAMAGE SUFFERED BY REASON OF ANY DEFENSE, SETOFF, COUNTERCLAIM, RECOUPMENT OR
REDUCTION OF LIABILITY WHATSOEVER OF THE OBLIGOR THEREUNDER (INCLUDING IN
CONNECTION WITH OR AS A RESULT OF, IN WHOLE OR IN PART, THE MERE NEGLIGENCE OF
ANY OF COLLATERAL AGENT OR ANY SECURED PARTY), ARISING OUT OF A BREACH BY ANY
DEBTOR OF ANY OBLIGATION THEREUNDER OR
INTERCREDITOR AGREEMENT - Page 15
<PAGE>
ARISING OUT OF ANY OTHER AGREEMENT OR LIABILITY AT ANY TIME OWING TO OR IN FAVOR
OF SUCH OBLIGOR OR ITS SUCCESSORS FROM ANY DEBTOR, AND ALL SUCH OBLIGATIONS OF
DEBTORS SHALL BE AND REMAIN ENFORCEABLE AGAINST AND ONLY AGAINST DEBTORS AND
SHALL NOT BE ENFORCEABLE AGAINST COLLATERAL AGENT, ANY SECURED PARTY OR ANY OF
THEIR RESPECTIVE REPRESENTATIVES, DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS. THE
AGREEMENTS IN THIS SECTION 5.3 SHALL SURVIVE THE PAYMENT OF THE BANK
-----------
OBLIGATIONS, THE NOTE OBLIGATIONS AND TERMINATION OF THE OTHER PROVISIONS OF
THIS INTERCREDITOR AGREEMENT. COLLATERAL AGENT AND SECURED PARTIES SHALL NOT BE
SO INDEMNIFIED AND HELD HARMLESS FOR ANY LOSSES OR DAMAGES WHICH WERE CAUSED BY
THE INDEMNIFIED PARTY'S WILLFUL MISCONDUCT OR GROSS NEGLIGENCE, AND COLLATERAL
AGENT AND SECURED PARTIES, AS THE CASE MAY BE, SHALL BE LIABLE TO DEBTORS ONLY
TO THE EXTENT OF ANY DIRECT (AS OPPOSED TO CONSEQUENTIAL) DAMAGES SUFFERED BY
DEBTORS.
V.4 Collateral Agent's Lien. Notwithstanding anything to the contrary in
this Intercreditor Agreement, as security for the payment of the expenses of
Collateral Agent pursuant to Section 5.1 (i) Collateral Agent is hereby granted
-----------
a first and prior Lien by each Debtor upon all Collateral and (ii) Collateral
Agent shall have the right to use and apply any of the funds held by Collateral
Agent in the Collateral Account to cover such expenses.
VI. POSSESSION AND USE OF COLLATERAL; PARTIAL RELEASES
VI.1 Use of Collateral. The rights of Debtors in and to the Collateral
are set forth in the Bank Credit Agreement, the Note Agreements and the Security
Documents.
VI.2 Releases. Releases and dispositions of Collateral (other than sales,
releases and dispositions of Collateral which are permitted by the terms and
provisions of the Bank Credit Agreement, the Note Agreements and the Security
Documents) may be made by Collateral Agent, only at the direction of all Lenders
and all Holders. Sales, releases or other dispositions of Collateral which are
permitted by the terms and provisions of the Bank Credit Agreement, the Note
Agreements and the Security Documents shall not require any written or oral or
consent of Collateral Agent, Lenders or Holders, and sales or other dispositions
of Collateral which are pursuant to the exercise of remedies hereunder or under
any Security Document shall not require any written or oral or consent of any
Secured Party. Nevertheless, any Debtor may request that Collateral Agent
execute and deliver to such Debtor or any purchaser of Collateral a written
release, disclaimer or quitclaim of Collateral Agent's interest in any
Collateral under the Security Documents, and such purchaser shall be entitled to
rely conclusively on such release, disclaimer or quitclaim. Unless requested by
any Debtor, it shall not be necessary for any Secured Party to sign such
release. Such request shall be in writing, shall describe the property to be
released in reasonable detail, and, shall state that such release is or will be
in accordance with the Security Documents. Collateral Agent shall send a copy
of all releases to Administrative Agent and the Holders.
VII. COLLATERAL AGENT
INTERCREDITOR AGREEMENT - Page 16
<PAGE>
VII.1 Appointment. Each Secured Party irrevocably designates and appoints
Chase Bank of Texas, National Association as Collateral Agent of such Person
under this Intercreditor Agreement and the Security Documents and each Secured
Party irrevocably authorizes Chase Bank of Texas, National Association as
Collateral Agent for such Person to take such action on such Person's behalf
under the provisions of this Intercreditor Agreement and the Security Documents
and to exercise such powers and perform such duties as are expressly delegated
to Collateral Agent by the terms hereof and thereof, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary in this Intercreditor Agreement and the Security Documents,
Collateral Agent shall not have any duties or responsibilities, except those
expressly set forth in this Intercreditor Agreement and the Security Documents,
nor any fiduciary or trustee relationship with any Secured Party, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Intercreditor Agreement and the Security Documents or
otherwise exist against Collateral Agent.
VII.2 Exculpatory Provisions.
(a) Collateral Agent shall not be responsible in any manner whatsoever
for the correctness of any recitals, statements, representations or
warranties herein, all of which are made solely by Debtors. Collateral
Agent makes no representations as to the value or condition of the
Collateral or any part thereof, or as to the title of Debtors thereto or as
to the security afforded by this Intercreditor Agreement or any Security
Document, or as to the validity, execution, enforceability, legality or
sufficiency of this Intercreditor Agreement, the Security Documents, the
Bank Credit Agreement, the Note Agreements, the Bank Obligations or the
Note Obligations, and Collateral Agent shall incur no liability or
responsibility in respect of any such matters. Collateral Agent shall not
be responsible for insuring the Collateral or for the payment of taxes,
charges or assessments or discharging of Liens upon the Collateral or
otherwise as to the maintenance of the Collateral.
(b) Collateral Agent shall not be required to ascertain or inquire as
to the performance by any Debtor of any of the covenants or agreements
contained herein or in any Security Document, the Bank Credit Agreement or
the Note Agreements. Whenever it is necessary, or in the opinion of
Collateral Agent advisable, for Collateral Agent to ascertain the amount of
the Bank Obligations or the Note Obligations, then held by the respective
Secured Parties, Collateral Agent may rely on a certificate of
Administrative Agent, in the case of the Bank Obligations, or of the
Holders, in the case of the Note Obligations.
(c) Collateral Agent shall be under no obligation or duty to take any
action under this Intercreditor Agreement or any Security Document if
taking such action (i) would subject Collateral Agent to a tax in any
jurisdiction where it is not then subject to a tax or (ii) would require
Collateral Agent to qualify to do business in any jurisdiction where it is
not then so qualified, unless Collateral Agent receives security or
indemnity satisfactory to it against such tax (or equivalent liability), or
any liability resulting from such qualification, in each case as results
from the taking of such action under this Intercreditor Agreement or any
Security Document.
INTERCREDITOR AGREEMENT - Page 17
<PAGE>
(d) Notwithstanding any other provision of this Intercreditor
Agreement, Collateral Agent shall not be liable for any action taken or
omitted to be taken by it in accordance with this Intercreditor Agreement
or any Security Document, except to the extent that taking such action or
omitting to take such action constitutes gross negligence or wilful
misconduct by Collateral Agent.
(e) Collateral Agent shall have the same rights with respect to any
obligation held by it as any other Secured Party and may exercise such
rights as though it were not Collateral Agent hereunder, and may accept
deposits from, lend money to, and generally engage in any kind of business
with any Debtor as if it were not Collateral Agent.
VII.3 Delegation of Duties. Collateral Agent may execute any of the
powers hereof and perform any duty hereunder either directly or by or through
agents or attorneys-in-fact. Collateral Agent shall be entitled to advice of
counsel concerning all matters pertaining to such powers and duties. Collateral
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it in good faith.
VII.4 Reliance by Collateral Agent.
(a) Collateral Agent may consult with counsel, and any advice or
statements of legal counsel (including, without limitation, counsel to
Debtors) shall be full and complete authorization and protection in respect
of any action taken or suffered by it hereunder or under any Security
Document in accordance therewith.
(b) Collateral Agent may conclusively rely, and shall be fully
protected in acting, upon any resolution, statement, certificate,
instrument, opinion, report, notice, request, consent, order, bond or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties or, in the case of cables,
telecopies and telexes, to have been sent by the proper party or parties,
except to the extent that such reliance or action constitutes gross
negligence or wilful misconduct of Collateral Agent. Collateral Agent may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished
to Collateral Agent and conforming to the requirements of this
Intercreditor Agreement, except to the extent that such reliance
constitutes gross negligence or wilful misconduct of Collateral Agent.
(c) Notwithstanding anything to the contrary contained herein,
Collateral Agent shall not be under any obligation to exercise any of the
rights or powers vested in Collateral Agent by this Intercreditor Agreement
and the Security Documents, at the request or direction of any Secured
Party pursuant to this Intercreditor Agreement, or otherwise, unless
Collateral Agent shall have been provided security to its reasonable
satisfaction against the fees, costs, expenses and liabilities which may be
incurred by it, including such reasonable advances as may be requested by
Collateral Agent.
INTERCREDITOR AGREEMENT - Page 18
<PAGE>
VII.5 Limitations on Duties of Collateral Agent.
(a) Collateral Agent shall be obligated to perform such duties and
only such duties as are specifically set forth in this Intercreditor
Agreement and the Security Documents, and no implied covenants or
obligations shall be read into this Intercreditor Agreement or any Security
Document against Collateral Agent.
(b) Collateral Agent shall not be under any obligation to take any
action which is discretionary with Collateral Agent under the provisions
hereof or any Security Document, except upon the written request of the
Determining Secured Parties, and upon such written request of the
Determining Secured Parties Collateral Agent shall take such action
(subject to the terms and provisions hereof).
VII.6 Resignation or Removal of Collateral Agent.
(a) Should Collateral Agent ever cease to be a Lender, or should
Collateral Agent ever resign as Collateral Agent, then a new Collateral
Agent appointed by the Determining Secured Parties shall forthwith become
Collateral Agent, and Debtors and Secured Parties shall execute such
documents as Administrative Agent or Prudential may reasonably request to
reflect such change. Any resignation of Collateral Agent shall become
effective upon the appointment by Determining Secured Parties of a
successor Collateral Agent; provided, however, that if Determining Secured
Parties fail for any reason to appoint a successor within 60 days after
such removal or resignation, Collateral Agent shall thereafter have no
obligation to act as Collateral Agent hereunder.
(b) If the Collateral Agent shall fail or refuse to perform or
commence performing any act set forth in written instructions delivered
pursuant to, and in accordance with the terms and conditions of, this
Intercreditor Agreement (other than where such nonperformance is beyond the
control of the Collateral Agent or where such performance would entail a
violation of applicable Law or conflict with the provisions of this
Intercreditor Agreement or any Financing Document or where performance is
not required by this Intercreditor Agreement, including without limitation
as provided in Sections 7.2(c) and 7.4(c)), and such failure continues for
--------------------------
a period of 15 days from the date of receipt of said written instructions,
the Collateral Agent may be removed by the Determining Secured Parties.
Determining Secured Parties shall also have the right to appoint a
successor Collateral Agent.
(c) Upon the acceptance of any appointment as Collateral Agent
hereunder by a successor Collateral Agent, such successor Collateral Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Collateral Agent, and the retiring
Collateral Agent shall be discharged from its duties and obligations
hereunder. After any retiring Collateral Agent's resignation or removal
hereunder as Collateral Agent, (a) the provisions of Sections 5.3 and 7.11
---------------------
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Collateral Agent, (b) any
Collateral held in possession of the retiring Collateral Agent shall
INTERCREDITOR AGREEMENT - Page 19
<PAGE>
be delivered to the successor Collateral Agent, and (c) the retiring
Collateral Agent shall assign all of its rights as secured party or other
similar position with respect to all of the Collateral to the successor
Collateral Agent for the pro rata benefit of the Secured Parties.
--- ----
VII.7 Status of Successor. Every successor Collateral Agent appointed
pursuant to Section 7.6 shall be a depository institution in good standing and
-----------
having power to act as Collateral Agent hereunder, incorporated under the laws
of the United States of America or any State thereof or the District of Columbia
and having capital and surplus no less than $250,000,000.
VII.8 Merger of Collateral Agent. Any corporation into which Collateral
Agent may be merged, or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which Collateral Agent shall be a
party, or any corporation which is otherwise a successor of Collateral Agent,
shall be Collateral Agent under this Intercreditor Agreement and the Security
Documents without the execution or filing of any paper or any further act on the
part of the parties hereto except as required by applicable Law.
VII.9 Treatment of Payee or Endorsee by Collateral Agent, Representatives
of Lenders and Holders. Collateral Agent may treat the registered holder or, if
none, the payee or endorsee of any promissory note or debenture evidencing the
Bank Obligations or the Note Obligations as the absolute owner thereof for all
purposes and shall not be affected by any notice to the contrary, whether such
promissory note or debenture shall be past due or not.
VII.10 Non-Reliance on Collateral Agent. Each Secured Party expressly
acknowledges that neither Collateral Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates has made any representations
or warranties to them. Except for notices, reports and other documents
expressly required to be furnished to Secured Parties by Collateral Agent
hereunder, Collateral Agent shall not have any duty or responsibility to provide
any Secured Party with any credit or other information concerning the business,
operations, property, financial and other condition or creditworthiness of any
Debtor which may come into its possession or the possession of any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates.
Collateral Agent and its affiliates may exercise all contractual and legal
rights and remedies which may exist from time to time with respect to other
existing and future relationships with any Debtor without any duty to account
therefor to any Secured Party.
VII.11 INDEMNIFICATION. SECURED PARTIES AGREE TO INDEMNIFY COLLATERAL
AGENT (IN ITS CAPACITY AS SUCH), WITHOUT LIMITING THE OBLIGATION OF ANY DEBTOR
TO DO SO, RATABLY ACCORDING TO THE POST-ACCELERATION SHARING PERCENTAGES OF
SECURED PARTIES DETERMINED AT THE DATE OF ANY CLAIM BY COLLATERAL AGENT FOR
INDEMNITY UNDER THIS SECTION, FROM AND AGAINST ANY AND ALL LIABILITIES,
-------
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES (INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND EXPENSES OF
COUNSEL) OR DISBURSEMENTS OF ANY KIND WHATSOEVER WHICH MAY AT ANY TIME BE
IMPOSED ON, INCURRED BY OR ASSERTED AGAINST COLLATERAL AGENT IN ANY WAY RELATING
TO OR ARISING OUT OF THIS INTERCREDITOR AGREEMENT,
INTERCREDITOR AGREEMENT - Page 20
<PAGE>
THE BANK CREDIT AGREEMENT, THE NOTE AGREEMENTS, THE SECURITY DOCUMENTS, OR ANY
DOCUMENTS CONTEMPLATED HEREBY OR THEREBY OR REFERRED TO HEREIN OR THEREIN OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR ANY ACTION TAKEN OR OMITTED BY
COLLATERAL AGENT HEREUNDER OR THEREUNDER OR IN CONNECTION THEREWITH, INCLUDING
THE MERE NEGLIGENCE OF COLLATERAL AGENT, TO THE EXTENT THAT COLLATERAL AGENT HAS
NOT BEEN INDEMNIFIED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES BUT EXCEPT TO
THE EXTENT THAT SUCH CLAIM OR LIABILITY AROSE AS A RESULT OF THE GROSS
NEGLIGENCE OR WILFUL MISCONDUCT OF COLLATERAL AGENT; PROVIDED, HOWEVER, IF ANY
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ACTION BY COLLATERAL AGENT WAS NOT TAKEN WITH THE EXPRESS AUTHORIZATION OR
CONSENT OF A SECURED PARTY, SUCH SECURED PARTY'S INDEMNIFICATION LIABILITY
HEREUNDER FOR CLAIMS RESULTING FROM SUCH ACTION SHALL BE LIMITED TO THE AMOUNTS
WHICH SUCH SECURED PARTY RECEIVES OR OTHERWISE WOULD BE ENTITLED TO RECEIVE
UNDER THIS INTERCREDITOR AGREEMENT. SECURED PARTIES AGREE TO REIMBURSE
COLLATERAL AGENT (TO THE EXTENT NOT REIMBURSED BY DEBTORS), RATABLY ACCORDING TO
THE POST-ACCELERATION SHARING PERCENTAGES OF SECURED PARTIES, PROMPTLY UPON
DEMAND FOR ANY OUT-OF-POCKET EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES)
INCURRED BY COLLATERAL AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION,
DELIVERY, ADMINISTRATIVE, MODIFICATION, AMENDMENT, OR ENFORCEMENT (WHETHER
THROUGH LEGAL PROCEEDINGS OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS
OR RESPONSIBILITIES UNDER, THIS INTERCREDITOR AGREEMENT AND THE SECURITY
DOCUMENTS, OR ANY OTHER DOCUMENTS CONTEMPLATED HEREBY OR THEREBY. THE AGREEMENTS
IN THIS SECTION 7.11 SHALL SURVIVE THE PAYMENT OF THE BANK OBLIGATIONS, THE NOTE
------------
OBLIGATIONS AND THE TERMINATION OF THE OTHER PROVISIONS OF THIS INTERCREDITOR
AGREEMENT.
VIII. PARI PASSU PROVISIONS
VIII.1 Agreement. Notwithstanding anything contained in the Bank Credit
Agreement, the Note Agreements or any Security Document to the contrary, the
terms and provisions of this Section 8.1 shall control. Lenders, Secured
-----------
Parties and Debtors agree that any security interests, pledges of stock, or
other encumbrances of any Holder securing the Note Obligations, are and shall be
subject to and pari passu with the security interests, pledges of stock or other
encumbrances of Administrative Agent or any Lender securing payment of the Bank
Obligations. Lenders, Secured Parties and Debtors agree that any and all of the
rights and remedies of any Holder with respect to the Collateral shall remain
subject to and pari passu with the rights and remedies of Administrative Agent
and each Lender with respect thereto. In the event that Administrative Agent,
any Lender or any Holder at any time obtains possession of any of the
Collateral, it shall promptly deliver such Collateral to Collateral Agent,
unless precluded by Law or judicial order.
VIII.2 Authority of Collateral Agent. Each of the Secured Parties hereby
irrevocably constitute and appoint Collateral Agent and any officer or agent
thereof until such time as this Intercreditor Agreement terminates pursuant to
Section 9.9, with full power of substitution, as its
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INTERCREDITOR AGREEMENT - Page 21
<PAGE>
true and lawful attorney-in-fact with full power and authority in the name of
such Secured Party or in Collateral Agent's own name, from time to time in
Collateral Agent's discretion, to take any and all appropriate action permitted
hereunder, under the Security Documents and to execute any and all documents and
instruments which may be necessary or desirable to carry out the terms of this
Intercreditor Agreement and the Security Documents and accomplish the purposes
hereof and thereof and, without limiting the generality of the foregoing, each
Secured Party hereby gives the Collateral Agent the power and rights on behalf
of such Secured Party, without notice to or further assent by any Secured Party
to do the following:
(i) to ask for, demand, sue for, collect, receive and give acquittance
for any and all moneys due or to become due upon, or in connection with,
the Collateral;
(ii) to receive, take, endorse, assign and deliver any and all checks,
notes, drafts, acceptances, documents and other negotiable and non-
negotiable instruments taken or received by Collateral Agent as, or in
connection with, the Collateral;
(iii) to commence, prosecute, defend, settle, compromise or adjust
any claim, suit, action or proceeding with respect to, or in connection
with, the Collateral;
(iv) to sell, transfer, release, assign or otherwise deal in or with
the Collateral or any part thereof as fully and effectively as if
Collateral Agent were the absolute owner thereof; and
(v) to do, at its option, at any time or from time to time, all acts
and things which Collateral Agent deems necessary to protect or preserve
the Collateral and to realize upon the Collateral.
Said attorney, Collateral Agent, is hereby granted and given full power and
authority to do and perform every act necessary and proper to be done in the
exercise of any of the foregoing powers. Understanding that powers of attorney
are strictly construed, each Secured Party declares that it is its expressed
intention that this power of attorney shall be liberally construed to give the
fullest effect to the powers granted herein.
VIII.3 No Commencement of Any Proceeding. Each Secured Party agrees that,
so long as any of the Bank Obligations or the Note Obligations shall remain
unpaid, it will not exercise any right, power or remedy referred to in Section
-------
8.2 hereof with respect to the Collateral without the consent of Collateral
- ---
Agent.
VIII.4 Obligations Hereunder Not Affected. All agreements, rights and
interests of Collateral Agent and Secured Parties and all agreements and
obligations of Debtors hereunder, shall remain in full force and effect,
irrespective of:
(a) any lack of validity or enforceability of any of the Bank Credit
Agreement, this Intercreditor Agreement, the Note Agreements, the Security
Documents, or any other documents related thereto;
INTERCREDITOR AGREEMENT - Page 22
<PAGE>
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Bank Obligations or the Note Obligations,
or any other amendment or waiver of or any consent to departure from the
Bank Credit Agreement, this Intercreditor Agreement, the Note Agreements,
the Security Documents or any other documents related thereto;
(c) any exchange, release or non-perfection of any Collateral, or any
release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Bank Obligations or the Note Obligations;
and
(d) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, any Debtor in respect of the Bank
Obligations or the Note Obligations.
VIII.5 Reinstatement. This Intercreditor Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Bank Obligations or the Note Obligations is rescinded or must
otherwise be returned by Collateral Agent upon the insolvency, bankruptcy or
reorganization of any Debtor or otherwise, all as though such payment had not
been made.
VIII.6 Waiver. Each Debtor hereby waives, except as provided in the
Security Documents, the Bank Credit Agreement or the Note Agreements,
promptness, diligence, notice of acceptance and any other notice with respect to
any of the Bank Obligations or the Note Obligations and this Intercreditor
Agreement and any requirement that Collateral Agent protect, secure, perfect or
insure any security interest or Lien or any property subject thereto or exhaust
any right or take any action against any Debtor or any other Person or any
Collateral.
IX. SECURED PARTIES
IX.1 Cooperation. Each Secured Party agrees with each of the other
Secured Parties and the Collateral Agent that:
(a) it will from time to time provide such information to the
Collateral Agent as may be necessary to enable the Collateral Agent to make
any calculation as referred to in Section 3.7 of this Intercreditor
-----------
Agreement or otherwise required for any other purpose hereof;
(b) it will, from time to time consult with the Collateral Agent and
the other Secured Parties in good faith regarding the enforcement of its
rights with a view to recovering amounts due under the Credit Facilities;
(c) it will, in the case of any Event of Default with respect to which
it shall have received written notice from, or provided written notice to,
the Borrower, promptly give each other Secured Party and the Collateral
Agent written notice of such Event of Default (a "Notice of Event of
Default"); and
INTERCREDITOR AGREEMENT - Page 23
<PAGE>
(d) it will give the Collateral Agent and each other Secured Party
prompt written notice of any Acceleration of any of its Obligations.
IX.2 Waivers of Rights. Except as otherwise expressly set forth herein,
so long as the Obligations remain unpaid, the Secured Parties hereby agree to
refrain from exercising any and all rights each may individually (i.e., other
than through the Collateral Agent) now or hereafter have to exercise any right
pursuant to the Security Documents, the Uniform Commercial Code as in effect in
any applicable jurisdiction, or under similar provisions of the Laws of any
jurisdiction or otherwise dispose of or retain any of the Collateral. The
Secured Parties hereby agree not to take any action whatsoever to enforce any
term or provision of the Security Documents or to enforce any right with respect
to the Collateral, in conflict with this Intercreditor Agreement or the terms
and provisions of the Security Documents.
IX.3 Permitted Action by the Secured Parties. Any Secured Party may (but
in no event shall be required to), without instruction from the Collateral
Agent, take action permitted by applicable Law or in accordance with the terms
of the Security Documents to preserve their rights and liens in any item of
Collateral securing the payment and performance of the Obligations, including
but not limited to curing any default or alleged default under any contract
entered into by the Borrower or any of its Subsidiaries, paying any tax, fee or
expense on behalf of the Borrower or any of its Subsidiaries, exercising any
offset or recoupment rights and paying insurance premiums on behalf of the
Borrower or any of its Subsidiaries so long as such action shall not impair the
rights of the Collateral Agent or of any other Secured Party.
IX.4 Right to Instruct Collateral Agent. Upon Acceleration under a Credit
Facility, the Determining Secured Parties may instruct the Collateral Agent to
liquidate the Collateral in the manner described in the Security Documents.
X. MISCELLANEOUS
X.1 Notices. Unless otherwise provided herein, all notices, requests,
consents and demands shall be in writing and shall be personally delivered or
mailed by certified mail, postage prepaid, to the respective addresses specified
herein, or, as to any party, to such other address as may be designated by it in
written notice to all other parties. All notices, requests, consents and
demands hereunder will be effective when personally delivered or mailed by
certified mail, postage prepaid, addressed as aforesaid.
X.2 No Waivers. No failure on the part of Collateral Agent or any Secured
Party to exercise, no course of dealing with respect to, and no delay in
exercising, any right, power or privilege under this Intercreditor Agreement or
any Security Document shall operate as a waiver thereof nor shall any single or
partial exercise of any such right, power or privilege preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
X.3 Amendments, Supplements and Waivers. The provisions of this
Intercreditor Agreement may not be amended, modified or waived except by the
written agreement of Debtors,
INTERCREDITOR AGREEMENT - Page 24
<PAGE>
Collateral Agent and Determining Secured Parties; provided, however, that the
provisions of Section 6.2 of this Intercreditor Agreement and this Section 9.3
----------- -----------
may not be amended, modified or waived except by the written agreement of
Debtors, Collateral Agent and all of the Lenders and Holders. The provisions of
each Security Document may not be amended, modified or waived except by the
written agreement of the Debtor party thereto, Collateral Agent and Determining
Secured Parties; provided, however, that no such amendment, modification or
waiver shall be contrary to Section 6.2 hereof, or shall adversely affect the
-----------
interests of any Secured Party or release any security interest except as
otherwise permitted by this Intercreditor Agreement or provide that any Person
other than the Secured Parties and their respective successors and assigns shall
have the benefits of the security interests created by any of the Security
Documents. Any such supplemental agreements shall be binding upon Debtors,
Collateral Agent, Secured Parties and their respective successors and assigns.
X.4 Headings. The headings of Sections and subsections have been included
herein and in the Security Documents for convenience only and should not be
considered in interpreting this Intercreditor Agreement or the Security
Documents.
X.5 Severability. Any provision of this Intercreditor Agreement which is
prohibited or unenforceable in any jurisdiction shall not invalidate the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
X.6 Successors and Assigns.
(a) This Intercreditor Agreement shall be binding upon and inure to
the benefit of each of the parties hereto and their respective successors
and assigns, and nothing herein is intended or shall be construed to give
any other Person any right, remedy or claim under, to or in respect of this
Intercreditor Agreement or any Collateral.
(b) No provision of this Intercreditor Agreement shall restrict in any
manner the assignment, participation or other transfer by any Secured Party
of all or any part of its right, title or interest under any Credit
Facility; provided that, unless the transferee becomes a Secured Party for
--------
purposes hereof in accordance with Section 10.6(c), the transferor Secured
---------------
Party shall remain responsible for performance of this Intercreditor
Agreement with respect to the interest transferred, all as more fully set
forth herein, and the Collateral Agent shall have no responsibilities to
and need not acknowledge the interests of such transferee.
(c) In connection with an assignment of all, or of a proportionate
part of all, of its right, title and interest under any Credit Facility to
any bank, insurance company or other financial institution (the
"Purchaser"), all in accordance with the applicable provisions of the
relevant Credit Facility, such Purchaser shall become a Secured Party
hereunder only upon (i) the written agreement of such transferor Secured
Party and such Purchaser and (ii) the receipt by the Collateral Agent of a
Supplement to Intercreditor Agreement substantially in the form of Exhibit
-------
A hereto executed and delivered by such Purchaser.
-
INTERCREDITOR AGREEMENT - Page 25
<PAGE>
X.7 GOVERNING LAW. THIS INTERCREDITOR AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
X.8 Counterparts. This Intercreditor Agreement may be signed in any
number of counterparts with the same effect as if the signatures thereto and
hereto were upon the same instrument.
X.9 Termination.
(a) Upon (i) receipt by Collateral Agent from Secured Parties of a
written direction to cause Collateral Agent's Liens under the Pledge
Agreements to be released and discharged, (ii) payment in full of the Bank
Obligations, the Note Obligations and all fees and expenses owing to
Collateral Agent hereunder, (iii) termination of the Bank Credit Agreement
and the Note Agreements, and (iv) execution by Collateral Agent of
instruments of release and delivery of all of its interest in the
Collateral to the respective Debtors, this Intercreditor Agreement shall
terminate with respect to Collateral Agent and Secured Parties and all of
their obligations hereunder shall cease; and the security interests of
Collateral Agent as secured party created by Section 5.4 and by the
-----------
Security Documents shall be released; provided, that the provisions of
Sections 5.1, 5.3 and 7.11 shall not be affected by any such termination.
------------ --- ----
(b) Upon the first Business Day after the Maturity Date, if there are
no Bank Obligations other than the LC Exposure and the LC Exposure is
secured in full by cash collateral in accordance with Section 4.7 of this
-----------
Intercreditor Agreement and Section 2.04(c) of the Bank Credit Agreement,
---------------
this Intercreditor Agreement shall terminate with respect to the Collateral
Agent and Secured Parties and all of their obligations hereunder shall
cease; and the security interest of Collateral Agent as secured party
created by Section 5.4 and by the Security Documents shall be assigned to a
-----------
collateral agent appointed by the Holders; provided, that the provisions of
Sections 5.1, 5.3 and 7.11 shall not be affected by any such termination.
--------------------------
Collateral Agent shall execute such assignments of the Security Documents
and related financing statements (in form and substance acceptable to
Collateral Agent) as Prudential may reasonably require to further evidence
such assignment and shall deliver to Prudential any Collateral in
Collateral Agent's possession (other than cash collateral securing LC
Exposure).
X.10 Control. Notwithstanding anything contained herein which may be to
the contrary, this Intercreditor Agreement and the transactions contemplated
hereby do not and will not constitute, create, or have the effect of
constituting or creating, directly or indirectly, actual or practical ownership
of any Debtor or any Subsidiary of the Borrower, by Collateral Agent or any
Secured Party, or control, affirmative or negative, direct or indirect, by
Collateral Agent or any Secured Party, over the programming, management, or any
other aspect of the day-to-day operation of any Debtor or any Subsidiary, which
control remains in Borrower, its shareholders and boards of directors.
INTERCREDITOR AGREEMENT - Page 26
<PAGE>
X.11 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT AND THE OTHER DOCUMENTS
REFERENCED HEREIN OR CONTEMPLATED HEREBY REPRESENT THE FINAL AGREEMENT AMONG THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
INTERCREDITOR AGREEMENT - Page 27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Intercreditor
Agreement to be duly executed by their respective authorized officers as of the
day and year first written above.
BORROWER: GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
Address:
2121 San Jacinto, Suite 2500
Dallas, Texas 75201 By: /s/ PAUL W. FEHLMAN
Attention: Paul W. Fehlman --------------------------------
--------------------- Name: Paul W. Fehlman
Fax No.: 214-953-4594 ---------------------------
------------------------ Title: Treasurer
--------------------------
MATERIAL SUBSIDIARIES: GPX CORP., a Nevada corporation
Address:
2121 San Jacinto, Suite 2500
Dallas, Texas 75201 By: /s/ PAUL W. FEHLMAN
Attention: Paul W. Fehlman --------------------------------
Fax No.: (214) 953-4594 Name: Paul W. Fehlman
---------------------------
Title: Treasurer
--------------------------
HARBISON-WALKER REFRACTORIES
COMPANY, a Delaware corporation
Address:
By: /s/ PAUL W. FEHLMAN
--------------------------------
Attention: Paul W. Fehlman Name: Paul W. Fehlman
--------------------- ---------------------------
Fax No.: 214-953-4594 Title: Treasurer
----------------------- ---------------------------
GLOBAL PROCESSING SYSTEMS, INC.,
a Delaware corporation
Address:
By: /s/ PAUL W. FEHLMAN
--------------------------------
Attention: Paul W. Fehlman Name: Paul W. Fehlman
--------------------- ---------------------------
Fax No.: 214-953-4594 Title: Treasurer
----------------------- ---------------------------
INTERCREDITOR AGREEMENT - Page 28
<PAGE>
CORROSION TECHNOLOGY INTERNATIONAL,
INC., a Delaware corporation
Address: 2121 San Jacinto St.
Suite 2500
Dallas, TX 75201
By: /s/ PAUL W. FEHLMAN
--------------------------------
Attention: Paul W. Fehlman Name: Paul W. Fehlman
--------------------- ---------------------------
Fax No.: 214-953-4594 Title: Treasurer
----------------------- ---------------------------
A.P. GREEN REFRACTORIES, INC.,
a Delaware corporation
Address:
By: /s/ PAUL W. FEHLMAN
--------------------------------
Attention: Paul W. Fehlman Name: Paul W. Fehlman
--------------------- ---------------------------
Fax No.: 214-953-4594 Title: Treasurer
----------------------- ---------------------------
A.P. GREEN INDUSTRIES, INC.,
a Delaware corporation
Address:
By: /s/ PAUL W. FEHLMAN
--------------------------------
Attention: Paul W. Fehlman Name: Paul W. Fehlman
--------------------- ---------------------------
Fax No.: 214-953-4594 Title: Treasurer
----------------------- ---------------------------
DETRICK REFRACTORY FIBERS INC.,
a Mississippi corporation
Address:
By: /s/ PAUL W. FEHLMAN
--------------------------------
Attention: Paul W. Fehlman Name: Paul W. Fehlman
--------------------- ---------------------------
Fax No.: 214-953-4594 Title: Treasurer
----------------------- ---------------------------
INTERCREDITOR AGREEMENT - Page 29
<PAGE>
POLYMER PIPE TECHNOLOGY, INC.,
a Delaware corporation
Address: 2121 San Jacinto St.
Suite 2500
Dallas, TX 75201
By: /s/ PAUL W. FEHLMAN
--------------------------------
Attention: Paul W. Fehlman Name: Paul W. Fehlman
--------------------- ---------------------------
Fax No.: 214-953-4594 Title: Treasurer
----------------------- ---------------------------
CORROSION IP CORP.,
a Nevada corporation
Address:
By: /s/ PAUL W. FEHLMAN
--------------------------------
Attention: Paul W. Fehlman Name: Paul W. Fehlman
--------------------- ---------------------------
Fax No.: 214-953-4594 Title: Treasurer
----------------------- ---------------------------
GLOBAL INDUSTRIAL TECHNOLOGIES
SERVICES COMPANY, a Delaware corporation
Address:
By: /s/ PAUL W. FEHLMAN
--------------------------------
Attention: Paul W. Fehlman Name: Paul W. Fehlman
--------------------- ---------------------------
Fax No.: 214-953-4594 Title: Treasurer
----------------------- ---------------------------
COLLATERAL AGENT: CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION,
Address: as Collateral Agent
2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201 By: /s/ MAE K. REEVES
--------------------------------
Attention: Mae K. Reeves Name: Mae K. Reeves
---------------------------
Fax No.: (214) 965-2044 Title: Vice President
--------------------------
INTERCREDITOR AGREEMENT - Page 30
<PAGE>
ADMINISTRATIVE AGENT: CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION,
Address: as Administrative Agent
2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201
Attention: Mae K. Reeves By: /s/ MAE REEVES
---------------------------
Fax No.: (214) 965-2044 Name: Mae Reeves
----------------------
Title: Vice President
----------------------
ISSUING BANK: ABN AMRO BANK N.V., HOUSTON AGENCY
as Issuing Bank
Address:
Three Riverway, Suite 1700
Houston, Texas 77056 By: /s/ DIEGO PUIGGARI
---------------------------
Attention: Diego Puiggari Name:
Diego Puiggari
Fax No.: (713) 961-1699 ---------------------------
Title:
Group Vice President
---------------------------
By: /s/ ERIC R. HOLLINGSWORTH
---------------------------
Name: Eric R. Hollingsworth
----------------------
Title: Vice President
---------------------
LENDERS: CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
Address:
2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201 By: /s/ MAE REEVES
---------------------------
Attention: Mae K. Reeves Name: Mae K. Reeves
----------------------
Fax No.: (214) 965-2044 Title: Vice President
---------------------
PNC BANK, NATIONAL ASSOCIATION
Address:
249 Fifth Avenue, 2nd Floor
Pittsburgh, Pennsylvania 15222-2707 By: /s/ DARLENE B. KRUTH
---------------------------
Attention: Philip Liebscher Name: Darlene B. Kruth
----------------------
Fax No.: (412) 762-6484 Title: Assistant Vice
President
----------------------
INTERCREDITOR AGREEMENT - Page 31
<PAGE>
ABN-AMRO BANK N.V., HOUSTON AGENCY
Address:
Three Riverway, Suite 1700
Houston, Texas 77056 By: By: /s/ Diego Puiggari
Attention: Diego Puiggari -------------------------------
Fax No.: (713) 961-1699 Name: Diego Puiggari
--------------------------
Title: Group Vice President
--------------------------
By: /s/ Eric R. Hollingsworth
-------------------------------
Name: Eric R. Hollingsworth
--------------------------
Title: Vice President
--------------------------
HOLDERS: THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
Address:
c/o Prudential Capital
2200 Ross Avenue By: /s/ R. Chris Busbee
Dallas, Texas 75201 -------------------------------
Attention: Name: R. Chris Busbee
------------------------ --------------------------
Fax No.:
------------------------ Title: Vice President
--------------------------
U.S. PRIVATE PLACEMENT FUND
Address: By: Prudential Private Placement
Investors, L.P., Investment Advisor
By: Prudential Private Placement
Attention: Investors, Inc., its General Partner
------------------------
Fax No.:
------------------------
By: /s/ R. Chris Busbee
---------------------------
Name: R. Chris Busbee
----------------------
Title: Vice President
----------------------
INTERCREDITOR AGREEMENT - Page 32
<PAGE>
PRINCIPAL LIFE INSURANCE COMPANY
Address:
By: /s/ JoEllen J. Watts
--------------------------------
Attention: Name: JoEllen J. Watts
--------------------- ---------------------------
Fax No.: Title: Counsel
----------------------- ---------------------------
By: /s/ Stephen G. Skrivanek
--------------------------------
Name: Stephen G. Skrivanek
---------------------------
Title: Counsel
---------------------------
INTERCREDITOR AGREEMENT - Page 33
<PAGE>
Exhibit A
---------
SUPPLEMENT TO INTERCREDITOR AGREEMENT
(SUCCESSOR LENDERS)
[Date]
Re: Intercreditor Agreement dated as of July 30, 1999, made by Chase Bank
of Texas, National Association, as Collateral Agent for itself and the
other Secured Parties (the "Intercreditor Agreement"); capitalized
terms used herein and not otherwise defined herein shall have the
meaning provided in the Intercreditor Agreement.
Ladies and Gentlemen:
We acknowledge that we have received a copy of the Intercreditor Agreement
and we refer to Section 10.6 thereof.
------------
Upon your receipt of this Supplement, we (a) shall have all the rights and
benefits of a "Secured Party" under the Intercreditor Agreement as if we were an
original signatory thereto, and (b) agree to be bound by the terms and
conditions set forth in the Intercreditor Agreement and to be obligated
thereunder as if we were an original signatory thereto.
[We hereby advise you that we have succeeded to [[_______]% of] the
interest of [applicable holder of Notes] under the Note Agreement and have
assumed the obligations of [applicable holder of Notes] thereunder.]
[We hereby advise you that we have succeeded to [[______]% of] the interest
of [applicable Lender] under the Bank Credit Agreement and have assumed the
obligations of [applicable Lender] thereunder.]
We hereby advise you of the following administrative details:
Address:
Facsimile:
Telephone:
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be duly
executed by its proper officer thereunto duly authorized.
[NEW LENDER]
By:
---------------------------------
Name:
--------------------------
Title:
--------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 9
<SECURITIES> 0
<RECEIVABLES> 114
<ALLOWANCES> 5
<INVENTORY> 133
<CURRENT-ASSETS> 491
<PP&E> 433
<DEPRECIATION> 178
<TOTAL-ASSETS> 1,078
<CURRENT-LIABILITIES> 383
<BONDS> 0
0
0
<COMMON> 7
<OTHER-SE> 226
<TOTAL-LIABILITY-AND-EQUITY> 1,078
<SALES> 273
<TOTAL-REVENUES> 274
<CGS> 204
<TOTAL-COSTS> 263
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> 10
<INCOME-TAX> 2
<INCOME-CONTINUING> 8
<DISCONTINUED> (11)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3)
<EPS-BASIC> (.15)
<EPS-DILUTED> (.15)
</TABLE>
