UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended May 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission File Number: 0-22992
The Shaw Group Inc.
(Exact name of registrant as specified in its charter)
Louisiana 72-1106167
(State of Incorporation) (I.R.S. Employer Identification Number)
11100 Mead Road, 2nd Floor, Baton Rouge, Louisiana 70816
(Address of principal executive offices) (Zip Code)
(504) 296-1140
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares outstanding of each of the issue's classes of common stock
as of the latest practicable date, is as follows:
Common stock, no par value, 12,612,866 shares outstanding as of July 9, 1998.
<PAGE>
FORM 10-Q
TABLE OF CONTENTS
Part I - Financial Information
Item 1. - Financial Statements
Consolidated Balance Sheets - August 31, 1997
and May 31, 1998 3 - 4
Consolidated Statements of Income -For the Three
Months and Nine Months Ended May 31, 1997 and 1998 5
Consolidated Statements of Cash Flows - For the Nine Months
Ended May 31, 1997 and 1998 6 - 7
Notes to Consolidated Financial Statements 8 - 13
Item 2. - Management's Discussion and Analysis of Financial Condition
and Results of Operations 14 - 19
Part II - Other Information
Item 4. - Submission of Matters to a Vote of Security Holders 20
Item 6 - Exhibits and Reports on Form 8-K 20
Signature Page 21
Exhibit Index
2
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
THE SHAW GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<CAPTION>
ASSETS
(UNAUDITED) (UNAUDITED)
August 31, May 31,
1997 1998
------------ -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,358 $ 3,791
Accounts receivable, net 85,980 153,265
Receivables from unconsolidated entity 1,453 1,379
Inventories 76,304 81,503
Prepaid expenses 2,352 6,541
Deferred income taxes 2,855 2,787
----- -----
Total current assets 173,302 249,266
Investment in unconsolidated entity 4,005 4,118
Property and equipment:
Transportation equipment 4,984 2,816
Furniture and fixtures 8,456 9,995
Machinery and equipment 48,040 62,775
Buildings and improvements 22,792 29,007
Assets acquired under capital leases 318 215
Land 3,973 4,955
----- -----
88,563 109,763
Less: Accumulated depreciation (including
amortization of assets acquired under capital leases) (18,236) (23,777)
------- -------
70,327 85,986
Goodwill, net of accumulated amortization of $493 at
August 31, 1997 and $1,147 at May 31, 1998 11,100 23,229
Other assets, net 3,725 5,315
-------- --------
$262,459 $367,914
======== ========
</TABLE>
(Continued)
The accompanying notes are an integral part of these statements.
3
<PAGE>
<TABLE>
THE SHAW GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
(UNAUDITED) (UNAUDITED)
August 31, May 31,
1997 1998
---------- ----------
<S> <C> <C>
Current liabilities:
Outstanding checks in excess of bank balance $ 691 $ 12,840
Accounts payable 31,155 30,584
Accrued liabilities 8,545 24,365
Current maturities of long-term debt 6,366 9,157
Revolving lines of credit 29,146 14,007
Current portion of obligations under capital leases 26 20
Deferred revenue- prebilled 3,582 2,608
Advanced billings 834 22,721
------ -------
Total current liabilities 80,345 116,302
Long-term debt, less current maturities 38,933 92,785
Obligations under capital leases, less current portion 106 11
Deferred income taxes 5,260 5,190
Shareholders' equity:
Preferred stock, no par value,
5,000,000 shares authorized;
no shares issued and outstanding --- ---
Common stock, no par value,
50,000,000 shares authorized;
19,151,309 and 19,263,059 shares issued, respectively;
12,488,393 and 12,600,143 shares outstanding,
respectively 104,870 105,964
Retained earnings 39,773 55,793
Cumulative translation adjustments --- (829)
Unearned restricted stock compensation --- (474)
Treasury stock, 6,662,916 shares (6,828) (6,828)
------- -------
Total shareholders' equity 137,815 153,626
------- -------
$262,459 $367,914
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
<TABLE>
THE SHAW GROUP INC. AND SUBSIDIRIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<CAPTION>
(UNAUDITED) (UNAUDITED)
Three Months Ended Nine Months Ended
May 31, May 31,
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Sales $ 88,884 $ 147,684 $ 250,119 $384,883
Cost of sales 71,541 123,948 203,068 319,635
------ ------- ------- -------
Gross profit 17,343 23,736 47,051 65,248
General and administrative expenses 10,144 13,104 27,626 36,888
------ ------ ------ ------
Operating income 7,199 10,632 19,425 28,360
Interest expense (1,736) (2,367) (5,355) (6,310)
Other income, net 92 618 240 891
------ ------ ------ ------
(1,644) (1,749) (5,115) (5,419)
Income before income taxes 5,555 8,883 14,310 22,941
Provision for income taxes 1,750 2,894 4,592 7,034
------- ------- -------- ---------
Income before earnings from
unconsolidated entity 3,805 5,989 9,718 15,907
Earnings (losses) from unconsolidated
entity (250) (11) 570 113
------- -------- -------- ---------
Net income $ 3,555 $ 5,978 $ 10,288 $ 16,020
======= ======== ======== =========
Basic earnings per common share $ .29 $ .48 $ .91 $ 1.28
======= ======== ======== =========
Diluted earnings per common share $ .28 $ .47 $ .88 $ 1.25
======= ======== ======== =========
Weighted average number of shares
outstanding - basic 12,367 12,558 11,333 12,533
======== ======== ======== =========
Weighted average number of shares
outstanding - diluted 12,649 12,778 11,636 12,765
======== ======== ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
<TABLE>
THE SHAW GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
(UNAUDITED)
Nine Months Ended
May 31,
1997 1998
---------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $10,288 $16,020
Net loss not included in reporting period (See
Note 4 of Notes to Consolidated Financial
Statements) (132) ---
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization 4,810 6,803
(Earnings) from unconsolidated entity (570) (113)
Other -- (461)
Changes in assets and liabilities:
(Increase) in receivables (13,285) (48,644)
(Increase) decrease in inventories (1,315) 6,168
(Increase) in prepaid expenses (1,935) (4,193)
(Increase) in other assets (107) (1,646)
(Decrease) in accounts payable (6,085) (10,167)
Increase (decrease) in deferred revenue - prebilled 2,155 (974)
Increase in advanced billings 3,357 16,706
Increase in accrued liabilities 257 5,527
------- --------
Net cash provided by (used in) operating activities (2,562) (14,974)
Cash flows from investing activities:
Investment in unconsolidated entity (1,644) ---
Investment in subsidiaries, net of cash received (11,293) (26,126)
Proceeds from sale of property and equipment -- 3,370
Purchase of property and equipment (12,837) (9,969)
Proceeds from notes receivable 87 ---
-------- --------
Net cash provided by (used in) investing activities (25,687) (32,725)
</TABLE>
(Continued)
The accompanying notes are an integral part of these statements.
6
<PAGE>
<TABLE>
(UNAUDITED)
Nine Months Ended
May 31,
1997 1998
---- ----
<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in outstanding checks
in excess of bank balance (926) 10,658
Net (repayments) on revolving credit agreements (13,760) (15,039)
Proceeds from issuance of debt 11,880 62,188
Repayment of debt and leases (7,498) (11,108)
Distributions to members of Freeport Properties, L.C. (168) ---
Purchase of treasury stock (661) ---
Issuance of common stock 47,174 513
------ ------
Net cash provided by financing activities 36,041 47,212
Effect of exchange rate changes on cash --- (80)
------ ------
Net increase (decrease) in cash and cash equivalents 7,792 (567)
Cash and cash equivalents - beginning of period 2,967 4,358
------ ------
Cash and cash equivalents - end of period $10,759 $3,791
======= ======
Supplemental disclosures:
Cash payments for:
Interest $ 5,233 $6,036
======= ======
Income taxes $ 5,508 $2,520
======= ======
Noncash investing and financing activities:
Purchase of inventory and payment of liabilities
through the cancellation of notes receivable $ 538 $ --
======= =====
Investment in subsidiaries acquired through
issuance of debt $ --- $4,702
====== ======
Property and equipment acquired through
issuance of debt $ --- $ 85
====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE>
THE SHAW GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Unaudited Financial Information -
The financial information of The Shaw Group Inc. and its subsidiaries
(collectively, the Company) for the three-month and nine-month periods ended May
31, 1997 and 1998 and as of August 31, 1997 and May 31, 1998 included herein is
unaudited; however, such information reflects, in the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) that are
necessary to present fairly the results of operations for such periods. Results
of operations for the interim periods are not necessarily indicative of results
of operations that will be realized for the fiscal year ending August 31, 1998.
Note 2 - Inventories -
The major components of inventory consist of the following (in thousands):
(UNAUDITED) (UNAUDITED)
August 31, May 31,
1997 1998
---------- ----------
Finished goods $ 29,027 $ 29,036
Raw materials 35,257 37,636
Work in process 12,020 14,831
------ ------
$ 76,304 $ 81,503
======== ========
Note 3 - Earnings Per Common Share -
Basic earnings per common share were computed by dividing net income by the
weighted average number of shares of common stock outstanding during the periods
presented in the income statements. Diluted earnings per common share for the
periods presented include the dilution impact of the Company's stock options.
The Company adopted SFAS No. 128, "Earnings per Share," effective December 15,
1997. As a result, the Company's reported earnings per share for prior periods
were restated to conform to the requirements of SFAS 128. The effect of this
adoption on previously reported earnings per share (EPS) data was not material.
Note 4 - Acquisitions -
Effective October 1, 1996, the Company acquired all of the outstanding
capital stock of Pipe Shields Inc. (Pipe Shields), an industrial pipe insulation
company located in Vacaville, California, for approximately $2.5 million in
cash, net of cash received. The purchase method was used to account for the
acquisition. The excess of cost over the estimated fair value of the assets
acquired (goodwill) was approximately $2.0 million, which is being amortized on
a straight-line basis over 20 years. The operating results of Pipe Shields have
been included in the consolidated statements of income of the Company from the
effective date of the acquisition. The pro-forma effect of the acquisition of
Pipe Shields, had it occurred on September 1, 1996, is not material to the
operations of the Company.
8
<PAGE>
On January 27, 1997, the Company completed the acquisition of NAPTech,
Inc., a fabricator of industrial piping systems and engineered piping modules
located in Clearfield, Utah. The Company issued 432,881 shares of its Common
Stock in exchange for NAPTech, Inc. and the 335,000 square foot facility that
NAPTech, Inc. had leased from a related entity, Freeport Properties, L.C.
(Freeport). The acquisition was accounted for using the pooling-of-interests
method; accordingly, the Company's financial information for all prior periods
presented herein has been restated to include financial information of NAPTech,
Inc. and Freeport, (collectively, NAPTech).
Because the fiscal periods of the Company and NAPTech were not the same,
NAPTech's financial statements for the 1996 fiscal year were recast from the
twelve months ended March 31, 1996 to the twelve months ended June 30, 1996. The
1997 fiscal year of NAPTech is the same as the Company's. As a result, the
following July and August, 1996 sales and losses of NAPTech have been excluded
from the statement of income for the fiscal year ended August 31, 1997 (in
thousands):
Sales $ 5,194
=========
Net losses $ (132)
=========
Effective February 1, 1997, the Company purchased all of the outstanding
capital stock of United Crafts, Inc. (UCI) (now named Shaw Constructors. Inc.),
an industrial construction and maintenance company based in Baton Rouge,
Louisiana, for cash of approximately $7.6 million, net of cash received.
Acquisition costs of approximately $.2 million were incurred by the Company. The
purchase method was used to account for the acquisition. Goodwill was
approximately $4.8 million and is being amortized on a straight-line basis over
20 years. The estimated fair value of the assets and liabilities of UCI as of
February 1, 1997 are as follows (in thousands):
Accounts receivable $ 6,040
Property and equipment 2,992
Other assets 4,832
Accounts payable & accrued liabilities (3,502)
Advance billings (1,277)
Notes payable (1,101)
Deferred income taxes (146)
-------
Purchase price (net of cash received of $354) $ 7,838
=======
The operating results of UCI have been included in the consolidated
statements of income from the effective date of the acquisition.
On March 20, 1997, the Company, through a newly-formed, wholly-owned
subsidiary, completed the purchase of certain assets and the assumption of
certain liabilities of MERIT Industrial Constructors, Inc. (MERIT), an
9
<PAGE>
industrial construction and maintenance firm based in Baton Rouge, Louisiana,
and certain of its affiliates. Total consideration paid by the Company was
approximately $1.3 million in cash (including acquisition costs), 62,500 shares
of the Company's Common Stock valued at $1.3 million, options to purchase 25,000
shares of the Company's Common Stock at $20.25 per share, as well as the
assumption of approximately $340,000 of debt. The purchase method was used to
account for the acquisition. Goodwill, which is being amortized on a
straight-line basis over 20 years, was approximately $1.3 million. The operating
results related to the acquired MERIT assets have been included in the
consolidated statements of income from the date of the acquisition. The
pro-forma effect of the acquisition of the MERIT assets, had it occurred on
September 1, 1996, is not material to the operations of the Company.
On October 8, 1997, the Company purchased the capital stock of Pipework
Engineering and Developments Limited (PED), a pipe fabrication company in
Wolverhampton, United Kingdom, for approximately $539,000 in cash, net of cash
received, and notes payable to former stockholders of approximately $1,078,000.
Acquisition costs of approximately $190,000 were incurred by the Company. The
purchase method was used to account for the acquisition. Goodwill, which is
being amortized over 20 years using the straight-line method, was approximately
$1.7 million. The operating results of PED have been included in the
consolidated statements of income of the Company from the date of acquisition.
The pro-forma effect of the acquisition of PED, had it occurred on September 1,
1996, is not material to the operations of the Company.
On November 14, 1997, the Company purchased all of the capital stock or
substantially all of the assets of the principal operating businesses of
Prospect Industries plc (Prospect) of Derby, United Kingdom, for approximately
$15.9 million in cash, net of cash received. Acquisition costs of approximately
$2.2 million were incurred by the Company. Prospect, a mechanical contractor and
provider of turnkey piping systems serving the power generating and process
industries worldwide, operated through several wholly-owned subsidiaries
including Connex Pipe Systems, Inc. (Connex), a piping systems fabrication
business located in Troutville, Virginia; CBP Engineering Corp. (CBP), an
abrasion and corrosion resistant pipe systems specialist based in Pennsylvania;
Aiton Australia Pty Limited (Aiton Australia), a piping systems, boiler
refurbishment and project management company based near Sydney, Australia; and
Prospect Engineering Limited (PEL), a mechanical contractor and a provider of
turnkey piping systems located in Derby, United Kingdom. Prospect also owned a
66% interest in Inflo Control Systems Limited (Inflo), a manufacturer of boiler
steam leak detection, acoustic mill and combustion monitoring equipment and
related systems. Under the terms of the acquisition agreement, the Company
acquired all of the outstanding capital stock of Prospect Industries Overseas
Limited, a United Kingdom holding company that held the entire ownership
interest in Connex and CBP, all of the capital stock of Aiton Australia and
certain assets of PEL, as well as Prospec's entire ownership interest in Inflo.
The Company also assumed certain liabilities of PEL and Prospect relating to its
employees and pension plans. The purchase method was used to account for the
acquisition. Goodwill, which is being amortized over 20 years using the
straight-line method, was approximately $3 million. The estimated fair value of
the assets acquired and liabilities assumed as of November 14, 1997 are as
follows (in thousands):
10
<PAGE>
Accounts receivable $17,441
Inventories 11,297
Property and equipment 11,305
Other assets 3,151
Outstanding checks in excess of bank balance (1,527)
Accounts payable and accrued liabilities (18,296)
Revolving line of credit (422)
Advanced billings (4,833)
------
Purchase price (net of cash received of $127) $18,116
=======
The operating results of Prospect have been included in the consolidated
statements of income from the date of the acquisition.
In connection with the Prospect acquisition, the Company incurred certain
contingent liabilities. (See Note 8 of Notes to Consolidated Financial
Statements).
On January 15, 1998, the Company purchased all of the outstanding capital
stock of Lancas, C.A. (Lancas), a construction company in Punto Fijo, Venezuela
for $2.6 million in cash, net of cash received. The purchase method was used to
account for this acquisition. The operating results of Lancas have been included
in the consolidated statements of income from the date of acquisition. The
pro-forma effect of the acquisition of Lancas, had it occurred on September 1,
1996, is not material to the operations of the Company.
On January 19, 1998, the Company completed the acquisition of all of the
outstanding capital stock of Cojafex, B.V. of Rotterdam, Holland (Cojafex) for
$9.5 million, $4.5 million (net of cash received) of which was paid at closing.
The balance of the purchase price will be paid through December 31, 2003.
Acquisition costs of approximately $.1 million were incurred by the Company.
Cojafex owns the technology for certain induction pipe bending machines used for
bending pipe and other carbon steel and alloy items for industrial, commercial
and agricultural applications, and using such technology, Cojafex designs,
engineers, manufactures, markets and sells such induction bending machines.
Goodwill, which is being amortized over 20 years using the straight-line method,
was approximately $8.6 million. The purchase method was used to account for this
acquisition. The operating results of Cojafex have been included in the
consolidated statements of income from the date of acquisition. The pro-forma
effect of the acquisition of Cojafex, had it occurred on September 1, 1996, is
not material to the operations of the Company.
The following summarized unaudited income statement data reflects the
impact the UCI and Prospect acquisitions would have had on the Company's results
of operations if such acquisitions had taken place on September 1, 1996 (in
thousands, except per share data):
Unaudited Pro-forma Results
for the Nine Months Ended May 31,
---------------------------------
1997 1998
---- ----
Gross revenue $ 359,873 $416,418
========== ========
Net income $ 7,038 $ 15,996
========== ========
Basic earnings per common share $ .62 $ 1.28
========== ========
Diluted earnings per common share $ .60 $ 1.25
========== ========
11
<PAGE>
Prospect, PED and Cojafex maintain their accounting records in their local
currency (British Sterling and Dutch Guilder). The currencies are converted to
U.S. Dollars with the effect of the foreign currency translation reflected as a
component of shareholders' equity in accordance with SFAS No. 52, "Foreign
Currency Translation." Foreign currency transaction gains or losses are credited
or charged to income. Transaction gains or losses were not material for the
periods presented. Cumulative foreign currency translation adjustments were
approximately $829,000 as of May 31, 1998.
Note 5 - Investment in Unconsolidated Entity -
During the nine months ended May 31, 1998, the Company recognized earnings
of approximately $113,000 from Shaw-Nass Middle East, W.L.L., the Company's
Bahrain joint venture (Shaw-Nass). In addition, as of August 31, 1997 and May
31, 1998, the Company had outstanding receivables from Shaw-Nass totaling $1.5
million and $1.4 million, respectively. These receivables relate primarily to
inventory and equipment sold to the entity.
Note 6 - Long Term Debt -
In May 1998, the Company closed the private placement of two separate
tranches of senior secured long-term debt totaling $60 million. Principal
payments on $20 million of the Senior Secured Notes are due from 1999 through
2005, with interest at 6.44% payable semi-annually; principal payments on $40
million of the Senior Secured Notes are due from 2002 through 2008, with
interest at 6.93% payable semi-annually. The Senior Secured Notes will rank in
pari passu with the new U.S. revolving credit facility. (See Note 7 of Notes to
Consolidated Financial Statements)
Note 7 - Revolving Lines of Credit -
In May 1998, the Company entered into a three-year secured revolving credit
facility increasing the total U.S. line of credit to $100 million. This replaced
a $77 million secured revolving credit facility and a $13 million unsecured
revolving credit facility.
Note 8 - Commitments and Contingencies -
For the year ended August 31, 1997, 22% of the Company's labor force was
covered by collective bargaining agreements, all of which will expire during the
Company's fiscal year ended August 31, 1998. The Company does not expect that
the renewal of the agreements will have a material adverse impact on the
Company's results of operations or financial position.
In connection with the acquisition of the principal operating businesses of
Prospect (see Note 4 of Notes to Consolidated Financial Statements), the Company
entered into several indemnification agreements in favor of Prospect, PEL, and
Prospec's principal lender (the Lender). The first agreement requires the
Company to indemnify the Lender for any losses that the Lender may incur in
connection with certain letters of credit, bonds and guarantees previously
issued by the Lender relating to projects entered into by PEL, Connex, CPB,
Aiton Australia and other subsidiaries of Prospect. The Company has determined
that its maximum exposure for indemnity under the agreement with the Lender was
approximately $9.9 million as of November 14, 1997. However, the Company
12
<PAGE>
believes that its actual exposure is much less, particularly since many of the
projects for which the Lender has issued the letters of credit, bonds and
guarantees, are projects the Company procured in connection with the
acquisition.
Additionally, the Company has agreed to indemnify each of Prospect, PEL and
the Lender with respect to certain preferential creditors of Prospect and PEL.
Immediately after the closing of the acquisition by the Company of Prospect, the
Lender had an administrative receiver appointed for Prospect, PEL and the
subsidiaries not acquired by the Company. The Company is obligated to indemnify
Prospect and PEL for preferential debts of PEL and Prospect in connection with
the receivership proceedings. Further, the Company has agreed to indemnify the
Lender for any loss the Lender may suffer as a result of the Company's failure
to perform its indemnity obligations under the Company's agreement with Prospect
and PEL concerning preferential creditors. The Company understands that the
aggregate preferential debt of Prospect and PEL as of November 14, 1997 was
approximately $4,605,000.
On August 11, 1997, the Company announced that Shaw Power Services, Inc.,
its wholly-owned subsidiary, and China Baoyuan Industry and Trade Company, a
wholly-owned subsidiary of China National Nuclear Corporation, have signed a
letter of intent to establish joint-venture ownership of a piping systems
fabrication facility located in Dalian, Peoples Republic of China (P.R.C.).
Under the terms of the letter of intent, the Company's ownership and income
participation in the joint-venture is contemplated to be at least 60%. The
formation of the joint-venture is subject to, among other things, the
negotiation and execution of a definitive agreement and regulatory approvals by
the P.R.C. It is anticipated that the Company will invest approximately $7
million of cash and equipment, as well as its technology, in the joint venture.
At this time, the Company is not able to estimate when the transactions
contemplated by the letter of intent will be consummated or when the
joint-venture facility will be operational.
On May 5, 1998, the Company announced that it had signed a letter of intent
to acquire all of the outstanding shares of common stock of Bagwell Brothers,
Inc. (Bagwell), a Louisiana-based fabrication and construction company serving
the offshore energy industry. In connection with the acquisition, the Company
expects to issue up to 675,000 shares of its common stock in exchange for all of
the outstanding capital stock of Bagwell and a related entity. The Company
expects that the acquisition will be accounted for using the
pooling-of-interests method. The acquisition is subject to the negotiation and
execution of definitive acquisition agreements and satisfactory completion of
due diligence reviews.
13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
The following discussion summarizes the financial position of The Shaw
Group Inc. and its subsidiaries (hereinafter referred to collectively, unless
the context otherwise requires, as the "Company" or "Shaw") at May 31, 1998, and
the results of its operations for the three-month and nine-month periods then
ended, and should be read in conjunction with the consolidated financial
statements and notes thereto included elsewhere in this Quarterly Report on Form
10-Q.
On January 27, 1997, the Company completed the acquisition of NAPTech, Inc.
("NAPTech"), a fabricator of industrial piping systems and engineered piping
modules located in Clearfield, Utah. The Company issued 432,881 shares of its
Common Stock in exchange for NAPTech and the 335,000 square foot facility that
NAPTech had leased from a related entity. The acquisition was accounted for
using the pooling-of-interests method; accordingly, the Company's financial
information for all prior periods presented herein has been restated to include
financial information of NAPTech. (See Note 4 of Notes to Consolidated Financial
Statements).
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. The statements contained in this
quarterly report that are not historical facts are forward-looking statements
based on the Company's current expectations and beliefs concerning future
developments and their potential effects on the Company. There can be no
assurance that future developments affecting the Company will be those
anticipated by the Company. Actual results may differ from those projected in
the forward-looking statements. These forward-looking statements involve
significant risks and uncertainties (some of which are beyond the control of the
Company) and are subject to change based upon various factors, including but not
limited to the following risks and uncertainties: changes in the demand for and
market acceptance of the Company's products and in general economic conditions;
the presence of competitors with greater financial resources and the impact of
competitive products and pricing; the effect of the Company's policies,
including the amount and rate of growth of Company expenses; the continued
availability to the Company of adequate funding sources; delays or difficulties
in the production, delivery or installation of products; the strength or
weakness of the U.S. dollar relative to foreign currencies; and various legal,
regulatory and litigation risks. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. For a more detailed discussion of
some of the foregoing risks and uncertainties, see the Company's other filings
with the Securities and Exchange Commission.
Liquidity and Capital Resources:
Net cash used in operations was $15.0 million for the nine months ended May
31, 1998, compared to $2.6 million for the same period of the previous fiscal
year. For the nine months ended May 31, 1998, cash used in operations included
an increase of $48.6 million in accounts receivable and a decrease of $10.2
million in accounts payable. For the nine months ended May 31, 1998, cash
provided by operations included $16.0 million of net income, $6.8 million of
depreciation and amortization, a decrease of $6.2 million in inventory, an
increase of $16.7 million in advanced billings and an increase of $5.5 million
in accrued liabilities. The increase in accounts receivable resulted primarily
from a higher level of sales. The decrease in accounts payable, as well as the
increases in advance billings and accrued liabilities, relates to the timing of
cash receipts from customers and payments of liabilities to the Company's
vendors and creditors. The reduction in inventory was due to a concentrated
effort by the Company to reduce and better manage its inventory.
14
<PAGE>
Net cash used in investing activities was $32.7 million for the nine months
ended May 31, 1998, compared to $25.7 million for the same period of the last
fiscal year. During the nine months ended May 31, 1998, the Company used cash
amounting to approximately $26.1 million for the acquisitions of (i) the capital
stock of Pipework Engineering and Developments Limited ("PED"), (ii) the
principal operating businesses of Prospect Industries plc (the "Prospect
Businesses"), (iii) the capital stock of Lancas, C.A. ("Lancas"), and (iv) the
capital stock of Cojafex B.V. ("Cojafex"). See Note 4 of Notes to Consolidated
Financial Statements. The Company also purchased approximately $10.0 million of
property and equipment, consisting of $1.4 million of assets for a new facility
in Houston, Texas, $4.3 million for the Company's Shaw Constructors, Inc.
subsidiary and other purchases of $4.3 million. Partially offsetting these cash
outflows was $3.4 million of proceeds from the sale of certain property and
equipment.
Net cash provided by financing activities was $47.2 million for the
nine-month period ended May 31, 1998, compared to $36.0 million provided for the
nine months ended May 31, 1997. For the nine-month period ended May 31, 1998,
$62.2 million of cash was provided from the issuance of new debt, primarily $60
million of Senior Secured Notes funded in May 1998. See Note 6 of Notes to
Consolidated Financial Statements. The proceeds from the Senior Secured Notes
were used primarily to pay down the Company's principal revolving line of credit
facility, which had reached a balance of $69.5 million. The principal revolving
line of credit facility has been used generally to provide working capital and
fund fixed asset purchases and subsidiary acquisitions. Cash was also provided
by a $10.7 million increase in outstanding checks in excess of bank balances and
$.5 million from the issuance of the Company's common stock, while funds of
$11.1 million were used to pay down outstanding debt.
In May 1998, in connection with the private placement of the Senior Secured
Notes, the Company entered into a three-year secured revolving line of credit
facility with its commercial lenders providing for a line of credit of up to
$100 million. This replaced the Company's secured revolving line of credit of up
to $77 million and the Company's unsecured revolving line of credit of up to $13
million with such commercial lenders. The Senior Secured Notes will rank in pari
passu with the new revolving line of credit facility. See Note 7 of Notes to
Consolidated Financial Statements. The Company believes that its current
financing arrangements are sufficient to support its operations for the
foreseeable future.
Results of Operations
The following table sets forth for the periods indicated the percentages of
the Company's net sales that certain income and expense items represent:
15
<PAGE>
<TABLE>
(Unaudited) (Unaudited)
Three-Months Ended Nine-Months Ended
May 31, May 31,
<CAPTION>
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 80.5 83.9 81.2 83.0
---- ---- ---- ----
Gross profit 19.5 16.1 18.8 17.0
General and
administrative expenses 11.4 8.9 11.0 9.6
---- --- ---- ---
Operating income 8.1 7.2 7.8 7.4
Interest expense (1.9) (1.6) (2.2) (1.6)
Other income, net .1 .4 .1 .2
---- ---- ---- ----
(1.8) (1.2) (2.1) (1.4)
---- ---- ---- ----
Income before income taxes 6.3 6.0 5.7 6.0
Provision for income taxes 2.0 2.0 1.8 1.8
--- --- --- ---
Income before earnings from
unconsolidated entity 4.3 4.0 3.9 4.2
Earnings from unconsolidated
entity (.3) -- .2 --
--- --- --- ---
Net income 4.0% 4.0% 4.1% 4.2%
=== === === ===
</TABLE>
Sales increased 66.2% to $147.7 million for the three months ended May 31,
1998, as compared to $88.9 million for the same period in the prior year.
Approximately $50.4 million of the $58.8 million increase relates to sales of
subsidiaries acquired during fiscal 1998. The remaining increase relates to
additional domestic work of $14.2 million partially offset by a decrease in
international sales of $5.8 million. For the nine months ended May 31, 1998,
sales were $384.9 million compared to $250.1 million for the first nine months
of fiscal 1997, an increase of 53.9%. Approximately $112.7 million of the $134.8
million increase relates to sales of subsidiaries acquired during or after the
nine months ended May 31, 1997. The remaining $22.1 million increase relates to
increases in both domestic and international sales of Company subsidiaries that
were owned by the Company during the entire nine-month period ended May 31,
1997.
16
<PAGE>
The Company's sales by geographic region for the periods indicated were as
follows:
<TABLE>
<CAPTION>
Three-Months Ended May 31,
1997 1998
Geographic Region (in millions) % (in millions) %
----------------- ------------- --- ------------- ---
<S> <C> <C> <C> <C>
U.S.A. $60.9 68% $ 76.3 52%
Far East/Pacific Rim 13.4 15 31.5 21
Middle East 4.2 5 1.7 1
South America 7.7 9 12.6 8
Europe .7 1 24.8 17
Other 2.0 2 .8 1
--- --- ------ ---
$88.9 100% $147.7 100%
===== === ====== ===
</TABLE>
With respect to the Far East/Pacific Rim region, the Company expects that
sales in the foreseeable future will be negatively impacted by the economic
problems in the region. On the other hand, the Company believes that the outlook
for growth in sales in the South America region is positive based upon the
current economic outlook, the prospective projects identified by the Company and
the Company's existing presence and contacts in the region, particularly in
Venezuela. The increase in sales to Europe for the three months ended May 31,
1998, compared to the same period of the prior year, is primarily due to the
acquisitions of the Company's United Kingdom operations (PED and certain of the
Prospect Businesses) in the first quarter of fiscal 1998. The Company expects
that long-term sales to Europe will continue at the same general levels;
however, until Shaw's strategies and procedures are fully implemented and
executed and the anticipated synergies from the acquisitions are realized, the
Company expects actual sales in the region to be at reduced levels.
The Company's sales by industry sector for the periods indicated were as
follows:
<TABLE>
Three-Months Ended May 31,
1997 1998
----------------------- -----------------------------
<CAPTION>
Industry Sector (in millions) % (in millions) %
--------------- ------------- --- ------------- ---
<S> <C> <C> <C> <C>
Electric Power $26.5 30% $65.1 44%
Chemical 42.3 47 40.1 27
Refining 7.0 8 23.9 16
Petrochemical * -- 5.8 4
Oil and Gas * -- 7.2 5
Other 13.1 15 5.6 4
----- --- ------ ---
$88.9 100% $147.7 100%
===== === ====== ===
</TABLE>
* Sales for the Petrochemical and Oil and Gas sectors are not segregated
and are included elsewhere in this chart.
The gross profit percentage for the three-month period ended May 31, 1998
decreased to 16.1% from 19.5% for the same period the prior year. For the nine
months ended May 31, 1998, gross profit decreased to 17.0% from 18.8% for the
same period the prior year. Major factors contributing to this decrease were the
higher volume in construction work, which typically produces a lower gross
profit margin, the Company's United Kingdom operations, which the Company
acquired since August 31, 1997 and which have experienced lower gross margins
than the Company's historical levels, and the reduced gross margins on the
Company's manufactured stainless goods being significantly lower in the period
than historical levels for such goods. With respect to its United Kingdom
operations, the Company expects lower margins until Shaw strategies and
procedures are implemented and executed and anticipated synergies can be
realized.
17
<PAGE>
General and administrative expenses increased from $10.1 million for the
quarter ended May 31, 1997 to $13.1 million for the quarter ended May 31, 1998.
Approximately $1.9 million of this increase relates to general and
administrative expenses of PED and the Prospect Businesses; the remainder
relates to variable costs associated with increased sales. As a percentage of
sales, however, general and administrative expenses decreased from 11.4% for the
three months ended May 31, 1997 to 8.9% for the three months ended May 31, 1998.
This is attributable in part to the Company's overhead reduction plan
implemented in the first quarter of fiscal 1998.
Interest expense for the quarter ended May 31, 1998 was $2.4 million,
compared to $1.7 million for the same period last year. The majority of this
increase relates to increased debt incurred as a result of the acquisition of
PED, the Prospect Businesses, Cojafex and Lancas. The balance relates to working
capital needs to fund additional sales.
The Company's effective income tax rates for the quarters ended May 31,
1997 and 1998 were 31.5% and 32.6%, respectively. The higher tax rate for the
quarter ended May 31, 1998 relates to the mix of foreign versus domestic work.
In prior periods, increased foreign sales generally decreased the Company's
income tax rate. With the purchase of the Prospect Businesses (see Note 4 of
Notes to Consolidated Financial Statements), however, a higher percentage of
international sales for the period were in the United Kingdom, which has an
overall higher effective tax rate than the United States.
Total backlog was $257 million at May 31, 1998 compared to $197 million
reported at the end of the third quarter of fiscal 1997 and $280 million
reported at February 28, 1998. The timing of contract awards affects reported
backlog.
May 31, 1998 Backlog Breakdown by Industry Sector (in millions):
----------------------------------------------------------------
Chemical $ 82.6 32%
Electric Power 80.8 32
Petrochemical 41.8 16
Oil & Gas 23.3 9
Other 15.8 6
Refining 12.7 5
---- ---
Total 257.0 100%
===== ===
May 31, 1998 Backlog Breakdown by Geographic Region (in millions):
------------------------------------------------------------------
Domestic $156.5 61%
International 100.5 39
----- --
Total $257.0 100%
====== ===
18
<PAGE>
Year 2000
The "Year 2000" issue involves computer programs and applications that were
written using two digit date fields instead of four to describe the applicable
year. Computer systems that do not recognize date sensitive information when the
year changes to 2000 could generate erroneous data or fail. The Company has
established a plan pursuant to which all current systems being used by the
Company will be reviewed to (i) establish and document that it is Year 2000
compliant or (ii) identify the remedial measures that must be undertaken to
render it compliant. The review process should be completed by August 31, 1998.
The Company has to date, however, reviewed its two significant systems and
has determined that they are both Year 2000 compliant. As a result, the Company
does not believe the cost to upgrade or replace its other systems will be
material to the Company's results of operations or financial condition, although
the total estimated cost will not be known until the Company completes its
review process.
The Company is also in the process of developing strategies for evaluating
the risks associated with the Year 2000 issue with respect to its major
customers and suppliers.
Financial Accounting Standards Board Statement
In June 1998, the Financial Accounting Standards Board (the FASB) issued
Statement of Financial Accounting Standards No. 133 (SFAS No. 133) "Accounting
for Derivative Instruments and Hedging Activities." The provisions of this
statement are effective for the Company's fiscal year ending August 31, 2000.
Management does not believe that the impact of adopting this statement will have
a material impact on the Company's financial position or results of operations.
19
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fiscal quarter ended May 31, 1998, there were no matters
submitted to a vote of security holders by the Company.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Exhibit Number Description
10.1 Credit Agreement dated May 15, 1998 among The Shaw
Group Inc., Mercantile Business Credit Inc., City
National Bank of Baton Rouge, Hibernia National
Bank and Union Planters Bank of Louisiana
10.2 Note Purchase Agreement dated May 21, 1998
11 Computation of Earnings Per Share
27 Financial Data Schedule
B. Forms 8-K
During the fiscal quarter ended May 31, 1998, the Company did not file a
Form 8-K.
20
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE SHAW GROUP INC.
Dated: July 15, 1998 /s/ Edward L. Pagano
------------------------
Chief Financial Officer
(Duly Authorized Officer
& Principal Financial Officer)
21
<PAGE>
THE SHAW GROUP INC.
EXHIBIT INDEX
Form 10-Q Quarterly Report for the Quarterly Period ended May 31, 1998.
Exhibit Number Description
10.1 Credit Agreement dated May 15, 1998 among The
Shaw Group Inc., Mercantile Business Credit
Inc., City National Bank of Baton Rouge,
Hibernia National Bank and Union Planters Bank of
Louisiana
10.2 Note Purchase Agreement dated May 21, 1998
11 Computation of Earnings per Share
27 Financial Data Schedule
<PAGE>
<TABLE>
EXHIBIT 11
Computation of Earnings Per Share
(In thousands, except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
May 31, May 31,
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average shares outstanding (used
in Basic Earnings per share computation) 12,367 12,558 11,333 12,533
Net effect of dilutive stock options
based on the Treasury Stock method
using average market price 282 220 303 232
------ ------ ------ ------
Weighted average shares outstanding (used
in Diluted Earnings per share computation) 12,649 12,778 11,636 12,765
====== ====== ====== ======
Net income $ 3,555 $ 5,978 10,288 16,020
======= ======= ====== ======
Basic Earnings per share $ .29 $ .48 $ .91 $ 1.28
======= ======= ====== ======
Diluted earnings per share $ .28 $ .47 $ .88 $ 1.25
======= ======= ====== ======
</TABLE>
CREDIT AGREEMENT
BETWEEN
THE SHAW GROUP INC.
AND
MERCANTILE BUSINESS CREDIT INC.,
AS AGENT,
AND THE BANKS WHICH ARE
A PARTY HERETO
Dated May 15, 1998
<PAGE>
TABLE OF CONTENTS
SECTION 1. TERM---------------------------------------------------------------1
SECTION 2. DEFINITIONS--------------------------------------------------------1
SECTION 3. THE REVOLVING CREDIT LOANS----------------------------------------15
3.1 Revolving Credit Commitment of Banks-----------------------------15
3.2 Procedure for Borrowing------------------------------------------17
(a) Revolving Credit Loan Advances--------------------------17
(b) Interest Rate Conversions-------------------------------18
3.3 Letters of Credit------------------------------------------------19
3.4 Interest Rates and Payments--------------------------------------23
3.5 Prepayment; Funding Losses---------------------------------------24
3.6 Basis for Determining Interest Rate Inadequate or Unfair---------24
3.7 Illegality-------------------------------------------------------25
3.8 Increased Cost---------------------------------------------------25
3.9 Prime Loans Substituted for Affected LIBOR Loans-----------------26
3.10 Place and Manner of Payment-------------------------------------27
3.11 Termination or Reduction of Revolving Credit Commitments--------27
3.12 Facility Fee----------------------------------------------------27
3.13 Commitment Fee--------------------------------------------------27
3.14 Maturity--------------------------------------------------------28
3.15 Voluntary Prepayments-------------------------------------------28
3.16 Discretion of Bank as to Manner of Funding----------------------28
SECTION 4. PRECONDITIONS TO LOANS--------------------------------------------29
4.1 Initial Revolving Credit Loan or Letter of Credit----------------29
4.2 Subsequent Revolving Credit Loans--------------------------------30
SECTION 5. COLLATERAL--------------------------------------------------------33
5.1 Security Agreement-----------------------------------------------33
5.2 Pledge Agreements------------------------------------------------33
5.3 Subsidiary Security Agreements-----------------------------------34
SECTION 6. REPRESENTATIONS AND WARRANTIES------------------------------------35
6.1 Corporate Existence and Power------------------------------------35
6.2 Authorization----------------------------------------------------35
6.3 Binding Effect---------------------------------------------------35
6.4 Financial Statements---------------------------------------------36
<PAGE>
6.5 Litigation-------------------------------------------------------36
6.6 Pension and Welfare Plans----------------------------------------36
6.7 Tax Returns and Payment------------------------------------------37
6.8 Subsidiaries-----------------------------------------------------37
6.9 Compliance With Other Instruments; None Burdensome---------------37
6.10 Other Loans and Guarantees--------------------------------------37
6.11 Title to Property-----------------------------------------------38
6.12 Multi-Employer Pension Plan Amendments Act of 1980--------------38
6.13 Patents, Licenses, Trademarks, Etc.-----------------------------38
6.14 Environmental and Safety and Health Matters---------------------38
6.15 Other Corporate or Fictitious Names-----------------------------39
SECTION 7. COVENANTS---------------------------------------------------------39
7.1 Affirmative Covenants of the Borrower----------------------------39
(a) Information---------------------------------------------39
(b) Payment of Indebtedness---------------------------------40
(c) Consultations and Inspections---------------------------41
(d) Payment of Taxes; Corporate Existence;
Maintenance of Properties; Maintenance
of Collateral; Insurance--------------------------------
(e) Accountants---------------------------------------------42
(f) ERISA Compliance----------------------------------------42
(g) Maintenance of Books and Records------------------------43
(h) Further Assurances--------------------------------------43
(i) Financial Covenants-------------------------------------44
(j) Compliance with Law-------------------------------------44
(k) Notices-------------------------------------------------45
(i) Default----------------------------------------45
(ii) Litigation------------------------------------45
(iii) Judgment-------------------------------------45
(iv) Pension Plans---------------------------------45
(v) Change of Name---------------------------------46
(vi) Environmental Matters-------------------------46
(vii) Material Adverse Change----------------------46
(viii) Change in Management or Line(s) of
Business------------------------------------46
(ix) Other Notices---------------------------------46
(l) Protection of Collateral--------------------------------46
7.2 Negative Covenants of the Borrower-------------------------------47
(a) Limitation on Indebtedness------------------------------47
(b) Limitations on Liens------------------------------------48
(c) Sale of Property----------------------------------------49
(d) Mergers and Consolidations------------------------------49
(e) Acquisitions; Subsidiaries------------------------------49
(f) Fiscal Year---------------------------------------------49
(g) Stock Redemptions and Distributions---------------------49
<PAGE>
(h) Transactions with Related Parties-----------------------49
(i) Capital Expenditures------------------------------------50
(j) Advancing or Guaranteeing Credit------------------------50
(l) Dissolution or Liquidation------------------------------51
(m) Operating Leases----------------------------------------51
(n) Change in Nature of Business----------------------------51
(o) Pension Plans-------------------------------------------51
(p) Management Fees-----------------------------------------51
7.3 Use of Proceeds--------------------------------------------------51
SECTION 8. EVENTS OF DEFAULT-------------------------------------------------52
SECTION 9. THE AGENT---------------------------------------------------------55
9.1 Appointment and Authorization------------------------------------55
9.2 Agent and Affiliates---------------------------------------------55
9.3 Action by Agent--------------------------------------------------55
9.4 Consultation with Experts----------------------------------------55
9.5 Liability of Agent-----------------------------------------------55
9.6 Indemnification--------------------------------------------------56
9.7 Credit Decision--------------------------------------------------56
9.8 Resignation of Agent---------------------------------------------56
9.9 Removal of Agent-------------------------------------------------57
9.10 Agent's Fee-----------------------------------------------------57
SECTION 10. GENERAL----------------------------------------------------------57
10.1 No Waiver-------------------------------------------------------57
10.2 Right of Setoff-------------------------------------------------58
10.3 Cost and Expenses-----------------------------------------------58
10.4 Environmental Indemnity-----------------------------------------59
10.5 General Indemnity-----------------------------------------------59
10.6 Authority to Act------------------------------------------------60
10.7 Notices---------------------------------------------------------60
10.8 CONSENT TO JURISDICTION-----------------------------------------60
10.9 Agent's and Banks'Books and Records-----------------------------61
10.10 Governing Law; Amendments, Waivers and Consents----------------61
10.11 Successors and Assigns; Participations-------------------------61
10.12 Assignment Agreements------------------------------------------62
10.13 References; Headings for Convenience---------------------------62
10.14 Subsidiary Reference-------------------------------------------63
10.15 Binding Agreement----------------------------------------------63
10.16 NO ORAL AGREEMENTS; ENTIRE AGREEMENT---------------------------63
10.17 Severability---------------------------------------------------63
<PAGE>
10.18 Counterparts---------------------------------------------------63
10.19 Resurrection of the Borrower's Obligations---------------------64
10.20 U. S. Dollars--------------------------------------------------64
10.21 Confidentiality------------------------------------------------64
SCHEDULES
3.2 ---------Authorized Representatives
3.3(a) ---------Outstanding Letters of Credit
5 ---------Description of Collateral
6.5 ---------Litigation
6.6 ---------Pension Plan Matters
6.8 ---------Borrower's Subsidiaries
6.10 ---------Other Loans and Guaranties
6.11 ---------Permitted Liens
6.12 ---------Multiemployer Plans
6.14 ---------Environmental and Health and Safety Matters
6.15 ---------List of Predecessor and Fictitious Names
7.1(k)(viii)------Directors and Executive Officers
7.2(a) ---------Permitted Indebtedness
7.2(h) ---------Transactions With Related Parties
7.2(k) ---------Investments Held By Borrower and Its Subsidiaries as of
May 15, 1998
EXHIBITS
A Borrowing Base Certificate
B Revolving Credit Note
C Opinion of Borrower's Counsel
D Compliance Certificate
E Standby Letter of Credit Application and Reimbursement Agreement
F Commercial Letter of Credit Application and Reimbursement Agreement
G Letter of Credit Participation Certificate
H Assignment Agreement
I Form of Security Agreement
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is made and entered into as of
this _____ day of May, 1998, by and between THE SHAW GROUP INC., a Louisiana
corporation (the "Borrower"), the undersigned lenders and any other lenders
hereafter becoming a party to this Agreement (the "Banks"), and MERCANTILE
BUSINESS CREDIT INC., a Missouri corporation, as agent on behalf of Banks (in
such capacity, the "Agent").
WITNESSETH:
WHEREAS, the Borrower has applied for revolving credit loans from Banks in
aggregate principal amounts of up to One Hundred Million Dollars
($100,000,000.00); and
WHEREAS, Banks are willing to make said revolving credit loans to the
Borrower upon, and subject to, the terms, provisions and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby mutually promise and agree as follows:
SECTION 1. TERM.
The "Term" of this Agreement shall commence on the date hereof and shall
end on March 31, 2001, unless earlier terminated pursuant to Section 3.11 or by
acceleration or otherwise upon the occurrence of an Event of Default under this
Agreement, in which case the Term hereof shall end on such earlier date.
SECTION 2. DEFINITIONS.
In addition to the terms defined elsewhere in this Agreement or in any
Exhibit or Schedule hereto, when used in this Agreement, the following terms
shall have the following meanings (such meanings shall be equally applicable to
the singular and plural forms of the terms used, as the context requires):
Acquisition shall mean any transaction or series of related transactions,
consummated on or after the date of this Agreement, by which the Borrower or any
of its Subsidiaries (a) acquires any going business or all or substantially all
of the assets of any corporation, partnership or other organization or entity,
whether through purchase of assets, merger or otherwise or (b) directly or
indirectly acquires (in one transaction or as of the most recent transaction in
a series of transactions) at least (i) a majority (in number of votes) of the
stock and/or other securities of a corporation having ordinary voting power for
the election of directors (other than stock and/or other securities having such
power only by reason of the happening of a contingency), (ii) a majority (by
percentage of voting power) of the outstanding partnership interests of a
partnership or (iii) a majority of the ownership interests in any organization
<PAGE>
or entity other than a corporation or partnership, provided, that for any such
Acquisition, the Borrower or such Subsidiary shall remain a surviving corporate
entity.
Agent shall mean Mercantile Business Credit Inc., a Missouri corporation,
and its successors and assigns.
Applicable Margin shall mean, with respect to each type of Revolving Credit
Loan, the rate of interest per annum shown in the applicable column below for
the type of Revolving Credit Loan specified for each such column:
<TABLE>
<CAPTION>
Level I Level II Level III Level IV Level V
<S> <C> <C> <C> <C> <C>
If Ratio of Consolidated Total Funded Debt to => 4.00 < 4.00 < 3.00 < 2.50 < 2.00
Consolidated EBITDA at the preceding quarter => 3.00 => 2.50 => 2.00
end is
LIBOR Loans 2.00% 1.50% 1.20% 1.00% 0.75%
Prime Loans 0.75% 0.25% 0.00% 0.00% 0.00%
Commitment Fee 0.375% 0.20% 0.15% 0.125% 0.10%
</TABLE>
Notwithstanding the above, the Applicable Margins applicable to each
Revolving Credit Loan up to the date the Borrower delivers its Form 10-Q and
Compliance Certificate for the quarter ended February 28, 1998 shall be Zero
Percent (0.0%) per annum for Prime Loans and One Percent (1.0%) per annum for
LIBOR Loans with interest periods commencing on or before such date, and the
Commitment Fee shall be calculated at the rate of One-Eighth of One Percent
(0.125%) per annum for the portion of each fiscal quarter occurring on or before
such date. Commencing on each June 1, September 1, December 1 and March 1 during
the Term hereof or as soon thereafter as Agent shall have received Borrower's
quarterly Form 10-Q or Form 10-K, as the case may be, and Compliance Certificate
for the most recent quarter-end pursuant to Section 7.1(a), the ratio of
Consolidated Total Funded Debt to Consolidated EBITDA for such most recent
fiscal quarter-end shall be computed by Agent and the Applicable Margins shall
be adjusted and become effective (except the effective date for LIBOR Loans
shall be as set forth in the last sentence of this definition) as of the
delivery date of such Form 10-Q or Form 10-K and Compliance Certificate in
accordance with the levels set forth above. Such new Applicable Margins shall
continue in effect until the next such adjustment, if any, on the following June
1, September 1, December 1 and March 1 (or such later delivery date of the
quarter-end Form 10-Q or Form 10-K, as the case may be, and Compliance
Certificate for such most recent quarter-end) in accordance with the preceding
sentence. Each determination by Agent of the Applicable Margins shall be deemed
prima facie correct. All such adjustments shall become effective as to LIBOR
Loans outstanding on the first day of any quarter (or on any such later date of
determination of Applicable Margins under this definition) upon the expiration
of the then current applicable Interest Periods for such LIBOR Loans.
<PAGE>
Attorneys' Fees shall mean the reasonable value of the services (and costs,
charges and expenses related thereto) of the attorneys (and all paralegals,
secretaries, accountants and other staff employed by such attorneys) employed by
Agent or any of the Banks (including, without limitation, attorneys and
paralegals who are employees of Agent or any of the Banks or any affiliate of
Agent or any of the Banks) and which are necessary from time to time (i) in
connection with the documentation, negotiation, execution, delivery,
administration and enforcement of this Agreement and/or any of the other
Transaction Documents, (ii) to represent Agent or any of the Banks in any
litigation, contest, dispute, suit or proceeding, or to commence, defend or
intervene in any litigation, contest, dispute, suit or proceeding, or to file
any petition, complaint, answer, motion or other pleading or to take any other
action in or with respect to any litigation, contest, dispute, suit or
proceeding (whether instituted by Agent, any of the Banks, the Borrower or any
other Person and whether in bankruptcy or otherwise) in any way or respect
relating to any of the Collateral, any Third Party Collateral, this Agreement or
any of the other Transaction Documents, the Borrower, any Subsidiary of the
Borrower or any other Obligor, (iii) to protect, collect, lease, sell, take
possession of or liquidate any of the Collateral or any Third Party Collateral,
(iv) to attempt to enforce any security interest in or other Lien upon any of
the Collateral or any Third Party Collateral or to give any advice with respect
to such enforcement and (v) to enforce any of Agent's or any Bank's rights to
collect any of the Borrower's Obligations.
Authorized Representative will have the meaning ascribed thereto in Section
3.2(a).
Bond Letter of Credit shall have the meaning ascribed thereto in Section
3.3(d)(ii).
Borrower's Obligations shall mean any and all indebtedness (principal,
interest, fees and other amounts), liabilities and obligations of the Borrower
to Agent or any of the Banks evidenced by or arising under the Notes, this
Agreement, the Security Agreement, the Pledge Agreements, any of the other
Transaction Documents or any other agreement, document or instrument heretofore,
now or hereafter executed and delivered by the Borrower to Agent or any of the
Banks, in each case whether now existing or hereafter arising, absolute or
contingent, joint and/or several, secured or unsecured, direct or indirect,
expressed or implied in law, contractual or tortious, liquidated or
unliquidated, at law or in equity, or otherwise, and whether created directly or
acquired by Agent or any of the Banks by assignment or otherwise, and any and
all costs of collection and/or Attorneys' Fees incurred or to be incurred in
connection therewith.
Borrowing Base shall have the meaning ascribed thereto in Section 3.1(b).
Borrowing Base Certificate shall have the meaning ascribed thereto in
Section 3.1(c).
Borrowing Notice shall have the meaning ascribed thereto in Section 3.2.
<PAGE>
Business Day shall mean any day except a Saturday, Sunday or legal holiday
observed by any of the Banks or by commercial banks in St. Louis, Missouri.
Capital Expenditure shall mean any expenditure which, in accordance with
generally accepted accounting principles consistently applied, is or should be
capitalized on the balance sheet of the Person making the same.
Capitalized Lease shall mean any lease which, in accordance with generally
accepted accounting principles consistently applied, is or should be capitalized
on the balance sheet of the lessee.
Code shall mean the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to sections of the Code
shall be construed to also refer to any successor sections.
Collateral shall mean any Property or assets of the Borrower which now or
at any time hereafter secure the payment or performance of any of the Borrower's
Obligations.
Collateral Agency and Intercreditor Agreement shall mean that certain
Collateral Agency and Intercreditor Agreement dated of even date herewith made
by and among Borrower, Agent as Collateral Agent thereunder, Banks and other
secured parties now or hereafter made a party thereto, as the same may be
amended from time to time.
Commitment Fee shall have the meaning ascribed thereto in Section 3.13.
Consolidated Debt Service shall mean the sum of all of the Borrower's and
its Consolidated Subsidiaries' (a) interest expense, plus (b) minimum required
payments of principal on all borrowed money Indebtedness, including the
principal portion of any rental payments under any Capitalized Leases, all of
which were paid or otherwise due and payable during the specified period
preceding the date of any such calculation.
Consolidated EBITDA shall mean on any date the Borrower's and its
Consolidated Subsidiaries' net income (exclusive of any extraordinary gains or
losses and any net income or loss of any Person which is not required to be
consolidated with the Company in accordance with generally accepted accounting
principles consistently applied) plus interest expense of Borrower and its
Consolidated Subsidiaries, plus expenses for income taxes of Borrower and its
Consolidated Subsidiaries, plus depreciation expenses of Borrower and its
Consolidated Subsidiaries, plus amortization expenses of Borrower and its
Consolidated Subsidiaries, all for the twelve month period included in any such
calculation and ending on the date of any such calculation, all as determined on
a consolidated basis in accordance with generally accepted accounting
principles, consistently applied.
Consolidated Net Operating Cash Flow shall mean on any date Consolidated
EBITDA minus Capital Expenditures of Borrower and its Consolidated Subsidiaries,
<PAGE>
all for the twelve-month period included in any such calculation and ending on
the date of any such calculation, all as determined on a consolidated basis in
accordance with generally accepted accounting principles, consistently applied.
Consolidated Shareholders' Equity shall mean on any date the total assets
minus total liabilities of Borrower and its Consolidated Subsidiaries, all
determined on a consolidated basis in accordance with generally accepted
accounting principles, consistently applied.
Consolidated Subsidiary shall mean with respect to any Person at any date,
any Subsidiary or other entity the assets and liabilities of which are or should
be consolidated with those of such Person in its consolidated financial
statements as of such date in accordance with generally accepted accounting
principles consistently applied.
Consolidated Total Funded Debt shall mean, as of any fiscal quarter-end of
the Borrower, the sum of (a) the outstanding principal amount of all Revolving
Credit Loans on any such fiscal quarter-end date, plus (b) the undrawn face
amount of all issued and outstanding Letters of Credit or any other letters of
credit issued for the account of Borrower or its Consolidated Subsidiaries as of
any such fiscal quarter-end date, plus (c) all of the Borrower's and its
Consolidated Subsidiaries' other borrowed money Indebtedness outstanding on any
such fiscal quarter-end date, including, without limitation, amounts due under
any Capitalized Leases.
Conversion Notice shall have the meaning ascribed thereto in Section
3.2(b).
Default shall mean any event or condition the occurrence of which would,
with the lapse of time or the giving of notice or both, become an Event of
Default as defined in Section 8 hereof.
Distribution in respect of any corporation shall mean (i) dividends or
other distributions on capital stock of the corporation (other than stock
dividends); and (ii) the redemption, repurchase or other acquisition by such
corporation of such stock or of warrants, rights or other options to purchase
such stock (except when solely in exchange for such stock).
Environmental Laws shall mean the Resource Conservation and Recovery Act of
1987, the Comprehensive Environmental Response, Compensation and Liability Act,
any so-called "Superfund" or "Superlien" law, the Toxic Substances Control Act
and any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to or imposing liability or
standards of conduct concerning any Hazardous Materials or any other hazardous,
toxic or dangerous waste, substance or constituent or other substance, whether
solid, liquid or gas, as now or at any time hereafter in effect.
Environmental Lien shall have the meaning ascribed thereto in Section
7.1(k)(vi).
ERISA shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
<PAGE>
ERISA Affiliate shall mean any corporation, trade or business that is,
along with the Borrower, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in Sections 414(b) and
414(c), respectively, of the Code.
Event of Default shall have the meaning ascribed thereto in Section 8.
Facility Fee shall have the meaning ascribed thereto in Section 3.12.
Guarantee by any Person shall mean any obligation, contingent or otherwise,
of such Person guaranteeing any Indebtedness of any other Person or in any
manner providing for the payment of any Indebtedness of any other Person or
otherwise protecting the holder of such Indebtedness against loss (whether by
agreement to keep-well, to purchase assets, goods, securities or services, or to
take-or-pay or otherwise); provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb shall have a correlative meaning.
Guarantor shall mean each Subsidiary of Borrower (other than those
Subsidiaries noted as "Dormant" on Schedule 6.8 for so long as such Subsidiaries
remain dormant) which are now or at any time hereafter required to execute a
Subsidiary Guaranty of all of Borrower's Obligations pursuant to the terms of
this Agreement, and Guarantors shall mean any or all of them.
Hazardous Materials shall mean any hazardous substance or pollutant or
contaminant defined as such in (or for the purposes of) any Environmental Law
and shall include, without limitation, petroleum, including crude oil or any
fraction thereof which is liquid at standard conditions of temperature or
pressure (60 degrees fahrenheit and 14.7 pounds per square inch absolute), any
radioactive material, including, without limitation, any source, special nuclear
or byproduct material as defined in 42 U.S.C. Section 2011 et seq., as amended
or hereafter amended, and asbestos in any form or condition.
Indebtedness of any Person shall mean and include, without duplication, any
and all indebtedness (principal, interest, fees and other amounts), liabilities
and obligations of such Person which in accordance with generally accepted
accounting principles, consistently applied are or should be classified upon a
balance sheet of such Person as liabilities of such Person, and in any event
shall include all (i) obligations of such Person for borrowed money or which
have been incurred in connection with the acquisition of Property, (ii)
obligations secured by any Lien or other charge upon any Property owned by such
Person, provided that if such Person has not assumed or become liable for the
payment of such obligations, such obligations shall still be included in
Indebtedness but the determination of the amount of Indebtedness evidenced by
such obligations shall be limited to the book value of such Property, (iii)
obligations created or arising under any conditional sale or other title
retention agreement with respect to any Property acquired by such Person,
provided that if the rights and remedies of the seller, lender or lessor in the
<PAGE>
event of default under such agreement are limited solely to repossession or sale
of such Property, such obligations shall still be included in Indebtedness but
the determination of the amount of Indebtedness evidenced by such obligations
shall be limited to the book value of such Property, (iv) all Guarantees and
other contingent indebtedness, liabilities and obligations of such Person
whether or not reflected on the balance sheet of such Person and (v) all
obligations of such Person as lessee under any Capitalized Lease.
Interest Period shall mean with respect to each LIBOR Loan:
(i) Initially, the period commencing on the date of such LIBOR Loan and
ending 1, 2, 3 or 6 months thereafter (or such other period agreed upon in
writing by the Borrower and all of the Banks), as the Borrower may elect in the
applicable Notice of Borrowing for a Revolving Credit Loan; and
(ii) Thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such LIBOR Loan and ending 1, 2, 3 or 6
months thereafter (or such other period agreed upon in writing by the Borrower
and all of the Banks), as the Borrower may elect pursuant to Section 3.2(b);
provided that:
(iii) For purposes of determining an Interest Period, a month means a
period starting on one day in a calendar month and ending on a numerically
corresponding day in the next calendar month, provided, however, if an Interest
Period begins on the last day of a month and if there is no numerically
corresponding day in the month in which an Interest Period is to end, then such
Interest Period shall end on the last Business Day of such month;
(iv) Subject to clause (v) below, if any Interest Period would otherwise
end on a day which is not a Business Day, such Interest Period shall end on the
immediately following Business Day, except that if such immediately following
Business Day is in a different month, such Interest Period shall end on the
immediately preceding Business Day; and
(v) No Interest Period with respect to any LIBOR Loan shall extend beyond
the last day of the Term hereof.
Inventory shall mean all inventory of the Borrower and the Guarantors.
Issuer shall mean Mercantile Bank National Association, and its successors
and assigns.
Letter of Credit and Letters of Credit shall have the meanings ascribed
thereto in Section 3.3(a).
<PAGE>
Letter of Credit Application shall mean an application and agreement for
irrevocable standby letter of credit in the form of Exhibit E attached hereto
and incorporated herein by reference or an application and agreement for
irrevocable commercial letter of credit in the form of Exhibit F attached hereto
and incorporated herein by reference, and in either case executed by Borrower,
as account party, and delivered to Agent pursuant to Section 3.3(a) or deemed
delivered pursuant to Section 3.3(a), as the same may from time to time be
amended, modified, extended or renewed.
Letter of Credit Commitment Fee shall have the meaning ascribed thereto in
Section 3.3(d)(ii) and Section 3.3(d)(iii).
Letter of Credit Issuance Fee shall have the meaning ascribed thereto in
Section 3.3(d)(i).
Lien shall mean any interest in Property securing an obligation owed to, or
a claim by, a Person other than the owner of the Property, whether such interest
is based on common law, statute or contract, including, without limitation, any
security interest, mortgage, deed of trust, pledge, hypothecation, judgment lien
or other lien or encumbrance of any kind or nature whatsoever, any conditional
sale or trust receipt and any lease, consignment or bailment for security
purposes. The term "Lien" shall include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting Property.
LIBOR Base Rate means, for an Interest Period, (a) the LIBOR Index Rate for
such Interest Period, if such rate is available, and (b) if the LIBOR Index Rate
cannot be determined, the arithmetic average of the rates of interest per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) at which deposits in
U.S. dollars in immediately available funds are offered to Agent at 11:00 a.m.
(St. Louis time) two (2) Business Days before the beginning of such Interest
Period by two (2) or more major banks in the interbank eurodollar market
selected by Agent for a period equal to such Interest Period and in an amount
equal or comparable to the principal amount of the LIBOR Loan scheduled to be
made available by Banks. As used herein, "LIBOR Index Rate" means, for any
Interest Period, the rate per annum (rounded upwards, if necessary, to the next
higher one hundred-thousandth of a percentage point) for deposits in U.S.
Dollars for a period equal to such Interest Period, which appears on the
Telerate Page 3750 as of 9:00 a.m. (St. Louis time) on the day two Business Days
before the commencement of such Interest Period.
LIBOR Loan shall mean any Revolving Credit Loan bearing interest at the
LIBOR Rate.
LIBOR Rate shall mean (a) the quotient of (i) the LIBOR Base Rate divided
by (ii) one minus the LIBOR Reserve Percentage, plus (b) the Applicable Margin.
<PAGE>
LIBOR Reserve Percentage shall mean for any day the reserve percentage
(including any supplemental percentage applied on a marginal basis or any other
reserve requirement having a similar effect), expressed as a decimal, which is
in effect on the first day of the applicable Interest Period, as prescribed by
the Board of Governors of the Federal Reserve System (or any successor) under
Regulation D (or any other applicable regulation of the Board of Governors (or
any successor)) with respect to "Eurocurrency Liabilities." The LIBOR Rate shall
be adjusted automatically on and as of the effective date of any change in the
LIBOR Reserve Percentage. As of the date hereof, the LIBOR Reserve Percentage is
0.00%.
Multiemployer Plan shall mean a "multi-employer plan" as defined in Section
4001(a) (3) of ERISA which is maintained for employees of the Borrower, any
ERISA Affiliate or any Subsidiary of the Borrower.
Notes shall mean each of the Revolving Credit Notes of the Borrower to be
executed and delivered to each of the Banks pursuant to Section 3.1(a), as the
same may from time to time be amended, modified, extended or renewed, and Note
shall mean any of them.
Note Purchase Agreements shall mean those certain Note Purchase Agreements
each dated as of May 21, 1998 respectively made by the Borrower with Nationwide
Life Insurance Company, Connecticut General Life Insurance Company, Insurance
Company of North America, Connecticut General Life Insurance Company on Behalf
of One or More Separate Accounts, Life Insurance Company of North America,
Northern Life Insurance Company, Reliastar Life Insurance Company of New York,
Reliastar United Services Life Insurance Company, Washington Square Advisers
Private Placement Trust Fund and Security Connecticut Life Insurance Company, as
amended or supplemented from time to time, which provide, among other things,
for the issuance and sale by the Borrower of $20,000,000 aggregate principal
amount of its 6.44% Series A Senior Secured Notes due 2005 and $40,000,000
aggregate principal amount of its 6.93% Series B Senior Secured Notes due 2008.
Obligor shall mean the Borrower and each other Person who is or shall at
any time hereafter become primarily or secondarily liable on any of the
Borrower's Obligations or who grants Agent or any of the Banks a Lien upon any
of the Property or assets of such Person as security for any of the Borrower's
Obligations.
Occupational Safety and Health Laws shall mean the Occupational Safety and
Health Act of 1970, as amended, and any other federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating, relating to
or imposing liability or standards of conduct concerning employee health and/or
safety, as now or at any time hereafter in effect.
PBGC shall mean the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
Pension Plan shall mean a "pension plan," as such term is defined in
Section 3(2) of ERISA, which is established or maintained by the Borrower, any
ERISA Affiliate or any Subsidiary of the Borrower, other than a Multiemployer
Plan.
<PAGE>
Permitted Acquisition shall mean any Acquisition of an ongoing domestic
business similar to, consistent with or complementary of the Borrower's or the
Guarantors' current lines of business which: (a) has been: (i) in the event a
corporation or its assets is the subject of such Acquisition, either (x)
approved by the Board of Directors of the corporation which is the subject of
such Acquisition or (y) recommended by such Board of Directors to the
shareholders of such corporation, (ii) in the event a partnership is the subject
of such Acquisition, approved by a majority (by percentage of voting power) of
the partners of the partnership which is the subject of such Acquisition, (iii)
in the event an organization or entity other than a corporation or partnership
is the subject of such Acquisition, approved by a majority (by percentage of
voting power) of the governing body, if any, or by a majority (by percentage of
ownership interest) of the owners of the organization or entity which is the
subject of such Acquisition or (iv) in the event the corporation, partnership or
other organization or entity which is the subject of such Acquisition is in
bankruptcy, approved by the bankruptcy court or another court of competent
jurisdiction; (b) Borrower has given Agent and Banks at least ten (10) Business
Days prior written notice of such Acquisition and (c) if the total consideration
paid by Borrower and its Subsidiaries in connection with such Acquisition, plus
any liabilities assumed by Borrower or any Subsidiary in connection with such
Acquisition exceeds $20,000,000.00, or if the portion of the purchase price for
such Acquisition payable by Borrower in cash exceeds: (1) $7,500,000.00 if
Borrower's ratio of Consolidated Total Funded Debt to Consolidated EBITDA as of
the most recent quarter-end is greater than 3.50 to 1.0, or (2) $15,000,000.00
if Borrower's ratio of Consolidated Funded Debt to Consolidated EBITDA as of the
most recent quarter-end is less than or equal to 3.50 to 1.0, then Borrower must
obtain the prior written consent of the Required Banks; provided, however, that
no Acquisition shall be a Permitted Acquisition unless both as of the date of
any such Acquisition and immediately following such Acquisition no Event of
Default then exists or would be created thereby, and the Borrower is, and on a
pro forma basis projects that it will continue to be, in compliance with the
terms, covenants and conditions contained in this Agreement and the other
Transaction Documents, which pro forma compliance shall be demonstrated by
Borrower pursuant to such financial and other information concerning such
Acquisition as Agent or any of the Banks may reasonably require which shall be
provided to the Agent and the Banks not less than ten (10) Business Days prior
to the closing date of any such Acquisition, including, without limitation,
balance sheet, income statement and cash flow statement forecasts for the
following three fiscal years (and for each fiscal quarter during the first year
after such Acquisition) and narrative descriptions of the primary assumptions
made in preparing such statements.
Permitted Investments shall mean any investment by Borrower or any
Subsidiary in any of the following:
(a) Investments by the Borrower or any of its Subsidiaries in any
Subsidiary of the Borrower or Investments by any Subsidiary of the Borrower in
the Borrower;
(b) Direct obligations of the United States of America or any
instrumentality or agency thereof, the payment of which is unconditionally
guaranteed by the United States of America or any instrumentality or agency
thereof (all of which Investments must mature within twelve (12) months from the
time of acquisition thereof);
<PAGE>
(c) Investments in debt instruments of any state or political subdivision
thereof rated AA- or better by Standard & Poor's or Aa3 or better by Moody's
Investment Service and maturing not more than twelve (12) months from the date
of acquisition thereof;
(d) Investments in readily marketable commercial paper which, at the time
of acquisition thereof by Borrower or any Subsidiary, is rated A-1 or better by
Standard & Poor's or P-1 or better by Moody's Investment Service and which
matures within 270 days from the date of acquisition thereof, provided that the
issuer of such commercial paper shall, at the time of acquisition of such
commercial paper, have a senior long-term debt rating of at least A by Standard
& Poor's and Moody's Investment Service;
(e) Investments in corporate debt obligations rated AA- or better by
Standard & Poor's or Aa3 or better by Moody's Investment Service and maturing
not more than twelve (12) months from the date of acquisition thereof;
(f) Investments in federal funds, time deposits, negotiable certificates of
deposit or negotiable bankers acceptances issued by any of the Banks or any
other bank or trust company organized under the laws of the United States of
America or any state thereof, which bank or trust company (other than the Banks
to which such restrictions shall not apply) is a member of both the Federal
Deposit Insurance Corporation and the Federal Reserve System and is rated B or
better by Thompson Bank Watch Service (all of which Permitted Investments must
mature within twelve (12) months from the time of acquisition thereof);
(g) Repurchase agreements, which shall be collateralized for at least 100%
of face value, issued by any of the Banks or any other bank or trust company
organized under the laws of the United States or any state thereof, which bank
or trust company (other than the Banks to which such restrictions shall not
apply) is a member of both the Federal Deposit Insurance Corporation and the
Federal Reserve System and is rated B or better by Thompson Bank Watch Service
(all of which Permitted Investments must mature within twelve (12) months from
the time of acquisition thereof);
(h) Investments in money market funds or other mutual funds the investments
of which are limited to domestic securities;
(i) Investments existing as of the date hereof by the Borrower or any of
its Subsidiaries as shown on Schedule 7.2(k);
(j) Settlement accounts between the Borrower and its Subsidiaries or its
Subsidiaries and other Subsidiaries;
<PAGE>
(k) Property and buildings necessary to the operations of the Borrower and
its Subsidiaries;
(l) The redemption, purchase, retirement or other acquisition of any shares
of any class of stock of the Borrower as permitted by Section 7.2(g);
(m) Investments in Permitted Acquisitions; and
(n) Investments not otherwise permitted above, provided that the aggregate
amount (at original cost) of all such Investments of the Borrower and all of its
Subsidiaries at any time outstanding shall not exceed $2,500,000.00.
Person shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity or government (whether national, federal, state, county,
city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
Pledge Agreements shall mean: (i) that certain General Pledge and Security
Agreement to be executed by Borrower and delivered to Agent for the benefit of
each of the Banks, pledging all of the issued and outstanding capital stock of
each of the Guarantors directly owned by Borrower, together with all collateral
schedules, stock powers, original stock certificates and other agreements to be
delivered in connection therewith pursuant to Section 5.2, all as the same may
be from time to time amended, (ii) each of those certain General Pledge and
Security Agreements to be executed by any present or future Guarantor and
delivered to Agent for the benefit of each of the Banks, pledging all of the
issued and outstanding capital stock of each Subsidiary of any of the
Guarantors, together with all collateral schedules, stock powers, original stock
certificates and other agreements to be delivered in connection therewith,
whether pursuant to Section 4.2, Section 5.2 or Section 7.2(e), all as the same
may be from time to time amended, and (iii) each of those certain General Pledge
and Security Agreements to be executed by Borrower or any of its Subsidiaries
and delivered to Agent for the benefit of each of the Banks following demand
therefor by the Required Banks pursuant to Section 5.2 herein, pledging
sixty-six percent (66%) of the issued and outstanding capital stock of each
present or future foreign Subsidiary of Borrower or of any of Borrower's
Subsidiaries, together with all collateral schedules, stock powers, original
stock certificates (if in certificated form) and other agreements to be
delivered in connection therewith, all as the same may be from time to time
amended.
Prime Loan shall mean a Revolving Credit Loan bearing interest at the Prime
Rate plus the Applicable Margin.
Prime Rate shall mean the interest rate announced from time to time by
Agent as its "prime rate" on commercial loans (which rate shall fluctuate as and
when said prime rate shall change).
Pro Rata Share shall mean, with respect to each Bank, such Bank's
percentage of the aggregate amount of Revolving Credit Loans then outstanding,
determined by dividing the aggregate principal amount of all Revolving Credit
Loans of such Bank then outstanding by the aggregate amount of all Revolving
Credit Loans of all Banks then outstanding, or, if no Revolving Credit Loans are
then outstanding, such Bank's percentage of the total Revolving Credit
Commitments of all of the Banks, determined by dividing any such Bank's
Revolving Credit Commitment by the aggregate sum of the Revolving Credit
Commitments of all of the Banks.
Property shall mean any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible. Properties shall mean the
plural of Property. For purposes of this Agreement, the Borrower and each
Subsidiary of the Borrower shall be deemed to be the owner of any Property which
it has acquired or holds subject to a conditional sale agreement, financing
lease or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes.
Related Party shall mean any Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by or is under
common control with, the Borrower or any Subsidiary of the Borrower, (ii) which
beneficially owns or holds ten percent (10%) or more of the equity interest of
the Borrower, (iii) ten percent (10%) or more of the equity interest of which is
beneficially owned or held by the Borrower or a Subsidiary of the Borrower, or
(iv) who is a director, officer or employee of the Borrower or any Subsidiary of
the Borrower. The term "control" shall mean the possession, directly or
indirectly, of the power to vote ten percent (10%) or more of the capital stock
of any Person or the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
Reportable Event shall have the meaning given to such term in ERISA.
Required Banks shall mean at any time Banks having 100% of the aggregate
amount of Revolving Credit Loans then outstanding or, if no Revolving Credit
Loans are then outstanding, 100% of the total Revolving Credit Commitments of
all of the Banks.
Revolving Credit Commitment shall mean, subject to termination or reduction
as set forth in Section 3.11, for each Bank the amount set forth as the
Revolving Credit Commitment of such Bank next to its name on the signature pages
hereof or on the signature pages of any subsequent Assignment Agreement to which
such Bank is a party.
Revolving Credit Loan shall mean each Revolving Credit Loan as described in
Section 3.1(a), whether made as a Prime Loan or a LIBOR Loan, and Revolving
Credit Loans shall mean any or all of the foregoing.
Security Agreement shall mean the Security Agreement to be executed by
Borrower and delivered to Agent for the benefit of each of the Banks pursuant to
Section 5.1, as the same may from time to time be amended.
Subordinated Debt shall mean any borrowed money Indebtedness of Borrower
which has been duly subordinated by the holder thereof to all of Borrower's
Obligations to the Banks and Agent pursuant to a subordination agreement or
intercreditor agreement in form and substance satisfactory to the Required
Banks.
Subsidiary shall mean, with respect to any Person, any corporation of which
fifty percent (50%) or more of the issued and outstanding capital stock entitled
to vote for the election of directors (other than by reason of default in the
payment of dividends) is at the time owned directly or indirectly by such
Person.
Subsidiary Guaranties shall mean those certain guaranties of Borrower's
Obligations dated as of the date hereof executed respectively by the Guarantors
in existence as of the date hereof and the guaranties of any subsequently
activated, created or acquired Subsidiary of Borrower executed and delivered to
Agent hereafter pursuant to Section 4.2 or Section 7.2(e), all as the same may
from time to time be amended.
Subsidiary Security Agreements shall mean those certain security agreements
dated as of the date hereof executed respectively by the Guarantors in existence
as of the date hereof and delivered to Agent for the benefit of each of the
Banks and the Subsidiary Security Agreements executed by any Subsidiary of
Borrower activated, created or acquired subsequent to the date of this
Agreement, which Subsidiary Security Agreement shall be delivered pursuant to
Section 4.2 or Section 7.2(e), all as the same may from time to time be amended.
Term shall have the meaning ascribed thereto in Section 1.
Third Party Collateral shall mean any Property or assets of any Obligor
other than the Borrower which now or at any time hereafter secure the payment or
performance of any of the Borrower's Obligations.
Total Capitalization shall mean, at any quarter-end or year-end, the sum of
Consolidated Total Funded Debt as of such date, plus Consolidated Shareholders'
Equity as of such date.
Total Revolving Credit Commitment shall have the meaning ascribed thereto
in Section 3.1.
Transaction Documents shall mean this Agreement, the Notes, the Security
Agreement, the Pledge Agreements, any Letter of Credit Application, the
Subsidiary Guaranties, the Subsidiary Security Agreements and all other
agreements, documents and instruments heretofore, now or hereafter delivered to
Agent or any of the Banks with respect to or in connection with or pursuant to
this Agreement, any Revolving Credit Loans made or Letters of Credit issued
hereunder or any other of the Borrower's Obligations, and executed by or on
behalf of the Borrower or any of its Subsidiaries, all as the same may from time
to time be amended, modified, extended or renewed.
SECTION 3. THE REVOLVING CREDIT LOANS.
3.1 Revolving Credit Commitment of Banks.
(a) Subject to the terms and conditions hereof, during the Term of this
Agreement, each Bank hereby severally agrees to make such loans (individually, a
"Revolving Credit Loan" and collectively, the "Revolving Credit Loans"), to the
Borrower as the Borrower may from time to time request pursuant to Section
3.2(a). The aggregate principal amount of Revolving Credit Loans which Banks,
cumulatively, shall be required to have outstanding hereunder at any one time,
plus the face amount of Letters of Credit issued by Issuer and indemnified by
Agent and then outstanding under Section 3.3, shall not exceed the lesser of (i)
the then current Borrowing Base (as hereinafter defined); or (ii) One Hundred
Million Dollars ($100,000,000.00) (the "Total Revolving Credit Commitment"), and
the amount each Bank shall be required to have outstanding hereunder as
Revolving Credit Loans plus their undivided Pro Rata Share participation
interest in each Letter of Credit issued by Issuer and indemnified by Agent
under Section 3.3 shall not exceed, in the aggregate at any one time
outstanding, the lesser of (x) the amount of such Bank's Revolving Credit
Commitment or (y) such Bank's Pro Rata Share of the then current Borrowing Base.
Each Revolving Credit Loan under this Section 3.1(a) shall be made from the
several Banks ratably in proportion to their respective Revolving Credit
Commitments. The Revolving Credit Loans from Banks to the Borrower shall be
evidenced by Revolving Credit Notes of the Borrower dated the date hereof and
payable to the order of each of the Banks in the respective original principal
amounts of each such Bank's Revolving Credit Commitment and in the form attached
hereto as Exhibit B and incorporated herein by reference (as the same may from
time to time be amended, modified, extended or renewed, the"Notes"). Subject to
the terms and conditions hereof, the Borrower may borrow, repay and reborrow
such sums from Banks.
(b) For purposes of computing the amount of Revolving Credit Loans
available under Section 3.1(a) above, the "Borrowing Base" shall mean an amount
equal to 3.00 times Borrower's Consolidated EBITDA for the twelve-month period
ending on Borrower's most recent fiscal quarter-end, as determined by reference
to Borrower's most recent Borrowing Base Certificate;
(c) Borrower shall deliver to Agent on the date of execution hereof (with
respect to the fiscal quarter ended February 28, 1998) and thereafter within
forty-five (45) days after the end of each fiscal quarter thereafter (or more
often if requested by the Required Banks), a Borrowing Base Certificate in the
form of Exhibit A attached hereto and incorporated herein by reference (a
"Borrowing Base Certificate") setting forth:
(i) the Borrowing Base and its components as of the end of such fiscal
quarter;
(ii) the aggregate principal amount of all outstanding Revolving Credit
Loans and the face amount of all Letters of Credit then outstanding as of the
end of such fiscal quarter;
(iii) the difference, if any, between the Borrowing Base and the aggregate
principal amount of all outstanding Revolving Credit Loans and the face amount
of all outstanding Letters of Credit as of the end of such fiscal quarter.
The Borrowing Base shown in such Borrowing Base Certificate shall be and
remain the Borrowing Base hereunder until the next Borrowing Base Certificate is
delivered to Agent and each of the Banks, at which time the Borrowing Base shall
be the amount shown in such subsequent Borrowing Base Certificate. Each
Borrowing Base Certificate shall be certified (subject to normal year-end
adjustments) as to truth and accuracy by the President or principal financial
officer of the Borrower.
(d) If at any time the aggregate principal amount of all outstanding
Revolving Credit Loans plus the face amount of all outstanding Letters of Credit
should exceed the lesser of the then current Borrowing Base or the Total
Revolving Credit Commitment of Banks, whether by reduction of the maximum Total
Revolving Credit Commitment amount available under Section 3.1(a) pursuant to
Section 3.11, reduction of the Borrowing Base or otherwise, the Borrower shall
be automatically required (without demand or notice of any kind by Agent or any
of the Banks, all of which are hereby expressly waived by the Borrower) to
immediately repay the Revolving Credit Loans in an amount sufficient to reduce
such aggregate principal amount of outstanding Revolving Credit Loans to an
amount equal to the lesser of the then current Borrowing Base or the Total
Revolving Credit Commitment. If the undrawn face amount of all Letters of Credit
still exceeds the lesser of the then current Borrowing Base or the Total
Revolving Credit Commitment after repayment in full of all Revolving Credit
Loans under the preceding sentence, Borrower agrees to provide cash collateral
in form and substance acceptable to Agent in the amount by which the face amount
of outstanding Letters of Credit exceeds the lesser of the then current
Borrowing Base or the Total Revolving Credit Commitment in the manner required
under Section 3.3(f).
(e) Each Bank shall record in its books and records, and prior to any
transfer of its Note shall endorse on the schedules forming a part thereof,
appropriate notations to evidence the date and amount of each Revolving Credit
Loan made by it during the Term hereof, whether such Revolving Credit Loan is
then a Prime Loan or a LIBOR Loan, and the date and amount of each payment of
principal made by Borrower with respect thereto. Each Bank is hereby irrevocably
authorized by Borrower so to endorse its Note and to attach to and make a part
of any such Note a continuation of any such schedule as and when required;
provided, however that the obligation of Borrower to repay each Revolving Credit
Loan made hereunder shall be absolute and unconditional, notwithstanding any
failure of any Bank to endorse or any mistake by any Bank in connection with
endorsement on the schedules attached to their respective Notes. The books and
records of each Bank (including, without limitation, the schedules attached to
the Notes) showing the account between such Bank and Borrower shall be
admissible in evidence in any action or proceeding and shall constitute prima
facie proof of the items therein set forth.
3.2 Procedure for Borrowing.
(a) Revolving Credit Loan Advances. Subject to the terms and conditions
hereof, Banks shall cause the Revolving Credit Loans to be made to the Borrower
at any time and from time to time during the Term hereof upon timely notice
("Borrowing Notice") to Agent, in writing signed by an authorized representative
of the Borrower (the "Authorized Representatives") as set forth on Schedule 3.2
attached hereto, as such Authorized Representatives may be changed from time to
time pursuant to a certificate signed by the President or chief financial
officer of Borrower and delivered to Agent, (including any such Borrowing Notice
by facsimile transmission) or, if a Prime Loan is being requested, such
Borrowing Notice may be oral provided it is promptly confirmed in writing signed
by an Authorized Representative of the Borrower to Agent, specifying: (1) the
desired amount of the new Revolving Credit Loan, (2) the applicable interest
rate option being selected, (3) if a LIBOR Loan is requested, the Interest
Period, which in no event shall extend beyond the last day of the Term hereof,
and (4) the date on which the Revolving Credit Loan proceeds are to be made
available to the Borrower, which shall be a Business Day. Each Borrowing Notice
must be received by Agent not later than 11:00 a.m. (St. Louis time) on the
Business Day on which a Revolving Credit Loan being borrowed as a Prime Loan is
to be made, and not later than 11:00 a.m. (St. Louis time) on the second
Business Day prior to the Business Day on which a Revolving Credit Loan being
borrowed as a LIBOR Loan is to be made. Upon receipt of a Borrowing Notice given
to it, the Agent shall notify each Bank by 12:00 noon (St. Louis time) on the
date of receipt of such Borrowing Notice by the Agent of the contents thereof
and of such Bank's Pro Rata Share of such new Revolving Credit Loan. A Borrowing
Notice, once issued, shall not be revocable by the Borrower. Not later than 2:00
p.m. (St. Louis time) on the date of each new Revolving Credit Loan, each Bank
shall make available its Pro Rata Share of such Revolving Credit Loan, in
federal or other funds immediately available in St. Louis, Missouri, to the
Agent at its address specified in or pursuant to Section 10.7. Agent shall not
be required to make any amount available to Borrower hereunder except to the
extent it shall have received such amounts from the Banks as set forth herein,
provided, however, that unless the Agent shall have been notified by a Bank
prior to the date a Revolving Credit Loan is to be made hereunder that such Bank
does not intend to make its Pro Rata Share of such Revolving Credit Loan
available to the Agent, the Agent may assume that such Bank has made such Pro
Rata Share available to the Agent on such date, and the Agent may in reliance
upon such assumption make available to the Borrower a corresponding amount. If
such corresponding amount is not in fact made available to the Agent by such
Bank and the Agent has made such amount available to the Borrower, the Agent
shall be entitled to receive such amount from such Bank forthwith upon its
demand, together with interest thereon in respect of each day during the period
commencing on the date such amount was made available to the Borrower and ending
on but excluding the date the Agent recovers such amount from the Bank at a rate
per annum equal to the effective rate charged to the Agent for overnight federal
funds transactions with member banks of the Federal Reserve System for each day
as determined by the Agent (or in the case of a day which is not a Business Day,
then for the preceding day) provided, however, nothing herein shall release such
Bank from any obligation or liability to the Borrower on account of such failure
to make such amount available. Subject to the terms and conditions hereof,
provided that Agent has received a timely Borrowing Notice, Agent shall (unless
Agent determines that any applicable condition specified in Section 4 has not
been satisfied) make the funds so received from the Banks available to Borrower
by wiring or otherwise transferring the proceeds of such Revolving Credit Loan
not later than 2:30 p.m. (St. Louis time) on the Business Day specified in said
Borrowing Notice in accordance with any instructions for such disbursement
received from the Borrower. The Borrower hereby authorizes Agent and Banks to
rely on telephonic, telegraphic, telecopy, telex or written instructions of any
Person identifying himself or herself as an Authorized Representative for
purposes of requesting Revolving Credit Loans or making repayments hereunder,
and on any signature which Agent or any of the Banks believes to be genuine, and
the Borrower shall be bound thereby in the same manner as if such Person were
actually authorized or such signature were genuine. Borrower also hereby agrees
to indemnify Agent and Banks and hold Agent and Banks harmless from and against
any and all claims, demands, damages, liabilities, losses, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses)
relating to or arising out of or in connection with the acceptance of
instructions for making Revolving Credit Loans or making repayments hereunder
unless such acceptance results from the gross negligence or willful misconduct
of the Agent or a Bank, as determined by a court of competent jurisdiction. A
Borrowing Notice shall not be required in connection with a Prime Loan pursuant
to Section 3.3(c).
(b) Interest Rate Conversions. Subject to the terms and conditions hereof,
Banks shall permit the Borrower to convert outstanding Revolving Credit Loans
from a Prime Loan to a LIBOR Loan or from a LIBOR Loan to a Prime Loan, and
Banks shall permit the Borrower to request a new Interest Period for any
existing LIBOR Loan at the end of its then current Interest Period, upon timely
notice ("Conversion Notice") to Agent, in writing signed by an Authorized
Representative of the Borrower (including any such notice by facsimile
transmission) specifying: (1) the amount of the outstanding Revolving Credit
Loan being converted to a new interest rate basis, or the amount of the LIBOR
Loan being continued as a LIBOR Loan for a new Interest Period, (2) the
applicable interest rate option being selected, (3) if a LIBOR Loan is
requested, the Interest Period, which in no event shall extend beyond the last
day of the Term hereof, and (4) the effective date, which shall be a Business
Day, and if pertaining to an existing LIBOR Loan, shall also be the last day of
the then current Interest Period. Each Conversion Notice must be received by
Agent not later than 11:00 a.m. (St. Louis time) on the Business Day on which a
conversion to a Prime Loan is to be made, and not later than 11:00 a.m. (St.
Louis time) on the second Business Day prior to the Business Day on which a
conversion to a LIBOR Loan is to be made. Each Conversion Notice for extension
of an existing LIBOR Loan for a new Interest Period must be received by Agent
not later than 11:00 a.m. (St. Louis time) on the second Business Day prior to
the last day of the then current Interest Period. Upon receipt of a Conversion
Notice given to it, the Agent shall notify each Bank by 12:00 noon (St. Louis
time) on the date of receipt of such Conversion Notice by the Agent of the
contents thereof. Unless the Borrower shall have otherwise requested Agent to
notify the Banks to continue an existing LIBOR Loan for a new Interest Period in
a timely Conversion Notice, upon the expiration of the current Interest Period
any LIBOR Loan made in relation to such Interest Period and then outstanding
shall bear interest at the Prime Rate plus Applicable Margin from and after the
expiration of such Interest Period unless and until subsequently converted in
accordance with the terms of this Section 3.2(b). A Conversion Notice shall not
be revocable by the Borrower. Subject to the terms and conditions hereof,
provided that Agent has received the timely Conversion Notice, Banks shall
(unless Agent determines that any applicable condition specified in Section 4
has not been satisfied) convert the interest rate on the portion of the
outstanding Revolving Credit Loans as directed by the Borrower in the Conversion
Notice, or Banks shall extend any LIBOR Loan for a new Interest Period as
directed by the Borrower in the Conversion Notice, at 2:30 p.m. (St. Louis time)
on the Business Day specified in said Conversion Notice; provided, however, that
notwithstanding the foregoing, in addition to and without limiting the rights
and remedies of the Agent and the Banks under Section 8 hereof, so long as any
Default or Event of Default under this Agreement has occurred and is continuing,
Borrower shall not be permitted to renew any LIBOR Loan as a LIBOR Loan or to
convert any Prime Loan into a LIBOR Loan. The Borrower hereby authorizes Agent
and the Banks to rely on telephonic, telegraphic, telecopy, telex or written
instructions of any person identifying himself or herself as an Authorized
Representative for purposes of requesting a conversion of a Revolving Credit
Loan or continuing a LIBOR Loan hereunder, and on any signature which Agent or
any of the Banks believe to be genuine, and the Borrower shall be bound thereby
in the same manner as if such Person were actually authorized or such signature
were genuine. The Borrower also hereby agrees to indemnify Agent and the Banks
and hold Agent and the Banks harmless from and against any and all claims,
demands, damages, liabilities, losses, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) relating to or arising out
of or in connection with the acceptance of instructions for converting Revolving
Credit Loans to a new interest rate basis or continuing LIBOR Loans hereunder
unless such acceptance results from the gross negligence or willful misconduct
of the Agent or a Bank as determined by a court of competent jurisdiction. A
Conversion Notice shall not be required in connection with a Prime Loan pursuant
to Section 3.6, 3.7 or 3.8.
3.3 Letters of Credit.
(a) Subject to the terms and conditions of this Agreement, during the Term
of this Agreement, and so long as no Default or Event of Default under this
Agreement has occurred and is continuing (provided, however, that Agent shall
have no liability to any of the Banks for causing Mercantile Bank National
Association (the "Issuer") to issue a Letter of Credit after the occurrence of
any Default or Event of Default under this Agreement unless Agent has previously
received notice in writing to Agent by Borrower or any of the other Banks of the
occurrence of such Default or Event of Default), Agent hereby agrees to cause
Issuer to issue irrevocable standby and commercial letters of credit for the
account of Borrower (individually, a "Letter of Credit" and collectively, the
"Letters of Credit") in an amount and for the term specifically requested by
Borrower by application in writing to Issuer in the form of Exhibit E in the
case of a standby Letter of Credit or in the form of Exhibit F in the case of a
commercial Letter of Credit, each as attached hereto and incorporated herein by
reference (a "Letter of Credit Application") at least three (3) Business Days
prior to the requested issuance thereof; provided, however, that:
(i) Borrower shall have executed and delivered to Agent and Issuer a Letter
of Credit Application with respect to such Letter of Credit;
(ii) the term of any such Letter of Credit shall not extend beyond the
earlier of (A) the last day of the Term hereof, or (B) three hundred sixty-five
(365) days from the issuance thereof, provided, however, that any such Letter of
Credit may be renewable on terms satisfactory to the Agent and the Issuer; and
(iii) the aggregate undrawn face amount of all outstanding Letters of
Credit shall not at any one time exceed Fifteen Million Dollars ($15,000,000.00)
and the aggregate undrawn face amount of all outstanding Letters of Credit plus
the outstanding principal amount of all Revolving Credit Loans shall not at any
one time exceed the lesser of (a) the then current Borrowing Base or (b) One
Hundred Million Dollars ($100,000,000.00); and
(iv) the text of any such Letter of Credit is provided to Agent and Issuer
no less than three (3) Business Days prior to the requested issuance date, which
text must be acceptable to Agent and Issuer in their sole and absolute
discretion.
Borrower, the Agent and Banks acknowledge that Borrower and/or certain of
its Subsidiaries have, prior to the date of this Agreement, obtained the
issuance of Letters of Credit by Issuer pursuant to Letters of Credit
Applications executed by such parties prior to the date hereof, which Letters of
Credit are described on Schedule 3.3(a) attached hereto. For purposes of
determining availability of Revolving Credit Loans under Section 3.1 above, each
of the Letters of Credit listed on Schedule 3.3(a) shall be deemed to be Letters
of Credit issued pursuant to this Section, and each such Letter of Credit listed
on Schedule 3.3(a) shall also constitute a Letter of Credit for purposes of the
Fifteen Million Dollar ($15,000,000.00) limit for all such Letters of Credit
under subpart (iii) above. The Letter of Credit Application and Reimbursement
Agreements for each of the Letters of Credit listed on Schedule 3.3(a) shall
also be deemed to be Letters of Credit Applications for purposes of this
Agreement.
(b) The payment of drafts under each Letter of Credit shall be made in
accordance with the terms thereof and, in that connection, Issuer shall be
entitled to honor any drafts and accept any documents presented to it by the
beneficiary of such Letter of Credit in accordance with the terms of such Letter
of Credit and believed by Issuer to be genuine. Issuer shall not have any duty
to inquire as to the accuracy or authenticity of any draft or other drawing
document that may be presented to it other than the duties contemplated by the
applicable Letter of Credit Application. If Issuer shall have received documents
that in its judgment constitute all of the documents that are required to be
presented before payment or acceptance of a draft under a Letter of Credit, it
shall be entitled to pay such draft provided such documents conform on their
face to the requirements of such Letter of Credit.
(c) In the event of any payment by Issuer of a draft presented or accepted
under a Letter of Credit, Borrower agrees to pay to Agent for reimbursement to
Issuer in immediately available funds at the time of such drawing an amount
equal to the sum of such drawing plus the Issuer's customary negotiation,
processing and other fees related thereto. Borrower hereby authorizes each of
Agent and Issuer to charge or cause to be charged Borrower's bank accounts at
Agent or Issuer to the extent there are balances of immediately available funds
therein, in an amount equal to the sum of such drawing plus Issuer's customary
negotiation, processing and other fees related thereto, and Borrower agrees to
pay the amount of any such drawing (and/or Issuer's customary negotiation,
processing and other fees related thereto) not so charged prior to the close of
business of Issuer on the day of such drawing. In the event any payment under a
Letter of Credit is made by Issuer prior to receipt of payment from Borrower,
such payment by Issuer shall constitute a request by Borrower for a Revolving
Credit Loan as a Prime Loan from the Banks under Section 3.1(a) above (and the
Banks shall have the right to make such Prime Loan to Borrower regardless of
whether the conditions precedent to the making of such Prime Loan have been
met).
(d)(i) Borrower shall also pay to Agent, for the sole account of Issuer,
with respect to each a Letter of Credit issued after the date hereof and
excluding those listed on Schedule 3.3(a), a nonrefundable issuance fee in the
amount of One Hundred Twenty-Five Dollars ($125.00) (the "Letter of Credit
Issuance Fee"), which Letter of Credit Issuance Fee shall be due and payable on
the date of issuance of each Letter of Credit, and such other fees as Issuer may
from time to time customarily charge in accordance with Issuer's published
schedule of fees in effect from time to time, which fees shall be due and
payable on demand by Agent hereunder; and
(ii) As reasonable compensation for the Banks indemnifying Agent for its
indemnification of that certain Letter of Credit issued by Issuer for the
account of B.F. Shaw, Inc. in the face amount of $4,049,316.00 (the "Bond Letter
of Credit"), as credit enhancement for those certain Adjustable Rate Economic
Development Revenue Bonds, (B.F. Shaw, Inc.) Series 1995 (B.F. Shaw, Inc.
Project) issued by the South Carolina Jobs-Economic Development Authority (the
"Bonds"), the Borrower shall pay to Agent for the ratable account of the Banks
with respect to the Bond Letter of Credit for the period after the date hereof
during which such Bond Letter of Credit is outstanding, a nonrefundable Letter
of Credit Commitment Fee on each anniversary date of the issuance thereof equal
to One Percent (1.00%) per annum times the face amount of such Bond Letter of
Credit.
(iii) For Letters of Credit other than the Bond Letter of Credit described
in Section 3.3(d)(ii) above, Borrower shall pay to Agent for the ratable account
of the Banks with respect to each Letter of Credit for each fiscal quarter or
portion thereof during which such Letter of Credit is outstanding, a
nonrefundable Letter of Credit Commitment Fee in an amount equal to the
Applicable Margin for LIBOR Loans in effect for each such fiscal quarter
(calculated on an actual day, 360-day year basis) times the face amount (taking
into account any scheduled increases or decreases therein during the fiscal
quarter in question) of each Letter of Credit issued hereunder ("Letter of
Credit Commitment Fee"), which Letter of Credit Commitment Fee shall be due and
payable initially within ten (10) days of the date hereof for all Letters of
Credit outstanding on the date hereof and on the date of issuance for each
Letter of Credit issued by Issuer for Borrower's account hereafter, in each case
prorated for the remainder of the then current quarter, and such Letter of
Credit Commitment Fee shall also be payable thereafter for all outstanding
Letters of Credit, other than the Bond Letter of Credit, quarterly in advance on
each April 1, July 1, October 1 and January 1 during the Term hereof.
(e) Agent shall on the date hereof execute an indemnity agreement in favor
of Issuer of all of Borrower's reimbursement obligations under any Letter of
Credit Applications in order to induce Issuer to issue Letters of Credit
hereunder for Borrower's account. Such indemnity agreement shall also evidence
Agent's agreement to indemnify Issuer for all of Borrower's reimbursement
obligations under any Letter of Credit Application for each of the Letters of
Credit issued prior to the date hereof and listed on Schedule 3.3(a) attached
hereto. Upon the issuance of a Letter of Credit by Issuer, an undivided
participation interest in Agent's indemnity obligations with respect thereto
(including, without limitation, any such indemnity obligations with respect to
each of the Letters of Credit listed on Schedule 3.3(a) attached hereto) shall
automatically be granted by Agent to and accepted by each of the Banks in an
amount based on each such Bank's Pro Rata Share of the face amount of such
Letter of Credit, which participation shall be evidenced by a Letter of Credit
Participation Certificate executed by Agent in favor of each such Bank in the
form attached hereto as Exhibit G and incorporated herein by reference. Agent
agrees to provide each Bank with a copy of each Letter of Credit issued
hereunder. If Agent shall make payment to Issuer under its indemnity agreement
on any draft presented or accepted under a Letter of Credit, Agent shall give
notice of such payment to the other Banks, and each of the other Banks hereby
authorizes and requests Agent to advance for their respective accounts, pursuant
to the terms hereof, their respective shares of any such payment based upon
their respective Pro Rata Shares. If a Default has occurred hereunder and if
such drawing is not paid by Borrower in immediately available funds prior to the
close of business of Issuer on the date of such drawing, Agent shall promptly so
notify the other Banks and each of the other Banks agrees to immediately
reimburse Agent in immediately available funds for its Pro Rata Share of the
amount of such drawing, plus interest calculated on its Pro Rata Share of such
amount at a rate per annum equal to the effective rate charged to the Issuer for
overnight federal funds transactions with member banks of the Federal Reserve
System calculated from the date of such payment by Issuer to but excluding the
date of reimbursement by each Bank and on an actual-day, 360-day year basis.
Each of the other Banks will be entitled to its Pro Rata Share of any Letter of
Credit Commitment Fees paid by Borrower, but such other Banks shall have no
right to share in any Letter of Credit Issuance Fees or any other fees paid by
Borrower to Issuer or Agent in connection with any of the Letters of Credit.
(f) Notwithstanding any provision contained in this Agreement or any of the
Letter of Credit Applications to the contrary, upon the occurrence of any Event
of Default under this Agreement, at Agen's option and without demand or further
notice to Borrower, an amount equal to the aggregate undrawn face amount of all
Letter(s) of Credit then outstanding shall be deemed (as between Agent and
Borrower) to have been paid or disbursed by Agent to Issuer under its indemnity
of Borrower's Letter of Credit reimbursement obligations (notwithstanding that
such amounts may not in fact have been so paid or disbursed by Agent), and which
amount shall be immediately due and payable. In lieu of the foregoing, at the
election of the Required Banks upon the occurrence of any Event of Default under
this Agreement, Borrower shall, upon the Required Banks' demand, deliver to
Agent cash, or other collateral acceptable to the Required Banks in their sole
and absolute discretion, having a value, as determined by the Required Banks, at
least equal to aggregate undrawn face amount of all outstanding Letters of
Credit. Any such collateral and/or any amounts received by Agent for such
Letters of Credit reimbursement obligations shall be held by Agent in a separate
account at the Issuer appropriately designated as a cash collateral account in
relation to this Agreement and the Letters of Credit and retained by Issuer for
the benefit of itself, Agent and the Banks as collateral security for the
payment of Borrower's Obligations hereunder. Cash amounts delivered to Agent
pursuant to the foregoing requirements of this Section shall be invested, at the
request and for the account of Borrower, in investments of a type and nature and
with a term acceptable to the Required Banks. Such amounts, including in the
case of cash amounts invested in the manner set forth above, any interest
realized thereon, may be applied to reimburse Issuer, Agent and/or any of the
Banks for drawings or payments under or pursuant to the Letters of Credit which
any such Person has paid, or if no such reimbursement is required to the payment
of such other of Borrower's Obligations as the Required Banks shall determine.
Any amounts remaining in any cash collateral account established pursuant to
this Section after the payment in full of all of Borrower's Obligations and the
expiration or cancellation of all of the Letters of Credit shall be promptly
returned to Borrower (after deduction of Agent's expenses, if any).
3.4 Interest Rates and Payments.
(a) Each Revolving Credit Loan shall bear interest prior to maturity at a
rate per annum equal to such of the following as the Borrower, at its option,
shall select in accordance with Section 3.2: (i) the Prime Rate plus Applicable
Margin, which rate shall fluctuate as and when said Prime Rate or said
Applicable Margin shall change, or (ii) the LIBOR Rate plus Applicable Margin,
determined in the case of LIBOR Loans as of the date of the commencement of the
applicable Interest Period. Accrued interest on all Prime Loans shall be payable
monthly in arrears on the first day of each month, commencing on the first such
date after such Revolving Credit Loan is made. Accrued interest on all LIBOR
Loans shall be payable in arrears on the last day of the Interest Period
applicable to each such LIBOR Loan, and if any such Interest Period exceeds
three months, all accrued and unpaid interest shall be due and payable on the
date three months following the commencement of such Interest Period as well. In
addition, all accrued interest on all Revolving Credit Loans shall be payable on
the last day of the Term hereof, whether by reason of acceleration or otherwise.
(b) After the occurrence of an Event of Default, the principal balance of
and, to the extent permitted by law, any overdue interest on any Prime Loan
shall bear interest, payable on demand, for each day until paid, at a rate per
annum equal to Three and Three-Fourths Percent (3.75%) over and above the Prime
Rate, fluctuating as and when said Prime Rate shall change. After the occurrence
of an Event of Default, the principal balance of and, to the extent permitted by
law, any overdue interest on any LIBOR Loan shall bear interest, payable on
demand, for each day during the applicable Interest Period until paid, at a rate
per annum equal to the sum of Three Percent (3.00%) plus the LIBOR Rate plus
Applicable Margin for such LIBOR Loan, and after the expiration of such Interest
Period, such Revolving Credit Loan shall thereafter bear interest at the default
rate applicable to Prime Loans under the preceding sentence. From and after the
maturity of the Notes, whether by reason of acceleration or otherwise, the
unpaid principal balance of each Revolving Credit Loan shall bear interest until
paid, payable on demand, at a rate per annum equal to Three and Three-Fourths
Percent (3.75%) over and above the Prime Rate, fluctuating as aforesaid.
(c) Interest shall be computed with respect to all Revolving Credit Loans
on an actual day, 360-day year basis. Each Prime Loan shall be for a principal
amount of Five Hundred Thousand Dollars ($500,000.00) or any larger multiple of
Twenty-Five Thousand Dollars ($25,000.00). Each LIBOR Loan shall be for a
principal amount of Two Million Five Hundred Thousand Dollars ($2,500,000.00) or
any larger multiple of One Hundred Thousand Dollars ($100,000.00), and the
Borrower shall be permitted to have no more than ten (10) LIBOR Loans
outstanding at any one time.
(d) The Agent shall determine each interest rate applicable to the
Revolving Credit Loans hereunder as selected by Borrower pursuant to Section
3.2. The Agent shall give prompt notice to Borrower and the Banks by telephone,
telecopy, telex or cable of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
3.5 Prepayment; Funding Losses. The Borrower shall be privileged to prepay
all at any time or any portion from time to time of the unpaid principal balance
of any Revolving Credit Loan, provided, however, that any LIBOR Loan may be
prepaid only at the expiration of the applicable Interest Period. If the
Borrower makes any payment with respect to any LIBOR Loan on any day other than
the last day of the Interest Period applicable thereto (whether by reason of
acceleration, a required prepayment under this Agreement or otherwise), or if
the Borrower converts any LIBOR Loan or portion thereof to a Prime Loan on any
day other than the last day of the Interest Period applicable thereto (whether
by reason of Section 3.7, 3.8 or otherwise), or if the Borrower fails to borrow
any LIBOR Loan after a request for such a Revolving Credit Loan has been given
to Agent pursuant hereto, the Borrower shall reimburse any of the Banks on
demand for any resulting losses and expenses incurred by any such Bank,
including, without limitation, any losses incurred in obtaining, liquidating or
employing deposits from third parties, including loss of margin for the period
after such payment or conversion, provided that such Bank shall have delivered
to the Borrower a certificate, with supporting calculations, as to the amount of
such losses and expenses, which certificate shall be conclusive in the absence
of manifest error. All prepayments shall be applied solely to the payment of
principal.
3.6 Basis for Determining Interest Rate Inadequate or Unfair. If with
respect to any Interest Period:
(a) Deposits in dollars (in the applicable amounts) are not being offered
to any Bank in the relevant market for such Interest Period, or
(b) Any Bank determines that the LIBOR Rate as determined pursuant to the
definition thereof will not adequately and fairly reflect the cost to such Bank
of maintaining or funding the LIBOR Loans for such Interest Period,
such Bank shall forthwith give notice thereof to the Borrower, which notice
shall set forth in detail the basis for such notice, whereupon until such Bank
notifies the Borrower that the circumstances giving rise to such suspension no
longer exist, (a) the obligations of the such Bank to make LIBOR Loans shall be
suspended, and (b) the Borrower shall convert all of its then outstanding LIBOR
Loans from such Bank on the last day of the then current Interest Period
applicable to each such LIBOR Loan, to a Prime Loan in an equal principal
amount. Interest accrued on such LIBOR Loan prior to such conversion shall be
due and payable on the date of such conversion.
3.7 Illegality. If, after the date of this Agreement, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental or regulatory
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank with any request or directive
(whether or not having the force of law) of any such governmental or regulatory
authority, central bank or comparable agency shall make it unlawful or
impossible for such Bank to make, maintain or fund its LIBOR Loans to the
Borrower, such Bank shall forthwith give notice thereof to the Borrower. Upon
receipt of such notice, the Borrower shall convert all of their then outstanding
LIBOR Loans from such Bank on either (a) the last day of the then current
Interest Period applicable to such LIBOR Loan if such Bank may lawfully continue
to maintain and fund such LIBOR Loan to such day or (b) immediately if such Bank
may not lawfully continue to fund and maintain such LIBOR Loan to such day, to a
Prime Loan in an equal principal amount. Interest accrued on such LIBOR Loan
prior to such conversion shall be due and payable on the date of such conversion
together with any funding losses and other amounts due under Section 3.5.
3.8 Increased Cost.
(a) If (i) Regulation D of the Board of Governors of the Federal Reserve
System, as amended, or (ii) after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental or regulatory
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank with any request or directive
(whether or not having the force of law) of any such governmental or regulatory
authority, central bank or comparable agency (a "Regulatory Change"):
(i) shall subject any such Bank to any tax, duty or other charge with
respect to its LIBOR Loans, the Notes or the obligation to make LIBOR Loans, or
shall change the basis of taxation of payments to any such Bank of the principal
of or interest on its LIBOR Loans or any other amounts due under this Agreement
in respect of its LIBOR Loans or its obligation to make LIBOR Loans (except for
taxes on or changes in the rate of tax on the overall net income of such Bank);
or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any reserve imposed by the Board of Governors of the Federal
Reserve System), special deposit, capital or similar requirement against assets
of, deposits with or for the account of, or credit extended or committed to be
extended by, any such Bank or shall, with respect to such Bank impose, modify or
deem applicable any other condition affecting such Bank's LIBOR Loans, the Notes
or such Bank's obligation to make LIBOR Loans;
and the result of any of the foregoing is to increase the cost to (or in
the case of Regulation D, to impose a cost on or increase the cost to) such Bank
of making or maintaining any LIBOR Loan, or to reduce the amount of any sum
received or receivable by such Bank under this Agreement or under any of the
Notes with respect thereto, by an amount deemed by such Bank to be material, and
if such Bank is not otherwise fully compensated for such increase in cost or
reduction in amount received or receivable by virtue of the inclusion of the
reference to "LIBOR Reserve Percentage" in the calculation of the LIBOR Rate,
then upon notice by such Bank to the Borrower, which notice shall set forth such
Bank's supporting calculations and the details of the Regulatory Change, the
Borrower shall pay such Bank, as additional interest, such additional amount or
amounts as will compensate Banks for such increased cost or reduction. The
determination by any Bank under this Section of the additional amount or amounts
to be paid to it hereunder shall be conclusive in the absence of manifest error.
In determining such amount or amounts, the Banks may use any reasonable
averaging and attribution methods.
(b) If any Bank demands compensation under this Section, the Borrower may
at any time, upon at least one (1) Business Day's prior notice to such Bank,
convert their then outstanding LIBOR Loans to Prime Loans in an equal principal
amount. Interest accrued on such LIBOR Loan prior to such conversion shall be
due and payable on the date of such conversion together with any funding losses
and other amounts due under Section 3.5.
(c) The covenants contained in this Section shall survive the termination
of this Agreement and payment of the outstanding Notes; provided, that any Bank
shall only be entitled to claim such additional amounts hereunder as are
specified in a request submitted to the Borrower not later than 90 days after
the termination of this Agreement and the payment of the outstanding Notes.
3.9 Prime Loans Substituted for Affected LIBOR Loans. If notice has been
given by any Bank pursuant to Section 3.6 or 3.7 or by the Borrower pursuant to
Section 3.8 requiring LIBOR Loans to be repaid or converted, then, unless and
until such Bank notifies the Borrower that the circumstances giving rise to such
repayment or conversion no longer apply, all Revolving Credit Loans which would
otherwise be made by such Bank to the Borrower as LIBOR Loans shall be made
instead as Prime Loans. Any such Bank shall promptly notify the Borrower if and
when the circumstances giving rise to such repayment no longer apply. All
indemnities and all provisions relating to reimbursement to any Bank of amounts
sufficient to protect the yield to such Bank with respect to the Revolving
Credit Loans, including, without limitation, Sections 3.5, 3.6, 3.7 and 3.8
hereof, shall survive the payment of the Notes and the termination of this
Agreement for the period specified in such Sections.
3.10 Place and Manner of Payment. Both principal and interest on the
Revolving Credit Loans and all fees due hereunder and under any of the other
Transaction Documents payable to any Bank shall be paid in lawful currency of
the United States, in federal or other immediately available funds, at Agent's
office at 721 Locust Street, St. Louis, Missouri 63101. The Agent will promptly
distribute to each Bank in immediately available funds its ratable share of each
such payment received by the Agent pursuant to the terms of this Agreement for
the account of such Banks. Whenever any payment of principal of, or interest on,
the Revolving Credit Loans or of fees shall be due on a day which is not a
Business Day, the date for payment thereof shall be extended to the next
succeeding Business Day, except as required by clauses (iii) or (iv) of the
definition of Interest Period. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon, at the then
applicable rate, shall be payable for such extended time.
3.11 Termination or Reduction of Revolving Credit Commitments. The Borrower
may, upon one (1) Business Day's prior written notice to Agent, terminate
entirely at any time, or proportionately reduce from time to time on a pro rata
basis among the Banks based on their respective Revolving Credit Commitments, by
an aggregate amount of $5,000,000.00 or any larger multiple of $1,000,000.00,
the unused portions of the Revolving Credit Commitments as specified by Borrower
in such notice to Agent; provided, however, that (i) at no time shall the
Revolving Credit Commitments be reduced to a figure less than the total of the
outstanding principal amount of all Revolving Credit Loans plus the face amount
of all outstanding Letters of Credit, (ii) at no time shall the Revolving Credit
Commitments be reduced to a figure greater than zero but less than
$10,000,000.00, and (iii) any such termination or reduction shall be permanent
and the Borrower shall have no right to thereafter reinstate or increase, as the
case may be, the Revolving Credit Commitment of any Bank.
3.12 Facility Fee. The Borrower shall pay to Agent on the date hereof a
nonrefundable Facility Fee (the "Facility Fee") in the amount of Fifty Thousand
Dollars ($50,000.00), which Facility Fee shall be distributed by Agent to the
Banks in accordance with their Pro Rata Shares thereof.
3.13 Commitment Fee. From the date hereof to but excluding the last day of
the Term hereof, the Borrower shall pay to the Agent, for distribution to the
Banks in accordance with their Pro Rata Shares, a quarterly nonrefundable
commitment fee equal to the then current Applicable Margin, multiplied by the
average daily unused portion of the Total Revolving Credit Commitment. The
unused Total Revolving Credit Commitment shall be calculated as (i) the sum of
the amounts each day during any such fiscal quarter equal to the Total Revolving
Credit Commitment minus (x) the outstanding principal balance of all Revolving
Credit Loans, and (y) the face amount of all issued and outstanding Letters of
Credit on each such day, divided by (ii) 90, or by such lesser number of days in
any partial fiscal quarter for which such Revolving Credit Commitment was
available. Such commitment fee shall be payable quarterly in arrears on each
April 1, July 1, October 1 and January 1 during the Term hereof and on the last
day of the Term hereof, and shall be calculated on an actual day, 360-day year
basis.
3.14 Maturity. All principal, interest and other amounts outstanding with
respect to the Revolving Credit Loans which are not paid prior thereto shall be
due and payable on the last day of the Term hereof, whether by reason of the
expiration thereof, acceleration or otherwise.
3.15 Voluntary Prepayments.
(a) Borrower may, upon notice to Agent specifying that it is paying its
Prime Loans, pay its Prime Loans in whole at any time, or from time to time in
part in amounts aggregating Fifty Thousand Dollars ($50,000.00) or any larger
multiple of Ten Thousand Dollars ($10,000.00), by paying the principal amount to
be paid together with all accrued and unpaid interest thereon to but excluding
the date of payment; provided, however, that in no event may the Borrower make a
partial payment of Prime Loans which results in the total outstanding Revolving
Credit Loans which are Prime Loans being greater than zero but less than One
Hundred Thousand Dollars ($100,000.00).
(b) Borrower may, upon at least two (2) Business Day's notice to Agent
specifying that it is paying LIBOR Loans, pay on the last day of any Interest
Period its LIBOR Loans to which such Interest Period applies, in whole, or in
part in amounts aggregating Five Hundred Thousand Dollars ($500,000.00) or any
larger multiple of One Hundred Thousand Dollars ($100,000.00), by paying the
principal amount to be paid together with all accrued and unpaid interest
thereon to but excluding the date of payment; provided, however, that in no
event may the Borrower make a partial payment of LIBOR Loans which results in
the total outstanding LIBOR Loans with respect to which a given Interest Period
applies being greater than zero but less than Two Million Five Hundred Thousand
Dollars ($2,500,000.00).
(c) Upon receipt of a notice of payment pursuant to this Section, the Agent
shall promptly notify each Bank of the contents thereof and of such Bank's Pro
Rata Share of such payment and such notice shall not thereafter be revocable by
Borrower.
3.16 Discretion of Bank as to Manner of Funding. Notwithstanding any
provision contained in this Agreement to the contrary, each of the Banks shall
be entitled to fund and maintain its funding of all or any part of its LIBOR
Loans in any manner it elects, it being understood, however, that for purposes
of this Agreement all determinations hereunder (including, without limitation,
the determination of each Bank's funding losses and expenses under Section 3.5)
shall be made as if such Bank had actually funded and maintained each LIBOR Loan
through the purchase of deposits having a maturity corresponding to the maturity
of the applicable Interest Period relating to the applicable LIBOR Loan and
bearing an interest rate equal to the applicable LIBOR Rate. Each Bank may, at
its option, elect to make, fund or maintain its Loans hereunder at the branches
or offices specified on the signature pages hereof or on any Assignment
Agreement executed and delivered pursuant to Section 10.12 hereof or at such
other of its branches or offices as such Bank may from time to time elect,
provided that the Borrower shall not be required to reimburse any Bank under any
of the provisions of Section 3.5 for any cost which such Bank would not have
incurred but for changing its lending or funding branch unless Borrower consents
to such change.
SECTION 4. PRECONDITIONS TO LOANS.
4.1 Initial Revolving Credit Loan or Letter of Credit. Notwithstanding any
provision contained herein to the contrary, Banks shall have no obligation to
make any Revolving Credit Loan hereunder, and Agent shall have no obligation to
cause the Issuer to issue any Letter of Credit, unless Agent and Banks shall
have received no later than May ___, 1998 the following:
(a) This Agreement and the Notes, each executed by a duly authorized
officer of the Borrower;
(b) The Security Agreement, financing statements and such other documents
as Agent may reasonably require under Section 5.1, each executed by a duly
authorized officer of the Borrower;
(c) The Subsidiary Guaranties executed and delivered by a duly authorized
officer of each of the respective Guarantors in existence on the date hereof;
(d) The Subsidiary Security Agreements, financing statements and such other
documents as Agent may reasonably require under Section 5.3, each executed by a
duly authorized officer of each of the respective Guarantors;
(e) The Pledge Agreements, together with such collateral schedules, Reg.
U-1 affidavits, stock powers (signed in blank) and other documents as Agent may
reasonably require under Section 5.2, each respectively executed by a duly
authorized officer of the Borrower and any of the Guarantors which own any of
Borrower's other Subsidiaries;
(f) The Collateral Agency and Intercreditor Agreement executed by a duly
authorized officer of the Borrower, each of the Banks and each of the
Noteholders (as defined therein);
(g) The policies or certificates of insurance required by Section 7.1(d)
herein;
(h) A copy of resolutions of the Board of Directors of Borrower, duly
adopted, which authorize the execution, delivery and performance of this
Agreement, the Notes, the Security Agreement, its Pledge Agreement and the other
Transaction Documents to be executed by Borrower, certified by the Secretary or
Assistant Secretary of Borrower;
(i) A copy of resolutions of the Boards of Directors of each of the
Guarantors, each duly adopted, authorizing the execution, delivery and
performance by each such Guarantor of its Subsidiary Guaranty, its Subsidiary
Security Agreement, its Pledge Agreement and any other Transaction Documents to
be executed by such Guarantor, certified by the Secretary or Assistant Secretary
of such Guarantor;
(j) Copies of the Articles or Certificate of Incorporation of Borrower and
each Guarantor, including any amendments thereto, certified by the Secretary of
State of each of their respective states of incorporation;
(k) A copy of Borrower's Bylaws and copies of the Bylaws of each of the
Guarantors, including amendments thereto, certified respectively by the
corporate Secretary or Assistant Secretary of Borrower and each such Guarantor;
(l) Incumbency certificates, executed respectively by the Secretaries or
Assistant Secretaries of the Borrower and of each Guarantor, which shall
identify by name and title and bear the signatures of all of the officers of the
Borrower or each such Guarantor executing any of the Transaction Documents;
(m) A certificate of corporate good standing of Borrower and each of the
Guarantors issued by the Secretary of State of their respective states of
incorporation;
(n) An opinion of counsel of Kantrow, Spaht, Weaver & Blitzer, (A
Professional Law Corporation), independent Louisiana counsel to the Borrower and
the Louisiana Guarantors, in the form of Exhibit C attached hereto and
incorporated herein by reference and such local counsel opinions as may be
required by the Banks;
(o) The initial Borrowing Base Certificate required by Section 3.1(c);
(p) The Borrowing Notice required by Section 3.2(a);
(q) Such other agreements, documents, instruments and certificates as Agent
or Banks may reasonably request.
4.2 Subsequent Revolving Credit Loans. Notwithstanding any provision
contained herein to the contrary, Banks shall have no obligation to make any
subsequent Revolving Credit Loan hereunder, and Agent shall have no obligation
to cause the Issuer to issue any subsequent Letter of Credit under any Letter of
Credit Application, unless:
(a) Agent and each of the Banks shall have received a current Borrowing
Base Certificate as required by Section 3.1(c);
(b) Agent shall have received a Borrowing Notice or Conversion Notice for
such Revolving Credit Loan as required by Section 3.2, or the Issuer and Agent
shall have received the Letter of Credit Application as required by Section 3.3;
(c) If any Subsidiary has been activated, created or acquired by Borrower
or any of its Subsidiaries after the date hereof, Borrower shall have caused
such newly activated, created or acquired Subsidiary to execute and deliver to
Agent:
(i) A Subsidiary Guaranty executed and delivered by a duly authorized
officer of such new Subsidiary;
(ii) A Subsidiary Security Agreement, financing statements and such other
documents as Agent may reasonably require, each executed by a duly authorized
officer of such new Subsidiary;
(iii) A Pledge Agreement and such other documents as Agent may reasonably
require, each executed by a duly authorized officer of such new Subsidiary;
(iv) A copy of resolutions of the Board of Directors of such new
Subsidiary, duly adopted, authorizing the execution, delivery and performance by
such Subsidiary of its Subsidiary Guaranty, its Subsidiary Security Agreement
and any other Transaction Documents to be executed by such Subsidiary, certified
by the Secretary or Assistant Secretary of such Subsidiary;
(v) A copy of the Articles or Certificate of Incorporation of such new
Subsidiary, certified by the Secretary of State of its state of incorporation;
(vi) A copy of the Bylaws of such new Subsidiary, certified by the
corporate Secretary or Assistant Secretary of such Subsidiary;
(vii) An incumbency certificate, executed by the Secretary of such new
Subsidiary, which shall identify by name and title and bear the signatures of
all of the officers of such Subsidiary executing any of the Transaction
Documents; and
(viii) A certificate of corporate good standing of such Subsidiary, issued
by the Secretary of State of its state of incorporation.
(d) Borrower shall have delivered to Agent, or shall have caused any
Subsidiary which holds a direct investment in any such new Subsidiary to deliver
to Agent, for the benefit of each of the Banks, the original stock certificate
of such newly activated, created or acquired Subsidiary, together with such
collateral schedules, stock powers, Regulation U-1 affidavits and other
documents Agent may reasonably require;
(e) If the Required Banks have made written demand at any time for the
pledge and delivery of sixty-six percent (66%) of the capital stock of each
present and future foreign Subsidiary of Borrower pursuant to Section 5.2
herein, then within forty-five (45) days after such written demand by the
Required Banks Borrower shall execute and deliver, and Borrower shall have
caused any of its Subsidiaries which own stock of any foreign Subsidiary to
execute and deliver to Agent:
(i) A Pledge Agreement and such other documents as Agent may reasonably
require pursuant to Section 5.2, each executed by a duly authorized officer of
Borrower or any such Subsidiary;
(ii) A copy of resolutions of the Board of Directors of Borrower and each
such Subsidiary, duly adopted, authorizing the execution, delivery and
performance by Borrower and each such Subsidiary of its Pledge Agreement and any
other Transaction Documents to be executed by Borrower or such Subsidiary,
certified, respectively, by the Secretary or Assistant Secretary of Borrower and
each such Subsidiary;
(iii) A copy of the Articles or Certificate of Incorporation of each such
foreign Subsidiary, certified by the Secretary or Assistant Secretary of each
such Subsidiary;
(iv) A copy of the Bylaws of each such foreign Subsidiary, certified by the
Secretary or Assistant Secretary of each such Subsidiary;
(v) An incumbency certificate, executed by the Secretary or Assistant
Secretary of each such Subsidiary, which shall identify by name and title and
bear the signatures of all of the officers of such Subsidiary executing any of
the Transaction Documents; and
(vi) Borrower shall have delivered to Agent, or shall have caused any
Subsidiary which holds a direct investment in any such foreign Subsidiary to
deliver to Agent, for the benefit of each of the Banks, the original stock
certificate (if in certificated form) of each such foreign Subsidiary, together
with such collateral schedules, stock powers, Regulation U-1 affidavits and
other documents Agent may reasonably require;
(f) On the date of and immediately after such Revolving Credit Loan,
Revolving Credit Loan conversion or Letter of Credit issuance, no Default or
Event of Default under this Agreement shall have occurred and be continuing; and
(g) On the date of and immediately after such Revolving Credit Loan,
Revolving Credit Loan conversion or Letter of Credit issuance, no material
adverse change in the business, financial position or results of operations of
the Borrower or any of its Subsidiaries shall have occurred since the date of
this Agreement and be continuing; and
(h) All of the representations and warranties of the Borrower contained in
this Agreement shall be true and correct on and as of the date of such Revolving
Credit Loan, Revolving Credit Loan conversion or Letter of Credit issuance as if
made on the date of such Revolving Credit Loan, the date of such Revolving
Credit Loan conversion or the issuance date of such Letter of Credit, as the
case may be except for the effects of events occurring subsequent to the date of
the Agreement which are either permitted events pursuant to the terms of this
Agreement or have received the prior written consent of the Required Banks.
Each request for a Revolving Credit Loan, for conversion of a Revolving
Credit Loan or application for a Letter of Credit by the Borrower hereunder
shall be deemed to be a representation and warranty by the Borrower on the date
of such Revolving Credit Loan, Revolving Credit Loan conversion or Letter of
Credit issuance as to the facts specified in clauses (e), (f) and (g) of this
Section 4.2.
SECTION 5. COLLATERAL.
5.1 Security Agreement. In order to secure the payment when due of the
Borrower's Obligations, the Borrower shall convey to Agent for the benefit of
each of the Banks a security interest in, among other things, all of the
Property of the Borrower described on Schedule 5 attached hereto and
incorporated herein by reference, which security interest shall be a first and
prior interest in all such items except for those Uniform Commercial Code
security interests described on Schedule 6.11 attached hereto and Liens
otherwise permitted under Section 7.2(b). Said security interest shall be
evidenced by a Security Agreement dated the date hereof and executed by the
Borrower in favor of Agent for the benefit of each of the Banks in form of
Exhibit I hereto (as the same may from time to time be amended, the "Security
Agreement"). The Borrower further covenants and agrees to execute and deliver to
Agent for the benefit of each of the Banks any and all financing statements,
continuation statements and such other documentation as may be requested by
Agent from time to time in order to create, perfect and continue said security
interests. Upon demand, the Borrower shall pay all legal and filing fees and
expenses incurred by Agent in the preparation of the foregoing documents and
perfection of the security interests contemplated thereby. Banks shall have no
obligation to make any Revolving Credit Loan or convert the interest rate on any
Revolving Credit Loan hereunder unless and until the Borrower has fully
satisfied these requirements.
5.2 Pledge Agreements. In order to further secure the payment when due of
the Borrower's Obligations, the Borrower shall pledge to Agent for the benefit
of each of the Banks, and Borrower shall cause each of the Guarantors which own
any investments in any other Subsidiaries to pledge to Agent for the benefit of
each of the Banks, all of the issued and outstanding capital stock of each
present Subsidiary of the Borrower and the Guarantors, and if any such
Subsidiary is activated, created or acquired subsequent to the date hereof, on
the date of any such activation, acquisition or formation, Borrower shall pledge
and deliver to Agent for the benefit of each of the Banks, and Borrower shall
cause each of the Guarantors which own any investments in any other Subsidiaries
to pledge to Agent for the benefit of each of the Banks, all of the issued and
outstanding stock of any such future Subsidiary. Said pledges are more fully
described and evidenced by that certain General Pledge and Security Agreement
dated of even date herewith and executed by the Borrower in favor of Agent for
the benefit of each of the Banks, and those certain General Pledge and Security
Agreements dated of even date herewith or at any time hereafter and executed by
certain of the Guarantors in favor of Agent for the benefit of each of the Banks
(as the same may from time to time be amended, modified, extended or renewed,
the "Pledge Agreements"). The Borrower covenants and agrees to execute, and to
cause the Guarantors to execute, any and all collateral schedules, stock powers,
Reg. U-1 affidavits and such other documents as may from time to time be
requested by Agent or any Bank in order to create, perfect and maintain the
pledge created by the Pledge Agreements and to deliver all original stock
certificates for any such present or future Subsidiaries. Upon demand, the
Borrower shall pay to Agent or to any other party designated by Agent, all
filing fees or transfer fees incurred by Agent in the perfection and
administration of the pledges contemplated hereby. Banks shall have no
obligation to make any Revolving Credit Loan hereunder or to convert any
Revolving Credit Loan hereunder to a new interest rate basis unless and until
the Borrower and its Subsidiaries have fully satisfied these requirements.
Borrower, Agent and Banks further agree that in order to further secure the
payment when due of the Borrower's Obligations, the Required Banks may at any
time after the date hereof demand the pledge and delivery, subject to any Liens
permitted under Section 7.2(b), to Agent for the benefit of each of the Banks of
sixty-six percent (66%) of the issued and outstanding capital stock of each
present and future foreign Subsidiary (collectively, the "Foreign Stock") owned
by Borrower or of any present or future Subsidiary of Borrower. Within
forty-five (45) days after receipt by Borrower of such demand in writing by the
Required Banks, Borrower agrees to pledge and deliver any such Foreign Stock it
owns pursuant to the Pledge Agreement executed by Borrower, and Borrower further
agrees to cause any of its Subsidiaries, foreign or domestic, to pledge and
deliver any such Foreign Stock to Agent and to execute and deliver to Agent a
Pledge Agreement and the other documents required by Section 4.2(e). If any such
foreign Subsidiary is created or acquired thereafter, on the date of any such
acquisition or formation, Borrower shall pledge and deliver to Agent for the
benefit of each of the Banks, and Borrower shall cause each of its Subsidiaries
which own any investments in any such foreign Subsidiaries to pledge to Agent
for the benefit of each of the Banks, sixty-six percent (66%) of the issued and
outstanding capital stock of any such future foreign Subsidiary pursuant to a
Pledge Agreement and other documents as required by Section 4.2(e). The Borrower
covenants and agrees to execute, and to cause any of its Subsidiaries to
execute, any and all collateral schedules, stock powers, Reg. U-1 affidavits and
such other documents as may from time to time be requested by Agent or any Bank
in order to create, perfect and maintain the pledges of Foreign Stock created by
any of the Pledge Agreements and to deliver the original stock certificates (if
in certificated form) for any such Foreign Stock. Upon demand, the Borrower
shall pay to Agent or to any other party designated by Agent, all filing fees or
transfer fees incurred by Agent in the perfection and administration of the
pledges of Foreign Stock contemplated hereby. Forty-Five (45) days following any
demand by the Required Banks for a pledge of the Foreign Stock, Banks shall
cease to have any obligation to make any Revolving Credit Loan hereunder or to
convert any Revolving Credit Loan hereunder to a new interest rate basis unless
and until the Borrower and its Subsidiaries have fully satisfied the foregoing
requirements.
5.3 Subsidiary Security Agreements. In order to secure the payment when due
of the Borrower's Obligations as guaranteed under each of the respective
Subsidiary Guaranties, the Borrower shall cause each Guarantor to convey to
Agent for the benefit of each of the Banks a security interest in, among other
things, all of the Property of each such Guarantor of a type described on
Schedule 5 attached hereto and incorporated herein by reference, which security
interest shall be a first and prior interest in all such items except for those
Uniform Commercial Code security interests described on Schedule 6.11 attached
hereto, and those Liens otherwise permitted under Section 7.2(b). Said security
interest shall be evidenced by a Subsidiary Security Agreement dated the date
hereof and executed, respectively, by each such Guarantor in favor of Agent for
the benefit of each of the Banks in form and substance acceptable to Agent (as
the same may from time to time be amended, the "Subsidiary Security
Agreements"). The Borrower further covenants and agrees to cause each of the
Guarantors to execute and deliver to Agent for the benefit of each of the Banks
any and all financing statements, continuation statements and such other
documentation as may be requested by Agent from time to time in order to create,
perfect and continue said security interests. Upon demand, the Borrower shall
pay all legal and filing fees and expenses incurred by Agent in the preparation
of the foregoing documents and perfection of the security interests contemplated
thereby. Banks shall have no obligation to make any Revolving Credit Loan
hereunder or convert the interest rate on any Revolving Credit Loan hereunder
unless and until the Borrower and each of the Guarantors have fully satisfied
these requirements.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Agent and Banks that:
6.1 Corporate Existence and Power. Borrower: (a) is duly incorporated,
validly existing and in good standing under the laws of the State of Louisiana;
(b) has all requisite corporate powers and all governmental and regulatory
licenses, authorizations, consents and approvals required to carry on its
business as now conducted; and (c) is duly qualified to do business in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary, except where failure to have such licenses,
authorizations, consents or approvals or to so qualify would not have a material
adverse effect on its and the Guarantors' businesses, financial condition or
operations taken as a whole.
6.2 Authorization. The execution, delivery and performance by the Borrower
of this Agreement, the Notes, the Security Agreement, the Pledge Agreement of
Borrower and the other Transaction Documents to which it is a party are within
the corporate powers of Borrower, and have been duly authorized by all necessary
action of the board of directors of said corporation.
6.3 Binding Effect. This Agreement, the Notes, the Security Agreement, the
Pledge Agreement and the other Transaction Documents to which the Borrower is a
party have been duly executed and delivered by the Borrower and constitute the
legal, valid and binding obligations of the Borrower enforceable in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting creditors' rights in
general.
6.4 Financial Statements. The Borrower has furnished Agent and the Banks
with the following financial statements, identified by the principal financial
officer of the Borrower: (1) the audited consolidated balance sheets and
corresponding consolidated statements of income, retained earnings and cash
flows of Borrower and its Consolidated Subsidiaries dated as of August 31, 1997
and for the period then ended, all audited by the independent certified public
accountants of Borrower, which financial statements have been prepared in
accordance with generally accepted accounting principles consistently applied;
and (2) an unaudited consolidated and consolidating balance sheet and unaudited
consolidated and consolidating statements of income, retained earnings and cash
flows of Borrower and its Consolidated Subsidiaries dated as of February 28,
1998 and for the period then ended, certified by the principal financial officer
of the Borrower as being true and correct to the best of his knowledge and as
being prepared in accordance with generally accepted accounting principles
consistently applied. The Borrower further represents and warrants to Agent and
each of the Banks that: (x) said balance sheets and their accompanying notes
fairly present, in all material respects, the condition of Borrower and its
Consolidated Subsidiaries as of the dates thereof; (subject to normal year-end
adjustments for the unaudited balance sheets) (y) there has been no material
adverse change in the condition or operation, financial or otherwise, of the
Borrower and its Consolidated Subsidiaries, taken as a whole, since February 28,
1998; and (3) neither the Borrower nor any Consolidated Subsidiary has any
direct or contingent liabilities which are required to be disclosed by generally
accepted accounting principles consistently applied, but are not disclosed on
said financial statements.
6.5 Litigation. Except as disclosed on Schedule 6.5 attached hereto, there
is no action or proceeding pending or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or any Subsidiary of the Borrower
before any court, arbitrator or any governmental, regulatory or administrative
body, agency or official which could result in any material adverse change in
the condition or operation, financial or otherwise, of the Borrower and its
Subsidiaries, taken as a whole, and neither the Borrower nor any Subsidiary of
the Borrower is in default with respect to any order, writ, injunction, decision
or decree of any court, arbitrator or any governmental, regulatory or
administrative body, agency or official, a default under which could have a
material adverse effect on the condition or operation, financial or otherwise,
of the Borrower and its Subsidiaries, taken as a whole.
6.6 Pension and Welfare Plans. Each Pension Plan complies in all material
respects with all applicable statutes and governmental rules and regulations; no
Reportable Event has occurred and is continuing with respect to any Pension
Plan; neither the Borrower nor any ERISA Affiliate nor any Subsidiary of the
Borrower has withdrawn from any Multiemployer Plan in a "complete withdrawal" or
a "partial withdrawal" as defined in Sections 4203 or 4205 of ERISA,
respectively; no steps have been instituted by the Borrower, any ERISA Affiliate
or any Subsidiary of the Borrower to terminate any Pension Plan; no condition
exists or event or transaction has occurred in connection with any Pension Plan
or Multiemployer Plan which could result in the incurrence by the Borrower, any
ERISA Affiliate or any Subsidiary of the Borrower of any material liability,
fine or penalty; and neither the Borrower nor any ERISA Affiliate nor any
Subsidiary of the Borrower is a "contributing sponsor" as defined in Section
4001(a)(13) of ERISA of a "single-employer plan" as defined in Section
4001(a)(15) of ERISA which has two or more contributing sponsors at least two of
whom are not under common control. Except as disclosed on Schedule 6.6 attached
hereto, neither the Borrower nor any Subsidiary of the Borrower has any
contingent liability with respect to any "employee welfare benefit plan", as
such term is defined in Section 3(a) of ERISA, which covers retired employees
and their beneficiaries, other than those shown on the balance sheets referred
to in Section 6.4.
6.7 Tax Returns and Payment. The Borrower and each Subsidiary of the
Borrower has filed all federal, state and local income tax returns and all other
tax returns which are required to be filed and has paid all taxes due pursuant
to such returns or pursuant to any assessment received by the Borrower or any
Subsidiary of the Borrower, except for the filing of such returns, if any, in
respect of which an extension of time for filing is in effect and except for
such taxes, if any, as are being contested in good faith by appropriate
proceedings being diligently conducted and as to which adequate reserves in
accordance with generally accepted accounting principles consistently applied
have been provided. The charges, accruals and reserves on the books of the
Borrower and each Subsidiary of the Borrower in respect of any taxes or other
governmental charges are, in the opinion of the Borrower, adequate.
6.8 Subsidiaries. The Borrower's Subsidiaries are as listed in Schedule 6.8
attached hereto, which schedule sets forth each such Subsidiary's past and
present names, their current principal places of business and all locations of
any inventory or equipment owned by such Subsidiaries, and whether any such
Subsidiary is a dormant Subsidiary as of the date of this Agreement.
6.9 Compliance With Other Instruments; None Burdensome. Neither the
Borrower nor any Subsidiary of the Borrower is a party to any contract or
agreement or subject to any charter or other corporate restriction which
materially and adversely affects its business, any material Property or
financial condition and which is not disclosed on the Borrower's financial
statements heretofore submitted to Agent and the Banks; none of the execution
and delivery by the Borrower of the Transaction Documents, the consummation of
the transactions therein contemplated or the compliance with the provisions
thereof will violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on the Borrower, or any of the provisions of
Borrower's Articles of Incorporation or Bylaws or any of the provisions of any
material indenture, agreement, document, instrument or undertaking to which the
Borrower is a party or subject, or by which it or its material Property is
bound, or conflict with or constitute a default thereunder or result in the
creation or imposition of any Lien pursuant to the terms of any such indenture,
agreement, document, instrument or undertaking (other than in favor of Agent for
the benefit of Banks pursuant to the Transaction Documents). No order, consent,
approval, license, authorization or validation of, or filing, recording or
registration with, or exemption by, any governmental, regulatory, administrative
or public body or authority, or any subdivision thereof, is required to
authorize, or is required in connection with, the execution, delivery or
performance of, or the legality, validity, binding effect or enforceability of,
any of the Transaction Documents except those previously obtained or the filings
contemplated hereby.
6.10 Other Loans and Guarantees. Except as disclosed on Schedule 6.10
attached hereto, neither the Borrower nor any Subsidiary of the Borrower is a
party to any loan transaction or Guarantee as of the date hereof, and neither
Borrower nor any Subsidiary of Borrower will become a party to any such loan
transaction or Guarantee except as permitted under Sections 7.2(a), (j) or (k).
6.11 Title to Property. The Borrower, and each Subsidiary of the Borrower,
is the owner of, or has the legal right to use and occupy, all Property which is
material and necessary for the Borrower or such Subsidiary of the Borrower to
conduct its business. Neither the Borrower nor any Subsidiary of the Borrower
has signed any financing statements, security agreements or chattel mortgages
with respect to any such Property, has granted or permitted any Liens with
respect to any of its Property or has any knowledge of any Liens with respect to
any such Property, except in favor of Agent for the benefit of Banks or as
otherwise disclosed on Schedule 6.11 attached hereto or as otherwise permitted
under Section 7.2(b).
6.12 Multi-Employer Pension Plan Amendments Act of 1980. Neither the
Borrower nor any Subsidiary of the Borrower is a party to any Multiemployer Plan
as of the date hereof except as disclosed on Schedule 6.12 attached hereto, and
neither Borrower nor any of its Subsidiaries will become a party to a
Multiemployer Plan except as permitted under Section 7.2(o) herein.
6.13 Patents, Licenses, Trademarks, Etc. The Borrower, and each Subsidiary
of the Borrower, possesses all patents, licenses, trademarks, trademark rights,
trade names, trade name rights and copyrights which are necessary and material
to conduct its business without conflict with any patent, license, trademark,
trade name or copyright of any other Person, which conflict might have a
material adverse effect on the condition or operations, financial or otherwise,
of the Borrower and its Subsidiaries, taken as a whole.
6.14 Environmental and Safety and Health Matters. Except as disclosed on
Schedule 6.14 attached hereto or where such matter will not have a material
adverse effect on the Borrower: (i) the operations of the Borrower and each
Subsidiary of the Borrower comply with (A) all applicable Environmental Laws and
(B) all applicable Occupational Safety and Health Laws; (ii) none of the
operations of the Borrower or any Subsidiary of the Borrower is subject to any
judicial, governmental, regulatory or administrative proceeding alleging the
violation of any Environmental Law or Occupational Safety and Health Law; (iii)
none of the operations of the Borrower or any Subsidiary of the Borrower is the
subject of any federal or state investigation evaluating whether any remedial
action is needed to respond to (A) any spillage, disposal or release into the
environment of any Hazardous Material or any other hazardous, toxic or dangerous
waste, substance or constituent or other substance, or (B) any unsafe or
unhealthful condition at any premises of the Borrower or such Subsidiary of the
Borrower; (iv) neither the Borrower nor any Subsidiary of the Borrower has filed
any notice under any Environmental Law or Occupational Safety and Health Law
indicating or reporting (A) any past or present spillage, disposal or release
into the environment of, or treatment, storage or disposal of, any Hazardous
Material or any other hazardous, toxic or dangerous waste, substance or
constituent or other substance or (B) any unsafe or unhealthful condition at any
premises of the Borrower or such Subsidiary of the Borrower; and (v) neither the
Borrower nor any Subsidiary of the Borrower has any known contingent liability
in connection with (A) any spillage, disposal or release into the environment
of, or otherwise with respect to, any Hazardous Material or any other hazardous,
toxic or dangerous waste, substance or constituent or other substance or (B) any
unsafe or unhealthful condition at any premises of the Borrower or such
Subsidiary of the Borrower.
6.15 Other Corporate or Fictitious Names. Except as set forth on Schedule
6.15, the Borrower has not, during the preceding five (5) years, been known by
or used any corporate or fictitious name other than "The Shaw Group Inc.," and
no Guarantor has used any such other corporate or fictitious name during the
preceding five (5) years other than those listed in Schedule 6.15 attached
hereto.
SECTION 7. COVENANTS.
7.1 Affirmative Covenants of the Borrower. The Borrower covenants and
agrees that, so long as Banks have any obligation to make any Revolving Credit
Loan hereunder or any of the Borrower's Obligations remain unpaid or any Letter
of Credit remains outstanding:
(a) Information. The Borrower will deliver to Agent and each of the Banks:
(i) As soon as available and in any event within ninety (90) days after the
end of each fiscal year of Borrower, the consolidated balance sheets of Borrower
and its Consolidated Subsidiaries as of the end of such fiscal year and the
related consolidated statements of income, retained earnings and cash flows for
such fiscal year, setting forth in each case, in comparative form, the figures
for the previous fiscal year, all such financial statements to be prepared in
accordance with generally accepted accounting principles consistently applied
and audited by the Borrower's present independent certified public accountants
or such other independent certified public accountants selected by the Borrower
and acceptable to Agent, together with (1) the unqualified opinion of such
accountants, and (2) any management letter issued by such accountants to
Borrower's management in connection with such annual audit;
(ii) As soon as available and in any event within forty-five (45) days
after the end of each fiscal quarter, unaudited consolidated and consolidating
balance sheets of Borrower and its Consolidated Subsidiaries as of the end of
such quarter and the related consolidated and consolidating statements of income
for such quarter and for the portion of the Borrower's fiscal year ended at the
end of such quarter, setting forth in each case in comparative form, the figures
for the corresponding quarter and the corresponding portion of the Borrower's
previous fiscal year, all certified (subject to normal year-end adjustments) as
to fairness of presentation in all material respects and generally accepted
accounting principles and consistency by the principal financial officer of
Borrower;
(iii) Simultaneously with the delivery of each set of quarter-end and
fiscal year-end financial statements referred to in clauses (i) and (ii) above,
a certificate of the principal financial officer of Borrower in the form
attached hereto as Exhibit D and incorporated herein by reference;
(iv) Promptly upon receipt thereof, any reports submitted to the Borrower
or any Consolidated Subsidiary of the Borrower (other than reports previously
delivered pursuant to Sections 7.1(a)(i) and (ii) above) by independent
accountants in connection with any annual, interim or special audit made by them
of the books of the Borrower or any Consolidated Subsidiary of the Borrower;
(v) Promptly upon any filing thereof, and in any event within ten (10) days
after the filing thereof, copies of all registration statements (other than the
exhibits thereto and any registration statements on form S-8 or its equivalent)
and annual, quarterly or monthly reports which Borrower shall file with the
Securities and Exchange Commission, including, but not limited to, any Form 10-K
or Form 10-Q;
(vi) Promptly upon the mailing thereof to the shareholders of Borrower
generally, and in any event within ten (10) days after such mailing, copies of
all financial statements, reports, proxy statements and other material and
information so mailed, including, but not limited to, any Form 10-K or Form
10-Q;
(vii) Prior to the beginning of each fiscal year of the Borrower, the
Borrower's annual budget and quarterly projections for such fiscal year; and
(viii) With reasonable promptness, such further information regarding the
business, affairs and/or financial condition of Borrower or any Subsidiary of
Borrower as Agent or any of the Banks may from time to time reasonably request.
Agent and each of the Banks are hereby authorized to deliver a copy of any
financial statement or other information made available by the Borrower to any
regulatory authority having jurisdiction over Agent or any such Bank, pursuant
to any request therefor subject to Section 10.21 herein.
(b) Payment of Indebtedness. The Borrower and each Subsidiary of the
Borrower will (i) pay any and all Indebtedness payable or Guaranteed by the
Borrower or such Subsidiary of the Borrower, as the case may be, and any
interest or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) in accordance with the agreement,
document or instrument relating to such Indebtedness or Guarantee and (ii)
faithfully perform, observe and discharge all covenants, conditions and
obligations which are imposed upon the Borrower or such Subsidiary of the
Borrower, as the case may be, by any and all agreements, documents and
instruments evidencing, securing or otherwise relating to such Indebtedness or
Guarantee, provided, that the Borrower or such Subsidiary may contest any item
described in clauses (i) and (ii) of this Section 7.1(b) in good faith by
appropriate proceedings diligently conducted so long as adequate reserves in
form and amount satisfactory to Agent in its reasonable discretion are
maintained with respect thereto.
(c) Consultations and Inspections. The Borrower will permit, and will cause
each Guarantor to permit, Agent and Banks (and any Person appointed by Agent or
any of the Banks to whom the Borrower does not reasonably object) to discuss the
affairs, finances and accounts of the Borrower and each Guarantor with the
principal officers of the Borrower and each Guarantor (provided that Agent or
such Bank shall notify a principal officer of Borrower prior to contacting a
Person who is only an officer of any of the Guarantors), all at such reasonable
times and as often as Agent or any of the Banks may reasonably request. The
Borrower will also permit, and will cause each Guarantor to permit, inspection
of its Properties, books and records and the Collateral by Agent and Banks, upon
reasonable advance notice to the Borrower, during normal business hours or at
other reasonable times. The Borrower will also permit, and will cause each
Guarantor to permit, Agent and Banks to conduct field inspections at such times
during reasonable business hours as Agent or any of the Banks elects, upon not
less than 24 hours' advance notice thereof to the Borrower, provided that prior
to any Default, such field audits and inspections will not be made more than
once in any fiscal year. Borrower shall pay all reasonable costs and expenses
incurred by Agent or any such Bank in connection with any such inspections. The
Borrower further agrees to reimburse to Agent and the Banks the actual costs and
expenses incurred by Agent or any of the Banks in connection with its up front
collateral inspection conducted prior to closing by Agent or any of the Banks,
whether Agent or any such Bank shall have used its own auditors or shall
contract for such audit services through a third party.
(d) Payment of Taxes; Corporate Existence; Maintenance of Properties;
Maintenance of Collateral; Insurance. The Borrower and each Subsidiary of the
Borrower will:
(i) Duly file all federal, state and local income tax returns and all other
tax returns and reports of the Borrower and each Subsidiary of the Borrower
which are required to be filed and duly pay and discharge promptly all taxes,
assessments and other governmental charges imposed upon it or any of its income,
Property or assets; provided, however, that neither the Borrower nor any
Subsidiary of the Borrower shall be required to pay any such tax, assessment or
other governmental charge the payment of which is being contested in good faith
and by appropriate proceedings diligently conducted and for which adequate
reserves in form and amount satisfactory to Agent in its reasonable discretion
have been provided, except that the Borrower and each Subsidiary of the Borrower
shall pay or cause to be paid all such taxes, assessments and governmental
charges forthwith upon the commencement of proceedings to foreclose any Lien
which is attached as security therefor, unless such foreclosure is stayed by the
filing of an appropriate bond in a manner satisfactory to Agent;
(ii) Except as permitted by Section 7.2(d), do all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchise and to be duly qualified to do business in all jurisdictions where the
nature of its business requires such qualification except where the failure to
so qualify will not have a material adverse effect on Borrower or such
Subsidiary;
(iii) Maintain and keep its Properties useful and necessary to its business
in good repair, working order and condition; provided, however, that nothing in
this subsection (iii) shall prevent any dispositions permitted by Section 7.2(c)
or any abandonment of any Property which is not disadvantageous in any material
respect to Banks and which, in the good faith opinion of the management of the
Borrower, is in the best interests of the Borrower or such Subsidiary of the
Borrower, as the case may be;
(iv) Keep all of the Collateral in good and merchantable condition, and
will, as applicable, shelter, store, secure, refrigerate, process and otherwise
deal with the Collateral in accordance with customary standards and practices;
and
(v) Insure with financially sound and reputable insurers all Property of
the Borrower and each Subsidiary of the Borrower of the character usually
insured by corporations engaged in the same or similar businesses similarly
situated, against loss or damage of the kind customarily insured against by such
corporations, and carry adequate liability insurance and other insurance of a
kind and in an amount generally carried by corporations engaged in the same or
similar businesses similarly situated, and in each case, (i) with such
deductibles and with such self-insurance provisions as are customarily
maintained by similar business(es), and (ii) naming Agent as loss payee, as
mortgagee or as an additional insured, as appropriate, in such policies for the
benefit of each of the Banks Promptly upon any Bank's request therefor, the
Borrower shall provide such Bank with evidence that the Borrower maintains, and
that each Subsidiary of the Borrower maintains, the insurance required under
this Section 7.1(d)(v), and evidence of the payment of all premiums therefor.
(e) Accountants. The Borrower shall give Agent and each of the Banks prompt
notice of any change of the Borrower's independent certified public accountants
and a statement of the reasons for such change. The Borrower shall at all times
utilize independent certified public accountants reasonably acceptable to Agent
and Banks.
(f) ERISA Compliance. If the Borrower or any Subsidiary of the Borrower
shall have any Pension Plan, the Borrower and such Subsidiary or Subsidiaries of
the Borrower shall comply with all requirements of ERISA relating to such plan.
Without limiting the generality of the foregoing, neither the Borrower nor any
Subsidiary of the Borrower shall:
(i) permit any Pension Plan maintained by it to engage in any nonexempt
"prohibited transaction, " as such term is defined in Section 4975 of the Code;
(ii) permit any Pension Plan maintained by it to incur any "accumulated
funding deficiency", as such term is defined in Section 302 of ERISA, 29 U.S.C.
Section 1082, whether or not waived;
(iii) terminate any such Pension Plan in a manner which could result in the
imposition of a Lien on any Property of the Borrower or any Subsidiary of the
Borrower pursuant to Section 4068 of ERISA, 29 U.S.C. Section 1368; or
(iv) take any action which would constitute a complete or partial
withdrawal from a Multiemployer Plan within the meaning of Sections 4203 and
4205 of Title IV of ERISA.
Notwithstanding any provision contained in this Section 7.1(f) to the
contrary, an act by the Borrower or any Subsidiary of the Borrower shall not be
deemed to constitute a violation of subparagraphs (i) through (iv) hereof unless
Agent determines in good faith that said action, individually or cumulatively
with other acts of the Borrower and the Subsidiaries of the Borrower, does have
or is reasonably likely to cause a material adverse financial effect upon the
Borrower or any such Subsidiary of the Borrower.
Borrower shall have the affirmative obligation hereunder to report to Agent
any of those acts identified in subparagraphs (i) through (iv) hereof,
regardless of whether said act does or is likely to cause a significant adverse
financial effect upon the Borrower or any Subsidiary of the Borrower, and
failure by the Borrower to report such act promptly upon the Borrower's becoming
aware of the existence thereof shall constitute an Event of Default hereunder.
(g) Maintenance of Books and Records. The Borrower and each Subsidiary of
the Borrower will maintain its books and records in accordance with generally
accepted accounting principles consistently applied and in which true, correct
and complete entries will be made of all of its dealings and transactions.
(h) Further Assurances. The Borrower will execute, and will cause each of
its Subsidiaries to execute, any and all further agreements, documents and
instruments, and take any and all further actions which may be required under
applicable law, or which Agent or any of the Banks may from time to time
reasonably request, in order to effectuate the transactions contemplated by this
Agreement, the Notes, the Security Agreement, the Pledge Agreements, the Letter
of Credit Applications, the Subsidiary Security Agreements and the other
Transaction Documents.
(i) Financial Covenants. The Borrower will:
(i) Debt Service Coverage Ratio. Maintain on a consolidated basis as of
each fiscal quarter-end during the Term hereof a ratio of Consolidated Net
Operating Cash Flow to Consolidated Debt Service, each determined for the
12-month period ending as of each such fiscal quarter-end, of not less than 2.50
to 1.0 for each fiscal quarter ending during the Term hereof;
(ii) Consolidated Total Funded Debt to Consolidated EBITDA. Maintain on a
consolidated basis at each fiscal quarter-end during the Term hereof, a ratio of
Consolidated Total Funded Debt to Consolidated EBITDA (determined for the
twelve-month period ending on the date of any such calculation) of not more than
(A) 5.00 to 1.0 for each quarter-end occurring on or before May 31, 1999, and
(B) 4.00 to 1.0 for each quarter-end occurring at anytime thereafter during the
Term hereof;
(iii) Consolidated Shareholders' Equity. Maintain on a consolidated basis
determined as of each fiscal quarter-end during the Term hereof, Consolidated
Shareholders' Equity of at least the sum of (x) $135,000,000.00, plus (y) fifty
percent (50%) of the after tax net income for each fiscal quarter of Borrower in
which net income is earned (but zero percent (0%) of any after tax net loss for
any fiscal quarter of Borrower in which a net loss is incurred) as shown on
Borrower's financial statements delivered previously or hereafter delivered
pursuant to Section 7.1(a)(i) and (ii), commencing with the addition of any net
income for the fiscal quarter ending November 30, 1997, with such required
increases to be cumulative for each fiscal quarter thereafter during the Term
hereof, plus (z) one hundred percent (100%) of the net proceeds received by
Borrower or any of its consolidated Subsidiaries from capital stock issued by
Borrower or such Subsidiary subsequent to August 31, 1997;
(iv) Consolidated Total Funded Debt to Total Capitalization. Maintain on a
consolidated basis at each fiscal quarter-end during the Term hereof, a ratio of
Consolidated Total Funded Debt to Total Capitalization (each measured as of the
last day of the fiscal quarter for which such calculation is being made) of not
more than 0.60 to 1.0 for each quarter-end occurring during the Term hereof; and
(v) Deliver a certificate of the principal financial officer of the
Borrower containing the financial ratio calculations required in clauses (i),
(ii), (iii) and (iv) above simultaneously with the financial statements referred
to in Sections 7.1(a)(i) and (ii).
(j) Compliance with Law. The Borrower will, and will cause each Subsidiary
of the Borrower to, comply with any and all laws, ordinances and governmental
and regulatory rules and regulations to which it is subject and obtain any and
all licenses, permits, franchises and other governmental and regulatory
authorizations necessary to the ownership of its Properties or to the conduct of
its business, which violation or failure to obtain might materially adversely
affect the condition or operation, financial or otherwise, of the Borrower and
its Subsidiaries, taken as a whole.
(k) Notices. The Borrower will promptly notify Agent and the Banks in
writing of any of the following upon the Borrower's President, Secretary,
principal financial officer or general counsel learning of the occurrence
thereof, describing the same and, if applicable, the steps being taken by the
Person(s) affected with respect thereto:
(i) Default. The occurrence of (A) any Default or Event of Default under
this Agreement, or (B) any default or event of default by the Borrower, any
other Obligor or any Subsidiary of the Borrower under any note, indenture, loan
agreement, mortgage, deed of trust, security agreement, lease or other similar
agreement, document or instrument to which the Borrower, any other Obligor or
any Subsidiary of the Borrower, as the case may be, is a party or by which it is
bound or to which it is subject which default would allow the other party to
such agreement, document or instrument to accelerate Indebtedness in an amount
of or foreclose on Property with a value of $500,000.00 or more;
(ii) Litigation. The institution of any litigation, arbitration proceeding
or governmental or regulatory proceeding affecting the Borrower, any other
Obligor, any Subsidiary of the Borrower, any Collateral or any Third Party
Collateral, whether or not considered to be covered by insurance, provided that
if such action is an action for money damages, that the damages sought are in
excess of $500,000.00;
(iii) Judgment. The entry of any judgment or decree against the Borrower,
any other Obligor or any Subsidiary of the Borrower in excess of $500,000.00;
(iv) Pension Plans. The occurrence of a Reportable Event with respect to
any Pension Plan; the filing of a notice of intent to terminate a Pension Plan
by the Borrower, any ERISA Affiliate or any Subsidiary of the Borrower; the
institution of proceedings to terminate a Pension Plan by the PBGC or any other
Person; the withdrawal in a "complete withdrawal" or a "partial withdrawal" as
defined in Sections 4203 and 4205, respectively, of ERISA by the Borrower, any
ERISA Affiliate or any Subsidiary of the Borrower from any Multiemployer Plan;
or the incurrence of any material increase in the contingent liability of the
Borrower or any Subsidiary of the Borrower with respect to any "employee welfare
benefit plan" as defined in Section 3(1) of ERISA which covers retired employees
and their beneficiaries, in each case which might result in a material adverse
effect on the condition or operations, financial or otherwise, of the Borrower
and the Guarantors, taken as a whole;
(v) Change of Name. Any change in the name of the Borrower or any
Guarantor;
(vi) Environmental Matters. Receipt of any notice that the operations of
the Borrower, any other Obligor or any Subsidiary of the Borrower are not in
full compliance with any of the requirements of any applicable Environmental Law
or Occupational Safety and Health Law; receipt of notice that the Borrower, any
other Obligor or any Subsidiary of the Borrower is subject to any federal, state
or local investigation evaluating whether any remedial action is needed to
respond to the release of any Hazardous Materials or any other hazardous or
toxic waste, substance or constituent or other substance into the environment;
or receipt of notice that any of the Properties or assets of the Borrower, any
other Obligor or any Subsidiary of the Borrower are subject to an Environmental
Lien, in each case which might result in a material adverse effect on the
condition or operations, financial or otherwise, of the Borrower and the
Guarantors, taken as a whole. For purposes of this Section 7.1(k)(vi),
"Environmental Lien" shall mean a Lien in favor of any governmental or
regulatory agency, entity, authority or official for (1) any liability under
Environmental Laws or (2) damages arising from or costs incurred by any such
governmental or regulatory agency, entity, authority or official in response to
a release of any Hazardous Materials or any other hazardous or toxic waste,
substance or constituent or other substance into the environment;
(vii) Material Adverse Change. The occurrence of any material adverse
change in the business, operations or condition, financial or otherwise, of the
Borrower or any Subsidiary of the Borrower;
(viii) Change in Management or Line(s) of Business. Any material change in
the directors and executive officers of the Borrower as listed in Schedule
7.1(k)(viii) attached hereto, or any change in the Borrower's or any Guarantor's
line(s) of business; and
(ix) Other Notices. Any notices required to be provided pursuant to other
provisions of this Agreement and notice of the occurrence of such other events
as Agent may from time to time reasonably specify.
(l) Protection of Collateral. During the term of this Agreement, the
Borrower will, and will cause each of the Guarantors to (a) do all things
necessary to keep unimpaired the Borrower's or such Guarantor's rights in the
Collateral or any Third Party Collateral; (b) cause all operating equipment
included in the Collateral or any Third Party Collateral to be maintained
properly in good and effective operating condition with all repairs, renewals,
replacements, additions and improvements being promptly made in accordance with
generally accepted practices and applicable federal, state and local laws, rules
and regulations; (c) pay, or cause to be paid, promptly as and when due and
payable, all expenses incurred in or arising from the maintenance, storage and
care of the Collateral or any Third Party Collateral; and (d) cause the
Inventory and other Collateral or any Third Party Collateral to be properly
maintained and protected in accordance with prudent operating practice, giving
consideration to and complying with applicable federal, state and local laws,
rules and regulations.
7.2 Negative Covenants of the Borrower. The Borrower covenants and agrees
that, so long as Banks have any obligation to make any Revolving Credit Loan
hereunder or any of the Borrower's Obligations remain unpaid or any Letter of
Credit remains outstanding, unless the prior written consent of the Required
Banks is obtained:
(a) Limitation on Indebtedness. Neither the Borrower nor any Subsidiary of
the Borrower will incur or be obligated on any Indebtedness, either directly or
indirectly, by way of Guarantee, suretyship or otherwise, other than:
(i) Unsecured trade accounts payable and normal accruals incurred in the
ordinary course of business which are not yet due and payable;
(ii) Indebtedness evidenced by the Notes;
(iii) Indebtedness in existence on the date hereof and listed on Schedule
7.2(a) attached hereto;
(iv) Indebtedness incurred in the ordinary course of business in connection
with the acquisition of Property by Borrower (excluding Indebtedness assumed on
any capital assets acquired pursuant to an Permitted Acquisition), provided that
such Indebtedness shall not exceed the value of the Property so acquired, and in
any event, such purchase money Indebtedness shall not exceed Ten Million Dollars
($10,000,000.00) in the aggregate;
(v) Secured Indebtedness assumed by Borrower or a Subsidiary in connection
with an Permitted Acquisition which, in the aggregate, shall not exceed Ten
Million Dollars ($10,000,000.00), provided that any Lien securing such
Indebtedness shall attach only to the Property securing such Indebtedness prior
to its assumption, or unsecured Indebtedness assumed by Borrower or a Subsidiary
in connection with an Permitted Acquisition or any other unsecured Indebtedness
incurred in the ordinary course of business, all of which, in the aggregate,
shall not exceed Five Million Dollars ($5,000,000.00); and
(vi) Subordinated Debt incurred in connection with an Permitted Acquisition
not to exceed Five Million Dollars ($5,000,000.00) in the aggregate, provided
that such Subordinated Debt is unsecured, and the holder of such Subordinated
Debt has executed a subordination and standby agreement in favor of Agent and
the Banks in form and substance acceptable to the Agent and the Required Banks.
(b) Limitations on Liens. The Borrower will not create, incur, assume or
suffer to exist, and will not cause or permit any Subsidiary of the Borrower to
create, incur, assume or suffer to exist, any Lien on any of its Property,
assets or revenues other than:
(i) Liens presently in existence which are described on Schedule 6.11
attached hereto;
(ii) Pledges or deposits in connection with or to secure workmen's
compensation, unemployment insurance, pension or other employee benefits;
(iii) Purchase money Liens incurred to secure Indebtedness permitted under
Section 7.2(a)(iv), provided that such Lien shall attach only to the Property
acquired in connection with such Indebtedness;
(iv) Any Lien renewing, extending or refunding any Lien permitted
hereunder, provided that the principal amount of Indebtedness secured by such
Lien is not increased and such Lien is not extended to cover any other Property
or assets of the Borrower or any Subsidiary of the Borrower;
(v) Subject to Section 7.1(d)(i), Liens for taxes, assessments or
governmental charges or levies on the income, Property or assets of the Borrower
or any Subsidiary of the Borrower if the same are not yet due and payable or are
being contested in good faith and by appropriate proceedings diligently
conducted and for which adequate reserves in form and amount satisfactory to
Agent and the Banks are provided;
(vi) Statutory liens and other encumbrances imposed by law, such as
materialmen's mechanics,' warehousemen's, processors,' landlord's, carriers,'
workmen's and repairmen's liens, arising in the ordinary course of business for
amounts not yet due and payable or which are being contested in good faith and
by appropriate proceedings diligently conducted and for which adequate reserves
in form and amount satisfactory to Agent and the Banks are provided;
(vii) Zoning restrictions, minor survey exceptions, easements and other
customary encumbrances on title to real property that (A) were not incurred in
connection with any Indebtedness, (B) do not render title to the property
encumbered thereby unmarketable, and (C) do not, individually or in the
aggregate, materially adversely affect the value or use of such property for its
current purposes; and
(viii) Liens on Property acquired pursuant to a Permitted Acquisition
permitted under Section 7.2(a)(v).
(c) Sale of Property. Neither the Borrower nor any Subsidiary of the
Borrower will sell, lease, transfer or otherwise dispose of any Property or
assets of the Borrower or such Subsidiary of the Borrower, as the case may be,
except (i) in the ordinary course of business, (ii) dispositions of obsolete
Property, (iii) transfers among the Borrower and/or the Guarantors, and (iv)
transfers pursuant to a transaction permitted by Section 7.2(d), provided that
all such sales or dispositions of Property, when considered in the aggregate,
shall constitute less than substantially all of the assets of Borrower and the
Guarantors as of the date hereof.
(d) Mergers and Consolidations. Neither the Borrower nor any Subsidiary of
the Borrower will merge or consolidate with any other Person or sell, transfer
or convey all or a substantial part of its Property or assets to any Person,
except for (i) Acquisitions permitted under Section 7.2(e) below, and (ii) any
merger of any Subsidiary into Borrower or any other Guarantor provided that for
any such merger or consolidation involving Borrower, the Borrower shall be the
surviving Person, and for any other such merger or consolidation, a Guarantor
shall be the surviving Person.
(e) Acquisitions; Subsidiaries. The Borrower will not, and will not cause
or permit any Subsidiary to, make or suffer to exist any Acquisition of any
Person, except Permitted Acquisitions and transactions permitted under Section
7.2(d)(ii). If at any time after the date hereof Borrower shall activate any
dormant Subsidiary or shall create or acquire any new Subsidiary, whether in
connection with an Permitted Acquisition or otherwise, Borrower shall give Bank
ten (10) Business Days' prior written notice thereof, and Borrower shall (x)
cause such Subsidiary to execute and deliver to Agent for the benefit of each of
the Banks a Subsidiary Guaranty of all of Borrower's Obligations, (y) cause such
Subsidiary to grant a security interest pursuant to a Subsidiary Security
Agreement in all of its assets of a type listed in Schedule 5 hereto, and (z)
pledge, or cause any of its Subsidiaries which may be a direct investor in or
owner of such new Subsidiary to pledge, all of the issued and outstanding stock
of such new Subsidiary to Agent for the benefit of each of the Banks pursuant to
a Pledge Agreement, collateral schedules, stock powers and other pledge
documents in form and substance satisfactory to Agent and the Required Banks.
Borrower further agrees to execute or cause any such Subsidiary to execute such
amendments to this Agreement and to the other Transaction Documents or such
additional agreements as may be required by Agent and the Banks to satisfy such
obligations.
(f) Fiscal Year. Neither Borrower nor any Subsidiary of the Borrower will
change its fiscal year.
(g) Stock Redemptions and Distributions. The Borrower will not make or
declare or incur any liability to make any Distribution in respect of the
capital stock of the Borrower.
(h) Transactions with Related Parties. Except as disclosed in Schedule
7.2(h) attached hereto, neither Borrower nor any Subsidiary of the Borrower
will, directly or indirectly, engage in any material transaction, in the
ordinary course of business or otherwise, with any Related Party unless such
transaction is upon fair market terms, is not disadvantageous in any material
respect to the Banks and has been approved by a majority of the disinterested
directors of the Borrower or such Subsidiary of the Borrower, as the case may be
(or, if none of such directors are disinterested, by a majority of the
directors), as being in the best interests of the Borrower or such Subsidiary of
the Borrower, as the case may be. In addition, neither the Borrower nor any
Subsidiary of the Borrower shall (i) transfer any Property or assets to any
Related Party for other than its fair market value or (ii) purchase or sign any
agreement to purchase any stock or other securities of any Related Party
(whether debt, equity or otherwise), underwrite or Guarantee the same, or
otherwise become obligated with respect thereto.
(i) Capital Expenditures. Neither Borrower nor any Subsidiary of the
Borrower will make any capital expenditures or enter into any Capitalized Leases
which in the aggregate (for the Borrower and all Subsidiaries of the Borrower)
exceeds $25,000,000.00 during any fiscal year without the prior written consent
of the Required Banks.
(j) Advancing or Guaranteeing Credit. Neither Borrower nor any Subsidiary
of the Borrower will become or be a guarantor or surety of, or otherwise become
or be responsible in any manner with respect to, any undertaking of another
except for: (i) the Subsidiary Guaranties of Borrower's Obligations, (ii)the
guaranties made by the Subsidiaries of any of Borrower's obligations under the
Note Purchase Agreements and the notes issued pursuant thereto, (iii) the loans
and Guarantees listed on Schedule 6.10 attached hereto, (iv) endorsements of
negotiable instruments for collection in the ordinary course of business, (v)
guaranties by Borrower or any of its Subsidiaries made in the ordinary course of
business of any payment to a vendor of goods or services to the Borrower or its
Subsidiaries or guaranties by Borrower of any of its Subsidiaries to any
customer of the Borrower or a Subsidiary of the Borrower made with respect to
the performance by Borrower or such Subsidiary of a contract for the sale of
goods or the delivery of services to such customer, and (vi) the guaranty by the
Borrower of the obligations of Word Industries Fabricators, Inc. under the Asset
Purchase Agreement executed in connection with Borrower's prior acquisition of
Word Industries Fabricators, Inc.
(k) Loans and Investments. Neither Borrower nor any Subsidiary of the
Borrower will make any loans or advances or extensions of credit to purchase any
stocks, bonds, notes, debentures or other securities of, make any expenditures
on behalf of, or in any manner assume liability (direct, contingent or
otherwise) for the Indebtedness of any Person, except for (i)advances for
relocation, travel or other expenses to the Borrower's or any Guarantor's
employees in the ordinary course of business and other loans to employees in
principal amounts of less than $500,000.00, (ii)a loan in the amount of
$3,850,000.00 from B.F. Shaw, Inc. to Word Industries Fabricators, Inc.
evidenced by a promissory note of Word Industries Fabricators, Inc. retained in
Borrower's offices for Agent's inspection, endorsed over to the Agent for the
benefit of Banks, and which Borrower shall cause B.F. Shaw, Inc. to deliver to
Agent at any time upon demand therefor, (iii) other loans among the Subsidiaries
evidenced by promissory notes retained in Borrower's offices for Agent's
inspection, endorsed over to the Agent for the benefit of Banks and which
Borrower agrees to cause such Subsidiaries to deliver to Agent at any time upon
demand therefor, (iv) loans to joint venture Related Parties evidenced by
promissory notes retained in Borrower's offices for Agent's inspection, and (v)
a loan from the Borrower to Merit Industrial Constructors, Inc. in the principal
amount of $475,000.00 evidenced by a promissory note made by Merit Industrial
Constructors, Inc. which is retained in Borrower's offices for Agent's
inspection, endorsed over to the Agent for the benefit of Banks and which the
Borrower agrees to deliver to Agent at any time upon demand therefor (which
loans under (iii), (iv) and (v) of this subsection 7.2(k) shall not exceed
$8,000,000.00 in the aggregate or $3,000,000.00 for any one loan or to any one
such Subsidiary or joint venture Related Party) (vi) the Loans and Guaranties
described on Schedule 6.10 attached hereto, and (vii) Permitted Investments. For
purposes of this Section 7.2(k), any Person which becomes a Subsidiary of the
Borrower after the date hereof shall be deemed to have made, at the time it
becomes a Subsidiary, all Investments of such Person existing immediately after
it became a Subsidiary.
(l) Dissolution or Liquidation. Borrower will not seek or permit the
dissolution or liquidation of the Borrower in whole or in part.
(m) Operating Leases. Neither Borrower nor any Subsidiary of the Borrower
will enter into or permit to remain in effect any agreements to rent or lease
(as lessee) any real or personal property (other than Capitalized Leases) for
initial terms (including options to renew or extend any term, whether or not
exercised) of more than one (1) year which in the aggregate (for the Borrower
and all Subsidiaries of the Borrower) provide for payments in any fiscal year in
excess of One Percent (1.00%) of the net revenue of Borrower and all of its
Subsidiaries as indicated in their audited financial statements for the
immediately preceding fiscal year.
(n) Change in Nature of Business. Neither Borrower nor any Subsidiary of
the Borrower will make any material change in the nature of its business.
(o) Pension Plans. Neither Borrower nor any Subsidiary of Borrower shall
(a) permit any condition to exist in connection with any Pension Plan which
might constitute grounds for the PBGC to institute proceedings to have such
Pension Plan terminated or a trustee appointed to administer such Pension Plan
or (b) engage in, or permit to exist or occur, any other condition, event or
transaction with respect to any Pension Plan which could result in the
incurrence by Borrower or any Subsidiary of the Borrower of any material
liability, fine or penalty. Neither Borrower nor any Subsidiary of the Borrower
shall become obligated to contribute to any Pension Plan or Multiemployer Plan
other than any such plan or plans in existence on the date hereof, except as may
be required in a Permitted Acquisition.
(p) Management Fees. Neither Borrower nor any Subsidiary of Borrower will
pay any management fees, consulting fees or similar fees to any Related Parties
(other than to the Borrower, any Subsidiary of Borrower or any officer or
employee of Borrower or any such Subsidiary) without the prior written consent
of the Required Banks.
7.3 Use of Proceeds.
(a) The Borrower agrees that the proceeds of the Revolving Credit Loans
hereunder will be used solely to refinance existing Indebtedness of Borrower and
its Subsidiaries, for the Borrower's and the Subsidiaries' working capital and
general corporate purposes and for financing Permitted Acquisitions;
(b) None of such proceeds will be used in violation of any applicable law
or regulation; and
(c) The Borrower will not engage principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying "margin stock" within the meaning of Regulation U of The Board of
Governors of the Federal Reserve System, as amended.
SECTION 8. EVENTS OF DEFAULT.
If any of the following (each of the following herein sometimes called an
"Event of Default") shall occur and be continuing:
8.1 Borrower shall fail to pay any of the Borrower's Obligations when the
same shall become due and payable, whether by reason of demand, acceleration,
mandatory prepayment or otherwise;
8.2 Any representation or warranty of the Borrower made in this Agreement,
in any other Transaction Document or in any certificate, agreement, instrument
or statement furnished or made or delivered pursuant hereto or thereto or in
connection herewith or therewith, shall prove to have been untrue or incorrect
in any material respect when made or effected;
8.3 Borrower shall fail to perform or observe any term, covenant or
provision contained in Section 7.1(c), Section 7.2 or Section 7.3;
8.4 Borrower shall fail to perform or observe any term, covenant or
provision contained in Section 7.1(a) or Section 7.1(i) of this Agreement and
any such failure shall remain unremedied for fifteen (15) days;
8.5 Borrower shall fail to perform or observe any other term, covenant or
provision contained in this Agreement and any such failure shall remain
unremedied for thirty (30) days after written notice thereof shall have been
given to the Borrower by Agent or any of the Banks;
8.6 This Agreement or any of the other Transaction Documents shall at any
time for any reason cease to be in full force and effect or shall be declared to
be null and void by a court of competent jurisdiction, or if the validity or
enforceability thereof shall be contested or denied by the Borrower, or if the
transactions completed hereunder or thereunder shall be contested by the
Borrower or if the Borrower shall deny that it has any or further liability or
obligation hereunder or thereunder;
8.7 Borrower or any Guarantor shall (i) voluntarily commence any proceeding
or file any petition seeking relief under Title 11 of the United States Code or
any other federal, state or foreign bankruptcy, insolvency, receivership,
liquidation or similar law, (ii) consent to the institution of, or fail to
contravene in a timely and appropriate manner, any such proceeding or the filing
of any such petition, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator or similar official of itself,
himself or herself or of a substantial part of its, his or her Property or
assets, (iv) file an answer admitting the material allegations of a petition
filed against itself, himself or herself in any such proceeding, (v) make a
general assignment for the benefit of creditors, (vi) become unable, admit in
writing its, his or her inability or fail generally to pay its, his or her debts
as they become due or (vii) take any corporate or other action for the purpose
of effecting any of the foregoing;
8.8 An involuntary proceeding shall be commenced or an involuntary petition
shall be filed in a court of competent jurisdiction seeking (i) relief in
respect of the Borrower or any Guarantor, or of a substantial part of the
Property or assets of the Borrower or any Guarantor, under Title 11 of the
United States Code or any other federal, state or foreign bankruptcy,
insolvency, receivership, liquidation or similar law, (ii) the appointment of a
receiver, trustee, custodian, sequestrator or similar official of the Borrower
or any Guarantor or of a substantial part of the Property or assets of the
Borrower or any Guarantor or (iii) the winding-up or liquidation of the Borrower
or any Guarantor; and such proceeding or petition shall continue undismissed for
sixty (60) consecutive days or an order or decree approving or ordering any of
the foregoing shall continue unstayed and in effect for sixty (60) consecutive
days;
8.9 Any "Event of Default" (as defined therein) shall occur under or within
the meaning of
the Security Agreement;
8.10 Any default shall occur under or within the meaning of any of the
Pledge Agreements;
8.11 Any default shall occur under the terms of any Letter of Credit
Application;
8.12 Any of the Subsidiary Guaranties shall at any time for any reason
cease to be in full force and effect or shall be declared to be null and void by
a court of competent jurisdiction, or if the validity or enforceability thereof
shall be contested by or denied by the Guarantor executing any such Subsidiary
Guaranty, or if any such Guarantor shall deny that it has any further liability
or obligation thereunder;
8.13 Any "Event of Default" (as defined therein) shall occur under or
within the meaning of any of the Subsidiary Security Agreements;
8.14 Borrower or any Guarantor shall be declared by Agent or any of the
Banks to be in default (beyond any applicable cure or grace period, if any) on,
or pursuant to the terms of, (1) any other present or future obligation to Agent
or any of the Banks, including, without limitation, any other loan, line of
credit, revolving credit, guaranty or letter of credit reimbursement obligation,
or (2) any other present or future agreement purporting to convey to any such
Bank or to Agent a Lien upon any Property or assets of the Borrower or any such
Guarantor, as the case may be;
8.15 Borrower or any Guarantor shall fail (and such failure shall not have
been cured or waived) to perform or observe any term, provision or condition of,
or any other default or event of default shall occur under, any agreement,
document or instrument evidencing, securing or otherwise relating to any
outstanding Indebtedness of the Borrower or any such Guarantor, as the case may
be, for borrowed money (other than the Borrower's Obligations) in a principal
amount in excess of Five Hundred Thousand Dollars ($500,000.00), including,
without limitation, the Note Purchase Agreements and any agreement, whether
executed now or hereafter, to provide the Borrower with any interest rate swap,
interest rate cap or other interest hedge, including, but not limited to, any
such agreements to finance any such arrangement, if the effect of such failure
or default is to cause or permit such Indebtedness to be declared to be due and
payable or otherwise accelerated, or to be required to be prepaid (other than by
a regularly scheduled required prepayment), prior to the stated maturity
thereof;
8.16 Borrower or any Guarantor shall have a judgment entered against it,
him or her by a court having jurisdiction in the premises in an amount of Five
Hundred Thousand Dollars ($500,000.00) or more and such judgment shall not be
appealed in good faith or satisfied by the Borrower or such Guarantor, as the
case may be, within thirty (30) days after the entry of such judgment;
THEN, and in each such event (other than an event described in Sections 8.7
or 8.8), Agent may, or if requested in writing by the Required Banks shall,
declare that the obligations of the Banks to make Revolving Credit Loans and of
the Agent to issue Letters of Credit under this Agreement have terminated,
whereupon such obligations of Agent and Banks shall be immediately and forthwith
terminated, and Agent may further, or if requested in writing by the Required
Banks shall further, declare on behalf of each of the Banks that the entire
outstanding principal balance of and all accrued and unpaid interest on the
Notes and all of the other Borrower's Obligations are forthwith due and payable,
whereupon all of the unpaid principal balance of and all accrued and unpaid
interest on the Notes and all such other Borrower's Obligations shall become and
be immediately due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower,
and Agent and the Banks may exercise any and all other rights and remedies which
any of them may have under any of the other Transaction Documents or under
applicable law; provided, however, that upon the occurrence of any event
described in Sections 8.7 or 8.8, Banks' obligations to make Revolving Credit
Loans and Agent's obligation to issue Letters of Credit under this Agreement
shall automatically terminate and the entire outstanding principal balance of
and all accrued and unpaid interest on the Notes issued under this Agreement and
all other Borrower's Obligations shall automatically become immediately due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Borrower, and Agent and the Banks
may exercise any and all other rights and remedies which any of them may have
under any of the other Transaction Documents or under applicable law. Following
acceleration of Borrower's Obligations hereunder as set forth above, Agent may,
or if requested in writing by the Required Banks and provided with the indemnity
required under Section 9.6 shall, proceed to enforce any remedy then available
to Agent or any of the Banks under any applicable law, including, without
limitation, all rights granted to Agent hereunder, under the Subsidiary
Guaranties, the Security Agreement, any of the Pledge Agreements, any of the
Subsidiary Security Agreements, or any Letter of Credit Application, and the
rights and remedies available to a secured party under the Uniform Commercial
Code as in effect in the State of Missouri.
Upon the occurrence of any Event of Default, Agent will have the right, in
addition to all other rights and remedies available to Agent and the Banks under
this Agreement or under the other Loan Documents, after oral or written notice
is sent to the Borrower, to take possession of, preserve and care for the
Collateral, to execute and/or endorse as the Borrower's agent any bills of sale
or documents, instruments or chattel paper in or pertaining to the Collateral,
to notify account debtors and obligors on documents, accounts receivable and
instruments included in the Collateral to make payment directly to Agent, to
take control of all of the Borrower's cash, to collect and receive funds
generated by the Collateral, including proceeds or refunds from insurance, or as
a result of claims for the damage, loss, or destruction of the Collateral, and
use the same to reduce any part of the obligations.
The Agent shall give notice of a Default to Borrower promptly upon being
requested to do so by any Bank and shall thereupon notify all of the Banks
thereof.
SECTION 9. THE AGENT.
9.1 Appointment and Authorization. Each Bank irrevocably appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement, the Notes and the other Transaction Documents
as are delegated to the Agent by the terms hereof or thereof, together with all
such powers as may be reasonably incidental thereto.
9.2 Agent and Affiliates. The Agent shall have the same rights and powers
under this Agreement as any other Bank and may exercise or refrain from
exercising the same as though it were not the Agent, and the Agent and its
affiliates may accept deposits from, lend money to and generally engage in any
kind of business with Borrower or any of its Subsidiaries or Affiliates as if it
were not the Agent hereunder.
9.3 Action by Agent. The obligations of the Agent hereunder are only those
expressly set forth herein. Without limiting the generality of the foregoing,
the Agent shall not be required to take any action with respect to any Default
or Event of Default, except as expressly provided in Section 8.
9.4 Consultation with Experts. The Agent may consult with legal counsel,
independent certified public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or other
experts.
9.5 Liability of Agent. Neither the Agent nor any of its directors,
officers, employees, agents or advisors shall be liable for any action taken or
not taken by it in connection herewith (i) with the consent or at the request of
the requisite percentage in interest of the Banks set forth herein or (ii) in
the absence of its own gross negligence or willful misconduct as determined by a
court of competent jurisdiction. Neither the Agent nor any of its directors,
officers, employees, agents or advisors shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with this Agreement or any Revolving Credit
Loan hereunder; (ii) the performance or observance of any of the covenants or
agreements of Borrower; (iii) the satisfaction of any condition specified in
Section 4, except receipt of items required to be delivered to the Agent; or
(iv) the validity, effectiveness or genuineness of this Agreement, the Notes or
any of the other Transaction Documents. The Agent shall not incur any liability
by acting in reliance upon any notice, consent, certificate, statement or other
writing (which may be a bank wire, telex, telecopy or similar writing) believed
by it to be genuine or to be signed by the proper party or parties.
9.6 Indemnification. Notwithstanding any other provision contained in this
Agreement to the contrary, to the extent Borrower fails to reimburse the Agent
pursuant to Section 10.3, Section 10.4 or Section 10.5, or if any Default or
Event of Default shall occur under this Agreement, the Banks shall ratably in
accordance with their respective Pro Rata Shares, indemnify the Agent and hold
it harmless from and against any and all liabilities, losses, costs and/or
expenses, including, without limitation, any liabilities, losses, costs and/or
expenses arising from the failure of any Bank to perform its obligations
hereunder or in respect of this Agreement, and also including, without
limitation, reasonable attorneys' fees and expenses, which the Agent may incur,
directly or indirectly, in connection with this Agreement, the Notes or any of
the other Transaction Documents, or any action or transaction related hereto or
thereto; provided only that the Agent shall not be entitled to such
indemnification for any losses, liabilities, costs and/or expenses directly and
solely resulting from its own gross negligence or willful misconduct as
determined by a court of competent jurisdiction. This indemnity shall be a
continuing indemnity, contemplates all liabilities, losses, costs and expenses
related to the execution, delivery and performance of this Agreement, the Notes
and the other Transaction Documents, and shall survive the satisfaction and
payment of the Revolving Credit Loans and the termination of this Agreement.
9.7 Credit Decision. Each Bank acknowledges that it has, independently and
without reliance upon the Agent or any other Bank, 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 Bank also acknowledges that it will,
independently and without reliance upon the Agent or any other Bank, 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 any action
under this Agreement.
9.8 Resignation of Agent. The Agent may resign at any time by giving
written notice thereof to the Banks and Borrower. Upon any such resignation,
Banks shall have the right to appoint a successor Agent with the prior consent
of Borrower, which consent shall not be unreasonably withheld, and which
successor Agent shall be a Bank, unless none of the Banks agrees to serve as the
Agent hereunder, in which case the successor Agent shall be a commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $100,000,000.00. If no
successor Agent shall have been so appointed by Banks, and shall have accepted
such appointment, within thirty (30) days after the retiring Agent's giving of
notice of resignation, then the Agent shall, on behalf of all of the Banks,
appoint a successor Agent with the prior consent of Borrower, which consent
shall not be unreasonably withheld, and which successor Agent shall be one of
the Banks, unless none of the Banks agrees to serve as the Agent hereunder, in
which case the successor Agent shall be a commercial bank organized under the
laws of the United States of America or of any State thereof and having a
combined capital and surplus of at least $100,000,000.00. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all of the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from all of its duties and obligations under this Agreement. After
any retiring Agent's resignation as Agent, the provisions of this Section 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.
9.9 Removal of Agent. The Agent may be removed at any time, for or without
cause, by an instrument or instruments in writing executed by the Required Banks
(excluding any such Bank which at the time is the Agent hereunder) and delivered
to the Agent with a copy to Borrower, specifying the removal and the date when
it shall take effect. Upon any such removal, Banks shall have the right to
appoint a successor Agent with the prior consent of Borrower, which consent
shall not be unreasonably withheld, and which successor Agent shall be a
commercial bank organized under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$100,000,000.00. If no successor Agent shall have been so appointed by Banks,
and shall have accepted such appointment, within thirty (30) days after the date
of removal of the Agent, then the Required Banks shall, on behalf of all of the
Banks, appoint a successor Agent with the prior consent of Borrower, which
consent shall not be unreasonably withheld, and which successor Agent shall be a
commercial bank organized under the laws of the United States of America or of
any state thereof and having a combined capital and surplus of at least
$100,000,000.00. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the removed Agent,
and the removed Agent shall be discharged from all of its duties and obligations
under this Agreement. After any such removal, the provisions of this Section 9
shall inure to such former Agent's benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement.
9.10 Agent's Fee. Borrower will pay to Agent for its own account on the
date hereof and on each anniversary of the date hereof during the Term, an
Agent's Fee in the amount agreed to between Borrower and Agent.
SECTION 10. GENERAL.
10.1 No Waiver. No failure or delay by Agent or any of the Banks in
exercising any right, remedy, power or privilege hereunder or under any other
Transaction Document 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, remedy, power or privilege. The remedies provided
herein and in the other Transaction Documents are cumulative and not exclusive
of any remedies provided by law. Nothing herein contained shall in any way
affect the right of Agent or any of the Banks to exercise any statutory or
common law right of banker's lien or setoff.
10.2 Right of Setoff. Upon the occurrence and during the continuance of any
Event of Default, each of the Banks is hereby authorized at any time and from
time to time, without notice to the Borrower (any such notice being expressly
waived by the Borrower) and to the fullest extent permitted by law, to setoff
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held by any such Bank and any and all other indebtedness
at any time owing by any such Bank to or for the credit or account of the
Borrower against any and all of the Borrower's Obligations irrespective of
whether or not Agent or any such Bank shall have made any demand hereunder or
under any of the other Transaction Documents and although such obligations may
be contingent or unmatured. Such Bank agrees to promptly notify Borrower after
any such setoff and application made by such Bank, provided, however, that the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of Banks under this Section 10.2 are in addition to any
other rights and remedies (including, without limitation, other rights of
setoff) which Banks may have. Nothing contained in this Agreement or any other
Transaction Document shall impair the right of each of the Banks to exercise any
right of setoff or counterclaim they may have against the Borrower and to apply
the amount subject to such exercise to the payment of indebtedness of the
Borrower unrelated to this Agreement or the other Transaction Documents.
10.3 Cost and Expenses. Borrower agrees, whether or not any Revolving
Credit Loan is made hereunder, to pay Agent upon demand (i) all reasonable
out-of-pocket costs and expenses and all Attorneys' Fees of Agent and each of
the Banks in connection with the preparation, documentation, negotiation,
execution and administration of this Agreement, the Notes and the other
Transaction Documents, (ii) all reasonable recording, filing and search fees
incurred in connection with this Agreement and the other Transaction Documents,
(iii) all reasonable out-of-pocket costs and expenses and all Attorneys' Fees of
Agent and each of the Banks in connection with the preparation of any waiver or
consent hereunder or any amendment hereof or any Event of Default or alleged
Event of Default hereunder, (iv) if an Event of Default occurs, all
out-of-pocket costs and expenses and all Attorneys' Fees incurred by Agent and
each of the Banks in connection with such Event of Default and collection and
other enforcement proceedings resulting therefrom and (v) all other Attorneys'
Fees incurred by Agent and each of the Banks relating to or arising out of or in
connection with this Agreement or any of the other Transaction Documents
subsequent to the date hereof. The Borrower further agrees to pay or reimburse
Agent and each of the Banks for any stamp or other taxes which may be payable
with respect to the execution, delivery, recording and/or filing of this
Agreement, the Notes, the Security Agreement, the Pledge Agreements, the
Subsidiary Guaranties, the Subsidiary Security Agreements, or any of the other
Transaction Documents. All of the obligations of the Borrower under this Section
10.3 shall survive the satisfaction and payment of the Borrower's Obligations
and the termination of this Agreement. In the event Agent or any Bank claims any
amounts pursuant to this Section 10.3, Agent or such Bank, as the case may be,
shall provide to Borrower an itemized statement of amounts claimed.
10.4 Environmental Indemnity. The Borrower hereby agrees to indemnify Agent
and each of the Banks and hold Agent and each of the Banks harmless from and
against any and all losses, liabilities, damages, injuries, costs, expenses and
claims of any and every kind whatsoever (including, without limitation, court
costs and attorneys' fees and expenses) which at any time or from time to time
may be paid, incurred or suffered by, or asserted against, Agent or any of the
Banks for, with respect to or as a direct or indirect result of the violation by
the Borrower or any Subsidiary of the Borrower of any Environmental Laws; or
with respect to, or as a direct or indirect result of the presence on or under,
or the escape, seepage, leakage, spillage, discharge, emission or release from,
properties utilized by the Borrower and/or any Subsidiary of the Borrower in the
conduct of its businesses into or upon any land, the atmosphere or any
watercourse, body of water or wetland, of any Hazardous Materials or any other
hazardous or toxic waste, substance or constituent or other substance
(including, without limitation, any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under the Environmental Laws); and
the provisions of and undertakings and indemnification set out in this Section
10.4 shall survive the satisfaction and payment of the Borrower's Obligations
and the termination of this Agreement.
10.5 General Indemnity. In addition to the payment of expenses pursuant to
Section 10.3, whether or not the transactions contemplated hereby shall be
consummated, the Borrower hereby agrees to indemnify, pay and hold Agent, each
of the Banks and any other holder(s) of the Notes, and the officers, directors,
employees, agents and affiliates of any of them (collectively, the
"Indemnitees") harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Indemnitees shall be
designated a party thereto), that may be imposed on, incurred by or asserted
against the Indemnitees, in any manner relating to or arising out of this
Agreement, any of the other Transaction Documents or any other agreement,
document or instrument executed and delivered by the Borrower or any other
Obligor in connection herewith or therewith, the statements contained in any
commitment letters delivered by Agent or any of the Banks, the Banks' agreements
to make the Revolving Credit Loans hereunder or the use or intended use of the
proceeds of any Revolving Credit Loan hereunder (collectively, the "indemnified
liabilities"); provided that the Borrower shall have no obligation to an
Indemnitee hereunder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of that Indemnitee as determined by a
court of competent jurisdiction. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the Borrower
shall contribute the maximum portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all indemnified
liabilities incurred by the Indemnitees or any of them. The provisions of the
undertakings and indemnification set out in this Section 10.5 shall survive
satisfaction and payment of the Borrower's Obligations and the termination of
this Agreement.
10.6 Authority to Act. Agent and the Banks shall be entitled to act on any
notices and instructions (telephonic or written) believed by Agent or any such
Bank to have been delivered by any Authorized Representative, regardless of
whether such notice or instruction was in fact delivered by a Person authorized
to act on behalf of the Borrower, and the Borrower hereby agrees to indemnify
Agent and each of the Banks and hold Agent and each of the Banks harmless from
and against any and all losses and expenses, if any, ensuing from any such
action, other than for such losses or expenses directly caused by the gross
negligence or willful misconduct of the Agent or such Bank, as determined by a
court of competent jurisdiction.
10.7 Notices. Any notice, request, demand, consent, confirmation or other
communication hereunder shall be in writing and delivered in person or sent by
telegram, telex, telecopy, overnight courier service or registered or certified
mail, return receipt requested and postage prepaid, if to the Borrower, in care
of The Shaw Group Inc. at 11100 Mead Road, Baton Rouge, Louisiana 70816,
Attention: Edward L. Pagano, Chief Financial Officer, if to Agent, at 100 South
Brentwood Boulevard., Suite 500, St. Louis, Missouri 63105, Attention: Brian K.
Dickmann, Vice President, or if to Banks, at their respective addresses or
telecopy numbers set forth on the signature pages of this Agreement, or at such
other address as any party may designate as its address for communications
hereunder by notice so given. Such notices shall be deemed effective on the day
on which delivered if delivered in person or by overnight courier service, or on
the date sent if sent by telegram, telex or telecopy, or on the third (3rd)
Business Day after the day on which mailed, if sent by registered or certified
mail.
10.8 CONSENT TO JURISDICTION. BORROWER, AGENT AND BANKS IRREVOCABLY SUBMIT
TO THE NONEXCLUSIVE JURISDICTION OF ANY MISSOURI STATE COURT OR ANY UNITED
STATES OF AMERICA COURT SITTING IN THE EASTERN DISTRICT OF MISSOURI, AS AGENT
MAY ELECT, IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT TO THE EXTENT SUBJECT MATTER
JURISDICTION EXISTS. THE BORROWER, AGENT AND BANKS HEREBY IRREVOCABLY AGREE THAT
ALL CLAIMS IN RESPECT TO SUCH SUIT, ACTION OR PROCEEDING MAY BE HELD AND
DETERMINED IN ANY OF SUCH COURTS. THE BORROWER, AGENT AND BANKS IRREVOCABLY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THE BORROWER,
AGENT OR ANY OF THE BANKS MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT, AND THE BORROWER,
AGENT AND BANKS FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
THE BORROWER, AGENT AND BANKS HEREBY EXPRESSLY WAIVE ALL RIGHTS OF ANY OTHER
JURISDICTION WHICH THE BORROWER, AGENT OR ANY SUCH BANK MAY NOW OR HEREAFTER
HAVE BY REASON OF ITS PRESENT OR SUBSEQUENT DOMICILE. EACH OF THE BORROWER,
AGENT AND BANKS AUTHORIZES THE SERVICE OF PROCESS UPON THE BORROWER, AGENT AND
BANKS BY REGISTERED MAIL SENT TO THE BORROWER, AGENT AND BANKS AT ITS ADDRESS
SET FORTH IN SECTION 10.7.
10.9 Agent's and Banks' Books and Records. Agent's and Banks' books and
records showing the account between the Borrower and Agent or any of the Banks
shall be admissible in evidence in any action or proceeding and shall constitute
prima facie proof thereof.
10.10 Governing Law; Amendments, Waivers and Consents. This Agreement, the
Notes, the Security Agreement, the Pledge Agreements, the Subsidiary Guaranties,
the Subsidiary Security Agreements, and all of the other Transaction Documents
shall be governed by and construed in accordance with the internal laws of the
State of Missouri. Any provision of this Agreement, the Notes, the Security
Agreement, the Pledge Agreements, the Subsidiary Guaranties, the Subsidiary
Security Agreements, or any of the other Transaction Documents may be amended or
waived, or any consent given, if, but only if, such amendment, consent or waiver
is in writing and is signed by Borrower, the Required Banks and, in the case of
an amendment, the Agent (and in the case of any waiver or consent, if the rights
or duties of the Agent in its capacity as Agent are affected thereby, by the
Agent); provided that no such amendment or waiver shall, unless signed by all of
the Banks, (i) increase the Revolving Credit Commitment of any Bank, (ii) reduce
the principal amount of or rate of interest on any Revolving Credit Loan or any
fees hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Revolving Credit Loan or any fees hereunder, (iv) affirmatively
release any collateral security or any guaranty for any Revolving Credit Loan
hereunder, (v) increase the percentage advance rate against Borrower's trailing
twelve-month Consolidated EBITDA set forth in Section 3.1(b), (vi) amend or
waive any Event of Default, or (vii) change the percentage in the definition of
Required Banks, or (v) amend this Section 10.10.
10.11 Successors and Assigns; Participations.
(a) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that Borrower may not assign or otherwise transfer any of its rights or
delegate any of its obligations under this Agreement. Any of the Banks may sell
participations in its Notes and its rights under this Agreement, the other
Transaction Documents and in the Collateral in whole or in part to any
commercial bank organized under the laws of the United States or any state
thereof without the prior consent of Borrower so long as each agreement pursuant
to which any such participation is granted provides that no such participant
shall have any rights under this Agreement or any other Transaction Document
(the participants' rights against the Bank granting its participation to be
those set forth in the Participation Agreement between the participant and such
Bank), and such selling Bank shall retain the sole right to approve or
disapprove any amendment, modification or waiver of any provision of this
Agreement or any of the other Transaction Documents. Each such participant shall
be entitled to the benefits of the yield protection provisions hereof to the
extent any Bank would have been so entitled had not such participation been sold
or assignment made.
(b) Any Bank which, in accordance with Section 10.11(a),
grants a participation in any of its rights under this Agreement or its Notes
shall give prompt notice describing the details thereof to the Agent and
Borrower.
(c) Unless otherwise agreed to by Borrower in writing, no Bank shall, as
between Borrower and that Bank, be relieved of any of its obligations under this
Agreement as a result of such Bank's granting of a participation in all or any
part of such Bank's Notes or all or any part of such Bank's rights under this
Agreement.
10.12 Assignment Agreements. Each Bank may, upon prior notice to and
consent of Borrower and Agent, which consent shall not be unreasonably withheld,
from time to time sell or assign to other banking institutions rated "B" or
better by Thompson Bank Watch Service a pro rata part of all of the indebtedness
evidenced by the Notes then owed by it together with an equivalent proportion of
its obligation to make Revolving Credit Loans hereunder and the credit risk
incidental to the Letters of Credit pursuant to an Assignment Agreement
substantially in the form of Exhibit H attached hereto, executed by the
assignor, the assignee and the Borrower, which agreements shall specify in each
instance the portion of the indebtedness evidenced by the Notes which is to be
assigned to each such assignor and the portion of the Revolving Credit
Commitment of the assignor and the credit risk incidental to the Letters of
Credit (which portions shall be equivalent) to be assumed by it (the "Assignment
Agreements"), provided that nothing herein contained shall restrict, or be
deemed to require any consent as a condition to, or require payment of any fee
in connection with, any sale, discount or pledge by any Bank of any Note or
other obligation hereunder to a federal reserve bank. Any such portion of the
indebtedness assigned by any Bank pursuant to this Section 10.12 shall not be
less than $5,000,000.00. Upon the execution of each Assignment Agreement by the
assignor, the assignee and the Borrower and consent thereto by the Agent (i)
such assignee shall thereupon become a "Bank" for all purposes of this Agreement
with a Revolving Credit Commitment in the amount set forth in such Assignment
Agreement and with all the rights, powers and obligations afforded a Bank
hereunder, (ii) the assignor shall have no further liability for funding the
portion of its Revolving Credit Commitment assumed by such other Bank and (iii)
the address for notices to such Bank shall be as specified in the Assignment
Agreement, and the Borrower shall, in exchange for the cancellation of the Note
held by the assignor Bank, execute and deliver a Note to the assignee Bank in
the amount of its Revolving Credit Commitment and a new Note to the assignor
Bank in the amount of its Revolving Credit Commitment after giving effect to the
reduction occasioned by such assignment, all such Notes to constitute "Notes"
for all purposes of this Agreement, and there shall be paid to the Agent, as a
condition to such assignment, an administration fee of $5,000.00 plus any
out-of-pocket costs and expenses incurred by it in effecting such assignment,
such fee to be paid by the assignor or the assignee as they may mutually agree,
but under no circumstances shall any portion of such fee be payable by or
charged to the Borrower.
10.13 References; Headings for Convenience. Unless otherwise specified
herein, all references herein to Section numbers refer to Section numbers of
this Agreement, all references herein to Exhibits A, B, C, D, E, F, G, H and I
refer to annexed Exhibits A, B, C, D, E, F, G, H and I which are hereby
incorporated herein by reference and all references herein to Schedules 3.2,
3.3(a), 5, 6.5, 6.6, 6.8, 6.10, 6.11, 6.12, 6.14, 6.15, 7.1(k)(viii), 7.2(a),
7.2(h) and 7.2(k) refer to annexed Schedules 3.2, 3.3(a), 5, 6.5, 6.6, 6.8,
6.10, 6.11, 6.12, 6.14, 6.15, 7.1(k)(viii), 7.2(a), 7.2(h) and 7.2(k) which are
hereby incorporated herein by reference. The Section headings are furnished for
the convenience of the parties and are not to be considered in the construction
or interpretation of this Agreement.
10.14 Subsidiary Reference. Any reference herein to a Subsidiary or
Consolidated Subsidiary of the Borrower, and any financial definition, ratio,
restriction or other provision of this Agreement which is stated to be
applicable to the Borrower and its Subsidiaries or Consolidated Subsidiaries or
which is to be determined on a "consolidated" or "consolidating" basis, shall
apply only to the extent the Borrower has any Subsidiaries or Consolidated
Subsidiaries and, where applicable, to the extent any such Subsidiaries are
consolidated with the Borrower for financial reporting purposes.
10.15 Binding Agreement. This Agreement shall be binding upon and inure to
the benefit of the Borrower and its successors and Agent and each of the Banks
and their respective permitted successors and assigns. The Borrower may not
assign or delegate any of its rights or obligations under this Agreement.
10.16 NO ORAL AGREEMENTS; ENTIRE AGREEMENT. ORAL AGREEMENTS OR COMMITMENTS
TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT,
INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT
THE BORROWER, AGENT AND BANKS FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY
AGREEMENTS REACHED BY THE BORROWER, AGENT AND BANKS COVERING SUCH MATTERS ARE
CONTAINED IN THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, WHICH AGREEMENT
AND OTHER TRANSACTION DOCUMENTS ARE A COMPLETE AND EXCLUSIVE STATEMENT OF THE
AGREEMENTS BETWEEN THE BORROWER, AGENT AND BANKS, EXCEPT AS THE BORROWER, AGENT
AND BANKS MAY LATER AGREE IN WRITING TO MODIFY THEM. THIS AGREEMENT EMBODIES THE
ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND SUPERSEDES ALL
PRIOR AGREEMENTS AND UNDERSTANDINGS (ORAL OR WRITTEN) RELATING TO THE SUBJECT
MATTER HEREOF.
10.17 Severability. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein that may be given effect without the invalid, illegal or unenforceable
provision shall not in any way be affected or impaired thereby.
10.18 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.
10.19 Resurrection of the Borrower's Obligations. To the extent that Agent
or any of the Banks receives any payment on account of any of the Borrowe's
Obligations, and any such payment(s) or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, subordinated
and/or required to be repaid to a trustee, receiver or any other Person under
any bankruptcy act, state or federal law, common law or equitable cause, then,
to the extent of such payment(s) received, the Borrower's Obligations or part
thereof intended to be satisfied and any and all Liens upon or pertaining to any
Property or assets of the Borrower and theretofore created and/or existing in
favor of Agent for the benefit of the Banks as security for the payment of the
Borrower's Obligations shall be revived and continue in full force and effect,
as if such payment(s) had not been received by Agent or any such Bank and
applied on account of the Borrower's Obligations.
10.20 U. S. Dollars. All currency references set forth herein, in any other
Transaction Documents and in any transactions referenced herein or therein shall
be denominated in Dollars of the United States of America.
10.21 Confidentiality. The Agent and the Banks agree to maintain the
confidentiality of all proprietary and nonpublic information obtained by them
from or furnished to them by the Borrower pursuant to this Agreement or the
other Transaction Documents, not to disclose any such information and to use
such information only in connection with the transactions contemplated by this
Agreement and the other Transaction Documents, except that the foregoing shall
not be construed to, now or in the future, apply to any information reflected in
any publicly recorded document, any information obtained from sources other than
the Borrower which are not to the Agent's or any such Bank's knowledge bound by
confidentiality agreements or which information is in the public domain at the
time of such disclosure by the Agent or any such Bank, nor shall it be construed
to prevent (a) the Agent or any Bank from making any disclosure of any
information (i) if required to do so by any applicable law or regulation, (ii)
to any governmental agency or regulatory body having authority over the Agent or
such Bank pursuant to a request by such agency or body, (iii) pursuant to and to
the extent required by a subpoena or other legal process believed by the Agent
or such Bank, in good faith, to be legally issued and valid, (iv) to the extent
necessary for the Agent or any such Bank after an Event of Default and during
the continuance thereof to enforce any remedy provided for in the Transaction
Documents or otherwise available by law, (b) the Agent or any Bank from making
such disclosure as it reasonably deems necessary or appropriate to any bank or
other financial institution, and counsel thereto, which bank or other financial
institution is a prospective lender under the Transaction Documents or any Bank
from making such disclosures as it reasonably deems necessary or appropriate to
any bank or other financial institution, and counsel thereto, to which such Bank
in good faith desires to sell an interest in its Revolving Credit Loans and its
Revolving Credit Commitment; provided, that in the case of this clause (b),
prior to making any disclosure contemplated hereby, the Agent or such Bank shall
notify the Borrower and shall require any such prospective recipient to agree to
abide by the confidentiality provisions of this Section 10.21 prior to providing
any such proprietary or nonpublic information to such recipient, or (c) the
Agent or any Bank from making, on a confidential basis, such disclosures as it
deems necessary or appropriate to its affiliates, legal counsel or accountants,
(including outside auditors); provided, that in the case of this clause (c),
prior to making any disclosure contemplated hereby, the Agent or such Bank will
advise the prospective recipient of the provisions of this Section 10.21. The
provisions of this Section 10.21 shall survive the termination or expiration of
the Transaction Documents.
IN WITNESS WHEREOF, the parties have executed this Credit Agreement this
_____ day of May, 1998.
THE SHAW GROUP INC.
By:
Name:
Title:
Revolving Credit Commitment: MERCANTILE BUSINESS CREDIT INC.
$31,250,000.00
By:
Name:
Title:
Address: 100 South Brentwood Blvd.,
Suite 500
St. Louis, Missouri 63105
Attention: Brian Dickmann,
Vice President
Telecopy No: (314) 579-8480
Revolving Credit Commitment: CITY NATIONAL BANK OF BATON ROUGE
$25,000,000.00
By:
Name:
Title:
Address: 445 North Boulevard, Suite 340
Baton Rouge, Louisiana 70816
Attention: Mark Bensabat,
Telecopy No: (504) 377-8396
Revolving Credit Commitment: HIBERNIA NATIONAL BANK
$25,000,000.00
By:
Name:
Title:
Address: 333 Travis Street
Shreveport, Louisiana 71101
Attention: David A. Holden,
Vice President
Telecopy No: (318) 674-3758
Revolving Credit Commitment: UNION PLANTERS BANK, N. A.
$18,750,000.00
By:
Name:
Title:
Address: 8440 Jefferson Highway
Baton Rouge, Louisiana 70809
Attention: Mark Phillips,
Telecopy No: (504) 924-9300
MERCANTILE BUSINESS CREDIT INC., as Agent
By:
Name:
Title:
Address: 100 South Brentwood Boulevard,
Suite 500
St. Louis, Missouri 63105
Attention: Brian Dickmann,
Vice President
<PAGE>
SCHEDULE 3.2
Authorized Representatives
Name Signature
J. M. Bernhard, Jr. _________________________
Edward L. Pagano _________________________
George P. Bevan _________________________
T. A. Barfield, Jr. _________________________
George Hooper _________________________
<PAGE>
SCHEDULE 3.3(a)
Outstanding Letters of Credit
Date Account Party Face Amount Expiry
2-18-98 Alloy Piping Products, Inc. US $ 23,500.00 5-1-98
2-8-93 B.F. Shaw, Inc. US $ 1,178,742.00 10-1-99
9-20-95 B.F. Shaw, Inc. US $ 4,049,316.00 12-31-98
4-24-96 The Shaw Group Inc. US $ 262,250.00 2-28-00
3-18-97 The Shaw Group Inc. US $ 400,000.00 3-31-98
7-26-96 Shaw International US $ 647,577.70 1-31-98
9-16-97 Shaw Overseas (Cayman) Limited US $ 217,524.62 2-15-98
10-8-97 Shaw Power Services, Inc. US $ 564,220.00 3-27-99
10-8-97 Shaw Power Services, Inc. US $ 564,220.00 3-27-99
<PAGE>
SCHEDULE 5
Description of Collateral
All of Borrower's right, title and interest in and to the following
described property and any and all additions, accessions and substitutions
thereto or therefor (hereinafter collectively referred to as the "Collateral"):
(a) all accounts, contract rights, documents, instruments and other forms
of obligation and other rights to the payment of money (collectively,
"Accounts"), and all goods whose sale, lease, rental or other disposition by
Borrower have given rise to Accounts and have been returned to or repossessed or
stopped in transit by Borrower;
(b) all inventory of Borrower, wherever located, whether in transit, held
by others for Borrower's account, covered by warehouse receipts, purchase orders
and/or contracts, or in the possession of any carriers, forwarding agents,
truckers, warehousemen, vendors or other Persons, including, without limitation,
all raw materials, work in process, finished goods, supplies, goods,
incidentals, office supplies and packaging and shipping materials (collectively,
"Inventory");
(c) all general intangibles of any kind or nature whatsoever, including,
without limitation, all patents, trademarks and copyrights, and all applications
for, registrations of and licenses of the foregoing, and all computer software,
product specifications, trade secrets, licenses, trade names, service marks,
goodwill, tax refunds and rights to tax refunds (collectively, "General
Intangibles");
(d) monies, reserves, deposits, certificates of deposit and deposit
accounts and interest or dividends thereon, securities, cash, cash equivalents
and other property now or at any time or times hereafter in the possession or
under the control of any of the Banks, any of their affiliates or their bailees;
(e) all books, records, computer records, computer disks, ledger cards,
programs and other computer materials, customer and supplier lists, invoices,
orders and other property and general intangibles at any time evidencing or
relating to any of the Collateral (collectively, "Records");
(f) all accessions to any of the property described above and all
substitutions, renewals, improvements and replacements of and additions thereto;
and
(g) all proceeds, including, without limitation, proceeds which constitute
property of the types described in (a), (b), (c), (d), (e) and (f) above and any
rents and profits of any of the foregoing items, whether cash or noncash,
immediate or remote, including, without limitation, all income, accounts,
contract rights, general intangibles, chattel paper, notes, drafts, acceptances,
instruments and other rights to the payment of money arising out of the sale,
rental, lease, exchange or other disposition of any of the foregoing items
(provided, however, that nothing contained herein or in any financing statement
shall be deemed to permit or assent to any such disposition other than the sale
of Inventory in the ordinary course of business), and insurance proceeds, and
all products, of (a), (b), (c), (d), (e) and (f) above, and any indemnities,
warranties and guaranties payable by reason of loss or damage to or otherwise
with respect to any of the foregoing items;
<PAGE>
<TABLE>
SCHEDULE 6.5
Litigation
<CAPTION>
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Case Name Type Action Status Location
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Slanderfer v. Word Age discrimination Motion for Summary Tulsa, Oklahoma
Judgment filed; No
Response; trial 5/98?
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Howard V. Shaw Wrongful termination/age Discovery, trial 6/22/98 Martine, California
discrimination
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Shaw v. Mitsui Contract 6/19/98 Hearing on Motion Baton Rouge, Louisiana
to Stay
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Carreon v. Shaw Personal Injury Answer filed, waiting on Galveston, Texas
files from Sunland for
discovery, trial
12/16/98-12/18/98
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Enterprise Products v. NYE Property damage negligence Answer filed 3/30/98 Chambers County, Texas
Engineering, et al.
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Lavalco v. APP Contract Discovery Houston, Texas
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Shaw v. Natkin Delay/Extra Work Discovery, 9/98 trial Nashville, Tennessee
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Connex v. Tuna Association Property Purchase Trial pending Botetourt County, Virginia
Environmental
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Koon v. B.F. Shaw Open Account/Contract Answer due 4/30/98 8th JDC, Laurens, South
Carolina
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
<PAGE>
SCHEDULE 6.6
Pension Plan Matters
None.
<PAGE>
SCHEDULE 6.8
Borrower's Subsidiaries
State of
Names Addresses Incorporation
<PAGE>
SCHEDULE 6.10
Other Loans and Guaranties
1. Secured loan (Jetstar plane) by Metlife Capital Financial Corporation to
the Borrower, with a March 31, 1998 balance of approximately $1,690,641.32.
2. Secured loan (equipment) by Metlife Capital Financial Corporation to The
Shaw Group Inc. for Sunland Fabricators, Inc. equipment, with a March 31,
1998 balance of approximately $1,911,610.34.
3. Secured loan (equipment) by Metlife Capital Financial Corporation to The
Shaw Group Inc. for Sunland Fabricators, Inc. equipment, with a March 31,
1998 balance of approximately $462,192.08.
4. Secured loan (real estate/fixtures) by Metlife Capital Financial
Corporation to Sunland Fabricators, Inc., with a March 31, 1998 balance of
approximately $2,251,071.31. Guaranteed by the Borrower, B. F. Shaw, Inc.,
FVF Incorporated and National Fabricators, Inc.
5. Secured loan (equipment) by Metlife Capital Financial Corporation to The
Shaw Group Inc. for Sunland Fabricators, Inc. equipment, with a March 31,
1998 balance of approximately $3,345,607.04.
6. Secured loan (real estate) by Metlife Capital Financial Corporation to
Sunland Fabricators, Inc. with a March 31, 1998 balance of approximately
$1,688,434.78. Guaranteed by the Borrower, B. F. Shaw, Inc., FVF
Incorporated and National Fabricators, Inc.
7. Secured loan (real estate) by Metlife Capital Financial Corporation to Word
Industries Fabricators, Inc., with a March 31, 1998 balance of
approximately $1,777,363.66. Guaranteed by the Borrower.
8. Secured loan (equipment) by Metlife Capital Financial Corporation to Word
Industries Fabricators, Inc., with a March 31, 1998 balance of
approximately $1,560,443.00. The Borrower is a co-maker of such loan.
9. Secured loan (equipment) by MetLife Capital Financial Corporation to Word
Industries Fabricators, Inc., with a March 31, 1998 balance of
approximately $1,786,357.42. Guaranteed by the Borrower.
10. Secured loan (real estate) by Metlife Capital Financial Corporation to SAON
Properties, Inc., with a March 31, 1998 balance of approximately
$3,133,409.00. Guaranteed by the Borrower, Alloy Piping Products, Inc.,
Sunland Fabricators, Inc., National Fabricators, Inc., B. F. Shaw, Inc.,
FVF Incorporated, NAPTech, Inc. and Word Industries Fabricators, Inc.
11. Secured loan (equipment) by First Bank of Boston to Alloy Piping Products,
Inc., with a March 31, 1998 balance of approximately $5,549,999.83.
Guaranteed by the Borrower.
12. Secured loan (equipment) by BancBoston Leasing to NAPTech, Inc., with a
March 31, 1998 balance of approximately $3,428,571.00. Guaranteed by the
Borrower.
13. Secured loan (equipment) by BancBoston Leasing, Inc. to Shaw Constructors,
Inc., with a March 31, 1998 balance of approximately $1,131,938.57.
Guaranteed by the Borrower.
14. Secured loan (equipment) by Mercantile Business Credit Inc. to B. F. Shaw,
Inc., with a March 31, 1998 balance of approximately $1,350,000.00.
Guaranteed by the Borrower. [To be paid at Closing].
15. Secured loan by Mercantile Business Credit Inc. to the Borrower, with a
March 31, 1998 balance of approximately -0-.
16. $13,000,000.00 unsecured revolving credit facility extended to the Borrower
by Mercantile Business Credit Inc., which has a March 31, 1998 principal
balance of $2,115,800.00. [To be paid at Closing.]
17. Secured loans, letters of credit and guarantees under the Second Amended
Loan and Security Agreement dated March 29, 1996 among Borrower, the
Subsidiaries of Borrower parties thereto and Mercantile Business Credit
Inc., et al., and all amendments thereto. [To be paid at Closing.]
18. South Carolina bonds in favor of B. F. Shaw, Inc., unsecured, with a March
31, 1998 balance of $4,000,000.00.
19. Secured loan (real estate) by Pioneer/Hibernia Bank to Alloy Piping
Products, Inc., with a March 31, 1998 balance of approximately
$3,178,492.86.
20. Secured loan (real estate) by Union Planters Bank to United Crafts, Inc.,
with a March 31, 1998 balance of approximately $545,875.87.
21. Fifteen secured loans by Union Planters Bank to United Crafts, Inc., with a
March 31, 1998 balance of approximately $106,878.12.
22. Secured loan (real estate) by ARKLA to Alloy Piping Products, Inc., with a
March 31, 1998 balance of approximately $19,220.71.
23. Secured loan (real estate) by McJunkin Corporation to Alloy Piping
Products, Inc., with a March 31, 1998 balance of approximately $140,065.03.
Guaranteed by the Borrower.
24. Unsecured loan by Alkota Cleaning Systems to United Crafts, Inc.,
unsecured, with a March 31, 1998 balance of approximately $2,235.69.
25. Unsecured loan by Associated Leasing to FVF, Incorporated, with a March 31,
1998 balance of approximately $15,899.50.
26. Unsecured loan by Phil Hollingsworth Equipment to Shaw Industrial Supply
Company, Inc., with a March 31, 1998 balance of approximately -0-.
27. Unsecured loan by First Premium to the Borrower, with a March 31, 1998
balance of approximately -0-.
28. Secured loan (equipment) by Contractors Finance Co. of Louisiana to Shaw
Constructors, Inc. (UCI), with a March 31, 1998 balance of approximately
$78,894.41.
29. Secured loan (assets) by NatWest Bank facility to Shaw Aiton, Ltd. in the
amount of approximately 3,000,000.00 British Sterling Pounds, which has a
March 31, 1998 balance of approximately 1,367,000.00 British Sterling
Pounds. Parent company guarantee of the Borrower and Shaw Group U.K.
Holdings, Ltd. and a mortgage on the assets of Shaw Group U.K. Holdings,
Ltd., Shaw U.K., Ltd., Shaw Aiton, Ltd., Shaw Dunn, Ltd. and Pipework
Engineering and Development, Ltd.
30. Bank guarantees by Westpac Banking Corp. in favor of Aiton Australia Pty.
Ltd. ("Aiton") in the amount of Aus. $2,696,848.00.
31. Aus. $1,500,000.00 facility by Westpac Banking Corp. in favor of Aiton,
which has a March 31, 1998 balance of Aus. $198,393.00 guaranteed by the
Borrower.
32. Secured loan (assets) by Barclays Bank to Pipework Engineering and
Developments, Ltd., which has a March 31, 1998 principal balance of
182,637.00 British Sterling Pounds.
33. 6.44% Series A Senior Secured Notes due 2005 and 6.93% Series B Senior
Secured Notes due 2008 and Subsidiary Guarantees thereof.
34. Loan in the amount of $3,850,000.00 from B. F. Shaw, Inc. to Word
Industries Fabricators, Inc.
35. Loan by the Borrower to Merit Industrial Constructors, Inc. pursuant to a
Loan Agreement dated July 2, 1997, which has a March 31, 1998 balance of
$475,000.00.
36. Various loans by the Borrower and/or its Subsidiaries to the employees of
the Borrower and its Subsidiaries.
37. Loans to joint venture Related Parties.
38. Various loans among the Borrower and/or its Subsidiaries.
39. Guarantee by the Borrower of the obligations of Word Industries
Fabricators, Inc. under the Asset Purchase Agreement executed in connection
with the prior acquisition of assets for Word Industries Pipe Fabricating,
Inc. and affiliates.
40. Existing guarantees by the Borrower or any Subsidiary made in the ordinary
course of business of any payment to a vendor of goods or services to the
Borrower/Subsidiaries or guarantees by the Borrower or any Subsidiary made
with respect to the performance by the Borrower/Subsidiary of a contract
for the sale of goods or the delivery of services.
41. Endorsements of negotiable instruments for collection in the ordinary
course of business.
42. The Borrower and/or one of its Subsidiaries is indebted in the approximate
amount of $3,623,760.00 as of March 31, 1998, to Vekamaf Holding B.V.,
incurred in connection with the acquisition of Cojafex, B.V. ("Cojafex"),
which amount is secured by the pledge of the capital stock in Cojafex.
43. The Borrower and/or one of its Subsidiaries is indebted to the former
stockholders of Pipework Engineering and Developments, Ltd. ("PED") in the
amount of approximately $1,078,440.00 as of March 31, 1998, such
indebtedness resulting from the deferred portion of the purchase price for
the capital stock in PED, which is secured by a letter of credit.
44. Deed dated November 14, 1997 to which the Borrower is a party relating to
preferential creditors of Prospect Industries, plc ("Prospect") and
Prospect Engineering Limited ("PEL").
45. Deed of Indemnity dated November 14, 1997 by the Borrower in favor of
Midland Bank, plc ("Midland") relating to claims of the preferential
creditors of Prospect and PEL.
46. Deed of Indemnity dated November 14, 1997 by the Borrower in favor of
Midland with respect to demands or
claims on certain letters of credit, bonds or guarantees.
47. Each of the Letters of Credit set forth on Schedule 3.3(a) to this
Agreement.
48. Customary indemnification obligations undertaken by the Borrower and/or its
Subsidiaries in connection with acquisitions prior to the date of the
Agreement.
<PAGE>
SCHEDULE 6.11
Permitted Liens
============== -------- ------------- ------------- ------------- ==============
Date File
Secured Party UCC Jurisdiction Filed Number Description
============== -------- ------------- ------------- ------------- ==============
============== -------- ------------- ------------- ------------- ==============
============== -------- ------------- ------------- ------------- ==============
============== -------- ------------- ------------- ------------- ==============
============== -------- ------------- ------------- ------------- ==============
============== -------- ------------- ------------- ------------- ==============
============== -------- ------------- ------------- ------------- ==============
============== -------- ------------- ------------- ------------- ==============
============== -------- ------------- ------------- ------------- ==============
============== -------- ------------- ------------- ------------- ==============
============== -------- ------------- ------------- ------------- ==============
============== -------- ------------- ------------- ------------- ==============
============== ======== ============= ============= ============= ==============
============== ======== ============= ============= ============= ==============
<PAGE>
SCHEDULE 6.12
Multiemployer Plans
None.
<PAGE>
SCHEDULE 6.14
Environmental and Health and Safety Matters
Certain environmental issues have arisen with respect to the property in
Troutville, Virginia being leased by Connex Pipe Systems, Inc. Connex is
presently involved in litigation with the lessor of such property in which
litigation environmental cleanup issues have been raised. Connex believes that
it is not responsible for the environmental cleanup since it believes that any
hazardous materials requiring remediation were placed on the property by a
former tenant, the present owner, or a former owner of such property or some
other third party.
<PAGE>
SCHEDULE 6.15
List of Predecessor and Fictitious Names
1. The Shaw Group Inc.
Shaw Industries, Inc.
B.F. Shaw, Inc.
2. Alloy Piping Products, Inc.
APP
WeldTech
Oil Capital Supply
Multi Metals
3. Connex Pipe Systems, Inc.
Whessoe Pipe, Inc.
4. Fronek A/DE, Inc.
FCI/ADE Acquisition, Inc.
Anchor Darling
5. Fronek Engineering and
Consulting, Inc.
Fronek Company, Inc.
FCI
FCI Canada
Fronek Consulting, Inc.
6. NAPTech, Inc.
North American Piping Technologies
7. National Fabricators, Inc.
Process Fabricators, a division of
National Fabricators
8. Prospect Industries (Holdings), Inc.
Greenback Engineering Corp.
Prospect Industries, Inc.
9. Shaw Constructors, Inc.
United Crafts, Inc.
UCI
10. Shaw Fronek-Fabricators, Inc.
FCI Pipe Support Sales, Inc.
FCI PSSI
PSSI
11. Shaw Industrial Supply, Inc.
Energy Metal Specialties, Inc.
SIS
12. Shaw Maintenance, Inc.
Merit Industrial Constructors
13. Sunland Fabricators, Inc.
Shaw/Sunland Fabricators, Inc.
14. Welding Technology and Supply, Inc.
Weld Tech
15. Word Industries Fabricators, Inc.
Word Industries, Inc.
Word Industries Pipe Fabricating, Inc.
<PAGE>
SCHEDULE 7.1(k)(viii)
Directors and Executive Officers
Directors
J. M. Bernhard, Jr.
Albert McAlister
L. Lane Grigsby
David W. Hoyle
John W. Sinders, Jr.
William H. Grigg
Executive Officers
Name Position
J. M. Bernhard, Jr. President and Chief Executive Officer
Edward L. Pagano Chief Financial Officer and Treasurer
George P. Bevan Executive Vice President, Assistant Secretary
G. Ray Wilkie, Jr. Executive Vice President
Ronald D. Brown, Jr. President of Shaw Manufacturing and Services, Inc.
N. Andrew Dupuy, Jr. President of Shaw Power Services, Inc.
Richard F. Gill President of Shaw Process and Industrial Group, Inc.
<PAGE>
SCHEDULE 7.2(a)
Permitted Indebtedness
The items set forth on Schedule 6.11 - Other Loans and Guarantees to this
Agreement, are incorporated by reference herein.
<PAGE>
SCHEDULE 7.2(h)
Transactions with Related Parties
1. Transactions among the Borrower and/or its Subsidiaries and any Related
Party that are set forth on any other Schedule to this Agreement.
2. Transactions entered into at the time of an acquisition by the Borrower
with persons who agreed to become officers of Borrower or any of its
Subsidiaries as described in more detail under "Certain Relationships and
Related Transactions" set forth in Borrowers' Proxy Statement (the "Proxy
Statement") dated December 22, 1997 for its 1998 Annual Meeting of
Shareholders.
3. John W. Sinders, Jr., a director of the Borrower, is a managing director of
Jeffries & Company, Inc., an investment banking firm that has provided
certain investment banking services as described in "Certain Relationships
and Related Transactions" in the Proxy Statement.
4. Employment Agreement with J. M. Bernhard, Jr.
5. MAPP Construction, Inc. ("MAPP") has performed and may perform various
office construction contracts for the Borrower and its Subsidiaries. Total
payments to MAPP, in which L. Lane Grigsby (a member of the Borrower's
Board of Directors) is a shareholder, have totaled approximately
$1,000,000.00.
<PAGE>
SCHEDULE 7.2(k)
Investments Held by Borrower and its Subsidiaries as of May 15, 1998
In addition to the investments of the Borrower and its Subsidiaries in any
of the investments described in (a) - (h) and (j) - (n) of the definition of
"Permitted Investments" in the Agreement, the Borrower has an investment in a
Bahrain joint venture known as Shaw Nass Middle East, W.L.L.
<PAGE>
EXHIBIT A
BORROWING BASE CERTIFICATE
This Borrowing Base Certificate is delivered pursuant to Section 3.1(c) of
that certain Credit Agreement dated as of May 15, 1998, by and between The Shaw
Group Inc. and Mercantile Business Credit Inc., as Agent, and the Banks a party
thereto (the "Loan Agreement") and is subject to the terms and provisions
contained therein. All capitalized terms used and not otherwise defined herein
shall have the respective meanings ascribed to them in the Loan Agreement.
Borrower hereby represents and warrants to Agent and Banks that the
following information is true and correct as of _________________________,
19____.
I. BORROWING BASE CALCULATIONS
Consolidated EBITDA for the twelve months ended as of ____________, ______:
1. (a) Consolidated Net Income (excluding extraordinary items)$_____________
(b) Consolidated Income Taxes $______________
(c) Consolidated Interest Expense $______________
(d) Consolidated Depreciation Expense $______________
(e) Consolidated Amortization Expense $______________
2. Consolidated EBITDA (Sum of Lines 1(a) through 1(e)) $______________
3. Borrowing Base Multiplier 3.00
4. Total Borrowing Base (Line 2 multiplied by Line 3, but not to
exceed $100,000,000.00) $______________
II. LOAN AVAILABILITY
5. Aggregate principal amount of outstanding Revolving Credit
Loans $______________
6. Face amount of outstanding Letters of Credit $______________
7. Total Outstandings (Line 5 plus Line 6) $______________
8. Borrowing Base Excess (Deficit) (Line 4 minus Line 7) (Negative amount
represents $______________ mandatory repayment)
If Line 8 above is negative, this Borrowing Base Certificate is accompanied
by the mandatory repayment required by Section 3.1(d) of the Loan Agreement.
This Borrowing Base Certificate is dated the day of , 19 .
THE SHAW GROUP INC.
By:
Name:
Title:
<PAGE>
EXHIBIT B
REVOLVING CREDIT NOTE
$_______________ St. Louis, Missouri
May 15, 1998
FOR VALUE RECEIVED, on March 31, 2001, the undersigned, THE SHAW GROUP
INC., ("Borrower"), hereby promises to pay to the order of
_______________________ ("Bank"), the principal sum of ________________________
Dollars ($______________), or such lesser sum as may then be outstanding
hereunder. The aggregate principal amount which Bank shall be committed to have
outstanding hereunder at any one time shall not exceed________________ Dollars
($_______________) subject to the limitation of Bank's pro rata share of the
"Borrowing Base" (as defined in the Credit Agreement), which amount may be
borrowed, paid, borrowed and repaid, in whole or in part, subject to the terms
and conditions hereof and of the Credit Agreement hereinafter identified.
Borrower further promises to pay to the order of Bank interest on the
principal amount from time to time outstanding hereunder on the dates and at the
rate or rates provided for in the Credit Agreement. All payments hereunder
(other than prepayments) shall be applied first to the payment of all accrued
and unpaid interest, with the balance, if any, to be applied to the payment of
principal. All prepayments hereunder shall be applied solely to the payment of
principal.
All payments of principal and interest hereunder shall be made in lawful
currency of the United States in federal or other immediately available funds at
the office of Mercantile Business Credit Inc. (the "Agent") situated at 100
South Brentwood Boulevard, Suite 500, St. Louis, Missouri 63105, or at such
other place as the Agent shall designate in writing. Interest shall be computed
on an actual day, 360-day year basis. Consistent with the terms of the Credit
Agreement, the Agent shall determine each interest rate applicable to the
advances hereunder, which determination shall be conclusive in the absence of
manifest error.
Bank may record the date and amount of all loans and all payments of
principal and interest hereunder in the records it maintains with respect
thereto. Bank's books and records showing the account between Bank and the
Borrower shall be admissible in evidence in any action or proceeding and shall
constitute prima facie proof of the items therein set forth.
This Note is referred to in that certain Credit Agreement dated as of the
date hereof by and between the Borrower, Agent, Bank and other lenders named
therein (as the same may from time to time be amended, the "Credit Agreement"),
to which Credit Agreement reference is hereby made for a statement of the terms
and conditions upon which the maturity of this Note may be accelerated, and for
other terms and conditions, including prepayment, which may affect this Note.
This Note is secured by that certain Security Agreement dated the date
hereof and executed by Borrower in favor of Agent for the benefit of Bank and
others, and by certain other Security Agreements dated as of the dates of their
respective executions and executed respectively by each of the Borrower's
present and future Subsidiaries in favor of Agent for the benefit of Bank and
others (collectively, as the same may from time to time be amended, the
"Security Agreements"), to which Security Agreements reference is hereby made
for a description of the security and a statement of the terms and conditions
upon which this Note is secured.
This Note is also secured by that certain General Pledge and Security
Agreement dated the date hereof and executed by Borrower in favor of Agent for
the benefit of Bank and others and by certain other General Pledge and Security
Agreements dated as of the dates of their respective executions and executed
respectively by certain of Borrower's present and future Subsidiaries in favor
of Agent for the benefit of Bank and others (collectively, as the same may from
time to time be amended, the "Pledge Agreements"), to which Pledge Agreements
reference is also hereby made for a description of the security and a statement
of the terms and conditions upon which this Note is further secured.
If the Borrower shall fail to make any payment of any principal of or
interest on this Note as and when the same shall become due and payable, or if
any "Event of Default" (as defined therein) shall occur under or within the
meaning of the Credit Agreement or any of the Security Agreements or the Pledge
Agreements, Bank's obligation to make any additional loans under this Note may
be terminated as set forth in the Credit Agreement, and Agent, on behalf of
Bank, may further declare the entire outstanding principal balance of this Note
and all accrued and unpaid interest thereon to be immediately due and payable.
In the event that any payment of any principal of or interest on this Note
shall not be paid when due, whether by reason of acceleration or otherwise, and
this Note shall be placed in the hands of an attorney or attorneys for
collection or for foreclosure of any or all of the Security Agreements and/or
any or all of the Pledge Agreements securing payment hereof, or for
representation of Bank in connection with bankruptcy or insolvency proceedings
relating hereto, the Borrower promises to pay, in addition to all other amounts
otherwise due hereon, the reasonable costs and expenses of such collection,
foreclosure and representation, including, without limitation, reasonable
attorneys' fees and expenses (whether or not litigation shall be commenced in
aid thereof). All parties hereto severally waive presentment for payment,
demand, protest, notice of protest and notice of dishonor.
This Note shall be governed by and construed in accordance with the
internal laws of the State of Missouri.
THE SHAW GROUP INC.
By:
Name:
Title:
<PAGE>
Revolving Credit Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
Amount Amount of Unpaid
Prime Notation of Principal Principal
Date or LIBOR Loan Loan Repaid Balance
Made By
<PAGE>
EXHIBIT C
LETTERHEAD Of BORROWER'S COUNSEL
May 15, 1998
Mercantile Business Credit Inc.
100 South Brentwood Boulevard, Suite 500
St. Louis, Missouri 63105
City National Bank of Baton Rouge
445 North Boulevard, Suite 340
Baton Rouge, Louisiana 70816
Hibernia National Bank
313 Travis Street
Shreveport, Louisiana 71101
Union Planters Bank, N. A.
8440 Jefferson Highway
Baton Rouge, Louisiana 70809
Gentlemen:
We are counsel to The Shaw Group Inc., ("Borrower"), and its subsidiaries,
listed on Schedule 6.8 to the Loan Agreement (defined below) (collectively, the
"Guarantors"), and, in connection with this opinion, we have reviewed the Credit
Agreement dated as of May 15, 1998 (the "Loan Agreement") made by and among the
Borrower, Mercantile Business Credit Inc., as agent (the "Agent")and Mercantile
Business Credit Inc. (in its capacity as a lender "Mercantile"), City National
Bank of Baton Rouge ("City National"), Hibernia National Bank ("Hibernia"), and
Union Planters Bank, N. A. ("Union Planters," and collectively with Mercantile,
City National and Hibernia, the "Banks"), the $31,250,000.00 Revolving Credit
Note dated as of May 15, 1998 made by the Borrower payable to the order of
Mercantile, the $25,000,000.00 Revolving Credit Note dated as of May 15, 1998
made by the Borrower payable to the order of City National, the $18,750,000.00
Revolving Credit Note dated as of May 15, 1998 made by the Borrower payable to
the order of Union Planters, and the $25,000,000.00 Revolving Credit Note dated
as of May 15, 1998 made by the Borrower payable to the order of Hibernia
(collectively, the "Notes"), the Security Agreement dated as of May 15, 1998
made by Borrower in favor of Agent for the benefit of all of the Banks (the
"Security Agreement"), those certain General Pledge and Security Agreements
dated as of May 15, 1998 made by Borrower in favor of Agent for the benefit of
all the Banks and those _______________ (_____) General Pledge and Security
Agreements, each dated as of May 15, 1998 made by certain of the Guarantors in
favor of Agent for the benefit of all the Banks, together with the collateral
schedules, stock powers and original stock certificates delivered pursuant
thereto (collectively, the "Pledge Agreements"), the Guaranties executed
respectively by each of the Guarantors dated of even date herewith (the
"Guaranties"), and the Subsidiary Security Agreements, each dated as of May 15,
1998 and made respectively by each of the Guarantors in favor of the Agent for
the benefit of all of the Banks (the "Subsidiary Security Agreements"). The Loan
Agreement, the Notes, the Security Agreement, the Pledge Agreement executed by
Borrower and all agreements or documents to be delivered pursuant thereto are
referred to herein as the "Loan Documents." The Guaranties, the Subsidiary
Security Agreements, the Pledge Agreements executed by any of the Guarantors,
and all agreements or documents to be delivered pursuant thereto are referred to
herein as the "Subsidiary Documents"). All terms used but not defined herein
shall have the respective meanings ascribed to them in the Loan Agreement.
We have also reviewed the corporate organization and existence of the
Borrower and each Guarantor, the corporate proceedings of the Borrower in
relation to the Loan Documents, and the corporate proceedings of each of the
Guarantors in relation to the Subsidiary Documents, and such other matters as we
have deemed necessary or relevant as a basis for this opinion.
Based upon the foregoing, it is our opinion that:
1. Borrower is a duly organized and validly existing corporation in good
standing under the laws of Louisiana, with perpetual corporate existence, and it
has the corporate power and authority to own its properties and to transact the
business in which it is engaged or presently proposes to engage; and Borrower is
duly qualified as a foreign corporation and in good standing in all of the
states where the nature of its business or the ownership or use of property
requires such qualification.
2. Each of the Guarantors is a duly organized and validly existing
corporation in good standing under the laws of the state of its incorporation,
with perpetual corporate existence, and each Guarantor has the corporate power
and authority to own its properties and to transact the business in which it is
engaged or presently proposes to engage; and each of the Guarantors is duly
qualified as a foreign corporation and in good standing in all of the states
where the nature of its business or the ownership or use of property requires
such qualification.
3. Borrower has the corporate power to execute, deliver and carry out the
terms and provisions of the Loan Documents and Borrower has duly taken or caused
to be taken all necessary corporate action (including but not limited to the
obtaining of any consent of stockholders required by law or by the Articles of
Incorporation or Bylaws of Borrower) to authorize the execution, delivery and
performance of the Loan Documents.
4. Each of the Guarantors has the corporate power to execute, deliver and
carry out the terms and provisions of the Subsidiary Documents, and each of the
Guarantors has duly taken or caused to be taken all necessary corporate action
(including but not limited to the obtaining of any consent of stockholders
required by law or by the Articles or Certificate of Incorporation or Bylaws of
such Guarantor) to authorize the execution, delivery and performance of the
Subsidiary Documents.
5. Neither the execution and delivery of the Loan Documents by Borrower,
the execution and delivery of the Subsidiary Documents by the Guarantors, nor
compliance with the provisions thereof will violate any law or regulation or any
order or decree of any court or governmental instrumentality, or will conflict
with, or result in the breach of, or constitute a default under, any indenture,
mortgage, deed of trust, agreement or other instrument (of which we have
knowledge) to which the Borrower or any Guarantor is a party or by which the
Borrower or any Guarantor might be bound, or result in the creation or
imposition of any lien, charge or encumbrance upon, any of the property of the
Borrower or any Guarantor thereunder, or violate any provision of the Articles
or Certificate of Incorporation, Bylaws or any preferred stock provisions of the
Borrower or any Guarantor. In this connection, we have made a reasonable
investigation with respect to the existence of any such indenture, mortgage,
deed of trust, agreement or other instrument.
6. There are no actions, suits or proceedings pending or (to our knowledge)
threatened against or affecting the Borrower or any Guarantor before any court,
arbitrator or governmental or administrative body or agency which might result
in any material adverse change in the business, operations, properties or assets
or in the condition, financial or otherwise, of the Borrower or any such
Guarantor.
7. Except as set forth in Paragraphs 9 through 29 below, no action of, or
filing with, any governmental or public body or authority is required to
authorize, or is otherwise required in connection with, the execution, delivery
and performance of the Loan Documents or the Subsidiary Documents.
8. The respective Loan Documents have been duly executed and delivered by
the Borrower and constitute valid and binding obligations of the Borrower
enforceable in accordance with their respective terms subject to bankruptcy,
reorganization and other similar laws affecting the enforcement of creditors'
rights. The respective Subsidiary Documents have been duly executed and
delivered by the Guarantors executing the same and constitute the valid and
binding obligations of such Guarantors enforceable in accordance with their
respective terms, subject to bankruptcy, reorganization and other similar laws
affecting the enforcement of creditors' rights.
9. The Security Agreement, upon the recording of UCC-1 financing statements
in the name of The Shaw Group Inc. in the Office of the Secretary of State of
each of South Carolina, Texas, New Jersey, Oklahoma, New Hampshire, California
and Utah, and in the Recorder's Offices for East Baton Rouge Parish, Louisiana,
Caddo Parish, Louisiana, Laurens County, South Carolina, Gregg County, Texas,
Bergen County, New Jersey, Tulsa County, Oklahoma, Belknap County, New
Hampshire, Solano County, California and Davis County, Utah creates in Agent for
the benefit of all of the Banks a valid, perfected and enforceable lien in and
to the property described in Schedule 5 of the Loan Agreement of the Borrower.
10. The Pledge Agreements, upon possession by Agent of the original stock
certificates evidencing shares in each of the Guarantors, creates in Agent for
the benefit of all of the Banks a valid, perfected and enforceable lien in and
to the capital stock described therein.
11. The Subsidiary Security Agreement of B. F. Shaw, Inc., upon the
recording of UCC-1 financing statements in the name of B. F. Shaw, Inc. in the
Office of the Secretary of State of South Carolina, and in the Recorder's Office
for Laurens County, South Carolina, creates in Agent for the benefit of all of
the Banks a valid, perfected and enforceable lien in and to the types of
property owned by B. F. Shaw, Inc. described in Schedule 5 of the Loan
Agreement.
12. The Subsidiary Security Agreement of National Fabricators, Inc., upon
the recording of UCC-1 financing statements in the name of National Fabricators,
Inc. in the Recorder's Office for East Baton Rouge Parish, Louisiana, creates in
Agent for the benefit of all of the Banks a valid, perfected and enforceable
lien in and to the types of property owned by National Fabricators, Inc.
described in Schedule 5 of the Loan Agreement.
13. The Subsidiary Security Agreement of FVF, Incorporated, upon the
recording of UCC-1 financing statements in the name of FVF, Incorporated in the
Recorder's Office for East Baton Rouge Parish, Louisiana, creates in Agent for
the benefit of all of the Banks a valid, perfected and enforceable lien in and
to the types of property owned by FVF, Incorporated described in Schedule 5 of
the Loan Agreement.
14. The Subsidiary Security Agreement of Sunland Fabricators, Inc., upon
the recording of UCC-1 financing statements in the name of Sunland Fabricators,
Inc. in the Recorder's Office for East Baton Rouge Parish, Louisiana, creates in
Agent for the benefit of all of the Banks a valid, perfected and enforceable
lien in and to the types of property owned by Sunland Fabricators, Inc.
described in Schedule 5 of the Loan Agreement.
15. The Subsidiary Security Agreement of Shaw-Fronek Fabrication, Inc.,
upon the recording of UCC-1 financing statements in the name of Shaw-Fronek
Fabrication, Inc. in the Office of the Secretary of State of Texas, and in the
Recorder's Office for Gregg County, Texas, creates in Agent for the benefit of
all of the Banks a valid, perfected and enforceable lien in and to the types of
property owned by Shaw-Fronek Fabrication, Inc. described in Schedule 5 of the
Loan Agreement.
16. The Subsidiary Security Agreement of Fronek Engineering and Consulting,
Inc., upon the recording of UCC-1 financing statements in the name of Fronek
Engineering and Consulting, Inc. in the Office of the Secretary of State of New
Jersey, and in the Recorder's Office for Bergen County, New Jersey, creates in
Agent for the benefit of all of the Banks a valid, perfected and enforceable
lien in and to the types of property owned by Fronek Engineering and Consulting,
Inc. described in Schedule 5 of the Loan Agreement.
17. The Subsidiary Security Agreement of Shaw International, Inc., upon the
recording of UCC-1 financing statements in the name of Shaw International, Inc.
in the Recorder's Office for East Baton Rouge Parish, Louisiana, creates in
Agent for the benefit of all of the Banks a valid, perfected and enforceable
lien in and to the types of property owned by Shaw International, Inc. described
in Schedule 5 of the Loan Agreement.
18. The Subsidiary Security Agreement of Word Industries Fabricators, Inc.,
upon the recording of UCC-1 financing statements in the name of Word Industries
Fabricators, Inc. in Recorder's Office for Tulsa County and Oklahoma County,
Oklahoma, creates in Agent for the benefit of all of the Banks a valid,
perfected and enforceable lien in and to the types of property owned by Word
Industries Fabricators, Inc. described in Schedule 5 of the Loan Agreement.
19. The Subsidiary Security Agreement of Shaw Industrial Supply Co., Inc.,
upon the recording of UCC-1 financing statements in the name of Shaw Industrial
Supply Co., Inc. in the Recorder's Office for East Baton Rouge Parish,
Louisiana, creates in Agent for the benefit of all of the Banks a valid,
perfected and enforceable lien in and to the types of property owned by Shaw
Industrial Supply Co., Inc. described in Schedule 5 of the Loan Agreement.
20. The Subsidiary Security Agreement of Alloy Piping Products, Inc., upon
the recording of UCC-1 financing statements in the name of Alloy Piping
Products, Inc. in the Recorder's Office for Caddo Parish, Louisiana, creates in
Agent for the benefit of all of the Banks a valid, perfected and enforceable
lien in and to the types of property owned by Alloy Piping Products, Inc.
described in Schedule 5 of the Loan Agreement.
21. The Subsidiary Security Agreement of Fronek A/DE, Inc., upon the
recording of UCC-1 financing statements in the name of Fronek A/DE, Inc. in the
Office of the Secretary of State of New Hampshire, and in the Recorder's Office
for Belknap County, New Hampshire, creates in Agent for the benefit of all of
the Banks a valid, perfected and enforceable lien in and to the types of
property owned by Fronek A/DE, Inc. described in Schedule 5 of the Loan
Agreement.
22. The Subsidiary Security Agreement of Welding Technology and Supply Inc,
upon the recording of UCC-1 financing statements in the name of Welding
Technology and Supply Inc in the Office of the Secretary of State of Oklahoma,
and in the Recorder's Office for Tulsa County and Oklahoma County, Oklahoma,
creates in Agent for the benefit of all of the Banks a valid, perfected and
enforceable lien in and to the types of property owned by Welding Technology and
Supply Inc described in Schedule 5 of the Loan Agreement.
23. The Subsidiary Security Agreement of Pipe Shields, Inc., upon the
recording of UCC-1 financing statements in the name of Pipe Shields, Inc. in the
Office of the Secretary of State of California, and in the Recorder's Office for
Solano County California, creates in Agent for the benefit of all of the Banks a
valid, perfected and enforceable lien in and to the types of property owned by
Pipe Shields, Inc. described in Schedule 5 of the Loan Agreement.
24. The Subsidiary Security Agreement of NAPTech, Inc., upon the recording
of UCC-1 financing statements in the name of NAPTech, Inc. in the Office of the
Secretary of State of Utah, and in the Recorder's Office for Davis County, Utah,
creates in Agent for the benefit of all of the Banks a valid, perfected and
enforceable lien in and to the types of property owned by NAPTech, Inc.
described in Schedule 5 of the Loan Agreement.
25. The Subsidiary Security Agreement of NAPTech Pressure Systems
Corporation, upon the recording of UCC-1 financing statements in the name of
NAPTech Systems Corporation in the Office of the Secretary of State of Utah, and
in the Recorder's Office for Davis County, Utah, creates in Agent for the
benefit of all of the Banks a valid, perfected and enforceable lien in and to
the types of property owned by NAPTech Systems Corporation described in Schedule
5 of the Loan Agreement.
26. The Subsidiary Security Agreement of Shaw Constructors, Inc., upon the
recording of UCC-1 financing statements in the name of Shaw Constructors, Inc.
in the Recorder's Office for East Baton Rouge Parish, Louisiana, creates in
Agent for the benefit of all of the Banks a valid, perfected and enforceable
lien in and to the types of property owned by Shaw Constructors, Inc. described
in Schedule 5 of the Loan Agreement.
27. The Subsidiary Security Agreement of Connex Pipe Systems Inc., upon the
recording of UCC-1 financing statements in the name of Connex Pipe Systems Inc.
in the Office of the Secretary of State of Virginia, and in the Recorder's
Office for Botetourt County, Virginia, creates in Agent for the benefit of all
of the Banks a valid, perfected and enforceable lien in and to the types of
property owned by Connex Pipe Systems Inc. described in Schedule 5 of the Loan
Agreement.
Very truly yours,
<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
_________________, 19___
Mercantile Business Credit Inc.
100 South Brentwood Boulevard, Suite 500
St. Louis, Missouri 63105
Attention: Senior Credit Officer
Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of May
15, 1998, by and between you, as agent for the Banks named therein, and the
undersigned (as from time to time amended, the "Agreement"). All capitalized
terms used and not otherwise defined herein shall have the respective meanings
ascribed to them in the Agreement.
The undersigned hereby certifies to you that as of the date hereof:
(a) All of the representations and warranties set forth in Section 6 of the
Agreement are true and correct as if made on the date hereof;
(b) No violation or breach of any of the affirmative covenants set forth in
Section 7.1 of the Agreement has occurred and is continuing;
(c) No violation or breach of any of the negative covenants set forth in
Section 7.2 of the Agreement has occurred and is continuing;
(d) No Default or Event of Default under or within the meaning of the
Agreement has occurred and is continuing;
(e) The financial statements of Borrower and its Consolidated Subsidiaries
delivered to you with this letter are true, correct and complete in all material
respects and have been prepared in accordance with generally accepted accounting
principles consistently applied; and
(f) The financial covenant information set forth in Schedule 1 to this
letter is true and correct.
Very truly yours,
THE SHAW GROUP INC.
By:
Name:
Title:
<PAGE>
Schedule 1
To Compliance Certificate
(The Certificate attached hereto is as of ________________)
Capitalized terms used herein shall have the meanings set forth in the
Credit Agreement dated as of May 15, 1998 among The Shaw Group Inc., Mercantile
Business Credit Inc., as agent, and the lenders named therein (as amended,
restated, supplemented or otherwise modified from time to time, the
"Agreement"). Subsection references herein relate to the subsections of the
Agreement.
A. MAXIMUM CAPITAL EXPENDITURES
1. Actual Capital Expenditures for current Fiscal
Year-To-Date $_____________
2. Maximum Permitted (Section 7.2(i)) $_____________
B. CONSOLIDATED EBITDA
For the 12 months ended _____________:
1. Net Income (excluding extraordinary items) $_____________
2. Income Tax Expense $_____________
3. Interest Expense $_____________
4. Amortization and Depreciation Expenses $_____________
5. Consolidated EBITDA (sum of Lines B1 through B4) $_____________
C. CONSOLIDATED NET OPERATING CASH FLOW
1. Consolidated EBITDA (from B5 above) $_____________
2. Capital Expenditures (for 12 months ended __________) $_____________
3. Consolidated Net Operating Cash Flow (Line C1 minus C2)$_____________
D. DEBT SERVICE COVERAGE RATIO
1. Consolidated Net Operating Cash Flow (Line C3 above) $_____________
2. Interest Expense (from Line B3 above) $_____________
3. Scheduled payments of principal on Indebtedness
(for the 12 months ending ______________) $_____________
4. Consolidated Debt Service (Sum of D2 and D3) $_____________
5. Debt Service Coverage (D1 divided by D4) ____ to 1.0
6. Minimum Required (Section 7.1(i)(i)) 2.50 to 1.0
E. MAXIMUM LEVERAGE RATIO
1. Average Revolving Credit Loans outstanding $_____________
2. Face amount of Letters of Credit outstanding $_____________
3. Other Borrowed Money Indebtedness outstanding $_____________
4. Consolidated Total Funded Debt outstanding as of
_____________ (Sum of E1 through E3) $_____________
5. Consolidated EBITDA (from B5 above) $_____________
6. Leverage Ratio (E4 divided by E5) ____ to 1.0
7. Maximum Permitted (Section 7.1(i)(ii)) 4.00 to 1.0
F. SHAREHOLDERS' EQUITY
1. Shareholders' Equity as of ______________ $_____________
2. Beginning Required Shareholders' Equity $135,000,000.00
3. Cumulative Quarterly Net Income (excluding any
Quarterly Net Losses) for $ Quarters ending
November 30, 1997 and thereafter
4. Net Proceeds of Capital Stock issued subsequent
to August 31,1997 $_____________
5. Total Required Shareholders' Equity
(Sum of F2 through F4) $_____________
G. TOTAL FUNDED DEBT TO TOTAL CAPITALIZATION
1. Consolidated Total Funded Debt (Line E4 above) $_____________
2. Shareholders' Equity (Line F1 above) $_____________
3. Total Capitalization (Sum of G1 plus G2) $_____________
4. Ratio of G1 divided by G3) _____ to 1.0
5. Maximum Permitted Ratio (Section 7.1(i)(iv)) 0.60 to 1.0
H. OTHER INDEBTEDNESS
1. Purchase money debt as of _________________ $_____________
2. Maximum permitted (Section 7.2(a)(iv)) $_____________
3. Subordinated Debt as of _______________ $_____________
4. Maximum permitted (Section 7.2(a)(v)) $_____________
5. Other Indebtedness $_____________
6. Maximum permitted (Section 7.2(a)(vi)) $_____________
I. RESTRICTION ON LEASES
1. Direct and indirect obligations with respect to leases $_____________
2. Maximum permitted (Section 7.2(m)) $_____________
<PAGE>
EXHIBIT E
STANDBY LETTER OF CREDIT APPLICATION
AND REIMBURSEMENT AGREEMENT
SEE ATTACHED
<PAGE>
EXHIBIT F
COMMERCIAL LETTER OF CREDIT APPLICATION
AND REIMBURSEMENT AGREEMENT
SEE ATTACHED
<PAGE>
EXHIBIT G
LETTER OF CREDIT PARTICIPATION CERTIFICATE
This Letter of Credit Participation Certificate is issued pursuant to
Section 3.3(e) of that certain Credit Agreement dated as of May 15, 1998, by and
among The Shaw Group Inc., the Banks listed on the signature pages thereof and
Mercantile Business Credit Inc., as agent for the Banks ("Agent"), as the same
may from time to time be amended, modified, extended or renewed (the "Credit
Agreement"). All capitalized terms used and not otherwise defined herein shall
have the respective meanings ascribed to them in the Credit Agreement.
Subject to the terms, provisions and conditions contained in the Credit
Agreement, Agent hereby issues to _____________________ a __________________
Percent (____%) undivided participation interest in all of Agent's
indemnifications to Mercantile Bank National Association as the issuer of all
Letters of Credit from time to time under the Credit Agreement (including,
without limitation, an undivided participation interest in the reimbursement
risk relating to such Letters of Credit and in all payments and Revolving Credit
Loans made in connection with such Letters of Credit).
This Certificate 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 on the same instrument.
Executed this ________ day of May, 1998.
MERCANTILE BUSINESS CREDIT INC., as Agent
By:
Title:
The foregoing Letter of Credit Participation Certificate is hereby accepted
this _______day of May, 1998.
By:
Title:
<PAGE>
EXHIBIT H
ASSIGNMENT AGREEMENT
AGREEMENT dated as of ___________, 19______ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee"), THE SHAW GROUP INC. (the "Borrower"),
and MERCANTILE BUSINESS CREDIT INC., as Agent (the "Agent").
WITNESSETH:
WHEREAS, this Assignment Agreement (this "Agreement") relates to the Credit
Agreement dated as of May 15, 1998 among the Borrower, the Assignor and the
other Banks party thereto, as Banks, and the Agent (the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Revolving Credit Commitment to make Revolving Credit Loans to the Borrower, in
an aggregate principal amount at any time outstanding not to exceed $___________
(the "Revolving Credit Commitment");
WHEREAS, Revolving Credit Loans made to the Borrower by the Assignor under
the Credit Agreement in the aggregate principal amount of $______________ are
outstanding as of the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the rights
of the Assignor under the Credit Agreement in respect of a ____________ percent
(_____%) portion of its Revolving Credit Commitment in the amount of
$_______________ (the "Assigned Commitment"), together with a corresponding
portion of its outstanding Revolving Credit Loans and Letter of Credit risk
participations, and its interest in all Collateral and Guarantees therefor, and
the Assignee proposes to accept assignment of such rights and assume the
corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined herein
shall have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Commitment, and the Assignee hereby accepts such
assignment from the Assignor and assumes all of the obligations of the Assignor
under the Credit Agreement to the extent of the Assigned Commitment, including
the purchase from the Assignor of the corresponding portion of the principal
amount of the Revolving Credit Loans made by the Assignor and risk
participations in any Letters of Credit outstanding at the date hereof. Upon the
execution and delivery hereof by the Assignor, the Assignee, the Borrower and
the Agent and the payment of the amounts specified in Section 3 required to be
paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed
to the rights and be obligated to perform the obligations of a Bank under the
Credit Agreement with a Revolving Credit Commitment of $____________, and (ii)
the Revolving Credit Commitment of the Assignor shall, as of the date hereof, be
reduced by a like amount and the Assignor released from its obligations under
the Credit Agreement to the extent such obligations have been assumed by the
Assignee. The assignment provided for herein shall be without recourse to the
Assignor. Assignee shall, as of the date hereof, succeed to a corresponding pro
rata share of the Collateral and Third Party Collateral, which rights shall be
subject to the agreements granting such interests, and Assignee further agrees
to execute such amendments or other agreements as Agent may determine necessary
to make Assignee a party to that certain Collateral Agency and Intercreditor
Agreement dated May 15, 1998 made by and among Borrower, Agent thereunder,
Assignor and the other lenders a party thereto.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in federal funds the amount heretofore agreed between them.1 It is
understood that commitment and/or facility fees accrued to the date hereof with
respect to the Assigned Commitment, are for the account of the Assignor and such
fees accruing from and including the date hereof are for the account of the
Assignee. Each of the Assignor and the Assignee hereby agrees that if it
receives any amount under the Credit Agreement which is for the account of the
other party hereto, it shall receive the same for the account of such other
party to the extent of such other party's interest therein and shall promptly
pay the same to such other party.
SECTION 4. Consent of the Borrower and the Agent. This Agreement is
conditioned upon the consent of the Borrower and the Agent pursuant to Section
10.12 of the Credit Agreement. The execution of this Agreement by the Borrower
and the Agent is evidence of this consent. Pursuant to, and subject to the
requirements of, Section 10.12 the Borrower agrees to execute and deliver a Note
payable to the order of the Assignee to evidence the assignment and assumption
provided for herein.
SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation
or warranty in connection with, and shall have no responsibility with respect
to, the solvency, financial condition, or statements of the Borrower, or the
validity and enforceability of the obligations of the Borrower in respect of the
Credit Agreement or any Note. The Assignee acknowledges that it has,
independently and without reliance on the Assignor, and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and will continue to be responsible for
making its own independent appraisal of the business, affairs and financial
condition of the Borrower.
SECTION 6. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Missouri.
SECTION 7. Counterparts. 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.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.
[ASSIGNOR]
By:
Title:
[ASSIGNEE]
By:
Title:
THE SHAW GROUP INC.
By:
Title:
MERCANTILE BUSINESS CREDIT INC., as Agent
By:
Title:
<PAGE>
EXHIBIT I
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") dated as of May 15, 1998 is made
by and between THE SHAW GROUP INC., a Louisiana corporation (the "Borrower"),
and MERCANTILE BUSINESS CREDIT INC., a Missouri corporation, in its capacity as
Collateral Agent ("Collateral Agent").
WITNESSETH:
WHEREAS, the Borrower has entered into separate Note Purchase Agreements
dated as of May 21, 1998 (collectively, as may be amended or supplemented from
time to time, the "Note Purchase Agreement"), with Nationwide Life Insurance
Company, Connecticut General Life Insurance Company, Insurance Company of North
America, Connecticut General Life Insurance Company on Behalf of One or More
Separate Accounts, Life Insurance Company of North America, Northern Life
Insurance Company, Reliastar Life Insurance Company of New York, Reliastar
United Services Life Insurance Company, Washington Square Advisers Private
Placement Trust Fund and Security Connecticut Life Insurance Company,
respectively (collectively, together with their respective successors and
assigns, the "Noteholders"), which provide, among other things, for the issuance
and sale by the Borrower of $20,000,000 aggregate principal amount of its 6.44%
Series A Senior Secured Notes due 2005 (the "Series A Notes") and $40,000,000
aggregate principal amount of its 6.93% Series B Senior Secured Notes due 2008
(together with the Series A Notes, herein referred to as the "Notes");
WHEREAS, Borrower is entering into that certain Credit Agreement dated as
of the date hereof (as the same may from time to time be amended, modified,
extended or renewed, the "Credit Agreement") among Borrower, the lenders party
thereto and any other lenders thereafter becoming a party to the Credit
Agreement (the "Banks") and Mercantile Business Credit Inc., in its capacity as
agent for the Banks (in such capacity, the "Agent"), pursuant to which the Banks
have agreed to extend loans to Borrower and the Agent has agreed to cause
Mercantile Bank National Association to issue letters of credit for the benefit
of Borrower, cumulatively in an aggregate principal amount not to exceed
$100,000,000.00;
WHEREAS, the Banks, the Agent and the Noteholders are sometimes referred to
herein collectively as the "Secured Parties";
WHEREAS, pursuant to the Collateral Agency and Intercreditor Agreement
dated as of the date hereof (as amended or modified from time to time, the
"Intercreditor Agreement"), among Borrower, the Secured Parties and the
Collateral Agent, the Secured Parties have appointed Mercantile Business Credit
Inc. as collateral agent under this Agreement, under the Subsidiary Security
Agreements dated as of the date hereof made by the Guarantors and any future
Subsidiary Security Agreements executed hereafter by any subsequently activated,
created or acquired subsidiary of Borrower in favor of the Collateral Agent (the
"Subsidiary Security Agreements") and under the General Pledge and Security
Agreements dated as of the date hereof made by Borrower and certain of the
Guarantors and any future General Pledge and Security Agreement executed
hereafter by Borrower, a Guarantor or any subsequently activated, created or
acquired subsidiary of Borrower in favor of the Collateral Agent (the "Pledge
Agreements" and together with this Agreement and the Subsidiary Security
Agreements, the "Security Documents");
WHEREAS, as a condition precedent to the execution and delivery of the
Credit Agreement and the Note Purchase Agreement, the Secured Parties have
required that Borrower execute and deliver this Agreement, pursuant to which the
Borrower will grant to the Collateral Agent for the equal and ratable benefit of
the Secured Parties, a security interest in the certain of the Borrower's assets
as more fully described herein;
WHEREAS, the Security Documents together with the Note Purchase Agreement,
the Notes, the Credit Agreement, the Revolving Credit Notes and all other
relevant agreements executed in connection with the Note Purchase Agreement or
the Credit Agreement are sometimes referred to herein collectively as the
"Credit Documents";
WHEREAS, pursuant to the Intercreditor Agreement, Borrower, the Collateral
Agent and the Secured Parties agree that all obligations payable by the Borrower
to a Secured Party pursuant to any Credit Document (the "Secured Obligations")
shall be equally and ratably secured by this Agreement;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower hereby covenants and agrees with the Collateral Agent as
follows:
1. Definitions. For the purposes of this Agreement the following terms
shall have the following meanings specified with respect thereto below:
"Agent" shall have the meaning ascribed to such term in the recitals
hereto.
"Agreement" shall mean this Security Agreement, as the same may be amended
and in effect from time to time.
"Banks" shall have the meaning ascribed to such term in the recitals
hereto.
"Collateral Agent" shall have the meaning ascribed to such term in the
opening paragraph hereto.
"Credit Agreement" shall have the meaning ascribed to such term in the
recitals hereto.
"Event of Default" shall have the meaning ascribed to such term in Section
6 hereto.
"Guarantor" shall have the meaning ascribed to such term in the Credit
Agreement.
"Noteholders" shall have the meaning ascribed to such term in the recitals
hereto.
"Notes" shall have the meaning ascribed to such term in the recitals
hereto.
"Note Purchase Agreement" shall have the meaning ascribed to such term in
the recitals hereto.
"Required Secured Parties" shall have the meaning ascribed to such term in
the Intercreditor Agreement.
"Revolving Credit Notes" shall have the meaning ascribed to such term in
the Credit Agreement.
"Secured Obligations" shall have the meaning ascribed to such term in the
recitals hereto.
2. Grant of Security Interest. For value received, Borrower hereby sells,
assigns, transfers, conveys and mortgages to, and grants in favor of, the
Collateral Agent for the equal and ratable benefit of the Secured Parties, a
continuing security interest in all of Borrower's now owned and existing and
hereafter created, acquired or arising right, title and interest in, to and
under the following described property, wherever located (collectively, the
"Collateral"):
(a) all accounts, contract rights, documents, instruments and other forms
of obligation and other rights to the payment of money (collectively,
"Accounts"), and all goods whose sale, lease, rental or other disposition by
Borrower have given rise to Accounts and have been returned to or repossessed or
stopped in transit by Borrower;
(b) all inventory of Borrower, wherever located, whether in transit, held
by others for Borrower's account, covered by warehouse receipts, purchase orders
and/or contracts, or in the possession of any carriers, forwarding agents,
truckers, warehousemen, vendors or other Persons, including, without limitation,
all raw materials, work in process, finished goods, supplies, goods,
incidentals, office supplies and packaging and shipping materials (collectively,
"Inventory");
(c) all general intangibles of any kind or nature whatsoever, including,
without limitation, all patents, trademarks and copyrights, and all applications
for, registrations of and licenses of the foregoing, and all computer software,
product specifications, trade secrets, licenses, trade names, service marks,
goodwill, tax refunds and rights to tax refunds (collectively, "General
Intangibles");
(d) monies, reserves, deposits, certificates of deposit and deposit
accounts and interest or dividends thereon, securities, cash, cash equivalents
and other property now or at any time or times hereafter in the possession or
under the control of any of the Secured Parties, any of their affiliates or
their bailees;
(e) all books, records, computer records, computer disks, ledger cards,
programs and other computer materials, customer and supplier lists, invoices,
orders and other property and general intangibles at any time evidencing or
relating to any of the Collateral (collectively, "Records");
(f) all accessions to any of the property described above and all
substitutions, renewals, improvements and replacements of and additions thereto;
and
(g) all proceeds, including, without limitation, proceeds which constitute
property of the types described in (a), (b), (c), (d), (e) and (f) above and any
rents and profits of any of the foregoing items, whether cash or noncash,
immediate or remote, including, without limitation, all income, accounts,
contract rights, general intangibles, chattel paper, notes, drafts, acceptances,
instruments and other rights to the payment of money arising out of the sale,
rental, lease, exchange or other disposition of any of the foregoing items
(provided, however, that nothing contained herein or in any financing statement
shall be deemed to permit or assent to any such disposition other than the sale
of Inventory in the ordinary course of business), and insurance proceeds, and
all products, of (a), (b), (c), (d), (e) and (f) above, and any indemnities,
warranties and guaranties payable by reason of loss or damage to or otherwise
with respect to any of the foregoing items;
to secure the payment of any and all of the Secured Obligations.
3. Representations and Covenants of Borrower. Borrower hereby represents
and warrants to the Collateral Agent and each of the Secured Parties, and
covenants and agrees with the Collateral Agent and each of the Secured Parties,
that:
(a) the officer(s) of Borrower executing this Agreement has been duly
elected and qualified and has been duly authorized and empowered to execute,
deliver and perform the terms of this Agreement on behalf of Borrower;
(b) Borrower's chief executive office and principal place of business and
the location of the only office where it keeps its books and records respecting
the Accounts, General Intangibles and other Collateral is that given at the end
of this Agreement and all other places of business of Borrower and locations of
any of Borrower's Inventory are listed on Exhibit A attached hereto and
incorporated herein by reference;
(c) unless otherwise consented to in writing by the Required Secured
Parties or as permitted under Section 3(d) below, all of the Collateral (other
than Inventory in transit) (i) is and will be kept solely at Borrower's
principal place of business or at one of the other locations of Borrower listed
on Exhibit A attached hereto and incorporated herein by reference, (ii) will not
be attached or affixed in any manner to or become a part of any real estate or
other personal property apart from other items of the Collateral and (iii) is in
the exclusive possession and control of Borrower;
(d) Borrower will not (i) change the location of its principal place of
business and chief executive office, (ii) change the location of any of its
other places of business, (iii) change the location of any of the Collateral
from Borrower's principal place of business or one of the other locations of
Borrower set forth on Exhibit A attached hereto or (iv) establish any additional
places of business or additional locations at which Collateral is stored, kept
or processed, unless (A) such office or Collateral location is located within
the continental United States of America, (B) Borrower gives Collateral Agent
thirty (30) days prior written notice of the same and (C) prior to making any
such change or establishing any such new location, Borrower executes and/or
obtains and delivers to the Collateral Agent any and all additional financing
statements and other documents or notices as may be reasonably required by the
Collateral Agent;
(e) Borrower is, or, as to Collateral acquired after the date hereof, will
be, the sole and absolute owner of the Collateral, free and clear of any and all
liens, claims, security interests and encumbrances of any kind or nature
whatsoever other than the security interest granted hereby and liens otherwise
permitted under Section 7.2(b) of the Credit Agreement and Section 10.6(a) of
the Note Purchase Agreement, and Borrower will defend the Collateral against all
claims and demands of all Persons at any time claiming the same or any interest
therein;
(f) no financing statement (other than any filed on behalf of the
Collateral Agent and in respect of liens otherwise permitted under Section
7.2(b) of the Credit Agreement and Section 10.6(a) of the Note Purchase
Agreement) covering any of the Collateral is or will be on file in any public
office at any time during the term of this Agreement;
(g) Borrower will not sell, transfer, lease or otherwise dispose of or
offer to dispose of any of the Collateral or any interest therein, except as
provided in Sections 7.2(b) and (c) of the Credit Agreement and Section 10.8 of
the Note Purchase Agreement, prior to the occurrence of an Event of Default
under this Agreement, without the prior written consent of the Required Secured
Parties, or, after the occurrence of an Event of Default under this Agreement,
without the prior written consent of the Required Banks and the Required
Noteholders;
(h) Borrower will at all times keep all of the Collateral consisting of
Inventory in good condition, excepting any loss, damage or destruction which is
fully covered by proceeds of insurance and will not use any of the Collateral or
permit any of the Collateral to be used in violation of any law, rule,
regulation, ordinance or insurance policy;
(i) Borrower will, and it will cause each of its Subsidiaries to, insure
all of the Collateral of the character usually insured against loss, damage,
theft or other risks of the kind customarily insured against, in such amounts
and under policies in such form as are acceptable to corporations engaged in the
same or similar businesses similarly situated. All insurance required by this
Section 3(i) shall be with financially sound and reputable insurers. Such
policies of insurance shall (i) provide such deductibles and self-insurance
provisions as are customarily maintained by similar businesses and (ii) contain
an endorsement acceptable to the Collateral Agent naming the Collateral Agent as
loss payee as its interests may appear. Such endorsement, or an independent
instrument furnished to the Collateral Agent, shall provide that the insurance
companies will give the Collateral Agent at least thirty (30) days written
notice before any such policy or policies of insurance shall be amended or
cancelled and that no act or default of Borrower or any other Person shall
affect the right of the Collateral Agent to recover under such policy or
policies of insurance in the event of any loss of or damage to any of the
Collateral. Borrower hereby directs all insurers under such policies of
insurance to pay all proceeds payable thereunder directly to the Collateral
Agent as its interests may appear. All insurance proceeds received by the
Collateral Agent on account of any loss of or damage to any of the Collateral,
after deducting therefrom the reasonable charges and expenses paid or incurred
in connection with the collection and disbursement of said proceeds, shall be
(A) so long as no Event of Default under this Agreement and no event which with
the passage of time or the giving of notice or both would constitute an Event of
Default under this Agreement has occurred and is continuing, delivered to
Borrower to replace the Collateral, and (B) from and after the occurrence and
during the continuance of an Event of Default under this Agreement, applied to
the payment of the Secured Obligations in such order and manner as provided in
the Intercreditor Agreement, unless otherwise consented to in writing by the
Required Secured Parties. Borrower irrevocably makes, constitutes and appoints
the Collateral Agent (and all officers, employees or agents designated by the
Collateral Agent) as Borrower's true and lawful attorney (and agent-in-fact) for
the purpose of, if Borrower fails to do so upon the demand of the Collateral
Agent and as directed by the Collateral Agent, making, settling and adjusting
claims under such policies of insurance, endorsing the name of Borrower on any
check, draft, instrument or other item of payment of the proceeds of such
policies of insurance and for making all determinations and decisions with
respect to such policies of insurance. In the event Borrower at any time or
times hereafter shall fail to obtain or maintain any of the policies of
insurance required above or to pay any premium in whole or in part relating
thereto, then the Collateral Agent, without waiving or releasing any obligation
or default by Borrower hereunder, may at any time or times thereafter (but shall
be under no obligation to do so) obtain and maintain such policies of insurance
and pay such premiums and take any other action with respect thereto which the
Collateral Agent deems advisable. All sums so disbursed by the Collateral Agent,
including, without limitation, reasonable attorneys' fees, court costs, expenses
and other charges relating thereto, shall be part of the Secured Obligations,
payable by Borrower to the Collateral Agent on demand;
(j) if any of the Accounts is evidenced by a promissory note or other
"instrument" (as defined in the applicable Uniform Commercial Code), Borrower
will, unless the Required Secured Parties otherwise agree in writing, endorse
such promissory note or other instrument "Pay to the order of Mercantile
Business Credit Inc., as Collateral Agent, with recourse" or in blank and
deliver the original(s) of such promissory note(s) or other instrument(s) to the
Collateral Agent;
(k) Borrower will from time to time, at its own expense, execute, deliver
and file such UCC financing and continuation statements and such amendments
thereto and such other agreements, documents and instruments and do such other
acts and things as may be necessary or as the Collateral Agent or any of the
Secured Parties may from time to time reasonably request, to establish and
maintain a valid and perfected first priority security interest in the
Collateral in favor of the Collateral Agent to secure the payment of the Secured
Obligations. Borrower hereby authorizes the Collateral Agent on behalf of the
Secured Parties to file one or more UCC financing or continuation statements or
amendments thereto relating to all or any part of the Collateral without the
signature of Borrower where permitted by law; provided, however, that nothing in
this Agreement shall relieve Borrower of its obligation to file all necessary
UCC financing and continuation statements and amendments thereto in order to
perfect and protect the security interest granted to the Collateral Agent under
this Agreement;
(l) Borrower will reimburse the Collateral Agent and the Secured Parties
upon demand for (A) all reasonable costs and expenses incident to perfecting,
maintaining or terminating the security interest granted hereby, including
filing and recording fees and all taxes and legal and other out-of-pocket fees
and expenses paid or incurred by the Collateral Agent or such Secured Party(s)
in connection with any of the foregoing and (B) all reasonable costs and
expenses, including, without limitation, reasonable attorneys' fees and
expenses, incurred by the Collateral Agent or such Secured Party(s) in seeking
to collect or enforce any rights under this Agreement or incurred by the
Collateral Agent or such Secured Party(s) in seeking to collect or enforce any
of the Secured Obligations;
(m) Borrower does not now and will not any time during the term of this
Agreement conduct business under any fictitious business name or trade name
other than The Shaw Group Inc., or as set forth in Schedule 6.15 to the Credit
Agreement, and will not at any time during the term of this Agreement change its
name, identity, structure or employer identification number; and
(n) based on the locations of Borrower's offices and places of business and
the location of the Collateral, Exhibit B attached hereto and incorporated
herein by reference sets forth a complete list of all of the offices where UCC
financing statements must be filed in order to perfect the Collateral Agent's
security interest in the Collateral to the extent such security interest can be
perfected by the filing of UCC financing statements under the Uniform Commercial
Codes of the applicable states of the U.S.
4. Collection, Preservation and Disposition of Collateral.
(a) Borrower covenants and agrees to, at its own expense, use its best
efforts to collect, as and when due, all amounts due with respect to Accounts.
(b) So long as no Event of Default under this Agreement and no event which
with the passage of time or the giving of notice or both would constitute an
Event of Default under this Agreement has occurred and is continuing, Borrower
may grant, in the ordinary course of business, to any party obligated on any
Account (an "Account Debtor"), any rebate, refund or allowance to which such
party may be lawfully entitled, and may accept, in connection therewith, the
return of goods, the sale or lease of which shall have given rise to such
Account. The Collateral Agent may notify any Account Debtor to make payment to
the Collateral Agent of all amounts due or to become due under any Account and
enforce collection of any of the Accounts by suit or otherwise and surrender,
release or exchange all or any part thereof, or compromise or extend or renew
for any period (whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby, all without releasing Borrower from any of its
obligations to the Collateral Agent and the Secured Parties. Upon request of the
Collateral Agent, Borrower will, at its own expense, notify each Account Debtor
to make payment to the Collateral Agent of any amounts due or to become due
under all Accounts.
(c) Borrower covenants and agrees that (i) all invoices for Borrower's
Accounts and all other directions for payment concerning any proceeds of any of
the Collateral shall direct the obligor thereon to make payment to a lock box
established by Borrower with the Collateral Agent (the "Lock Box"), (ii)
Borrower will forthwith upon receipt deliver to the Lock Box in precisely the
form received all cash, checks, drafts, chattel paper and other instruments or
writings for the payment of money (properly endorsed, where required, so that
such items may be collected by the Collateral Agent) which may be received by
Borrower at any time in full or partial payment or otherwise as proceeds of any
of the Collateral (including, without limitation, all collections of Accounts),
and until so delivered, any such items shall be deemed to be held in trust by
Borrower for and as the sole property of the Collateral Agent and shall not be
commingled with Borrower's other funds. Borrower hereby irrevocably authorizes
the Collateral Agent to endorse Borrower's name on any such instruments and
Borrower hereby irrevocably constitutes and appoints the Collateral Agent as the
agent and attorney-in-fact of Borrower for such purpose. From and after the
occurrence and during the continuance of an Event of Default under this
Agreement, the Collateral Agent shall have sole access to all items deposited in
the Lock Box and the Collateral Agent may access the Lock Box daily, open all
items addressed to Borrower therein and endorse Borrower's name on and apply the
proceeds of all cash, checks, drafts, chattel paper and other items of payment
on any of the Accounts or other Collateral to the payment or prepayment of any
outstanding Secured Obligations or hold such proceeds as additional Collateral,
as set forth in the Intercreditor Agreement. All cash and other items held in
the Lock Box shall continue to be Collateral for all of the Secured Obligations
and shall not constitute payment thereof until applied as provided above.
5. Additional Actions by the Collateral Agent. The Collateral Agent, at its
option, may from time to time perform any agreement of Borrower hereunder which,
after making demand upon Borrower, Borrower shall fail to perform within a
period of five (5) days and take any other action which the Collateral Agent in
good faith or deems necessary for the maintenance or preservation of any of the
Collateral or its interest therein (including, without limitation, the discharge
of taxes or liens of any kind against the Collateral (to the extent the same are
not being contested in good faith by appropriate proceedings being diligently
conducted) or the procurement of insurance or the payment of warehousing
charges, landlord's bills or other charges), and Borrower agrees to forthwith
reimburse the Collateral Agent for all reasonable costs and expenses incurred by
the Collateral Agent in connection with the foregoing, together with interest
thereon at the highest rate of interest applicable under the Credit Agreement
from the date incurred until reimbursed by Borrower. The Collateral Agent may
for the foregoing purposes act in its own name or that of Borrower and may also
so act for the purposes of adjusting, settling or canceling any policy of
insurance on the Collateral or endorsing any draft received in connection
therewith, in payment of a loss or otherwise, for all of which purposes Borrower
hereby grants to the Collateral Agent its power of attorney, irrevocable during
the term of this Agreement.
6. Defaults. The occurrence of any of the following events or conditions
shall constitute an "Event of Default" hereunder: (a) default by Borrower in the
due performance or observance of any of the terms, provisions, covenants or
agreements contained in Sections 3(c), 3(d), 3(e), 3(f), 3(i), 3(k), 3(m) and/or
3(n) of this Agreement; (b) default by Borrower in the due performance or
observance of any of the other terms, provisions, covenants or agreements
contained in this Agreement and any such default shall remain unremedied for
thirty (30) days after the earlier of (i) written notice of default is given to
Borrower by the Collateral Agent or any of the Secured Parties or (ii) the
President, Secretary, principal financial officer or general counsel of the
Borrower obtains knowledge of such default; (c) any representation or warranty
made by Borrower in this Agreement shall prove to be untrue or incorrect in any
material respect; or (d) any "Event of Default" (as defined therein) shall occur
under or within the meaning of the Credit Agreement, the Note Purchase Agreement
or any Security Document.
7. Remedies. Upon the occurrence and continuation of any Event of Default:
(a) pursuant to the provisions contained in the Credit Agreement, the Agent and
Banks may terminate their obligation to make Loans and issue Letters of Credit
under the Credit Agreement and declare the entire outstanding principal balance
of and all accrued and unpaid interest on the Revolving Credit Notes and all of
the other Secured Obligations owing to the Banks to be forthwith due and
payable; (b) pursuant to the provisions contained in the Note Purchase
Agreement, the Noteholders may declare the entire outstanding principal balance
of and all accrued and unpaid interest on the Notes and all of the other Secured
Obligations owing to the Noteholders to be forthwith due and payable; (c)
whether or not any or all of the Secured Obligations are declared to be
forthwith due and payable, the Collateral Agent shall have the right to take
immediate possession of the Collateral covered hereby, and, for that purpose may
pursue the same wherever said Collateral may be found, and may enter upon any of
the premises of Borrower with or without force or process of law, wherever said
Collateral may be or may be supposed to be, and search for the same, and, if
found, take possession of and remove and sell and dispose of said Collateral, or
any part thereof; (d) the Collateral Agent shall have the right to notify any
Account Debtor with respect to any Account to make all payments under the
Accounts directly to the Collateral Agent and demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose and realize on the Accounts and
all amounts due under the Accounts as the Collateral Agent may determine in good
faith; (e) the Collateral Agent shall have the right to exercise any or all of
the other rights and remedies accruing to a secured party under the Uniform
Commercial Code of the relevant state or states and any other applicable law
upon default by a debtor; and (f) the Collateral Agent shall have the right to
enter, with or without process of law and without breach of the peace, any
premises where the books and records of Borrower pertaining to the Accounts or
any of the other Collateral are or may be located, and without charge or
liability on the part of the Collateral Agent therefor seize and remove said
books and records from said premises or remain upon said premises and use the
same for the purpose of collecting, preparing and disposing of the Collateral
for the purpose of identifying and locating any of the Collateral. Borrower
shall, upon the Collateral Agent's request, assemble the Collateral and make the
Collateral available to the Collateral Agent at any place designated by the
Collateral Agent which is reasonably convenient to Borrower.
8. Foreclosure. Foreclosure on the Collateral covered hereby may be had at
public or private sale or sales, disposing of such portion or portions of the
Collateral at each such sale, for cash or on credit on such terms, at such place
or places, and with or without the Collateral being present at such sale, all as
the Collateral Agent in its sole and absolute discretion shall determine from
time to time so long as such foreclosure occurs in a commercially reasonable
manner. In the case of public sale, notice thereof shall be deemed and held to
be adequate and reasonable if such notice shall appear three (3) times in a
newspaper published in the city(ies) or county(ies) wherein the sale is to be
held and the Collateral is located, the first such publication being at least
fifteen (15) days before such sale and the last such publication being not more
than three (3) days before such sale. In the case of a private sale, notice
thereof shall be deemed and held to be adequate and reasonable if such notice
shall be given to Borrower in accordance with the provisions of Section 13
hereof at least twenty (20) days before such sale.
9. Application of Proceeds and Deficiency. The Collateral Agent may apply
the net proceeds of any sale, lease or other disposition of any of the
Collateral or of any other collection of the proceeds of any of the Collateral,
after deducting all reasonable costs and expenses of every kind incurred therein
or incidental to the retaking, holding, preparing for sale, selling, leasing or
the like of the Collateral on Borrower's premises, or elsewhere, or in any way
related to the Collateral Agent's or any Secured Party's rights hereunder
(including, without limitation, reasonable attorneys' fees and expenses, court
costs, bonds and other legal expenses, moving expenses, insurance, security
guard and alarm expenses incurred in connection with the holding and/or
relocating of the of the Collateral, advertising and other expenses relating to
the sale of the Collateral, and rental and utilities expense on the premises or
elsewhere in connection with storage and sale of the Collateral) to the payment,
in whole or in part, of the Secured Obligations, as provided in the
Intercreditor Agreement, and only after payment by the Collateral Agent of any
other amounts required by any existing or future provision of law (including
Section 9-504(1)(c) of the Uniform Commercial Code or any comparable statutory
provision of any jurisdiction in which any of the Collateral may at the time be
located) need the Collateral Agent account to Borrower for the surplus, if any.
The proceeds of any sale(s), lease(s) or other disposition(s) of any of the
Collateral and/or of any collection(s) of any of the Collateral shall be applied
by the Collateral Agent pursuant to the terms set forth in Section 4.3 of the
Intercreditor Agreement. Borrower shall remain liable to the Collateral Agent
and the Secured Parties for the payment of any deficiency, with interest.
10. The Collateral Agent's Care of Collateral. The Collateral Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession if it takes such action for that purpose as
Borrower requests in writing (but failure of the Collateral Agent to comply with
any such request shall not of itself be deemed a failure to exercise reasonable
care) or if it affords the Collateral the same protection as the Collateral
Agent affords its own property.
11. Amendments; Waivers; Remedies Cumulative. No delay on the part of the
Collateral Agent or any of the Secured Parties in the exercise of any right
hereunder shall operate as a waiver thereof and no single or partial exercise by
the Collateral Agent or any of the Secured Parties of any right shall preclude
other or further exercise thereof or the exercise of any other right. Each and
every right granted to the Collateral Agent and the Secured Parties hereunder,
under the Credit Agreement and under the other Credit Documents, or at law or in
equity, shall be deemed cumulative and may be exercised from time to time.
Neither the Collateral Agent nor any of the Secured Parties shall by any act,
delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder and no waiver whatsoever shall be valid unless in writing and
signed by the Collateral Agent or the applicable Secured Party(s), as the case
may be, and then only to the extent therein set forth. A waiver by the
Collateral Agent or any of the Secured Parties of any right or remedy hereunder
on any one occasion shall not be construed as a bar to any right or remedy which
the Collateral Agent or such Secured Party(s) would otherwise have on any future
occasion. No amendment may be made to this Agreement unless the same shall be in
writing, signed by both the Borrower and the Collateral Agent, and shall comply
with the provisions governing amendment of Credit Documents set forth the
Intercreditor Agreement. Promptly after the execution of any such amendment, the
Collateral Agent agrees to send copies of such amendment to each Secured Party.
The headings of the paragraphs hereof shall not be considered in the
construction or interpretation of this Agreement. All capitalized terms used and
not otherwise defined in this Agreement shall have the respective meanings
ascribed to them in the Credit Agreement.
12. Durable Power of Attorney. Borrower hereby makes, constitutes and
appoints the Collateral Agent the true and lawful agent and attorney-in-fact of
Borrower with full power of substitution (a) to receive, open and dispose of all
mail addressed to Borrower relating to the Collateral, (b) to notify and direct
the United States Post Office authorities by notice given in the name of
Borrower and to sign on behalf of Borrower, to change the address for delivery
of all mail addressed to Borrower relating to the Collateral to an address to be
designated by the Collateral Agent, and to cause such mail to be delivered to
such designated address where the Collateral Agent may open all such mail and
remove therefrom any notes, checks, acceptances, drafts, money orders or other
instruments included in the Collateral in which the Collateral Agent has a
security interest under the terms of this Agreement, with full power to endorse
the name of Borrower upon any such notes, checks, acceptances, drafts, money
orders, instruments or other documents relating to the Collateral or security of
any kind and to effect the deposit and collection thereof, and the Collateral
Agent shall have the further right and power to endorse the name of Borrower on
any documents relating to the Collateral, (c) to sign the name of Borrower to
drafts against its debtors, to notices to such debtors, to assignments and
notices of assignments, (d) to sign the name of Borrower to financing statements
or other public records or notices and all other instruments and documents, and
(e) to do any and all things necessary and take such actions in the name and on
behalf of Borrower to carry out the intent of this Agreement, including, without
limitation, the grant of the security interest granted under this Agreement and
to perfect and protect the security interest granted to the Collateral Agent in
respect to the Collateral and the Collateral Agent's rights created under this
Agreement. Borrower agrees that neither the Collateral Agent nor any of its
agents, designees or attorneys-in-fact will be liable for any acts of commission
or omission (other than for acts of commission or omission which constitute
gross negligence or willful misconduct as determined by a court of competent
jurisdiction in a final, nonappealable order), or for any error of judgment or
mistake of fact or law in respect to the exercise of the power of attorney
granted under this Section. The power of attorney granted under this Section
shall be irrevocable during the term of this Agreement.
13. Notices. Any notice, request, demand, consent, confirmation or other
communication hereunder shall be in writing and delivered in person or sent by
telecopy, overnight courier service or registered or certified mail, return
receipt requested and postage prepaid, to the applicable party at its address or
telecopy number set forth on the signature pages hereof, or at such other
address or telecopy number as any party hereto may designate as its address for
communications hereunder by notice so given. Such notices shall be deemed
effective on the day on which received if delivered in person or by overnight
courier service, or on the date sent if sent by telecopy, or on the third (3rd)
business day after the day on which mailed, if sent by registered or certified
mail; provided, however, that notices to the Collateral Agent under Section 3
shall not be effective until actually received by the Collateral Agent.
14. Applicable Law and Severability. It is the intention of the parties
hereto that this Agreement is entered into pursuant to the provisions of the
Uniform Commercial Code as it is in force in the State of Missouri (the "Code").
Any applicable provisions of the Code, not specifically included herein, shall
be deemed a part of this Agreement in the same manner as if set forth herein at
length; and any provisions of this Agreement that might in any manner be in
conflict with any provision of the Code shall be deemed to be modified so as not
to be inconsistent with the Code. This Agreement shall be deemed to be a
contract entered into pursuant to the laws of the State of Missouri and shall in
all respects be governed, construed, applied and enforced in accordance with the
internal laws of the State of Missouri, except to the extent preempted by
federal law and excluding Missouri's laws relating to conflicts of laws,
provided, however, that the creation, perfection, priority, and enforcement of
the lien of this Agreement on any property located in other jurisdictions shall
in all respects be governed, construed, applied and enforced in accordance with
the internal laws of the applicable jurisdiction, except to the extent preempted
by federal law and excluding such jurisdiction's laws relating to conflicts of
laws. To the extent any provision of this Agreement is not enforceable under
applicable law, such provision shall be deemed null and void and shall have no
effect on the remaining portions of this Agreement.
15. Relationship to Other Agreements. This Agreement and the liens and
security interests (and pledges and assignments, as applicable) herein granted
are in addition to any and all deeds of trusts, mortgages, security agreements,
security interests, pledges, assignments, liens, rights, title or interest in
favor of Collateral Agent or assigned to such party in connection with the
obligations of Borrower to such party. All rights and remedies of Collateral
Agent in all such agreements are cumulative but in the event of actual conflict
in terms and conditions of this Agreement and any such agreements other than the
Intercreditor Agreement, the terms and conditions of this Agreement shall govern
and control; provided, however, in the event of any direct conflict between the
terms and conditions of this Agreement and the Intercreditor Agreement, the
terms and conditions of the Intercreditor Agreement shall govern and control.
16. Successors and Assigns; Duration of Security Interest. This Agreement
shall be binding upon and inure to the benefit of Borrower and the Collateral
Agent and their respective permitted successors. Borrower may not assign any of
its rights or delegate any of its obligations under this Agreement. This
Agreement shall continue in full force and effect and the security interest
granted hereby and all of the representations, warranties, covenants and
agreements of Borrower hereunder and all of the terms, conditions and provisions
hereof relating thereto shall continue to be fully operative until such time as
(a) all of the Secured Obligations shall have been paid or have been caused to
be paid, or otherwise discharged, (b) no letters of credit issued by the Agent
for the account of Borrower shall be outstanding and (c) there shall be no
remaining commitment or obligation of the Collateral Agent or any of the Secured
Parties to advance funds or make loans to Borrower or to issue letters of credit
for the account of Borrower under the Credit Agreement or otherwise. Borrower
expressly agrees that to the extent a payment or payments to the Collateral
Agent or any of the Secured Parties, or any part thereof, are subsequently
invalidated, declared to be void or voidable or set aside and are required to be
repaid to a trustee, custodian, receiver or any other party under any bankruptcy
act, state or federal law, common law or equitable cause, then to the extent of
such payment or repayment, the obligation or part thereof intended to be
satisfied shall be revived and continued in full force and effect as if said
payment had not been made.
17. Seizure and Sale of Collateral in Louisiana. This subsection applies to
the extent any of the Collateral is located within the State of Louisiana and in
the event that the Collateral Agent shall commence appropriate Louisiana
foreclosure proceedings under this Agreement. The Collateral Agent may cause
such Collateral, or any part or parts thereof, to be immediately seized and
sold, under ordinary or executory process, in accordance with applicable
Louisiana law, to the highest bidder for cash, with or without appraisement, and
without the necessity of making additional demand upon or notifying the Borrower
or placing the Borrower in default, all of which are expressly waived. For
purposes of foreclosure under Louisiana executory process procedures, the
Borrower confesses judgment and acknowledges to be indebted unto and in favor of
the Collateral Agent and the other Secured Parties up to the full amount of the
Secured Obligations, in principal, interest, costs, expenses, attorneys' fees
and other fees and charges. The Borrower further confesses judgment and
acknowledges to be indebted unto and in favor of the Collateral Agent and the
other Secured Parties in the amount of all additional advances that the
Collateral Agent and the other Secured Parties may make or have made on the
Borrower's behalf pursuant to the Credit Agreement or the Note Purchase
Agreement, together with interest thereon, up to a maximum of two (2) times the
face amount of such advances. To the extent permitted under applicable Louisiana
law, the Borrower additionally waives: (a) the benefit of appraisal as provided
in Articles 2332, 2336, 2723 and 2724 of the Louisiana Code of Civil Procedure,
and all other laws with regard to appraisal upon judicial sale; (b) the demand
and three (3) days' delay as provided under Articles 2639 and 2721 of the
Louisiana Code of Civil Procedure; (c) the notice of seizure as provided under
Articles 2293 and 2721 of the Louisiana Code of Civil Procedure; (d) the three
(3) days' delay provided under Articles 2331 and 2722 of the Louisiana Code of
Civil Procedure; and (e) all other benefits provided under Articles 2331, 2722
and 2723 of the Louisiana Code of Civil Procedure and all other Articles not
specifically mentioned above. Should any or all of the Collateral be seized as
an incident to an action for the recognition or enforcement of this Agreement,
by executory process, sequestration, attachment, writ of fieri facias or
otherwise, the Borrower hereby agrees that the court issuing any such order
shall, if requested by the Collateral Agent, appoint the Collateral Agent, or
any agent designated by the Collateral Agent, or any person or entity named by
the Collateral Agent at the time such seizure is requested, or any time
thereafter, as keeper of the Collateral as provided under La. R.S. 9:5136, et
seq. Such a keeper shall be entitled to reasonable compensation. The Borrower
agrees to pay the reasonable fees of such keeper, which are hereby fixed at
$50.00 per hour, which compensation to the keeper shall also be secured by this
Agreement in the form of an additional advance as provided herein. Should it
become necessary for the Collateral Agent to foreclose under this Agreement, all
declarations of fact, which are made under an authentic act before a Notary
Public in the presence of two witnesses, by a person declaring such facts to lie
within his or her knowledge shall constitute authentic evidence for purposes of
executory process and also for purposes of La. R.S. 9:3509.1, La. R.S.
9:3504(D)(6) and La. R.S. 10:9-508, as applicable.
18. Consent to Jurisdiction; Waiver of Jury Trial. BORROWER AND COLLATERAL
AGENT IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY MISSOURI STATE
COURT OR ANY UNITED STATES OF AMERICA COURT SITTING IN THE EASTERN DISTRICT OF
MISSOURI, AS THE COLLATERAL AGENT MAY ELECT, IN ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT. BORROWER AND COLLATERAL AGENT
HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT TO SUCH SUIT, ACTION OR
PROCEEDING MAY BE HELD AND DETERMINED IN ANY OF SUCH COURTS. BORROWER AND
COLLATERAL AGENT IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH BORROWER OR COLLATERAL AGENT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT, AND BORROWER AND COLLATERAL AGENT FURTHER IRREVOCABLY WAIVE ANY CLAIM
THAT SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. BORROWER AND COLLATERAL AGENT AUTHORIZE THE SERVICE OF
PROCESS UPON BORROWER AND COLLATERAL AGENT BY REGISTERED MAIL SENT TO SUCH PARTY
AT ITS ADDRESS SET FORTH IN SECTION 13. BORROWER AND THE COLLATERAL AGENT
IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION IN WHICH
BORROWER AND THE COLLATERAL AGENT ARE PARTIES RELATING TO OR ARISING OUT OF OR
IN CONNECTION WITH THIS AGREEMENT. IN WITNESS WHEREOF, Borrower has executed
this Security Agreement this _____ day of May, 1998.
THE SHAW GROUP INC., Borrower
By:
Title:
Address of Principal Place of Business and
Chief Executive Office of Borrower and Location
of Books and Records of Borrower:
11100 Mead Road
Baton Rouge, Louisiana 70816
Telecopy Number:
MERCANTILE BUSINESS CREDIT INC.,
Collateral Agent
100 South Brentwood Boulevard, Suite 500
St. Louis, Missouri 63105
Telecopy Number: (314) __________________
By:
Title:
<PAGE>
EXHIBIT A
Additional Locations of Places of Business of Borrower
and/or Additional Locations of Collateral
1. P.O. Box 40187
Baton Rouge, Louisiana 70835-0187
<PAGE>
EXHIBIT B
UCC Filing Locations
1. East Baton Rouge Parish, Louisiana
<PAGE>
DOCUMENT NAME: Credit Agreement
AUTHOR/OWNER: MKaltenrieder
CLIENT NUMBER: 299 CLIENT NAME: MBSL Non Retainer
MATTER NUMBER: 19112 MATTER NAME: Shaw Group
PC DOCS #: 891409 VERSION: 25
TYPIST/USER'S NAME: NParsons APPLICATION: MS Word
TODAY'S DATE: May 26, 1998/5:02 PM
DOCUMENT HISTORY: Duped from 526147
COMMENTS:
DO NOT DISCARD THIS PAGE
1 Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the assignee, net of any portion of
any up front fee to be paid by the Assignor to the Assignee. It may be
preferable in an appropriate case to specify these amounts generically or by
formula rather than as a fixed sum.
-----------------------
Note Purchase Agreement
-----------------------
THE SHAW GROUP INC.
DATED AS OF MAY 21, 1998
$20,000,000 6.44% SERIES A SENIOR SECURED NOTES DUE 2005
$40,000,000 6.93% SERIES B SENIOR SECURED NOTES DUE 2008
<PAGE>
TABLE OF CONTENTS
PAGE
1. AUTHORIZATION OF NOTES............................................. 1
2. SALE AND PURCHASE OF NOTES......................................... 1
3. CLOSING............................................................ 2
4. CONDITIONS TO CLOSING.............................................. 2
4.1 Representations and Warranties............................ 2
4.2 Performance; No Default................................... 2
4.3 Compliance Certificates................................... 2
4.4 Opinions of Counsel....................................... 3
4.5 Purchase Permitted By Applicable Law, etc................. 3
4.6 Sale of Other Notes....................................... 3
4.7 Bank Loan Agreement....................................... 4
4.8 Intercreditor Agreement................................... 4
4.9 Security Agreements....................................... 4
4.10 Pledge Agreements......................................... 4
4.11 Perfection of Liens....................................... 4
4.12 Termination or Assignment of Existing Liens............... 4
4.13 Guaranty Agreement........................................ 4
4.14 Payment of Special Counsel Fees........................... 5
4.15 Private Placement Numbers................................. 5
4.16 Changes in Corporate Structure............................ 5
4.17 Proceedings and Documents................................. 5
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................... 5
5.1 Organization; Power and Authority......................... 5
5.2 Authorization, etc........................................ 6
5.3 Disclosure................................................ 6
5.4 Organization and Ownership of Shares of Subsidiaries;
Affiliates................................................ 6
5.5 Financial Statements...................................... 7
5.6 Compliance with Laws, Other Instruments, etc.............. 7
5.7 Governmental Authorizations, etc.......................... 8
5.8 Litigation; Observance of Agreements, Statutes and Orders. 8
5.9 Taxes..................................................... 8
5.10 Title to Property; Leases................................. 9
5.11 Licenses, Permits, etc.................................... 9
5.12 Compliance with ERISA..................................... 9
5.13 Private Offering by the Company........................... 10
5.14 Use of Proceeds; Margin Regulations....................... 10
5.15 Existing Indebtedness; Future Liens....................... 11
5.16 Foreign Assets Control Regulations, etc................... 11
5.17 Status under Certain Statutes............................. 11
5.18 Environmental Matters..................................... 11
5.19 Security Documents........................................ 12
5.20 Solvency.................................................. 12
6. REPRESENTATIONS OF THE PURCHASER................................... 13
6.1 Purchase for Investment................................... 13
6.2 Source of Funds........................................... 13
7. INFORMATION AS TO COMPANY.......................................... 14
7.1 Financial and Business Information........................ 14
7.2 Officer's Certificate..................................... 17
7.3 Inspection................................................ 18
8. PAYMENT OF THE NOTES, ETC.......................................... 18
8.1 Required Prepayments; Payment at Maturity................. 18
8.2 Optional Prepayments with Make-Whole Amount............... 19
8.3 Change in Control......................................... 19
8.4 Allocation of Partial Prepayments......................... 22
8.5 Maturity; Surrender, etc.................................. 22
8.6 No Other Optional Prepayments or Purchase of Notes........ 22
8.7 Make-Whole Amount......................................... 22
9. AFFIRMATIVE COVENANTS.............................................. 24
9.1 Compliance with Law....................................... 24
9.2 Insurance................................................. 24
9.3 Maintenance of Properties................................. 24
9.4 Payment of Taxes and Claims............................... 24
9.5 Corporate Existence, etc.................................. 25
9.6 New Subsidiaries.......................................... 25
9.7 Pari Passu................................................ 25
10. NEGATIVE COVENANTS................................................. 26
10.1 Transactions with Affiliates.............................. 26
10.2 Line of Business.......................................... 26
10.3 Maintenance of Consolidated Adjusted Net Worth............ 26
10.4 Consolidated Fixed Charges Coverage Ratio................. 26
10.5 Limitation on Debt........................................ 26
10.6 Liens..................................................... 27
10.7 Merger, Consolidation, etc................................ 30
10.8 Sale of Assets, etc....................................... 31
11. EVENTS OF DEFAULT.................................................. 32
12. REMEDIES ON DEFAULT, ETC........................................... 35
12.1 Acceleration.............................................. 35
12.2 Other Remedies............................................ 36
12.3 Rescission................................................ 36
12.4 No Waivers or Election of Remedies, Expenses, etc......... 36
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES...................... 37
13.1 Registration of Notes..................................... 37
13.2 Transfer and Exchange of Notes............................ 37
13.3 Replacement of Notes...................................... 37
14. PAYMENTS ON NOTES.................................................. 38
14.1 Place of Payment.......................................... 38
14.2 Home Office Payment....................................... 38
15. EXPENSES, ETC...................................................... 39
15.1 Transaction Expenses...................................... 39
15.2 Survival.................................................. 39
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT....... 39
17. AMENDMENT AND WAIVER............................................... 39
17.1 Requirements.............................................. 39
17.2 Solicitation of Holders of Notes.......................... 40
17.3 Binding Effect, etc....................................... 40
17.4 Notes held by Company, etc................................ 40
18. NOTICES............................................................ 41
19. REPRODUCTION OF DOCUMENTS.......................................... 41
20. CONFIDENTIAL INFORMATION........................................... 41
21. SUBSTITUTION OF PURCHASER.......................................... 43
22. MISCELLANEOUS...................................................... 43
22.1 Additional Notes.......................................... 43
22.2 Successors and Assigns.................................... 43
22.3 Payments Due on Non-Business Days; When Payments Deemed
Received............................................... 44
22.4 Severability.............................................. 44
22.5 Construction.............................................. 44
22.6 Counterparts.............................................. 44
22.7 Governing Law............................................. 44
<PAGE>
SCHEDULES & EXHIBITS
SCHEDULE A -- Information Relating to Purchasers
SCHEDULE B -- Defined Terms
SCHEDULE 3 -- Payment Instructions
SCHEDULE 4.16 -- Changes in Corporate Structure
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership
of Subsidiary Stock
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.8 -- Certain Litigation
SCHEDULE 5.11 -- Patents, etc.
SCHEDULE 5.12 -- ERISA Affiliates
SCHEDULE 5.14 -- Use of Proceeds
SCHEDULE 5.15 -- Existing Debt and Liens
EXHIBIT 1A -- Form of 6.44% Series A Senior Secured Note
due May 21, 2005
EXHIBIT 1B -- Form of 6.93% Series B Senior Secured Note
due May 21, 2008
EXHIBIT 4.4(a) -- Forms of Opinions of Special Counsel for the
Obligors
EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the
Collateral Agent
EXHIBIT 4.4(c) -- Form of Opinion of Special Counsel for the
Purchasers
EXHIBIT 4.8 -- Form of Intercreditor Agreement
EXHIBIT 4.9 -- Form of Security Agreement
EXHIBIT 4.10 -- Form of Pledge Agreement
EXHIBIT 4.13 -- Form of Guaranty Agreement
<PAGE>
THE SHAW GROUP INC.
11100 Mead Road
Baton Rouge, LA 70816
6.44% SERIES A SENIOR SECURED NOTES DUE MAY 21, 2005
6.93% SERIES B SENIOR SECURED NOTES DUE MAY 21, 2008
Dated as of May 21, 1998
To the Purchaser Named on
the Signature Page Hereto
Ladies and Gentlemen:
THE SHAW GROUP INC., a Louisiana corporation (together with its successors
and assigns, the "Company"), agrees with you as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize
(a) the issue and sale of $20,000,000 aggregate principal amount of its
6.44% Series A Senior Secured Notes due 2005 (together with all notes issued
pursuant hereto in exchange or substitution thereof, the "Series A Notes"), and
(b) the issue and sale of $40,000,000 aggregate principal amount of its
6.93% Series B Senior Secured Notes due 2008 (together with all notes issued
pursuant hereto in exchange or substitution thereof, the "Series B Notes");
(the Series A Notes and the Series B Notes referred to, collectively, as
the "Notes"). The Series A Notes and the Series B Notes shall be substantially
in the forms set out in Exhibit 1A and Exhibit 1B, respectively, with such
changes therefrom, if any, as may be approved by you and the Company. Certain
capitalized terms used in this Agreement are defined in Schedule B; references
to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule
or an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the Closing
provided for in Section 3, Notes in the principal amount and the series
specified below your name in Schedule A at the purchase price of 100% of the
principal amount thereof. Contemporaneously with entering into this Agreement,
the Company is entering into separate Note Purchase Agreements (the "Other
Agreements") identical with this Agreement with each of the other purchasers
named in Schedule A (the "Other Purchasers"), providing for the sale at such
Closing to each of the Other Purchasers of Notes in the principal amount and the
series specified below its name in Schedule A. Your obligation hereunder and the
obligations of the Other Purchasers under the Other Agreements are several and
not joint obligations and you shall have no obligation under any Other Agreement
and no liability to any Person for the performance or no performance by any
Other Purchaser thereunder.
3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Hebb & Gitlin, One State Street,
Hartford, Connecticut 06103 at 10:00 a.m., local time, at a closing (the
"Closing") on May 21, 1998. At the Closing the Company will deliver to you the
Notes of the series to be purchased by you in the form of a single Note (or such
greater number of Notes in denominations of at least $100,000 as you may
request), dated the date of the Closing and registered in your name (or in the
name of your nominee), as indicated in Schedule A, against payment by federal
funds wire transfer in immediately available funds of the amount of the purchase
price therefor as directed by the Company in Schedule 3. If at the Closing the
Company shall fail to tender such Notes to you as provided above in this Section
3, or any of the conditions specified in Section 4 shall not have been fulfilled
to your satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights you may
have by reason of such failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at the
Closing is subject to the fulfillment to your satisfaction, prior to or at the
Closing, of the following conditions:
4.1 Representations and Warranties.
The representations and warranties of the Company and its Subsidiaries in
the Financing Documents shall be correct when made and at the time of the
Closing.
4.2 Performance; No Default.
The Company and each of the Initial Guarantors shall have performed and
complied with all agreements and conditions contained in the Financing Documents
required to be performed or complied with by the Company or such Initial
Guarantor prior to or at the Closing and after giving effect to the issue and
sale of the Notes (and the application of the proceeds thereof as contemplated
by Schedule 5.14) no Default or Event of Default shall have occurred and be
continuing. Neither the Company nor any Subsidiary shall have entered into any
transaction since the date of the Memorandum that would have been prohibited by
any of Sections 10.1, 10.4, 10.5 or 10.8 had such Sections applied since such
date.
4.3 Compliance Certificates.
(a) Officer's Certificate. The Company shall have delivered to you an
Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.16 have been fulfilled.
(b) Company Secretary's Certificate. The Company shall have delivered to
you a certificate of its Secretary or one of its Assistant Secretaries, dated
the date of the Closing, certifying as to the resolutions attached thereto and
other corporate proceedings relating to the authorization, execution and
delivery of the Financing Documents.
(c) Initial Guarantor Secretary's Certificates. Each of the Initial
Guarantors shall have delivered to you a certificate of its Secretary or one of
its Assistant Secretaries, dated the date of the Closing, certifying as to the
resolutions attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of the Financing Documents to which such
Initial Guarantor is a party.
4.4 Opinions of Counsel.
You shall have received opinions in form and substance satisfactory to you,
dated the date of the Closing, from
(a) Kantrow, Spaht, Weaver & Blitzer (A Professional Law Corporation),
counsel for the Company and the Initial Guarantors, substantially in the form
set out in Exhibit 4.4(a) and covering such other matters incident to the
transactions contemplated hereby as you or your counsel may reasonably request
(and the Company hereby instructs such counsel to deliver such opinion to you),
and
(b) David H. Rubin, counsel for the Collateral Agent, substantially in the
form set out in Exhibit 4.4(b) and covering such other matters incident to the
transactions contemplated hereby as you or your counsel may reasonably request,
and
(c) Hebb & Gitlin, your special counsel in connection with such
transactions, substantially in the form set out in Exhibit 4.4(c) and covering
such other matters incident to such transactions as you may reasonably request.
4.5 Purchase Permitted By Applicable Law, etc.
On the date of the Closing your purchase of Notes shall (a) be permitted by
the laws and regulations of each jurisdiction to which you are subject, without
recourse to provisions (such as section 1405(a)(8) of the New York Insurance
Law) permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (b) not violate any applicable
law or regulation (including, without limitation, Regulation T, U or X of the
Board of Governors of the Federal Reserve System) and (c) not subject you to any
tax, penalty or liability under or pursuant to any applicable law or regulation.
If requested by you, you shall have received an Officer's Certificate certifying
as to such matters of fact as you may reasonably specify to enable you to
determine whether such purchase is so permitted.
4.6 Sale of Other Notes.
Contemporaneously with the Closing the Company shall sell to the Other
Purchasers and the Other Purchasers shall purchase the Notes of the series to be
purchased by them at the Closing as specified in Schedule A.
4.7 Bank Loan Agreement.
The Company and the Banks shall have entered into the Bank Loan Agreement,
in form and substance satisfactory to you, and the Company shall have delivered
to you copies of the Bank Loan Agreement and each other document executed in
connection therewith requested by you, certified as true and correct by a
Responsible Officer.
4.8 Intercreditor Agreement.
The Company, the Banks, you, the Other Purchasers and the Collateral Agent
shall have executed and delivered (and the Initial Guarantors shall have
executed and delivered the consent and agreement to) the Collateral Agency and
Intercreditor Agreement, substantially in the form of Exhibit 4.8 (as amended
from time to time, the "Intercreditor Agreement"), and the Intercreditor
Agreement shall be in full force and effect.
4.9 Security Agreements.
Each Obligor and the Collateral Agent shall have entered into a Security
Agreement, substantially in the form of Exhibit 4.9 (collectively, as amended or
supplemented from time to time, the "Security Agreements"), and each Security
Agreement shall be in full force and effect.
4.10 Pledge Agreements.
Each of the Company and certain Guarantors shall have entered into a
General Pledge and Security Agreement with the Collateral Agent, substantially
in the form of Exhibit 4.10 (collectively, as amended or supplemented from time
to time, the "Pledge Agreements"), and each Pledge Agreement shall be in full
force and effect.
4.11 Perfection of Liens.
Each Obligor shall have executed and delivered to the Collateral Agent all
UCC-1 financing statements necessary to perfect the Liens of the Collateral
Agent in the Collateral which may be perfected by the filing thereof and shall
have delivered to the Collateral Agent all appropriate stock certificates
(together with undated stock powers executed in blank to the Collateral Agent)
evidencing the shares of Capital Stock pledged pursuant to the Pledge
Agreements.
4.12 Termination or Assignment of Existing Liens.
All actions necessary to terminate, release or assign to the Collateral
Agent any and all Liens on the Collateral, other than Liens permitted under
Section 10.6(a), shall have been taken in accordance with the provisions of the
Security Agreements, including, without limitation, the filing of all
appropriate Uniform Commercial Code termination statements.
4.13 Guaranty Agreement.
You shall have received a counterpart of the Guaranty Agreement, duly
executed and delivered by each of the Initial Guarantors, substantially in the
form of Exhibit 4.13 (as amended or supplemented from time to time, the
"Guaranty Agreement"), and the Guaranty Agreement shall be in full force and
effect.
4.14 Payment of Special Counsel Fees.
Without limiting the provisions of Section 15.1, the Company shall have
paid on or before the Closing the fees, charges and disbursements of your
special counsel referred to in Section 4.4(c) to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the date of the Closing.
4.15 Private Placement Numbers.
A Private Placement Number issued by Standard & Poor's CUSIP Service Bureau
(in cooperation with the Securities Valuation Office of the National Association
of Insurance Commissioners) shall have been obtained for each series of Notes.
4.16 Changes in Corporate Structure.
Except as specified in Schedule 4.16, the Company shall not have changed
its jurisdiction of incorporation or been a party to any merger or consolidation
and shall not have succeeded to all or any substantial part of the liabilities
of any other entity, at any time following the date of the most recent financial
statements referred to in Schedule 5.5.
4.17 Proceedings and Documents.
All corporate and other proceedings in connection with the transactions
contemplated by the Financing Documents and all documents and instruments
incident to such transactions shall be satisfactory to you and your special
counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you, as of the date of the Closing,
that:
5.1 Organization; Power and Authority.
Each Obligor is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each Obligor has the corporate power and authority to own or
hold under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver the Financing Documents to which it is or is to be a party and to
perform the provisions thereof.
5.2 Authorization, etc.
The Financing Documents have been duly authorized by all necessary
corporate action on the part of the Obligors, and each of this Agreement, the
Security Agreements, the Pledge Agreements, the Guaranty Agreement and the
Intercreditor Agreement constitutes, and upon execution and delivery thereof
each Note will constitute, a legal, valid and binding obligation of each Obligor
party thereto, enforceable against each such Obligor in accordance with its
terms, except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (b) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
5.3 Disclosure.
The Company, through its agents, SPP Hambro & Co., LLC and Mercantile Bank,
has delivered to you and each Other Purchaser a copy of a Confidential Direct
Placement Memorandum, dated February 1998 (the "Memorandum"), relating to the
transactions contemplated hereby. The Memorandum fairly describes, in all
material respects, the general nature of the business and principal properties
of the Company and its Subsidiaries. Except as disclosed in Schedule 5.3, the
Financing Documents, the Memorandum, the documents, certificates or other
writings delivered to you by or on behalf of the Company in connection with the
transactions contemplated by the Financing Documents and the financial
statements listed in Schedule 5.5, taken as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements herein or therein not misleading in light of the
circumstances under which they were made, except in all cases as corrected,
supplemented or modified in any subsequent document, certificate or other
instrument delivered to you by or on behalf of the Company prior to the date of
the Closing. Except as disclosed in the Memorandum or as expressly described in
Schedule 5.3, or in the documents, certificates or other writings identified
herein or therein, or in the financial statements listed in Schedule 5.5, since
August 31, 1997, there has been no change in the financial condition,
operations, business, properties or prospects of the Company or any Subsidiary
except changes that individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect. There is no fact known to the
Company that would reasonably be expected to have a Material Adverse Effect that
has not been set forth herein or in the Memorandum or in the other documents,
certificates and other writings delivered to you by or on behalf of the Company
specifically for use in connection with the transactions contemplated hereby
5.4 Organization and Ownership of Shares of Subsidiaries; Affiliates.
(a) Schedule 5.4 contains (except as noted therein) complete and correct
lists of (i) the Company's Subsidiaries, showing, as to each Subsidiary, the
correct name thereof, the jurisdiction of its organization, and the percentage
of shares of each class of its Capital Stock outstanding owned by the Company
and each other Subsidiary and (ii) the Company's Affiliates, other than
Subsidiaries.
(b) All of the outstanding shares of Capital Stock of each Subsidiary shown
in Schedule 5.4 as being owned by the Company and its Subsidiaries have been
validly issued, are fully paid and nonassessable and are owned by the Company or
another Subsidiary free and clear of any Lien (except as otherwise disclosed in
Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or other
legal entity duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements listed
in Schedule 5.4 and customary limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay dividends out of profits or
make any other similar distributions of profits to the Company or any of its
Subsidiaries that owns outstanding shares of Capital Stock of such Subsidiary.
5.5 Financial Statements.
The Company has delivered to you and each Other Purchaser copies of the
consolidated financial statements of the Company and its Subsidiaries listed in
Schedule 5.5. All of said consolidated financial statements (including in each
case the related schedules and notes) fairly present in all material respects
the consolidated financial position of the Company and its Subsidiaries as of
the respective dates specified in such statements and the consolidated results
of their operations and cash flows for the respective periods so specified and
have been prepared in accordance with GAAP consistently applied throughout the
periods involved except as set forth in the notes thereto (subject, in the case
of any interim financial statements, to normal year-end adjustments).
5.6 Compliance with Laws, Other Instruments, etc.
The execution, delivery and performance by the Obligors of the Financing
Documents will not
(a) contravene, result in any breach of, or constitute a default under, or
result in the creation of any Lien in respect of any property of the Company or
any Subsidiary (other than as contemplated by the Security Documents) under, any
indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease,
corporate charter or by-laws, or any other agreement or instrument to which the
Company or any Subsidiary is bound or by which the Company or any Subsidiary or
any of their respective properties may be bound or affected, which, in each
case, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect,
(b) conflict with or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree, or ruling of any court, arbitrator or
Governmental Authority applicable to the Company or any Subsidiary, which, in
each case, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect, or
(c) violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any Subsidiary, which, in
each case, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect.
5.7 Governmental Authorizations, etc.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Obligors of the Financing Documents,
except those previously obtained or made or those as to which the failure to so
obtain or make would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
5.8 Litigation; Observance of Agreements, Statutes and Orders.
(a) Except as disclosed in Schedule 5.8, there are no actions, suits or
proceedings pending or, to the knowledge of the Company, threatened against or
affecting the Company or any Subsidiary or any property of the Company or any
Subsidiary in any court or before any arbitrator of any kind or before or by any
Governmental Authority that, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any term of
any agreement or instrument to which it is a party or by which it is bound, or
any order, judgment, decree or ruling of any court, arbitrator or Governmental
Authority or is in violation of any applicable law, ordinance, rule or
regulation (including, without limitation, Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
5.9 Taxes.
The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments levied
upon them or their properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (a) the amount of which is not
individually or in the aggregate Material or (b) the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company or a Subsidiary, as the case
may be, has established adequate reserves in accordance with GAAP. The Company
knows of no basis for any other tax or assessment that would reasonably be
expected to have a Material Adverse Effect. The charges, accruals and reserves
on the books of the Company and its Subsidiaries in respect of Federal, state or
other taxes for all fiscal periods are adequate. The Federal income tax
liabilities of the Company and its Subsidiaries have been determined by the
Internal Revenue Service and paid for all fiscal years up to and including the
fiscal year ended August 31, 1990.
5.10 Title to Property; Leases.
The Company and its Subsidiaries have good and sufficient title to their
respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance sheet
referred to in Section 5.5 or purported to have been acquired by the Company or
any Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement. All leases that individually or in the aggregate are Material
are valid and subsisting and are in full force and effect in all material
respects.
5.11 Licenses, Permits, etc.
Except as disclosed in Schedule 5.11,
(a) the Company and its Subsidiaries own or possess all licenses, permits,
franchises, authorizations, patents, copyrights, service marks, trademarks and
trade names, or rights thereto, that individually or in the aggregate are
Material, without known conflict with the rights of others;
(b) to the best knowledge of the Company, no product or practice of the
Company or any Subsidiary infringes in any material respect any license, permit,
franchise, authorization, patent, copyright, service mark, trademark, trade name
or other right owned by any other Person; and
(c) to the best knowledge of the Company, there is no Material violation by
any Person of any right of the Company or any of its Subsidiaries with respect
to any patent, copyright, service mark, trademark, trade name or other right
owned or used by the Company or any of its Subsidiaries.
5.12 Compliance with ERISA.
(a) The Company and each ERISA Affiliate have operated and administered
each Plan in compliance with all applicable laws except for such instances of
noncompliance as have not resulted in and would not reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate
has incurred any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans (as defined
in section 3 of ERISA), and no event, transaction or condition has occurred or
exists that would reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the imposition of any
Lien on any of the rights, properties or assets of the Company or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty
or excise tax provisions or to section 401(a)(29) or 412 of the Code, other than
such liabilities or Liens as would not be individually or in the aggregate
Material.
(b) The present value of the aggregate benefit liabilities under each of
the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "benefit liabilities" has the
meaning specified in section 4001 of ERISA and the terms "current value" and
"present value" have the meaning specified in section 3 of ERISA.
(c) The Company and the ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected postretirement benefit obligation (determined as of the
last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company and its Subsidiaries is not Material.
(e) The execution and delivery of the Financing Documents and the issuance
and sale of the Notes hereunder will not involve any transaction that is subject
to the prohibitions of section 406 of ERISA or in connection with which a tax
could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The
representation by the Company in the first sentence of this Section 5.12(e) is
made in reliance upon and subject to the accuracy of your representation in
Section 6.2 as to the sources of the funds used to pay the purchase price of the
Notes to be purchased by you.
(f) Schedule 5.12 sets forth all ERISA Affiliates and all "employee benefit
plans" maintained by the Company (or any "affiliate" thereof) or in respect of
which the Notes could constitute an "employer security" ("employee benefit plan"
has the meaning specified in section 3 of ERISA, "affiliate" has the meaning
specified in section 407(d) of ERISA and section V of the Department of Labor
Prohibited Transaction Exemption 95-60 (60 FR 35925, July 12, 1995) and
"employer security" has the meaning specified in section 407(d) of ERISA).
5.13 Private Offering by the Company.
Neither the Company nor anyone authorized to act on its behalf has offered
the Notes or any similar Securities for sale to, or solicited any offer to buy
any of the same from, or otherwise approached or negotiated in respect thereof
with, any Person other than you, the Other Purchasers and not more than 8 other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Company nor anyone authorized to act on its
behalf has taken, or will take, any action that would subject the issuance or
sale of the Notes to the registration requirements of section 5 of the
Securities Act. For purposes of this Section 5.13 only, each reference to the
Notes shall be deemed to include a reference to the Guaranty Agreement.
5.14 Use of Proceeds; Margin Regulations.
The Company will apply the proceeds of the sale of the Notes as set forth
in Schedule 5.14. No part of the proceeds from the sale of the Notes hereunder
will be used, directly or indirectly, for the purpose of buying or carrying any
margin stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve the Company in
a violation of Regulation X of said Board (12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin
stock does not constitute more than 1% of Consolidated Total Assets and the
Company does not have any present intention that margin stock will constitute
more than 1% of Consolidated Total Assets. As used in this Section, the terms
"margin stock" and "purpose of buying or carrying" shall have the meanings
assigned to them in said Regulation U.
5.15 Existing Indebtedness; Future Liens.
(a) Except as described therein, Schedule 5.15 sets forth a complete and
correct list of all outstanding Indebtedness of the Company and its Subsidiaries
as of March 31, 1998 (indicating as to each such Indebtedness, the collateral,
if any, securing such Indebtedness), since which date there has been no Material
change in the amounts, interest rates, sinking funds, installment payments or
maturities of the Indebtedness of the Company or its Subsidiaries. Neither the
Company nor any Subsidiary is in default and no waiver of default is currently
in effect, in the payment of any principal or interest on any Indebtedness of
the Company or such Subsidiary and no event or condition exists with respect to
any Indebtedness of the Company or any Subsidiary the outstanding principal
amount of which exceeds $250,000 that would permit (or that with notice or the
lapse of time, or both, would permit) one or more Persons to cause such
Indebtedness to become due and payable before its stated maturity or before its
regularly scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien not permitted by Section 10.6(a).
5.16 Foreign Assets Control Regulations, etc.
Neither the sale of the Notes by the Company hereunder nor its use of the
proceeds thereof, nor any other transaction contemplated by the Financing
Documents, will violate the Trading with the Enemy Act, as amended, or any of
the foreign assets control regulations of the United States Treasury Department
(31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or
executive order relating thereto.
5.17 Status under Certain Statutes.
Neither the Company nor any Subsidiary is subject to regulation under the
Investment Company Act of 1940, as amended, the Public Utility Holding Company
Act of 1935, as amended, the Transportation Acts (49 U.S.C.), as amended, or the
Federal Power Act, as amended.
5.18 Environmental Matters.
Neither the Company nor any Subsidiary has knowledge of any claim or has
received any notice of any claim, and no proceeding has been instituted raising
any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as would not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
to you in writing,
(a) neither the Company nor any Subsidiary has knowledge of any facts which
would give rise to any claim, public or private, of violation of Environmental
Laws or damage to the environment emanating from, occurring on or in any way
related to real properties now or formerly owned, leased or operated by any of
them or to other assets or their use, except, in each case, such as would not
reasonably be expected to result in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or operated
by any of them or disposed of any Hazardous Materials in a manner contrary to
any Environmental Laws, in each case in any manner that would reasonably be
expected to result in a Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased or operated by
the Company or any of its Subsidiaries are in compliance with applicable
Environmental Laws, except where failure to comply would not reasonably be
expected to result in a Material Adverse Effect.
5.19 Security Documents.
(a) Security Agreements. The Security Agreements create (after filing UCC-1
financing statements as therein provided) a valid and perfected (to the extent
such perfection can be made by filing such UCC-1 financing statements under the
Uniform Commercial Code of the applicable jurisdictions) first priority Lien in
and to the Collateral (as defined in the Security Agreements) in favor of the
Collateral Agent, subject to no Liens except to the extent permitted by Section
10.6(a).
(b) Pledge Agreements. The Pledge Agreements create (after delivery of the
Pledged Shares (as defined in the Pledge Agreements) as therein provided) a
valid and perfected (to the extent such perfection can be made by delivery under
the Uniform Commercial Code of the applicable states of the United States) first
priority Lien in and to such Pledged Shares in favor of the Collateral Agent,
subject to no Liens except to the extent permitted by Section 10.6(a).
(c) Warranties and Representations True. All warranties and representations
made in the Security Documents are true and correct as of the date of the
Closing.
5.20 Solvency.
The fair value of the business and assets of each of the Obligors exceeds
the amount that will be required to pay its liabilities (including, without
limitation, contingent, subordinated, unmatured and unliquidated liabilities on
existing debts, as such liabilities may become absolute and matured), in each
case after giving effect to the transactions contemplated by the Financing
Documents, including, without limitation, the provisions of Section 2.10 of the
Guaranty Agreement. Neither the Company nor any of the Initial Guarantors, after
giving effect to the transactions contemplated by the Financing Documents, will
be insolvent or will be engaged in any business or transaction, or about to
engage in any business or transaction, for which such Person has unreasonably
small assets or capital (within the meaning of the Uniform Fraudulent Transfer
Act, the Uniform Fraudulent Conveyance Act and Section 548 of Title 11 of the
United States Code), and neither the Company nor any of the Initial Guarantors
has any intent to hinder, delay or defraud any entity to which it is, or will
become, on or after the date of the Closing, indebted or incur debts that would
be beyond its ability to pay as they mature.
6. REPRESENTATIONS OF THE PURCHASER.
6.1 Purchase for Investment.
You represent that you are an Accredited Investor as defined in Regulation
D promulgated under the Securities Act and are purchasing the Notes for your own
account or for one or more separate accounts maintained by you or for the
account of one or more pension or trust funds and not with a view to the
distribution thereof, provided that the disposition of your or their property
shall at all times be within your or their control. You understand that the
Notes have not been registered under the Securities Act and may be resold only
if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that the
Company is not required to register the Notes.
6.2 Source of Funds.
You represent that at least one of the following statements is an accurate
representation as to each source of funds (a "Source") to be used by you to pay
the purchase price of the Notes to be purchased by you hereunder:
(a) the Source is an "insurance company general account" as defined in
United States Department of Labor Prohibited Transaction Exemption ("PTE") 95-60
(60 FR 35925, July 12, 1995) and there is no "employee benefit plan" (as defined
in section 3(3) of ERISA and section 4975(e)(1) of the Code (treating as a
single plan all plans maintained by the same employer or employee organization
or affiliate thereof)) with respect to which the amount of the general account
reserves and liabilities of all contracts held by or on behalf of such plan
exceeds 10% of the total reserves and liabilities of such general account
(exclusive of separate account liabilities) plus surplus, as set forth in the
National Association of Insurance Commissioners' Annual Statement filed with
your state of domicile; or
(b) if you are an insurance company, the Source does not include assets
allocated to any separate account maintained by you in which any employee
benefit plan (or its related trust) has any interest, other than a separate
account that is maintained solely in connection with your fixed contractual
obligations under which the amounts payable, or credited, to such plan and to
any participant or beneficiary of such plan (including any annuitant) are not
affected in any manner by the investment performance of the separate account; or
(c) the Source is either (i) an insurance company pooled separate account,
within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank
collective investment fund, within the meaning of the PTE 91-38 (issued July 12,
1991) and, except as you have disclosed to the Company in writing pursuant to
this paragraph (c), no employee benefit plan or group of plans maintained by the
same employer or employee organization beneficially owns more than 10% of all
assets allocated to such pooled separate account or collective investment fund;
or
(d) the Source constitutes assets of an "investment fund" (within the
meaning of part V of PTE 84-14 (the "QPAM Exemption")) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of part V of the QPAM
Exemption), no employee benefit plan's assets that are included in such
investment fund, when combined with the assets of all other employee benefit
plans established or maintained by the same employer or by an affiliate (within
the meaning of section V(c)(1) of the QPAM Exemption) of such employer or by the
same employee organization and managed by such QPAM, exceed 20% of the total
client assets managed by such QPAM, the conditions of part I(c) and (g) of the
QPAM Exemption are satisfied, neither the QPAM nor a person controlling or
controlled by the QPAM (applying the definition of "control" in section V(e) of
the QPAM Exemption) owns a 5% or more interest in the Company and
(i) the identity of such QPAM and
(ii) the names of all employee benefit plans whose assets are included in
such investment fund have been disclosed to the Company in writing pursuant to
this paragraph (d); or
(e) the source is a governmental plan; or
(f) the Source is one or more employee benefit plans, or a separate account
or trust fund comprised of one or more employee benefit plans, each of which has
been identified to the Company in writing pursuant to this paragraph (f); or
(g) the Source does not include assets of any employee benefit plan, other
than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "employee benefit plan", "governmental
plan" and "separate account" shall have the respective meanings assigned to such
terms in Section 3 of ERISA.
7. INFORMATION AS TO COMPANY.
7.1 Financial and Business Information.
The Company shall deliver to each holder of Notes that is an Institutional
Investor:
(a) Quarterly Statements -- within 45 days after the end of each quarterly
fiscal period in each fiscal year of the Company (other than the last quarterly
fiscal period of each such fiscal year), duplicate copies of,
(i) a consolidated balance sheet of the Company and its Subsidiaries as at
the end of such quarter, and
(ii) consolidated statements of income and cash flows of the Company and
its Subsidiaries, for such quarter and (in the case of the second and third
quarters) for the portion of the fiscal year ending with such quarter, setting
forth in each case in comparative form the figures for the corresponding periods
in the previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP applicable to quarterly financial statements generally, and certified
by a Senior Financial Officer as fairly presenting, in all material respects,
the consolidated financial position of the companies being reported on and their
consolidated results of operations and cash flows, subject to changes resulting
from year-end adjustments, provided that delivery within the time period
specified above of copies of the Company's Quarterly Report on Form 10-Q
prepared in compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the requirements
of this Section 7.1(a);
(b) Annual Statements -- within 90 days after the end of each fiscal year
of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its Subsidiaries, as at
the end of such year, and
(ii) consolidated statements of income, shareholders' equity and cash flows
of the Company and its Subsidiaries, for such year, setting forth in each case
in comparative form the figures for the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP, and accompanied by
(A) an opinion thereon of independent certified public accountants of
recognized national standing, which opinion shall state that such financial
statements present fairly, in all material respects, the consolidated financial
position of the companies being reported upon and their consolidated results of
operations and cash flows and have been prepared in conformity with GAAP, and
that the examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted auditing
standards, and that such audit provides a reasonable basis for such opinion in
the circumstances, and
(B) a certificate of such accountants stating that they have reviewed this
Agreement and stating further whether, in making their audit, they have become
aware of any condition or event that then constitutes a Default or an Event of
Default, and, if they are aware that any such condition or event then exists,
specifying the nature and period of the existence thereof (it being understood
that such accountants shall not be liable, directly or indirectly, for any
failure to obtain knowledge of any Default or Event of Default unless such
accountants should have obtained knowledge thereof in making an audit in
accordance with generally accepted auditing standards or did not make such an
audit), provided that the delivery within the time period specified above of the
Company's Annual Report on Form 10-K for such fiscal year prepared in accordance
with the requirements therefor and filed with the Securities and Exchange
Commission, together with the accountant's certificate described in clause (B)
above, shall be deemed to satisfy the requirements of this Section 7.1(b);
(c) SEC and Other Reports -- promptly upon their becoming available, one
copy of (i) each financial statement, report (including, without limitation, the
Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3
under the Exchange Act), notice or proxy statement sent by the Company or any
Subsidiary to public securities holders generally, and (ii) each regular or
periodic report, each registration statement other than on Form S-8 (without
exhibits except as expressly requested by such holder), and each prospectus and
all amendments thereto filed by the Company or any Subsidiary with the
Securities and Exchange Commission and of all press releases and other
statements made available generally by the Company or any Subsidiary to the
public concerning developments that are Material;
(d) Notice of Default or Event of Default -- promptly, and in any event
within five days after a Responsible Officer becoming aware of the existence of
any Default or Event of Default or that any Person has given any notice or taken
any action with respect to a claimed default hereunder or that any Person has
given any notice or taken any action with respect to a claimed default of the
type referred to in Section 11(f), a written notice specifying the nature and
period of existence thereof and what action the Company is taking or proposes to
take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within five days after a
Responsible Officer becoming aware of any of the following, a written notice
setting forth the nature thereof and the action, if any, that the Company or an
ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable event, as defined in section
4043(c) of ERISA and the regulations thereunder, for which notice thereof has
not been waived pursuant to such regulations as in effect on the date of the
Closing; or
(ii) the taking by the PBGC of steps to institute, or the threatening by
the PBGC of the institution of, proceedings under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by the PBGC with respect to such
Multiemployer Plan; or
(iii) any event, transaction or condition that would result in the
incurrence of any liability by the Company or any ERISA Affiliate pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans, or in the imposition of any Lien on any of
the rights, properties or assets of the Company or any ERISA Affiliate pursuant
to Title I or IV of ERISA or such penalty or excise tax provisions, if such
liability or Lien, taken together with any other such liabilities or Liens then
existing, would reasonably be expected to have a Material Adverse Effect;
(f) Notices from Governmental Authority -- promptly, and in any event
within 30 days of receipt thereof, copies of any notice to the Company or any
Subsidiary from any Federal or state Governmental Authority relating to any
order, ruling, statute or other law or regulation that would reasonably be
expected to have a Material Adverse Effect;
(g) Actions, Proceedings -- promptly after a Responsible Officer becomes
aware of the commencement thereof, notice of any action or proceeding relating
to the Company or any Subsidiary in any court or before any Governmental
Authority or arbitration board or tribunal as to which there is a reasonable
possibility of an adverse determination and that, if adversely determined, would
reasonably be expected to have a Material Adverse Effect; and
(h) Requested Information -- with reasonable promptness, such other data
and information relating to the business, operations, affairs, financial
condition, assets or properties of the Company or any of its Subsidiaries or
relating to the ability of the Obligors to perform their obligations under the
Financing Documents as from time to time may be reasonably requested by any such
holder of Notes, or such information regarding the Company required to satisfy
the requirements of 17 C.F.R. ss.230.144A, as amended from time to time, in
connection with any contemplated transfer of the Notes.
7.2 Officer's Certificate.
Each set of financial statements delivered to a holder of Notes pursuant to
Section 7.1(a) or Section 7.1(b) shall be accompanied by a certificate of a
Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Sections 10.3 through 10.6, inclusive, and
Section 10.8 during the quarterly or annual period covered by the statements
then being furnished (including with respect to each such Section, where
applicable, the calculations of the maximum or minimum amount, ratio or
percentage, as the case may be, permissible under the terms of such Sections,
and the calculation of the amount, ratio or percentage then in existence); and
(b) Event of Default -- a statement that such officer has reviewed the
relevant terms of the Financing Documents and has made, or caused to be made,
under his or her supervision, a review of the transactions and conditions of the
Company and its Subsidiaries from the beginning of the quarterly or annual
period covered by the statements then being furnished to the date of the
certificate and that such review has not disclosed the existence during such
period of any condition or event that constitutes a Default or an Event of
Default or, if any such condition or event existed or exists (including, without
limitation, any such event or condition resulting from the failure of the
Company or any Subsidiary to comply with any Environmental Law), specifying the
nature and period of existence thereof and what action the Company shall have
taken or proposes to take with respect thereto.
7.3 Inspection.
The Company shall permit the representatives of each holder of Notes that
is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists, at the
expense of such holder and upon reasonable prior notice to the Company, to visit
the principal executive office of the Company, to discuss the affairs, finances
and accounts of the Company and its Subsidiaries with the Company's principal
officers, and (with the consent of the Company, which consent will not be
unreasonably withheld) its independent public accountants, and (with the consent
of the Company, which consent will not be unreasonably withheld) to visit the
other offices and properties of the Company and each Subsidiary, all at such
reasonable times and as often as may be reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then exists, at the expense
of the Company, to visit and inspect any of the offices or properties of the
Company or any Subsidiary, to examine all their respective books of account,
records, reports and other papers, to make copies and extracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
principal officers and independent public accountants (and by this provision the
Company authorizes said accountants to discuss the affairs, finances and
accounts of the Company and its Subsidiaries), all at such reasonable times and
as often as may be reasonably requested.
8. PAYMENT OF THE NOTES, ETC.
8.1 Required Prepayments; Payment at Maturity.
(a) Series A Notes. On May 21, 1999 and on each May 21 thereafter to and
including May 21, 2004, the Company will prepay $2,857,143 principal amount (or
such lesser principal amount as shall then be outstanding) of the Series A Notes
at par and without payment of the Make-Whole Amount or any premium, and the
Company will pay all of the principal amount of the Series A Notes remaining
outstanding, if any, on May 21, 2005.
(b) Series B Notes. On May 21, 2002 and on each May 21 thereafter to and
including May 21, 2007, the Company will prepay $5,714,286 principal amount (or
such lesser principal amount as shall then be outstanding) of the Series B Notes
at par and without payment of the Make-Whole Amount or any premium, and the
Company will pay all of the principal amount of the Series B Notes remaining
outstanding, if any, on May 21, 2008.
8.2 Optional Prepayments with Make-Whole Amount.
The Company may, at its option, upon notice as provided below, prepay at
any time all, or from time to time any part of, the Notes (but if in part, in an
amount not less than $5,000,000 or such lesser amount as shall then be
outstanding), at 100% of the principal amount so prepaid, plus the Make-Whole
Amount determined for the prepayment date with respect to such principal amount.
The Company will give each holder of Notes written notice of each optional
prepayment under this Section 8.2 not less than 30 days and not more than 60
days prior to the date fixed for such prepayment. Each such notice shall specify
such prepayment date, the aggregate principal amount of the Notes to be prepaid
on such date, the principal amount of each Note held by such holder to be
prepaid (determined in accordance with Section 8.4), and the interest to be paid
on the prepayment date with respect to such principal amount being prepaid, and
shall be accompanied by a certificate of a Senior Financial Officer as to the
estimated Make-Whole Amount due in connection with such prepayment (calculated
as if the date of such notice were the date of the prepayment), setting forth
the details of such computation. Two Business Days prior to such prepayment, the
Company shall deliver to each holder of Notes a certificate of a Senior
Financial Officer specifying the calculation of such Make-Whole Amount as of the
specified prepayment date.
Each partial prepayment of the Notes pursuant to this Section 8.2 will be
applied first, to the amount due on the maturity date of the Notes and second,
to the mandatory prepayments applicable to the Notes, as set forth in Section
8.1, in the inverse order of the maturity thereof.
8.3 Change in Control.
(a) Notice of Change in Control or Control Event. The Company will, within
five Business Days after any Responsible Officer has knowledge of the occurrence
of any Change in Control or Control Event, give written notice of such Change in
Control or Control Event to each holder of Notes, unless notice in respect of
such Change in Control (or the Change in Control contemplated by such Control
Event) shall have been given pursuant to Section 8.3(b). If a Change in Control
has occurred, such notice shall contain and constitute an offer to prepay Notes
as described in Section 8.3(c) and shall be accompanied by the certificate
described in Section 8.3(g).
(b) Condition to Company Action. The Company will not take any action that
consummates or finalizes a Change in Control unless
(i) at least 15 Business Days prior to such action it shall have given to
each holder of Notes written notice containing and constituting an offer to
prepay Notes as described in Section 8.3(c), accompanied by the certificate
described in Section 8.3(g), and
(ii) contemporaneously with such action, it prepays all Notes required to
be prepaid in accordance with this Section 8.3.
(c) Offer to Prepay Notes. The offer to prepay Notes contemplated by
Section 8.3(a) and Section 8.3(b) shall be an offer to prepay, in accordance
with and subject to this Section 8.3, all, but not less than all, the Notes held
by each holder (in this case only, "holder" in respect of any Note registered in
the name of a nominee for a disclosed beneficial owner shall mean such
beneficial owner) on a date specified in such offer (the "Proposed Prepayment
Date"), without distinction between series. If such Proposed Prepayment Date is
in connection with an offer contemplated by Section 8.3(a), such date shall be
not less than 15 Business Days and not more than 20 Business Days after the date
of such offer (if the Proposed Prepayment Date shall not be specified in such
offer, the Proposed Prepayment Date shall be the 20th Business Day after the
date of such offer).
(d) Acceptance; Rejection. A holder of Notes may accept or reject the offer
to prepay made pursuant to this Section 8.3 by causing a notice of such
acceptance or rejection to be delivered to the Company at least two Business
Days prior to the Proposed Prepayment Date. A failure by a holder of Notes to
respond to an offer to prepay made pursuant to this Section 8.3 shall be deemed
to constitute an acceptance of such offer by such holder.
(e) Prepayment. Prepayment of the Notes to be prepaid pursuant to this
Section 8.3 shall be at 100% of the principal amount of such Notes, plus the
Make-Whole Amount determined for the date of prepayment with respect to such
principal amount, together with interest on such Notes accrued to the date of
prepayment. Two Business Days prior to such prepayment, the Company shall
deliver to each holder of Notes being prepaid a statement showing the Make-Whole
Amount, if any, due in connection with such prepayment and setting forth the
details of the computation of such amount. The prepayment shall be made on the
Proposed Prepayment Date except as provided in Section 8.3(f).
(f) Deferral Pending Change in Control. The obligation of the Company to
prepay Notes pursuant to the offers accepted in accordance with Section 8.3(d)
is subject to the occurrence of the Change in Control in respect of which such
offers and acceptances shall have been made. In the event that such Change in
Control does not occur on the Proposed Prepayment Date in respect thereof, the
prepayment shall be deferred until and shall be made on the date on which such
Change in Control occurs. The Company shall keep each holder of Notes reasonably
and timely informed of
(i) any such deferral of the date of prepayment,
(ii) the date on which such Change in Control and the prepayment are
expected to occur, and
(iii) any determination by the Company that efforts to effect such Change
in Control have ceased or been abandoned (in which case the offers and
acceptances made pursuant to this Section 8.3 in respect of such Change in
Control shall be deemed rescinded).
(g) Officer's Certificate. Each offer to prepay the Notes pursuant to this
Section 8.3 shall be accompanied by a certificate, executed by a Senior
Financial Officer and dated the date of such offer, specifying:
(i) that such offer is made pursuant to this Section 8.3;
(ii) the Proposed Prepayment Date;
(iii) the last date upon which the offer can be accepted or rejected, and
setting forth the consequences of failing to provide an acceptance or rejection,
as provided in Section 8.3(d);
(iv) the principal amount of each Note offered to be prepaid;
(v) the estimated Make-Whole Amount, if any, due in connection with such
prepayment (calculated as if the date of such notice were the date of the
prepayment), setting forth the details of such computation;
(vi) the interest that would be due on each Note offered to be prepaid,
accrued to the Proposed Prepayment Date;
(vii) that the conditions of this Section 8.3 have been fulfilled; and
(viii) in reasonable detail, the nature and date or proposed date of the
Change in Control.
(h) Effect on Required Payments. The amount of each payment of the
principal of the Notes of any series made pursuant to this Section 8.3 shall be
applied against and reduce each of the then remaining principal payments of the
Notes of such series due pursuant to Section 8.1 by a percentage equal to the
aggregate principal amount of the Notes of such series so paid divided by the
aggregate principal amount of the Notes of such series outstanding immediately
prior to such payment.
(i) "Change in Control" Defined. "Change in Control" means the acquisition,
directly or indirectly, by any Person or Persons (other than members of the
Management Group) acting in concert of control or ownership (beneficially or
otherwise) of more than 50% (by number of shares) of the issued and outstanding
Voting Stock of the Company.
(j) "Control Event" Defined. "Control Event" means:
(i) the execution by the Company or any of its Subsidiaries or Affiliates
of any agreement or letter of intent with respect to any proposed transaction or
event or series of transactions or events which, individually or in the
aggregate, may reasonably be expected to result in a Change in Control,
(ii) the execution of any written agreement which, when fully performed by
the parties thereto, would result in a Change in Control, or
(iii) the making of any written offer by any person (as such term is used
in section 13(d) and section 14(d)(2) of the Exchange Act as in effect on the
date of the Closing) or related persons constituting a group (as such term is
used in Rule 13d-5 under the Exchange Act as in effect on the date of the
Closing) to the holders of the common stock of the Company, which offer, if
accepted by the requisite number of holders, would result in a Change in
Control.
(k) "Management Group" Defined. "Management Group" means any three of the
individuals listed in the Memorandum as President, Chief Financial Officer, and
Executive Vice President of the Company, and President of each of Shaw
Manufacturing and Services, Inc., Shaw Power Services, Inc. and Shaw Process and
Industrial Group, Inc.
8.4 Allocation of Partial Prepayments.
All partial prepayments of the Series A Notes and the Series B Notes
pursuant to Section 8.1 shall be allocated to all outstanding Notes of the
applicable series ratably in accordance with the unpaid principal amounts
thereof. All partial prepayments of the Notes pursuant to Section 8.2 shall be
allocated to all outstanding Notes (without regard to series) ratably in
accordance with the unpaid principal amounts thereof.
8.5 Maturity; Surrender, etc.
In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
8.6 No Other Optional Prepayments or Purchase of Notes.
The Company will not, and will not permit any Affiliate to, purchase,
redeem, pay, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
8.7 Make-Whole Amount.
The term "Make-Whole Amount" means, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Note over the amount of
such Called Principal, provided that the Make-Whole Amount may in no event be
less than zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:
"Called Principal" means, with respect to any Note, the principal of such
Note that is to be prepaid pursuant to Section 8.2, Section 8.3 or Section 10.8,
or has become or is declared to be immediately due and payable pursuant to
Section 12.1, as the context requires.
"Discounted Value" means, with respect to the Called Principal of any Note,
the amount obtained by discounting all Remaining Scheduled Payments with respect
to such Called Principal from their respective scheduled due dates to the
Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on such Note is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called Principal of any
Note, 0.50% over the yield to maturity implied by (a) the yields reported, as of
10:00 A.M. (New York City time) on the second Business Day preceding the
Settlement Date with respect to such Called Principal, on the display designated
as "Page PX1" on the Bloomberg Financial Market Service (or such other display
as may replace Page PX1 on the Bloomberg Financial Market Service) for actively
traded U.S. Treasury securities having a maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date, or (b) if such yields
are not reported as of such time or the yields reported as of such time are not
ascertainable, the Treasury Constant Maturity Series Yields reported, for the
latest day for which such yields have been so reported as of the second Business
Day preceding the Settlement Date with respect to such Called Principal, in
Federal Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a constant
maturity equal to the Remaining Average Life of such Called Principal as of such
Settlement Date. Such implied yield will be determined, if necessary, by (i)
converting U.S. Treasury bill quotations to bond-equivalent yields in accordance
with accepted financial practice and (ii) interpolating linearly between (1) the
actively traded U.S. Treasury security with the duration closest to and greater
than the Remaining Average Life and (2) the actively traded U.S. Treasury
security with the duration closest to and less than the Remaining Average Life.
"Remaining Average Life" means, with respect to any Called Principal, the
number of years (calculated to the nearest one-twelfth year) obtained by
dividing (a) such Called Principal into (b) the sum of the products obtained by
multiplying (i) the principal component of each Remaining Scheduled Payment with
respect to such Called Principal by (ii) the number of years (calculated to the
nearest one-twelfth year) that will elapse between the Settlement Date with
respect to such Called Principal and the scheduled due date of such Remaining
Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the Called Principal
of any Note, all payments of such Called Principal and interest thereon that
would be due after the Settlement Date with respect to such Called Principal if
no payment of such Called Principal were made prior to its scheduled due date,
provided that if such Settlement Date is not a date on which interest payments
are due to be made under the terms of such Note, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of interest
accrued to such Settlement Date and required to be paid on such Settlement Date
pursuant to Section 8.2, Section 8.3, Section 10.8 or Section 12.1.
"Settlement Date" means, with respect to the Called Principal of any Note,
the date on which such Called Principal is to be prepaid pursuant to Section
8.2, Section 8.3 or Section 10.8, or has become or is declared to be immediately
due and payable pursuant to Section 12.1, as the context requires.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
9.1 Compliance with Law.
The Company will and will cause each of its Subsidiaries to comply with all
laws, ordinances or governmental rules or regulations to which each of them is
subject, including, without limitation, Environmental Laws, and will obtain and
maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each case to the
extent necessary to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
9.2 Insurance.
The Company will and will cause each of its Subsidiaries to maintain, with
financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are maintained with
respect thereto) as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly situated.
9.3 Maintenance of Properties.
The Company will and will cause each of its Subsidiaries to maintain and
keep, or cause to be maintained and kept, their respective properties in good
repair, working order and condition (other than ordinary wear and tear), so that
the business carried on in connection therewith may be properly conducted at all
times, provided that this Section shall not prevent the Company or any
Subsidiary from discontinuing the operation and the maintenance of any of its
properties if such discontinuance is desirable in the conduct of its business
and the Company has concluded that such discontinuance would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
9.4 Payment of Taxes and Claims.
The Company will and will cause each of its Subsidiaries to file all tax
returns required to be filed in any jurisdiction and to pay and discharge all
taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes, assessments,
charges or levies have become due and payable and before they have become
delinquent and all claims for which sums have become due and payable that have
or will become a Lien on properties or assets of the Company or any Subsidiary,
provided that neither the Company nor any Subsidiary need pay any such tax or
assessment or claims if (a) the amount, applicability or validity thereof is
contested by the Company or such Subsidiary on a timely basis in good faith and
in appropriate proceedings, and the Company or such Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (b) the nonpayment of all such taxes, assessments, charges
and levies in the aggregate would not reasonably be expected to have a Material
Adverse Effect.
9.5 Corporate Existence, etc.
Subject to Section 10.7, the Company will at all times preserve and keep in
full force and effect its corporate existence. Subject to Sections 10.7 and
10.8, the Company will at all times preserve and keep in full force and effect
the corporate existence of each of its Subsidiaries (unless merged into the
Company or a Subsidiary) and all rights and franchises of the Company and its
Subsidiaries unless, in the good faith judgment of the Company, the termination
of or failure to preserve and keep in full force and effect such corporate
existence, right or franchise would not, individually or in the aggregate, have
a Material Adverse Effect.
9.6 New Subsidiaries.
(a) Guaranty Agreement. The Company will cause each Person that, after the
date of the Closing, becomes a direct or indirect Significant Subsidiary of the
Company, to become a Guarantor under the Guaranty Agreement by executing and
delivering to each holder of Notes a Joinder Agreement in the form attached to
the Guaranty Agreement as Annex 2. Each such Joinder Agreement shall be
accompanied by copies of the constitutive documents of such Subsidiary and
corporate resolutions (or equivalent) authorizing such transaction, in each case
certified as true and correct by a Responsible Officer of the Company and an
officer of such Subsidiary.
(b) Security Documents. The Company will execute, and cause each such
Subsidiary delivering a Joinder Agreement to execute, and deliver to each holder
of Notes and the Collateral Agent, all Security Documents that in the opinion of
the Collateral Agent are necessary to create and preserve the Liens with respect
to such new Subsidiary as are provided in the Security Documents on the
properties of the Initial Guarantors.
(c) "Significant Subsidiary" Defined. "Significant Subsidiary" means any
Subsidiary organized under the laws of the United States or any state thereof,
other than a non-operating Subsidiary having de minimis assets, and any other
Subsidiary that at any time becomes liable in respect of any Guaranty of any of
the obligations under the Bank Loan Agreement.
9.7 Pari Passu.
The Company covenants that its obligations under the Notes and under this
Agreement and the Other Agreements do and will rank at least pari passu with all
its other present and future Bank Debt and all other Debt, if any, secured by
the Collateral.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
10.1 Transactions with Affiliates.
The Company will not, and will not permit any Subsidiary to, enter into
directly or indirectly any transaction or group of related transactions
(including, without limitation, the purchase, lease, sale or exchange of
properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or another Subsidiary), except in the ordinary course
and pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than would be obtainable in a comparable
arm's-length transaction with a Person not an Affiliate.
10.2 Line of Business.
The Company will not, and will not permit any of its Subsidiaries to,
engage in any business if, as a result, the general nature of the business in
which the Company and its Subsidiaries, taken as a whole, would then be engaged
would be substantially changed from the general nature of the business in which
the Company and its Subsidiaries, taken as a whole, are engaged on the date of
this Agreement as described in the Memorandum.
10.3 Maintenance of Consolidated Adjusted Net Worth.
The Company will not, at any time, permit Consolidated Adjusted Net Worth
to be less than the sum of
(a) $100,000,000 plus
(b) an aggregate amount equal to 50% of Consolidated Net Earnings (but, in
each case, only if a positive number) for each completed fiscal year of the
Company beginning with the fiscal year ended August 31, 1998.
10.4 Consolidated Fixed Charges Coverage Ratio.
The Company will not, at the end of any fiscal quarter of the Company,
permit the Pro Forma Consolidated Fixed Charges Coverage Ratio to be less than
2.00 to 1.00, in each case in respect of the period of four consecutive fiscal
quarters then ended.
10.5 Limitation on Debt.
(a) Limitation on Funded Debt. The Company will not, and will not permit
any of its Subsidiaries to, create, assume, incur, guaranty or otherwise become
obligated in respect of any Funded Debt, except:
(i) Funded Debt evidenced by the Notes and the Guaranty Agreement;
(ii) Funded Debt of any Subsidiary owing to the Company or a Wholly-Owned
Subsidiary;
(iii) Funded Debt in existence as of the date of the Closing (after giving
effect to the application of the proceeds of the Notes pursuant to Section 5.14)
and described in Schedule 5.15;
(iv) Funded Debt of the Company or any Subsidiary extending, renewing or
refunding any then existing Funded Debt that was originally incurred in
compliance with clause (iii) of this Section 10.5(a), provided that the
principal amount of such new Funded Debt does not exceed the principal amount of
such extended, renewed or refunded Funded Debt outstanding immediately prior to
the incurrence of such new Funded Debt; and
(v) additional Funded Debt of the Company and its Subsidiaries not
otherwise permitted under clause (i), clause (ii), clause (iii) or clause (iv)
above, provided that at the time of the incurrence thereof and after giving
effect thereto and to the application of the proceeds thereof, Consolidated
Funded Debt would not exceed 60% of Consolidated Total Capitalization.
(b) Limitation on Priority Debt. The Company will not at any time permit
Priority Debt of the Company and its Subsidiaries (determined without
duplication) to exceed 20% of Consolidated Adjusted Net Worth.
(c) Debt of Acquired Subsidiaries. Any Person becoming a Subsidiary after
the date hereof shall be deemed to have incurred all of its then outstanding
Debt at the time it becomes a Subsidiary.
10.6 Liens.
(a) Negative Pledge. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly create, assume, incur or suffer to be
created, assumed or incurred or to exist (upon the happening of a contingency or
otherwise), any Lien on or with respect to any property or asset (including,
without limitation, any document or instrument in respect of goods or accounts
receivable) of the Company or any such Subsidiary, whether now owned or held or
hereafter acquired, or any income or profits therefrom, or assign or otherwise
convey any right to receive income or profits, except:
(i) Taxes, etc. -- Liens for taxes, assessments or other governmental
charges that are not yet due and payable or the payment of which is not at the
time required by Section 9.4;
(ii) Legal Proceedings -- Liens
(A) arising from judicial attachments and judgments,
(B) securing appeal bonds, supersedeas bonds, and
(C) arising in connection with court proceedings (including, without
limitation, surety bonds and letters of credit or any other instrument serving a
similar purpose), provided that the execution or other enforcement of such Liens
is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
(iii) Ordinary Course Liens -- Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of business
(A) in connection with workers' compensation, unemployment insurance,
social security and other like laws,
(B) to secure (or to obtain letters of credit that secure) the performance
of tenders, statutory obligations, surety and performance bonds (of a type other
than set forth in Section 10.6(a)(ii)), bids, leases (other than Capital
Leases), purchase, construction or sales contracts and other similar
obligations, in each case not incurred or made in connection with the borrowing
of money, the obtaining of advances or credit or the payment of the deferred
purchase price of property,
(C) to secure the claims or demands of materialmen, mechanics, carriers,
warehousemen, vendors, repairmen, landlords, lessors and other like Persons,
arising in the ordinary course of business, and
(D) in the nature of reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other similar
title exceptions or encumbrances affecting real property, provided that (1) any
amounts secured by such Liens are not overdue and (2) such Liens do not, in the
aggregate, materially detract from the value of such property or materially
impair the use of such property in the conduct of the business of the Company,
or the conduct of the business of the Company and its Subsidiaries taken as a
whole;
(iv) (A) Existing Liens -- Liens in existence as of the date of the Closing
securing Debt and listed in Schedule 5.15, and
(B) Renewals -- Liens securing renewals, extensions (as to time) and
refinancings of Debt secured by the Liens listed in Schedule 5.15, provided that
the amount of Debt secured by each such Lien is not increased in excess of the
amount of Debt outstanding on the date of such renewal, extension or
refinancing, and none of such Liens is extended to include any additional
property of the Company or any Subsidiary;
(v) Intra-Group Liens -- Liens on property of the Company or any of its
Subsidiaries securing Debt owing to the Company or to any of its Subsidiaries;
(vi) Purchase Money Liens -- Liens on tangible property (or any improvement
thereon) acquired or constructed by the Company or any Subsidiary after the date
of the Closing to secure Debt of the Company or such Subsidiary incurred in
connection with such acquisition or construction, provided that
(A) no such Lien shall extend to or cover any property other than the
property (or improvement thereon) being acquired or constructed,
(B) the amount of Debt secured by any such Lien shall not exceed an amount
equal to the Fair Market Value (as determined in good faith by the Company) of
the property (or improvement thereon) being acquired or constructed, determined
at the time of such acquisition or at the time of substantial completion of such
construction, and
(C) such Lien shall be created concurrently with or within 180 days after
such acquisition or the substantial completion of such construction;
(vii) Acquisition Liens -- Liens existing on property of a Person
immediately prior to its being consolidated with or merged into the Company or a
Subsidiary or its becoming a Subsidiary, or any Lien existing on any property
acquired by the Company or any Subsidiary at the time such property is so
acquired (whether or not the Debt secured thereby shall have been assumed),
provided that
(A) no such Lien shall have been created or assumed in contemplation of
such consolidation or merger or such Person's becoming a Subsidiary or such
acquisition of property,
(B) each such Lien shall extend solely to the item or items of property so
acquired and, if required by the terms of the instrument originally creating
such Lien, other property which is an improvement to or is acquired for specific
use in connection with such acquired property, and
(C) the principal amount of the Debt secured by any such Lien shall at no
time exceed an amount equal to the lesser of (1) the cost to the Company or such
Subsidiary of the property (or improvement thereon) so acquired and (2) the Fair
Market Value (as determined in good faith by the board of directors of the
Company or such Subsidiary) of such property (or improvement thereon) at the
time of such transaction;
(viii) Security Documents -- the Lien of the Collateral Agent under the
Security Documents; and
(ix) Priority Debt -- Liens securing Debt (other than any Bank Debt) of the
Company or any Subsidiary and not otherwise permitted by clauses (i) through
(viii), inclusive, of this Section 10.6(a), but only to the extent that the Debt
secured by each such Lien is, at the time of the incurrence of such Debt,
permitted to be incurred under Section 10.5(a)(v) and Section 10.5(b).
(b) Equal and Ratable Lien; Equitable Lien. In case any property shall be
subjected to a Lien in violation of this Section 10.6, the Company will
forthwith make or cause to be made, to the fullest extent permitted by
applicable law, provision whereby the Notes will be secured equally and ratably
with all other obligations secured thereby pursuant to such agreements and
instruments as shall be approved by the Required Holders, and the Company will
cause to be delivered to each holder of a Note an opinion of independent counsel
to the effect that such agreements and instruments are enforceable in accordance
with their terms, and in any such case the Notes shall have the benefit, to the
full extent that, and with such priority as, the holders of Notes may be
entitled under applicable law, of an equitable Lien on such property securing
the Notes. Such violation of this Section 10.6 will constitute an Event of
Default hereunder, whether or not any such provision is made pursuant to this
Section 10.6(b).
(c) Financing Statements. The Company will not, and will not permit any of
its Subsidiaries to, sign or file a financing statement under the Uniform
Commercial Code of any jurisdiction that names the Company or such Subsidiary as
debtor, or sign any security agreement authorizing any secured party thereunder
to file any such financing statement, except, in any such case, a financing
statement filed or to be filed to perfect or protect a security interest that
the Company or such Subsidiary is entitled to create, assume or incur, or permit
to exist, under the foregoing provisions of this Section 10.6 or to evidence for
informational purposes a lessor's interest in property leased to the Company or
any such Subsidiary.
(d) Liens of Subsidiaries. Each Person that becomes a Subsidiary after the
date of the Closing will be deemed to have granted on the date such Person
becomes a Subsidiary all the Liens in existence on its property on such date.
10.7 Merger, Consolidation, etc.
The Company will not, and will not permit any of its Subsidiaries to,
consolidate with or merge with any other corporation or Transfer substantially
all of its assets in a single transaction or series of transactions to any
Person (except that a Subsidiary of the Company may (x) consolidate with or
merge with, or Transfer substantially all of its assets in a single transaction
or series of transactions to, the Company (with the Company being the survivor
thereof) or a Subsidiary and (y) Transfer all of its assets in compliance with
the provisions of Section 10.8), provided that the foregoing restriction does
not apply to the consolidation or merger of the Company with, or the Transfer of
substantially all of the assets of the Company in a single transaction or series
of transactions to, any Person so long as:
(a) the successor formed by such consolidation or the survivor of such
merger or the Person that acquires by Transfer substantially all of the assets
of the Company as an entirety, as the case may be (the "Successor Corporation"),
shall be a solvent corporation organized and existing under the laws of the
United States of America, any state thereof or the District of Columbia;
(b) if the Company is not the Successor Corporation, such corporation and
each of its domestic Subsidiaries shall have executed and delivered to each
holder of Notes its assumption of the due and punctual performance and
observance of each covenant and condition of the Financing Documents to which it
is or is to become a party, pursuant to documents in form and substance
satisfactory to the Required Holders, and the Company shall have caused to be
delivered to each holder an opinion, in form and substance satisfactory to the
Required Holders, of independent counsel reasonably satisfactory to the Required
Holders, to the effect that all agreements or instruments effecting such
assumption are enforceable in accordance with their terms and comply with the
terms hereof; and
(c) immediately after giving effect to such transaction no Default or Event
of Default would exist.
No such Transfer of substantially all of the assets of the Company shall
have the effect of releasing the Company or any Successor Corporation from its
liability under the Financing Documents.
10.8 Sale of Assets, etc.
(a) Sale of Assets, etc. The Company will not, and will not permit any of
its Subsidiaries to, make any Asset Disposition, unless:
(i) in the good faith opinion of the Company, such Asset Disposition is in
exchange for consideration having a Fair Market Value at least equal to that of
the property exchanged; and
(ii) immediately after giving effect to such Asset Disposition:
(A) no Default or Event of Default would exist; and
(B) the ratio (expressed as a percentage) of
(I) the aggregate amount of the obligations (including the Notes) secured
by the Collateral at such time, to
(II) the Fair Market Value of the Collateral at such time,
would not exceed 80%; and
(C) the Disposition Value of all property that was the subject of any Asset
Disposition occurring on or after the date of the Closing up to and including
the date of such Asset Disposition would not exceed 25% of Consolidated Total
Assets determined as of the end of the then most recently ended fiscal quarter.
If the Net Proceeds Amount for any Transfer is applied to a Debt Prepayment
Application, as more particularly provided in subsection (b) of this Section
10.8, concurrently with such Transfer, or a Property Reinvestment Application,
within 12 months after such Transfer, then such Transfer, only for the purpose
of determining compliance with clause (a)(ii)(B) of this Section 10.8 as of any
date, shall be deemed not to be an Asset Disposition.
(b) Debt Prepayment Offer. In connection with any Transfer consummated
after the date of the Closing and any Debt Prepayment Application by the Company
pursuant to subsection (a) of this Section 10.8 with respect thereto, the
following procedure will apply:
(i) The Company shall provide written notice to each holder of Notes of,
and such written notice shall constitute, an irrevocable offer by the Company to
prepay a principal amount of the Notes of each such holder equal to such
holder's Ratable Portion of the Net Proceeds Amount with respect to such
Transfer, together with accrued interest with respect to such principal amount
being prepaid, and the Make-Whole Amount with respect to such principal amount.
Such written notice shall be given to each holder of Notes not less than 30 days
and not more than 60 days prior to the actual date of prepayment (the "Debt
Prepayment Application Date"), and shall set forth:
(A) the Debt Prepayment Application Date,
(B) the principal amount of the Notes to be so prepaid, the amount of
accrued interest thereon being paid, and the estimated Make-Whole Amount due in
connection with such prepayment (calculated as if the date of such notice were
the date of the prepayment), setting forth the details of such computation, and
(C) a statement describing the Transfer in respect of such prepayment and a
calculation of the Net Proceeds Amount in respect thereof.
(ii) Each holder of a Note that fails to respond to such offer in writing
at least 10 days prior to the Debt Prepayment Application Date shall be deemed
to have accepted such offer. The Company may retain for its own purposes the
Ratable Portion of any rejecting holder.
(iii) Any partial prepayment of the Notes pursuant to this Section 10.8
shall reduce the principal amount of each required prepayment of the Notes
becoming due under Section 8.1 on and after the date of such prepayment and the
principal amount of the required payment due on the maturity date of the Notes
in the same proportion as the aggregate unpaid principal amount of the Notes is
reduced as a result of such partial prepayment.
11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or Make-Whole
Amount, if any, on any Note when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any Note for
more than five Business Days after the same becomes due and payable; or
(c) (i) the Company defaults in the performance of or compliance with any
term contained in any of Sections 10.1, 10.2 or 10.5 through 10.8, inclusive, or
Section 7.1(d), or
(ii) the Company defaults in the performance of or compliance with any term
contained in Section 10.3 or Section 10.4 and such default is not remedied
within 15 days after the occurrence thereof; or
(d) any Obligor defaults in the performance of or compliance with any term
contained herein (other than those referred to in paragraphs (a), (b) and (c) of
this Section 11) or in any other Financing Document and such default is not
remedied within 30 days after the earlier of (i) a Responsible Officer obtaining
actual knowledge of such default and (ii) the Company receiving written notice
of such default from any holder of a Note; or
(e) any representation or warranty made in writing by or on behalf of any
Obligor or by any officer of such Obligor in any Financing Document or in any
writing furnished in connection with the transactions contemplated by any
Financing Document proves to have been false or incorrect in any material
respect on the date as of which made; or
(f) (i) the Company or any Subsidiary is in default (as principal or as
guarantor or other surety) in the payment of any principal of or premium or
make-whole amount or interest on any Indebtedness (other than Indebtedness under
this Agreement, the Other Agreements and the Notes) beyond any period of grace
provided with respect thereto, that individually or together with such other
Indebtedness as to which any such failure exists has an aggregate outstanding
principal amount of at least $1,000,000, or
(ii) the Company or any Subsidiary is in default in the performance of or
compliance with any term of any evidence of any Indebtedness (other than
Indebtedness under this Agreement, the Other Agreements and the Notes), that
individually or together with such other Indebtedness as to which any such
failure exists has an aggregate outstanding principal amount of at least
$1,000,000, or of any mortgage, indenture or other agreement relating thereto or
any other condition exists, and as a consequence of such default or condition
such Indebtedness has become, or has been declared, due and payable before its
stated maturity or before its regularly scheduled dates of payment, or
(iii) the Company or any Subsidiary is in default in the performance of or
compliance with any term of any evidence of any Indebtedness (other than
Indebtedness under this Agreement, the Other Agreements and the Notes), that
individually or together with such other Indebtedness as to which any such
failure exists has an aggregate outstanding principal amount of at least
$4,000,000, or of any mortgage, indenture or other agreement relating thereto or
any other condition exists, and (A) such default has not been cured, remedied or
waived within 30 days after the occurrence of such default and (B) as a
consequence of such default or condition such Indebtedness has become, or has
been declared (or one or more Persons are entitled to declare such Indebtedness
to be), due and payable before its stated maturity or before its regularly
scheduled dates of payment, or
(iv) as a consequence of the occurrence or continuation of any event or
condition (other than the passage of time or the right of the holder of
Indebtedness to convert such Indebtedness into equity interests),
(A) the Company or any Subsidiary has become obligated to purchase or repay
Indebtedness before its regular maturity or before its regularly scheduled dates
of payment in an aggregate outstanding principal amount of at least $1,000,000,
or
(B) one or more Persons have the right to require the Company or any
Subsidiary so to purchase or repay such Indebtedness; or
(g) the Company or any Subsidiary (i) is generally not paying, or admits in
writing its inability to pay, its debts as they become due, (ii) files, or
consents by answer or otherwise to the filing against it of, a petition for
relief or reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an assignment
for the benefit of its creditors, (iv) consents to the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
the purpose of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction enters an
order appointing, without consent by the Company or any Subsidiary, a custodian,
receiver, trustee or other officer with similar powers with respect to the
Company or any Subsidiary or with respect to any substantial part of the
property of the Company or any Subsidiary, or constituting an order for relief
or approving a petition for relief or reorganization or any other petition in
bankruptcy or for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution, winding-up or
liquidation of the Company or any Subsidiary, or any such petition shall be
filed against the Company or any Subsidiary and such petition shall not be
dismissed within 60 days; or
(i) a final judgment or judgments for the payment of money aggregating in
excess of $1,000,000 are rendered against one or more of the Company and its
Subsidiaries and which judgments are not, within 45 days after entry thereof,
bonded, discharged or stayed pending appeal, or are not discharged within 45
days after the expiration of such stay; or
(j) (i) the Guaranty Agreement shall cease to be in full force and effect
or shall be declared by a court or governmental authority of competent
jurisdiction to be void, voidable or unenforceable against any Guarantor,
(ii) the validity or enforceability of the Guaranty Agreement against any
Guarantor shall be contested by such Guarantor, the Company or any Affiliate, or
(iii) any Guarantor, the Company or any Affiliate shall deny that such
Guarantor has any further liability or obligation under the Guaranty Agreement;
or
(k) if (i) any Plan shall fail to satisfy the minimum funding standards of
ERISA or the Code for any plan year or part thereof or a waiver of such
standards or extension of any amortization period is sought or granted under
section 412 of the Code,
(ii) a notice of intent to terminate any Plan shall have been or is
reasonably expected to be filed with the PBGC or the PBGC shall have instituted
proceedings under ERISA section 4042 to terminate or appoint a trustee to
administer any Plan or the PBGC shall have notified the Company or any ERISA
Affiliate that a Plan may become a subject of any such proceedings,
(iii) the aggregate "amount of unfunded benefit liabilities" (within the
meaning of section 4001(a)(18) of ERISA) under all Plans, determined in
accordance with Title IV of ERISA, shall exceed $1,000,000,
(iv) the Company or any ERISA Affiliate shall have incurred or is
reasonably expected to incur any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to employee benefit
plans,
(v) the Company or any ERISA Affiliate withdraws from any Multiemployer
Plan, or
(vi) the Company or any Subsidiary establishes or amends any employee
welfare benefit plan that provides post-employment welfare benefits in a manner
that would increase the liability of the Company or any Subsidiary thereunder;
and any such event or events described in clauses (i) through (vi) above,
either individually or together with any other such event or events, would
reasonably be expected to have a Material Adverse Effect.
As used in Section 11(k), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1 Acceleration.
(a) If an Event of Default with respect to the Company described in
paragraph (g) or paragraph (h) of Section 11 (other than an Event of Default
described in clause (i) of paragraph (g) or described in clause (vi) of
paragraph (g) by virtue of the fact that such clause encompasses clause (i) of
paragraph (g)) has occurred, all the Notes then outstanding shall automatically
become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, any
holder or holders of more than 66-_% in principal amount of the Notes at the
time outstanding may at any time at its or their option, by notice or notices to
the Company, declare all the Notes then outstanding to be immediately due and
payable.
(c) If any Event of Default described in paragraph (a) or (b) of Section 11
has occurred and is continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any time, at its or their
option, by notice or notices to the Company, declare all the Notes held by it or
them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest
thereon and (y) the Make-Whole Amount determined in respect of such principal
amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
12.2 Other Remedies.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained in any Financing Document, or
for an injunction against a violation of any of the terms thereof, or in aid of
the exercise of any power granted thereby or by law or otherwise.
12.3 Rescission.
At any time after any Notes have been declared due and payable pursuant to
clause (b) or clause (c) of Section 12.1, the holders of not less than a
majority in principal amount of the Notes then outstanding, by written notice to
the Company, may rescind and annul any such declaration and its consequences if
(a) the Company has paid all overdue interest on the Notes, all principal of and
Make-Whole Amount, if any, due and payable on any Notes other than by reason of
such declaration, and all interest on such overdue principal and Make-Whole
Amount, if any, and (to the extent permitted by applicable law) any overdue
interest in respect of the Notes, at the Default Rate, (b) all Events of Default
and Defaults, other than non-payment of amounts that have become due solely by
reason of such declaration, have been cured or have been waived pursuant to
Section 17, and (c) no judgment or decree has been entered for the payment of
any monies due pursuant hereto or to the Notes. No rescission and annulment
under this Section 12.3 will extend to or affect any subsequent Event of Default
or Default or impair any right consequent thereon.
12.4 No Waivers or Election of Remedies, Expenses, etc.
No course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by any Financing Document upon any holder of any Note shall be
exclusive of any other right, power or remedy referred to herein or therein or
now or hereafter available at law, in equity, by statute or otherwise. Without
limiting the obligations of the Company under Section 15, the Company will pay
to the holder of each Note on demand such further amount as shall be sufficient
to cover all costs and expenses of such holder incurred in any enforcement or
collection under this Section 12, including, without limitation, reasonable
attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1 Registration of Notes.
The Company shall keep at its principal executive office a register for the
registration and registration of transfers of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address
of each transferee of one or more Notes shall be registered in such register.
Prior to due presentment for registration of transfer, the Person in whose name
any Note shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary. The Company shall give to any holder of a
Note that is an Institutional Investor promptly upon request therefor, a
complete and correct copy of the names and addresses of all registered holders
of Notes.
13.2 Transfer and Exchange of Notes.
Upon surrender of any Note at the principal executive office of the Company
for registration of transfer or exchange (and in the case of a surrender for
registration of transfer, duly endorsed or accompanied by a written instrument
of transfer duly executed by the registered holder of such Note or his attorney
duly authorized in writing and accompanied by the address for notices of each
transferee of such Note or part thereof), the Company shall execute and deliver,
at the Company's expense (except as provided below), one or more new Notes (as
requested by the holder thereof) in exchange therefor, in the same series and
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1A or
Exhibit 1B, as the case may be. Each such new Note shall be dated and bear
interest from the date to which interest shall have been paid on the surrendered
Note or dated the date of the surrendered Note if no interest shall have been
paid thereon. The Company may require payment of a sum sufficient to cover any
stamp tax or governmental charge imposed in respect of any such transfer of
Notes. Notes shall not be transferred in denominations of less than $100,000,
provided that if necessary to enable the registration of transfer by a holder of
its entire holding of Notes, one Note may be in a denomination of less than
$100,000. Any transferee, by its acceptance of a Note registered in its name (or
the name of its nominee), shall be deemed to have made the representation set
forth in Section 6.2.
13.3 Replacement of Notes.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that if the holder of such Note is, or is a nominee
for, an original purchaser or an Institutional Investor, such Person's own
unsecured agreement of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation thereof, the
Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
14. PAYMENTS ON NOTES.
14.1 Place of Payment.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if any,
and interest becoming due and payable on the Notes shall be made in Baton Rouge,
Louisiana at the principal office of the Company in such jurisdiction. The
Company may at any time thereafter, by notice to each holder of a Note, change
the place of payment of the Notes so long as such place of payment shall be
either a principal office of the Company in the United States or a principal
office of a bank or trust company in the United States.
14.2 Home Office Payment.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor that is the direct
or indirect transferee of any Note purchased by you under this Agreement and
that has made the same agreement relating to such Note as you have made in this
Section 14.2.
15. EXPENSES, ETC.
15.1 Transaction Expenses.
Whether or not the transactions contemplated by the Financing Documents are
consummated, the Company will pay all costs and expenses (including reasonable
attorneys' fees of a special counsel and, if reasonably required, local or other
counsel) incurred by you and each Other Purchaser or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of the Financing Documents (whether or not such
amendment, waiver or consent becomes effective), including, without limitation:
(a) the costs and expenses incurred in enforcing or defending (or determining
whether or how to enforce or defend) any rights under the Financing Documents or
in responding to any subpoena or other legal process or informal investigative
demand issued in connection with the Financing Documents, or by reason of being
a holder of any Note, and (b) the costs and expenses, including financial
advisors' fees, incurred in connection with the insolvency or bankruptcy of the
Company or any Subsidiary or in connection with any work-out or restructuring of
the transactions contemplated by the Financing Documents. The Company will pay,
and will save you and each other holder of a Note harmless from, all claims in
respect of any fees, costs or expenses if any, of brokers and finders (other
than those retained by you).
15.2 Survival.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of any Financing Document, and the termination of any Financing
Document.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained in any Financing Document
shall survive the execution and delivery of this Agreement and the Notes, the
purchase or transfer by you of any Note or portion thereof or interest therein
and the payment of any Note, and may be relied upon by any subsequent holder of
a Note, regardless of any investigation made at any time by or on behalf of you
or any other holder of a Note. All statements contained in any certificate or
other instrument delivered by or on behalf of the Company pursuant to any
Financing Document shall be deemed representations and warranties of the Company
under this Agreement. Subject to the preceding sentence, the Financing Documents
embody the entire agreement and understanding between you and the Company and
supersede all prior agreements and understandings relating to the subject matter
hereof.
17. AMENDMENT AND WAIVER.
17.1 Requirements.
This Agreement and the Notes may be amended, and the observance of any term
hereof or of the Notes may be waived (either retroactively or prospectively),
with (and only with) the written consent of the Company and the Required
Holders, except that (a) no amendment or waiver of any of the provisions of any
of Sections 1, 2, 3, 4, 5, 6 and 21, or any defined term (as it is used
therein), will be effective as to you unless consented to by you in writing, and
(b) no such amendment or waiver may, without the written consent of the holder
of each Note at the time outstanding affected thereby, (i) subject to the
provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (ii) change the percentage of the principal
amount of the Notes the holders of which are required to consent to any such
amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 and
20.
17.2 Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause to be
paid any remuneration, whether by way of supplemental or additional interest,
fee or otherwise, or grant any security, to any holder of Notes as consideration
for or as an inducement to the entering into by any holder of Notes of any
waiver or amendment of any of the terms and provisions hereof unless such
remuneration is concurrently paid, or security is concurrently granted, on the
same terms, ratably to each holder of Notes then outstanding even if such holder
did not consent to such waiver or amendment.
17.3 Binding Effect, etc.
Any amendment or waiver consented to as provided in this Section 17 applies
equally to all holders of Notes and is binding upon them and upon each future
holder of any Note and upon the Company without regard to whether such Note has
been marked to indicate such amendment or waiver. No such amendment or waiver
will extend to or affect any obligation, covenant, agreement, Default or Event
of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of any holder of such Note. As used herein, the term
"this Agreement" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
17.4 Notes held by Company, etc.
Solely for the purpose of determining whether the holders of the requisite
percentage of the aggregate principal amount of Notes then outstanding approved
or consented to any amendment, waiver or consent to be given under any of the
Financing Documents, or have directed the taking of any action provided in any
of the Financing Documents to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in writing
and sent (a) by telecopy if the sender on the same day sends a confirming copy
of such notice by a recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail with return receipt requested (postage
prepaid), or (c) by a recognized overnight delivery service (with charges
prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address specified for
such communications in Schedule A, or at such other address as you or it shall
have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such address as
such other holder shall have specified to the Company in writing, or
(iii) if to the Company, to the Company at its address set forth at the
beginning hereof to the attention of the Chief Financial Officer, telecopier:
(504) 296-1199, or at such other address as the Company shall have specified to
the holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating hereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential Information" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
include information that
(a) was publicly known or otherwise known to you prior to the time of such
disclosure,
(b) subsequently becomes publicly known through no act or omission by you
or any person acting on your behalf,
(c) otherwise becomes known to you other than through disclosure by the
Company or any Subsidiary, or
(d) constitutes financial statements delivered to you under Section 7.1
that are otherwise publicly available.
You will maintain the confidentiality of such Confidential Information in
accordance with procedures adopted by you in good faith to protect confidential
information of third parties delivered to you, provided that you may deliver or
disclose Confidential Information to:
(i) your directors, officers, employees, agents, attorneys and affiliates
(to the extent such disclosure reasonably relates to the administration of the
investment represented by your Notes),
(ii) your financial advisors and other professional advisors who agree to
hold confidential the Confidential Information substantially in accordance with
the terms of this Section 20,
(iii) any other holder of any Note,
(iv) any Institutional Investor to which you sell or offer to sell such
Note or any part thereof or any participation therein (if such Person has agreed
in writing prior to its receipt of such Confidential Information to be bound by
the provisions of this Section 20),
(v) any Person from which you offer to purchase any Security of the Company
(if such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20),
(vi) any federal or state regulatory authority having jurisdiction over
you,
(vii) the National Association of Insurance Commissioners or any similar
organization, or any nationally recognized rating agency that requires access to
information about your investment portfolio or
(viii) any other Person to which such delivery or disclosure may be
necessary or appropriate
(A) to effect compliance with any law, rule, regulation or order applicable
to you,
(B) in response to any subpoena or other legal process,
(C) in connection with any litigation to which you are a party, or
(D) if an Event of Default has occurred and is continuing, to the extent
you may reasonably determine such delivery and disclosure to be necessary or
appropriate in the enforcement or for the protection of the rights and remedies
under the Financing Documents.
Each holder of a Note, by its acceptance of a Note, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this Section 20 as
though it were a party to this Agreement. On reasonable request by the Company
in connection with the delivery to any holder of a Note of information required
to be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions of
this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as the
purchaser of the Notes that you have agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.
22. MISCELLANEOUS.
22.1 Additional Notes.
Subject to the terms and provisions hereof (including, but not limited to,
Section 10.5), the Company may, from time to time, issue and sell additional
promissory notes pursuant to agreements which may incorporate by reference all
or certain of the provisions of this Agreement and the Other Agreements. Such
incorporation by reference shall not have the effect of constituting such
promissory notes as Notes for any purpose, whether for acceleration of the
Notes, rescission of such acceleration, or the exercise of any other amendments
or waivers of the provisions hereof or of the Other Agreements, or otherwise.
22.2 Successors and Assigns.
All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
22.3 Payments Due on Non-Business Days; When Payments Deemed Received.
(a) Payments Due on Non-Business Days. Anything in this Agreement or the
Notes to the contrary notwithstanding, any payment of principal of or Make-Whole
Amount or interest on any Note that is due on a date other than a Business Day
shall be made on the next succeeding Business Day without including the
additional days elapsed in the computation of the interest payable on such next
succeeding Business Day.
(b) Payments, When Received. Any payment to be made to the holders of Notes
hereunder or under the Notes shall be deemed to have been made on the Business
Day such payment actually becomes available to such holder at such holder's bank
prior to 12:00 noon (local time of such bank).
22.4 Severability.
Any provision of this Agreement that 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 hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
22.5 Construction.
Each covenant contained herein shall be construed (absent express provision
to the contrary) as being independent of each other covenant contained herein,
so that compliance with any one covenant shall not (absent such an express
contrary provision) be deemed to excuse compliance with any other covenant.
Where any provision herein refers to action to be taken by any Person, or which
such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person.
22.6 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be an original but all of which together shall constitute one instrument.
Each counterpart may consist of a number of copies hereof, each signed by less
than all, but together signed by all, of the parties hereto.
22.7 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF CONNECTICUT
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
[Remainder of page intentionally blank. Next page is signature page.]
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
THE SHAW GROUP INC.
By
---------------------------------------------------
Name:
Title:
The foregoing is hereby
agreed to as of the
date thereof.
[PURCHASER]
By -----------------------------------------------------
Name:
Title:
<PAGE>
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Purchaser Name NATIONWIDE LIFE INSURANCE COMPANY
Name in Which Note is Registered Nationwide Life Insurance Company
Note Registration Number; Series; Series A;
Principal Amount RA-1; $20,000,000
Payment on Account of Note
Federal Funds Wire Transfer
Method The Bank of New York
ABA #021-000-018
Account Information BNF: IOC566
F/A/O Nationwide Life Insurance Company
Attn: P&I Department
Ref:See "Accompanying Information" below
Accompanying Information Name of Company: THE SHAW GROUP INC.
Description of
Security: 6.44% Series A Senior Secured
Note due 2005
PPN: 820280 A* 6
Due Date and Application (as among
principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices Related to
Payments Nationwide Life Insurance Company
c/o The Bank of New York
P.O. Box 19266
Attn: P & I Department
Newark, NJ 07195
Fax: 212-635-8844
with a copy to
Nationwide Life Insurance Company
Attn: Investment Accounting
One Nationwide Plaza (1-32-05)
Columbus, Ohio 43215-2220
Fax: 614-249-6286
Address for all other Notices Nationwide Life Insurance Company
Attn: Corporate Fixed-Income Securities
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Fax: 614-249-4553
Other Instructions NATIONWIDE LIFE INSURANCE COMPANY
By_______________________
Name:
Title:
Instructions re Delivery of Notes The Bank of New York
One Wall Street
3rd Floor-Window A
New York, NY 10286
F/A/O Nationwide Life Insurance Company
Acct #267829
Tax Identification Number 31-4156830
<PAGE>
Purchaser Name CONNECTICUT GENERAL LIFE INSURANCE COMPANY
Name in Which Note is Registered CIG & Co.
Note Registration Number; Series;
Principal Amount Series B;
RB-1; $11,400,000
RB-2; $3,000,000
RB-3; $3,000,000
Payment on Account of Note
Federal Funds Wire Transfer
Method Chase NYC/CTR/
BNF=CIGNA Private Placements/AC=9009001802
Account Information ABA #021000021
Custody Account No. G-05033
Ref: See "Accompanying Information" below
Accompanying Information OBI=[name of company; description of security;
interest rate, maturity date; PPN; due date
and application (as among principal, premium
and interest of the payment being made);
contact name and phone.]
Name of Company: THE SHAW GROUP INC.
Description of
Security: 6.93% Series B Senior Secured Note
due 2008
PPN: 820280 A@ 4
Due Date and Application (as among principal,
Make-Whole Amount and interest) of the
payment being made:
Address for Notices Related
to Payments CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing S-309
900 Cottage Grove Road
Hartford, CT 06152-2309
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities - S307
Operations Group
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax: 860-726-7203
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P.O. Box 1508
Bowling Green Station
New York, NY 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
Address for all other Notices
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division - S-307
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax: 860-726-7203Other Instructions
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By CIGNA Investments, Inc.
By_____________________________
Name:
Title:
Instructions re Delivery of Notes
The Chase Manhattan Bank
4 New York Plaza
11th Floor New York, NY 10004
Attn: Larry Zimmer
Tax Identification Number 13-3574027
<PAGE>
Purchaser Name INSURANCE COMPANY OF NORTH AMERICA
Name in Which Note is Registered CIG & Co.
Note Registration Number; Series; RB-4; Series B;
Principal Amount $3,600,000
Payment on Account of Note Federal Funds Wire Transfer
Method Chase NYC/CTR/
BNF=CIGNA Private Placements/
AC=9009001802
Account Information ABA #021000021
Custody Account No. G-06283
Ref:See "Accompanying Information" below
Accompanying Information OBI=[name of company; description of
security; interest rate, maturity date;
PPN; due date and application (as among
principal, premium and interest of the
payment being made); contact name and
phone.]
Name of Company: THE SHAW GROUP INC.
Description of
Security: 6.93% Series B Senior Secured
Note due 2008
PPN: 820280 A@ 4
Due Date and Application (as among
principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices Related to Payments
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing S-309
900 Cottage Grove Road
Hartford, CT 06152-2309
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities - S-307
Operations Group
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax: 860-726-7203
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P.O. Box 1508
Bowling Green Station
New York, NY 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
Address for all other Notices
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division - S-307
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax: 860-726-7203Other Instructions
INSURANCE COMPANY OF NORTH AMERICA
By CIGNA Investments, Inc.
By_____________________________
Name:
Title:
Instructions re Delivery of Notes
The Chase Manhattan Bank
4 New York Plaza
11th Floor
New York, NY 10004
Attn: Larry ZimmerTax Identification Number
13-3574027
<PAGE>
Purchaser Name CONNECTICUT GENERAL LIFE INSURANCE COMPANY ON BEHALF
OF ONE OR MORE SEPARATE ACCOUNTS
Name in Which Note
is Registered CIG & Co.
Note Registration
Number; Series; RB-5; Series B;
Principal Amount $3,000,000
Payment on Account of Note
Federal Funds Wire Transfer
Method
Chase NYC/CTR/
BNF=CIGNA Private Placements/AC=9009001802
Account Information
ABA #021000021
Custody Account No. G-05034
Ref: See "Accompanying Information" below
Accompanying Information
OBI=[name of company; description of security; interest rate, maturity date;
PPN; due date and application (as among principal, premium and interest of the
payment being made); contact name and phone.]
Name of Company: THE SHAW GROUP INC.
Description of
Security: 6.93% Series B Senior Secured Note
due 2008
PPN: 820280 A@ 4
Due Date and Application (as among principal,
Make-Whole Amount and interest)of the payment
being made:
Address for Notices Related to Payments
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing S-309
900 Cottage Grove Road
Hartford, CT 06152-2309
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities - S-307
Operations Group
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax: 860-726-7203
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P.O. Box 1508
Bowling Green Station
New York, NY 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
Address for all other Notices
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division - S-307
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax: 860-726-7203
Other Instructions
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY ON BEHALF OF ONE OR MORE SEPARATE
ACCOUNTS By CIGNA Investments, Inc.
By_____________________________
Name:
Title:
Instructions re Delivery of Notes
The Chase Manhattan Bank
4 New York Plaza
11th Floor
New York, NY 10004
Attn: Larry Zimmer
Tax Identification Number 13-3574027
<PAGE>
Purchaser Name LIFE INSURANCE COMPANY OF NORTH AMERICA
Name in Which Note is Registered CIG & Co.
Note Registration Number; Series; RB-6; Series B;
Principal Amount $3,000,000
Payment on Account of Note
Federal Funds Wire Transfer
Method
Chase NYC/CTR/
BNF=CIGNA Private Placements/AC=9009001802
Account Information
ABA #021000021
Custody Account No. G-06286
Ref: See "Accompanying Information" below
Accompanying Information
OBI=[name of company; description of security; interest rate, maturity date;
PPN; due date and application (as among principal, premium and interest of the
payment being made); contact name and phone.]
Name of Company: THE SHAW GROUP INC.
Description of
Security: 6.93% Series B Senior Secured Note due 2008
PPN: 820280 A@ 4
Due Date and Application (as among principal, Make-Whole Amount and interest) of
the payment being made:
Address for Notices Related to Payments
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing S-309
900 Cottage Grove Road
Hartford, CT 06152-2309
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities - S-307
Operations Group
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax: 860-726-7203
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P.O. Box 1508
Bowling Green Station
New York, NY 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
Address for all other Notices
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division - S-307
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax: 860-726-7203
Other Instructions
LIFE INSURANCE COMPANY OF NORTH AMERICA
By CIGNA Investments, Inc.
By_____________________________
Name:
Title:
Instructions re Delivery of Notes
The Chase Manhattan Bank
4 New York Plaza
11th Floor
New York, NY 10004
Attn: Larry Zimmer
Tax Identification Number 13-3574027
<PAGE>
Purchaser Name NORTHERN LIFE INSURANCE COMPANY
Name in Which Note is Registered NORTHERN LIFE INSURANCE COMPANY
Note Registration Number; Series; RB-7; Series B
Principal Amount $6,000,000
Payment on Account of Note
Federal Funds Wire Transfer
Method
US Bank N.A./Mpls.
601 2nd Ave. S.
Account Information
Minneapolis, MN 55401
Acct. #160232376105
ABA #091000022
ATTN: Securities Accounting
Ref: See "Accompanying Information" below
Accompanying Information
Name of Company: THE SHAW GROUP INC.
Description of
Security: 6.93% Series B Senior Secured Note due 2008
PPN: 820280 A@ 4
Due Date and Application (as among principal, Make-Whole Amount and interest) of
the payment being made:Address for all Notices, including Notices Related to
Payments ReliaStar Investment Research, Inc.
100 Washington Square, Suite 800
Minneapolis, MN 55401-2121
Attn: Mark Ponder
Tel: 612-372-5232
Fax: 612-372-5368Other Instructions
NORTHERN LIFE INSURANCE COMPANY
By_______________________
Name:
Title:
Instructions re Delivery of Notes
ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Attn: Bret Brunner
Tax Identification Number 41-1295933
<PAGE>
Purchaser Name RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK
Name in Which Note is Registered
SIGLER & CO.
Note Registration Number; Series; RB-8; Series B
Principal Amount $2,000,000
Payment on Account of Note
Federal Funds Wire Transfer
Method
Chase Manhattan
New York, NY
Account Information
A/C #544755102
FF/C #G53095 Dept 571 NonStandard Securities Acct #1960
ABA #021000021
Ref: See "Accompanying Information" below
Accompanying Information
Name of Company: THE SHAW GROUP INC.
Description of
Security: 6.93% Series B Senior Secured Note due 2008
PPN: 820280 A@ 4
Due Date and Application (as among principal, Make-Whole Amount and interest) of
the payment being made:Address for all Notices, including Notices Related to
Payments ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Ref: Mark Ponder
Tel: 612-372-5232
Fax: 612-372-5368Other Instructions
RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK
By_______________________
Name:
Title:
Instructions re Delivery of Notes
ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Attn: Bret Brunner
Tax Identification Number 53-0242530
<PAGE>
Purchaser Name RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY
Name in Which Note
is Registered SALKELD & CO.
Note Registration Number;
Series; RB-9; Series B
Principal Amount $2,000,000
Payment on Account of Note
Federal Funds Wire Transfer
Method
Bankers Trust
New York, NY
Account Information
ABA #021001033
A/C #99000739
FBO ReliaStar United Services Life Ins.
Acct 92574
Ref: See "Accompanying Information" below
Accompanying Information
Name of Company: THE SHAW GROUP INC.
Description of
Security: 6.93% Series B Senior Secured Note due 2008
PPN: 820280 A@ 4
Due Date and Application (as among principal, Make-Whole Amount and interest) of
the payment being made:
Address for all Notices, including Notices Related to Payments
ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Ref: Mark Ponder
Tel: 612-372-5232
Fax: 612-372-5368
Other Instructions
RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY
By_______________________
Name:
Title:
Instructions re Delivery of Notes
ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Attn: Bret Brunner
Tax Identification Number 53-0159267
<PAGE>
Purchaser Name WASHINGTON SQUARE ADVISERS PRIVATE PLACEMENT TRUST FUND
Name in Which Note
is Registered WASHINGTON SQUARE ADVISERS PRIVATE PLACEMENT TRUST FUND
Note Registration Number; Series;
Principal Amount RB-10; Series B $2,000,000
Payment on Account of Note
Federal Funds Wire Transfer
Method
First Bank N.A. (DTC#2839; Inst. ID#93696; Agent Bank#93697)
601 2nd Ave. S.
Account Information
Minneapolis, MN 55401
Acct #10604960
ABA #091000022
F/F/C First Trust Company
A/C 180121167365
ITG A/C 47300020
ATTN: Washington Square Advisers Private Placement Trust Fund
Ref: See "Accompanying Information" below
Accompanying Information
Name of Company: THE SHAW GROUP INC.
Description of
Security: 6.93% Series B Senior Secured Note due 2008
PPN: 820280 A@ 4
Due Date and Application (as among principal, Make-Whole Amount and interest) of
the payment being made:Address for all Notices, including Notices Related to
Payments Washington Square Advisers, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Ref: Mark Ponder
Tel: 612-342-5232
Fax: 612-342-3656
Other Instructions
WASHINGTON SQUARE ADVISERS PRIVATE PLACEMENT TRUST FUND
By_______________________
Name:
Title:Instructions re Delivery of Notes
Washington Square Advisers, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Attn: Frank Pintens
Tax Identification Number 41-6424976MN
Tax Identification Number 3085334
<PAGE>
Purchaser Name SECURITY CONNECTICUT LIFE INSURANCE COMPANY
Name in Which Note
is Registered SIGLER & CO.
Note Registration
Number; Series; RB-11; Series B
Principal Amount $1,000,000
Payment on Account of Note
Federal Funds Wire Transfer
Method
Chase Manhattan Bank
Account Information
New York, New York
ABA #:021-000-021
Beneficiary Account #: 544755102
Reference: Sigler & Co. (Nominee Name)
Tax I.D. #: 13-3641527
F/C #BS72152-07
Ref: See "Accompanying Information" belowAccompanying Information
Name of Company: THE SHAW GROUP INC.
Description of
Security: 6.93% Series B Senior Secured Note due 2008
PPN: 820280 A@ 4
Due Date and Application (as among principal, Make-Whole Amount and interest) of
the payment being made:
Address for Notices Related to Payments
Sigler & Co.
c/o Chase Manhattan Bank
Dept. #3492
P.O. Box 50000
Newark, New Jersey 07101-8006
with a copy to:
ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Ref: Mark Ponder
Tel: 612-372-5232
Fax: 612-372-5368
Address for all other Notices
ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Ref: Mark Ponder
Tel: 612-372-5257
Fax: 612-372-5368Other Instructions
SECURITY CONNECTICUT LIFE INSURANCE COMPANY
By_______________________
Name:
Title:
Instructions re Delivery of Notes
ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Attn: Bret Brunner
Tax Identification Number 35-1468921
<PAGE>
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
"Acquisition" means any acquisition, directly or indirectly, by the Company
or any Subsidiary, after the date of the Closing, of
(a) any Capital Stock of a Person that concurrently with such acquisition
becomes a Subsidiary, or
(b) all or substantially all of the assets of a Person.
"Affiliate" means, at any time, and with respect to any Person,
(a) any other Person that at such time directly or indirectly through one
or more intermediaries Controls, or is Controlled by, or is under common Control
with, such first Person, and
(b) any Person beneficially owning or holding, directly or indirectly, 10%
or more of any class of voting or equity interests of the Company or any
Subsidiary or any corporation of which the Company and its Subsidiaries
beneficially own or hold, in the aggregate, directly or indirectly, 10% or more
of any class of voting or equity interests.
As used in this definition, "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. Unless the context otherwise clearly requires, any
reference to an "Affiliate" is a reference to an Affiliate of the Company.
"Agreement, this" is defined in Section 17.3.
"Asset Disposition" means any Transfer except:
(a) any Transfer from a Subsidiary to the Company or a Wholly-Owned
Subsidiary, or
(b) any Transfer made in the ordinary course of business and involving only
property that is either (i) inventory held for sale or (ii) equipment, fixtures,
supplies or materials no longer required in the operation of the business of the
Company or any of its Subsidiaries or that is obsolete.
"Bank Debt" means any Debt of the Company or any of its Subsidiaries owed
to any of the Banks under the Bank Loan Agreement or any related agreement,
instrument or other document.
"Bank Loan Agreement" means the Credit Agreement dated as of May 15, 1998,
among the Company, the Banks set forth on the signature pages thereof, and
Mercantile Business Credit Inc., as agent for such Banks, as may be amended,
restated, otherwise modified or replaced from time to time; provided that if any
such new agreement shall at any time be entered into by the Company, then
concurrently therewith the Company shall, unless otherwise agreed by the
Required Holders, cause the Banks under such new agreement to enter into a new
intercreditor agreement with the holders of the Notes substantially in the form
of the Intercreditor Agreement.
"Banks" means the banks initially party to the Bank Loan Agreement (namely,
Mercantile Business Credit Inc., City National Bank of Baton Rouge, Hibernia
National Bank, and Union Planters Bank, N.A.) and each other bank or other
Person from time to time acting as a lender or other provider of financial
accommodations to the Company or any Subsidiary under the Bank Loan Agreement.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which commercial banks in New York City are required or authorized to be closed.
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Capital Lease Obligation" means, with respect to any Person and a Capital
Lease, the amount of the obligation of such Person as the lessee under such
Capital Lease that would, in accordance with GAAP, appear as a liability on a
balance sheet of such Person.
"Capital Stock" means any class of capital stock, share capital or similar
equity interest of a Person.
"Change in Control" is defined in Section 8.3(i).
"Closing" is defined in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"Collateral" has, at any time, the meaning specified in the Intercreditor
Agreement at such time.
"Collateral Agent" means Mercantile Business Credit Inc., as collateral
agent under the Security Documents and the Intercreditor Agreement, and any
successor or assign appointed in accordance with the provisions of the
Intercreditor Agreement.
"Company" is defined in the introductory sentence of this Agreement.
"Confidential Information" is defined in Section 20.
"Consolidated Adjusted Net Worth" means, at any time,
(a) the sum of (i) the par value (or value stated on the books of the
corporation) of the Capital Stock (but excluding treasury stock and capital
stock subscribed and unissued, and any Preferred Stock that is mandatorily
redeemable) of the Company and its Subsidiaries, plus (ii) the amount of the
paid-in capital and retained earnings of the Company and its Subsidiaries, plus
(iii) deferred income taxes of the Company and its Subsidiaries, in each case as
such amounts would be shown on a consolidated balance sheet of the Company and
its Subsidiaries as of such time prepared in accordance with GAAP, minus
(b) to the extent included in clause (a), all amounts properly attributable
to minority interests, if any, in the stock and surplus of Subsidiaries.
"Consolidated Fixed Charges" means, with respect to any period, the sum of
(a) Consolidated Interest Charges for such period plus (b) Consolidated Lease
Rentals for such period.
"Consolidated Funded Debt" means, as of any date of determination, the
total of all Funded Debt of the Company and its Subsidiaries outstanding on such
date, after eliminating all offsetting debits and credits between the Company
and its Subsidiaries and all other items required to be eliminated in the course
of the preparation of consolidated financial statements of the Company and its
Subsidiaries in accordance with GAAP.
"Consolidated Interest Charges" means, with respect to any period, the sum
(without duplication) of the following (in each case, eliminating all offsetting
debits and credits between the Company and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and its Subsidiaries in accordance with
GAAP): (a) all interest expense in respect of Debt of the Company and its
Subsidiaries (including imputed interest on Capital Lease Obligations) deducted
in determining Consolidated Net Earnings for such period, plus (b) all debt
discount and expense amortized or required to be amortized in the determination
of Consolidated Net Earnings for such period.
"Consolidated Lease Rentals" means, with respect to any period, the sum of
the rental and other obligations required to be paid during such period by the
Company or any Subsidiary as lessee under all leases of real or personal
property (other than Capital Leases), excluding any amount required to be paid
by the lessee (whether or not therein designated as rental or additional rental)
on account of maintenance and repairs, insurance, taxes, assessments, water
rates and similar charges, provided that if, at the date of determination, any
such rental or other obligations are contingent or not otherwise definitely
determinable by the terms of the related lease, the amount of such obligations
(a) shall be assumed to be equal to the amount of such obligations for the
period of 12 consecutive calendar months immediately preceding the date of
determination or (b) if the related lease was not in effect during such
preceding 12-month period, shall be the amount estimated by a Senior Financial
Officer on a reasonable basis and in good faith.
"Consolidated Net Earnings" means, with reference to any period, the net
income (or loss) of the Company and its Subsidiaries for such period (taken as a
cumulative whole), as determined in accordance with GAAP, after eliminating all
offsetting debits and credits between the Company and its Subsidiaries and all
other items required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its Subsidiaries in
accordance with GAAP, provided that there shall be excluded:
(a) the income (or loss) of any Person accrued prior to the date it becomes
a Subsidiary or is merged into or consolidated with the Company or a Subsidiary,
and the income (or loss) of any Person, substantially all of the assets of which
have been acquired in any manner, realized by such other Person prior to the
date of acquisition,
(b) the income (or loss) of any Person (other than a Subsidiary) in which
the Company or any Subsidiary has an ownership interest, except to the extent
that any such income has been actually received by the Company or such
Subsidiary in the form of cash dividends or similar cash distributions,
(c) the undistributed earnings of any Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such Subsidiary
is not at the time permitted by the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Subsidiary,
(d) any restoration to income of any contingency reserve, except to the
extent that provision for such reserve was made out of income accrued during
such period,
(e) any aggregate net gain (but not any aggregate net loss) during such
period arising from the sale, conversion, exchange or other disposition of
capital assets (such term to include, without limitation, (i) all non-current
assets and, without duplication, (ii) the following, whether or not current: all
fixed assets, whether tangible or intangible, all inventory sold in conjunction
with the disposition of fixed assets, and all Securities),
(f) any gains resulting from any write-up of any assets (but not any loss
resulting from any write-down of any assets),
(g) any net gain from the collection of the proceeds of life insurance
policies,
(h) any gain arising from the acquisition of any Security, or the
extinguishment, under GAAP, of any Debt, of the Company or any Subsidiary,
(i) any net income or gain (but not any net loss) during such period from
(i) any change in accounting principles in accordance with GAAP, (ii) any prior
period adjustments resulting from any change in accounting principles in
accordance with GAAP, or (iii) any discontinued operations or the disposition
thereof,
(j) any deferred credit representing the excess of equity in any Subsidiary
at the date of acquisition over the cost of the investment in such Subsidiary,
(k) in the case of a successor to the Company by consolidation or merger or
as a transferee of its assets, any earnings of the successor corporation prior
to such consolidation, merger or transfer of assets,
(l) any portion of such net income that cannot be freely converted into
United States Dollars, and
(m) any net income or gain (or any net loss) during such period from any
extraordinary items, including, without limitation, foreign exchange gains or
losses.
"Consolidated Net Earnings Available for Fixed Charges" means, with respect
to any period, Consolidated Net Earnings for such period plus all amounts
deducted in the computation thereof on account of (a) Consolidated Fixed
Charges, (b) taxes imposed on or measured by income or excess profits and (c)
depreciation and amortization.
"Consolidated Total Assets" means, at any time, the total assets of the
Company and its Subsidiaries that would be shown as assets on a consolidated
balance sheet of the Company and its Subsidiaries as of such time prepared in
accordance with GAAP.
"Consolidated Total Capitalization" means, at any time, the sum of (a)
Consolidated Adjusted Net Worth at such time plus (b) Consolidated Funded Debt
at such time.
"Control Event" is defined in Section 8.3(j).
"Debt" means, with respect to any Person, without duplication,
(a) its liabilities for borrowed money and its redemption obligations in
respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of property acquired by
such Person (excluding accounts payable arising in the ordinary course of
business but including, without limitation, all liabilities created or arising
under any conditional sale or other title retention agreement with respect to
any such property);
(c) its Capital Lease Obligations;
(d) all liabilities for borrowed money secured by any Lien with respect to
any property owned by such Person (whether or not it has assumed or otherwise
become liable for such liabilities); and
(e) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (d) hereof; provided that, with respect
to the Company, Debt shall not include any unfunded obligations which may now or
hereafter exist with respect to Company's Plans.
"Debt Prepayment Application" means, with respect to any Transfer of
property by the Company or any Subsidiary, the application by the Company or
such Subsidiary of cash in an amount equal to the Net Proceeds Amount with
respect to such Transfer to pay Senior Debt of the Company or such Subsidiary
(other than Senior Debt owing to any of the Subsidiaries or any Affiliate and
Senior Debt in respect of any revolving credit or similar facility providing the
Company or such Subsidiary with the right to obtain loans or other extensions of
credit from time to time, except to the extent that in connection with such
payment of Senior Debt the availability of credit under such credit facility is
permanently reduced by an amount not less than the amount of such proceeds
applied to the payment of such Senior Debt), provided that in the course of
making such application the Company shall offer to prepay each outstanding Note
in accordance with Section 10.8(b) in a principal amount that equals the Ratable
Portion for such Note. If any holder of a Note fails to accept such offer of
prepayment, then, for purposes of the preceding sentence only, the Company
nevertheless will be deemed to have paid Senior Debt in an amount equal to the
Ratable Portion for such Note.
As used in this definition,
"Ratable Portion" means, for any Note, an amount equal to the product of
(a) the Net Proceeds Amount being so offered to the payment of Senior Debt,
multiplied by
(b) a fraction the numerator of which is the outstanding principal amount
of such Note and the denominator of which is the aggregate outstanding principal
amount of Senior Debt of the Company and its Subsidiaries.
"Senior Debt" means the Notes and any Debt of the Company or its
Subsidiaries that by its terms is not subordinated in right of payment to any
unsecured Debt of the Company or any Subsidiary.
"Debt Prepayment Application Date" is defined in Section 10.8(b).
"Default" means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.
"Default Rate" means that rate of interest that is the greater of (i) 2%
per annum above the rate of interest stated in clause (a) of the first paragraph
of the Notes or (ii) 2% over the rate of interest publicly announced from time
to time by Morgan Guaranty Trust Company of New York in New York, New York (or
its successor) as its "base" or "prime" rate.
"Disposition Value" means, at any time, with respect to any property
(a) in the case of property that does not constitute Subsidiary Stock, the
book value thereof, valued at the time of such disposition in good faith by the
Company, and
(b) in the case of property that constitutes Subsidiary Stock, an amount
equal to that percentage of book value of the assets of the Subsidiary that
issued such stock as is equal to the percentage that the book value of such
Subsidiary Stock represents of the book value of all of the outstanding Capital
Stock of such Subsidiary (assuming, in making such calculations, that all
Securities convertible into such Capital Stock are so converted and giving full
effect to all transactions that would occur or be required in connection with
such conversion) determined at the time of the disposition thereof, in good
faith by the Company.
"Environmental Laws" means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
that is treated as a single employer together with the Company under section 414
of the Code.
"Event of Default" is defined in Section 11.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Fair Market Value" means, at any time and with respect to any property,
the sale value of such property that would be realized in an arm's-length sale
at such time between an informed and willing buyer and an informed and willing
seller (neither being under a compulsion to buy or sell).
"Financing Documents" means, collectively, this Agreement, the Other
Agreements, the Notes, the Guaranty Agreement, the Intercreditor Agreement, the
Security Agreements, the Pledge Agreements and any other Security Document
executed from time to time.
"Funded Debt" means, with respect to any Person, all Debt of such Person
which by its terms or by the terms of any instrument or agreement relating
thereto matures, or which is otherwise payable or unpaid, more than one year
from, or is directly or indirectly renewable or extendible at the option of the
obligor in respect thereof to a date more than one year (including, without
limitation, an option of such obligor under a revolving credit or similar
agreement obligating the lender or lenders to extend credit over a period of
more than one year) from, the date of the creation thereof, provided that Funded
Debt shall, as at any date of determination, include Current Maturities of
Funded Debt.
As used in this definition,
"Current Maturities of Funded Debt" means, at any time and with respect to
any item of Funded Debt, the portion of such Funded Debt outstanding at such
time which by the terms of such Funded Debt or the terms of any instrument or
agreement relating thereto is due on demand or one year or less from such time
(whether by sinking fund, other required prepayment or final payment at
maturity) and is not directly or indirectly renewable, extendible or refundable
at the option of the obligor under an agreement or firm commitment in effect at
such time to a date more than one year from such time.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"Governmental Authority" means
(a) the government of
(i) the United States of America or any state or other political
subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary conducts all
or any part of its business, or that asserts jurisdiction over any properties of
the Company or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, any such government.
"Guarantor" means, at any time, each Person (including, without limitation,
each of the Initial Guarantors) that at such time is a guarantor under the
Guaranty Agreement.
"Guaranty" means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including, without limitation, obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of such
indebtedness or obligation, or (ii) to maintain any working capital or other
balance sheet condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or payment of such
indebtedness or obligation;
(c) to lease properties or to purchase properties or services primarily for
the purpose of assuring the owner of such indebtedness or obligation of the
ability of any other Person to make payment of the indebtedness or obligation;
or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor
under any Guaranty, the indebtedness or other obligations that are the subject
of such Guaranty shall be assumed to be direct obligations of such obligor.
"Guaranty Agreement" is defined in Section 4.13.
"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
"holder" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to Section
13.1.
"Indebtedness" with respect to any Person means, at any time, without
duplication,
(a) its liabilities for borrowed money and its redemption obligations in
respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of property acquired by
such Person (excluding accounts payable arising in the ordinary course of
business but including all liabilities created or arising under any conditional
sale or other title retention agreement with respect to any such property);
(c) all Capital Lease Obligations of such Person;
(d) all liabilities for borrowed money secured by any Lien with respect to
any property owned by such Person (whether or not it has assumed or otherwise
become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or instruments
serving a similar function issued or accepted for its account by banks and other
financial institutions (whether or not representing obligations for borrowed
money);
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (f) hereof.
Indebtedness of any Person shall include all obligations of such Person of
the character described in clauses (a) through (g) to the extent such Person
remains legally liable in respect thereof notwithstanding that any such
obligation is deemed to be extinguished under GAAP.
"Initial Guarantors" means, collectively, each Subsidiary that enters into
the Guaranty Agreement on the date of the Closing.
"Institutional Investor" means (a) any original purchaser of a Note, (b)
any holder of a Note holding more than 5% of the aggregate principal amount of
the Notes then outstanding, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
"Intercreditor Agreement" is defined in Section 4.8.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"Major Asset Disposition" means any Asset Disposition, directly or
indirectly, by the Company or any Subsidiary, after the date of the Closing, of
(a) all or substantially all of the Capital Stock or assets of a
Subsidiary; or
(B) any line of business of the Company and its Subsidiaries.
"Make-Whole Amount" is defined in Section 8.7.
"Management Group" is defined in Section 8.3(k).
"Material" means material in relation to the business, operations, affairs,
financial condition, assets, properties, or prospects of the Company and its
Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, or (b) the ability of the
Obligors, taken as a whole, to perform their obligations under the Financing
Documents, or (c) the validity of any of the Financing Documents, or (d) the
enforceability against the Obligors, taken as a whole, of the Financing
Documents.
"Memorandum" is defined in Section 5.3.
"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as such
term is defined in section 4001(a)(3) of ERISA).
"Net Proceeds Amount" means, with respect to any Transfer of any property
by any Person, an amount equal to the difference of
(a) the aggregate amount of the consideration (valued at the Fair Market
Value of such consideration at the time of the consummation of such Transfer)
received by such Person in respect of such Transfer, minus
(b) all ordinary and reasonable out-of-pocket costs and expenses actually
incurred by such Person in connection with such Transfer.
"Notes" is defined in Section 1.
"Obligors" means the Company and each Guarantor.
"Officer's Certificate" means a certificate of a Senior Financial Officer
or of any other officer of the Company whose responsibilities extend to the
subject matter of such certificate.
"Other Agreements" is defined in Section 2.
"Other Purchasers" is defined in Section 2.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
"Plan" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"Pledge Agreements" is defined in Section 4.10.
"Preferred Stock" means any class of Capital Stock of a Person that is
preferred over any other class of Capital Stock of such Person as to the payment
of dividends or other equity distributions or the payment of any amount upon
liquidation or dissolution of such Person.
"Priority Debt" means, at any time, without duplication, the sum of
(a) all Debt of the Company and its Subsidiaries secured by any Lien on any
property of the Company or any Subsidiary, other than any such Debt secured by
Liens permitted by any one or more of clauses (a)(i) through (a)(viii),
inclusive, of Section 10.6, plus
(b) all unsecured Debt of Subsidiaries,
provided that there shall be excluded from Priority Debt (i) Debt of any
Guarantor under the Guaranty Agreement, (ii) Debt of any Guarantor referred to
in the foregoing clause (i) under such Guarantor's guaranty of obligations under
the Bank Loan Agreement or any related agreement, instrument or other document,
so long as such obligations of such Guarantor are subject to the sharing
provisions of the Intercreditor Agreement, and (iii) any Debt of any Subsidiary
under clause (b) above owing solely to the Company or any Wholly-Owned
Subsidiary.
"Pro Forma Consolidated Fixed Charges Coverage Ratio" means, at any time,
the ratio of (a) Consolidated Net Earnings Available for Fixed Charges for the
immediately preceding period of four consecutive fiscal quarters of the Company
(for purposes of this definition, a "One Year Retrospective Period"), after
giving effect to the assumptions set forth in the last paragraph of this
definition, to (b) Consolidated Fixed Charges for such One Year Retrospective
Period, after giving effect to the assumptions set forth in the last paragraph
of this definition.
For purposes of determining "Consolidated Net Earnings Available for Fixed
Charges" and "Consolidated Fixed Charges" in this definition, any Acquisition or
Major Asset Disposition by the Company or any Subsidiary that is consummated
during any One Year Retrospective Period shall be deemed to have been
consummated as of the first day of such One Year Retrospective Period (and the
earnings and other results of operations during such period in respect of the
property acquired or disposed of shall accordingly be included in the case of an
Acquisition, or excluded in the case of an Asset Disposition, for purposes of
such determination) and any incurrence of Debt in connection with any such
Acquisition or repayment of Debt in connection with any such Major Asset
Disposition shall be deemed to have occurred as of such first day.
"property or properties" means, unless otherwise specifically limited, real
or personal property of any kind, tangible or intangible, choate or inchoate.
"Property Reinvestment Application" means, with respect to any Transfer of
property, the application of an amount equal to the Net Proceeds Amount with
respect to such Transfer to the acquisition by the Company or any Subsidiary of
operating assets of the Company or any Subsidiary of a nature generally similar,
and a value at least equivalent, to the property subject to such Transfer.
"Proposed Prepayment Date" is defined in Section 8.3(c).
"PTE" is defined in Section 6.2(a).
"QPAM Exemption" is defined in Section 6.2(d).
"Required Holders" means, at any time, the holder or holders of at least
66-_% in principal amount of the Notes at the time outstanding (exclusive of
Notes then owned by the Company or any of its Affiliates).
"Responsible Officer" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Security" has the meaning set forth in section 2(1) of the Securities Act.
"Security Agreements" is defined in Section 4.9.
"Security Documents" means, collectively, the Security Agreements, the
Pledge Agreements and each other agreement, document or other instrument
relating to the Collateral executed from time to time, all as amended or
supplemented from time to time.
"Senior Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.
"Series A Notes" is defined in Section 1.1(a).
"Series B Notes" is defined in Section 1.1(b).
"Significant Subsidiary" is defined in Section 9.6(c).
"Source" is defined in Section 6.2.
"Subsidiary" means, as to any Person, any corporation, association or other
business entity in which such Person or one or more of its Subsidiaries or such
Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership or joint venture can and does ordinarily
take major business actions without the prior approval of such Person or one or
more of its Subsidiaries). Unless the context otherwise clearly requires, any
reference to a "Subsidiary" is a reference to a Subsidiary of the Company.
"Subsidiary Stock" means, with respect to any Person, the Capital Stock (or
any options or warrants to purchase stock or other Securities exchangeable for
or convertible into any Capital Stock) of any Subsidiary of such Person.
"Successor Corporation" is defined in Section 10.7(a).
"Swaps" means, with respect to any Person, payment obligations with respect
to interest rate swaps, currency swaps and similar obligations obligating such
Person to make payments, whether periodically or upon the happening of a
contingency. For the purposes of this Agreement, the amount of the obligation
under any Swap shall be the amount determined in respect thereof as of the end
of the then most recently ended fiscal quarter of such Person, based on the
assumption that such Swap had terminated at the end of such fiscal quarter, and
in making such determination, if any agreement relating to such Swap provides
for the netting of amounts payable by and to such Person thereunder or if any
such agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligation shall be the net
amount so determined.
"Transfer" means, with respect to any Person, any transaction in which such
Person sells, conveys, transfers or leases (as lessor) any of its property,
including, without limitation, Subsidiary Stock.
"Voting Stock" means Capital Stock of any class or classes of a corporation
the holders of which are ordinarily, in the absence of contingencies, entitled
to elect a majority of the corporate directors (or Persons performing similar
functions), irrespective of whether or not at the time stock of any of the class
or classes shall have or might have special voting power or rights by reason of
the happening of any contingency.
"Wholly-Owned Subsidiary" means, at any time, any Subsidiary 100% of all of
the equity interests (except directors' qualifying shares) and voting interests
of which are owned by any one or more of the Company and the Company's other
Wholly-Owned Subsidiaries at such time.
<PAGE>
SCHEDULE 3
PAYMENT INSTRUCTIONS
BANK: MERCANTILE BANK
ST. LOUIS, MISSOURI
ABA #: 081000210
FOR CREDIT TO: THE SHAW GROUP INC.
ACCOUNT NO. 100-5014814
CONTACT: THERESE JONES
(314) 579-8437
<PAGE>
SCHEDULE 4.16
CHANGES IN CORPORATE STRUCTURE
[To be provided by the Company.]
<PAGE>
SCHEDULE 5.3
DISCLOSURE MATERIALS
[To be provided by the Company.]
<PAGE>
SCHEDULE 5.4
SUBSIDIARIES OF THE COMPANY AND OWNERSHIP OF SUBSIDIARY STOCK
[To be provided by the Company.]
<PAGE>
SCHEDULE 5.5
FINANCIAL STATEMENTS
[To be provided by the Company.]
<PAGE>
SCHEDULE 5.8
CERTAIN LITIGATION
[To be provided by the Company.]
<PAGE>
SCHEDULE 5.11
PATENTS, ETC.
[To be provided by the Company.]
<PAGE>
SCHEDULE 5.12
ERISA AFFILIATES
[To be provided by the Company.]
<PAGE>
SCHEDULE 5.14
USE OF PROCEEDS
[To be provided by the Company.]
<PAGE>
SCHEDULE 5.15
EXISTING DEBT AND LIENS (WITH THIRD PARTIES)
[To be provided by the Company.]
<PAGE>
EXHIBIT 1A
FORM OF SERIES A NOTE
THE SHAW GROUP INC.
6.44% SERIES A SENIOR SECURED NOTE DUE MAY 21, 2005
No. RA-___ [Date]
$_______ PPN 820280 A* 6
FOR VALUE RECEIVED, the undersigned, THE SHAW GROUP INC. (herein called the
"Company"), a corporation organized and existing under the laws of the State of
Louisiana, hereby promises to pay to , or registered assigns, the principal sum
of DOLLARS ($_________) on May 21, 2005, with interest (computed on the basis of
a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the
rate of 6.44% per annum ---------------------- -------------------------------
from the date hereof, payable semiannually on the 21st day of May and November
in each year, commencing with the May 21 or November 21 next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount, 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 greater of (i) 8.44% or (ii) 2% over the rate of
interest publicly announced from time to time by Morgan Guaranty Trust Company
of New York in New York, New York (or its successor) as its "base" or "prime"
rate. Capitalized terms used herein and not otherwise defined have the meanings
specified in the Note Purchase Agreements referred to below.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the address shown in the register maintained by the Company for such
purpose or at such other place as the Company shall have designated by written
notice to the holder of this Note as provided in the Note Purchase Agreements
referred to below.
This Note is one of a series of Senior Secured Notes (herein called the
"Notes") issued pursuant to separate Note Purchase Agreements, dated as of May
21, 1998 (as from time to time amended, the "Note Purchase Agreements"), between
the Company and the respective purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 20 of the Note Purchase Agreements and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, 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 Company 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 Company will not be affected by any notice to
the contrary.
The Notes and all other obligations of the Company (i) have been
unconditionally guarantied certain of by the Company's Subsidiaries pursuant to
the Guaranty Agreement, and (ii) together with certain other indebtedness of the
Company, are secured by the Security Documents.
The Company will make required prepayments of principal on the dates and in
the amounts specified in the Note Purchase Agreements. This Note is also subject
to optional prepayment, in whole or from time to time in part, at the times and
on the terms specified in the Note Purchase Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreements, occurs
and is continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner, at the price (including any applicable
Make-Whole Amount) and with the effect provided in the Note Purchase Agreements.
THIS NOTE AND THE NOTE PURCHASE AGREEMENTS ARE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF CONNECTICUT, EXCLUDING CHOICE-OF-LAW
PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE
LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
THE SHAW GROUP INC.
By -----------------------------------------------------
Name:
Title:
FORM OF SERIES A NOTE
<PAGE>
EXHIBIT 1B
FORM OF SERIES B NOTE
THE SHAW GROUP INC.
6.93% SERIES B SENIOR SECURED NOTE DUE MAY 21, 2008
No. RB-_____ [Date]
$___________ PPN 820280 A@ 4
FOR VALUE RECEIVED, the undersigned, THE SHAW GROUP INC. (herein called the
"Company"), a corporation organized and existing under the laws of the State of
Louisiana, hereby promises to pay to ______________, or registered assigns, the
principal sum of _____________________ DOLLARS (___________________) on May 21,
2008, with interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) on the unpaid balance thereof at the rate of 6.93% per annum from
the date hereof, payable semiannually on the 21st day of May and November in
each year, commencing with the May 21 or November 21 next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount, 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 greater of (i) 8.93% or (ii) 2% over the rate of
interest publicly announced from time to time by Morgan Guaranty Trust Company
of New York in New York, New York (or its successor) as its "base" or "prime"
rate. Capitalized terms used herein and not otherwise defined have the meanings
specified in the Note Purchase Agreements referred to below.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the address shown in the register maintained by the Company for such
purpose or at such other place as the Company shall have designated by written
notice to the holder of this Note as provided in the Note Purchase Agreements
referred to below.
This Note is one of a series of Senior Secured Notes (herein called the
"Notes") issued pursuant to separate Note Purchase Agreements, dated as of May
21, 1998 (as from time to time amended, the "Note Purchase Agreements"), between
the Company and the respective purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 20 of the Note Purchase Agreements and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, 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 Company 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 Company will not be affected by any notice to
the contrary.
The Notes and all other obligations of the Company (i) have been
unconditionally guarantied by certain of the Company's Subsidiaries pursuant to
the Guaranty Agreement, and (ii) together with certain other indebtedness of the
Company, are secured by the Security Documents.
The Company will make required prepayments of principal on the dates and in
the amounts specified in the Note Purchase Agreements. This Note is also subject
to optional prepayment, in whole or from time to time in part, at the times and
on the terms specified in the Note Purchase Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreements, occurs
and is continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner, at the price (including any applicable
Make-Whole Amount) and with the effect provided in the Note Purchase Agreements.
THIS NOTE AND THE NOTE PURCHASE AGREEMENTS ARE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF CONNECTICUT, EXCLUDING CHOICE-OF-LAW
PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE
LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
THE SHAW GROUP INC.
By -----------------------------------------------------
Name:
Title:
FORM OF SERIES B NOTE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000914024
<NAME> THE SHAW GROUP INC.
<MULTIPLIER> 1,000
<CURRENCY> U S DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> MAY-31-1998
<EXCHANGE-RATE> 1
<CASH> 3,791
<SECURITIES> 0
<RECEIVABLES> 153,265
<ALLOWANCES> 0
<INVENTORY> 81,503
<CURRENT-ASSETS> 249,266
<PP&E> 109,763
<DEPRECIATION> 23,777
<TOTAL-ASSETS> 367,914
<CURRENT-LIABILITIES> 113,445
<BONDS> 0
0
0
<COMMON> 105,964
<OTHER-SE> 47,662
<TOTAL-LIABILITY-AND-EQUITY> 367,914
<SALES> 384,883
<TOTAL-REVENUES> 384,883
<CGS> 319,635
<TOTAL-COSTS> 319,635
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,310
<INCOME-PRETAX> 22,941
<INCOME-TAX> 7,034
<INCOME-CONTINUING> 16,020
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,020
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 1.25
</TABLE>
